<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                             ----------------------

                                    FORM 10-Q

                             ----------------------


(MARK ONE)

     /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999

                                       OR

     / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

            FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                         COMMISSION FILE NUMBER 0-27401

                            ------------------------


                                INTERSPEED, INC.
             (Exact name of registrant as specified in its charter)


                 DELAWARE                                  04-3333365
      (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                   Identification No.)


               39 HIGH STREET
        NORTH ANDOVER, MASSACHUSETTS                            01845
  (Address of Principal Executive Offices)                   (Zip Code)


                                 (978) 688-6164
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
              (Former Name, former address and former fiscal year,
                          if changed since last report)


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 / /

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of February 7, 2000, 10,774,462 shares of $0.01 par value common stock of the
registrant were outstanding.


                            Page 1 of 22 Total Pages
                       (Exhibit Index appears on Page 21)

<PAGE>


<TABLE>
<CAPTION>

                                                                        Page
                                                                        ----
<S>                                                                     <C>
PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

1.  Condensed Balance Sheets as of December 31, 1999 (unaudited)
    and September 30, 1999                                                 3

2.  Condensed Statements of Operations (unaudited) for the
    three months ended December 31, 1999 and 1998                          4

3.  Condensed Statements of Cash Flows (unaudited) for the
    three months ended December 31, 1999 and 1998                          5

4.  Notes to Condensed Financial Statements                              6-7


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS                 8-19

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK       19

PART II.  OTHER INFORMATION

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS                       20

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                21

SIGNATURE PAGE                                                            22

</TABLE>


                            Page 2 of 22 Total Pages

<PAGE>


                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                INTERSPEED, INC.
                            CONDENSED BALANCE SHEETS
                        (in thousands, except share data)


<TABLE>
<CAPTION>
                                                                                   December 31,        September 30,
                                                                                       1999                1999
                                                                                   ------------        -------------
                                                                                    (Unaudited)
<S>                                                                                 <C>                 <C>

Assets

Current assets:

Cash ...........................................................................    $    14,634         $     21,227
Accounts receivable, net .......................................................          3,174                 808
Inventory ......................................................................          3,072               2,445
Receivable from Brooktrout .....................................................             90                  --
Prepaid expenses and other .....................................................            476                 168
                                                                                    -----------         -----------
Total current assets ...........................................................         21,446              24,648
Property and equipment, net ....................................................          1,501               1,178
Other assets ...................................................................              5                  54
                                                                                    -----------         -----------
Total assets ...................................................................    $    22,952         $    25,880
                                                                                    -----------         -----------
                                                                                    -----------         -----------

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable ...............................................................    $     1,858         $     2,789
Accrued expenses ...............................................................            913                 662
Short-term note payable--due Brooktrout ........................................             --                 129
Deferred revenue ...............................................................             13                  26
                                                                                    -----------         -----------
Total current liabilities ......................................................          2,784               3,606
Deferred rent ..................................................................            127                 104

Stockholders' equity:

Common stock, $.01 par value, 30,000,000 shares authorized,
   10,707,132 and 10,684,526 shares issued and outstanding .....................            107                 107
Additional paid-in capital .....................................................         41,995              41,995
Accumulated deficit ............................................................        (18,371)            (15,825)
Deferred compensation ..........................................................         (3,690)             (4,107)
                                                                                    -----------         -----------
Total stockholders' equity .....................................................         20,041              22,170
                                                                                    -----------         -----------
Total liabilities and stockholders' equity .....................................    $    22,952         $    25,880
                                                                                    -----------         -----------
                                                                                    -----------         -----------
</TABLE>


    The Condensed Balance Sheet as of September 30, 1999 has been summarized
            from the Company's audited Balance Sheet as of that date.


                  See notes to condensed financial statements.


                            Page 3 of 22 Total Pages

<PAGE>


                                INTERSPEED, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                        Three Months
                                                     Ended December 31,
                                                     ------------------
                                                       1999       1998
                                                     -------    -------

<S>                                                  <C>        <C>

Revenue ..........................................   $ 3,152    $    64
Cost of revenue ..................................     1,769         36
                                                     -------    -------
Gross profit .....................................     1,383         28

Operating expenses:
Research and development..........................     1,652      1,273
Selling, general and administrative ..............     2,090        346
Stock compensation ...............................       417         32
                                                     -------    -------
Loss from operations .............................    (2,776)    (1,623)
Interest income ..................................       230         --
                                                     -------    -------
Loss before income taxes .........................    (2,546)    (1,623)
Income tax expense ...............................        --         --
                                                     -------    -------
Net loss .........................................   $(2,546)   $(1,623)
                                                     -------    -------
                                                     -------    -------

Net loss per share--basic and diluted                $ (0.24)   $ (0.20)
                                                     -------    -------
                                                     -------    -------

Shares used to compute net loss per
Share--basic and diluted .........................    10,706      8,000
                                                     -------    -------
                                                     -------    -------
</TABLE>


                  See notes to condensed financial statements.


                            Page 4 of 22 Total Pages

<PAGE>


                                INTERSPEED, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                     Three months ended
                                                                        December 31,
                                                                     ------------------
                                                                       1999      1998
                                                                     --------  --------

<S>                                                                  <C>       <C>

Cash flows from operating activities:
Net loss ........................................................      (2,546)   (1,623)
  operating activities:
     Depreciation and amortization ..............................         146        39
     Amortization of stock compensation .........................         417        32
     Increase (decrease) in cash from:
     Accounts receivable ........................................      (2,366)      (64)
     Receivable from Brooktrout .................................         (90)       --
     Inventory ..................................................        (627)      (23)
     Prepaid expenses and other .................................        (259)       14
     Accounts payable ...........................................        (931)      (83)
     Accrued expenses ...........................................         251       226
     Payable to Brooktrout ......................................        (129)       --
     Deferred revenue ...........................................         (13)       --
     Deferred rent ..............................................          23        --
                                                                     --------  --------

Net cash used for operating activities ..........................      (6,124)   (1,482)
                                                                     --------  --------

Cash flows used for investing activities:
Purchases of property and equipment .............................        (469)      (15)
                                                                     --------  --------

Cash flows from financing activities:
Proceeds from long term debt-due Brooktrout .....................          --     1,491
                                                                     --------  --------

Net decrease in cash ............................................      (6,593)       (6)

Cash, beginning of period .......................................      21,227       132
                                                                     --------  --------

Cash, end of period .............................................    $ 14,634  $    126
                                                                     --------  --------
                                                                     --------  --------

</TABLE>


                  See notes to condensed financial statements.


                            Page 5 of 22 Total Pages

<PAGE>


                                INTERSPEED, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared by
Interspeed, Inc. (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission regarding interim financial reporting. They
should be read in conjunction with the audited financial statements included in
the Company's Annual Report on Form 10-K/A for the year ended September 30,
1999.

In the opinion of management, the accompanying unaudited condensed financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the interim periods presented.

The operating results for the interim periods presented are not necessarily
indicative of the results which could be expected for the full year.

NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of common
shares outstanding during each period. Outstanding stock options have been
excluded from the computation of diluted per share amounts since the effect
would be antidilutive. Had the impact of stock options, using the treasury stock
method, been included in the computation, weighted average shares would have
increased by 1,083,000 and 1,197,000 for the quarters ended December 31, 1999
and 1998, respectively.

INCOME TAXES

The Company's quarterly effective tax rate is based on the estimated tax rate
for the fiscal year.

COMPREHENSIVE INCOME

There was no difference between the Company's net loss and its total
comprehensive loss for any of the periods presented.

SEGMENT INFORMATION

The Company currently operates in one business segment: designing, developing
and marketing advanced communications products which enable service providers to
deliver high speed data access to small and medium sized businesses,
multi-tenant units ("MTUs"), and other organizations.

CONCENTRATION OF RISK

To date, the Company's activities have been conducted primarily in the United
States. The Company performs ongoing credit evaluations of its customers and
generally requires no collateral. At December 31, 1999, approximately 94% of the
receivable balance was comprised of balances due from two customers.

The Company relies on contract manufacturers and some single source suppliers of
materials for certain product components. As a result, should the Company's
current manufacturers or suppliers not produce and deliver inventory for the
Company to sell on a timely basis, operating results could be adversely
impacted.


                            Page 6 of 22 Total Pages

<PAGE>

INVENTORY

Inventory consisted of the following (in thousands):


<TABLE>
<CAPTION>

                              December 31,    September 30,
                              ------------    -------------
                                  1999             1999

<S>                            <C>            <C>

Raw material ..............         $2,253           $1,622
Work in process ...........             --                5
Finished goods ............            819              818
                              ------------    -------------
    Total .................         $3,072           $2,445
                              ------------    -------------
                              ------------    -------------

</TABLE>


SIGNIFICANT CUSTOMER AND GEOGRAPHIC INFORMATION

The Company currently targets its sales efforts to data communications service
providers, MTUs, and other service organizations to both public and private
network providers and users across four related market segments. For the three
months ended December 31, 1999, sales to United States customers amounted to
$2,967,000 and export sales amounted to $185,000. One customer accounted for
approximately 53% and another customer accounted for approximately 41% of
revenue for the three months ended December 31, 1999.

RELATED PARTY TRANSACTIONS

From its inception through the completion of its initial public offering on
September 24, 1999 ("IPO"), the Company's operations were funded through
contributions of capital and loans from Brooktrout, Inc. ("Brooktrout"), its
parent company. At September 24, 1999, in connection with the Company's IPO,
Brooktrout contributed $13,598,000, the majority of the outstanding note
balance, to the capital of the Company.

The Company and Brooktrout entered into a Transition Services Agreement (the
"Agreement") which expired on December 31, 1999. The Agreement outlined certain
services that would continue to be performed on behalf of the Company by
Brooktrout through December 31, 1999. The Agreement required that these services
be phased out over a period beginning on October 1999 to December 1999. The
services included payroll processing and administration, human resources,
benefits, marketing, information technology and telecommunications, accounts
receivable, accounting and finance and order entry. The fees for such services
were on an "as used" basis and were included in the Agreement. During the three
months ended December 31, 1999, fees for services totaled $43,000.


                            Page 7 of 22 Total Pages

<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
        RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED FINANCIAL STATEMENTS
AND NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS QUARTERLY REPORT. THIS
DOCUMENT CONTAINS CERTAIN STATEMENTS THE ARE "FORWARD-LOOKING STATEMENTS" AS
THAT TERM IS DEFINED UNDER THE PRIVATE SECURITIES LEGISLATION REFORM ACT OF 1995
AND RELEASES ISSUED BY THE SECURITIES AND EXCHANGE COMMISSION. THE WORDS
"BELIEVE," EXPECT," "ANTICIPATE," "INTEND," "ESTIMATE," AND OTHER EXPRESSIONS,
WHICH ARE PREDICTIONS OF OR INDICATE FUTURE EVENTS AND TRENDS AND WHICH DO NOT
RELATE TO HISTORICAL MATTERS, IDENTIFY FORWARD-LOOKING STATEMENTS.
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS, WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
OF THE COMPANY TO DIFFER MATERIALLY FROM THE ANTICIPATED FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING
STATEMENTS. SOME OF THE FACTORS DESCRIBED UNDER "RISK FACTORS" MAY RESULT IN
THESE DIFFERENCES. THE READER SHOULD CAREFULLY REVIEW ALL OF THESE FACTORS, AND
SHOULD BE AWARE THAT THERE MAYBE OTHER FACTORS THAT COULD CAUSE THESE
DIFFERENCES. WE DO NOT UNDERTAKE TO UPDATE ANY FORWARD-LOOKING STATEMENTS TO
REFLECT CHANGES IN UNDERLYING ASSUMPTIONS OR FACTORS, NEW INFORMATION, FUTURE
EVENTS OR OTHER CHANGES.

OVERVIEW

REVENUE.  Our revenue is generated primarily from sales of our products and
related maintenance services to data communications service providers and their
customers. Revenue from product sales is recognized upon shipment of the
product. No revenue is recognized on products shipped on a trial basis. Our
products generally carry a one year warranty from the date of purchase. We
estimate sales returns and warranty costs at the time the product revenue is
recognized and an accrual is recorded. Customers may contract for support
services over and above that provided by our warranty policy. Revenue from such
contracts and from the extended warranty contracts is recognized ratably over
the service period. We do not recognize revenue on beta units until beta testing
on such units is completed.

COST OF REVENUE.  Cost of revenue consists of direct product costs such as
standard parts and components for our products, salaries and employee benefits
for manufacturing personnel and overhead such as equipment and facility costs.

GROSS PROFIT.  We expect our gross profit to be affected by many factors
including pricing, product mix, cost factors such as component prices, internal
and external manufacturing costs as well as manufacturing efficiencies due to
higher volume of product shipments which we believe will result in the
improvement of overhead absorption.

RESEARCH AND DEVELOPMENT.  Research and development expenses consist
primarily of salaries and employee benefits for engineering personnel and
costs relating to prototypes including components, non-recurring engineering
charges and tools. Product enhancements and new features are key objectives.
We expect research and development expenses to increase in absolute dollars
in the future.

SALES AND MARKETING.  Sales and marketing expenses consist primarily of
salaries, employee benefits, trade shows, public relations, marketing
materials, travel and other marketing expenses. Future sales and marketing
activities will involve additional costs related to the expansion of the
sales and sales engineering organization, product branding, advertising and
public relations costs. We expect sales and marketing expenses to increase in
absolute dollars in the future.

GENERAL AND ADMINISTRATIVE.  General and administrative expenses consist of
personnel costs for executive officers, administrative and support activities
including payroll administration, worker's compensation and general liability
insurance, accounting and finance, legal, tax, human resources and
transaction processing.

STOCK COMPENSATION.  Stock options have been granted with exercise prices
that were less than the estimated fair value of the Company's common stock.
Compensation cost associated with these options is the difference between the
fair value of the stock and the exercise price.

INCOME TAX EXPENSE.  Prior to our IPO, we had been included in Brooktrout's
consolidated income tax filings and these losses have been used to reduce the
group's taxes payable. Brooktrout has not and does not intend to reimburse us
for the value of the net losses used to reduce Brooktrout's consolidated
taxable income. Accordingly,


                            Page 8 of 22 Total Pages

<PAGE>

we have not recorded any benefit related to these losses. We are no longer to be
included in Brooktrout's consolidated income tax filings; we do not anticipate
recognizing any benefits from losses generated in the short term due to our
limited operating history. We expect to continually evaluate the recoverability
of net loss carryforwards.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998

REVENUE.  Revenue for the three months ended December 31, 1999 was
$3,152,000, compared to $64,000 for the three months ended December 31, 1998.
During the first fiscal quarter of 1999, we recognized our first sale after
our product successfully completed beta testing; commencement of commercial
operations and the general release of our products began in February 1999.

COST OF REVENUE.  Cost of revenue was $1,769,000, or approximately 56% of
revenue, for the three months ended December 31, 1999, compared to $36,000
for the three months ended December 31, 1998. The significantly higher cost
of revenue in the first fiscal quarter of 2000 is due to the increased
revenue volume.

GROSS PROFIT.  Gross profit was $1,383,000, and gross profit percentage was
approximately 44%, for the three months ended December 31, 1999, compared to
gross profit of $28,000 for the three months ended December 31, 1998. This
increase was due to the substantially greater revenue recognized in the first
fiscal quarter of 2000.

RESEARCH AND DEVELOPMENT.  Research and development expenses increased by
approximately 30% to $1,652,000 during the three months ended December 31,
1999 from $1,273,000 for the three months ended December 31, 1998. This
increase was due primarily to increases in payroll related expenses from
growth in the number of engineering employees from the first fiscal quarter
of 1999 to the first fiscal quarter of 2000, and to a lesser extent,
consulting expenses for specific development projects during the first fiscal
quarter of 2000.

SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses for the three months ended December 31, 1999 were $2,090,000
compared to $346,000 for the three months ended December 31, 1998, an
increase of $1,744,000. This increase was due primarily to payroll-related
expenses, travel, advertising/marketing and trade show expenses associated
with the build-up in sales and marketing staff and activities, as well as
expenses relating to the implementation of internal Year 2000 compliant
systems.

STOCK COMPENSATION.  In prior periods, stock options have been granted with
exercise prices that were less than the estimated fair value of our common
stock. Compensation cost associated with such options was determined as
the difference between the fair value of the stock and the exercise price.
Stock compensation costs increased to $417,000 for the three months ended
December 31, 1999, from $32,000 for the three months ended December 31, 1998,
as the compensation cost is being charged to expenses over the option vesting
period.

INCOME TAX EXPENSE.  Prior to our IPO, we had been included in Brooktrout's
consolidated income tax filings and the losses associated with the Company
have been used to reduce the group's taxes payable. Brooktrout has not and
does not intend to reimburse us for the value of the net losses used to
reduce Brooktrout's consolidated taxes. Accordingly, we have not recorded any
benefit related to these prior losses. We have not recognized any benefit in
the current quarter for the losses generated for the three months ended
December 31, 1999 as we believe that it is more likely than not that such
benefits will not be recoverable. We will continually evaluate the
recoverability of net loss carryforwards.

NET LOSS.  Net loss for the three months ended December 31, 1999 was
$2,546,000 compared to net loss of $1,623,000 for the three months ended
December 31, 1998, an increase of $923,000. This increase is due primarily to
the increases in operating expenses and stock compensation charges, as
described above, that more than offset the increase in gross profit from
increased revenue resulting from the shipment of our product during the three
months ended December 31, 1999.


                            Page 9 of 22 Total Pages

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

From inception through the IPO, our operations had been funded through
contributions of capital and loans from Brooktrout. Subsequent to the IPO, our
operations have been funded through the proceeds from the IPO.

We believe that the remaining net proceeds will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures at least
until September 30, 2000. Thereafter, if cash generated from operations is
insufficient to satisfy our liquidity requirements, we might need to raise
additional funds through public or private financing, strategic relationships or
other arrangements. There can be no assurance that such additional funding, if
needed, will be available on terms that we believe are attractive, or at all. If
we fail to raise capital when needed, it could harm our business, operating
results and financial condition. If we raise additional funds through the
issuance of equity securities, the percentage ownership of our stockholders
would be reduced.

Cash decreased by $6,593,000 to $14,634,000 at December 31, 1999 from
$$21,227,000 at September 30, 1999. The decrease in cash is due primarily to a
$2,366,000 increase in accounts receivable, a $627,000 increase in inventory, a
$931,000 decrease in accounts payable, and a net loss of $2,546,000.

The increase in accounts receivable was due to substantially higher revenue
billings during the first quarter of fiscal 2000, while the increase in
inventory is due to the expectation of increased shipment volumes during
subsequent quarters. The decrease in accounts payable is due to the effort in
establishing more standard payment terms as a newly independent company. For the
three months ended December 31, 1999 and 1998, we purchased approximately
$469,000 and $15,000 respectively, of fixed assets. We currently have no
material commitments for additional capital expenditures.

We do not believe that inflation has had a significant effect on our operations
to date.

YEAR 2000 READINESS DISCLOSURE

The Year 2000 issue relates to potential problems arising from the way in which
computer software processes functions that are date dependent. These problems
arise from hardware and software unable to distinguish dates in the "2000s" from
dates in the "1900s" and from other sources such as the use of special codes and
conventions in software that use a date field. These problems could result in a
system failure with miscalculations causing disruptions of operations, including
among other things, a temporary inability to process transactions, send invoices
or engage in other normal business activities. The Year 2000 issue may pose
additional problems due to the fact the Year 2000 is a leap year and some
computers and programs may fail to recognize the extra day.

GENERAL READINESS ASSESSMENT.  As a wholly owned subsidiary of Brooktrout prior
to our IPO, we relied on Brooktrout's Year 2000 Plan except with respect to our
products and suppliers where we instituted our independent compliance program.
We no longer rely on any Brooktrout systems. We completed a formal systems
selection process and retained a systems consultant to assist us in determining
our systems requirements and purchasing Year 2000 compliant business systems to
satisfy our present and future needs. However, no assurance can be given that we
or third parties with whom we have a business relationship will successfully
address our or their Year 2000 issues. To date, we have not experienced any
problems with Year 2000 issues with either third party or our internal systems.
Our Year 2000 readiness program is supervised by our Year 2000 compliance
committee which is headed by Rajeev Agarwal, and we review our Year 2000 program
on a periodic basis.

Our overall non-Brooktrout related Year 2000 readiness program has consisted of
the following steps:

        -      purchasing internal systems that are Year 2000 compliant;

        -      developing a complete inventory of our products' hardware and
               software and assessing whether each specific piece of equipment
               or software is Year 2000 compliant;

        -      contacting most of our major equipment vendors to ensure that the
               equipment or software purchased has been tested and verified as
               Year 2000 compliant; and

        -      developing contingency plans to address potential Year 2000
               problems that are not directly in our control.


                            Page 10 of 22 Total Pages

<PAGE>

The following lists the specific areas in our Year 2000 program that have been
completed:

        -      ensuring our products' hardware and software are Year 2000
               compliant;

        -      contacting most of our major equipment providers and receiving
               disclosure statements that all of the equipment or software
               purchased from these vendors is Year 2000 compliant;

        -      implementing contingency plans ensuring that we have alternative
               suppliers for our products' components; and

        -      purchasing and installing Year 2000 compliant systems.

ASSESSMENT OF INTERNAL INFRASTRUCTURE.  With respect to our internal systems,
during the first quarter of fiscal 2000, we relied on Brooktrout's Year 2000
Plan which consists of three phases--assessment, testing and implementation.
We currently have our own internal systems in place. All of the internal
systems we purchased were Year 2000 compliant.

ASSESSMENT OF INTERSPEED'S SOFTWARE AND PRODUCTS.  We have gathered, tested
and produced information about our products impacted by the Year 2000
transition. We believe that all of our products are Year 2000 compliant.

SUPPLIERS.  All organizations dealing with the Year 2000 must address the
effect this issue will have on their significant business relationships with
key third parties. Our significant business relationships that may be
adversely impacted by the Year 2000 issue include certain contractual
relationships with key suppliers of components for our products and service
providers for our internal systems. We continue to work with third parties to
understand their ability to continue to provide services and products. If any
significant Year 2000 problems are identified with third parties, contingency
plans will be developed.

COSTS TO ADDRESS YEAR 2000 ISSUES.  Prior to the IPO, the primary costs in
achieving Year 2000 compliance had been incorporated into the fees Brooktrout
had charged us for managing our system requirements. During the three months
ended December 31, 1999, we purchased and implemented certain internal Year
2000 compliant systems. Costs of purchasing these systems and consultant fees
to assist with the installation of these systems were approximately $230,000
and $290,000, respectively. We expect any future costs directly attributable
to Year 2000 issues not to be material or to have an adverse effect on our
business and financial results.

CONTINGENCY PLAN.  While the implementation of internal Year 2000 compliant
systems was essentially completed by December 31, 1999, we are keeping
careful manual records in the event such systems fail. In addition, with
respect to our suppliers, we have successfully identified at least one
alternative supplier for each of our products' components.

CONSEQUENCES OF YEAR 2000 PROBLEMS.  We continue to evaluate potential
disruptions or complications that might result from Year 2000 related
problems. Presently, however, we believe that the most likely worst case
scenario related to the Year 2000 issue is associated with third party
vendors. A significant Year 2000 related disruption of the services provided
to us by third party vendors could prevent us from timely delivering our
products to customers, which in turn could materially and adversely affect
our results of operations, liquidity and financial condition. We are not
presently aware of any vendor related Year 2000 issue that is likely to
result in such a disruption.

We anticipate that litigation may be brought against vendors of all component
products of systems that are unable to properly manage data related to the Year
2000. We have not received any threats of such litigation. Although we believe
our products are Year 2000 compliant, no assurance can be given that such
litigation may not be threatened or brought in the future. Our failure or
failure of our key suppliers and/or customers to be Year 2000 compliant may also
result in litigation being brought against us in addition to making it more
difficult and/or costly for us to manufacture and sell our products. Any such
claims, with or without merit, or our failure or the failure of our suppliers or
customers to be Year 2000 compliant could result in a material adverse affect on
our business, financial condition and results of operations, including increased
warranty costs, customer satisfaction issues and potential lawsuits.


                            Page 11 of 22 Total Pages

<PAGE>

Although there continues to be inherent uncertainty in the Year 2000 issue, to
date we have not experienced any impact. However, we continue to monitor and
identify the nature and extent of any material risk to us as a result of any
Year 2000 disruptions. This section contains certain statements that are
forward-looking statements. Our Year 2000 compliance, and the effects of the
Year 2000 on us may be materially different than currently projected. This may
be due to, among other things, the failure of key third parties with whom we
have a significant business relationship to achieve Year 2000 compliance or
address Year 2000 issues.


                            Page 12 of 22 Total Pages

<PAGE>


                                  RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER
INFORMATION IN THIS ANNUAL REPORT. OUR BUSINESS, FINANCIAL CONDITION OR RESULTS
OF OPERATIONS COULD BE HARMED BY ANY OF THE FOLLOWING RISKS.

WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES

We have accumulated losses of approximately $18.4 million since inception in
October 1996 through December 31, 1999 and expect to incur net losses in the
future. Losses were approximately $10.5 million for the year ended September 30,
1999 and approximately $2.5 million of the first quarter of fiscal 2000. We
anticipate continuing to incur significant sales and marketing, research and
development and general and administrative expenses and, as a result, we will
need to generate higher revenues to achieve and sustain profitability. We cannot
be certain we will realize sufficient revenues to achieve profitability.

BECAUSE OF OUR LIMITED OPERATING HISTORY IT IS DIFFICULT FOR US TO PREDICT
FUTURE RESULTS OF OPERATIONS

We commenced operations in March 1997 and our first product became generally
available in February 1999. Due to our limited operating history, it is
difficult for us to predict future results of operations. You should consider
our business and prospects in light of the risks typically encountered by
companies in their early stages of development, particularly those in rapidly
evolving markets such as the data communications equipment market. We cannot be
certain that we will successfully address these risks.

OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND CAUSE OUR STOCK
PRICE TO BE VOLATILE WHICH COULD CAUSE THE VALUE OF YOUR INVESTMENT IN OUR
COMPANY TO DECLINE

Our quarterly or annual operating results are likely to fluctuate significantly
in the future due to a variety of factors, many of which are outside of our
control. If our operating results do not meet the expectations of securities
analysts, the trading price of our common stock could significantly decline
which may cause the value of your investment in our company to decline. In
addition, the value of your investment could be impacted by investor perception
of the Internet and emerging data communications sectors generally, independent
of the operating performance of our company or other similar companies. Some of
the factors that could affect our quarterly or annual operating results or
impact the market price of our common stock include:

        -      our ability to develop, manufacture, market and support our
               products and product enhancements;

        -      the timing and amount of, or cancellation or rescheduling of,
               orders for our products, particularly large orders from key
               customers;

        -      our ability to retain key management, sales and marketing and
               engineering personnel;

        -      announcements, new product introductions and price reductions
               in products offered by our competitors;

        -      our ability to obtain sufficient supplies of sole or limited
               source components for our products;

        -      a decrease in the average selling prices of our products;

        -      changes in costs of components which we include in our products;
               and

        -      the mix of products that we sell and the mix of distribution
               channels through which they are sold.

Due to these and other factors, quarterly or annual revenues, expenses and
results of operations could vary significantly in the future, and
period-to-period comparisons should not be relied upon as indications of future
performance.


                            Page 13 of 22 Total Pages

<PAGE>

THE LOSS OF ANY SIGNIFICANT CUSTOMER COULD CAUSE OUR REVENUE TO DECLINE

The loss of any of our significant customers could cause our revenue to decline
and thus have a material adverse effect on our business, financial condition and
results of operations. Our products became generally available in February 1999
and to date we have only sold products to a limited number of customers. Unless
and until we diversify and expand our customer base, our future success will
significantly depend upon a limited number of customers.

FAILURE TO ADEQUATELY DEVELOP OUR SALES CHANNELS COULD CAUSE OUR REVENUE TO
DECLINE

We sell our products directly through our sales force and indirectly through
original equipment manufacturers, value added resellers and system integrators.
Our failure to adequately develop these sales channels may cause our revenue to
decline and, thus, have a material adverse effect on our business, financial
condition and results of operations. We are currently continuing to develop
these sales channels and expect to expend significant resources in this area. As
of February 7, 2000, we had a total of 21 employees responsible for direct
sales, marketing and sales engineering in the United States and international
markets. To the extent we are able to enter into agreements with additional
original equipment manufacturers, value added resellers or systems integrators,
the amount and timing of resources which they devote to the sale of our products
may not be within our control, and they may not perform their obligations as
expected.

IF WE ARE UNABLE TO DEVELOP AND OPERATE AN EFFECTIVE CUSTOMER SUPPORT
ORGANIZATION, SALES OF OUR PRODUCTS MAY BE REDUCED

Purchasers of data communications equipment assign significant weight in their
purchasing decisions to a vendor's capabilities and reputation in supporting its
products. We will be required to expend significant resources and management
attention on developing and operating a customer support organization. If our
level of customer support does not satisfy customer expectations, our reputation
and future sales could be adversely affected. Accordingly, we have emphasized
customer support in our business strategy and marketing. Because our products
were recently introduced for sale, we have limited experience in operating a
customer support program.

IF OUR TARGET CUSTOMERS DO NOT ACCEPT DSL TECHNOLOGY, WE MAY BE UNABLE TO
SUSTAIN OR GROW OUR BUSINESS

Our future success is substantially dependent upon whether digital subscriber
line, or DSL, technology gains widespread market acceptance by data
communications service providers and the small to medium sized business users to
whom they market their services. In the event that our customers or potential
customers adopt technologies other than digital subscriber line, or DSL, we may
be unable to sustain or grow our business. Our business strategy and current
products are focused on DSL technology. Various alternative technologies,
including T-1, cable and broadband wireless, are currently available to deliver
high speed data communications, and each of the alternatives has comparative
advantages and disadvantages. Data communications service providers continually
evaluate alternative high speed data access technologies and may at any time
adopt technologies other than DSL.

IF OUR PRODUCTS ARE NOT ACCEPTED BY THE MARKET, OUR REVENUES MAY DECLINE

We have recently introduced our products to the market. Market acceptance of our
products is critical to our future success. Factors that may affect the market
acceptance of our products include:

        -     market acceptance of DSL technology;

        -     the features, performance, price and total cost of ownership of
              our products;

        -     the availability of competing products and technologies;

        -     the success and development of our direct sales force and
              distribution channels;

        -     the quality of our customer service and support of our products;
              and

        -     the breadth and depth of our product offerings.


                            Page 14 of 22 Total Pages
<PAGE>

Failure of our existing or future products to achieve and maintain meaningful
levels of market acceptance would materially adversely affect our business,
financial condition and results of operations.

BECAUSE WE CURRENTLY DEPEND ON A SINGLE FAMILY OF PRODUCTS, ANY DECLINE IN
DEMAND FOR THOSE PRODUCTS MAY HARM OUR OPERATING RESULTS

We expect to derive substantially all of our revenues from our DSL access
routers, or DSLARs, product family and related modules for the foreseeable
future. The market may not continue to demand our current products, and we may
not be successful in marketing any new or enhanced products. Any reduction in
the demand for our current products or our failure to successfully develop or
market and introduce new or enhanced products could materially adversely affect
our business, financial condition and results of operations.

UNLESS WE ARE ABLE TO KEEP PACE WITH THE EVOLUTION OF THE DATA COMMUNICATIONS
EQUIPMENT MARKET WE WILL NOT BE ABLE TO GROW OR SUSTAIN OUR BUSINESS

The data communications equipment market is characterized by:

        -      rapid technological advances;

        -      evolving industry standards;

        -      changes in end-user requirements;

        -      frequent new product introductions; and

        -      evolving offerings by data communications service providers.

We believe our future success will depend, in part, on our ability to anticipate
or adapt to such changes and to offer, on a timely basis, products that meet
customer demands. We intend to continue to invest significantly in product and
technology development. The development of new or enhanced products is a complex
and uncertain process requiring the anticipation of technological and market
trends. We may experience design, manufacturing, marketing and other
difficulties that could delay or prevent our development, introduction or
marketing of new products and enhancements and result in unexpected expenses.
The introduction of new or enhanced products also requires that we manage the
transition from older products in order to minimize disruption in customer
ordering patterns and ensure that adequate supplies of new products can be
delivered to meet anticipated customer demand. Our inability to develop on a
timely basis new products or enhancements to existing products, or the failure
of such new products or enhancements to achieve market acceptance, could have a
material adverse effect our business, financial condition and results of
operations.

IF WE LOSE KEY PERSONNEL, WE MAY BE UNABLE TO SUCCESSFULLY OPERATE OUR BUSINESS

Our success depends to a significant degree upon the continued contributions of
our principal management, engineering and sales personnel, many of whom perform
important management functions and would be difficult to replace. We do not have
employment contracts with our key personnel. The loss of the services of any key
personnel could materially adversely affect our business, financial condition
and results of operations.

IF WE ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL QUALIFIED PERSONNEL, WE MAY BE
UNABLE TO SATISFY CUSTOMER DEMANDS WHICH MAY CAUSE OUR REVENUES TO DECLINE

Our business strategy will require us to attract and retain additional
engineering, sales, customer support and administrative personnel. We have at
times experienced, and continue to experience, difficulty in recruiting
qualified personnel. Recruiting qualified personnel is an intensely competitive
and time consuming process. We may not be able to attract and retain the
necessary personnel to accomplish our business objectives, and we may experience
constraints that will adversely affect our ability to satisfy customer demand in
a timely fashion or to support our customers and operations. In addition,
companies in the data communications industry whose employees accept positions
with competitors frequently claim that such competitors have engaged in unfair
hiring practices. We could incur substantial costs in defending ourselves
against any such litigation, regardless of the merits or outcome of such
litigation.


                            Page 15 of 22 Total Pages

<PAGE>

FAILURE TO MANAGE OUR GROWTH EFFECTIVELY MAY PREVENT US FROM MAXIMIZING OUR
EARNINGS

We have expanded and plan to continue to expand our operations, including our
sales and marketing activities, our accounting, billing and human resource
departments and the establishment of additional sales offices. This expansion
may place significant strains on our ability to manage our growth, including our
ability to monitor operations, bill customers, control costs and maintain
effective quality controls. Until the end of December 1999, we relied upon
Brooktrout, our parent company, to provide us with administrative and support
services, including accounting, human resources and computer systems. Since
then, we have implemented systems that provide the functions and services that
were previously provided by Brooktrout. If we fail to manage our growth
effectively, it could have a material adverse effect on our business, financial
condition and results of operations.

INTENSE COMPETITION IN THE MARKET FOR HIGH SPEED DATA ACCESS EQUIPMENT PREVENT
US FROM ACHIEVING OR SUSTAINING PROFITABILITY

The market for data communications equipment is highly competitive, particularly
in the emerging DSL equipment market. If we are unable to compete effectively in
the market for high speed data access equipment, our results of operations could
be materially adversely affected. We compete directly with Ascend
Communications, Inc., which was acquired by Lucent Technologies Inc.; Copper
Mountain Networks, Inc.; Diamond Lane, which was acquired by Nokia, Inc.;
Paradyne Networks, Inc.; and Tut Systems, Inc. Many of our current and potential
competitors have significantly greater selling and marketing, technical,
manufacturing, financial, and other resources. Moreover, our competitors may
foresee the course of market developments more accurately than we do and could
in the future develop new technologies that compete with our products. The
strength and capabilities of our competitors may be increased as a result of the
trend toward consolidation in the data communications market. Capitalizing on
and maintaining our technological advantage will require a continued high level
of investment in research and development, marketing and customer service and
support. Due to the rapidly evolving markets in which we compete, additional
competitors with significant market presence and financial resources may enter
those markets, thereby further intensifying competition. We may not have
sufficient resources to continue to make the investments or achieve the
technological advances necessary to compete successfully with existing
competitors or new competitors.

IF WE ARE UNABLE TO DEVELOP INTERNATIONAL MARKETS FOR OUR PRODUCTS, WE MAY BE
UNABLE TO GROW AS PLANNED

Our strategy emphasizes the development of international markets for our
products. We may be unsuccessful in marketing, selling and distributing our
products in foreign markets. Conducting business outside of the United States is
subject to risks, including:

        -      longer accounts receivable collection cycles;

        -      possible foreign currency exchange and conversion issues;

        -      difficulties in managing operations across disparate geographic
               areas;

        -      difficulties associated with enforcing agreements and collecting
               receivables through foreign legal systems;

        -      changes in a specific country's or region's political or economic
               conditions;

        -      trade protection measures;

        -      import or export licensing requirements;

        -      potential adverse tax consequences;

        -      unexpected changes in regulatory requirements; and

        -      reduced or limited protection of our intellectual property rights
               in some countries.

We cannot be certain that one or more of such factors will not have a material
adverse effect on our future international operations, and consequently, our
business, financial condition and results of operations.


                            Page 16 of 22 Total Pages

<PAGE>

OUR DEPENDENCE ON SOLE AND SINGLE SOURCE SUPPLIERS AND INDEPENDENT MANUFACTURERS
EXPOSES US TO SUPPLY INTERRUPTIONS THAT COULD RESULT IN PRODUCT DELIVERY DELAYS

Although we generally use standard parts and components for our products, some
key components are purchased from sole or single source vendors for which
alternative sources are not currently available. Our inability to obtain
sufficient quantities of these components may result in future delays or
reductions in product shipments which could materially adversely affect our
business, financial condition and results of operations. We currently purchase
proprietary components from Conexant and Motorola for which there are no direct
substitutes. These components could be replaced with alternatives from other
suppliers, but that would involve redesign of our products. Such redesign would
involve considerable time and expense. We currently enter into purchase orders
with our suppliers for materials based on forecasts, but have no guaranteed
supply arrangements with these suppliers.

In addition, we currently use a small number of independent manufacturers to
manufacture printed circuit boards, chassis and subassemblies to our design. Our
reliance on independent manufacturers involves a number of risks, including the
potential for inadequate capacity, unavailability of, or interruptions in access
to, process technologies, and reduced control over delivery schedules,
manufacturing yields and costs. If our manufacturers are unable or unwilling to
continue manufacturing our components in required volumes, we will have to
transfer manufacturing to acceptable alternative manufacturers whom we have
identified, which could result in significant interruption of supply. Moreover,
the manufacture of these components is extremely complex, and our reliance on
the suppliers of these components exposes us to potential production
difficulties and quality variations, which could negatively impact cost and
timely delivery of our products. We currently enter into purchase orders with
independent manufacturers of materials based on forecasts, but have no
guaranteed arrangements with these manufacturers. Any significant interruption
in the supply, or degradation in the quality, of any component would have a
material adverse effect on our business, financial condition and results of
operations.

OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY PREVENT US FROM
RETAINING OUR COMPETITIVE ADVANTAGE

Our success and our ability to compete are dependent, in part, upon our
proprietary technology. Taken as a whole, we believe our intellectual property
rights are significant and any failure to adequately protect our proprietary
rights could result in our competitors offering similar products, potentially
resulting in loss of a competitive advantage and decreased revenues. In
addition, the laws of many foreign countries do not protect our intellectual
property to the same extent as the laws of the United States. Also, it may be
possible for unauthorized third parties to copy or reverse engineer aspects of
our products, develop similar technology independently or otherwise obtain and
use information that we regard as proprietary. Furthermore, policing the
unauthorized use of our products is difficult. Litigation may be necessary in
the future to enforce our intellectual property rights, to protect our trade
secrets or patents that we may obtain, or to determine the validity and scope of
the proprietary rights of others. Such litigation could result in substantial
costs and diversion of resources and could have a material adverse effect on our
future operating results.

INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND RESTRICT OUR BUSINESS

The data communications industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement. As the number of entrants in our market increases and the
functionality of our products is enhanced and overlaps with the products of
other companies, we may become subject to claims of infringement or
misappropriation of the intellectual property rights of others. Any claims
asserting that our products infringe or may infringe proprietary rights of third
parties, if determined adversely to us, could have a material adverse effect on
our business, financial condition or results of operations. Any claims, with or
without merit, could be time-consuming, result in costly litigation, divert the
efforts of our technical and management personnel, cause product shipment delays
or require us to enter into royalty or licensing agreements, any of which could
have a material adverse effect upon our operating results. Legal action claiming
patent infringement may be commenced against us. We cannot assure you that we
would prevail in such litigation given the complex technical issues and inherent
uncertainties in patent litigation. In the event a claim against us was
successful, and we could not obtain a license to the relevant technology on
acceptable terms or license a substitute technology or redesign to avoid
infringement, this could have a material adverse effect on our business,
financial condition and results of operations.


                            Page 17 of 22 Total Pages

<PAGE>

CHANGES TO REGULATIONS AFFECTING THE TELECOMMUNICATIONS INDUSTRY COULD REDUCE
DEMAND FOR OUR PRODUCTS

Any changes to the legal requirements relating to the telecommunications
industry, including the adoption of new regulations by federal or state
regulatory authorities under current laws or any legal challenges to existing
laws or regulations relating to the telecommunications industry, could have a
material adverse effect upon the market for our products. Moreover, our
distributors or customers may require, or we may otherwise deem it necessary
or advisable, that we modify our products to address actual or anticipated
changes in the regulatory environment. Our inability to modify our products
or address any regulatory changes could have a material adverse effect on our
business, financial condition or results of operations.

CONTROL BY BROOKTROUT MAY LIMIT STOCKHOLDERS' ABILITY TO INFLUENCE THE OUTCOME
OF MATTERS REQUIRING STOCKHOLDER APPROVAL

At December 31, 1999, Brooktrout owned approximately 57% of the outstanding
shares of common stock. Accordingly, Brooktrout will be able to control or
significantly influence matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions. This concentration of ownership could have
the effect of delaying or preventing a change in our control or otherwise
discouraging a potential acquiror from attempting to obtain control of us,
which in turn could have a material adverse effect on the market price of our
common stock or prevent our stockholders from realizing a premium over the
market prices for their shares of common stock.

SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD CAUSE
OUR STOCK PRICE TO FALL

The market price of our common stock could fall as a result of future sales of a
large number of shares of our common stock in the public market. As of February
7, 2000, we had approximately 10,774,462 shares of common stock outstanding, of
which approximately 3,957,400 shares are freely transferable without restriction
or registration under the Securities Act of 1933, unless such shares are held by
our affiliates. The remaining 6,817,062 shares of common stock held by existing
stockholders and 223,882 shares subject to outstanding options vested as of
February 7, 2000, of which 156,685 shares will be restricted securities and may
only be sold in the public market if registered or if they qualify for an
exemption from registration under the Securities Act and 67,197 shares are
freely transferable without restriction or registration under the Securities Act
of 1933. All of our officers and directors and Brooktrout have agreed with U.S.
Bancorp Piper Jaffray not to sell or otherwise dispose of any of their shares
for 180 days after the IPO. Beginning 180 days after the IPO, under specified
circumstances and subject to customary conditions, Brooktrout will have rights,
with respect to 6,075,000 shares of common stock, to require us to register its
shares of common stock under the Securities Act, and Brooktrout will have rights
to participate in any future registrations of securities by us.

PROVISIONS IN OUR CHARTER AND BYLAWS MAY DISCOURAGE TAKEOVER ATTEMPTS AND THUS
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK

Provisions in our amended and restated Certificate of Incorporation may have the
effect of delaying or preventing a change of control or changes in our
management. These provisions include:

        -      the right of the Board of Directors, without stockholder
               approval, to issue shares of preferred stock and to establish the
               voting rights, preferences, and other terms thereof;

        -      the right of the Board of Directors to elect a director to fill a
               vacancy created by the expansion of the Board of Directors;

        -      the ability of the Board of Directors to alter our bylaws without
               prior stockholder approval;

        -      the election of three classes of directors to each serve three
               year staggered terms;

        -      the elimination of stockholder voting by consent;

        -      the removal of directors only for cause;

        -      the vesting of exclusive authority in the Board of Directors
               (except as otherwise  required by law) to call special meetings
               of stockholders; and


                            Page 18 of 22 Total Pages

<PAGE>


        -      certain advance notice requirements for stockholder proposals
               and nominations for election to the Board of Directors.

These provisions discourage potential takeover attempts and could adversely
affect the market price of our common stock.

BECAUSE WE HAVE NO SPECIFIC PLAN FOR ANY SIGNIFICANT PORTION OF THE NET PROCEEDS
OF OUR IPO, OUR MANAGEMENT WILL HAVE THE DISCRETION TO ALLOCATE THE NET PROCEEDS
OF OUR IPO TO USES THE STOCKHOLDERS MAY NOT DEEM DESIRABLE

Although we expect to use the net proceeds of our IPO for general corporate
purposes such as working capital, product development and sales and marketing,
we currently have no other specific plan for any significant portion of the net
proceeds of our IPO. As a consequence, our management will have the discretion
to allocate the net proceeds of our IPO to uses the stockholders may not deem
desirable. We may not be able to invest these net proceeds to yield a
significant return. Substantially all of the net proceeds of our IPO will be
invested in short-term, interest-bearing, investment grade securities or
guaranteed obligations of the U.S. government for an indefinite period of time.

WE DO NOT INTEND TO PAY DIVIDENDS

To date, we have never declared or paid any cash dividends on shares of our
common stock. We currently intend to retain our earnings for future growth and
development of our business and, therefore, do not anticipate declaring or
paying any dividends in the foreseeable future.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk is the potential change in a financial instrument's value
caused by fluctuations in interest and currency exchange rates and equity and
commodity prices. Our operating activities expose us to many risks that are
continually monitored, evaluated, and managed. Proper management of these risks
helps reduce the likelihood of earnings volatility. At December 31, 1999, we
were not a party to any derivative arrangement and we do not engage in trading,
market-making or other speculative activities in the derivatives markets. We do
not engage in regular hedging activities to minimize the impact of foreign
currency fluctuations. At December 31, 1999, we had no short-term or long-term
debt obligations.


                            Page 19 of 22 Total Pages

<PAGE>


                                     PART II

                                OTHER INFORMATION


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

The Company completed its IPO in September 1999. The IPO was made pursuant to a
registration statement on Form S-1, originally filed with the Securities and
Exchange Commission on June 18, 1999, as amended (Commission File No.
333-81071), which was declared effective on September 23, 1999. The IPO
commenced on September 24, 1999 and terminated shortly thereafter after the sale
into the public market of all of the registered shares of common stock.

The shares of common stock sold in the IPO were offered for sale by a syndicate
of underwriters represented by U.S. Bancorp Piper Jaffray, Warburg Dillon Read
LLC, Tucker Anthony Cleary Gull and DLJdirect Inc.

The Company registered an aggregate of 3,500,000 shares of common stock
(including 1,500,000 sold by Brooktrout as a selling shareholder) in the IPO at
a per share price of $12.00, for an aggregate offering price of $42,000,000. As
of the date of the filing of this report, 3,925,000 registered shares (including
425,000 shares previously owned by Brooktrout that were sold upon the exercise
of the underwriters' overallotment option) have been sold at an aggregate
offering price of $47,100,000. Of the 3,925,000 shares sold in the IPO,
2,000,000 shares were registered for the Company's account.

The Company incurred the following expenses in connection with the IPO:


<TABLE>
<CAPTION>

<S>                                                  <C>

Underwriting discounts and commissions ............  $1.68 million
Other expenses ....................................   1.53 million
                                                     -------------
Total expenses ....................................  $3.21 million
                                                     -------------
                                                     -------------

</TABLE>


After deducting the expenses set forth above, the Company received $20,790,000
in net proceeds for the IPO. From the period commencing on September 23, 1999
through December 31, 1999, the Company has used approximately $6.6 million of
the net proceeds, of which approximately $6.1 million was used to fund operating
activities including the net loss for the first fiscal quarter of 2000, and
approximately $500,000 which was used to purchase equipment.


                            Page 20 of 22 Total Pages

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

3.1      The Amended and Restated Certificate of Incorporation of the Company is
         incorporated herein by reference to Exhibit 3.1 to the Company's Annual
         Report on Form 10-K, filed with the Securities and Exchange Commission
         on December 29, 1999 ("10-K").

3.2      The Amended and  Restated  By-Laws of the Company are  incorporated
         herein by reference to Exhibit 3.2 to the 10-K.

27.1     Financial Data Schedule


(b)      Reports on Form 8-K during the quarter ended December 31, 1999. The
         registrant filed the following Current Reports on Form 8-K during the
         quarter ended December 31, 1999:

         1.       On October 7, 1999, the Company filed a Current Report on
                  Form 8-K, disclosing its estimated revenue for the quarter
                  ended September 30, 1999.

         2.       On November 30, 1999, the Company filed a Current Report on
                  Form 8-K, disclosing its results of operations for the fourth
                  quarter and fiscal year ended September 30, 1999.


                            Page 21 of 22 Total Pages

<PAGE>


                                   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.


                                         INTERSPEED, INC.

Dated:  February 14, 2000                By:        /s/ Stephen A. Ide
                                             -------------------------------
                                             Stephen A. Ide
                                             President
                                             (Principal Executive Officer)


Dated:  February 14, 2000                By:       /s/ William J. Burke
                                             -------------------------------
                                             William J. Burke
                                             Chief Financial Officer, Senior
                                             Vice President--Finance, and
                                             Treasurer
                                             (Principal Financial Officer)


                            Page 22 of 22 Total Pages