<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-26763
----------------
NET2PHONE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3559037
(State or Other (I.R.S. Employer Identification No.)
Jurisdiction of
Incorporation or
Organization)
171 Main Street, Hackensack, New Jersey 07601
(Address of Principal Executive Offices, including Zip Code)
Registrant's Telephone Number, Including Area Code: (201) 530-4000
----------------
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 [_]
As of December 13, 1999, the registrant had outstanding 17,672,616 shares of
common stock, $.01 par value, and 33,924,250 shares of Class A stock, $.01 par
value.
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<PAGE>
NET2PHONE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:......................................... 1
Condensed Consolidated Balance Sheets as of October 31, 1999 and
July 31, 1999................................................... 1
Condensed Consolidated Statements of Operations for the three
months ended October 31, 1999 and 1998.......................... 2
Condensed Consolidated Statement of Stockholders' Equity
(Deficit) for the three months ended October 31, 1999........... 3
Condensed Consolidated Statements of Cash Flows for the three
months ended October 31, 1999 and 1998.......................... 4
Notes to Condensed Consolidated Financial Statements............ 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 8
Item 2. Changes in Securities and Use of Proceeds..................... 8
Item 3. Defaults Upon Senior Securities............................... 8
Item 4. Submission of Matters to a Vote of Security Holders........... 8
Item 5. Other Information............................................. 8
Item 6. Exhibits and Reports on Form 8-K.............................. 8
Signatures............................................................ 11
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
NET2PHONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, July 31,
1999 1999
------------ ------------
(unaudited) (Note 1)
<S> <C> <C>
ASSETS:
-------
Current assets:
Cash and cash equivalents........................ $ 84,757,962 $ 20,379,048
Trade accounts receivable........................ 1,062,376 531,536
Prepaid contract deposits........................ 9,285,107 6,162,084
Other current assets............................. 3,452,102 999,918
------------ ------------
Total current assets........................... 98,557,547 28,072,586
Property and equipment, net...................... 22,384,912 17,844,901
Trademark, net................................... 4,688,406 4,791,667
Other assets..................................... 107,737 107,737
------------ ------------
Total assets................................... $125,738,602 $ 50,816,891
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
-------------------------------------
Current liabilities:
Accounts payable................................. $ 4,574,160 $ 2,151,778
Accrued expenses................................. 3,937,574 4,692,953
Deferred revenue................................. 1,815,743 2,370,632
Due to IDT Corporation........................... 5,914,762 12,553,771
------------ ------------
Total current liabilities...................... 16,242,239 21,769,134
Due to IDT Corporation............................. 4,843,692 5,181,624
------------ ------------
Total liabilities.............................. 21,085,931 26,950,758
Commitments and contingencies
Redeemable convertible preferred stock, Series A,
$.01 par value; 3,150,000 shares authorized; no
and 3,140,000 shares issued and outstanding....... -- 27,929,000
Stockholders' equity (deficit)
Preferred stock, $.01 par value; 6,850,000 shares
authorized; no shares issued and outstanding.... -- --
Common stock, $.01 par value; 200,000,000
authorized; 11,672,616 and 4,819,777 shares
issued and outstanding.......................... 116,727 48,198
Class A stock, $.01 par value, 37,042,089
authorized and 36,524,250 and 27,622,089 shares
issued and outstanding.......................... 365,241 276,220
Additional paid-in capital....................... 175,118,950 61,126,266
Accumulated deficit.............................. (38,820,556) (30,455,286)
Deferred compensation--stock options............. (28,977,701) (31,908,275)
Loans to stockholders............................ (3,149,990) (3,149,990)
------------ ------------
Total stockholders' equity (deficit)........... 104,652,671 (4,062,867)
------------ ------------
Total liabilities and stockholders' equity
(deficit)..................................... $125,738,602 $ 50,816,891
============ ============
</TABLE>
1
<PAGE>
NET2PHONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
October 31,
------------------------
1999 1998
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Revenue:
Service revenue.................................... $12,379,956 $ 5,426,429
Product revenue.................................... 756,962 236,990
----------- -----------
Total revenue.................................... 13,136,918 5,663,419
Costs and expenses:
Direct cost of revenue:
Service cost of revenue.......................... 6,330,498 3,214,247
Product cost of revenue.......................... 503,613 139,000
----------- -----------
Total direct cost of revenue................... 6,834,111 3,353,247
----------- -----------
Gross profit......................................... 6,302,807 2,310,172
Operating expenses:
Selling and marketing.............................. 6,266,476 1,299,903
General and administrative......................... 5,707,539 1,900,234
Depreciation and amortization...................... 850,031 338,469
Compensation charge from the issuance of Stock
Options........................................... 2,930,574 --
----------- -----------
Total costs and expenses....................... 22,588,731 6,891,853
Loss from operations................................. (9,451,813) (1,228,434)
----------- -----------
Interest income, net................................. 1,086,543 --
----------- -----------
Net loss............................................. $(8,365,270) $(1,228,434)
=========== ===========
Basic and diluted net loss per common share.......... $ (.17) $ (.04)
=========== ===========
Weighted average number of common shares used in the
calculation of basic and diluted net loss per common
share......... 47,846,755 30,960,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
NET2PHONE, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Class A Stock
------------------- --------------------
Additional
Paid-In Accumulated Deferred Loans to
Shares Amount Shares Amount Capital Deficit Compensation Stockholders
---------- -------- ---------- -------- ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31,
1999........... 4,819,777 $ 48,198 27,622,089 $276,220 $ 61,126,266 $(30,455,286) $(31,908,275) $(3,149,990)
Issuance of
Common Stock... 6,210,000 62,100 85,159,384
Conversion of
Class A Stock
to Common
Stock.......... 517,839 5,179 (517,839) (5,179)
Exercise of
Stock Options.. 125,000 1,250 998,500
Conversion of
Preferred Stock
to Class A
Stock.......... 9,420,000 94,200 27,834,800
Net Loss for
Three Months
Ended October
31, 1999....... (8,365,270)
Amortization of Deferred
Compensation... 2,930,574
---------- -------- ---------- -------- ------------ ------------ ------------ -----------
Balance at
October 31,
1999........... 11,672,616 $116,727 36,524,250 $365,241 $175,118,950 $(38,820,556) $(28,977,701) $(3,149,990)
========== ======== ========== ======== ============ ============ ============ ===========
<CAPTION>
Total
Stockholders'
Equity
(Deficit)
--------------
<S> <C>
Balance at July 31,
1999........... $(4, 062,867)
Issuance of
Common Stock... 85,221,484
Conversion of
Class A Stock
to Common
Stock.......... --
Exercise of
Stock Options.. 999,750
Conversion of
Preferred Stock
to Class A
Stock.......... 27,929,000
Net Loss for
Three Months
Ended October
31, 1999....... (8,365,270)
Amortization of Deferred
Compensation... 2,930,574
--------------
Balance at
October 31,
1999........... $104,652,671
==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
NET2PHONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months ended
October 31,
--------------------------
1999 1998
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Operating activities:
Net loss.......................................... $ (8,365,270) $ (1,228,434)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 850,031 338,469
Amortization of deferred compensation........... 2,930,574 --
Changes in assets and liabilities:
Accounts receivable........................... (530,840) 160,694
Prepaid contract deposits..................... (3,123,013) --
Other current assets.......................... (2,452,184) --
Other assets.................................. -- (7,317)
Accounts payable.............................. 2,422,382 --
Accrued expenses.............................. (755,379) --
Deferred revenue.............................. (554,889) 135,398
------------ ------------
Net cash used in operating activities............. (9,578,598) (601,189)
Investing activities:
Purchases of property and equipment............. (5,286,781) (1,038,188)
------------ ------------
Net cash used in investing activities............. (5,286,781) (1,038,188)
Financing activities:
Proceeds from issuance of initial public
offering, net.................................. 85,221,484 --
Proceeds from exercise of stock options......... 999,750 --
Net advances from IDT Corporation............... (6,976,941) 1,639,377
------------ ------------
Net cash provided by financing activities......... 79,244,293 1,639,377
------------ ------------
Net increase in cash and cash equivalents......... 64,378,914 --
Cash and cash equivalents at beginning of
period........................................... 20,379,048 10,074
------------ ------------
Cash and cash equivalents at end of period........ $ 84,757,962 $ 10,074
============ ============
Supplemental disclosure of cash flow information:
Cash payments made for interest................. $ -- $ --
============ ============
Cash payments made for income taxes............. $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
NET2PHONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Net2Phone, Inc. and Subsidiary (collectively, "the Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. The results for the interim periods presented are not
necessarily indicative of the results that may be expected for any future
period. The following information should be read in conjunction with the
financial statements and notes thereto included in Net2Phone's annual report on
Form 10-K for the year ended July 31, 1999.
2. Accounting Policies
In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in fiscal years beginning after June 15, 2000.
Management does not anticipate that the adoption of this standard will have a
significant effect on earnings or the financial position of the Company.
The shares issuable upon the exercise of stock options and warrants are
excluded from the calculation of net loss per share as their effect would be
antidilutive.
3. Subsequent Event-Secondary Offering
On November 30, 1999, the Securities and Exchange Commission declared
effective the Company's registration statement on Form S-1 (File No. 333-
90317), to which the Company completed a public offering of 7,245,000 shares of
common stock at a price of $55.00 per share. 3,845,000 shares were sold by
selling stockholders and 3,400,000 shares were sold by Net2Phone. Net proceeds
to Net2Phone, after deducting underwriting discounts and commissions and
offering expenses were approximately $177.7 million.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion of the financial condition and results of
operations of Net2Phone should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and the Notes thereto included in the
Company's Annual Report on Form 10-K for the year ended July 31, 1999. This
quarterly report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties and actual results could differ
materially from those discussed in the forward-looking statements. All forward-
looking statements and risk factors included in this document are made as of
the date hereof, based on information available to Net2Phone as of the date
thereof, and Net2Phone assumes no obligation to update any forward-looking
statement or risk factors.
Results of Operations
Revenue. Revenue increased 132% from approximately $5.7 million for the
three months ended October 31, 1998 to approximately $13.1 million for the
three months ended October 31, 1999. The increase in revenue was primarily due
to an increase in billed minutes of use resulting from additional marketing of
our products and services.
Direct Cost of Revenue. Net2Phone's direct cost of revenue consists
primarily of network costs associated with carrying our customers' traffic on
our network and leased networks, and routing their calls through a local
telephone company to reach their final destination. Direct cost of revenue
increased by 103.8%, from approximately $3.4 million for the three months ended
October 31, 1998 to approximately $6.8 million for the three ended October 31,
1999. As a percentage of total revenue, these costs decreased from
approximately 59.2% for the three months ended October 31, 1998 to
approximately 52% for the three months ended October 31, 1999. This decrease is
primarily attributable to improved efficiencies in terminating traffic and
utilization of network assets.
Selling and Marketing. Selling and marketing expenses consist primarily of
expenses associated with acquiring customers, including commissions paid to our
sales personnel, advertising costs, referral fees and amounts paid to our
strategic partners in connection with revenue-sharing arrangements. Selling and
marketing expenses increased approximately 382% from approximately $1.3 million
for the three months ended October 31, 1998 to approximately $6.3 million for
the three months ended October 31, 1999. This increase primarily reflects the
increased marketing and advertising expenses associated with the agreements
established with Netscape, Infospace.com, Yahoo!, Excite, Snap and other
strategic partners.
General and Administrative. General and administrative expenses consist of
the salaries of our employees and associated benefits, and the cost of
insurance, travel, entertainment, rent and utilities. General and
administrative expenses increased approximately 200% from approximately $1.9
million for the three months ended October 31, 1998 to approximately $5.7
million for the three months ended October 31, 1999. As a percentage of total
revenue these costs increased from approximately 33.6% for the three months
ended October 31, 1998 to approximately 43.5% for the three months ended
October 31, 1999. This increase was primarily attributable to the additional
organizational infrastructure and an increase in personnel as the Company
continues to build its operations, customer service, marketing and business
development functions.
Depreciation and Amortization. Depreciation and amortization increased
approximately 151% from approximately $338,000 for the three months ended
October 31, 1998 to approximately $850,000 for the three months ended October
31, 1999. As a percentage of total revenues, these costs increased from
approximately 6% for the three months ended October 31, 1998 to approximately
6.5% for the three months ended October 31, 1999. Depreciation will continue to
increase as we increase capital expenditures for the deployment of network
equipment both domestically and internationally to manage increased call
volumes.
6
<PAGE>
Compensation Charge from the Issuance of Stock Options. We recognized $2.9
million of non-cash compensation expense in the three months ended October 31,
1999 as a result of stock options granted in May 1999 and July 1999. As a
percentage of total revenue, the compensation charge from the issuance of stock
options was 22.3%. No compensation charge from the issuance of stock options
was recognized in the three months ended October 31, 1998.
Loss from Operations. Loss from operations was approximately $1.2 million
for the three months ended October 31, 1998 as compared to loss from operations
of approximately $9.5 million for the three months ended October 31, 1999.
Excluding the non-cash compensation charge described above, our loss from
operations for the three months ended October 31, 1999 would have been $6.5
million.
Interest Income, net. Interest income consists primarily of interest earned
on cash and cash equivalents. Interest income for the three months ended
October 31, 1999 was $1.1 million representing approximately 8.3% of total
revenues. No interest income was recognized for the three months ended October
31, 1998.
Liquidity and Capital Resources
As of October 31, 1999, the Company had cash and cash equivalents of
approximately $84.8 million and working capital of approximately $82.3 million.
The Company generated negative cash flow from operating activities of
approximately $9.5 million during the three months ended October 31, 1999,
compared with negative cash flow from operating activities of $0.6 million
during the three months ended October 31, 1998. Accounts receivable were
approximately $1.1 million and $ 0.5 million at October 31, 1999 and 1998,
respectively. Accounts receivable and accounts payable have increased from
period to period as the Company's business has grown.
The Company's capital expenditures increased from approximately $1.0 million
in the three months ended October 31, 1998 to approximately $5.3 million in the
three months ended October 31, 1999, as the Company expanded its domestic and
international network infrastucture.
On November 30, 1999, the Securities and Exchange Commission declared
effective the Company's registration statement on Form S-1 (File No. 333-
90317), pursuant to which the Company completed a public offering of 7,245,000
shares of common stock at a price of $55.00 per share. 3,845,000 shares were
sold by selling stockholders and 3,400,000 shares were sold by Net2Phone. Net
proceeds to Net2Phone, after deducting underwriting discounts and commissions
and offering expenses, were approximately $177.7 million.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
7
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Net2Phone is not a party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
On July 29, 1999, the Securities and Exchange Commission declared effective
Net2Phone's registration statement on Form S-1 (File No. 333-78713) for an
initial public offering of 6,210,000 shares of common stock at an offering
price of $15.00 per share (the "IPO"). The IPO was managed by Hambrecht & Quist
LLC, Deutsche Bank Securities and Bear, Stearns & Co. Inc.
The Company received net proceeds of approximately $85.3 million from the
sale of its shares of common stock pursuant to the IPO. $7.0 million of the net
proceeds was used to repay a portion of the $14.0 million note outstanding to
IDT Corporation. $3.5 million was used to pay ICQ, a subsidiary of America
Online, in connection with our distribution and marketing agreement. The
balance has been invested in short-term, interest-bearing securities. Net2Phone
expects to use the balance of the net proceeds of the IPO for developing and
maintaining strategic relationships, advertising and promotion, research and
development, upgrading our network and general corporate purposes, including
working capital. Other than the repayment of a portion of the IDT Corporation
note, none of the net proceeds of the IPO were paid by the Company to any
director, officer or general partner of the Company or any of their associates,
or to any persons owning ten percent or more of any class of the Company's
equity securities, or to any affiliates of the Company.
On November 30, 1999, the Securities and Exchange Commission declared
effective Net2Phone's registration statement on Form S-1 (File No. 333-90317),
pursuant to which Net2Phone completed a public offering of 7,245,000 shares of
common stock at an offering price of $ 55.00 per share (the "Secondary
Offering"). 3,845,000 shares were sold by selling stockholders and 3,400,000
shares were sold by Net2Phone. The Secondary Offering was managed by Hambrecht
& Quist LLC, Donaldson Lufkin & Jenrette Securities Corporation, Deutsche Bank
Securities, BancBoston Robertson Stephens Inc. and Bear, Stearns & Co. Inc.
Proceeds to Net2Phone were approximately $177.7 million after deducting
underwriting commissions and discounts of approximately $8.6 million and
expenses of approximately $750,000. Net2Phone expects to use the net proceeds
for developing and maintaining strategic relationships, advertising and
promotion, upgrading and expanding its network, international expansion,
research and development, potential acquisitions and general corporate
purposes.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1* Certificate of Incorporation, as amended.
3.2* Bylaws.
3.3* Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.4* Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant.
4.1* Specimen Common Stock Certificate of the Registrant.
10.1* Employment Agreement, dated May 1, 1997, by and between Clifford M. Sobel and IDT
Corporation.
10.2* Amendment to Employment Agreement between IDT Corporation and Clifford M. Sobel,
dated as of May 11, 1999, by and between Clifford M. Sobel, IDT Corporation and the
Registrant.
10.3#* Bundling and Distribution Services Agreement, dated as of January 31, 1999, by and
between Netscape Communications Corporation and the Registrant.
10.4* General License Terms & Conditions, dated as of January 31, 1999, by and between
Netscape Communications Corporation and the Registrant.
10.5* Trademark License Agreement, dated as of January 31, 1999, by and between Netscape
Communications Corporation and the Registrant.
10.6* Internet/Telecommunications Agreement, dated as of May 7, 1999, by and between IDT
Corporation and the Registrant.
10.7* Joint Marketing Agreement, dated as of May 7, 1999, by and between IDT Corporation
and the Registrant.
10.8* IDT Services Agreement, dated as of May 7, 1999, by and between IDT Corporation and
the Registrant.
10.9* Net2Phone Services Agreement, dated as of May 7, 1999, by and between IDT
Corporation and the Registrant.
10.10* Assignment Agreement, dated as of May 7, 1999, by and between IDT Corporation and
the Registrant.
10.11* Tax Sharing and Indemnification Agreement, dated as of May 7, 1999, by and between
IDT Corporation and the Registrant.
10.12* Separation Agreement, dated as of May 7, 1999, by and between IDT Corporation and
the Registrant.
10.13* Lease Agreement, dated as of March 1, 1999, by and between 171-173 Main Street
Corporation and the Registrant.
10.14* Lease Agreement, dated as of March 1, 1999, by and between 294-298 State Street
Corporation and the Registrant.
10.15* The Registrant's Amended and Restated 1999 Stock Option and Incentive Plan.
10.16* Series A Subscription Agreement, dated as of May 13, 1999, by and between the
Investors listed therein and the Registrant.
10.17* Series A Preferred Shareholder Registration Rights Agreement, dated as of May 13, 1999,
by and between the Investors listed therein and the Registrant.
10.18* Form of Warrant to Purchase Common Stock.
10.19* Promissory Note of Registrant to IDT Corporation, dated as of May 12, 1999.
10.20* Stockholders Agreement, dated as of May 13, 1999, by and among the Investors listed
therein, IDT Corporation, Clifford M. Sobel, the trustee of the Scott Sobel Annual Gift
Trust and the Registrant.
10.21* Letter agreement, dated as of May 12, 1999, by and among IDT Corporation, Clifford M.
Sobel and the Registrant.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.22* Letter agreement, dated as of May 17, 1999, by and among IDT Corporation, Clifford M.
Sobel and the Registrant.
10.23* Co-Location and Facilities Management Services Agreement, dated as of May 20, 1999,
by and between IDT Corporation and the Registrant.
10.24* Form of Loan Agreement between the Registrant and each of its executive officers.
10.25* Form of Stock Option Agreement for Executive Officers.
10.26#* Letter agreement, dated as of June 25, 1999, by and between National Broadcasting
Company, Inc. and the Registrant.
10.27* Employment Agreement, dated July 2, 1999, by and between Jonathan Fram and the
Registrant.
10.28#* IP Telephony Services Distribution and Interactive Marketing Agreement, dated as of
July 15, 1999, by and between ICQ, Inc. and the Registrant.
10.29#* Stock Subscription Warrant, dated July 15, 1999, by and between America Online, Inc.
and the Registrant.
10.30* Amendment No. 1 to Employment Agreement, dated July 16, 1999, by and between
Jonathan Fram and the Registrant.
10.31** Amendment to Stock Subscription Warrants, dated November 19, 1999, by and between
America Online, Inc. and the Registrant.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference from our registration statement on Form S-
1(Registration No. 333-78713).
** Incorporated by reference from our registration statement on Form S-
1(Registration No. 333-90317).
# Confidential treatment granted as to parts of this document.
b.) Reports on Form 8-K.
Not applicable.
10
<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.
NET2PHONE, INC.
/s/ Howard S. Balter
By___________________________________
Howard S. Balter
Chief Executive Officer
/s/ Ilan M. Slasky
By___________________________________
Ilan M. Slasky
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED OCTOBER 31, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 84,757,962
<SECURITIES> 0
<RECEIVABLES> 1,062,376
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 98,557,547
<PP&E> 26,095,177
<DEPRECIATION> (3,710,265)
<TOTAL-ASSETS> 125,738,602
<CURRENT-LIABILITIES> 16,242,239
<BONDS> 0
0
0
<COMMON> 116,727
<OTHER-SE> 104,535,944
<TOTAL-LIABILITY-AND-EQUITY> 125,738,602
<SALES> 0
<TOTAL-REVENUES> 13,136,918
<CGS> 6,834,111
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<INTEREST-EXPENSE> (227,339)
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<INCOME-TAX> 0
<INCOME-CONTINUING> (8,365,270)
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<CHANGES> 0
<NET-INCOME> (8,365,270)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
