MPHASE TECHNOLOGIES INC, SB-2, 1999-08-13

MPHASE TECHNOLOGIES INC
SB-2, 1999-08-13
TELEPHONE INTERCONNECT SYSTEMS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1999
REGISTRATION NO. 333-

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

mPHASE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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NEW JERSEY (PRIMARY STANDARD INDUSTRIAL 22-2287503
(STATE OR OTHER JURISDICTION CLASSIFICATION CODE NUMBER) (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) 7385 IDENTIFICATION NO.)

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587 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854-0566
(203) 838-2741
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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RONALD A. DURANDO
CHIEF EXECUTIVE OFFICER
mPHASE TECHNOLOGIES, INC.
587 CONNECTICUT AVENUE
NORWALK, CONNECTICUT 06854-0566
(203) 838-2741
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
ROBERT H. JAFFE
ROBERT H. JAFFE & ASSOCIATES, P.A.
8 MOUNTAIN AVENUE
SPRINGFIELD, NEW JERSEY 07081-1728
(973)467-2246
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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CALCULATION OF REGISTRATION FEE

PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(1)
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Common Stock, without par value, to be offered by
selling stockholders.......................... 6,610,698 SHARES $6.03125 $ 39,870,772.31 $ 11,084.08
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(1) Fee calculated in accordance with Rule 457(c) under the Securities Act of
1933, as amended. Estimated solely for the purpose of calculating the
registration fee based on the average of the bid and ask prices per share of
the Registrant's common stock on August 10, 1999, as reported on the Nasdaq
OTC bulletin board.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.

<PAGE>

The information in this prospectus is not complete and may change. The selling
stockholders may not sell these securities publicly until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.

SUBJECT TO COMPLETION - AUGUST 13, 1999

MPHASE TECHNOLOGIES, INC.

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PROSPECTUS

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The stockholders of mPhase Technologies, Inc. identified elsewhere in this
prospectus are offering up to 6,610,698 shares of our common stock for resale to
the public. These selling stockholders will be selling shares of common stock
they own or that they can acquire by exercising warrants they own.

We will not receive any proceeds from the resale of shares of our common
stock by the selling stockholders. We are paying the expenses of this offering.

The primary market for our common stock is the Nasdaq OTC Bulletin Board,
where it trades under the symbol "XDSL." On August 10, 1999, the last reported
bid price of our common stock was $6.00 per share.

AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU SHOULD
CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED ON PAGES 5 TO 9 BEFORE INVESTING
IN OUR COMMON STOCK.

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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is _________, 1999

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TABLE OF CONTENTS

PAGE
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Cautionary Statement Concerning Forward-Looking Statements...................... 3
Prospectus Summary.............................................................. 4
Risk Factors.................................................................... 5
The Offering.................................................................... 9
Use of Proceeds................................................................. 10
Price Range of Common Stock..................................................... 10
Dividend Policy................................................................. 10
Management's Plan of Operation.................................................. 11
Our Business.................................................................... 12
Our Management.................................................................. 20
Security Ownership of Certain Beneficial Owners and Management.................. 24
Certain Relationships and Related Transactions.................................. 25
Selling Stockholders............................................................ 27
Plan of Distribution............................................................ 30
Description of Securities....................................................... 32
Legal Proceedings............................................................... 33
Legal Matters .................................................................. 33
Experts......................................................................... 33
Where You Can Find Additional Information....................................... 33
Index to Our Financial Statements............................................... F-1
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<PAGE>

CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS

We have made statements under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Our Business" and elsewhere in this prospectus that are
forward-looking statements that involve substantial risks and uncertainties. You
can identify these statements by forward-looking words such as "may," "will,"
"expect," "anticipate," "believe," "estimate," and "continue" or similar words.
You should read statements that contain these words carefully because they: (1)
discuss our future expectations; (2) contain projections of our future results
of operations or of our financial condition; or (3) state other "forward
looking" information.

We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or which we do not fully control. Important factors that
could cause actual results to differ materially from these expressed or implied
by our forward-looking statements, include, but are not limited to those risks,
uncertainties and other factors discussed under "Risk Factors" or elsewhere in
this prospectus.

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PROSPECTUS SUMMARY

THIS IS A SUMMARY OF INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES TO THE FINANCIAL
STATEMENTS, APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN OUR ANNUAL AND
QUARTERLY REPORTS AND OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
REFERENCES IN THIS PROSPECTUS TO "WE," "US" AND "OUR" REFER TO MPHASE
TECHNOLOGIES, INC., TOGETHER WITH ITS WHOLLY-OWNED SUBSIDIARIES, LIGHTPATHS,
INC., MICROPHASE TELECOMMUNICATIONS, INC. AND MPHASETV.NET/INC.

OUR COMPANY

We are a development stage company engaged in the development of
high-bandwidth telecommunications products incorporating digital subscriber
line, or DSL technology. Our products are designed to enable high speed
broadband transmission over the installed copper telephone wire infrastructure.
We believe that our DSL technology is unique in that in enables simultaneous
delivery of high-speed internet access, digital television programming and
telephone communications over an existing telephone line on an unshared
platform.

Our principal product is called the Traverser Digital Video Data
Delivery System, or DVDDS. We have installed a prototype system at Hart
Telephone in Hartwell, Georgia, our beta customer. We intend to reach commercial
production of the Traverser DVDDS Version 1.1, a system capable of transmitting
up to 192 channels of MPEG-2 digital television, by April 2000 and Version 2.0,
a 400 channel system, by the end of calendar year 2000. We cannot assure that
our efforts will be successful, or that we can meet these deadlines.

Our Traverser DVDDS products utilize technology licensed on an
exclusive basis from Georgia Tech Research Institute. Under a Basic Ordering
Research Agreement, Georgia Tech conducts a significant portion of the
engineering research and design efforts for us in developing the Traverser
product line.

If our Traverser product line is successfully developed, we intend to
direct our marketing efforts to telephone companies, competitive local exchange
carriers, domestic and international local exchange carriers, internet service
providers and regional Bell operating companies, or RBOCs. We expect to stress
to these service providers that use of the Traverser DVDDS will enable them to
offer customers an integrated package of enhanced services.

EXECUTIVE OFFICES

mPhase Technologies, Inc.
587 Connecticut Ave.
Norwalk, CT 06854-0566
Phone: 203-838-2741

INCORPORATION

We were incorporated in December 1979 in New Jersey under the name of
Tecma Laboratory, Inc. and in June 1997 we changed our name to mPhase
Technologies, Inc.

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RISK FACTORS

AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN INVESTMENT
DECISION CONCERNING OUR COMMON STOCK. YOU SHOULD NOT PURCHASE OUR COMMON STOCK
IF YOU CANNOT AFFORD THE LOSS OF YOUR ENTIRE INVESTMENT.

WE ANTICIPATE THAT WE WILL INCUR CONTINUED LOSSES FOR THE FORESEEABLE FUTURE AND
WE MAY NEVER BE PROFITABLE

We have never been profitable. As of March 31, 1999, we had an
accumulated deficit of approximately $9.5 million. For the year ended June 30,
1998 our net losses were approximately $4.3 million, and for the nine months
ended March 31, 1999 our net losses were approximately $4.4 million. We expect
to continue to incur losses for the foreseeable future. In order to attain
profitability, we must successfully complete development of, and successfully
market, our products. We may never achieve profitability.

OUR PRODUCTS ARE NOT READY FOR SALE AND WE MAY NEVER SUCCESSFULLY MARKET OUR
PRODUCTS

Since our inception, we have been engaged primarily in coordinating
with Georgia Tech, Microphase Corporation, a leading developer of
telecommunications technology, and our outside consultants in the development of
our DSL products and related technology, the recruitment of management and
technical personnel, and the raising of capital. We are in the process of
completing the development of our initial DSL product. We have not licensed or
sold any of our products or technologies to date. If we are unable to
successfully develop and market our DSL products, our business will not be
viable over the long-term.

OUR PRODUCTS MAY NOT BE ACCEPTED BY THE TELECOMMUNICATIONS EQUIPMENT MARKET

If our products do not gain commercial acceptance in the
telecommunications equipment marketplace, our business will be materially
adversely affected. Even if our DSL products succeed initially, we may be unable
to address changing consumer demands in the intensely competitive
telecommunications equipment market, which is characterized by swift
technological change, and frequent new product introduction. If we misjudge the
market for our products or if our technology is obsolete when we bring our
products to market, our ability to sell our products will suffer significantly.

IF OUR DSL TECHNOLOGY IS NOT WIDELY ACCEPTED AS A MEDIUM FOR TRANSMITTING
DIGITAL TELEVISION, INTERNET DATA AND VOICE SERVICE, OUR BUSINESS WILL SUFFER

Our future growth depends upon the widespread commercial acceptance by
service providers of our DSL technology. Service providers have only begun to
deploy DSL systems for technical and limited access marketing trials. If service
providers do not deploy the DSL technology or are delayed in deploying the DSL
technology, our business will be materially adversely affected.

THE LIMITATIONS OF COPPER TELEPHONE WIRE MAY ADVERSELY AFFECT THE DEMAND FOR OUR
PRODUCTS

All of our products are based on the use of copper telephone wire.
Copper wire networks have several limitations that make high speed data
transmission difficult. A significant portion of these networks is old and has
been implemented and repaired over many years. Consequently, these networks
consist of several different grades of wire. The copper wiring used by telephone
companies is also unshielded, making data transmission susceptible to
interference from noise, including sources such as motors, lightning, broadcast
radio and POTS. In addition, copper wiring has a basic transmission property
that causes the signal quality to degrade rapidly as the frequency increases or
the distance traveled by the signal increases.

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As a result of these limitations, our Traverser product may not be a
viable solution for customers requiring service at performance levels beyond the
current limits of copper telephone wire. Commercial acceptance of any competing
technologies, such as fiber optic cables, coaxial cables, satellites and other
wireless facilities, or any technological advancement or product introduction
that provides faster access, greater reliability, increased cost-effectiveness
or other advantages over technologies that utilize existing copper telephone
wires could decrease the likelihood of commercial success for our products and
materially adversely affect our business.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY

The market for telecommunications equipment is intensely competitive
and subject to rapid technological change. Several competing solutions such as
fiber optic, cable, wireless and satellite technologies will coexist in a
competitive environment and compete with our DSL products for market share.
Service providers may use other technologies to deploy high-speed transmission
such as fiber optic cable, hybrid coaxial cable, ISDN or other alternatives.

Within the DSL arena, we have numerous competitors, including:

- ADTRAN;
- Alacatel;
- Aware, Inc.;
- Broadband Technologies;
- CISCO Systems, Inc.;
- ESI;
- Lucent Technologies;
- General Data Com;
- Orckit Communications;
- PairGain Technologies;
- TUT Systems;
- Westell Technologies;
- AG Communications Systems;
- Copper Mountain;
- Diamond Lane;
- Paradyne; and
- SourceNet.

Many of our current and potential competitors have advantages over us.
These advantages include longer operating histories, larger client bases and
significantly greater financial, personnel, marketing, sales and public
relations resources.

Our revenues and results of operations will be adversely affected if we
do not compete successfully.

WE HAVE LIMITED MARKETING RESOURCES WITH WHICH TO EXPAND OUR BUSINESS

Our success will depend upon our ability to market our products to
service providers. We currently have limited financial, personnel and other
resources to undertake the extensive marketing activities necessary to sell our
products successfully. If we are unable to access additional marketing
resources, our profitability may suffer.

WE RELY SIGNIFICANTLY UPON A THIRD PARTY TO DEVELOP OUR PRODUCTS

We rely significantly on Georgia Tech for research involved with the
development of our products. We have entered into a Basic Ordering Research
Agreement with Georgia Tech, which includes a series of delivery orders
providing guidelines for the research and development of portions or components
of the Traverser. Although

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Georgia Tech has been able to develop working prototypes of our DSL product,
these products are not yet in a commercially salable form. Our business will be
materially adversely affected if Georgia Tech does not perform its
responsibilities on an acceptable basis or terminates our relationship, and we
are unable to replace their development services on a prompt basis.

WE WILL RELY UPON A THIRD PARTY TO MANUFACTURE OUR PRODUCTS

We have not secured a third party to manufacture our DSL product. If we
are unable to contract with a third party manufacturer on favorable terms, our
business may be materially adversely affected.

Even if we do secure a third party to manufacture our products,
dependence on a third party manufacturer is inherently risky. If there is a
disruption in supply from our principal manufacturer, we may be unable to obtain
the products we desire to sell. Our sales would suffer as a result of a
disruption in the operations of any of our manufacturers.

OUR KEY EXECUTIVES ARE AFFILIATED WITH MICROPHASE, ONE OF OUR MAJOR SUPPLIERS,
AND THIS MAY RESULT IN A CONFLICT OF INTEREST

Necdet F. Ergul, our Chairman of the Board, Ronald A. Durando, our
President and Chief Executive Officer, and Gustave T. Dotoli, our Chief
Operating Officer, are Chairman of the Board, Chief Operating Officer and Vice
President of Corporate Development, respectively, as well as shareholders of
Microphase Corporation. We currently purchase from Microphase passive components
of the Traverser, as well as resources and technology related to the development
of Traverser. Microphase may not be the most economical provider of these
components and resources. In addition, we will pay to Microphase, going forward,
a royalty comprised of a percentage of the commercial product sales for the
development of certain DSL-related technologies provided by Microphase.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY

Our success depends in part on our ability to protect our intellectual
property. To protect our proprietary rights, we have filed provisional patents
and copyright applications relating to some of our proposed products and
technology. Georgia Tech has filed an application for U.S. Patent for Georgia
Tech's Digital Video and Data System. Although we believe that certain of our
technology is patentable, the patents may not be obtained. Even if the patents
are obtained, the patents may not afford us sufficient protection for our
technologies from third party infringement. We may elect to seek foreign patent
protection, but foreign patent protection may not be granted. Our failure to
protect our intellectual property could materially adversely affect us.

WE HAVE BEEN SUED BY GLOBAL MUSIC AND MEDIA INC. AND IF WE LOSE THE SUIT OUR
BUSINESS WILL SUFFER

We are currently involved in a legal proceeding with Global Music and
Media Inc. Global alleges that we agreed to give it the exclusive right to
market our technology, aggregated television programming and related services
and that we breached the agreement. We have refuted these claims, contending
that the agreement was superseded by an agreement with Complete
Telecommunications, Inc., a joint venture between Global and mPhase that is
majority-owned by mPhase. Furthermore, we believe that Global defaulted in its
obligations under the original agreement. Although we intend to defend against
Global's allegations vigorously, we may settle the lawsuit with Global for an
amount that would not materially adversely affect our financial condition. If,
however, we fail to reach a settlement with Global and Global wins its lawsuit,
our business would be materially adversely affected.

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OUR COMPUTER SYSTEMS AND THOSE OF OUR KEY PARTNERS MAY NOT BE YEAR 2000
COMPLIANT, WHICH MAY DISRUPT OUR OPERATIONS

Many existing computer systems and software products that we use may
not properly recognize dates after December 31, 1999. This Year 2000 problem
could result in system failures or miscalculations causing disruptions of
operations, including, among others, a temporary inability to process financial
information, deliver products or engage in similar normal business activities.
We are in the process of evaluating the systems and products we use and do not
anticipate a major undertaking to becoming Year 2000 compliant. We anticipate
that our products currently under development will be Year 2000 compliant and as
such have informed our suppliers and co-developers of this requirement.

WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT FUNDS TO EXPAND OUR BUSINESS

We expect to incur substantial expenses in developing and marketing our
products. Because we expect to generate losses for the foreseeable future, we do
not expect that income from our operations will be sufficient to satisfy our
cash requirements. Therefore, we will likely have to seek additional financing.
Obtaining financing will depend on a number of factors, including:

- market conditions;
- the success of our product development efforts;
- our operating performance; and
- investor sentiment.

These factors may make the timing, amount, terms and conditions of
additional financing unattractive for us. If we are unable to raise additional
capital, our growth could be impeded. In addition, to the extent that additional
financing is satisfied through the issuance of equity securities, our
stockholders may experience dilution. Any debt financing may result in
restrictions on our spending or ability to pay dividends.

OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN KEY
PERSONNEL THAT ARE IN HIGH DEMAND

We depend on the services of our senior management and key technical
personnel. In particular, our success depends on the continued efforts of our
Chief Executive Officer, Ronald A. Durando, and our Chief Operating Officer,
Gustave T. Dotoli. The loss of the services of either executive officer or any
of our key management, sales or technical personnel could have a material
adverse effect on our business and prospects. In addition, our success is
largely dependent on our ability to hire highly qualified managerial, sales and
technical personnel. These individuals are in high demand and we may not be able
to attract the staff we need.

OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE AND COULD DROP UNEXPECTEDLY

The price of our common stock has been volatile and may fluctuate
substantially.

In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have affected the market prices
for the securities of technology companies. As a result, investors in our common
stock may experience a decrease in the value of their common stock regardless of
our operating performance or prospects.

IF OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES LITIGATION
WHICH IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF RESOURCES

In the past, following the periods of volatility in the market price of
a particular company's securities, securities class action litigation has often
been brought against the company. Many companies in our industry have been
subject to this type of litigation in the past. We may also become involved in
this type of litigation. Litigation

<PAGE>

is often expensive and diverts management's attention and resources, which could
have a material adverse effect upon our business, financial condition and
results of operations.

FUTURE SALES BY OUR CURRENT STOCKHOLDERS AND THE SELLING STOCKHOLDERS MAY CAUSE
THE MARKET PRICE OF OUR STOCK TO DECLINE

The market price of our common stock could decline as a result of sales
of a large number of shares in the market after this offering or the perception
that such sales could occur. These factors also could make it more difficult for
us to raise funds through future offerings of common stock.

This registration statement covers 6,610,698 shares of our common stock
that previously were not freely tradable. A large volume of sales by the selling
stockholders could have a significant adverse impact on the market price of our
common stock.

THE OFFERING

The selling stockholders are offering for resale up to 6,610,698 shares
of our common stock. Of the shares, 1,042,000 shares of common stock will be
issued upon the exercise of outstanding warrants.

We issued the shares of common stock and warrants as follows:

- We issued an aggregate of 642,000 units in a private placement to
accredited investors at $2.50 per unit in May 1999. Each unit
consisted of one share of common stock and one warrant to purchase
one share of common stock. The exercise price of the warrants
underlying the units was $2.50. All of the shares of common stock
that are part of the units and the shares of common stock to be
issued upon the exercise of the warrants are included in this
offering.

- We issued an aggregate of 4,426,698 shares of common stock in a
private placement to accredited investors at $2.50 per share in
June 1999. All of the shares of common stock issued to the
investors are included in this offering.

- In connection with these offerings, Lipper & Company, L.P., the
placement agent, received a warrant to purchase 400,000 shares of
common stock at an exercise price of $1.00 per share. These
warrants vested immediately and expire on June 30, 2004.

- We issued 1,945,000 shares of common stock in a private placement
to Lintel, Inc. in December 1998, of which 500,000 shares are
included in this offering.

The shares of common stock offered for resale may be sold by the
selling stockholders pursuant to this prospectus in the manner described under
"Plan of Distribution." Under the terms of the transactions described above, we
are contractually required to register the shares of common stock sold in the
May 1999 and June 1999 private placements and the shares of common stock to be
issued upon the exercise of the warrants.

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USE OF PROCEEDS

The selling stockholders will receive the proceeds from the resale of
the shares of common stock. We will not receive any proceeds from the resale of
the shares of common stock by the selling stockholders.

PRICE RANGE OF COMMON STOCK

The primary market for our common stock is the Nasdaq OTC Bulletin
Board, where it trades under the symbol "XDSL." We became publicly traded
through a merger with Lightpaths TP Technologies, formerly known as Tecma
Laboratories, Inc. on February 17, 1997. The following table sets forth the high
and low closing bid prices for the shares for the periods indicated as provided
by the National Quotation Bureau, Inc. The quotations shown reflect inter-dealer
prices, without retail mark-up, mark-down, or commission and may not represent
actual transactions. These figures have been adjusted to reflect a 1 for 10
reverse stock split on March 1, 1997.

YEAR/QUARTER HIGH LOW
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FISCAL YEAR ENDED JUNE 30, 1998
First Quarter................................................................... $2.00 $1.375
Second Quarter.................................................................. 1.375 0.625
Third Quarter................................................................... 1.75 0.875
Fourth Quarter.................................................................. 2.375 1.1875
FISCAL YEAR ENDED JUNE 30, 1999
First Quarter................................................................... 4.25 0.75
Second Quarter.................................................................. 3.65625 1.5625
Third Quarter................................................................... 5.625 1.875
Fourth Quarter ................................................................. 8.75 2.90625
FISCAL YEAR ENDED JUNE 30, 2000
First Quarter (through August 5, 1999).......................................... 9.25 6.375
</TABLE>

As of August 5, 1999, we had 23,581,074 shares of common stock
outstanding and approximately 379 stockholders of record.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock
and do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings, if any, to finance operations and
the expansion of our business. Any future determination to pay cash dividends
will be at the discretion of the board of directors and will be based upon our
financial condition, operating results, capital requirements, plans for
expansion, restrictions imposed by any financing arrangements and any other
factors that the board of directors deems relevant.

<PAGE>

MANAGEMENT'S PLAN OF OPERATION

To date, we have had no operating revenue. There can be no assurance
whatsoever that the Traverser technology and products, when developed and
manufactured, will be able to compete successfully in the marketplace and/or
generate revenue. Moreover, we forecast ongoing significant losses into the
foreseeable future, including, but not limited to, costs such as general and
administrative, marketing and sales, advertising, engineering, drafting,
manufacturing, assembly, quality control, cost of materials and research and
development expenses. Consequently, we will continue to have high levels of
operating expense before developing significant revenues and will be required to
make substantial capital expenditures in connection with our ongoing research
and development activities.

As a result of forecasted operating losses and the significant outlays
for research and development, we recently raised additional capital through the
issuance of common stock to sophisticated investors in a transaction exempt from
registration pursuant to Rule 506 of Regulation D promulgated by the Securities
and Exchange Commission under the Securities Act of 1933. As a result of this
private offering, we anticipate having sufficient working capital for the next
nine months, but we do anticipate that, in connection with the commercial
production of our Traverser DVDDS product, we will need to raise significant
additional funds through a public or private offering of our common stock or
otherwise.

We have installed a system capable of transmitting digital television,
internet data and voice service simultaneously at our beta customer, Hart
Telephone. A 1,000 user fully functional prototype of our Traverser DVDDS
version 1.1, a 192 channel end-to-end system solution, is expected to be
installed at Hart Telephone by the end of calendar year 1999, following which
time beta tests will immediately commence. By April 2000, we anticipate reaching
commercial production of the Traverser DVDDS version 1.1, which will be our
first commercial product. We expect to launch a 400-channel system, version 2.0,
by calendar year end 2000.

During the next twelve months, as we begin commercial production of our
Traverser DVDDS products we anticipate purchasing significant equipment,
including, digital downlinking equipment for the reception of digital satellite
television signals, MPEG-2 transcoding equipment, various testing equipment,
video on-demand servers and digital advertising insertion equipment. In
addition, during that period we anticipate hiring, as needed, additional
marketing and sales staff to assist Susan Cifelli, our executive vice president-
sales and marketing, in connection with the coordination of marketing of our
Traverser products and DSL components, investigation of new technologies,
investor relations matters, trade shows and other general sales support efforts.
In addition, we anticipate hiring additional administrative personnel to support
our expansion as we begin commercial production of our products.

<PAGE>

OUR BUSINESS

BUSINESS DEVELOPMENT, ORGANIZATION, AND ACQUISITION ACTIVITIES

mPhase Technologies, Inc. was incorporated in New Jersey in 1979 under
the name Tecma Laboratory, Inc., and we changed our name to Tecma Laboratories,
Inc. in 1987. As Tecma Laboratories, Inc., we were primarily engaged in
research, development and the exploitation of products in the skin care field.
On February 17, 1997, we acquired Lightpaths, Inc., a Delaware corporation,
which was engaged in the development of telecommunications products
incorporating DSL technology, and we changed our name to Lightpaths TP
Technologies, Inc in April 1987. On June 2, 1997, we changed our name to mPhase
Technologies, Inc.

As part of this transaction, on January 29, 1997 we formed another
wholly owned subsidiary called TLI Industries, Inc. The shares of TLI were spun
off to our stockholders effective March 31 ,1997, after transferring certain
assets and liabilities, primarily fixed assets, patents and shareholder loans
related to the prior business of Tecma Laboratories.

As a consequence of these transactions, most of which required and
obtained approval by our stockholders, on February 17, 1997, we became the
holding company of our wholly owned subsidiary, Lightpaths, Inc.

On June 25, 1998, we acquired Microphase Telecommunications, Inc., a
Delaware corporation, by issuing 2,500,000 shares of our common stock.
Microphase Telecommunications' principal assets were patents and patent
applications utilized in our proprietary Traverser digital video data delivery
system, or DVDDS, technology.

INDUSTRY BACKGROUND

Our Traverser product line is designed to provide a cost-effective
solution for high-speed digital data transmission over the installed twisted
pair, copper wire infrastructure, and an alternative to cable access television
as well as direct broadcast satellite services. By using the installed public
telephone infrastructure, the Traverser product line supports high-speed,
communication solutions without requiring costly upgrades from twisted pair
copper telephone lines to coaxial cable or fiber optics for the so-called last
mile or local loop that connects end-users to central office switching centers.
If our Traverser product line is successfully developed, we intend to direct our
marketing efforts to independent telephone companies, competitive local exchange
carriers, independent local exchange carriers, international local exchange
carriers, internet service providers and regional Bell operating companies, or
RBOCs. We expect to stress to these service providers that use of the Traverser
DVDDS will enable them to offer customers an integrated package of enhanced
services.

Since the first copper cable was installed for telephone
connectivity more than a century ago, an extensive copper infrastructure has
been installed. According to the Gartner Group, a telecommunications research
firm, the investment in copper infrastructure in the United States is
approximately $300 billion and $1 trillion worldwide. Dataquest, a source of
information concerning the telecommunications industry, estimates that there
are 182 million copper wire telephone lines in the United States consisting
of 164 million lines owned and operated by RBOCs and approximately 18 million
lines owned by independent telephone companies other than the RBOCs. There
are approximately 1,200 independent telephone companies in the continental
United States. In addition, Dataquest estimates that there are over 827
million lines worldwide. The Gartner Group estimates the number of copper
lines worldwide will grow by nearly 50 million per year for the next 5 years
and that approximately 65% of phone lines in the United States are DSL-

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ready.

Currently, copper wire and cable infrastructures must deal with the
increasing challenge to support the large volume of data traffic generated by
internet access from residences and small offices via remote dial-up. As a
result of the rapid growth of the internet and the use of the world wide web.
The volume of data being transmitted over the copper infrastructure has
increased rapidly but the current capacity of the copper infrastructure to
support it has remained relatively static. Only recently has technology been
developed that is capable of transforming this expansive copper network
originally designed for analog voice delivery into an affordable, high speed,
data-intensive digital communications delivery system capable of meeting the
demands of today's advanced high-tech, high-volume use. We believe that
telephone companies will seek to build upon their investment in copper wire by
utilizing that infrastructure for transmission of digital data rather than
pursuing costly fiber or hybrid fiber coaxial cable upgrades. In addition,
telephone companies will need to address competition from cable companies, which
are upgrading their networks in order to provide cable modem service and cable
telephony in addition to traditional television services.

According to International Data Corporation, there were approximately
69 million internet users worldwide in 1997 and they estimate that the number of
internet users will reach approximately 320 million by 2002. Many current
internet service providers enable access only via remote dial-up, which is
relatively slow and can be unreliable. Many consumers and telecommuters are,
therefore, demanding reliable, high-speed internet access. DSL technology allows
telephone companies to provide high-speed internet access and maximize the
potential of installed telephone lines, thus avoiding installation of new
wiring, a process which is time consuming and extremely expensive.

Using our proprietary hardware, we utilize a specific type of DSL
called rate adaptive digital subscriber line, allowing high-speed data
transmission at speeds up to 6.27 Mbps downstream and up to 1 Mbps upstream,
increasing through-put more than 200 times faster than an existing 28.8 Kbps
internet connection. Our DSL technology is unique because it enables
simultaneous delivery of high-speed internet access, digital television
programming, and telephone communications over an existing telephone line on an
unshared platform. Because the transmission speed is rate adaptive, our DSL
adjusts to the length and signal quality of the telephone line, automatically
selecting the highest practical operating speed. Furthermore, the dedicated
connectivity of our system maintains reliable service, which does not degrade or
decrease in speed with increased volume of subscribers.

We believe our products are the first affordable alternative to coaxial
and fiber delivery of both high-speed internet access and digital television
programming for RBOCs and local telephone exchange carriers. The mPhase DSL
transceiver is the only technology able to transport voice, digital television
programming, and high-speed data over the existing telephone infrastructure
without affecting voice traffic or degrading the quality of service. Other
potential applications of our products include video teleconferencing, remote
education, tele-medicine, video on-demand service, and e-commerce.

THE TRAVERSER

FLEXIBILITY OF SERVICE OFFERINGS. The Traverser product line is able to
partition bandwidth to meet the needs of the individual telephone company
customer, enabling all 6.27 Mbps of downstream and 1 Mbps of upstream bandwidth
to be used to transmit data exclusive of the digital television application. The
ability to segment and scale the bandwidth according to individual needs makes
the Traverser particularly useful for companies that wish to target the small
office/home office market. Our DSL-based, high-speed data delivery solutions are
also useful for vertical data communications applications such as video
conferencing, tele-medicine and all types of corporate data network markets.
Furthermore, our products provide a non-shared data transmission line, while
most other DSL products use a multiplexed modem at the central office. As a
result, transmission speed is far less likely to slow down as more customers
utilize the system.

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MAXIMIZING BREADTH OF CUSTOMER BASE. Companies that have traditionally
offered only one type of communications service are expanding into different
products. Cable companies are now offering internet and telephony services in
addition to cable television. Long distance companies are now entering the
local, cellular and internet service provider markets and, in some cases, the
video distribution market. We intend to target all carriers and believe that
most carriers would be interested in offering a variety of services.

Our Traverser system is modular and scalable so service providers can
buy equipment where they have presold lines, thereby eliminating stranded plant
or unused equipment. We estimate that 80% of expenditures relating to the
Traverser are variable and are incurred when a subscriber is added, compared to
20% which is fixed common equipment in the central office that is necessary
regardless of the number of subscribers on the system.

ENABLE SERVICE PROVIDERS TO BENEFIT FROM E-COMMERCE AND INTERNET
ADVERTISING. Telephone companies and service providers using the Traverser
product should benefit from additional revenue streams derived through
e-commerce and advertising profit sharing. We will seek to enter into
arrangements with telephone companies and other service providers to share
revenues derived from internet retailers. We anticipate that revenues may be
derived from the inclusion of online shopping links and advertising service
providers web sites.

PRODUCT OVERVIEW

Our Traverser Digital Video Data Delivery System, or DVDDS, products
utilize technology licensed exclusively to us by Georgia Tech, and rate adaptive
digital subscriber line technology licensed non-exclusively to us by Globespan
Semiconductor, Inc., formerly AT&T Paradyne, Inc. Georgia Tech currently
conducts a significant portion of the engineering research and design efforts
for us in developing the Traverser product line. Our proprietary system also
utilizes an advanced filter technology developed by Microphase Corporation, a
leading manufacturer of diplexer and detector logarithmic video amplifier
technology. Microphase serves the military electronic defense and
telecommunications industry. The hybrid filters in mPhase circuit boards enable
more efficient impedance matching of the copper loop, longer transmission
distances, and decreased signal bit error rates.

The Traverser is designed to be a complete, end-to-end data
transmission solution, which enables service providers to transmit broadcast
quality video at up to 5 Mbps, simultaneous internet access at up to 1 Mbps (in
four segments via Ethernet) and traditional voice. The Traverser product is
installed in the telephone company central office with our set-top box
configuration, the Intelligent Network Interface. Our network product is
utilized in conjunction with popular telecommunications transport protocols such
as: Digital Signal Level 3.0, Synchronous Optical Network, Synchronous Digital
Hierarchy, Asynchronous Transfer Mode or frame relay and is highly adaptable. We
are is also in the process of evaluating the extent to which our network
products can be used in conjunction with other transport protocols. The
Traverser is transparent to the switch and DLC manufacturer, supports emergency
service operation and relieves dial-up internet switch congestion.

With the Traverser, the content provider receives and distributes
digital data including television signals and internet, to a typical telephone
company central office via satellite or an optical network telecommunications
network. A programming and control center located at the telephone company
central office will combine the video and internet data as well as local off-air
broadcasts for transmission over the Traverser DVDDS. The central office then
delivers traditional analog voice signal, digital television, and internet data
via the Traverser DVDDS over the existing copper twisted-pair infrastructure to
the customer premises. At the customer premises, the Traverser Intelligent
Network Interface passes through the phone lines and connects to the television
set and the computer. The video signal is sent as both an S-video signal and a
channel 3 or 4 RF modulated signal. Internet is accessed via a 10baseT Ethernet
connection over category-5 wiring.

STATUS OF PRODUCT DEVELOPMENT

We are in our final stages of on-site beta testing. To date, we have
not generated any significant revenues through product sales or technology
licensing. We have installed a system capable of transmitting digital
television,

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<PAGE>

internet data and voice service simultaneously at Hart Telephone Company in
Hartwell Georgia, our beta customer. A point-to-point 99-channel prototype
product has been installed at Hart Telephone. We anticipate that a 1,000 user
fully functional prototype of our Traverser DVDDS version 1.1, a 192 channel
end-to-end system solution, will be installed at Hart Telephone by calendar year
end 1999, following which time beta tests will commence immediately. We
anticipate reaching commercial production of our Traverser DVDDS version 1.1 by
April 2000. We expect to launch a 400-channel system, version 2.0, by calendar
year end 2000.

We anticipate developing a number of future products that can be
incorporated into the Traverser product line using mPhase's proprietary
technology. In addition to digital television and internet usage, applications
such as video conferencing and digital telephony become a technical and economic
possibility. Remote security system monitoring, utility meter reading, and any
ethernet data application can be performed with the proper connectivity.
mPhase is in the early stages of development of these products.

In addition to our Traverser product, we have also designed component
products identified as Transmit/Receive Filters, Central Office Low Pass Filter
Shelves and Plain Old Telephone Service, or POTS, Splitter products. These
component products will be marketed to other DSL vendors providing integrated
DSL equipment to their customers. We do not believe our inherent competitive
advantage will be impaired by the sale of these component products to potential
competitors.

MPHASE TV.NET.

We organized a subsidiary corporation, mPhaseTV.net, which is an
integrator and aggregator of both digital television programming and internet
content. mPhase TV.net will provide content for telephone companies and other
service providers who install the Traverser DVDDS hardware. mPhaseTV.net's
content package for both the internet and the digital television applications of
the Traverser is expected to be introduced simultaneously with the introduction
of the Traverser DVDDS version 1.1. The programming available from mPhaseTV.net
will be a suggested package of channels but can be customized by each customer
for local programming, existing and future channels, special interest
programming or preferred movie packages.

mPhaseTV.net has signed an agreement with InfoSpace.com Inc., a leading
provider of internet content, who will aggregate and co-brand internet content
for mPhase. We have signed an agreement with InfoSpace to aggregate content and
coordinate regional banner advertising with mPhaseTV.net. Revenues from service
provision will be shared between InfoSpace and mPhaseTV.net. On an mPhase
website, mPhaseTV.net features included on the site will be InfoSpace.com Yellow
& White Pages, Classifieds, Finance, Shopping, Net Community, and City Guide.
InfoSpace will act as the internet portal for mPhase TV.net.

mPhaseTV.net will provide a gateway to the internet through the mPhase
website, which consumers access through an mPhaseTV.net service provider. When
accessing the internet, the subscriber will automatically enter the mPhase
homepage, similar to any on-line access provider. We anticipate that any
revenues derived from e-commerce will be shared between InfoSpace, mPhaseTV.net
and the telephone company or service provider based on pre-negotiated contracts.

RESEARCH AND DEVELOPMENT ACTIVITIES

Georgia Tech conducts a significant amount of research and development
for us pursuant to a basic ordering agreement comprised of a series of delivery
orders, which outline the timing, necessary actions and form of payment for
specific tasks related to the completion of certain components of the Traverser
product line. After the development of the Traverser DVDDS version 1.1, we
expect Georgia Tech to continue research and development of the Traverser
product to enhance features and functionality, as well as to coordinate the
effort to develop the Traverser, version 2.0 and additional products utilizing
Traverser technology.

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<PAGE>

As of March 31, 1999, approximately $3,927,000 had been billed to
mPhase for research and development conducted by Georgia Tech, of which
approximately $842,000 then remained outstanding.

We are the sole, worldwide licensee of the technology developed by
Georgia Tech in conjunction with the Traverser product line. Upon completion of
the commercial product, Georgia Tech will receive a royalty of 3% to 5% of
product sales.

The amount of research and development costs we have expended from
October 2, 1996, our inception date, through March 31, 1999 was approximately
$4,780,000. During the nine months ended March 31, 1999, we incurred research
and development expenses of approximately $2,290,000 as a consequence of the
continued development of our current DSL products.

COMPETITION

The telecommunications equipment market is characterized by swift
technological change. Several solutions such as fiber optic, cable, wireless and
satellite technologies compete with DSL for market share. Service providers may
use other technologies such as fiber optic cable, hybrid coaxial cable, ISDN to
deploy high-speed transmissions. Based on current industry standards, we believe
that DSL can compete, particularly with respect to telephone companies and other
copper-wire based service providers, from the standpoint of cost effectiveness
and ease of development.

Among sellers of DSL systems, our competitors include ADTRAN, Alacatel
S.A., Aware, Inc., Broadband Technologies, CISCO Systems, Inc., ESI, General
Data Com, Lucent Technologies, Orckit Communications, PairGain Technologies, TUT
Systems, Westell Technologies, AG Communications Systems, Copper Mountain,
Diamond Lane, Paradyne and SourceNet.

INTEGRATED SERVICES DIGITAL NETWORK. Emerging technologies for high
speed data transmission over copper lines include Integrated Services Digital
Network, or ISDN. ISDN currently delivers 128 Kbps computer networking
connections, which are two times faster than those available with the fastest
analog modems.

While ISDN does provide faster access than analog modems, it is
expensive, difficult to install, and not as fast as competing high speed
technologies. Moreover, it does not allow for simultaneous data transmission and
normal telephone service on the same line and it is not capable of delivering
digital television.

FIBER OPTIC CABLE. Fiber optic cable is another alternative that allows
high bandwidth transmission. However it is expensive to install.

COAXIAL. Cable companies have begun offering high speed Internet access
through cable modems. These modems provide the potential of wider bandwidth (up
to 10 Mbps as compared to 56 Kbps analog modems). But coaxial cable is
relatively expensive and has the drawbacks associated with a shared bandwidth
medium.

INITIAL CUSTOMER BASE AND MARKETING PLAN

Numerous domestic, independent telephone companies have indicated
interest in the Traverser DVDDS version 1.1, although none have placed any
orders with us other than a 1,000 unit order placed by Hart Telephone.

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STRATEGIES

MARKETING STRATEGY. We have focused initial marketing efforts on both
domestic and international telephone companies, which have responded positively
to DSL technology and, based on preliminary discussions, appear to be receptive
to DSL service provision via Traverser technology. Our initial marketing efforts
target small to medium-sized, independent telephone companies, which we believe
are most threatened by the prospect of cable modem and cable telephony
technological advances. Furthermore, independent telephone companies often have
a faster response time in implementing new technology.

We also intend to market to larger telephone companies in the United
States who need to respond to the threat of competition from cable companies, as
well as to new entrants in the telecommunications market such as competitive
local exchange carriers, internet service providers, and long distance providers
who are seeking access to local service. We believe that we will experience a
longer sales cycle in marketing to larger telephone companies than with the
smaller independent companies.

We believe that conditions for telecom, broadband and video
application growth are promising in many countries overseas. Most developing
nations have low teledensity rates and few over-air options. Moreover, cable
television service is rarely available in most international markets,
particularly in areas outside of the urban centers, making them prime
candidates for the Traverser system. For example, the majority of Central and
South American homes receive only two or three broadcast channels. According
to industry research, the current cable subscriber base in South America of
8.3 million represents less than ten (10%) percent of the TV households, with
over half of the subscribers concentrated in Argentina.

We intend to use a number of marketing strategies to facilitate product
sales overseas. We intend to develop a direct sales force to market our products
directly to service providers, as well as negotiate with international
resellers. We have signed one non-exclusive distribution agreement with CariPAC,
a distributor of telephone equipment in Hong Kong and southern China, to
distribute the Traverser in Hong Kong and China. We have also signed an
agreement with TelMex, the leading telecommunications services provider in
Mexico, whereby TelMex will conduct performance trials on our Traverser DVDDS
system. We are currently in discussions with other third party distributors and
intend to pursue the resale channels for various parts of the world.

To date, we have made no sales of our technology and have limited
resources to market our products. However, as part of our sales and marketing
initiative, we recently hired an executive vice president of marketing who will
oversee all marketing efforts. We intend to devote a meaningful portion of our
cash resources to expand our marketing and sales force.

PRODUCTION STRATEGY. mPhase plans to use contract manufacturing
companies to provide manufacturing services and customer support. We are
targeting leading contract manufacturing companies with strategically located
facilities in North America, Mexico and Asia with whom we can establish
long-term relationships.

We intend to seek additional strategic partners for the aggregation and
development of television and internet content, manufacturing, sales,
distribution and technological advancements. We are also exploring the
possibility of seeking a partner to provide a turnkey video package, which we
can then resell to telephone companies who purchase our hardware products. By
using contract manufacturers, we will seek to avoid the substantial capital
investments required for internal production.

PATENTS AND LICENSES

We have filed and intend to file United States patent and/or copyright
applications relating to some of our proposed products and technologies, either
with our collaborators/strategic partners or on our own. There can be no
assurance, however, that any of the patents obtained will result in our
sufficiently protecting our technologies or that we will have adequate resources
to enforce our patents. Because we may license our technology and products in

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<PAGE>

foreign markets, we may also seek foreign patent protection. With respect to
foreign patents, the patent laws of other countries may differ significantly
from those of the United States as to the patentability of our products or
technology. In addition, it is possible that competitors in both the United
States and foreign countries, many of which have substantially greater resources
and have made substantial investments in competing technologies, may have
applied for, or may in the future apply for and obtain, patents which will have
an adverse impact on our ability to make and sell our products. There can also
be no assurance that competitors will not infringe on our patents or will not
claim that we are infringing on their patents. Defense and prosecution of patent
suits, even if successful, are both costly and time consuming. An adverse
outcome in the defense of a patent suit could subject us to significant
liabilities to third parties, require disputed rights to be licensed from third
parties or require us to cease our operations.

The intellectual property owned and licensed by us falls into two
essential categories, analog and digital intellectual property. We own all of
the intellectual property related to the analog component of our DSL-based
products.

We have a pending patent application which was filed in June 1999
claiming priority to three provisional patent applications for the analog
portion of our technology used in relation to the Traverser DVDDS product.

Our DSL filter technology, enables increased video clarity over copper
wire, longer transmission distances and decreased signal error rate. The
intellectual property related to the DSL filters includes: low pass filter
shelves and the POTS splitters, which separates the Traverser DSL spectrum from
the traditional voice service, and G.lite filters utilized in the transmission
of data and voice service at up to 1.544 Mbps. We believe that both of these
components are key to providing a DSL signal at sufficient quality and service
distances for combined video and data delivery.

We license our digital intellectual property. We have a non-exclusive
license from GlobeSpan Semiconductor, Inc. for the rights to use the GlobeSpan
rate adaptive digital subscriber line chipset. We also have an exclusive,
worldwide license to manufacture and market products using the technology
developed under contract by Georgia Tech. The exclusive license with Georgia
Tech is applicable for the duration of their patent protecting the system design
and other technology related to the Traverser product line.

The licensed technology developed at Georgia Tech centers around the
capabilities of the Traverser DVDDS. The four United States patents under
application are: (1) System and Method for Maintaining Timing Synchronization in
a Digital Video Network; (2) System and Method for the Delivery of Digital Video
and Data over a Communications Channel; (3) Computer System and Method for
Providing Digital Video and Data over a Communications Channel; and (4)
Apparatus and Method for Transporting Infrared and Radio Frequency Signals.

The exclusively licensed digital intellectual property provides several
unique aspects of the DVDDS. Among these is the backplane design, which provides
the ability to have every subscriber view any channel available. All subscribers
in a given system could be watching the same channel, or could be watching
different channels with no degradation of service. The proprietary design, which
does not incorporate a Digital Subscriber Line Access Multiplexer architecture,
makes the DVDDS a true broadcast system rather than a mere video delivery
system.

Intellectual property rights also cover the development of the Framer
and the Framer chip. The Framer is an Application Specific Integrated Circuit
which gives the Traverser DVDDS the capability of allocating both the downstream
and upstream bandwidth into virtually any application required. This feature
allows the Traverser to deliver both MPEG-2 Digital Video and internet data
simultaneously and also allows for future applications of the DVDDS.

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Patents pending also protect the software management and control of the
individual Traverser links, the DVDDS, all firmware, C++ and Java code written
for the project and the channel changing methodology and interface to the
electronic program guide at the customer site through the Intelligent Network
Interface.

We also rely on unpatented proprietary technology, and there can be no
assurance that others may not independently develop the same or similar
technology or otherwise obtain access to our unpatented technology. If we are
unable to maintain the proprietary nature of our Traverser technology, our
future operations would be adversely affected.

REGULATION

The Federal Communication Commission, or FCC, and various state public
utility and service commissions, regulate most of our potential domestic
customers. Changes to FCC regulatory policies may affect the accessibility of
services, and otherwise affect how telecommunications providers conduct their
business. These regulations may adversely affect our potential penetration into
certain markets. In addition, our business and results of operations may also be
adversely affected by the imposition of certain tariffs, duties and other import
restrictions on components which we obtain from non-domestic suppliers. Changes
in current or future laws or regulations, in the U.S. or elsewhere, could
materially adversely affect our business.

EMPLOYEES

We presently have six employees, two of whom are concurrently employed
by Microphase Corporation. See the section entitled Certain Relationships and
Related Transactions.

PROPERTIES

Our corporate headquarters are located at 587 Connecticut Avenue,
Norwalk, CT 06856-0960. We also lease office space from Microphase on a month to
month basis for $10,000 per month. We also maintain an office and research
facility at the Georgia Tech Research Corporation in Atlanta, Georgia as part of
our basic ordering agreement with Georgia Tech.

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OUR MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our present executive officers and directors are:

NAME AGE POSITION(S)
<S> <C> <C>
Necdet F. Ergul.................................... 75 Chairman of the Board and Director
Ronald A. Durando.................................. 42 Chief Executive Officer and Director (principal executive
officer)
Gustave T. Dotoli.................................. 62 Chief Operating Officer and Director (principal financial
and accounting officer)
David Klimek....................................... 44 Chief Technology Officer and Director
Hal L. Willis...................................... 45 Executive Vice President - Corporate Development
Susan E. Cifelli................................... 41 Executive Vice President - Sales and Marketing
J. Lee Barton...................................... 45 Director
</TABLE>

The current executive officers and directors, along with their
backgrounds, are set forth below:

NECDET F. ERGUL has served as our Chairman of the Board since October
1996 with the exception of a three-month period when he temporarily resigned due
to the press of personal business. Mr. Ergul also currently serves as the
President and Chief Executive Officer of Microphase Corporation, which he
founded in 1955. In addition to his management responsibilities at Microphase,
he is active in engineering design and related research and development, Mr.
Ergul holds a Masters Degree in Electrical Engineering from the Polytechnic
Institute of Brooklyn, New York.

RONALD A. DURANDO is a co-founder of mPhase and has served as our
President and Chief Executive Officer since our inception in October 1996. Prior
to joining us, Mr. Durando was President and Chief Executive Officer of Nutley
Securities, Inc., a registered broker-dealer. In addition, Mr. Durando currently
serves as the Chief Operating Officer of Microphase Corporation, a leading
developer of telecommunications technology.

GUSTAVE T. DOTOLI has served as our Chief Operating Officer since
October 1996. In addition, Mr. Dotoli currently serves as the Vice President of
Corporate Development of Microphase Corporation. He is formerly the President
and Chief Executive Officer of the following corporations: Imperial
Electro-Plating, Inc., World Imports USA, Industrial Chemical Supply, Inc.,
SISCO Beverage, Inc. and Met Pack, Inc. Mr. Dotoli received a B.S. in Industrial
Engineering from Fairleigh Dikenson University in 1959.

DAVID KLIMEK is a co-founder of mPhase and has served as our Chief
Technology Officer since June 1997 and as Director of Engineering since our
inception in October 1996. He has more than 18 years of technical engineering
and design expertise and presently holds 13 individual or co-authored U.S.
patents. From 1982 to 1990, Mr. Klimek was the R&D manager of Digital Controls,
Inc. Mr. Klimek received his B.S. in Electrical Engineering in 1982 from
Milwaukee School of Engineering, Milwaukee, Wisconsin. In addition, he graduated
from the U.S. Navy Basic Electronics School at Great Lakes Naval Training Center
in 1972.

HAL L. WILLIS has been our Executive Vice President - Corporate
Development since October 1998. Prior to joining us, Mr. Willis has 17 years of
cable television industry experience with Gaylord Entertainment Company. Mr.
Willis was formerly Vice President and General Manager - Worldwide for the
Country Music Television Cable Network and General Counsel of the Nashville
Network.

SUSAN E. CIFELLI joined us in the capacity of Executive Vice President-
Marketing during February 1999. Ms. Cifelli has 18 years of experience in the
telecommunications industry with Bell Atlantic, NYNEX and New England Telephone
Company. Most recently, she was Project Manager for the "Infospeed" DSL Services

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Marketing Project at Bell Atlantic. Prior to this, she was the Project and
Product Manager for marketing InfoFone Services in the State of New York. Ms.
Cifelli holds a Masters of Science degree in Telecommunications & Computing
Management from Polytecnic University and a Bachelors of Art from the State
University of New York at Buffalo.

J. LEE BARTON has served as one of our directors since February 1999.
Mr. Barton also serves as President and Chief Executive Officer of Lintel, Inc.,
a holding company that owns Hart Telephone Company, a 10,000-line local exchange
carrier in northeast Georgia; Hart Communications, an interconnect, carriers'
carrier and long distance company; Hart Cellular, a partnership in two RSA's in
north Georgia; Hart Cable, a recently formed cable television company and Hart
GlobalNet.

COMMITTEES OF THE BOARD OF DIRECTORS

We do not currently maintain any committees on our board of directors.

DIRECTOR COMPENSATION

There are no standard arrangements pursuant to which any of our
directors are compensated and none of them were compensated for the year ended
June 30, 1998 for any service provided as a director. On August 5, 1999, we
issued shares of common stock to each of our directors in respect of services
provided as a director during the fiscal year ended June 30, 1999, as follows:
250,000 shares to Ronald A. Durando; 150,000 shares to Necdet F. Ergul; 125,000
shares to Gustave T. Dotoli; 75,000 shares to David Klimek; and 75,000 shares to
J. Lee Barton.

EMPLOYMENT AGREEMENTS

In January 1999, we entered into a two-year employment agreement with
Susan E. Cifelli. Under this agreement, Ms. Cifelli is entitled to receive an
initial base salary of $123,000, which may be increased on a semi-annual basis,
and such additional compensation, including performance-based bonuses, as may be
awarded to her. In addition, Ms. Cifelli received a stock option grant under
this employment agreement for 80,000 shares, at an exercise price of $1.50 per
share. This option vests in 20,000 share increments every six months during the
term of the agreement.

In June 1999, we entered into employment agreements with each of Ronald
A. Durando and Gustave T. Dotoli. Each of the agreements has a term of three
years. Under these employment agreements, Messrs. Durando and Dotoli are
entitled to receive a base salary, which may be increased on a semi-annual
basis, and such additional compensation, including performance-based bonuses, as
may be awarded to them. The base salaries for the year ending June 30, 2000 for
Messrs. Durando and Dotoli are $275,000 and $200,000, respectively.

Mr. Durando's employment agreement provides for a bonus at the end of
each year equal to 5% of the increase in our market capitalization during such
year. Such bonus will be paid 25% in cash and 75% in shares of common stock. In
addition, each of the employment agreements provides for the immediate grant of
an option to acquire shares of common stock (3,000,000 shares in the case of Mr.
Durando and 1,500,000 shares in the case of Mr. Dotoli) at $1.00 per share in
the event of a successful hostile acquisition of us by another entity.

21
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation
earned by our chief executive officer and our two other most highly compensated
executive officers for services rendered in all capacities to us for the year
ended June 30, 1999 and the two previous fiscal years.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG-TERM COMPENSATION
RESTRICTED SECURITIES
STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S) OPTIONS / SARS
- --------------------------- ---- ------ ----- -------- --------------
<S> <C> <C> <C> <C> <C>
Ronald A. Durando........................... 1999 250,000 275,000 400,000 562,500
Chief Executive Officer and President 1998 150,000 -- -- --
1997 75,000 -- -- 1,000,000
Gustave Dotoli.............................. 1999 175,000 100,000 175,000 300,000
Chief Operating Officer 1998 120,000 -- -- --
1997 60,000 -- -- 750,000
David Klimek................................ 1999 77,138 35,000 275,000 150,000
Chief Technology Officer 1998 68,500 -- -- --
1997 63,100 -- -- 500,000
Hal L. Willis............................... 1999 105,000 -- -- 100,000
Executive Vice President - Corporate 1998 -- -- -- --
Development 1997 -- -- -- --
</TABLE>

No individual named above received prerequisites or non-cash compensation during
the years indicated which exceeded the lesser of $50,000 or an amount equal to
10% of such person's salary. No other executive officer received compensation
and bonuses that exceeded $100,000 during any year.

The following table contains information regarding options granted in
the fiscal year ended June 30, 1999 to the executive officers named in the
summary compensation table above. For the fiscal year ended June 30, 1999, we
granted options to acquire up to an aggregate of 1,472,500 shares to employees
and directors.

OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)

% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EMPLOYEES
UNDERLYING OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED(#) YEAR PRICE ($/SH) DATE
- ---- ------------ ----- -------------- -----
<S> <C> <C> <C> <C>
Ronald A. Durando.................. 312,500 21.2 1.00 2004
250,000 17.0 2.50 2004
Gustave T. Dotoli.................. 150,000 10.2 1.00 2004
150,000 10.2 2.50 2004
David Klimek....................... 50,000 3.4 1.00 2004
100,000 6.8 2.50 2004
Hal L. Willis...................... 50,000 3.4 1.00 2004
50,000 3.4 2.50 2004
</TABLE>

22
<PAGE>

The following table sets forth information with respect to the number
and value of outstanding options held by executive officers named in the summary
compensation table above at June 30, 1999. The value of unexercised in-the-money
options is based upon the difference between $8.00, the closing price of our
common stock on June 30, 1999, and the exercise price of the options.

FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT YEAR END(#) YEAR END ($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald A. Durando..................... 1,487,500 -- 10,037,500 --
Gustave T. Dotoli..................... 1,000,000 -- 6,775,000 --
David Klimek.......................... 650,000 -- 4,400,000 --
Hal L. Willis......................... 100,000 -- 625,000 --
</TABLE>

LONG-TERM STOCK INCENTIVE PLAN

We have a long-term stock incentive plan, under which we have reserved
for issuance 5,000,000 shares of common stock. The plan provides for grants of
incentive stock options and nonqualified stock options to our key employees and
consultants and those key employees and consultants of our subsidiaries. The
compensation committee of the board of directors administers and interprets the
plan.

The exercise price of common stock underlying an option may be greater,
less than or equal to fair market value. However, the exercise price of an
incentive stock option must be equal to or greater than the fair market value of
a share of common stock on the date such incentive stock option is granted.

The maximum term of an option is five years from the date of grant. In
the event of a dissolution, liquidation or change in control transaction, we may
require option holders to either exercise their options within 30 days or
surrender such options (or unexercised portion thereof).

As of June 30, 1999, 4,392,500 options were outstanding under the plan.
On June 25, 1999, we granted 1,215,000 options to various employees and
consultants. Such grants were not made pursuant to any stock option plan.

23
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table set forth, as of August 5, 1999 certain information
regarding the beneficial ownership of shares of our common stock:

- by each of our directors;

- by each person who is known by us to beneficially own 5% or
more of the outstanding shares of common stock;

- by each of our executive officers named in the summary
compensation table; and

- by all of our executive officers and directors as a group.

AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP COMMON STOCK (2)
- ------------------------------------ -------------------- ------------
<S> <C> <C>
Necdet F. Ergul................................................. 1,425,000 6.0
Ronald A. Durando (3)........................................... 3,383,648 13.5
Gustave Dotoli.................................................. 1,775,000 7.2
J. Lee Barton (4)............................................... 2,720,000 11.5
David Klimek.................................................... 1,190,000 4.9
Hal L. Willis .................................................. 100,000 *
Lintel, Inc.(5)................................................. 1,945,000 8.2
All executive officers and directors as a group (seven people).. 10,723,648 39.2
</TABLE>

- -------------
*LESS THAN 1%
(1) Unless otherwise indicated, the address of each beneficial owner is 587
Connecticut Avenue, Norwalk, Connecticut 06854-0566
(2) Unless otherwise indicated, we believe that all persons named in the
table have sole voting and investment power with respect to all shares
of common stock beneficially owned by them. The percentage for each
beneficial owner listed above is based on 23,581,074 shares outstanding
as of August 5, 1999. In accordance with the rules of the Securities
and Exchange Commission, options to purchase shares of common stock
that are exercisable as of August 5, 1999 or exercisable within 60 days
thereafter, are deemed to be outstanding and beneficially owned by the
person holding such options for the purpose of computing such person's
percentage ownership, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. The
numbers of shares indicated in the table include the following number
of shares issuable upon the exercise of warrants or options: Necdet F.
Ergul - 325,000; Ronald A. Durando -- 1,487,500; Gustave Dotoli --
1,000,000; J. Lee Barton -- 100,000; David Klimek -- 650,000; Hal L.
Willis -- 100,000; and Susan E. Cifelli -- 130,000.
(3) Includes 320,000 shares held by Nutley Securities, Inc., which is
wholly-owned by Mr. Durando.
(4) Includes 1,945,000 shares held by Lintel, Inc., of which Mr. Barton is
the president and chief executive officer.
(5) The address for Lintel, Inc. is 196 North Forest Avenue, P.O. Box 388,
Hartwell, Ga 30643.

24
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our management are affiliated by employment at and/or ownership of a
related group of companies, including Microphase Corporation, Complete
Telecommunications, Inc. and Janifast Holdings, Ltd., which have recorded
material transactions with us. As a result of such affiliations, our
management in the future may have conflicting interests with these affiliated
companies.

Necdet F. Ergul, Ronald A. Durando and Gustave T. Dotoli, our Chairman,
Chief Executive Officer and Chief Operating Officer, respectively, are executive
officers and shareholders of Microphase.

- We reimburse Microphase $50,000 per month for research and
development services and administrative expenses incurred for
the use of Microphase's office space, lab facilities and
administrative staff.

- On June 25, 1998, we issued 2,500,000 shares to several
individuals, including Necdet F. Ergul, Ronald A. Durando and
Gustave T. Dotoli, in consideration for all the issued and
outstanding shares of Microphase Telecommunications, Inc.,
which at the time was an affiliate of Microphase.

- At March 31, 1999, we owed Microphase $1,227,566 in respect of
research and development and general administrative expenses.

In June 1999, we issued 200,000 shares of common stock to David Klimek,
one of our directors and executive officers, as a technical advisory fee in
connection with our acquisition of Microphase Telecommunications, Inc. referred
to above.

Ronald A. Durando is the owner/sole shareholder of Nutley Securities,
Inc., a registered broker-dealer.

- In February 1997, we issued 600,000 shares to Nutley
Securities as a "finder fee" in connection with the
acquisition of Lightpaths, Inc.

- During the period ended June 30, 1997, we paid $95,141 to
Nutley Securities in offering costs, and during the period
ended June 30, 1998, we incurred offering costs with Nutley
Securities totaling $153,999, of which $127,888 remained due
at March 31, 1999.

- At March 31, 1999, we owed Nutley Securities $228,900
including $12,900 accrued interest.

In August 1997, we granted Thomas A. Murphy a former director and
officer of mPhase, options to purchase 750,000 shares of our common stock at an
exercise price of $1.00 per share. Mr. Murphy has agreed to waive his right to
purchase such shares.

In October 1997, in connection with a planned joint venture licensing
agreement with Global Music & Media, Inc., a Tennessee corporation, we became
the 41.724% owner of Complete Telecommunications, Inc. mPhase invested $300,000
in Complete Telecommunications and issued to Global Music & Media 250,000 shares
of our common stock. We also loaned $150,000 to the joint venture. No payments
have been received by us from the joint venture with Global Music & Media.
During the fiscal year 1998, Global Music & Media commenced an action against us
alleging it was the holder of an exclusive license to market our Traverser
technology and related projects. See "Legal Proceedings."

One of our directors, J. Lee Barton, is the president and chief
executive officer of Lintel Inc. Lintel is the parent corporation of Hart
Telephone Company, our beta customer located in Hartwell, Georgia, where we have
installed our prototype product and commenced beta testing. In December 1998, we
issued 3,115,000 shares in a private placement to J. Lee Barton, several members
of his family, Lintel, several employees of Lintel and two

25
<PAGE>

employees of Microphase for a purchase price of approximately $1.03 per share,
or an aggregate purchase price of $3,197,416.

Janifast Holdings, Ltd., a Delaware corporation, is the parent
corporation of the manufacturer which has produced components for our prototype
Traverser DVDDS product, and may produce such components for us in the future.
Necdet F. Ergul, Ronald A. Durando and Gustave T. Dotoli are controlling
shareholders of Janifast with an aggregate ownership interest of greater than
75% of Janifast. In addition, Mr. Durando is chairman of the board of directors
and each of Messrs. Dotoli and Ergul are directors of Janifast.

26
<PAGE>

SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of shares of common stock by the selling stockholders as of August 5,
1999, and the number of shares of common stock covered by this prospectus.
Except as otherwise noted below, none of the selling stockholders has held any
position or office, or has had any other material relationship with us or any of
our affiliates within the past three years.

BENEFICIAL OWNERSHIP
AFTER RESALE OF SHARES
----------------------
MAXIMUM
NAME OF NUMBER OF SHARES NUMBER OF SHARES NUMBER
SELLING STOCKHOLDER BENEFICIALLY BEING OFFERED OF SHARES PERCENT(1)
OWNED
------------------- ---------------- ---------------- --------- ----------
<S> <C> <C> <C> <C>
Gregory Loprete............................. 4,000 4,000 0 0
Patricia Koo................................ 4,400 4,400 0 0
Wayne Clark Plewniak........................ 5,000 5,000 0 0
Emily Christenfeld.......................... 8,000 8,000 0 0
David Horowitz (2).......................... 8,000 8,000 0 0
Howard Horowitz (2) ........................ 8,000 8,000 0 0
Eliav Assouline............................. 10,000 10,000 0 0
Cong. Nier Baruch........................... 10,000 10,000 0 0
Irving & Blanche Berger..................... 10,000 10,000 0 0
Israel & Chanee Blumenfrucht................ 10,000 10,000 0 0
Mikael Breuer-Weil.......................... 10,000 10,000 0 0
Michael D. Loprete.......................... 10,000 10,000 0 0
Rose Perlstein.............................. 10,000 10,000 0 0
Ronald D. Shima & Susan M. Shima............ 10,000 10,000 0 0
Martin Thaler............................... 10,000 10,000 0 0
Michael B. & Joanne C. Visovsky............. 10,000 10,000 0 0
Sholom Chaim Babad.......................... 12,000 12,000 0 0
Curry E. Ford............................... 12,000 12,000 0 0
William Reckler (2)......................... 13,332 13,332 0 0
Caroline Reckler (2)........................ 13,334 13,334 0 0
Gillian Reckler (2)......................... 13,334 13,334 0 0
Matthew John Ripperger...................... 15,000 15,000 0 0
Shima's Market, Inc. ....................... 15,000 15,000 0 0
Edward J. Strafaci & Linda A. Strafaci...... 15,000 15,000 0 0
Congregation Sharei Chaim................... 35,230 16,298 18,932 *
F&N Associates.............................. 20,000 20,000 0 0
L&H Family Foundation....................... 20,000 20,000 0 0
Manor Investments........................... 20,000 20,000 0 0
Gilbert H. Dunham, Jr. (2)................. 24,000 24,000 0 0
Jack Emert.................................. 25,000 25,000 0 0
Abby L'Hommedieu Dunham (2)................. 28,000 28,000 0 0
Nachum Stein & Feige Stein.................. 30,000 30,000 0 0
Henry Weiss................................. 30,000 30,000 0 0
SPC Corporation............................. 35,000 35,000 0 0
Accord Futronics............................ 40,000 40,000 0 0
Alexander Hasenfeld Profit Sharing &
Retirement Plan............................. 40,000 40,000 0 0
Nicholas Aspiotes........................... 40,000 40,000 0 0
Abraham Friedman............................ 40,000 40,000 0 0
Reno Hartfiel............................... 40,000 40,000 0 0

</TABLE>

27
<PAGE>

BENEFICIAL OWNERSHIP
AFTER RESALE OF SHARES
----------------------
MAXIMUM
NAME OF NUMBER OF SHARES NUMBER OF SHARES NUMBER
SELLING STOCKHOLDER BENEFICIALLY BEING OFFERED OF SHARES PERCENT(1)
OWNED
------------------- ---------------- ---------------- --------- ----------
<S> <C> <C> <C> <C>
HSI Partnership............................. 40,000 40,000 0 0
Arhonto Kartalas............................ 40,000 40,000 0 0
Stephanie H. and Jon M. Reckler (2)......... 40,000 40,000 0 0
Rifky Weiner................................ 50,000 50,000 0 0
John M. Dipace, Sr. ........................ 60,000 60,000 0 0
Kentucky National Insurance Company......... 60,000 60,000 0 0
Rutgers Casualty Insurance Company.......... 60,000 60,000 0 0
Gilbert H. Dunham (2)....................... 68,000 68,000 0 0
Steven L. Scari (2)......................... 72,000 72,000 0 0
Bear Stearns SEC Corp. Cust. FBO
Steven L. Scari IRA (2)..................... 76,000 76,000 0 0
Kenneth L. Paul (2)......................... 80,000 80,000 0 0
Barry Wien (2).............................. 80,000 80,000 0 0
Morris Friedman............................. 100,000 100,000 0 0
Mervyn Klien................................ 155,000 100,000 55,000 *
Avrohom Moshel.............................. 100,000 100,000 0 0
Timothy O'Brien (2)......................... 100,000 100,000 0 0
Gloria M. Peterson.......................... 100,000 100,000 0 0
Solomon Werdiger & Esther Werdiger.......... 100,000 100,000 0 0
Altra Trading Investment, S.A. ............. 120,000 120,000 0 0
Theodore M. Turchan......................... 120,000 120,000 0 0
Nesher, Inc................................. 140,000 140,000 0 0
Timothy McCarthy (2)........................ 160,000 160,000 0 0
Austost Anstalt Schaan...................... 200,000 200,000 0 0
Balmore Funds, S.A. ........................ 200,000 200,000 0 0
Bretton Hill Funding, LLC................... 200,000 200,000 0 0
MJB Management Services, Ltd. (2)........... 200,000 200,000 0 0
George Weinberger (3)....................... 350,000 350,000 0 0
Ashfield Investments, Inc. ................. 400,000 400,000 0 0
Lipper & Company, L.P. (4)(5)............... 400,000 400,000 0 0
Dateline Investors LLC...................... 600,000 600,000 0 0
Perpetual Investments, Inc. ................ 1,000,000 1,000,000 0 0
Lintel, Inc. (6)............................ 1,945,000 500,000 1,445,000 6.1
TOTALS...................................... 8,129,630 6,610,698 1,518,932 6.4
</TABLE>

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

*Less than 1%

(1) Based on 23,581,074 shares outstanding as of August 5, 1999.
(2) Of the shares of common stock beneficially owned, one-half represent
shares of common stock that may be acquired immediately upon exercise
of warrants.

28
<PAGE>

(3) Of the shares of common stock beneficially owned, 150,000 shares may be
acquired immediately upon exercise of warrants.
(4) Represents shares of common stock that may be acquired immediately upon
exercise of warrants.

(5) Lipper & Company, L.P. served as placement agent in connection with a
private placement of shares of common stock pursuant to Rule 506 of
Regulation D under the Securities Act of 1933, which was completed in
June 1999. These warrants represent partial payment for such services.

(6) Lintel, Inc. is the parent corporation of Hart Telephone Company, our
beta customer in respect of our products as described elsewhere in this
prospectus. One of our directors, J. Lee Barton, is the President and
Chief Executive Officer of Lintel, Inc.

29
<PAGE>

PLAN OF DISTRIBUTION

The selling stockholder may, from time to time, sell all or a portion
of the shares of common stock on any market upon which the common stock may be
quoted, in privately negotiated transactions or otherwise, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such market prices or at negotiated prices. The shares of common
stock may be sold by the selling stockholder by one or more of the following
methods, without limitation:

- block trades in which the broker or dealer so engaged will
attempt to sell the shares of the common stock as agent, but
may petition and resell a portion of the block as principal to
facilitate the transaction ;

- purchases by broker or dealer as principal and resale by the
broker or dealer for its account pursuant to this prospectus;

- an exchange distribution in accordance with rules of the
exchange;

- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;

- privately negotiated transactions;

- market sales (both long and short to the extent permitted
under the federal securities laws); and

- a combination of any of these methods of sale.

In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling stockholders or,
if any such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser, in amounts to be negotiated. These commissions or discounts are
not expected to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the selling stockholders to sell a specified
number of shares of common stock at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for the selling
stockholder, to purchase as principal any unsold shares of common stock at the
price required to fulfill the broker dealer commitment to the selling
stockholders. Broker-dealers who acquire shares of common stock as principal may
thereafter resell such shares of common stock from time to time transactions
(which may involve block transactions and sales to and through other
broker-dealers, including transactions of the nature described above) at prices
and on terms then prevailing at the time of sale, at prices then related to
then-current market price or in negotiated transactions. In connection with such
resales, broker-dealers may pay to or receive from the purchasers of shares of
common stock commissions as described above. The selling stockholders may also
sell the shares of common stock in accordance with Rule 144 under the Securities
Act of 1933 rather than pursuant to this prospectus.

The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in sales of the shares of common stock
may be deemed to be "underwriters" within the meaning of the Securities Act in
connection with those sales. In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of the shares of common
stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.

From time to time, the selling stockholders may pledge their shares of
common stock pursuant to the margin provisions of its customer agreements with
its brokers. Upon default by a selling stockholder, the broker may offer and
sell such pledged shares of common stock from time to time. Upon a sale of the
shares of common stock, the selling stockholder intends to comply with the
prospectus delivery requirements under the Securities Act by delivering a
prospectus to each purchaser in the transaction. We intend to file any
amendments or other

30
<PAGE>

necessary documents in compliance with the Securities Act that may be required
in the event a selling stockholder defaults under any customer agreement with
brokers.

We are required to pay all fees and expenses incident to the
registration of the shares of common stock, including fees and disbursements of
counsel to the selling stockholders. We have agreed to indemnify the selling
stockholder against certain losses, claims damages and liabilities, including
liabilities under the Securities Act.

31
<PAGE>

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 50,000,000 shares of common
stock, without par value. As of August 5, 1999, our common stock was held by 379
stockholders of record.

COMMON STOCK

Each stockholder is entitled to one vote on all matters submitted to a
vote of stockholders for each share of common stock held. Cumulative voting for
the election of directors is not provided for in our certificate of
incorporation, which means that the holders of a majority of the shares of
common stock voted can elect all of the directors then standing for election.
The holders of outstanding shares of common stock are entitled to receive
dividends out of assets of legally available for dividends, at such times and in
such amounts as our board of directors deems appropriate. The common stock is
not entitled to preemptive rights and is not subject to conversion or
redemption. Upon liquidation, dissolution or winding up of our affairs, the
holders of common stock will be entitled to share ratably in all assets
remaining after the payment of liabilities. The rights and preferences of common
stockholders are subject to the rights of any class of preferred stock we may
issue in the future.

COMMON STOCK WARRANTS

As of August 5, 1999, we had warrants outstanding providing for the
purchase of an aggregate of 2,765,512 shares of common stock. The exercise
prices of the warrants range from $0.75 to $5.00 per share, with terms expiring
on dates ranging from January 15, 2003 to June 30, 2004.

ANTI-TAKEOVER PROVISIONS

New Jersey has adopted a type of anti-takeover law known as a "business
combination" statute. Subject to numerous qualifications and exceptions, the
statute prohibits an interested stockholder of a corporation from effecting a
business combination with the corporation for a period of five years unless the
corporation's board approved the transaction prior to the stockholder becoming
an interested stockholder. An "interested stockholder" is defined to include any
beneficial owner of 10% or more of the voting power of the outstanding voting
stock of the corporation and any affiliate of the corporation who within the
prior five year period has at any time owned 10% or more of the voting power.
The term "business combination" is defined broadly to include, inter alia,
merger of the corporation with the interested stockholder or any corporation
which after such merger would be an affiliate of the interested stockholder, and
any transfer of 10% or more of the corporation's assets to the interested
stockholder or affiliate thereof. The effect of the statute is to protect
non-tendering post-acquisition minority stockholders from mergers in which they
will be "frozen out" after the merger, by prohibiting transactions in which an
acquirer could favor itself at the expense of minority stockholders. This
statute applies to corporations which are organized under the laws of New Jersey
and have their principal executive offices or significant business operations
located within New Jersey. Because we have neither our principal executive
offices nor any significant business operations within New Jersey, the statute
currently does not apply to us. Our certificate of incorporation and Bylaws do
not contain antitakeover provisions.

<PAGE>

LEGAL PROCEEDINGS

We are involved in a litigation with Global Music and Media Inc. Global
Music believes that it has the exclusive right to market our technology. We
emphatically deny this allegation and will vigorously defend any legal claims
that are asserted by Global Music.

Other than the Global Music litigation, we are not a party to any material
legal proceedings.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Robert H. Jaffe & Associates, P.A., Springfield, New Jersey.

Robert H. Jaffe beneficially owns 675,000 shares of our common stock, which
includes:

- 100,000 shares owned by MJB Management Services, Ltd.;

- 100,000 shares underlying presently exercisable warrants held by
MJB Management Services, Ltd.;

- 175,000 shares owned by Robert H. Jaffe & Associates P.A.;

- 170,000 shares owned by Robert H. Jaffe; and

- 130,000 shares underlying presently exercisable warrants held
by Robert H. Jaffe.

Mr. Jaffe is a partner of Jaffe & Associates P.A. and the managing director
of MJB Management Services, Ltd. with voting and investment power over such
shares.

EXPERTS

The audited financial statements and schedules in this prospectus and
elsewhere in the registration statement have been audited by Schuhalter,
Coughlin & Suozzo, LLC, independent public accountants, as indicated in its
report with respect thereto, and are included in reliance upon the authority of
said firm as experts in giving said reports.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We file annual, quarterly and current reports, proxy statements and
additional information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information on file at the SEC's
Public Reference Section in Washington, D.C. You can also request copies of
those documents, upon payment of a duplicating fee, by writing to the SEC at the
Public Reference Section of the Commission, 450 Fifth Street, NW, Washington,
D.C. 20549.

We have filed a registration statement on Form SB-2 with the SEC. This
prospectus, which forms part of the registration statement, does not contain all
information included in the registration statement. Thus, you should refer to
the registration statement and its exhibits. The references made in this
prospectus to any of our contracts or documents are not necessarily complete.
Thus, you should refer to the exhibits attached to the registration statement
for copies of the actual contract or document mentioned. You may review a copy
of the registration statement at the SEC's public reference room, and at the
SEC's regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048. Please call the Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. Our filings and registration
statement can also be reviewed by accessing the SEC's web site at
http://www.sec.gov.

33
<PAGE>

mPhase Technologies, Inc.

Index to Consolidated Financial Statements

Page
----
<S> <C>
Report of Schuhalter, Coughlin & Suozzo, LLC F-2

Consolidated Balance Sheet as of June 30, 1998 and
March 31, 1999 (Unaudited) F-3, F-4

Consolidated Statement of Operations From the Company's Inception, October 2,
1996 through June 30, 1997 and December 31,1998 (Unaudited) and for the year
ended June 30, 1998 and the nine months ended March 31, 1999 (Unaudited) F-5 - F-6

Consolidated Statement of Changes in Stockholder's Deficit From Inception,
October 2, 1996 through June 30, 1997 and for the year ended June 30, 1998
and the nine months ended March 31, 1999 (Unaudited) F-7, F-8, F-9

Consolidated Statement of Cash Flows From the Company's Inception, October 2,
1996, through June 30, 1997 and March 31, 1999 (Unaudited) and for the - year
ended June 30, 1998 and the nine months ended March 31, 1999 (Unaudited) F-10

Notes to Consolidated Financial Statements F-11

</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
mPhase Technologies, Inc.

We have audited the accompanying balance sheets of mPhase Technologies, Inc. as
of June 30, 1998 and the related statements of operations, changes in
stockholders' equity, and cash flows for the period October 2, 1996 (date of
inception) through June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at June 30, 1998 and the results
of its operations and its cash flows for the period of October 2, 1996 (date of
inception) through June 30, 1998 in conformity with generally accepted
accounting principles.

The Company is in the development stage as of June 30, 1998. Recovery of the
Company's assets is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's development
program and its transition, ultimately, to attaining profitable operations is
dependent upon obtaining adequate financing to fulfill its development
activities and achieving a level of sales adequate to support the Company's cost
structure.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, conditions
exist which raise substantial doubt about the Company's ability to continue as a
going concern unless it is able to generate sufficient cash flows to meet its
present and future obligations and sustain its operations. Management's plan in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ Schuhalter, Coughlin & Suozzo, LLC
---------------------------------------------
Schuhalter, Coughlin & Suozzo, LLC

Raritan, New Jersey
January 28, 1999

F-2

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Balance Sheet

June 30, March 31,
1998 1999
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS

Cash and equivalents $ -- $ 122,479
Stock subscriptions receivable -- 375,000
Prepaid expenses 16,000 19,400
Deposits -- 7,415
Deferred offering costs -- 52,673
Equipment used in research and development, less
accumulated depreciation of $29,427 and $58,516 59,115 94,260
Marketing equipment, less accumulated depreciation
of $5,268 and $11,056 16,350 22,305
Patents and licensing rights, at cost, less
accumulated amortization of $46,534 and $202,000 1,084,492 916,690
Organization costs, less accumulated amortization
of $187 and $286 468 1,089
Note receivable - unconsolidated subsidiary, net
of $150,000 bad debt reserve -- --
Goodwill, less accumulated amortization of
$0 and $74,956 998,085 923,229
------------ -----------

TOTAL 2,174,510 2,534,540
------------ -----------
------------ -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Cash overdraft 8,432 --
Accounts payable 1,706,584 1,169,977
Accrued expenses 638,554 652,083
Due to affiliates 525,729 1,355,454
Deferred revenue -- 40,000
Loan(s) payable 210,000 228,900
------------ -----------

TOTAL LIABILITIES 3,089,299 3,446,414

STOCKHOLDERS DEFICIT

Common stock, no par value, 50,000,000 shares
authorized 13,579,711 shares issued and
outstanding at June 30, 1998 and 17,479,043
shares issued and outstanding at
March 31, 1999 (unaudited) 4,215,489 8,579,136
Deficit accumulated during development stage,
subsequent to recapitalization effective
October 2, 1996 (5,122,305) (9,483,037)
Treasury Stock, 13,750 shares at cost (7,973) (7,973)
------------ -----------

TOTAL STOCKHOLDERS' DEFICIT (914,789) (911,874)
------------ -----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,174,510 $ 2,534,540
------------ -----------
------------ -----------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Operations

<TABLE>
<CAPTION>
From
October 2,
1996
(Date of For the
Inception) Year
to Ended
June 30, June 30,
1997 1998
---------- ----------

<S> <C> <C>
TOTAL REVENUE $ -- $ --
------------ ----------

COSTS AND EXPENSES
Research and development (including $109,646
and $101,240 for the periods ended
June 30, 1997 and 1998 respectively and
$458,026 for the period ended 192,502 2,297,282
March 31, 1999 incurred with affiliate)
Licensing fees, including $450,000 for the
period ending June 30, 1998 incurred
with affiliate 37,500 450,000
General and administrative (including $223,488
and $61,131 for the period ended June 1997 and 1998 respectively, and
$90,000 for the period ended March 31, 1999 incurred
with affiliate) 540,722 1,109,801
Depreciation and amortization 10,522 29,131
Stock based compensation -- 150,000
Interest expense -- --
------------ -----------

TOTAL COSTS AND EXPENSES (781,247) (4,036,214)
------------ ----------
NET (LOSS) FROM OPERATIONS $ (781,246) (4,036,214)
------------ ----------

LOSS FROM UNCONSOLIDATED SUBSIDIARY
INCLUDING $150,000 RESERVE FOR BAD DEBT -- (304,845)
------------ ----------

NET (LOSS) $ (781,246) $(4,341,059)
------------ ----------
------------ ----------
BASIC LOSS PER COMMON SHARE $ (.100) $ (.465)
------------ ----------
------------ ----------
COMMON SHARES OUTSTANDING 7,806,457 9,336,340
------------ ----------
------------ ----------
DILUTED LOSS PER COMMON SHARE $ (.068) $ (.313)
------------ ----------
------------ ----------
COMMON SHARES AND EQUIVALENTS OUTSTANDING 11,481,457 13,883,185
------------ ----------
------------ ----------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Operations - (Continued)

From
October 2,
For the 1996
Nine (Date of
Months Inception)
Ended to
March 31, March 31,
1999 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
$ -- $ --
----------- -----------

2,290,005 4,779,789

-- 487,500

1,017,231 2,667,754
248,721 288,374
783,875 933,875
20,900 20,900
----------- -----------
(4,360,732) (9,178,192)
----------- -----------
(4,360,732) (9,178,192)
------------ -----------

-- (304,845)
----------- -----------
$(4,360,732) $(9,483,037)
----------- -----------
----------- -----------
$ (.291)
-----------
-----------
14,960,531
-----------
-----------
$ (.192)
-----------
-----------
22,761,126
-----------
-----------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Deficit
From July 1, 1996 to June 30, 1998 and December 31, 1998 (Unaudited)

Number Common Treasury
of Shares Stock Stock (Deficit) Total
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1996,
as previously
reported 9,876,800 $ 389,291 $ -- $ (671,039) $ (281,748)
Conversion of Loans
Payable to Common
Stock 1,500,000 5,000 -- -- 75,000
Conversation of
Accounts Payable
to Common Stock 27,465 6,866 -- -- 6,866
One-for-Ten Reverse
Common Stock Split (10,263,838) -- -- -- --
Assignment of
Certain Assets and
Liabilities of
Prior Tecma
Laboratories, Inc.
to TLI Industries,
Inc. and Spin-off
of 100% of TLI
Industries Common
Stock to
Shareholders, net
of $46,990 Loss
from Discontinued
Operations and
Dividend of $11,404 -- -- -- 133,332 133,332
--------- --------- -------- ---------- -----------
Subtotal 1,140,427 471,157 -- (537,707) (66,550)
--------- --------- --------- ----------- -----------

Issuance of Common
Stock in
Consideration for
100% of the Common
Stock of Lightpaths,
Inc 6,600,000 66,550 -- -- 66,550

Elimination of
Predecessor Retained
Deficit in
Recapitalization -- (537,707) -- 537,707 --
---------- ---------- --------- ----------- -----------

Balance as Restated
for Recapitalization,
Effective for
October 2, 1996
(Date of Inception
for Lightpaths, Inc.) 7,740,427 $ -- $ -- $ -- $ --
---------- ---------- --------- ------------ ------------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders' Deficit (Continued)
From July 1, 1996 to June 30, 1998 and December 31, 1998 (Unaudited)

Number Common Treasury
of Shares Stock Stock (Deficit) Total
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, as Restated 7,740,427 $ -- -- -- --

Issuance of Common
Stock, in Private
Placement Transactions,
Net of Offering Costs
of $138,931 594,270 758,474 -- -- 758,474

Net (Loss) for the
Year -- $ -- $ -- $ (781,246) $ (781,246)
---------- ----------- ----------- ------------- ------------

Balance, June 30,
1997 8,334,697 758,474 -- (781,246) (22,772)
---------- ----------- ----------- ------------- ------------

Issuance of Common
Stock, Net of
Offering Costs
of $205,203 2,195,014 1,472,015 -- -- 1,472,015

Issuance of Common
Stock for Services 300,000 150,000 -- -- 150,000

Issuance of Common
Stock in Connection
with investment in
Subsidiary 250,000 125,000 -- -- 125,000

Repurchase of 13,750
Shares of Common
Stock at Cost -- -- (7,973) -- (7,973)

Issuance of common
stock in
consideration for
100% of the common
stock of Microphase
Telecommunications,
Inc 2,500,000 1,710,000 -- -- 1,710,000

Net loss for the year -- -- -- (4,341,059) (4,341,059)
---------- ----------- ----------- ----------- -----------
Balance, June 30,
1998 13,579,711 $ 4,215,489 $ (7,973) $(5,122,305) $ (914,789)
---------- ----------- ----------- ----------- -----------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7

<PAGE>

Number Common Treasury
of Shares Stock Stock (Deficit) Total
--------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance, July 1,1998 13,579,711 $ 4,215,489 $ (7,973) $(5,122,305) $ (914,789)

Issuance of common
shares for services
(unaudited) 549,332 869,290 -- -- 869,290

Issuance of common
stock net of offering
costs of $184,065
(unaudited) 3,350,000 3,494,357 -- -- 3,494,357

Net loss for nine
months ended
March 31, 1999
(unaudited) -- -- -- (4,360,732) (4,360,732)
---------- --------- ------ ---------- --------

Balance, March 31,
1999 (unaudited) 17,479,043 8,579,136 (7,973) (9,483,037) (911,874)
---------- --------- ------ ---------- --------
---------- --------- ------ ---------- --------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-8

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flow

From
October 2,
1996
(Date of For the
Inception) Year Ended
June 30, June 30,
1997 1998
----------- -----------
<S> <C> <C>
Cash Flow Used In Operating Activities:
Net (Loss) $ (781,246) $(4,341,059)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Depreciation and Amortization 10,522 41,467
Depreciation of research and
development equipment 2,053 27,374
Interest expense -- --
Loss on unconsolidated subsidiary -- 304,845
Stock based compensation -- 150,000
Changes in assets and liabilities:
(Increase) Decrease in deposits -- --
(Increase) Decrease in prepaid expenses (6,705) (9,295)
Increase in accounts payable 86,297 1,620,387
Increase in accrued expenses 227,197 452,180
Increase in due to affiliate 425,766 78,294
Increase in deferred revenue - license fee -- --
Increase in cash overdraft -- 8,432
Increase in receivables from subsidiary -- (150,000)
----------- -----------

Net cash (used in) operating activities (450,216) (1,817,375)
----------- -----------
Cash Flow Used in Investing Activities:
Investment in organizational costs (54,110) --
Investment in licensing rights (655) --
Investment in fixed assets (80,906) (29,254)
Investment in unconsolidated subsidiary -- --
----------- -----------

Net cash (used in) investing activities (135,641) (29,254)
----------- -----------
Cash Flow From Financing Activities:
Proceeds from loan -- 210,000
Proceeds from issuance of common stock, net
of offering costs of $138,931, $205,203
and $184,065 747,674 1,482,815
Repurchase of Treasury stock at cost -- (7,973)
----------- -----------
Net cash provided by financing activities 747,674 1,684,842
----------- -----------
Net Increase (Decrease)in Cash 161,787 (161,787)

Cash, Beginning of Period -- 161,787
----------- -----------

Cash, End of Period $ 161,787 $ --
----------- -----------
----------- -----------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-9

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flow - (Continued)

From
October 2,
For the For the 1996
Nine (Date of
Months Inception)
Ended to
March 31, March 31,
1999 1999
----------- -----------
(Unaudited) (Unaudited)

<S> <C> <C>
$(4,360,732) $(9,483,037)

248,721 300,710

29,089 58,516
- -
- 304,845
783,875 933,875

(7,415) (7,415)
(3,400) (19,400)
(564,950) 1,135,886
13,529 692,906
679,725 769,785
40,000 40,000
- 8,432
- (150,000)
----------- -----------
(3,128,406) (5,395,997)
----------- -----------

(720) (54,830)
- (655)
- (186,137)
- -
----------- -----------
(76,697) (241,622)
----------- -----------

- 210,000

3,327,582 5,558,071
- (7,973)
----------- -----------
3,327,582 5,760,098
----------- -----------
122,479 122,479

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

$ 122,479 $ 122,479
----------- -----------
----------- -----------

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-10

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

NOTE 1 - LOSSES DURING THE DEVELOPMENT STAGE:

The Company and its predecessor corporation, discussed in Notes 2 and 3 below,
have recorded operating losses since inception, totaling $5,840,334 through June
30, 1998 which represents $718,029 operating losses by the predecessor and
$5,122,305 by the Company since the recapitalization.

Management plans to raise additional capital, primarily through the issuance of
common stock, until successful operations are obtained and the Company is no
longer in the development stage.

In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon the Company's ability to meet its
financing requirements, and the success of its future operations. Management
believes that actions presently being taken to underwrite the Company's
development stage through completion will provide the necessary financial
requirements which in turn will provide the opportunity for the Company to
continue as a going concern.

NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS:

The Company and its predecessor corporation was organized in the State of New
Jersey in December, 1979 under the name Tecma Laboratories, Inc. On April 7,
1997, the Company amended its certificate of incorporation and changed its name
to Lightpaths TP Technologies, Inc. On June 2, 1997, the Company amended the
certificate of incorporation and changed its name to mPhase Technologies, Inc.

The predecessor corporation was a development stage company primarily engaged in
research, development and the exploitation of certain products in the medical
and health care field. Since the recapitalization discussed in Note 3, the
Company is still in the development stage. The present activities of the Company
are focused on the completion of its proprietary Traverser(TM) Digital Data
Delivery System utilizing existing twisted pair copper wire infrature in "plain
old telephone systems" or "POTS".

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation:

The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany accounts and transactions have been
eliminated in consolidation. These include mPhase Technologies, Inc. (formerly
Lightpaths, Inc.), a Delaware corporation, formed on October 2, 1996; which is
the effective date of inception for the Company as the historical financial
statements are those of mPhase Technologies, Inc. as the transaction is
accounted for as a recapitalization of mPhase Technologies, Inc. Additionally,
the predecessor Company formed another wholly owned subsidiary called TLI
Industries, Inc. on January 29, 1997, shares of which were spun off to the
stockholders of the Company, effective March 31, 1997, after transferring
certain assets and liabilities, primarily fixed assets, patents and shareholder
loans. Effective for the period beginning July 1, 1998, these also include
Microphase Telecommunications, Inc. ("Microtel"). The liabilities in excess of
basis, and therefore the resultant gain on the disposal of discontinued
operations reduced by the loss from this discontinued operation through March
31, 1997, was treated as a decrease of the accumulated deficit prior to the
recapitalization.

F-11

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

The consolidated financial statements do not include an affiliate (see Note 5
Related Party Transactions) which the Company has been dependent upon for
facilities and technological assistance (see also Note 3).

Schedule of NonCash Investing and Financing Activities:

From
October 2, For the
1996 For the Nine
(Date of Year Months
Inception) Ended Ended
to June 30, June 30, March 31,
1997 1998 1999
-------- ---------- --------
(Unaudited)
<S> <C> <C> <C>
Accounts payable assumed in the
reverse acquisition of Lightpaths, Inc. $ 66,500
--------
--------
Common stock issued in connection with
investment in subsidiary $ 125,000
----------
----------
Common stock issued for services

Charged to operations $ 150,000 $783,875
---------- --------
---------- --------

Charged to common stock $ 85,415
--------
--------
Common stock issued for reduction of
accounts payable $ 27,983
--------

Common stock issued in connection with
the acquisition of Microphase
Telecommunications, Inc. $1,710,000
----------
----------
Other Supplemental Cash Flow Information:

Interest paid $ 0 $ 0 $ 2,000
-------- ---------- --------
-------- ---------- --------

</TABLE>

Property and Equipment:

Property and equipment are recorded at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of five years.

Research and Development:

Research and development costs are charged to operations as incurred.

Income Taxes:

Income taxes have been provided using the liability method in accordance with
FASB Statement No. 109, Accounting for Income Taxes.

Dependence:

The Company is dependent on an affiliated company for facilities and
technological assistance. (See Note 5 - Related Party Transactions). The Company
is also dependent on a co-patent holder, a research institute affiliated with
Georgia Tech University. This institute presently has the most significant
commitment of the Company. (See Note 6)

F-12

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

Effect of Uncertainty of Affiliate:

The affiliated companies for which the Company's depended on have not been
audited. Management has indicated that the affiliated companies have fiscal
uncertainties which question their ability to continue as a going concern. No
liabilities have been recorded in these financial statements for this
uncertainty.

Financial Instruments:

The preparation of financial statements in conformity with Generally Accepted
Accounting Principles (GAAP) requires the use of management's estimates.

The following methods and assumptions were used by the Company to estimate fair
values of financial instruments as discussed herein:

Cash and equivalents:

The carrying amount approximates fair value because of the short period of
maturity.

Receivables from and Payables to Affiliates:

The carrying amount approximates fair value because the Company anticipates
either repayment or offsets in the current period.

Marketing Expenses:

Marketing expenses are charged to Operations as incurred. Included in General
and Administrative expenses is $85,941 and $118,858 of marketing expenses for
the periods ended June 30, 1997 and 1998 respectively.

Licensing Rights:

Licensing rights are recorded at cost including $51,555 acquired in the
acquisition of Lightpaths, Inc. and are being amortized over the license period
of sixty months.

Equity Method:

The investment in a corporation in which the company has a 41.724% interest is
carried at cost, adjusted for the corporation's proportionate share of their
undistributed earnings or (loss).

Loss per Common Share

For the period ended June 30, 1997, and all periods subsequent thereto, the
Company adopted FASB 128 Statements of Financial Accounting Standards No. 128,
"Earnings Per Share," to compute earnings per share. Basis EPS excludes dilution
and is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. EPS from inception to date at March 31, 1999 is computed as if all these
shares were outstanding for all periods presented.

F-13

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

Intangible Assets:

Intangible assets are stated at cost. Amortization is computed using the
straight-line method over the estimated useful life of the asset, generally five
years for patents and copyrights and ten years for goodwill. At June 30, 1998,
the Company had capitalized $1,131,026 for patents and copyrights and $998,085
for goodwill, primarily in connection with its purchase of "Microtel" pursuant
to APB16.

Amortization expense was $10,133, $24,252 and $230,422 for the years ended June
30, 1997 and 1998 and the nine months ended March 31, 1999.

Long-Lived Assets

In March, 1995, the FASB issued SFAS No. 121 "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of" which states that
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable and long-lived assets and certain identifiable
intangibles are to be disposed of, they should be reported at the lower of
carrying amount or fair value less cost to sell. SFAS No. 121 also established
the procedures for review of recoverability and measurement of impairment, if
necessary, of long-lived assets and certain identifiable intangibles to be held
and used by an entity. The Company adopted SFAS No. 121 for the year ended June
30, 1997, and all periods subsequent thereto. The carrying value of assets of
the Company have not been affected by this statement.

Stock-Based Compensation:

The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for "Stock-Based Compensation," which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of the Accounting Principles Board (APB)
Opinion No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair value-based method, as defined in SFAS No. 123, had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure required by SFAS No. 123. As such,
compensation expense is generally recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price.

Purchase of Subsidiary

In June, 1998, the Company issued 2,500,000 post reverse split shares in
exchange for all of the issued and outstanding shares of Microphase
Telecommunications, a Delaware corporation. The transaction is an acquisition
accounted for as a purchase of Microphase Telecommunications, Inc. pursuant
to APB 16. The excess (approximately $998,085) of the total acquisition cost
over the recorded value of assets acquired was allocated to goodwill and will
be amortized over ten years effective July 1, 1998. Pursuant to the agreement
of merger, Microphase Telecommunications has become a wholly owned
subsidiary. As such, the Company will no longer be subject to the licensing
fee for technology development and transfer discussed in Note 6. The
agreement of merger further provides for the payment of a 3% royalty on the
net sales of mPhase Technologies, Inc. to be paid to Microphase Corporation,
an affiliate. The agreement also provides that the Company shall receive from
Microphase Corporation a 3% royalty on the net sales of digital subscriber
line components.

F-14

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

Condensed financial information for the corporation immediately before the
acquisition is as follows:

June 30,
Balance Sheet 1998
- ------------- ---------
<S> <C>
Assets:

Patents, net of $12,336 accumulated amortization $ 131,830
---------
Total Assets $ 131,830
---------
---------

Liabilities Due to Affiliates $ 286,169

Common stock 1,000

Retained Deficit (155,339)
---------
Total Liabilities and Shareholders Deficit $ 131,830
---------
---------

For the
Year
Ended
June 30,
Summary of Statement of Operations 1998
---------
Revenues - including

Licensing fees from M-Phase Technologies, Inc. $ 457,500

Expenses 400,551
---------
Operating Income 72,288

Gain on sale of patents and license rights 366,650
---------
Net Income $ 438,938
---------
---------

</TABLE>

F-15

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

Investment in Unconsolidated Subsidiary

On July 31, 1997 the Company and or its designates, agreed to purchase up to a
50% interest in Complete Telecommunications, Inc., together with Global Music
and Medica, Inc., a Tennessee corporation, a transaction which was memorialized
in an October 27, 1997 license agreement. Complete was intended to be a local
cable provider and a marketing vehicle for the Company's technology in certain
markets in the United States. The October 27th licensing agreement with
Complete, provided Complete certain rights of distribution in the continental
United States for mPhase technology for $2,000,000, the terms of which were
$300,000 cash and $1,700,000 to be paid upon the receipt by Complete of a
proposed financing ranging from $3,000,000 to $5,000,000 pursuant to a memo of
understanding between the Company and Global dated April 30, 1997.

The Company has an interest in a corporation, Complete Telecommunications, Inc.
which is involved in marketing the Company's technology. The investment is
accounted for using the equity method and represents a 41.724% ownership in the
subsidiary. The Company's accumulated deficit in the unconsolidated loss of the
corporation included in retained deficit at June 30, 1998 amounted to $304,845.

Unaudited condensed financial information of the unconsolidated subsidiary is as
follows:

Balance Sheet June 30, 1998
------------- -------------
<S> <C>
Assets:

Licensing fee, Net of $300,000
accumulated amortization $ 0

Pre-organizational costs, net of
$120,908 of accumulated amortization 211,081
---------

TOTAL ASSETS $ 211,081
---------
---------

Liabilities, including $150,000
note payable to mPhase 641,704

Common stock 300,000

Retained Deficit (730,623)
---------
TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT $ 211,081
---------
---------
Summary of Statement of Operations June 30, 1998
---------------------------------- -------------

Revenues $ 0

Expenses (730,623)
---------
NET LOSS $(730,623)
---------
---------

</TABLE>

F-16

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

NOTE 4 - COMMON STOCK:

Prior to June 30, 1989 the predecessor corporation issued 8,800,200 shares of
common stock for aggregate consideration of $222,093, after giving effect for a
stock split of 600 for 1 on September 1, 1987.

During 1988 the predecessor corporation entered into an Underwriting Agreement
with First Nutley Securities, Inc. for the proposed sale of its securities. The
underwriter agreed to sell 600,000 units to the public on a "best efforts,
250,000 unit or more" basis as to the first 250,000 units, and a "best efforts
basis" as to the remaining 350,000 Units at a price to the public of $1.00 per
unit. Each unit consisted of four shares of common stock, no par value, four
Class A redeemable common stock purchase warrants, and four Class B redeemable
common stock purchase warrants. Each Class A warrant and Class B warrant had
entitled the holder to purchase one share of common stock at a purchase price of
$.50 and $1.00 per share for a two and three year period respectively, after the
offering. The terms of the Class A and Class B warrants were extended to
February 13, 1997 and February 13, 1998 respectively and are now expired. Prior
to their expiration 4,400 net warrants for a like amount of common shares were
exercised for consideration of $2,125.

On July 20, 1989 the unit public offering was completed, 256,050 units were
issued, and the Company received $206,062 which was net of certain expenses of
the sale and offering costs of $49,988, and after giving effect to deferred
offering costs it had previously recorded of $53,015, generated net proceeds to
the Company of $153,048. Concurrently, the predecessor corporation issued
102,440 warrants to the underwriter for $.00025 per warrant and received $25.

During the six months ended December 31, 1995 the predecessor corporation issued
48,000 shares for aggregate consideration of $12,000.

Prior to recapitalization due to the reverse acquisition discussed in Note 3,
the Company issued 1,500,000 and 27,465 shares of stock in cancellation of
$75,000 of loans and $6,866 of accounts payable respectively, bringing the
aggregate shares to 11,404,270.

The Company effected a one-for-ten reverse split for the shares above, effective
March 31, 1997.

The Company issued 6,600,000 post reverse split shares in connection with the
reverse acquisition of Lightpaths, Inc. discussed in Note 3.

In June of 1997, the Company issued 594,270 post reverse split shares for
897,405, which net of offering costs of $138,931, generated net proceeds of
$758,474 to the Company. Included in the net proceeds was a stock subscription
of 10,800 which was collected in early July, 1997.

In October, 1997, the Company issued 250,000 shares in connection with its
investment in an unconsolidated subsidiary valued at $125,000 considering the
Rule "144" restrictions to which they were subject.

F-17

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

During the year ended June 30, 1998, the Company issued 2,195,014 post reverse
split shares for $1,677,218, which net of offering costs of $205,203, generated
net proceeds of $1,472,015 to the Company.

During the year ended June 30, 1998, the Company issued 250,000 shares valued at
$125,000 in connection with an investment in subsidiary.

During the year ended June 30, 1998, the Company issued 300,000 shares, valued
at $150,000, considering the Rule "144" restrictions which they were subject to,
and charged the same to stock based compensation in the statement of operations.

On June 25, 1998, the Company issued 2,500,000 shares, valued at $1,710,000 in
consideration for 100% of the common stock of Microphase Telecommunications,
Inc.

During the nine month period ended March 31, 1999, the Company issued 410,000
shares, valued at $828,540, considering the Rule "144" restrictions which they
were subject to, and charged $783,875 to stock based compensation in the
statement of operations and $85,415 to common stock.

During the period ended March 31, 1999, the Company issued 54,332 shares valued
at $40,750 for services.

During the period ended March 31, 1999, the Company issued 3,115,000 shares for
$3,197,416, which net of offering costs of $132,666, generated net proceeds of
$3,064,750 to the Company.

During the period ended March 31, 1999, the Company issued 235,000 shares for
$587,000 which included a $375,000 stock subscription collected in April, 1999
net of offering costs of $51,399, generated net proceeds of $536,101 to the
Company.

RESERVED SHARES:

On August 15, 1997, the Board of Directors authorized the grant of options to
purchase 3,675,000 shares of the Company's common stock at $1.00 per share,
including grants to purchase 3,000,000 shares of the Company's common stock to
officers and directors, upon the approval and implementation of a stock option
plan. No compensation was charged to expense as the grant price approximates the
fair market value of the options considering the Rule "144" restrictions on the
shares if exercised during the period. No shares have been exercised under these
grants. During the year ended June 30, 1998, the Company terminated an employee
for cause, which under the terms of the Company's stock option plan voided a
grant of options to purchase 750,000 shares at $1.00 per share. The effect of
such was to reduce the options outstanding from 3,675,000 to 2,925,000. During
the period ended March 31, 1999, the Company also issued options to purchase an
additional 2,648,750 shares of the Company's common stock at $1.00 per share,
bringing the total to 5,573,750 of such options.

During the nine month period ended March 31, 1999, the Company issued options to
purchase 80,000 shares of the Company's common stock at $1.50 per share, and
50,000 shares of the Company's common stock at $2.00 per share.

During the period ended March 31, 1999, the Company issued 1,621,845 warrants to
purchase one share of common stock at a price of $0.75 per share, exercisable
for five years from the date of issuance. These warrants are callable by the
Company if the trading price of the common stock traded on the exchange in which
the Company is listed remains over $5.00 per share for a specified period of
time.

F-18

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

During the nine month period ended March 31, 1999, the Company also issued
400,000 warrants to purchase one share of common stock at a price of $1.00 per
share, exercisable for five years from the date of issuance. These warrants are
callable by the Company is the trading price of the common stock traded on the
exchange in which the Company is listed remains over $5.00 per share for a
specified period of time.

During the nine month period ended March 31, 1999, the Company issued 25,000
warrants on September 15, 1998 to purchase one share of common stock at a price
of $1.06 per share, and 50,000 warrants on September 15, 1998 to purchase one
share of Common Stock at a price of $2.4375 exercisable for five years from the
date of issuance. These warrants are callable by the Company if the trading
price of the common stock traded on the exchange in which the Company is listed
remains over $5.00 per share for a specified period of time.

NOTE 5 - RELATED PARTY TRANSACTIONS:

The management of the Company are also employees of an affiliated Company which
have recorded material transactions with the Company. The Company's management
is in a position to, and in the future may, influence future operations of the
Company for the benefit of other companies that are under their control.

During the period ended June 30, 1997, the Company advanced $164,000 and
$250,000 to companies then under common control. Additionally, the Company
agreed to reimburse another affiliate $383,266 for research and development
expenses as well as certain marketing expenses and $42,500 for other costs
including licensing fees and facilities and administrative services discussed in
Note 6. The Company has agreed in principle to have a convertible option to
convert its $164,000 account receivable to equity in that affiliate.

On August 15, 1997 the Board of Directors of the Company and the Board of
Directors of the affiliates agreed to permit the right of offset for the above
advances against the liability of the affiliate discussed in Note 6.

On October 27, 1997, the Company, in connection with a planned joint venture
licensing agreement discussed in Note 3, became the 41.724% owner in an
unconsolidated subsidiary which included the investment of $300,000 and 250,000
shares of common stock valued at $125,000. Additionally, the Company advanced
$150,000 in the form of a note receivable bearing interest of 12% and due within
one year. No interest income was recorded in the statement of operations as the
unconsolidated subsidiary has failed to make any payments under the note. The
proposed joint venture partner in the unconsolidated subsidiary has continually
failed to raise and contribute its originally planned equity contributions to
the unconsolidated subsidiary and commenced an action against the Company and
the Company is presently negotiating a proposed revised licensing agreement with
the co-owners of the subsidiary.

F-19

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

During the period ended June 30, 1998, the "CTI" subsidiary is not
consolidated in these financial statements as management of the Company does
not believe it had effective control of the subsidiary.

During the period ended June 30, 1997, the Company paid $95,141 in offering
costs to a securities firm owned by a director, and during the period ended
June 30, 1998 the Company incurred offering costs with the same firm totaling
$153,999; of which $134,638 remained due and was included in accounts payable
and accrued expenses at June 30, 1998.

The licensing fees paid by the Company, discussed in Note 6, were paid to an
affiliate. The acquisition, pursuant to an agreement dated June 25, 1998,
discussed in Note 2, was of the same affiliate the licensing fees were
previously paid to and this company was acquired from another affiliate the
Company will be obligated to pay a 3% royalty to on revenues from the Company's
proprietary TRAVERSER(TM) Digital Video Data Delivery System.

During the nine month period ended March 31, 1999 the Company paid $90,000 in
administrative reimbursements, and $360,000 for technical assistance to
Microphase Corporation.

NOTE 6 - COMMITMENTS AND CONTINGENCIES:

On February 15, 1997 the Company entered into a Technology, Patent and Trademark
License Agreement with Microphase Telecommunications, Inc., an affiliated
Company. The agreement permits the Company to utilize the patent and trademark
technology of Microphase Telecommunications, Inc. under a licensing arrangement
with payments as follows:

(1) a one time non-refundable payment of $37,500 which the Company has recorded
as a license agreement in the Balance Sheet.

(2) Minimum annual royalties, based upon sales of the Company at rates of ten
(10%) percent on the first $1,000,000 of sales; nine (9%) percent for sales
between $1,000,001 and $5,000,000; eight (8%) percent for sales between
$5,000,001 and $10,000,000; seven (7%) percent for sales between
$10,000,001 and $20,000,000; and six (6%)percent for sales above
$20,000,000 per year. Regardless of the Company sales, the Company has
agreed to pay $50,000, $250,000 and $500,000 as a minimum payment in years
one, two and three and additionally, $1,000,000 every year thereafter.

(3) The Company also agreed to make payments of $37,500 per month, starting
June 1, 1997 and during the life of the Agreement, which in periods where
no royalties are earned, can be applied to the minimum royalty above, for
technology development and transfer. The Agreement is for the life of the
trademark and patented items, which have been applied for and are expected
to be seventeen years. During the period ended June 30, 1997, $37,500 has
been charged to expense under this Agreement.

On May 1, 1997 the Company entered into an agreement with Microphase
Corporation, an affiliate with common yet unidentical ownership, whereby the
Company will use office space as well as the administrative services of the
Company including the use of accounting personnel. This Agreement is for $5,000
per month and is on a month to month basis. During the period ended June 30,
1997, $10,000 has been charged to expense under this Agreement.

The predecessor corporation had previously abandoned its Bridgewater, New Jersey
facility and has claimed no obligation for rent under a lease which has since
expired during the current period. The Company has recorded $54,250 for unpaid
rent under this Agreement and the same is included in accounts payable at June
30, 1997. Management believes it will have no obligation under this lease and if
it is found otherwise, believes such obligation will be less than the amounts
recorded in the financial statements.

F-20

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

The Company has entered into various agreements with Georgia Tech Research
Corporation, GTRC, a Company affiliated with Georgia Tech Research Institute,
located in Atlanta, Georgia, pursuant to which the Company receives technical
assistance in developing the commercialization of its digital video and data
system. If and when sales commence utilizing this particular technology, the
Company will be obligated to record and pay to GTRC a royalty of net sales of 3%
to 5%, determined by mutual agreement on a product by product basis.

The dollar amount incurred by the Company of GTRC for technical assistance with
respect to its Research and Development activities during the year ended June
30, 1998 totaled $2,100,644 and included in accounts payable at June 30, 1998 is
$1,310,062 to GTRC. For the nine months ended March 31, 1999, $1,800,042 of
research and development expenses were incurred with GTRC and $842,027 was
included in accounts payable to GTRC at March 31, 1999.

In June, 1998, the Company was advised by Global Music & Media, Inc., a
Tennessee Corporation, and a major shareholder in the Company's unconsolidated
subsidiary, Complete Telecommunications, Inc. that they may be subject to suit
for an alleged breach of contract of an April 30, 1997 agreement, and
subsequently a suit was filed. The suit alleges Global was given the exclusive
right to market mPhase Technology as well as television programming and related
services. The Company believes the April 30, 1997 agreement was never intended
to give exclusive rights to its technology; the April 30, 1997 agreement was
superseded by the October 27, 1997 agreement with respect to which Global and a
related Company has defaulted under its obligations and clearly does not provide
for exclusivity. Accordingly, the Company considers the suit meritless and
intends to vigorously defend its position.

NOTE 7 - CORPORATE INCOME TAXES:

No provision has been made for corporate income taxes due to cumulative losses
incurred. The Company has available unrealized tax benefits of approximately
$1,935,000 in the form of net operating loss carryforwards of approximately
$5,221,200 for federal income tax purposes and $5,025,200 for state income tax
purposes to reduce future taxable income.

The Company has recognized these tax benefits as a deferred tax asset subject to
a 100% valuation allowance since it is uncertain whether or not these tax
benefits will be realized.

As of June 30, 1998 these losses expire as follows:

Federal State
------- ------
<S> <C> <C>
June 30, 1998 through 2005 $ 0 $5,025,200
June 30, 1999 and 2000 175,000 0
June 30, 2001 thru 2005 47,000 0
June 30, 2006 76,000 0
June 30, 2007 48,000 0
June 30, 2008 75,000 0
June 30, 2009 73,000 0
June 30, 2010 86,000 0
June 30, 2011 85,600 0
June 30, 2012 519,400 0
June 30, 2013 4,036,200 -
---------- ----------

TOTAL: $5,221,200 $5,025,200
---------- -----------
---------- -----------

</TABLE>

F-21

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

NOTE 8 - PROPERTY AND EQUIPMENT:

Property and equipment owned by the Company at June 30, 1997, June 30, 1998 and
March 31, 1999 (Unaudited) as well as the estimated useful lives used in
computing depreciation are as follows:

June 30, June 30, March 31,
1997 1998 1999
-------- -------- ---------
(Unaudited)
<S> <C> <C> <C>
Equipment used in research
and development (5-7 years) $ 66,906 $ 88,542 $ 152,776

Marketing equipment (3-5 years) 14,000 21,618 33,361
-------- --------- ---------
Subtotal 80,906 110,160 186,137

Less accumulated depreciation (2,442) (34,695) (69,572)
-------- --------- ---------
Net Total $ 78,464 $ 75,465 116,565
-------- --------- ---------
-------- --------- ---------

</TABLE>

Depreciation expense for the period ended June 30, 1997, June 30, 1998 and March
31, 1999 (Unaudited) was $389, $4,879 and $18,299 respectively for
administrative and marketing equipment and $2,053, $27,374 and $28,089,
respectively, for equipment used in research and development.

NOTE 9 - CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK:

In the course of the Company business, it has advanced monies to a supplier and
a licensing agent in the technology industries. Furthermore, these are
affiliated companies with limited history of operations.

These expose the Company to risk of loss of the amounts advanced should the
supplier ultimately be unable to produce what the Company intends upon
purchasing as well as risk of loss should the technology to be assigned
encounters obsolescence prior to its utilization by the Company. Additionally,
the Company may be exposed to off-balance sheet risk arising from potential
claims should the technology or products create a liability in which the
Company's counterparties may fail to satisfy their obligations.

The Company measures its exposure on a commitment by commitment basis. This risk
can be effected by changes in geographic, industrial or other economic factors.
To alleviate the potential for risk concentration, management has monitored the
progress of the supplier as well as the status of technological advances and
changes with its providers and within the industry itself.

F-22

<PAGE>

mPHASE TECHNOLOGIES, INC.
Formerly Tecma Laboratories, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited for the Nine Months Ended March 31, 1999)

NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS:

The estimated fair value of the Company's financial instruments are as follows:

June 30, 1998 March 31, 1999
---------------------- ---------------------
(Unaudited)
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:

Cash and
Equivalents $ - $ - $ 122,479 $ 122,479
Stock Subscription
Receivable - - $ 375,000 $ 375,000

Liabilities:
Cash overdraft $ 8,432 $ 8,432 $ - $ -
Accounts payable $1,571,945 $1,571,945 $1,169,977 $1,169,977
Accrued expenses $ 638,554 $ 638,554 $ 652,083 $ 652,083
Due to Affiliate(s) $ 8,432 $ 8,432 $1,355,454 $1,355,454
Loans payable $ - $ - $ 228,900 $ 228,900

</TABLE>

NOTE 11 - YEAR 2000 ISSUES

Many computer systems and software programs, including several used by the
Company may require modification and conversion to allow date code fields to
accept dates beginning with the year 2000. Major system failures or erroneous
calculations can result if computer system failures are not year 2000 compliant.

The Company is in the process of evaluating the computer systems they now have
in use and does not anticipate a major undertaking to be compliant.

All costs associated with year 2000 compliance that have been incurred by the
Company have been expensed and have not been capitalized. The overall cost to
the Company of modifications and conversion for year 2000 compliance with
relation to the financial statements taken as a whole is not material. The
Company is advised by a substantial majority of its vendors of computer
products upgraded to be year 2000 compliant, or will not be affected by the
year 2000 problem. The Company's business could be materially adversely
affected if the Company's computer-based systems are not year 2000 compliant
in a timely manner, the Company incurs significant additional expenses
pursuing year 2000 compliance, the Company's vendors do not timely provide
year 2000 compliant products, or the Company is subject to warranty or other
claims by the Company's clients related to product failures caused by the
year 2000 problem.

F-23

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 14A:3-5 of the New Jersey Business Corporation Act, as amended
("NJBCA"), provides that a corporation may indemnify a corporate agent against
his or her expenses and liabilities incurred in connection with any proceeding
(other than a derivative law suit) involving the corporate agent by reason of
his or her being or having been a corporate agent if (a) the corporate agent
acted in good faith or in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) with respect to any
criminal proceeding, the corporate agent had no reasonable cause to believe his
or her conduct was unlawful. Under the NJBCA the term "corporate agent" includes
any present or former director, officer, employee or agent of the corporation,
and a person serving as a "corporate agent" at the request of the corporation
for any other enterprise, or the legal representative of any such director,
officer, trustee, employee or agent. For purposes of this section, "proceeding"
means any pending, threatened or completed civil, criminal, administrative or
arbitrative action, suit, or proceeding, and any appeal therein and any inquiry
or investigation which could lead to such action, suit or proceeding.

With respect to any derivative action, mPhase is empowered to indemnify a
corporate agent against his or her expenses (but not his or her liabilities)
incurred in connection with any proceeding involving the corporate agent by
reason of his or her being or having been a corporate agent if the agent acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation. However, only a court can
empower a corporation to indemnify a corporate agent against expenses with
respect to any claim, issue or matter as to which the agent was adjudged liable
to the corporation.

mPhase may indemnify a corporate agent in a specific case if a
determination is made by any of the following that the applicable standard of
conduct was met:

(i) the Board of Directors, or a committee thereof, acting by a majority
vote of a quorum consisting of disinterested directors;
(ii) by independent legal counsel, if there is not a quorum of
disinterested directors or if the disinterested quorum empowers
counsel to make the determination; or
(iii)by the stockholders.

A corporate agent is entitled to mandatory indemnification to the extent
that the agent is successful on the merits or otherwise in any proceeding, or in
defense of any claim, issue or matter in the proceeding. If mPhase fails or
refuses to indemnify a corporate agent, whether the indemnification is
permissive or mandatory, the agent may apply to a court to grant him or her the
requested indemnification. In advance of the final disposition of a proceeding,
the Board of Directors may direct mPhase to pay an agent's expenses if the agent
agrees to repay the expenses in the event that it is ultimately determined that
he is not entitled to indemnification.

Article IX of mPhase's Bylaws provides that mPhase shall indemnify any
directors, officers, or agents to the full extent permitted by the NJBCA.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee.

<TABLE>

<S> <C>
Securities and Exchange Commission registration fee.......... $11,084.08
Transfer Agent's fees and expenses .......................... *
Printing and engraving expenses.............................. *
Legal fees and expenses...................................... *
Blue sky fees and expenses................................... *
Accountants' fees and expenses............................... *

</TABLE>

<PAGE>

<TABLE>

<S> <C>
Miscellaneous................................................ *
---------
Total Expenses............................................. $ *
---------
---------
</TABLE>

- -----------------------
* To be provided by amendment.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, mPhase has issued and sold unregistered
securities in the transactions described below.

SHARES OF COMMON STOCK

1. In June 1997, mPhase issued 594,270 shares to 58 investors for an
aggregate purchase price of $897,405. In July 1997, mPhase issued
49,300 shares to 12 investors for an aggregate purchase price of
$98,600. Both offerings were made pursuant to Rule 504 of Regulation D
of the Securities Act of 1933, as amended (the "1933 Act").

2. In November 1997, mPhase issued 300,000 shares to 7 investors for
marketing services rendered to mPhase valued at $0.25 per share.

3. In November 1997, mPhase issued 300,000 shares to the shareholders of
Complete Telecommunications, Inc. for a purchase price of $1.00 per
share, or an aggregate purchase price of $300,000, and issued 250,000
shares as part of mPhase's investment in Complete Telecommunications,
Inc.

4. During 1998, mPhase issued 2,195,014 shares to 70 accredited investors
for a purchase price of approximately $0.76 per share, or an aggregate
purchase price of $1,677,218, pursuant to Rule 505 of Regulation D of
the 1933 Act.

5. On June 25, 1998, mPhase issued 2,500,000 shares in consideration for
all the outstanding shares of Microphase Telecommunications, Inc., a
Connecticut corporation, which holds substantially all of the patents
and copyrights to mPhase's technology.

6. During the nine month period ended March 31, 1999, mPhase issued
410,000 shares valued at approximately $1.71 per share, or an aggregate
value of $700,500, considering the Rule 144 restrictions to which they
were subject, and charged the same to stock based compensation in the
statement of operations.

7. During the six month period ended December 31, 1998, mPhase issued
54,332 shares valued at $0.75 per share, or an aggregate value of
$40,750 to various service providers in respect of such services.

8. During the six month period ended December 31, 1998, mPhase issued
3,115,000 shares to 14 accredited investors, including J. Lee Barton,
several members of Mr. Barton's family, Lintel, Inc., several of
Lintel's employees and two employees of Microphase Corporation, a
corporation with which we have certain related transactions
described in the prospectus forming a part of this registration
statement, for an aggregate purchase price of $3,197,416, pursuant
to Rule 505 of Regulation D of the Securities Act of 1933.

9. In January and February 1999, mPhase issued 85,000 shares valued at
$0.50 per share, or an aggregate value of $42,500, in respect of
services rendered to mPhase.

10. In February 1997, mPhase issued 600,000 shares to Nutley Securities,
Inc., a company in which Ronald A. Durando, mPhase's Chief Executive
Officer, is President, valued at $0.01 per share, or an aggregate
value of $6,000, as a "finder fee" at the time of the acquisition of
Lightpaths, Inc.

11. In May 1998, mPhase issued 100,000 shares to Robert H. Jaffe &
Associates, P.A., valued at $0.25 per share, or an aggregate value of
$25,000, in consideration of legal services rendered by that law firm
in connection with mPhase's initial registration statement on SEC Form
10-SB.

12. In May 1999, mPhase issued 642,000 shares to 18 accredited investors
for a purchase price of $2.50 per share, or an aggregate purchase price
of $1,605,000, pursuant to Rule 506 of Regulation D of the 1933 Act.

13. In June 1999, mPhase issued 4,426,698 shares to 54 accredited investors
for a purchase price of $2.50 per share, or an aggregate purchase price
of $11,066,745, pursuant to Rule 506 of Regulation D of the 1933 Act.

14. In August 1999, mPhase issued 200,000 shares to David Klimek for
technical advisory services in connection with mPhase's acquisition of
Microphase Telecommunications, Inc.

15. In August 1999, mPhase issued 352,239 shares to Kaufman Bros., L.P. in
connection with the cashless exercise of Kaufman's warrant (described
below).

16. In August 1999, mPhase issued 75,000 shares to Robert H. Jaffe &
Associates, P.A., valued at $1.25 per share, or an aggregate value of
$93,750, for legal services.

WARRANTS TO PURCHASE COMMON STOCK

1. mPhase issued warrants to purchase an aggregate of 1,751,845 shares to
the investors in mPhase's 1998 Rule 505 offering. The warrants had an
exercise price of $.75 per share.

2. On July 15, 1998, mPhase issued a warrant to purchase 400,000 shares to
Kaufman Bros., L.P. for financial advisory services. The warrant has an
exercise price of $1.00 per share.

3. In December 1998, mPhase issued a warrant to purchase 6,666 shares to
M&M Creative Services for internet related services. The warrant has an
exercise price of $0.75 per share.

4. mPhase issued warrants to purchase an aggregate of 642,000 shares to
the investors in mPhase's May 1999 Rule 506 offering. The warrants had
an exercise price of $2.50 per share.

5. On June 30, 1999, mPhase issued a warrant to purchase 400,000 shares to
Lipper & Company for its services as placement agent in connection with
mPhase's Rule 506 offerings in May and June 1999. The warrant has an
exercise price of $1.00 per share.

mPhase believes that the transactions described above did not involve a
public offering and were exempt from registration under Section 4(2) of the
Securities Act because the subject securities were sold to a limited group of
persons, each of whom was believed to have been a sophisticated investor or had
a pre-existing business or personal relationship with mPhase or its management
and because each such person was purchasing for investment without a view to
further distribution. Restrictive legends were placed on stock certificates and
are contained in stock option agreements evidencing the securities described
above.

<PAGE>

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed as part of this registration
statement:

EXHIBITS
<TABLE>
<CAPTION>

Exhibit
Number Description
------- -----------
<S> <C>

2.1 Exchange of Stock Agreement and Plan of Reorganization, Dated
January 15, 1997 (Exhibit 2(a) to the Registration Statement on
Form 10-SB (Reg. No. 002-24969) filed May 6, 1999).
2.2 Exchange of Stock Agreement and Plan of Reorganization, Dated June
25, 1998 (Exhibit 2(b) to the Registration Statement on Form 10-SB
(Reg. No. 000-24969) filed May 6, 1999).
3.1 Certificate of Incorporation of Tecma Laboratory, Inc. filed
December 20, 1979 (Exhibit 3(a) to the Registration Statement on
Form 10-SB (Reg. No. 000-24969) filed May 6, 1999).
3.2 Certificate of Correction to Certificate of Incorporation of Tecma
Laboratory, Inc. dated June 29, 1987 (Exhibit 3(b) to the
Registration Statement on Form 10-SB (Reg. No. 000-24969) filed May
6, 1999).
3.3 Certificate of Amendment of Certificate of Incorporation of Tecma
Laboratory, Inc. dated August 28, 1987 (changing name to Tecma
Laboratories, Inc.) (Exhibit 3(c) to the Registration Statement on
Form 10-SB (Reg. No. 000-24969) filed May 6, 1999).
3.4 Certificate of Amendment of Certificate of Incorporation of Tecma
Laboratories, Inc. filed April 7, 1997 (changing its name to
Lightpaths TP Technologies, Inc. (Exhibit 3(d) to the Registration
Statement on Form 10-SB (Reg. No. 000-24969) filed May 6, 1999).
3.5 Certificate of Amendment of Certificate of Incorporation filed June
2, 1997 (changing its name to mPhase Technologies, Inc.) (Exhibit
3(e) to the Registration Statement on Form 10-SB (Reg. No.
000-24969) filed May 6, 1999).
3.6 Certificate of Incorporation of Lightpaths, Inc. Filed October 2,
1996 with the Delaware Secretary of State (Exhibit 3(f) to the
Registration Statement on Form 10-SB (Reg. No. 000-24969) filed May
6, 1999)
3.7 By-Laws of mPhase Technologies, Inc. (Exhibit 3(g) to the
Registration Statement on Form 10-SB (Reg. No. 000-24969) filed May
6, 1999).
3.8 mPhaseTV.net/Inc. Certificate of Incorporation dated August 21,
1998 (Exhibit 3(h) to the Registration Statement on Form 10-SB
(Reg. No. 000-24969) filed May 6, 1999).
3.9 Certificate of Incorporation of Microphase Telecommunications, Inc.
(Exhibit 3(i) to the Registration Statement on Form 10-SB (Reg. No.
000-24969) filed May 6, 1999).
4.1 mPhase Long Term Stock Incentive Plan authorized by the Company on
August 15, 1997 (Exhibit 4(a) to the Registration Statement on Form
10-SB (Reg. No. 000-24969) filed May 6, 1999)
4.2 A warrant agreement between the Company and Jersey Transfer & Trust
Co., Warrant Agent, relating to the warrants issued pursuant to
Rule 505 offering (Exhibit 4(b) to the Registration Statement on
Form 10-SB (Reg.
No. 000-24969) filed May 6, 1999)
5.1 Opinion of Robert H. Jaffe regarding the legality of the securities
being registered.*
10.1 Technology agreement Dated February 15, 1997 between Microphase
Telecommunications and mPhase Technologies, Inc. (Exhibit 10(a) to
the Registration Statement on Form 10-SB (Reg. No. 000-24969) filed
May 6, 1999).
10.2 Loan Agreements and Promissory Notes between Janifast Holdings,
Ltd. (the Maker) and mPhase Technologies Inc. (the Holder),
Dated April 10,1997, May 5, 1997, June 19, 1997 and August 31,
1997 (Exhibit 10(b) to the Registration Statement on Form 10-SB
(Reg. No. 000-24969) filed May 6, 1999).
10.3 Joint Venture Agreement dated April 30, 1997 between the Company
and Global Music & Medica, Inc. detailing terms and conditions
under which Complete Telecommunications, Inc. is to be organized
and operated (Exhibit 10(c) to the Registration Statement on Form
10-SB (Reg. No. 000-24969) filed May 6, 1999).
10.4 License Agreement dated October 27, 1997 between the Company,
Complete Telecommunications, Inc. and Global Music & Media, Inc.
(Exhibit 10 (d) to the Registration Statement on Form 10-SB (Reg.
No. 000-24969) filed May 6, 1999).
10.5 License Agreement dated March 26, 1998, by and between Georgia Tech
Research Corporation and the Company relating to the
commercialization of a certain invention entitled "Digital Video
and Data System." (Exhibit 10(e) to the Registration Statement on
Form 10-SB (Reg. No. 000-24969) filed May 6, 1999).
10.6 Infospace Content Distribution Agreement dated January 25, 1998, by
and between InfoSpace.com, Inc. and the Company (Exhibit 10(f) to
the Registration Statement on Form 10-SB (Reg. No. 000-24969) filed
May 6, 1999).
10.7 IP Equity Internet Investor Communication dated February 1, 1999 (Exhibit 10(g) to the Registration Statement
on Form 10-SB (Reg. No. 000-24969) filed May 6, 1999).
10.8 Employment Agreement with Ronald A. Durando.**
10.9 Employment Agreement with Gustave T. Dotoli.**
10.10 Employment Agreement with Susan E. Cifelli.**
11 Statement Re Computation of Per Share Earnings.**
16 Letter from Mauriello, Franklin & LaBrace, P.C. (Exhibit 16 to the
Registration Statement on Form 10-SB (Reg. No. 000-24969) filed May
6, 1999).
21 Subsidiaries (Exhibit 21 to the Registration Statement on Form
10-SB (Reg. No. 000-24969) filed May 6, 1999).
23.1 Consent of Schuhalter, Coughlin & Suozzo, LLC**
23.2 Consent of Robert H. Jaffe & Associates, P.A. (included in their
opinion filed as Exhibit 5.1)*
24 Power of Attorney (included as a part of the signature page of this
Registration Statement)
27 Financial Data Schedule (nine months ended March 31, 1999).**

</TABLE>

- ------------------
* To be filed by amendment.
** Filed herewith.

<PAGE>

ITEM 28. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration to Statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in this Registration Statement;

(iii)to include any material information with respect to the plan of
distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;

(2) that, for determining liability under the Securities Act, each such
post-effective amendment shall be treated as a new registration of
the securities offered, and the offering of such securities at that
time shall be treated as the initial bona fide offering; and

(3) to file a post-effective amendment to remove from registration any of
the securities that remain unsold at the termination of this
offering.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned in Norwalk,
Connecticut on August 13, 1999.

mPHASE TECHNOLOGIES, INC.

By: /s/ Ronald A. Durando
------------------------------------
Ronald A. Durando
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.

EACH PERSON IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS RONALD A.
DURANDO AND GUSTAVE T. DOTOLI , AND EACH OF THEM ACTING ALONE, HIS OR HER TRUE
AND LAWFUL ATTORNEY-IN-FACT, WITH FULL POWER OF SUBSTITUTION, TO EXECUTE AND
CAUSE TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, ANY AND ALL AMENDMENTS
AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT, WITH EXHIBITS
THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, AND HEREBY RATIFIES AND
CONFIRMS ALL THAT SAID ATTORNEY-IN-FACT OR HIS OR HER SUBSTITUTE OR SUBSTITUTES
MAY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.

NAME Capacity Date

<S> <C> <C>
/s/ Ronald A. Durando Chief Executive Officer and Director August 13, 1999
- -------------------------- (principal executive officer)
Ronald A. Durando

/s/ Gustave T. Dotoli Chief Operating Officer and Director August 13, 1999
- -------------------------- (principal financial and accounting
Gustave T. Dotoli officer)

/s/ Necdet F. Ergul Chairman of the Board and Director August 13, 1999
- --------------------------
Necdet F. Ergul

/s/ David Klimek Chief Technology Officer and Director August 13, 1999
- --------------------------
David Klimek

Director August 13, 1999
- --------------------------
J. Lee Barton

</TABLE>

<PAGE>

EXHIBIT 10.8

EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 24th day of June 1999 by and between mPhase
Technologies, Inc., a New Jersey corporation, with offices presently located at
587 Connecticut Avenue, Norwalk, Connecticut 06850, (hereinafter sometimes
referred to as "the Employer" or "the Company") and Ronald A. Durando residing
at 107 Rhoda Avenue, Nutley, New Jersey 07110 (hereinafter referred to as "the
Executive").
W I T N E S S E T H

WHEREAS, the Employer is in the business of designing, assembling,
selling and marketing telecommunications products, and in particular, the
development of its proprietary TRAVERSER Digital Video & Data Delivery Systems
to enhance the band width utilization of conventional twisted pair copper
telephone lines;

WHEREAS, Ronald A. Durando has performed extraordinary services for the
Company in his capacity as Chief Executive Officer during fiscal years 1997,
1998 and 1999;

WHEREAS, mPhase Technologies, Inc. is desirous of insuring that the
Executive will remain employed in his capacity as Chief Executive Officer for at
least three years from the date of this Agreement;

WHEREAS, the Executive is desirous of remaining employed by the
Employer on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements set forth in this Employment Agreement, the parties agree as follows:

<PAGE>

I. INCORPORATION OF "WHEREAS" CLAUSES

The representations, terms and undertakings set forth in the WHEREAS
clauses of this Agreement are incorporated herein by reference as though recited
verbatim and at length.

II. TERMS, DUTIES AND SERVICES

1. The effective date of this Employment Agreement shall commence as of
July 1, 1999 and shall continue for a minimum term of thirty-six months unless
sooner terminated for cause in accordance with the provisions of Article V of
this Agreement.

2. The Executive shall continue to hold the title of President and
Chief Executive Officer and will report solely to the Board of Directors of
mPhase Technologies, Inc. In the position of Chief Executive Officer, Ronald A.
Durando will have the primary responsibility to establish policy for the Company
and to oversee the development of its TRAVERSER technology and a strategic
marketing plan for the sale of telecommunications products designed,
manufactured and/or marketed by the Company.

III. COMPENSATION OF THE EXECUTIVE

1. The Employer shall pay the Executive a basic annual salary of
$275,000 and the Executive shall be given consideration for performance based
bonuses and salary increases on a semi-

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<PAGE>

annual basis with the first such review to take place six months after the
effective date of this Employment Agreement. In consideration of the receipt of
this compensation, the Executive shall be responsible to allocate such time as
would be required to meet the requirements of the chief executive officer of
mPhase Technologies, Inc.

IV. EMPLOYMENT BENEFITS

1. During the effective period of this Agreement, the Employer will
provide health and dental insurance coverage consistent with current policies of
mPhase Technologies, Inc. for the Executive and his family.

2. The Executive shall be entitled to a minimum of four weeks paid
vacation for every twelve months worked on the basis of one week accrued during
each three month period.

3. The Executive will also be entitled to receive such other fringe
benefits as would be received by other members of senior management at mPhase
Technologies, Inc.

V. TERMINATION OF EMPLOYMENT

1. It is the intention of the parties that not less than two months
prior to the expiration of this Agreement, the Employer and Executive agree to
negotiate an extension of this Agreement.

-3-
<PAGE>

In the absence of such renegotiated agreement, the Employer shall have the right
to terminate the Executive at any time after thirty-six months.

2. During the thirty-six month period covered by this Agreement, the
right of the Executive to any and all compensation to which he would be entitled
shall be terminated upon the earliest to occur of the following events: (i) his
death; (ii) permanent disability (as hereinafter defined); and (iii) upon
written notice to the Executive for "just cause" as hereinafter defined.

3. "Just Cause" for the purpose of this Agreement shall mean: (i) the
commission by the Executive of acts constituting theft, embezzlement, obtaining
funds or property under false pretenses, or similar acts of gross misconduct
with respect to the property of the Employer; or (ii) the conviction of the
Executive of a felony involving matters not directly related to the business of
the Company if, in the opinion of its board of directors, such conviction
adversely impacts on his ability to perform his executive duties.

4. In the event the Employer elects to terminate the employment of
Ronald A. Durando under this Agreement for "just

-4-
<PAGE>

cause" as defined above, the Employer shall set forth in a written notice to the
Executive describing in reasonable detail the conduct deemed to constitute just
cause. Thereafter, the Executive shall have an opportunity to provide the
Employer an explanation or to otherwise justify the conduct deemed to fall under
the category of "just cause." If this explanation does not satisfy the Employer,
the Executive will have the right to submit to Arbitration the issue of "just
cause" if the reason given for the termination comes under subparagraph (i) or
(ii) or paragraph 3.

5. The Executive may be deemed to be permanently disabled for purposes
of this Agreement in the event that he shall fail to render and perform the
executive services required under this Agreement for a continuous period of
three (3) consecutive months.

V. PROPRIETARY INFORMATION AGREEMENT

In consideration of his employment by mPhase Technologies, Inc. as more
fully set forth in this Agreement, the Executive agrees to turn over to the
Employer all inventions, improvements and concepts relating to the TRAVERSER
Digital Video and Data Delivery Systems developed by him while employed. Without
limiting the foregoing, he agrees to the following provisions:

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<PAGE>

(a) to disclose, grant and assign to the Employer as its
exclusive property, all inventions, improvements and technical innovations
relating in any way to the TRAVERSER technology of the Employer developed or
conceived by the Executive solely or jointly with others during the period of
his employment;

(b) to execute all necessary papers including applications,
assignments, and otherwise provide proper assistance (at the Employer's
expense), during and subsequent to employment, to enable the Employer to obtain
for itself or its nominees, patents, copyrights, or other legal protection for
such inventions or innovations in any and in all countries;

(d) not to use, publish or otherwise disclose (except as may
be required) either during or subsequent to employment, any secret or
confidential information or data of the Employer or its customers;

(e) not to disclose or utilize any secret or confidential
information to others (including any prior employers), or any inventions of the
Executive which are not included within the scope of this Agreement.

-6-
<PAGE>

VI. CONFIDENTIAL INFORMATION AND TRADE SECRETS

1. The Executive hereby acknowledges that in performing his duties and
services for mPhase Technologies, Inc., he shall receive confidential
information and trade secrets with respect to its business and the business of
its customers.

2. The Executive hereby agrees that he shall keep such information and
trade secrets confidential and shall not disclose such confidential information
and/or trade secrets to any person not employed by mPhase Technologies, Inc. and
authorized to receive same; he further agrees that he shall not make use of such
confidential information and/or trade secrets for a period of six months
subsequent to the termination of this Agreement.

3. The Executive further agrees that, during the course of his
employment with mPhase Technologies, Inc., he shall take affirmative steps to
prevent the disclosure of such confidential information and/or trade secrets by
other persons, except when such disclosure is authorized in writing by the
Company. As an example, the Executive shall request and obtain confidentiality
agreements from potential customers regarding disclosure of the Company's
proprietary technology and manufacturing processes.

VII. ENTITLEMENT TO INJUNCTIVE RELIEF

-7-
<PAGE>

1. The Executive hereby acknowledges that breach of the terms of
Articles VI and VII of this Agreement would cause irreparable harm to the
Company and could not adequately be compensated for by damages. In the event of
a breach by Ronald A. Durando of any provision of Articles VI and VII, the
Executive hereby consents to an injunction being issued against his restraining
his from any further breach of said provisions.

2. The provisions of this Article X shall not be construed so as to
affect or impair any other remedies which the Employer may have in the event of
the breach by the Executive of Articles VI and VII, including, but not limited
to, an action for damages arising out of such breach as referenced in an
attachment to this agreement.

VIII. EQUITY COMPENSATION BASED ON STOCK PRICE

1. Among the obligations and responsibilities of the Executive is the
requirement to maintain good shareholder relations with investors and financial
institutions who recommend to the marketplace for securities the shares of
technology companies such as mPhase Technologies, Inc. By way of this Agreement,
the company recognizes that increase in the market value of issued and
outstanding shares of the Company is a

-8-
<PAGE>

material factor in enabling the Company to obtain financing from individual and
institutional investors. Accordingly, the Executive will be entitled to a bonus
at the end of each of the three years covered by this agreement equal to five
(5%) percent of the increase in the market value of the issued and outstanding
shares of the Company over the previous period. For example, if there are
20,000,000 shares of the common stock of the Company issued and outstanding
trading at $7.00 per share as of June 30, 1999, this provides a market
capitalization of $140,000,000. In the event that, at the end of fiscal 2000,
there are 25,000,000 shares issued and outstanding trading at a price of $15.00
per share, this would result in the Company having a market value of
$375,000,000 or $235,000,000 above the market cap as of June 30, 1999. In such
event, the Executive would be entitled to compensation equivalent to $11,750,000
or five (5%) percent of the increase in market capitalization of which
twenty-five (25%) percent is to be paid in cash and seventy-five (75%) percent
is to be paid in stock valued at the same figure used to calculate the
compensation figure.

IX. GOLDEN PARACHUTE

If mPhase Technologies, Inc. is acquired by a third

-9-
<PAGE>

party by way of a hostile takeover, defined as circumstances where the Executive
does not vote for the acquisition either as a shareholder or as a member of the
Board, then, and in that event, the Executive will be entitled to purchase
3,000,000 shares of the common stock of mPhase Technologies, Inc. at a price of
$1.00 per share, said option being triggered by a vote of the shareholders which
results in at least fifty (50%) percent of the common stock of the Company being
owned by another business entity.

X. NOTICES

1. All notices, requests, demands and other communications required by
this Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, to the Executive or the
Employer at the addresses set forth at the beginning of this Agreement.

2. The parties to this Agreement may change the address to which
notices, requests, demands and other communications hereunder shall be sent by
sending written notice of such change of address to the other in the manner
provided for this Article IX.

XI. ENTIRE AGREEMENT

This Agreement and any exhibits hereto constitute the

-10-
<PAGE>

entire Agreement between the parties with respect to the terms and conditions of
the employment of Ronald A. Durando by mPhase Technologies, Inc. No other
statement, representation, warranty or covenant has been made by either party
with respect to the employment of the Executive.

-11-
<PAGE>

XII. MISCELLANEOUS PROVISIONS

1. BINDING NATURE OF THIS AGREEMENT. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and legal representatives of the Executive and shall inure to the
benefit of and be binding upon the Company and its successors.

2. NO OTHER AGREEMENT. The Executive warrants and represents that he
is not a party to any agreement, contract or understanding, whether contract of
employment or otherwise, with any other company or other business entity which
would in any way restrict or prohibit him from undertaking or performing his
employment duties in accordance with the terms and conditions of this Agreement.

3. AMENDMENTS. No amendments or modifications of the terms and
conditions of this Agreement shall be valid and enforceable unless set forth in
writing.

4. SEVERABILITY. In the event that any provision of this Agreement is
held invalid, unenforceable or modified by any court of competent jurisdiction,
it shall be construed as if such invalid, unenforceable or modified provision
had been more narrowly drawn so as not to invalidate or make unenforceable

-12-
<PAGE>

or modify any other provision.

5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without regard to conflict
of laws principles.

6. CONSULTATION WITH COUNSEL. The Executive acknowledges that prior to
executing this Agreement he has had the opportunity to consult and has in fact
consulted with independent counsel of his personal choice.

7. NO RIGHT TO ASSIGN AGREEMENT. The Executive may not assign,
transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement.
Any attempted delegation or disposition of any of his rights under this
Agreement shall be null and void and without effect.

IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties hereto the date first above written.

ATTEST: mPHASE TECHNOLOGIES, INC.

- --------------------------------- -------------------------------
GUSTAVE T. DOTOLI NECDET F. ERGUL, CHAIRMAN

ACCEPTED:

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<PAGE>

-------------------------------
RONALD A. DURANDO
CHIEF EXECUTIVE OFFICER

-14-

<PAGE>

Exhibit 10.9

EMPLOYMENT AGREEMENT

AGREEMENT dated as of the 24th day of June 1999 by and between mPhase
Technologies, Inc., a New Jersey corporation, with offices presently located at
587 Connecticut Avenue, Norwalk, Connecticut 06850, (hereinafter sometimes
referred to as "the Employer" or "the Company") and Gustave T. Dotoli residing
at 245 Rutgers Avenue, Nutley, New Jersey 07110 (hereinafter referred to as "the
Executive").
W I T N E S S E T H
WHEREAS, the Employer is in the business of designing, assembling,
selling and marketing telecommunications products, and in particular, the
development of its proprietary TRAVERSER Digital Video & Data Delivery Systems
to enhance the band width utilization of conventional twisted pair copper
telephone lines;

WHEREAS, Gustave T. Dotoli has performed extraordinary services for the
Company in his capacity as Chief Operating Officer during fiscal years 1997,
1998 and 1999;

WHEREAS, mPhase Technologies, Inc. is desirous of insuring that the
Executive will remain employed in his capacity as Chief Operating Officer for at
least three years from the date of this Agreement;

WHEREAS, the Executive is desirous of remaining employed by the
Employer on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements set forth in this Employment Agreement, the parties agree as follows:

<PAGE>

I. INCORPORATION OF "WHEREAS" CLAUSES

The representations, terms and undertakings set forth in the WHEREAS
clauses of this Agreement are incorporated herein by reference as though recited
verbatim and at length.

II. TERMS, DUTIES AND SERVICES

2. The Executive shall continue to hold the title of Chief Operating
Officer and will report solely to the Board of Directors of mPhase Technologies,
Inc. In the position of Chief Operating Officer, Ronald A. Durando will have the
primary responsibility to establish policy for the Company and to oversee the
development of its TRAVERSER technology and a strategic marketing plan for the
sale of telecommunications products designed, manufactured and/or marketed by
the Company.

III. COMPENSATION OF THE EXECUTIVE

1. The Employer shall pay the Executive a basic annual salary of
$200,000 and the Executive shall be given consideration for performance based
bonuses and salary increases on a semi-annual basis with the first such review
to take place six months after the effective date of this Employment Agreement.
In

-2-

<PAGE>

consideration of the receipt of this compensation, the Executive shall be
responsible to allocate such time as would be required to meet the requirements
of the chief executive officer of mPhase Technologies, Inc.

IV. EMPLOYMENT BENEFITS

2. The Executive shall be entitled to a minimum of four weeks paid
vacation for every twelve months worked on the basis of one week accrued during
each three month period.

3. The Executive will also be entitled to receive such other fringe
benefits as would be received by other members of senior management at mPhase
Technologies, Inc.

V. TERMINATION OF EMPLOYMENT

1. It is the intention of the parties that not less than two months
prior to the expiration of this Agreement, the Employer and Executive agree to
negotiate an extension of this Agreement. In the absence of such renegotiated
agreement, the Employer shall have the right to terminate the Executive at any
time after thirty-six months.

2. During the thirty-six month period covered by this

-3-

<PAGE>

Agreement, the right of the Executive to any and all compensation to which he
would be entitled shall be terminated upon the earliest to occur of the
following events: (i) his death; (ii) permanent disability (as hereinafter
defined); and (iii) upon written notice to the Executive for "just cause" as
hereinafter defined.

4. In the event the Employer elects to terminate the employment of
Gustave T. Dotoli under this Agreement for "just cause" as defined above, the
Employer shall set forth in a written notice to the Executive describing in
reasonable detail the conduct deemed to constitute just cause. Thereafter, the
Executive shall have an opportunity to provide the Employer an explanation or to
otherwise justify the conduct deemed to fall under the category of "just cause."
If this explanation does not

-4-

<PAGE>

satisfy the Employer, the Executive will have the right to submit to Arbitration
the issue of "just cause" if the reason given for the termination comes under
subparagraph (i) or (ii) or paragraph 3.

V. PROPRIETARY INFORMATION AGREEMENT

(a) to disclose, grant and assign to the Employer as its exclusive
property, all inventions, improvements and technical innovations relating in any
way to the TRAVERSER technology of the Employer developed or conceived by the
Executive solely or jointly with others during the period of his employment;

(b) to execute all necessary papers including applications,
assignments, and otherwise provide proper assistance (at the Employer's
expense), during and subsequent to employment,

-5-
<PAGE>

to enable the Employer to obtain for itself or its nominees, patents,
copyrights, or other legal protection for such inventions or innovations in any
and in all countries;

(d) not to use, publish or otherwise disclose (except as may be
required) either during or subsequent to employment, any secret or confidential
information or data of the Employer or its customers;

VI. CONFIDENTIAL INFORMATION AND TRADE SECRETS

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<PAGE>

confidential information and/or trade secrets for a period of six months
subsequent to the termination of this Agreement.

VII. ENTITLEMENT TO INJUNCTIVE RELIEF

2. The provisions of this Article VII shall not be construed so as to
affect or impair any other remedies which the Employer may have in the event of
the breach by the Executive of Articles VI and VII, including, but not limited
to, an action for damages arising out of such breach as referenced in an
attachment to

-7-

<PAGE>

this agreement.

VIII. GOLDEN PARACHUTE

If mPhase Technologies, Inc. is acquired by a third party by way of a
hostile takeover, defined as circumstances where the Executive does not vote for
the acquisition either as a shareholder or as a member of the Board, then, and
in that event, the Executive will be entitled to purchase 1,500,000 shares of
the common stock of mPhase Technologies, Inc. at a price of $1.00 per share,
said option being triggered by a vote of the shareholders which results in at
least fifty (50%) percent of the common stock of the Company being owned by
another business entity.

IX. NOTICES

X. ENTIRE AGREEMENT

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<PAGE>

This Agreement and any exhibits hereto constitute the entire Agreement
between the parties with respect to the terms and conditions of the employment
of Gustave T. Dotoli by mPhase Technologies, Inc. No other statement,
representation, warranty or covenant has been made by either party with respect
to the employment of the Executive.

XI. MISCELLANEOUS PROVISIONS

2. NO OTHER AGREEMENT. The Executive warrants and represents that he is
not a party to any agreement, contract or understanding, whether contract of
employment or otherwise, with any other company or other business entity which
would in any way restrict or prohibit him from undertaking or performing his
employment duties in accordance with the terms and conditions of this Agreement.

3. AMENDMENTS. No amendments or modifications of the terms and
conditions of this Agreement shall be valid and enforceable unless set forth in
writing.

4. SEVERABILITY. In the event that any provision of this

-9-

<PAGE>

Agreement is held invalid, unenforceable or modified by any court of competent
jurisdiction, it shall be construed as if such invalid, unenforceable or
modified provision had been more narrowly drawn so as not to invalidate or make
unenforceable or modify any other provision.

5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without regard to conflict
of laws principles.

IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties hereto the date first above written.

ATTEST: mPHASE TECHNOLOGIES, INC.

- ------------------------- -------------------------------
RONALD A. DURANDO NECDET F. ERGUL, CHAIRMAN

-10-

<PAGE>

ACCEPTED:

-------------------------------
GUSTAVE T. DOTOLI
CHIEF OPERATING OFFICER

-11-

<PAGE>

EXHIBIT 10.10

EMPLOYMENT AGREEMENT

AGREEMENT dated as of the 15th day of January 1999 by and between
mPhase Technologies, Inc., a New Jersey corporation, with offices presently
located at 587 Connecticut Avenue, Norwalk, Connecticut 06850, (hereinafter
sometimes referred to as "the Employer" or "the Company") and Susan E. Cifelli
residing at 26 Fieldstone Drive, Hartsdale, New York 10530-1524 (hereinafter
referred to as "the Executive").

W I T N E S S E T H

WHEREAS, Susan E. Cifelli has had extensive experience with other
companies marketing telecommunications products;

WHEREAS, mPhase Technologies, Inc. is desirous of employing the
Executive on the terms and conditions set forth in this Agreement; and

WHEREAS, the Executive is desirous of being employed by the Employer on
the terms and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants, promises
and agreements set forth in this Employment Agreement, the parties agree as
follows:

I. INCORPORATION OF "WHEREAS" CLAUSES

The representations, terms and undertakings set forth in the WHEREAS
clauses of this Agreement are incorporated herein by reference as though recited
verbatim and at length.

<PAGE>

II. TERMS, DUTIES AND SERVICES

1. The employment of the Executive shall commence as of a date
agreeable to the parties contemplated to be no later than March 31, 1999 and
shall continue for a minimum term of twenty-four months unless sooner terminated
for cause in accordance with the provisions of Article V of this Agreement.
Thereafter, as more fully set forth in Article V of this Agreement, the
employment of Executive shall be "at will" unless this Agreement is extended or
otherwise modified in writing.

2. The Executive shall be given the title of Executive Vice President -
Marketing and will report to the President and Chief Executive Officer of mPhase
Technologies, Inc. In the position of Executive Vice President - Marketing,
Susan E. Cifelli will have the primary responsibility to create an overall
strategic marketing plan for the sale of telecommunications products designed,
manufactured and/or marketed by the Company and to execute that marketing plan.

3. The Executive further agrees to perform from time to time such other
services as the president of mPhase Technologies, Inc. shall from time to time
reasonably request provided such employment services are within the knowledge
and/or scope of services that Susan E. Cifelli previously rendered with other
companies relating to the marketing of telecommunications

-2-
<PAGE>

products.

4. For the purposes of this Employment Agreement, the term "full time"
shall mean Ms. Cifelli will not involve herself in any other business
arrangements except for passive investments. The parties also agree that the
term "full time" also means that the Executive will be available during evenings
and weekends or when required to travel for business purposes.

III. COMPENSATION OF THE EXECUTIVE

1. The Employer shall pay the Executive an annual salary of $123,000
and the Executive shall be given consideration for performance based bonuses and
salary increases on an annual basis with the first such review to take place six
months after the effective date of this Employment Agreement. In consideration
of the receipt of this compensation on a bi-weekly basis, the Executive shall
provide her full time, energy and skill in the performance of her employment
duties in the area of marketing telecommunications products. Without limiting
the foregoing, mPhase Technologies, Inc. will also pay Susan E. Cifelli upon her
execution of this Agreement the sum of $2,500 as a sign-on bonus.

IV. EMPLOYMENT BENEFITS

1. During the effective period of this Agreement, the Employer will
provide health and dental insurance coverage consistent with current policies of
mPhase Technologies, Inc. for

-3-
<PAGE>

the Executive and her family. In addition, the Employer agrees to reimburse the
Executive for insurance coverage with her current employer until such time as
she qualifies for the Employer's health and dental insurance coverage, such
insurance coverage to be consistent with insurance coverage provided other
members of senior management at the Company.

2. The Executive shall be entitled to a minimum of five weeks paid
vacation for every twelve months worked on the basis of one week accrued during
each three month period worked with the fifth week to be accrued at the end of
the first year.

3. The Executive shall be entitled to participate in a 401K Plan
consistent with the participation of senior management of mPhase Technologies,
Inc. and federal government guidelines. The Employer intends to match
contributions of the Executive in an amount up to sixteen (16%) percent of base
salary. In addition, the Executive will be entitled to term life insurance at
twice the amount of her base salary.

4. The Executive will also be entitled to receive such other fringe
benefits as would be received by other members of senior management at mPhase
Technologies, Inc.

V. TERMINATION OF EMPLOYMENT

1. IT IS THE INTENTION OF THE PARTIES THAT NOT LESS THAN TWO MONTHS
PRIOR TO THE EXPIRATION OF THIS CONTRACT, THE EMPLOYER

-4-
<PAGE>

AND EXECUTIVE AGREE TO NEGOTIATE AN EXTENSION OF THIS CONTRACT. IN THE ABSENCE
OF SUCH RENEGOTIATED CONTRACT, the Employer shall have the right to terminate
the Executive at any time after twenty-four months, with or without cause, by
giving two months notice. In addition, the Employer may elect to pay the
Executive TWO MONTHS salary in lieu of giving TWO MONTHS notice.

2. During the twenty-four month period covered by this Agreement, the
right of the Executive to any and all compensation to which she would be
entitled shall be terminated upon the earliest to occur of the following events:
(i) her death; (ii) permanent disability (as hereinafter defined); and (iii)
upon written notice to the Executive for "just cause" as hereinafter defined.

3. "Just Cause" for the purpose of this Agreement shall mean: (i) gross
negligence by the Executive in the performance of her employment; (ii) the
commission by the Executive of acts constituting theft, embezzlement, obtaining
funds or property under false pretenses, or similar acts of gross misconduct
with respect to the property of the Employer; (iii) the commission by the
Executive of a material act in breach of Articles VI, VII and VIII of this
Agreement or other similar breach of trust against mPhase Technologies, Inc.;
(iv) the conviction of the Executive of a felony involving matters not directly
related to the business of

-5-
<PAGE>

the Company if, in the opinion of its board of directors, such conviction
adversely impacts on her ability to perform her executive duties; or (v) the
continuation after written warning by the president of mPhase Technologies, Inc.
that there has been a habitual pattern of personal conduct by the Executive
involving alcohol, drugs or the like that materially adversely impacts her
ability to perform her duties.

4. In the event the Employer elects to terminate the employment of
Susan E. Cifelli under this Agreement for "just cause" as defined above, the
Employer shall set forth in a written notice to the Executive describing in
reasonable detail the conduct deemed to constitute just cause. Thereafter, the
Executive shall have an opportunity to provide the Employer an explanation or to
otherwise justify the conduct deemed to fall under the category of "just cause."
If this explanation does not satisfy the Employer, the Executive will have the
right to submit to Arbitration the issue of "just cause" if the reason given for
the termination comes under subparagraph (i) or (v) or paragraph 3.

5. The Executive MAY be deemed to be permanently disabled for purposes
of this Agreement in the event that she shall fail to render and perform the
executive services required of her under this Agreement for a continuous period
of three (3) consecutive

-6-
<PAGE>

months.

VI. NON-COMPETITION CLAUSES

1. Susan E. Cifelli shall devote HER FULL TIME, skill and attention to
the business of the Employer during the effective period of this Agreement and
shall use her best efforts to further the interests of the business of mPhase
Technologies, Inc. at all times.

2. The Executive shall not, during the effective period of this
Agreement, engage, directly or indirectly, in any business other than that of
and on behalf of the Employer. In order to provide reasonable protection for the
business of mPhase Technologies, Inc. for so long as she is employed, Susan E.
Cifelli shall not, directly or indirectly, assist, solicit, or directly or
indirectly have any interest in any corporation, partnership or other business
entity which, directly or indirectly, consist of the conducting of a business
similar in any material manner to the business being conducted by mPhase
Technologies, Inc.

VII. PROPRIETARY INFORMATION AGREEMENT

In consideration of her employment by mPhase Technologies, Inc. as more
fully set forth in this Agreement, the Executive agrees to turn over to the
Employer all inventions, improvements and concepts developed by her while
employed. Without limiting

-7-
<PAGE>

the foregoing, she agrees to the following provisions:

(a) to disclose, grant and assign to the Employer as its
exclusive property, all inventions, improvements and technical or business
innovations and suggestions relating in any way to the business of the Employer,
or capable of beneficial use by the Employer, developed or conceived by the
Executive solely or jointly with others during the period of her employment, (1)
which are along the lines of the business, work or investigations of the
Employer or its affiliates, or (2) which result from or are suggested by any
work which the Executive may do for the Employer;

(d) upon the termination of her employment for any reason, the
Executive is to deliver to the Employer promptly all written and other materials
which are of a secret or confidential nature relating to the business of the
Employer or its affiliates;

(e) not to use, publish or otherwise disclose (except

-8-
<PAGE>

as may be required) either during or subsequent to employment, any secret or
confidential information or data of the Employer or its customers;

(f) not to disclose or utilize any secret or confidential
information to others (including any prior employers), or any inventions or
innovations of the Executive which are not included within the scope of this
Agreement.

VIII. RESTRICTIVE COVENANT.

1. The Executive hereby agrees that she shall not solicit orders from
any EXISTING CUSTOMER OF THE EMPLOYER AT THE TIME OF HER TERMINATION located in
the New England or Middle Atlantic states either on her own account or as an
employee of any other corporation, partnership or other business entity, nor
shall she personally do business either on her own account with such customers
for a period of six months following the date of the termination of her
employment with mPhase Technologies, Inc.

2. The Executive hereby agrees that for a period of six months
following the date of the termination of her employment with mPhase
Technologies, Inc., directly or indirectly, she shall not engage or employ any
person engaged as an employee of the Employer.

IX. CONFIDENTIAL INFORMATION AND TRADE SECRETS

1. The Executive hereby acknowledges that in performing

-9-
<PAGE>

her duties and services for mPhase Technologies, Inc., she shall receive
confidential information and trade secrets with respect to its business and the
business of its customers.

2. The Executive hereby agrees that she shall keep such information and
trade secrets confidential and shall not disclose such confidential information
and/or trade secrets to any person not employed by mPhase Technologies, Inc. and
authorized to receive same; she further agrees that she shall not make use of
such confidential information and/or trade secrets for a period of six months
subsequent to the termination of this Agreement.

3. The Executive further agrees that, during the course of her
employment with mPhase Technologies, Inc., she shall take affirmative steps to
prevent the disclosure of such confidential information and/or trade secrets by
other persons, except when such disclosure is authorized in writing by the
Company. As an example, she shall limit communications concerning any ongoing
negotiations to sell the Employer's products to new customers to the president
of the Company and other persons designated by the president as participants in
such negotiations. As another example, the Executive shall request and obtain
confidentiality agreements from potential customers regarding disclosure of the
Company's proprietary technology and manufacturing processes.

X. ENTITLEMENT TO INJUNCTIVE RELIEF

-10-
<PAGE>

1. The Executive hereby acknowledges that breach of the terms of
Articles VI, VII, VIII and IX of this Agreement would cause irreparable harm to
the Company and could not adequately be compensated for by damages. In the event
of a breach by Susan E. Cifelli of any provision of Articles VI, VII, VIII and
IX, the Executive hereby consents to an injunction being issued against her
restraining her from any further breach of said provisions.

2. The provisions of this Article X shall not be construed so as to
affect or impair any other remedies which the Employer may have in the event of
the breach by the Executive of Articles VI, VII, VIII and IX, including, but not
limited to, an action for damages arising out of such breach AS REFERENCED IN AN
ATTACHMENT TO THIS AGREEMENT.

XI. EQUITY COMPENSATION

1. The acceptance of this Agreement by Susan E. Cifelli entitles her to
a stock option to purchase 80,000 shares of mPhase Technologies, Inc. common
stock at a price of $1.50 per share. Said option shall invest in six month
increments during the twenty-four (24) month term of this Agreement. For
example, if the Executive terminates her employment with the Employer on or
before February 22, 2000, she would only be entitled to an option equal to
20,000 shares of Mphase Technologies, Inc. common stock. The terms of this
option shall be set forth further in detail in

-11-
<PAGE>

a Stock Option Agreement consistent with the provisions of the mPhase Long Term
Stock Option Plan as referenced in attachment of this agreement.

XII. NOTICES

XIII. ENTIRE AGREEMENT.

This Agreement and any exhibits hereto constitute the entire
Agreement between the parties with respect to the terms and conditions of the
employment of Susan E. Cifelli by mPhase Technologies, Inc. No other statement,
representation, warranty or covenant has been made by either party with respect
to the employment of the Executive.

-12-
<PAGE>

XIV. MISCELLANEOUS PROVISIONS

2. NO OTHER AGREEMENT. The Executive warrants and represents that she
is not a party to any agreement, contract or understanding, whether contract of
employment or otherwise, with any other company or other business entity which
would in any way restrict or prohibit her from undertaking or performing her
employment duties in accordance with the terms and conditions of this Agreement.

3. AMENDMENTS. No amendments or modifications of the terms and
conditions of this Agreement shall be valid and enforceable unless set forth in
writing.

5. GOVERNING LAW. This Agreement shall be governed by and

-13-
<PAGE>

construed in accordance with the laws of the State of New Jersey, without regard
to conflict of laws principles.

6. CONSULTATION WITH COUNSEL. The Executive acknowledges that prior to
executing this Agreement she has had the opportunity to consult and has in fact
consulted with independent counsel of her personal choice.

7. NO RIGHT TO ASSIGN AGREEMENT. The Executive may not assign,
transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement.
Any attempted delegation or disposition of any of her rights under this
Agreement shall be null and void and without effect.

IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties hereto the date first above written.

ATTEST: mPHASE TECHNOLOGIES, INC.

- ---------------------------------- ------------------------------------
GUSTAVE T. DOTOLI RONALD A. DURANDO, PRESIDENT

- ---------------------------------- ------------------------------------
SUSAN E. CIFELLI
EXECUTIVE VICE PRESIDENT--MARKETING

-14-

<PAGE>

EXHIBIT 11

mPhase Technologies, Inc.
A DEVELOPMENT STAGE ENTERPRISE
COMPUTATION OF PER SHARE EARNINGS
(In thousands except per share amounts)

For the
Period From
October 2, 1996
(Date of For the
Inception) For the Nine Months
Through Year Ended Ended
June 30, 1997 June 30, 1998 March 31,1999
------------- ------------- -------------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE:

1) Shares outstanding (1) 7,806 13,736 17,160
-------- --------- ---------
Total Common Shares Outstanding 7,806 13,736 17,160

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

Net (loss) (781) $ (4,341) $ (920)
-------- --------- ---------

Per Share Amounts:
Net (loss) per share $ (.100) $ (.251) $ (.053)
-------- --------- ---------
</TABLE>

1)Shares outstanding (1) 7,806 17,736 17,160
Net effect of dilutive
stock options based on
the treasury stock
method using current
market price 3,675 5,704 5,704
Net effect of warrants
outstanding, had they been
exercised at the beginning
of the period -- 2,097 2,097
-------- --------- ---------

Total Common Shares and
Equivalents Outstanding 11,481 21,537 24,961
-------- --------- ---------

Net (loss) $ (781) $ (4,341) $ (920)
-------- --------- ---------

Per Share Amounts:
Net (loss) per share $ (.068) $ (.0160) $ (.037)
-------- --------- ---------
-------- --------- ---------

</TABLE>

1) Average shares outstanding are based upon the weighted average shares
outstanding for the period presented giving retroactive recognition for the
number of equivalent shares received by Lightpaths, Inc.

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
SCHUHALTER, COUGHLIN & SUOZZO, LLC

We hereby consent to the use in this Registration Statement on Form SB-2 or our
report, dated January 28, 1999, appearing in the Prospectus, which is part of
the Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.

/s/ Schuhalter, Coughlin & Suozzo, LLC

Schuhalter, Coughlin & Suozzo, LLC

August 13, 1999

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 122,479
<SECURITIES> 0
<RECEIVABLES> 375000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 186137
<DEPRECIATION> (69572)
<TOTAL-ASSETS> 2534540
<CURRENT-LIABILITIES> 3446414
<BONDS> 0
0
0
<COMMON> 8579136
<OTHER-SE> (9491010)
<TOTAL-LIABILITY-AND-EQUITY> 2534540
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 4339832
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20900
<INCOME-PRETAX> (4360732)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4360732)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4360732)
<EPS-BASIC> (.291)
<EPS-DILUTED> (.192)

</TABLE>