<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)

 [X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities
  Exchange Act of 1934 for the quarterly period ended September 30, 2000 or

 [ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
  Exchange Act of 1934 for the transition period from _____ to _____.

                        Commission File Number: 000-26739

                                   ITXC CORP.
             (Exact name of registrant as specified in its charter)

            Delaware                                 22-35-31960
   (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)                 Identification No.)

                              600 College Road East
                           Princeton, New Jersey 08540
           (Address of principal executive office, including zip code)

                                 (609) 750-3300
              (Registrant's telephone number, including area code)

              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                           Yes  [X]           No

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

At October 31, 2000, there were 43,927,894 shares of Common Stock, par value
$.001 per share, outstanding.

                                                                          Page 1
<PAGE>

                                   ITXC CORP.

                                      INDEX


                                                                           Page
                                                                           ----

Part I.  Financial Information

Item 1.  Financial Statements


   Condensed Consolidated Balance Sheets as of December 31, 1999
   and September 30, 2000 (Unaudited).....................................   3

   Condensed Consolidated Statements of Operations for the Three
     and Nine Months Ended September 30, 1999 and 2000
      (Unaudited).........................................................   4

   Condensed Consolidated Statements of Cash Flows for the
     Nine Months Ended September 30, 1999 and 2000
      (Unaudited).........................................................   6

   Notes to Condensed Consolidated Financial Statements (Unaudited).......   7

Item 2.  Management's Discussion and Analysis of Financial
   Condition and Results of Operations....................................  10

Item 3.  Quantitative and Qualitative Disclosure About Market Risk........  18

Part II. Other Information

Item 1.  Legal Proceedings................................................  19

Item 2.  Changes in Securities and Use of Proceeds........................  19

Item 6.  Exhibits and Reports on Form 8-K.................................  20

Signatures................................................................  21


                                                                          Page 2
<PAGE>

                           ITXC CORP. AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets



                                                  December 31,    September 30,
                                                     1999             2000
                                                                   (Unaudited)
-------------------------------------------------------------------------------

Cash and cash equivalents                         $ 49,017,768    $ 38,881,385
Short term investments                              25,378,297     160,984,154
Accounts receivable, net                             5,738,804      14,195,319
Prepaid expenses and other current assets            1,298,102       2,511,488
                                                  ------------    ------------
  Total current assets                              81,432,971     216,572,346

Property and equipment, net                         15,411,656      33,187,418
Deposits and other assets                               66,232         788,358
Long-term investment                                         -       7,924,000
Service contract rights, net of amortization         2,950,750       2,209,969
                                                  ------------    ------------
   Total assets                                   $ 99,861,609    $260,682,091
                                                  ============    ============


Accounts payable and accrued liabilities          $ 13,560,456    $ 16,842,799
Customer deposits                                      442,240         936,478
Current portion of capital lease obligations         1,620,317       2,946,730
                                                  ------------    ------------
  Total current liabilities                         15,623,013      20,726,007

Equipment note payable                               1,723,191       1,723,191
Capital lease obligation, less current portion       2,149,177       2,510,787

Commitments and contingencies

Preferred Stock                                              -               -
Common Stock                                            35,816          38,600
Additional paid in capital                         118,089,750     297,383,680
Deferred employee compensation                     (10,240,858)     (6,884,045)
Accumulated other comprehensive income                       -         409,724
Accumulated deficit                                (27,518,480)    (55,225,853)
                                                  ------------    ------------
  Total stockholders' equity                        80,366,228     235,722,106

Total liabilities and stockholders' equity        $ 99,861,609    $260,682,091
                                                  ============    ============


See accompanying notes.


                                                                          Page 3
<PAGE>

                           ITXC CORP. AND SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                             Three Months ended September 30,
                                                                     1999          2000
                                                            ---------------------------------

<S>                                                               <C>           <C>
Telecommunications revenue                                        $ 6,549,249   $23,504,908

Costs and expenses:
Data communications and telecommunications                          6,241,632    20,687,818
Network operations                                                    881,831     1,312,975
Selling, general and administrative                                 4,031,428     6,895,519
Depreciation and amortization                                         654,551     3,294,365
Non-cash employee compensation                                      1,066,373       903,564
                                                                  -----------   -----------
 Total costs and expenses                                          12,875,815    33,094,241
Loss from operations                                               (6,326,566)   (9,589,333)
Interest income, net                                                   37,319     3,356,371
                                                                  -----------   -----------
Net loss                                                           (6,289,247)   (6,232,962)
Accretion of redemption value of mandatorily redeemable
  convertible preferred stock                                        (329,675)            -
                                                                  -----------   -----------
Net loss applicable to common stockholders                        $(6,618,922)  $(6,232,962)
                                                                  ===========   ===========
Basic and diluted net loss per share applicable to common
  stockholders                                                         $(0.64)       $(0.16)
                                                                  ===========   ===========
Weighted average shares used in computation of basic and
  diluted net loss per share applicable to common stockholders     10,338,369    38,572,410
Pro forma basic and diluted net loss per share                         $(0.22)       $(0.16)
                                                                  ===========   ===========
Weighted average shares used in computation of pro forma basic     28,528,527    38,572,410
  and diluted net loss per share
</TABLE>


See accompanying notes.

                                                                          Page 4
<PAGE>

                          ITXC CORP. AND SUBSIDIARIES
                Condensed Consolidated Statements of Operations
                                  (Unaudited)



<TABLE>
<CAPTION>
                                                                Nine Months ended September 30,
                                                                      1999           2000
                                                                -------------------------------

<S>                                                              <C>             <C>
Revenue:
Telecommunications revenue                                        $ 13,313,678     $57,190,208
Consulting revenue                                                     988,232               -
                                                                  ------------    ------------
 Total revenue                                                      14,301,910      57,190,208
Costs and expenses:
Data communications and telecommunications                          13,132,108      50,884,150
Network operations                                                   2,164,569       3,735,913
Selling, general and administrative                                  9,706,076      19,361,617
Depreciation and amortization                                        1,353,621       7,647,276
Non-cash employee compensation                                       1,753,965       3,024,197
                                                                  ------------    ------------
 Total costs and expenses                                           28,110,339      84,653,153
Loss from operations                                               (13,808,429)    (27,462,945)
Loss relating to joint venture                                               -      (8,195,000)
Interest income, net                                                   192,832       7,950,573
                                                                  ------------    ------------
Net loss                                                           (13,615,597)    (27,707,372)
Accretion of redemption value of mandatorily redeemable
 convertible preferred stock                                          (772,796)              -
                                                                  ------------    ------------
Net loss applicable to common stockholders                        $(14,388,393)   $(27,707,372)
                                                                  ============    ============
Basic and diluted net loss per share applicable to common
 stockholders                                                           $(1.56)         $(0.73)
                                                                  ============    ============
Weighted average shares used in computation of basic and
 diluted net loss per share applicable to common stockholders        9,194,259      37,890,380
Pro forma basic and diluted net loss per share                          $(0.52)         $(0.73)
                                                                  ============    ============
Weighted average shares used in computation of pro forma basic
 and diluted net loss per share                                     26,082,962      37,890,380
</TABLE>



See accompanying notes.

                                                                          Page 5
<PAGE>

                           ITXC CORP. AND SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                           Nine Months ended September 30,
                                                                               1999             2000
                                                                        ------------------------------------

<S>                                                                        <C>            <C>
Operating activities
Net loss                                                                    $(13,615,597)  $ (27,707,372)
Adjustments to reconcile net loss to net cash
 used in operating activities:
 Depreciation and amortization                                                 1,353,621       7,647,276
 Provision for doubtful accounts                                               1,649,459       2,449,134
 Loss relating to joint venture                                                        -       8,195,000
 Amortization for non-cash deferred employee compensation                      1,753,965       3,024,197
 Amortization of original issue discounts on marketable securities                            (2,031,835)
 Changes in operating assets and liabilities:
  Increase in accounts receivable                                             (5,037,429)    (10,905,649)
  Increase in prepaid expenses and other assets                                 (501,561)     (1,243,752)
  Increase in accounts payable and accrued
  expenses                                                                     4,792,326       3,282,303
  Increase (decrease) in customer deposits and deferred
   revenue                                                                      (612,231)        494,238
                                                                            ------------   -------------
Net cash used in operating activities                                        (10,217,447)    (16,796,460)

Investing activities
Purchase of property and equipment                                            (4,580,649)    (21,695,755)
Purchase of service contract rights                                                    -          (9,219)
Deferred acquisition costs                                                             -        (691,759)
Purchase of available for sale securities                                         (7,434)   (357,934,974)
Maturities of available for sale securities                                            -     224,770,364
                                                                            ------------   -------------
Net cash used in investing activities                                         (4,588,083)   (155,561,343)

Financing activities
Proceeds from equipment line of credit                                           523,191
Repayment of capital lease obligations                                          (171,274)     (1,288,911)
Issuance of convertible preferred stock                                       14,931,584
Proceeds from issuance of common stock in public offerings                       207,364     161,282,681
Proceeds from short swing sale                                                                 1,208,777
Proceeds from exercise of stock options                                                          363,975
Proceeds from issuance of common stock related to employee stock purchase plan                   654,898
Deferred costs of initial public offering                                       (669,194)
                                                                            ------------
Net cash provided by financing activities                                     14,821,671     162,221,420
                                                                            ------------   -------------
Increase (decrease) in cash                                                       16,141     (10,136,383)
Cash and cash equivalents at beginning of period                               3,971,237      49,017,768
                                                                            ------------   -------------
Cash and cash equivalents at end of period                                  $  3,987,378   $  38,881,385
                                                                            ============   =============
</TABLE>



See accompanying notes.




                                                                          Page 6
<PAGE>

                           ITXC CORP. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------

                                   (Unaudited)
                                   -----------


1.  Basis of Presentation

The September 30, 1999 and 2000 financial statements have been prepared by ITXC
Corp. (the "Company" or "ITXC") and are unaudited.  In the opinion of the
Company's management, all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position, results of operations and cash flows for the interim periods have been
made.  Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the
consolidated financial statements and notes thereto presented herein pursuant to
the rules and regulations of the Securities and Exchange Commission.  The
condensed consolidated financial statements and notes thereto presented herein
should be read in conjunction with the Company's audited consolidated financial
statements for the year ended December 31, 1999 and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999
filed with the Securities and Exchange Commission.  The results of operations
for the three and nine months ended September 30, 2000 are not necessarily
indicative of the results to be expected for any other interim period or the
entire fiscal year.

2.  Joint Venture

In July 1998, the Company obtained a 49% interest in ITXC Comunicacoes Ltda
("ITXC Ltda"), a newly formed joint venture, in consideration of rights to
certain technology, which provided exchange carrier long-distance services in
certain countries in South America.  The Company's ownership interest in ITXC
Ltda. was accounted for under the equity method of accounting.  No investment
was recorded as no consideration was paid.

The ITXC Ltda joint venture agreement, as amended, provided the Company a call
option and provided TeleNova Communicacoes Ltda and its assignee (collectively,
"TeleNova") a put option which required the Company to acquire TeleNova's
interest in ITXC Ltda, which options would be triggered upon the occurrence of
certain events, at a price based either on a formula, as defined in the
agreement, or an appraisal of ITXC Ltda's fair value.

In February 2000, the Company recast this relationship.  The Company issued
150,000 shares of its common stock to TeleNova and its affiliates in exchange
for: (1) equity in a private affiliate of TeleNova; (2) termination of the puts
and calls which previously could have required substantial cash or equity
outlays by the Company; and (3) certain contractual commitments by the parties.
As part of this transaction, the parties terminated the joint venture agreement
and a license agreement that the Company previously furnished to the joint
venture.  During the three months ended March 31, 2000, the Company recorded a
charge of $8.2 million, representing the difference between the value of the
Company's 150,000 shares issued by the Company and the value of the equity
received by the Company, valued as of the time of the transaction.

3.  Public Offering

On March 15, 2000, the Company completed a public offering of its common stock,
selling 2 million shares at a price of $85.00 per share, generating net proceeds
to the Company of approximately $161.3 million.  In addition, certain
stockholders sold 2 million previously unregistered shares.  Certain of these
shares were sold by an executive officer of the Company within six months after
his minor children had acquired shares of the Company's common stock.  In
accordance with SEC rules, the officer remitted $1.2 million to the Company in
April 2000.  Such amount is included in additional paid in capital.


                                                                          Page 7
<PAGE>

4.  Earnings Per Share

The Company's historical capital structure prior to the completion of its
initial public offering ("IPO") on October 1, 1999, is not indicative of its
ongoing structure due to the automatic conversion of all shares of the Company's
Series B and Series C Convertible Preferred Stock (the "Series B and Series C
Stock") upon closing of the IPO on October 1, 1999.  Accordingly, the unaudited
pro forma net loss per share for the three and nine months ended September 30,
1999 assumes the conversion of the Series B and Series C Stock to Common Stock
as if it had been converted at the date of issuance, even though the result is
antidilutive.

The following table presents the calculation of basic and diluted net loss per
share and pro forma net loss per share:





                                  Three Months Ended September 30,
                                  --------------------------------
<TABLE>
<CAPTION>

                                           1999                                  2000
                                           ----                                  ----

                                                 Denominator                          Denominator
                                                 (Weighted                            (Weighted
                                   Numerator     Average       Per      Numerator     Average       Per
                                   (Net Loss)    Shares)       Share    (Net Loss)    Shares)       Share
<S>                               <C>           <C>           <C>      <C>           <C>           <C>
Basic and diluted net
loss per common share             $(6,618,922)   10,338,369   $(0.64)  $(6,232,962)   38,572,410   $(0.16)
Accretion of redemption
value of mandatorily
Redeemable convertible
preferred stock                       329,675             -        -             -             -        -
Assumed conversion of
shares of mandatorily
redeemable convertible
preferred stock into
shares of common stock
at issuance                                 -    18,190,158        -             -             -        -
                                  -----------   -----------   ------   -----------   -----------   ------

Pro forma basic and
diluted net loss per
common share.                     $(6,289,247)   28,528,527   $(0.22)  $(6,232,962)   38,572,410   $(0.16)
                                  ===========   ===========   ======   ===========   ===========   ======
</TABLE>


                                                                          Page 8
<PAGE>

                             Nine Months Ended September 30,
                             -------------------------------

<TABLE>
<CAPTION>
                                            1999                                2000
                                            ----                                ----

                                           Denominator                          Denominator
                                           (Weighted                            (Weighted
                              Numerator     Average       Per        Numerator   Average     Per
                              (Net Loss)    Shares)       Share      (Net Loss)  Shares)     Share
                              -----------   -----------   ---------  ---------   -------     -----

<S>                           <C>            <C>         <C>      <C>             <C>         <C>
Basic and diluted net
loss per common share         $(14,388,393)   9,194,259  $(1.56)   ($27,707,372)  37,890,380  $(0.73)
Accretion of redemption
value of mandatorily
redeemable convertible
preferred stock                    772,796            -       -               -            -       -
Assumed conversion of
shares of mandatorily
redeemable convertible
preferred stock into
shares of common stock
At issuance                              -   16,888,703       -               -            -       -
                              ------------   ----------  ------   -------------   ----------  ------

Pro forma basic and
diluted net loss per
common share.                 $(13,615,597)  26,082,962  $(0.52)  $ (27,707,372)  37,890,380  $(0.73)
                              ============   ==========  ======   =============   ==========  ======
</TABLE>




5.  Capital Stock

On May 3, 2000, the Company's stockholders approved an increase in the
authorized Common Stock to 400,000,000 shares.

6.  Subsequent Event

On October 12 2000, the Company consummated its acquisition of eFusion, Inc.
("eFusion"), a provider of voice-enabled applications to service providers, e-
commerce companies and call centers.  Approximately 5.3 million shares of ITXC
common stock were issued upon consummation of the merger, subject to a post-
closing accounting adjustment. Approximately 0.6 million shares of ITXC common
stock are subject to stock options granted upon consummation of the merger in
exchange for eFusion options outstanding at the time of the merger.  The Company
will account for this transaction under the purchase method of accounting.
                                                                          Page 9
<PAGE>

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

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements, the related Notes to Consolidated Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 (the "10-K") and the Unaudited Condensed
Consolidated Financial Statements and related Notes to Consolidated Financial
Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

ITXC has included in this Quarterly Report certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995
concerning ITXC's business, operations and financial condition.  "Forward-
looking statements" consist of all non-historical information, including the
references in this Quarterly Report to (a) future EBITDA, cash flow and EPS
performance, (b) the time schedule for the attainment of profitable operations,
(c) comparative margins, (d) goodwill and intangible amortization and write-offs
of in-process development and (e) capital needs.  In addition, the words
"could", "expects", "anticipates", objective", "plan", "may affect", "may
depend", "believes", "estimates", "projects" and similar words and phrases are
also intended to identify such forward-looking statements.

Actual results could differ materially from those projected in the Company's
forward-looking statements due to numerous known and unknown risks and
uncertainties, including, among other things, unanticipated technological
difficulties, the volatile and competitive environment for Internet telephony,
changes in domestic and foreign economic, market and regulatory conditions, the
inherent uncertainty of financial estimates and projections, the difficulties of
integrating businesses which were previously operated as stand-alone units and
other considerations described as "Risk Factors" in Exhibit 99.1 to the 10-K
("Exhibit 99.1") and in other filings by the Company with the SEC. Such factors
may also cause substantial volatility in the market price of the Company's
common stock. All such forward-looking statements are current only as of the
date on which such statements were made.  ITXC does not undertake any obligation
to publicly update any forward-looking statement to reflect events or
circumstances after the date on which any such statement is made or to reflect
the occurrence of unanticipated events.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amount of costs and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates and assumptions.

Overview

The Company is a leading global provider of Internet-based voice and fax
services. From the Company's inception in July 1997 through April 1998, its
operating activities were focused primarily on:

     -  developing monitoring and analysis software (the Company's BestValue
        Routing software) to enable the Company to efficiently and cost
        effectively route voice over the Internet;

     -  developing relationships with affiliates throughout the world to
        increase the global reach of ITXC.net, the Company's network;

     -  developing additional business strategies to supplement the Company's
        affiliate network; and

     -  hiring the Company's initial employee group.

In April 1998, the Company launched its first service delivered over ITXC.net --
the Company's WWeXchange service.  The Company's operations since that time have
included:


                                                                         Page 10
<PAGE>

     -  increasing its voice traffic, from 2,746 minutes during April 1998 to
        approximately 218 million minutes carried through its WWeXchange
        service during the quarter ended September 30, 2000;

     -  refining its monitoring and analysis software in order to achieve
        BestValue Routing;

     -  expanding its affiliate network and increasing the global reach of
        ITXC.net;

     -  increasing its employee headcount, from 29 employees on April 1, 1998 to
        178 employees on September 30, 2000 (excluding eFusion); and

     -  developing and, during the quarter ended March 31, 2000, implementing
        its WebtalkNOW! Service, reaching 52.0 million minutes of voice traffic
        during the three months ended September 30, 2000.

The Company's primary sources of revenue have been the fees that it receives
from customers for terminating calls that they have originated on the Internet.
To date, the Company's revenue for terminating calls over ITXC.net has depended
primarily upon the following factors:

     -  the volume of voice traffic carried over ITXC.net, which is measured in
        terms of minutes of voice traffic;

     -  the mix of voice traffic carried over ITXC.net, which reflects the fact
        that calls made over certain routes will generate greater revenues than
        calls of a similar duration made over other routes; and

     -  pricing pressures resulting from competitive conditions in the Company's
        markets.

Increased competition from other providers of Internet telephony services and
traditional telephony services could materially adversely affect revenues in
future periods.

                                                                         Page 11
<PAGE>

The Company has also received consulting revenue derived from a market trial
agreement that it entered into with a third-party shortly after its inception in
order to generate funds to sustain operations. Under that agreement, the Company
earned a portion of the revenue ratably over the term of the agreement and the
remainder of the revenue as it met specific milestones. The Company does not
consider it likely that consulting revenue will continue beyond the year ended
December 31, 1999.

To date, the Company has derived a significant portion of its revenue from a
small number of customers. The loss of a major customer could have a material
adverse effect on the Company's business, financial condition, operating results
and future prospects.

The Company's operating expenses have been primarily:

  Data Communications and Telecommunications Expenses. Communications expenses,
consisting primarily of:

              . costs associated with sending voice traffic over the Internet,
       primarily fees that the Company pays to its affiliates to terminate or
       assist it in terminating calls, fees that the Company pays when it finds
       it necessary to utilize the traditional telephone network or private data
       networks to terminate calls and expenses incurred in connecting the
       Company's customers to its network; these expenses are largely
       proportional to the volume of voice traffic carried over the Company's
       network; and

              . costs associated with buying Internet access at ITXC-operated
       locations; these costs are largely proportional to the bandwidth of
       access available and do not typically vary based upon volume.

  Network Operations Expenses. Expenses associated with operating the network,
consisting primarily of the salaries, payroll taxes and benefits that the
Company pays for those employees directly involved in the operation of ITXC.net
and related expenses.

  Selling, General and Administrative Expenses.  ITXC's selling, general and
administrative expenses have consisted primarily of the following:

              . Sales and Marketing Expenses. Expenses relating to the salaries,
       payroll taxes, benefits and commissions that the Company pays for sales
       personnel and expenses associated with the development and implementation
       of the Company's promotion and marketing campaigns. The Company
       anticipates that sales and marketing expenses will increase in the future
       as it expands its internal sales force, hires additional marketing
       personnel and increases expenditures for promotion and marketing. The
       Company expects that such expenses will also increase as
       telecommunications revenue increases.

              . Development Expenses. Salary, payroll tax and benefit expenses
       that the Company pays for employees and consultants who work on the
       development of the Company's network management approaches and future
       applications of its technology. The Company believes that investing in
       the enhancement of its technology is critical to its future success. The
       Company expects that its development expenses will increase in future
       periods, based upon various factors, including:

                     . the importance to the Company of BestValue Routing;

                     . the pace of technological change in the Company's
              industry; and

                     . the Company's goal of expanding the applications of its
              technology.

              . General and Administrative Expenses. Salary, payroll tax and
       benefit expenses and related costs for general corporate functions,
       including executive management, administration, facilities, information
       technology and

                                                                         Page 12
<PAGE>

       human resources. The Company expects that general and administrative
       expenses will increase in the future as it hires additional personnel and
       incurs additional costs related to the growth of its business and
       operations. In addition, the Company expects to expand its facilities and
       incur associated expenses to support its anticipated growth.

     Non-cash Employee Compensation Expense. Non-cash employee compensation
represents compensation expense incurred in connection with the grant of certain
stock options to employees with exercise prices less than the fair value of the
Company's common stock at the respective dares of grant.  During 1999, but prior
to the Company's initial public offering, the Company granted options to
purchase 3,413,500 shares of common stock at exercise prices equal to or less
than fair value, resulting in non-cash charges of approximately $12.4 million.
Such charges will be expensed, generally over the next three to seven years, in
connection with the underlying vesting periods of the options granted.

The Company believes that the services that it provides over the Internet are
not currently actively regulated in the United States.  Several efforts have
been made, however, to enact federal legislation that would regulate certain
aspects of the Internet.  If adopted, such legislation could increase the
Company's costs significantly and could materially adversely affect its
business, operating results, financial condition and future prospects.

As ITXC.net continues to grow, the Company anticipates that from time to time
its operating expenses may increase on a per minute basis.  This increase is
related to the Company's decision to route additional traffic over the
traditional telephone network or private data networks in order to maintain
quality transmissions during relatively short periods of time as the Company
transitions its network to increased levels of capacity.  During these periods,
the Company occasionally experiences reductions in volume from certain
customers.  Historically, the Company has satisfactorily resolved these
transition issues.  However, the Company anticipates that in the future other
anticipated or unanticipated operating problems associated with the growth of
ITXC.net may develop.

Since the Company's inception in July 1997, it has experienced operating losses
in each quarterly and annual period and negative cash flows from operations in
each quarter since it commenced offering services over ITXC.net in April 1998.
As of September 30, 2000, the Company had an accumulated deficit of $55.2
million.  The profit potential of the Company's business is unproven, and the
Company's limited operating history makes an evaluation of it and its prospects
difficult.  The Company may not achieve profitability or, if it achieves
profitability, the Company might not sustain profitability.

The Company's eFusion acquisition accelerates ITXC's deployment of new voice-
enabled Web services on ITXC.net, including Push to Talk Service and Internet
call waiting.  Push to Talk Service is used by merchants and e-tailers to turn
Web site browsers into buyers and to increase the yield from targeted e-
mailings.  Push to Talk technology allows PC users to push a button on a Web
site or e-mail and be in immediate contact with a human in a call center either
through a traditional phone or through the PC itself.  Internet call waiting is
resold by carriers and ISPs to allow their end users to use a single line for
both Internet access and receiving incoming phone calls at the same time.

Outlook

Analysts have forecast that the Company will be EBITDA positive in the fourth
quarter of 2001. The Company believes that ITXC is, as of the date of this
report, thus far on track for this goal, excluding the impact of amortization of
goodwill and intangibles and the write-off of in-process development resulting
from ITXC's acquisitions. The Company does not expect that the eFusion
acquisition will delay the Company in meeting this EBITDA milestone, but
notes that goodwill and intangible amortization and the write-off of in-process
development resulting from ITXC's acquisitions is not included in the
operational forecasts. The Company estimates that goodwill and intangible
amortization and the write-off of in-process development resulting from ITXC's
acquisitions completed to date, will range from $145 million to $165 million in
the aggregate and expects approximately $25 million to $35 million of such
expenses in the fourth quarter of 2000 and approximately $35 million to $45
million being amortized over each of the next three years. In order to properly
allocate the purchase price of the eFusion transaction, the Company has engaged
an outside consultant to value the assets
                                                                         Page 13
<PAGE>

acquired by the Company in that transaction. This valuation process has not yet
been completed; accordingly, the Company's amortization estimates are subject to
change.

The Company cautions that these results cannot be assured and are subject to all
of the risks spelled out elsewhere in this Quarterly Report and in various
public filings by the Company, including its most recent Annual Report on Form
10-K.

Even if all planned capital spending were financed with cash (which does not
appear necessary given the level of vendor-financing presently available), the
Company believes that it would be able to execute its business plan for more
than a year past its anticipated break even quarter without needing to raise
additional capital.  In making this assessment, the Company has taken into
account its historical usage of cash, including the working capital needs of
eFusion.  Of course, both before and after break even is reached, the Company
may require new capital for new opportunities.

The Company's business model contemplates that it will continually explore new
opportunities.  The deployment of capital for new business opportunities and the
timing of such deployment are difficult to predict.

With respect to eFusion, through the end of 1999, eFusion sold a wide range of
information processing applications that bridged the telephone network and the
Internet. eFusion's bundled hardware and software, which was located on the
customer's premises, was sold to carriers, network service providers, Internet
service providers and e-commerce call centers. In late 1999, eFusion changed its
business and launched an application service provider business model, under
which it began to sell a set of market-ready online voice services for e-
commerce companies and Internet service providers. The shift away from providing
bundled hardware and software located on the customer's premises was made by
eFusion in response to market demand for applications and services on a
subscription or pay-per-use basis. The new application service provider business
model provides enhanced Internet telephony services to e-commerce companies and
Internet service providers without requiring large up-front investments in
hardware and software. In addition, it eliminates many of the difficulties
associated with the implementation of online communications services, such as
network integration, systems implementation and the need for information
technology personnel. ITXC anticipates that as execution improves on this new
business model and as eFusion's new services are deployed on ITXC.net, these new
services will command better margins than ITXC's basic phone-to-phone or PC-to-
phone service, although no assurances can be given in this regard.


Results of Operations - Comparison of the Three and Nine Months Ended September
30, 1999 and 2000

     Revenues

Telecommunications revenues of $23.5 million during the quarter ended September
30, 2000 and $57.2 million during the nine months ended September 30, 2000
represented increases of 259% and 330%, respectively, from the comparable
periods in 1999.  The Company carried 270 million minutes of traffic over
ITXC.net in the third quarter of 2000 and 602 million minutes of traffic over
ITXC.net in the first nine months of 2000, as compared with 43 million and 79
million minutes during the comparable 1999 periods.  Of the 602 million minutes,
497 million minutes were carried through the Company's WWeXchange service, which
provides international call completion to the Company's customers and enables
them to offer their own customers phone-to-phone global voice service.  The
remaining 105 million minutes were provided through the Company's webtalkNOW!
Service, a PC-to-telephone service which allows Internet portals, Internet
service providers and web sites to offer web-to-phone calling to their customers
under their own brands.  During the quarter ended September 30, 2000, the
Company's average revenues per minute were 10.2 cents per minute for WWeXchange
and 2.3 cents per minute for webtalkNOW!.

For the second year in a row, July 2000 revenues were less than June revenues.
ITXC's webtalkNOW! traffic declined significantly at the end of the second
quarter and beginning of the third quarter as customers experimented with a
variety of suppliers.  However, traffic recovered quickly in September 2000;
both phone-to-phone traffic on ITXC WWeXchange Service and webtalkNOW! were
strong for the month, with 73 million and 35 million minutes of use,
respectively.  Overall the sequential growth rate in revenues from the second to
third quarter was greater than growth from the first to the second quarter
despite the slow start and despite growing off a larger base.


                                                                         Page 14
<PAGE>

The Company recorded consulting revenues of $988,000 during the first nine
months of 1999.  As of June 30, 1999, the Company had satisfied all of the
performance requirements under its market trial agreement and had received all
consulting payments required by that agreement.  Accordingly, the Company did
not recognize any such revenues during the third quarter of 1999 or during the
first nine months of 2000.  The Company does not expect to earn significant
consulting revenue in subsequent periods.


     Operating Expenses

Data Communications and Telecommunications Expenses. During the three months
ended September 30, 1999 and 2000, data communication expenses amounted to $6.2
million and $20.7 million, respectively, or 95% and 88% of telecommunications
revenues, respectively.  During the nine months ended September 30, 1999 and
2000, data communication expenses amounted to $13.1 million and $50.9 million
respectively, or 99% and 89% of telecommunications revenues, respectively.  The
increase in the dollar amount of such costs primarily reflected the increased
traffic during 2000, as well as costs associated with establishing a new network
hub in Jersey City, New Jersey during the first quarter of 2000, a new network
hub in London during the second quarter of 2000, and establishing and increasing
capacity at the Company's hubs in anticipation of future growth in traffic.

Network Operations Expenses.  Network operations expenses increased from
$882,000 during the three months ended September 30, 1999 to $1.3 million during
the three months ended September 30, 2000 and from $2.2 million during the nine
moths ended September 30, 1999 to $3.7 million during the nine months ended
September 30, 2000.  Such expenses primarily reflected the cost of operating the
Company's 24-hours-a-day, 7 days-a-week network operations center, as well as
start-up costs associated with the Jersey City, New Jersey, Los Angeles,
California and London hubs.  Such costs represented 13% and 6% of
telecommunications revenues during the three months ended September 30, 1999,
and 2000, respectively, and 16% and 7% of telecommunications revenues during the
nine months ended September 30, 1999 and 2000, respectively,.

Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased from $4.0 million during the three
months ended September 30, 1999 to $6.9 million during the three months ended
September 30, 2000 and from $9.7 million during the nine months ended September
30, 1999 to $19.4 million during the nine months ended September 30, 2000. These
increases were due primarily to the hiring of additional sales and marketing,
development and administrative personnel, commissions paid on the Company's
increased telecommunications revenue, expanded sales and marketing campaigns and
increased facilities expenses associated with the Company's growth. Such
increase reflected not only the expansion of the Company's core business, but
also the development and deployment of the webtalkNOW! Service. As a percentage
of revenues, SG&A expenses decreased from 62% to 29% over the comparable three
month periods and from 73% to 34% over the comparable nine month periods,
reflecting the leveraging of such expenses over the Company's significantly
increased revenue base. As the Company's revenues continue to grow, the Company
expects SG&A expenses to decrease as a percentage of revenues. Such expectation
represents a forward-looking statement under the Private Securities Litigation
Reform Act of 1995. Actual results could differ from such expectation as a
result of a number of factors, including the extent to which the Company incurs
unanticipated expenses associated with revenue growth and other factors referred
to in Exhibit 99.1

Depreciation and Amortization Expenses.  Depreciation and amortization expenses
increased from $0.7 million during the three months ended September 30, 1999 to
$3.3 million during the three months ended September 30, 2000, and from $1.4
million during the nine months ended September 30, 1999 to $7.6 million during
the nine months ended September 30, 2000.  This increase reflects the expansion
of the Company's network and hubs and the addition of new technologies deployed
throughout the Company's network.  In addition, amortization in the current year
includes charges for the Company's acquisition of the contractual rights and
software of OzEmail, which acquisition occurred during the fourth quarter of
1999.  As noted elsewhere herein, the Company will substantially increase its
depreciation and

                                                                         Page 15
<PAGE>

amortization charges in future periods as a result of the eFusion transaction
and additional capital expenditures.

Non-cash Employee Compensation Expenses.  Non-cash employee compensation expense
decreased from $1.1 million during the three months ended September 30, 1999 to
$.9 million during the three months ended September 30, 2000 and increased from
$1.8 million during the nine months ended September 30, 1999 to $3.0 million
during the nine months ended September 30, 2000, representing amortization of
deferred compensation incurred in connection with the grant of options at
exercise prices less than fair value.

     Loss From Operations

The Company incurred operating losses of $6.3 million and $9.6 million,
respectively, during the three months ended September 30, 1999 and 2000,
respectively, and operating losses of $13.8 million and $27.5 million,
respectively, during the nine months ended September 30, 1999 and 2000,
respectively.  The Company anticipates that it will incur additional operating
and net losses for the foreseeable future.  The amount of these losses may
exceed the amount of the losses that the Company has incurred in prior periods,
particularly in light of amortization charges and write-offs of in-process
development expected to commence in the fourth quarter of 2000 as a result of
the eFusion acquisition.

     Loss Relating to Joint Venture.

During the quarter ended March 31, 2000, the Company incurred a one-time non-
cash charge of $8.2 million relating to the modifications made in the Company's
South America joint venture.  See Note 2 of the Notes to the Company's
Consolidated Financial Statements. At the end of each quarter, the Company
values the capital stock that it received as a result of the transaction.  Such
a valuation would lead to a charge to earnings if the Company were to conclude
that there has been an other than temporary decline in the market value of the
securities acquired by the Company.

     Interest Income, Net

The Company's interest income, net principally represents income from cash and
investments which, in turn, were derived from capital contributions made by the
Company's investors.  In addition to the capital invested near the inception of
its business, the Company raised (a) net proceeds of $9.9 million and $14.9
million from a group of investors in private transactions completed during April
1998 and February 1999; (b) net proceeds of $78.4 million from the Company's
initial public offering completed on October 1, 1999 and (c) net proceeds of
$161.3 million from the Company's follow-on offering completed on March 15,
2000.  The interest generated from these capital contributions exceeded the
interest that the Company paid on its line of credit by $37,000 and $3.4
million, respectively, during the three months ended September 30, 1999 and
2000, respectively, and by $193,000 and $8.0 million, respectively, during the
nine months ended September 30, 1999 and 2000, respectively.

Liquidity and Capital Resources

Prior to the Company's initial public offering, the Company financed its
operations primarily through the private placement of its capital stock and, to
a lesser extent, through equipment financing, and for the period after June 30,
1999, through capital leases.  Net proceeds from the Company's initial public
offering, including proceeds resulting from the exercise by the underwriters of
their over-allotment option, were $78.4 million.  This capital was supplemented
by net proceeds of $161.3 million raised upon consummation of the Company's
March 2000 follow-on offering of common stock.

Net cash provided by financing activities amounted to $162.2 million for the
nine months ended September 30, 2000 and was primarily attributable to net
proceeds from the Company's following-on offering.

Net cash used in operating activities amounted to $16.8 million for the nine
months ended September 30, 2000. Cash used in operating activities was primarily
the
                                                                         Page 16
<PAGE>

result of net operating losses and increased accounts receivable, partially
offset by the one-time charge of $8.2 million relating to the modification of
the Company's joint venture arrangement in South America and depreciation and
amortization.

Net cash used in investing activities amounted to $155.6 million for the nine
months ended September 30, 2000.  Cash used in investing activities was
primarily related to the purchases of property and equipment and purchases of
investments with the proceeds of the Company's public offerings.

As of September 30, 2000, the Company's principal commitments consisted of
obligations outstanding under operating and capital leases.  At that date,
future minimum payments for non-cancelable leases includes required payments of
$3.6 million during 2000 and $25.3 million for years after 2000 under all
leases, including the Company's commitments under a recently executed ten year
real estate lease.  The Company anticipates a substantial increase in capital
expenditures and lease commitments consistent with the anticipated growth in
operations, infrastructure and personnel, including the deployment of additional
networks hubs and SNARCs (a proprietary device which allows customers to access
the Company's network directly from their premises, eliminating the costs of
special traditional telephone connections dedicated to connecting with network
hubs and improving the economics of the Company's services to them).  As the
Company matures and improvements in technology impact the Company's equipment
base, the Company expects that it will also be required to fund the replacement
of obsolescent equipment.

The Company maintains a credit agreement that provides a committed line of
credit from a financial institution in the aggregate amount of $10.0 million.
The Company is permitted to use any portion of that commitment under a revolving
line of credit for working capital or under an equipment sub-line for the
purchase of certain capital equipment and related software.  This credit
agreement is collateralized by substantially all of the Company's assets.  The
Company is permitted to borrow under the credit agreement until February 2001.
At that time, the Company must repay the outstanding capital loans unless that
revolving line is extended.  Loans outstanding under the equipment sub-line are
due and payable  36 months after the final draw under the equipment sub-line.
Interest accrues at a floating rate per annum equal to the higher of the
lender's published prime rate and the weighted average federal funds rate
available to the Company's lender plus 0.5%.  The credit agreement contains
customary financial and other covenants and may be terminated by the lender 45
days after the occurrence of certain mergers, acquisitions and investments.

The Company has also arranged for financing in the ordinary course for gateway
equipment, switching equipment and general office equipment, from vendors such
as Lucent and Cisco.

The Company's capital requirements depend on numerous factors, including market
acceptance of ITXC's services, the responses of its competitors, the resources
allocated to ITXC.net and the development of future applications of the
Company's technology, the Company's success in marketing and selling its
services, and other factors.  The Company has experienced substantial increases
in its capital expenditures since its inception, consistent with growth in its
operations and staffing, and anticipates that its capital expenditures will
continue to increase in the future.  In addition to its recently completed
acquisition of eFusion, Inc., the Company will evaluate possible acquisitions
of, or investments in, complementary businesses, technologies or services and
plans to expand its sales and marketing programs.  Any such possible acquisition
may be material and may require the Company to incur a significant amount of
debt or issue a significant number of equity securities.  Further, any
businesses that the Company acquires will likely have their own capital needs,
which may be significant, which the Company would be called upon to satisfy
independent of the acquisition price.  The Company currently believes that its
available cash and cash equivalents will be sufficient to meet its anticipated
needs for working capital and capital expenditures for at least the next 12
months.  This statement represents a forward-looking statement under the Private
Securities Litigation Reform Act of 1995.  Actual results could differ
materially from the Company's expectations.  The Company may need to raise
additional funds in order to fund more rapid expansion, to develop new or
enhance existing services, to respond to competitive pressures or

                                                                         Page 17
<PAGE>

to acquire or invest in complementary business, technologies or services.
Additional funding may not be available on favorable terms or at all.

For additional information regarding the Company's capital, see "--Outlook."

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

The Company had investments of $184.5 million as of September 30, 2000 in
certain marketable securities, which primarily consist of short-term fixed
income investments.  Due to the short-term nature of the Company's investments,
the Company believes that the effects of changes in interest rates are limited
and would not have a material impact on the Company's financial condition or
operating results.
                                                                         Page 18
<PAGE>

PART II

Item 1.   Legal Proceedings

From time to time, the Company is involved in various legal proceedings relating
to claims arising in the ordinary course of business.

On May 23, 2000, Connectel, LLC filed suit against the Company in the United
States Federal District Court for the Eastern District of Pennsylvania.
Connectel alleges in its complaint that the Company is infringing on the claims
of a patent owned by Connectel by, acting alone or with others, assembling,
offering to sell or selling "communications networks or switching systems"
within the United States and for export worldwide without license from
Connectel.  The Company believes that the Connectel claims are without merit and
intends to defend the lawsuit vigorously.  However, should a judge issue an
injunction against the Company, such action could have a material adverse effect
on the Company's operations.

The Company is not a party to any other legal proceeding, the adverse outcome of
which is expected to have a material adverse effect on its financial condition,
operating results or liquidity.

Item  2.  Changes in Securities and Use of Proceeds

Pursuant to the rules of the Securities and Exchange Commission, the Company has
provided the following information with respect to its initial public offering
(comparable disclosures are not required with respect to the Company's follow-on
offering).

The Company's initial public offering was effected pursuant to a registration
statement on Form S-1 (No. 333-804111) declared effective by the SEC on
September 27, 1999.  The offering commenced on September 27, 1999 and terminated
after all securities registered were sold.  The managing underwriters of the
initial public offering in the United States were Lehman Brothers, CIBC World
Markets and First Analysis Securities Corporation and the managing underwriters
of the initial public offering outside of the Untied States were Lehman Brothers
International (Europe), CIBC World Markets International Limited and First
Analysis Securities Corporation.

The sole class of capital stock registered in the Company's public offering was
the Company's Common Stock.  The total amount of Common Stock registered was
$93,437,500.  In the initial public offering, a total of 7,187,500 shares were
sold at an offering price of $12 per share, for total gross proceeds of
$86,250,000.  All of the shares were sold for the account of the Company.

The expenses incurred by the Company (for underwriters' discounts and
commissions, finders' fees, expense paid to or for underwriters, other expenses
and total expenses) during the period from September 27, 1999 through September
30, 2000 (the "Reporting Period") in connection with the initial public offering
were (based on reasonable estimates) as follows:

  Underwriters' discounts and commissions. . . . . . . . . . . . . $6,037,500

  Finders' fees. . . . . . . . .. . . . . . . . .. . . . . . . . .          0

  Expenses paid to or for underwriters. . . . . . . . . . . . . .           0

  Other expenses. . . . . . . . . . . . . . . .  .................. 1,812,500

  Total expenses. . . . . . . . . . . . . ........................  7,850,000

None of such amounts represented direct or indirect payments to directors,
officers or general partners of ITXC or their associates, to persons owing 10%
percent or more of any class of equity securities of ITXC or to any affiliates
of ITXC or direct or indirect payments to persons other than the underwriters
and persons indicted in Part II of our registration statement.


                                                                         Page 19
<PAGE>

     The net offering proceeds to ITXC after deducting total expenses amounted
to $78.4 million.  The following table indicates (based on reasonable estimates)
the manner in which such net proceeds have been allocated during the Reporting
Period:

    Construction of plant, building and facilities . . . . . . . . . . . 0

    Purchase and installation of machinery and equipment. ..... .. . . . 0

    Purchase of real estate. . . . . . . . . . . . . . . . .. . . . . .. 0

    Acquisition of other businesses. . . . . . . . . . . . . . . . . . . 0

    Repayment of indebtedness. . . . . . . . . . . . . . . . . . . . . . 0

    Working capital (including investments and capital expenditures) $78,400,000

None of such amounts represented direct or indirect payments to directors,
officers or general partners of ITXC or their associates, to persons owing 10%
percent or more of any class of equity securities of ITXC or to any affiliates
of ITXC or direct or indirect payments to other persons.

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits:

     2.1  Amended and Restated Agreement and Plan of Merger, dated as of July
          25, 2000, by and among the Registrant, a wholly owned subsidiary of
          the Registrant and eFusion, Inc. (incorporated by reference to Exhibit
          2.1 of the Registrant's Registration Statement on Form S-4 (No. 333-
          44248))

     3.1  Third Restated Certificate of Incorporation, as amended (incorporated
          by reference to Exhibit 4.1 of the Registrant's Registration Statement
          on Form S-8 (333-47902))

     10.1  Lease Agreement, dated as of June 30, 2000, between the Registrant
          and PNC Associates, L.P. (incorporated by reference to Exhibit 10.14
          of the Registrant's Registration Statement on Form S-4 (No. 33-44248))

     27.1   Financial Data Schedule

     99.1  Risk Factors (incorporated by reference to Exhibit 99.1 to the
          Company's Annual Report on Form 10-K for the year ended December 31,
          1999)

     (b) No Current Reports on Form 8-K were filed by the Registrant during the
quarter ended September 30, 2000.



                                                                         Page 20
<PAGE>

                                   SIGNATURES

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

                     ITXC CORP.

                     By:  /s/ Edward B. Jordan
                          ---------------------
                            Edward B. Jordan
                          Executive Vice President,
                          Chief Financial Officer and
                          Chief Accounting Officer

Dated:  November 14, 2000

                                                                         Page 21
<PAGE>

                                 EXHIBIT INDEX


     2.1    Amended and Restated Agreement and Plan of Merger, dated as of July
            25, 2000, by and among the Registrant, a wholly owned subsidiary of
            the Registrant and eFusion, Inc. (incorporated by reference to
            Exhibit 2.1 of the Registrant's Registration Statement on Form S-4
            (No. 333- 44248)).

     3.1    Third Restated Certificate of Incorporation, as amended
            (incorporated by reference to Exhibit 4.1 of the Registrant's
            Registration Statement on Form S-8 (333-47902))

     27.1   Financial Data Schedule

     99.1   Risk Factors (incorporated by reference to Exhibit 99.1 to the
            Company's Annual Report on Form 10-K for the year ended December 31,
            1999)

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