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                                                                    EXHIBIT 99.1

RISK FACTORS

Certain statements under the captions "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and " Business of the Company"
and elsewhere in this Annual Report are forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, statements about our plans,
objectives, expectations and intentions and other statements contained in this
Annual Report that are not historical facts. When used in this Annual Report,
the words "expects," "anticipates," "intends," "plans," "believes," "seeks" and
"estimates" and similar expressions are generally intended to identify
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements. These factors consist primarily of the risks
identified below.

As a company with a limited operating history in a new and rapidly changing
industry, it is difficult to predict our future growth and operating results.

Our limited operating history and the rapidly changing marketplace and
environment makes predicting our future growth and operating results difficult.
We were incorporated in Delaware in 1997 and began our first commercial service
in April 1998. Our management team and other employees have worked at ITXC for a
relatively short period of time. Stockholders and potential stockholders should
consider the risks and uncertainties that a company like ours will face in the
rapidly evolving and highly competitive global wholesale voice market.
Stockholders and potential stockholders should consider that in order to succeed
we must:

     .  maintain our current, and develop new, relationships with the unrelated
third parties that complete voice and fax calls over our network, our
affiliates, as well as with our customers;

     .  respond effectively to competitive pressures;

     .  continue to develop and upgrade our network and technology; and

     .  adapt to the rapid changes in the identity and condition of other
players in the industry.

If we cannot accomplish these goals, our business may not succeed.

We have not been profitable and expect future losses.

To date, we have not been profitable. We may never be profitable or, if we
become profitable, we may be unable to sustain profitability. We have incurred
significant losses since inception. We reported net losses of $0.6 million for
the inception period from July 21, 1997 through December 31, 1997, $7.2 million
for the year ended December 31, 1998, $19.7 million for the year ended December
31, 1999; $71.0 million for the year ended December 31, 2000; and $176.4


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million for the year ended December 31, 2001. We expect to continue to incur
significant losses for the foreseeable future. As of December 31, 2001, our
accumulated deficit was $274.9 million. Our revenue may not continue to grow or
may not even continue at the current level. In addition, during 2001, we
determined that certain long-lived assets related to our eFusion acquisition had
become impaired. As a result, we recognized a $108.0 million impairment charge,
which represented an $86.7 million write-down of goodwill and a $21.3 million
write-down of other intangible assets to their fair values. On October 11, 2001,
we sold most of the tangible and intangible assets of our e-commerce business
(other than patents) to eStara, Inc., a privately held provider of web-voiced
services, in exchange for a 19.9% equity position in eStara. We granted certain
patent licenses to eStara, while retaining our ownership of such patents. An
additional $5.7 million impairment charge was recorded in 2001 to write-down
such assets to their fair value. In addition, as part of our July and September
2001 business-reorganization plans, we recorded a charge to earnings of
approximately $3.7 million.

The growth of our company depends upon the growth of the Internet, which may not
continue.

The growth of our company depends on continued growth in the use of the Internet
generally and on the growth in the use of the Internet through telephones and
other devices, in addition to personal computers. Growth of the Internet may be
inhibited by a number of factors, such as:

     .  quality of infrastructure;

     .  security concerns;

     .  technological failures, such as viruses;

     .  inconsistent quality of service; and

     .  lack of availability of cost-effective, high-speed service.

Even if Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth or its performance or
reliability may decline.

We are growing rapidly and effectively managing our growth may be difficult.

Our business has grown rapidly in terms of customers, employees and the size of
ITXC.net since our inception. This growth has placed a significant strain on our
resources and systems which has resulted in fluctuations in our network
expenses. Our business model depends on continued rapid growth which will put a
further strain on our resources, systems and management. If we are not able to
effectively manage our growth by implementing systems, expanding ITXC.net and
hiring, training and managing employees, our ability to offer our services will
be materially harmed.

Our business may be harmed because we rely on a third-party communications
infrastructure over which we have little control.

Our service could be disrupted, our reputation could be hurt and we could lose
customers, if the quality and maintenance of the third-party communications
infrastructure on which we rely suffers. This infrastructure, including the
Internet, is used to carry our voice traffic between our


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customers and affiliates. We have no control over whether the infrastructure on
which we rely will be adequately maintained by these third parties or whether
these third parties are able to upgrade or improve their equipment and prevent
it from becoming obsolete. If these third parties fail to maintain, upgrade or
improve this equipment, our business may be materially harmed. We do not control
the security of the Internet and our business could be materially harmed by
unauthorized activity which results in congestion, failures or deficiencies in
the infrastructure.

If we cannot maintain relationships with the few vendors of gateway equipment
and software upon which ITXC.net depends, our network expenses could rise
significantly.

ITXC.net is currently configured to use gateway equipment and software which is
primarily manufactured by three vendors, Cisco Systems, Clarent and VocalTec
Communications. A gateway is a computer server that translates voice and
voice-related signaling back and forth between a traditional telephone network
and a data network. Gateways provided by some of these vendors are not currently
interoperable with each other. Clarent has reported serious financial and
business issues and we expect to phase out future deployments of Clarent
gateways. If we or our affiliates are unable to maintain current purchasing
terms with Cisco and VocalTec, or if those suppliers should be unwilling or
unable to provide new products or support for existing products, we will have to
make significant technological modifications to ITXC.net which could raise our
network expenses significantly and have a material adverse affect on our
business, financial condition, operating results and future prospects.

We are currently reliant on a sole supplier of PSTN switches.

At present, as a result of a recent third party acquisition, we are reliant on a
sole supplier, Lucent, for our PSTN switches. Should Lucent cease to supply us
with or support such switches, or significantly change the terms of supply, our
financial condition, results of operations and prospects could be materially
adversely affected.

Our network and equipment may not be able to handle increased traffic, which
could hurt our reputation and result in a loss of customers.

While we seek to take reasonable precautions to protect our systems and
infrastructure against unauthorized activities or security breaches, hackers or
others may attack our systems leaving them vulnerable to unauthorized use,
fraud, diminished performance or failure, or rendering our back office systems,
such as billing, unable to perform properly. Any of these activities could
damage our reputation, our quality or continuity of service, our ability to
collect revenues or our operations and could therefore have a material adverse
affect on our business, financial condition, operating results and future
prospects.

Our network relies on hardware and software that we or our affiliates have
developed or acquired. We expect that our network traffic and volume of
simultaneous calls will increase significantly. If the hardware and software
used in our network cannot accommodate this additional volume, our reputation
could be damaged and we could lose customers. Failure to attract and retain
affiliates and customers will harm our business.

If we are unable to attract and retain affiliates and customers, the traffic on
ITXC.net may not increase and we may not be able to increase our global reach.
Our ability to attract and retain affiliates and customers will depend on a
number of factors, including:


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     .  our ability to reach agreement with telecommunications companies,
telephony resellers and Internet service providers regarding the terms and
conditions applicable to our business relationship;

     .  our success in marketing our services to potential new and existing
affiliates and customers;

     .  pricing by traditional carriers;

     .  the rate at which we are able to deploy our network and services;

     .  our ability to locate qualified foreign affiliates and call termination
providers;

     .  consolidation in the telecommunications industry;

     .  financial difficulties of other participants in the telecommunications
industry; and

     .  the quality of the customer and technical support we provide.

Our quarterly operating results may fluctuate and could fall below expectations
of investors and industry analysts, resulting in a decline in our stock price.

Our quarterly operating results have varied widely in the past and could
fluctuate significantly in the future. Therefore, you should not rely on
quarter-to-quarter comparisons for indications of future performance. Certain
factors may influence our quarterly operating results, including:

     .  the amount and timing of capital expenditures and other costs relating
to the expansion of ITXC.net;

     .  the introduction of new or enhanced services or changes in pricing
policies by us or our competitors; and

     .  economic conditions specific to the Internet or all or a portion of the
technology sector.

If we cannot successfully address these factors, our operating results may fall
below analyst and investor expectations and the price of our common stock could
decline.

Our financial results and our operations could be materially adversely affected
if it becomes necessary for us to discontinue relationships with customers who
become unable to meet their payment obligations.

From time to time, we have discontinued service to companies that had originated
calls over ITXC.net because of their failure to meet their payment obligations.
We have in the past specifically discontinued relationships with a number of
companies due to concerns about their credit status and may do so in the future.
Our financial results, including revenues and SG&A, and our operations could be
materially adversely affected if other comparably situated customers experience
similar difficulties in the future or if we continue to discontinue
relationships due to


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credit concerns. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Our marketing efforts could be adversely affected if we are not successful in
achieving development and deployment of new interoperability standards.

Deficiencies in interoperability among hardware produced by different vendors
may limit our ability to grow a worldwide, fully interoperable network.

Unless an interoperability standard is widely adopted and used by manufacturers
of gateways and other hardware, ITXC.net's growth may be limited. Our business
model depends on the growth of ITXC.net. Without a widely adopted
interoperability standard, terminators of voice traffic over the Internet may to
a considerable degree be limited to only accepting voice traffic which was
originated on gateways made by the same manufacturer as their terminating
gateway.

Intense price competition and the nature of the calls that we place over
ITXC.net may limit our revenues.

Our revenues are not solely tied to the number of minutes of calls that are
placed over ITXC.net. Intense competition could reduce the prices that we charge
for our services. In addition, our revenues are affected by the types of calls
placed over ITXC.net. Calls placed over certain routes or to certain termination
points may generate less revenue than calls of a similar duration made over
different routes or to different termination points.

Changes in various markets may increase competition and lower prices in high
margin routes for ITXC, which may materially adversely affect our revenues and
margins.

Intense price competition could reduce the demand for our service.

We may not be able to compete successfully in the very competitive international
wholesale voice market and the developing Internet telephony market. Many of our
competitors are larger than us and have substantially greater financial
resources than we do. The market for our services has been extremely competitive
and is expected to be so for the foreseeable future. Internet protocol and
Internet telephony service providers such as Concert Global Clearinghouse and
iBasis and the wholesale divisions of Net2Phone and deltathree.com route traffic
to destinations worldwide and compete directly with us. Other Internet telephony
service providers focus on a retail customer base and may in the future compete
with us. In addition, major telecommunications companies, such as AT&T, Deutsche
Telekom, MCI WorldCom, Sprint and BT, have entered or could plan to enter the
Internet telephony market. See "Business of the Company--Competition."

If we are unable to keep up with rapid technological change in our industry in a
cost-effective manner, our revenues will decrease.

The market we serve, the market for voice services over the Internet and for
wholesale international call completion, is characterized by rapid technological
developments, evolving industry standards and customer demands and frequent new
services announcements, such as new hardware and software entrants and releases.
In order for us to remain competitive and continue positive growth of our
business and increase the use of our services, we must respond to


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these developments quickly and in a cost-effective manner. If we fail to respond
in this manner, our technology could become obsolete, our customers will choose
other alternatives to transmit their traffic and our revenues will decrease.

We may need additional capital in the future to expand ITXC.net and it may not
be available on acceptable terms or at all, which could force us to curtail or
cease our operations.

The development of our business depends on our ability to expand the global
reach of ITXC.net. The net proceeds from our stock offerings and our cash flow
from operations could be insufficient to expand ITXC.net to meet future customer
demands. To date, our cash flow from operations has been insufficient to cover
our expenses and capital needs. We may require additional capital in the future
which may not be available on terms acceptable to us or at all. If we cannot
raise adequate capital on acceptable terms, we may be forced to restrict the
growth of ITXC.net, we may not be able to attract new affiliates and we may have
to curtail or cease our operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."

Foreign political and economic instability could harm our ability to maintain a
global presence.

A key component of our business plan is our global network of affiliates. Our
ability to maintain and expand our global reach may be harmed by foreign
political and economic instability. The following factors may inhibit our
ability to maintain and expand our global presence:

..potentially longer payment cycles outside of the U.S.;

..difficulty in collecting accounts receivable from foreign affiliates;

..weaknesses in particular foreign economies;

..changes in diplomatic and trade relationships;

..foreign taxes; and

..the economic and administrative burdens of complying with a variety of foreign
laws, trade standards, tariffs and trade barriers.

Damage to our systems and network could interrupt our service and result in
reduced revenue and harm to our reputation.

Our operations are dependent on our ability to maintain the components of
ITXC.net and our other computer and telecommunications systems and equipment in
effective working order. Our systems may be damaged by natural disasters,
equipment failure, terrorism or acts of war, or intentional acts of vandalism.
If we fail to safeguard our systems and network and experience frequent or long
system delays or interruptions, we may not be able to provide our service in a
consistent and cost-effective manner--which will result in reduced revenue and
harm to our reputation.

Our proprietary rights may be difficult to protect or maintain.


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Our efforts to protect our intellectual property rights through patent,
copyright, trademark and trade secret laws in the U.S. and in other countries
may not prevent misappropriation, and our failure to protect our proprietary
rights could materially adversely affect our business, financial condition,
operating results and future prospects.

A third party could, without authorization, copy or otherwise appropriate our
proprietary network information. Our agreements with employees and others who
participate in development activities could be breached, we may not have
adequate remedies for any breach, and our trade secrets may otherwise become
known or independently developed by competitors.

A third party could challenge our granted patents or make an infringement claim
against the company seeking a substantial monetary award or to obtain injunctive
relief that could effectively block our ability to provide services in the
United States or abroad. Such cases, even if baseless, could divert company
resources and management attention to defend our rights, which could materially
adversely affect our ability to operate.

We rely upon license agreements with respect to our use of the software and
hardware provided to us by our vendors. Those license agreements may not
continue to be available to us on acceptable terms or at all. See "Business of
the Company--Proprietary Rights."

Additional acquisitions may disrupt our business, divert the attention of our
management and require significant capital infusions.

Our industry is characterized by growth through acquisitions. To compete
effectively, we expect to make investments in complementary companies,
technologies or assets and may consider a number of acquisitions, significant
and otherwise, at any one time. Acquisitions could disrupt our ongoing business,
distract the attention of our small number of senior managers, make it difficult
to maintain our network and operational standards, controls and procedures and
subject us to risks that are different, in nature and magnitude, than the risks
we currently face.

We also may not be able to successfully integrate the services, products and
personnel of any acquisition into our operations. We may be required to incur a
significant amount of debt or issue a significant number of equity securities,
which may dilute our stockholders' equity interest substantially, to pay for
acquisitions and may be required to invest a substantial amount of cash to
support the further development of any companies that we may acquire. Our
acquisitions may not result in any return, or a sufficient return, on our
investment and we may lose all or a substantial portion of our investment.

Our success is dependent on the continued service of our key management and
technical personnel.

Our future success depends, in part, on the continued service of our key
management and technical personnel, including Tom I. Evslin, Edward B. Jordan
and other senior executive officers. If any of those individuals were unable or
unwilling to continue in their present positions, our business, financial
condition, operating results and future prospects could be materially adversely
affected. We do not carry key person life insurance on our personnel and most
executives do not have an employment agreement.


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We may have difficulty attracting and retaining the skilled employees we need to
execute our growth plan.

We do business in and with entities in many foreign countries and at times use
sales agents or other intermediaries to assist in the procurement of business.
Although our policies require compliance with the United States Foreign Corrupt
Practices Act and ethical business standards, it is possible that there may be
violations of such standards or allegations of such violations, which could
adversely affect the business and could also impair the Company's ability to do
business in particular countries.

From time to time we have experienced, and we expect to continue to experience
in the future, difficulty in hiring and retaining highly skilled employees. Our
future success depends on our ability to attract, retain and motivate highly
skilled employees, particularly engineering and technical personnel. Competition
for the most highly qualified employees in our industry is intense. We may not
be able to retain our key employees or attract, assimilate or retain other
highly qualified employees in the future.

Future government regulation and legal uncertainties could affect our ability to
provide our services.

Our business, financial condition, operating results and future prospects could
be materially adversely affected if Congress, the Federal Communications
Commission, state regulatory authorities, foreign governments or other bodies
begin to regulate, tax, or, in the case of certain foreign governments, prohibit
Internet telephony.

United States. Although our services are not currently actively regulated by the
FCC, aspects of our operations may be subject to state or federal regulation in
the future. Increased regulation of the Internet may slow its growth, and impact
our cost of providing our service over the Internet. In addition, the FCC may in
the future impose surcharges or other regulations upon us which could materially
adversely affect our business, financial condition, operating results and future
prospects.

The FCC has considered whether to impose surcharges or other common carrier
regulations upon certain providers of Internet telephony, primarily those which,
unlike ITXC, provide Internet telephony services directly to end users. While
the FCC has presently refrained from such regulation, the regulatory
classification of Internet telephony remains unresolved. If the FCC were to
determine that certain Internet-related services including Internet telephony
services are subject to FCC regulations as telecommunications services, the FCC
could subject providers of such services to traditional common carrier
regulation, including requirements to make universal service contributions, and
pay access charges to local telephone companies. It is also possible that the
FCC may adopt a regulatory framework other than traditional common carrier
regulation that would apply to Internet telephony providers. Any such
determinations could materially adversely affect ITXC's business, financial
condition, operating results and future prospects to the extent that any such
determinations negatively affect the cost of doing business over the Internet or
otherwise slow the growth of the Internet. Congressional dissatisfaction with
FCC conclusions could result in requirements that the FCC impose greater or
lesser regulation, which in turn could materially adversely affect ITXC's
business, financial condition, operating results and future prospects.


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State regulatory authorities may also retain jurisdiction to regulate certain
aspects of the provision of intrastate Internet telephony services. Several
state regulatory authorities have initiated proceedings to examine the
regulation of such services. Others could initiate proceedings to do so.

A wide variety of taxes may be applied to certain aspects of telecommunications
services, domestically and internationally. In the event that applicable
authorities conclude that taxes apply to aspects of our business that we have
concluded are exempt from tax, or apply taxing methodologies different from
those than we have applied, we could be faced with additional costs and
potential back tax bills, interest or penalties. Because a wide variety of
agencies have jurisdiction over such taxes, and because the statutory authority
and applicable regulations vary significantly, uniform results may be difficult
to achieve or predict. Adverse rulings could negatively impact our business,
operating results, financial condition or future prospects.

International. Increased regulation of the Internet and/or Internet telephony
providers or the prohibition of Internet telephony in one or more foreign
countries could materially adversely affect our business, financial condition,
operating results and future prospects. Our failure to qualify to do business in
a foreign jurisdiction in which we are required to do so or to comply with
foreign laws and regulations could harm our ability to conduct international
operations.

The regulatory treatment of Internet telephony outside of the U.S. varies widely
from country to country. A number of countries that currently prohibit
competition in the provision of voice telephony also prohibit Internet
telephony. Other countries permit but regulate Internet telephony. Some
countries will evaluate proposed Internet telephony service on a case-by-case
basis and determine whether it should be regulated as a voice service or as
another telecommunications service. Finally, in many countries, Internet
telephony has not yet been addressed by legislation or regulation. Increased
regulation of the Internet and/or Internet telephony providers or the
prohibition of Internet telephony in one or more countries could materially
adversely affect our business, financial condition, operating results and future
prospects.

ITXC cannot provide assurances that the services provided over ITXC.net will not
be deemed voice telephony subject to heightened regulation by one or more member
states. Moreover, ITXC cannot provide assurances that the failure of ITXC or any
of its customers or affiliates to obtain any necessary authorizations will not
have a material adverse effect on ITXC's business, financial condition,
operating results and future prospects.

Our customers and affiliates may also currently be, or in the future may become,
subject to requirements to qualify to do business in a particular foreign
country, to otherwise comply with regulations, including requirements to obtain
authorization, or to cease from conducting their business as conducted in that
foreign country. We cannot be certain that our customers and affiliates either
are currently in compliance with any such requirements, will be able to comply
with any such requirements, and/or will continue in compliance with any such
requirements. The failure of our customers and affiliates to comply with such
requirements could materially adversely affect our business, financial
condition, operating results and future prospects.

Additionally, it is possible that laws--new or already in existence--may be
applied by the U.S. and/or other countries to transport services provided over
the Internet, including laws governing:


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     .  sales and other taxes;

     .  user privacy;

     .  pricing controls;

     .  characteristics and quality of products and services;

     .  consumer protection;

     .cross-border commerce, including laws that would impose tariffs, duties
and other import restrictions; and

     .  other claims based on the nature and content of Internet materials,
including claims of defamation, negligence and the failure to meet necessary
obligations.

If such laws are applied to our services, our ability to conduct our business
could be materially adversely affected.

We have broad discretion in the use of the proceeds that we have received from
the public offering of our common stock.

Our management will have broad discretion in the application of proceeds and the
timing of the expenditure of all of the net proceeds that we have received from
the public offering of our common stock. If our management fails to apply those
proceeds effectively, we may not be successful in expanding ITXC.net and growing
our business and revenues.

Our certificate of incorporation and bylaws and Delaware law contain provisions
that could discourage a takeover.

Provisions of our certificate of incorporation and by-laws and Delaware law may
discourage, delay or prevent a merger or acquisition that stockholders may
consider favorable. These provisions of our certificate of incorporation and
by-laws:

     .  establish a classified board of directors in which only a portion of the
total number of directors will be elected at each annual meeting;

     .  authorize the board to issue preferred stock;

     .  prohibit cumulative voting in the election of directors;

     .  limit the persons who may call special meetings of stockholders;

     .  prohibit stockholder action by written consent; and

     .  establish advance notice requirements for nominations for the election
of the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.


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Our stockholders will experience dilution when we issue the additional shares of
common stock that we are permitted or required to issue under options, warrants
and our employee stock purchase plan.

Stockholders should be aware that we are permitted, and in some cases obligated,
to issue shares of common stock. If and when we issue these shares, the
percentage of the common stock that existing stockholders own will be diluted.
The following is a summary of additional shares of common stock that we have
currently reserved for issuance as of December 31, 2001:

     .  8,935,284 shares are issuable upon the exercise of options or other
benefits under our stock incentive plan, consisting of:

     .  outstanding options to purchase 6,502,364 shares at a weighted average
exercise price of $5.22 per share, of which options covering 2,591,744 shares
were exercisable as of December 31, 2001; and

     .  2,432,920 shares available for future awards after December 31, 2001;

     .  879,766 shares are issuable upon the exercise of outstanding warrants at
a weighted average exercise price of $.85 per share; and

     .  1,081,674 shares are issuable under our employee stock purchase plan.

The stock prices of Internet and telecommunications-related companies such as
ours are highly volatile and could change unexpectedly resulting in costly
litigation and harm to our business.

The market price of our common stock is subject to significant fluctuations.
Many companies in our industry have been the subject of class action litigation
by investors following periods of volatility in the price of their publicly
traded securities. If the market value of our common stock

experiences adverse fluctuations, and we become the subject of this type of
litigation, regardless of the outcome, we will incur substantial legal costs. In
addition, this type of litigation may strain our resources and divert management
attention, causing our business to suffer.

We are now named as a defendant in a securities class action relating to the
distribution of shares in our initial public offering and secondary offering
which has been consolidated with many other similar lawsuits involving other
companies. We are also a defendant in other litigation described more fully in
our Annual Report on Form 10-K. Litigation of such matters may present a drain
on the management and financial resources of the Company and adverse outcomes in
such lawsuits could materially adversely affect our financial condition or
operating results.


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