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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

          [X]     Annual Report pursuant to Section 13 or 15(d) of the
            Securities Exchange Act of 1934 for the fiscal year ended
                                December 31, 1999

        [ ]     Transition Report Pursuant to Section 13 or 15(d) of the
            Securities Exchange Act of 1934 for the transition period
             from_____________________ to _______________________ .

                         Commission File Number 0-22521

                              NETSPEAK CORPORATION
                            (Exact Name of Registrant
                          as Specified in Its Charter)

              Florida                                         65-0627616
   (State or Other Jurisdiction of                         (I.R.S. Employer
    Incorporation or Organization)                        Identification No.)

                         902 Clint Moore Road, Suite 104
                            Boca Raton, Florida 33487
                                  561-998-8700

               (Address, including zip code, and telephone number
        (including area code) of registrant's principal executive office)

         Securities registered pursuant to Section 12(b) of the Act:  None

         Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $.01 par value per share

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the last 90 days. [X] YES [ ] NO

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $180,276,748 as of February 29, 2000, based
upon the closing sale price of the Common Stock as quoted on the Nasdaq National
Market. This amount excludes an aggregate of 5,328,349 shares of Common Stock
held by executive officers, directors and by each entity that owns 5% or more of
the Common Stock outstanding at February 29, 2000.

         The number of shares of the registrant's Common Stock outstanding as of
February 29, 2000 was 13,713,314.

                       DOCUMENTS INCORPORATED BY REFERENCE

         As stated in Part III of this Form 10-K, portions of the registrant's
definitive proxy statement (the "Proxy Statement") for the registrant's 2000
Annual Meeting of Shareholders are incorporated by reference in Part III of this
Form 10-K.

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                              NETSPEAK CORPORATION
                                    FORM 10-K
                     FOR FISCAL YEAR ENDED DECEMBER 31, 1999

TABLE OF CONTENTS

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PART I

Item 1.      Business.......................................................................................    3

Item 2.      Properties.....................................................................................   14

Item 3.      Legal Proceedings..............................................................................   14

Item 4.      Submission of Matters to a Vote of Security Holders............................................   15

PART II

Item 5.      Market for the Registrant's Common Equity and Related Stockholder Matters......................   15

Item 6.      Selected Financial Data........................................................................   17

Item 7.      Management's Discussion and Analysis of Financial Condition
                     and Results of Operations..............................................................   18

Item 8.      Financial Statements and Supplementary Data....................................................   22

Item 9.      Changes in and Disagreements with Accountants on Accounting
                     and Financial Disclosure...............................................................   38

PART III

Item 10.     Directors and Executive Officers of the Registrant.............................................   38

Item 11.     Executive Compensation.........................................................................   38

Item 12.     Security Ownership of Certain Beneficial Owners and Management.................................   38

Item 13.     Certain Relationships and Related Transactions.................................................   38

PART IV

Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K................................   39
</TABLE>

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                           FORWARD LOOKING STATEMENTS

      NetSpeak Corporation ("NetSpeak" or the "Company") cautions readers that
certain important factors may affect the Company's actual results and could
cause such results to differ materially from any forward-looking statements
which may be deemed to have been made in this report or which are otherwise made
by or on behalf of the Company. The forward-looking statements are based on
management's beliefs as well as on a number of assumptions concerning future
events. For this purpose, any statements contained in this Form 10-K and
documents incorporated by reference herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may", "will", "expect", "believe",
"anticipate", "intend", "could", "would", "estimate", or "continue" or the
negative other variations thereof or comparable terminology are intended to
identify forward-looking statements. Factors which may affect the Company's
results include, but are not limited to, the Company's limited operating
history, the Company's need to develop a recurring revenue stream, the
acceptance of the Company's products in the marketplace, dependence on strategic
partners, the Company's ability to develop additional distribution channels for
its products and technology, the Company's ability to gain new customers in the
marketplace, the timing and scope of customer deployments, the need for ongoing
product development in an environment of rapid technological change, technical
difficulties with respect to the Company's products or products in development,
the emergence of new competitors in the marketplace, the timing of new product
announcements and releases by the Company and its competitors, the uncertainty
of future governmental regulation, the Company's ability to manage growth,
obtain patent protection, obtain additional funds, general economic conditions
and other risks discussed in this Report and in the Company's other filings with
the Securities and Exchange Commission (the "Commission").

                                     PART I

ITEM 1. BUSINESS

OVERVIEW

      NetSpeak develops, markets, and supports advanced telephony solutions for
Internet Protocol ("IP") networks. The Company's advanced telephony solutions
enable concurrent, real-time interactive voice, video and data communications
over packetized data networks such as private IP networks or the Internet. The
Company's products integrate a variety of features and functions commonly found
in traditional voice transmission networks into packetized data networks.
NetSpeak's products include its suite of call management software. The end-users
of the Company's products and solutions are service providers, including
traditional and new telecommunications carriers, cable companies and business
enterprises. The Company's call management platform enables service providers to
quickly, easily and cost effectively deploy multiple revenue-generating IP
telephony applications. NetSpeak's call management platform offers enterprises
the ability to reduce long distance calling charges.

      The market for IP telephony products and services is growing rapidly.
Frost & Sullivan, an industry analyst, estimated that in 2002 the total number
of voice minutes transmitted over IP networks would reach 8.8 billion by 2002
and purchases of IP telephony equipment would reach $3.2 billion.

      From inception to 1999, the Company's strategy and product development
efforts focused on integrating its technology and products into the product
lines of its strategic partners. In 1999, the Company revised its strategy and
transformed its product line to prepackaged call management solutions than can
be easily configured and combined with other vendors' gateway platforms to
provide a variety of voice over IP solutions. Currently, the Company is in the
process of expanding its distribution channels to more broadly address this
market opportunity. NetSpeak is concentrating its expansion on international
markets, as it believes that international markets represent a significant
portion of the worldwide IP telephony market. NetSpeak's primary objective is to
build an indirect sales channel, leveraging the distribution capabilities of
value added resellers ("VARs"), system integrators ("SIs") and original
equipment manufacturers ("OEMs"). NetSpeak is targeting VARs, SIs and OEMs that
concentrate on the IP telephony and data networking industries.

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NetSpeak has also established OEM relationships, with Motorola, Inc.
("Motorola") and Fujitsu Business Communications Systems ("Fujitsu") that have
extensive global distribution channels and broad sales coverage.

      The Company believes that its call management products are establishing
themselves as a leading call management platform in the IP telephony industry.
The Company is committed to continuing to perform ongoing research and
development activities in order to continue to build competitive advantages
through extending the features and functionality of its call management products
as well as developing new IP telephony applications.

INDUSTRY BACKGROUND

      There are two fundamentally different switching technologies that exist
today which enable voice communications: circuit switching and packet switching.
Since the invention of the telephone, the traditional public switching telephone
network ("PSTN") has been based on circuit switching technology. When a call is
transmitted over the PSTN a dedicated circuit is required in order for the call
to occur. In contrast, packet switching technology, which is utilized in data
networks, does not require a dedicated circuit between end-points. In packet
switched networks packets of data are sent through a data network and are then
reassembled at the end-point, thus this technology is more efficient. The
historical evolution of these switching technologies has focused on meeting and
enhancing the performance requirements of applications for which each technology
was initially intended, as a result two disparate network infrastructures have
emerged. The existence of disparate networks, as well as numerous compelling
reasons, has lead to the development of transmitting voice over IP data
networks.

      IP telephony applications were initially introduced to the market in 1995.
At that time, the market primarily consisted of client software programs that
allowed an end user to conduct a voice call over the Internet from a multimedia
equipped PC with another end user connected to the Internet who was deploying
the same software. By the end of 1995, a number of companies, including
NetSpeak, were offering software based client IP telephones. The concept was
simple, but Internet telephones had numerous limitations, such as poor voice
quality and the requirement that call participants had to either prearrange
their calls or make them when both parties happened to be connected to the
Internet and logged into a directory server.

      Since 1996, IP telephony has evolved to become the focus of many
technology vendors and service providers. The capability and quality has
advanced considerably with users primarily seeking benefits to reduce the cost
of voice and fax calls and to enable new applications through the combination of
telephony, computer and data functions, using IP networks as the common
communications platform. Up until now, cost reduction has been the primary
driving force behind IP telephony deployments and trials. In the service
provider domain, toll bypass is accomplished by allowing the caller to originate
a call using a standard telephone on the local PSTN network to a gateway which
transfers the call to the Internet or the service provider's IP network. The
call is transmitted over the IP network to another gateway close to the
destination, where it is transferred to the local PSTN and the called party's
standard telephone. Enterprise solutions seek to save toll charges by routing
inter-office long distance calls over a data network, such as local area
networks ("LANs") and wide area networks ("WANs") that already links the
enterprise's offices for data communications.

      Significant advances in both standards and technology have accompanied
this evolution. Initially, to overcome the poor quality issues, proprietary
solutions emerged as standards were still evolving. Many of the functions
previously performed in client software, like voice encoding, compression and
packetization were incorporated into IP telephony gateways, which increased
performance and voice quality. Although these advancements brought necessary
improvement in IP telephony applications, proprietary implementations hindered
adoption rates as service providers and enterprises were locked into a
particular

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vendor's solution. Recognition of the need for interoperability produced
advances in the development of standards and widespread support for a suite of
protocols called ITU H.323 ("H.323") to address the signaling, communications,
network management and security aspects of IP telephony. These open,
standards-based approaches and vendor commitments to interoperability have
gained strong momentum.

      While toll bypass remains a significant motivation for the deployment of
IP telephony, the opportunity for this application in the PSTN domain will
likely begin to disappear over the next few years as toll prices are reduced to
compete with IP telephony prices and regulatory induced cost burdens are reduced
to reflect true economic costs. The future of IP telephony is tied to the
convergence of voice and data networking infrastructures and the ubiquity of IP
as the end-to-end communications protocol that will run on these converged
networks.

      The growing maturity of data network technologies and their widespread
adoption by both enterprises and service providers has led to a wide recognition
that today's disparate network infrastructures for voice, data and video will be
united on a common packet network infrastructure. According to industry
analysts, packet switching equipment doubles in performance approximately every
20 months, while circuit switches take about 80 months, four times as long, to
achieve the same relative improvement. Several "next generation" telephone
companies, like Level 3 Communications, Inc., are building their networks
entirely on packet infrastructures and IP networking. The cable and wireless
data industries have also decided to adopt packet and IP telephony platforms for
converged voice, data and video infrastructure and are currently developing
specifications and architectures for those platforms.

      A combined voice and data infrastructure brings numerous benefits of which
the most compelling is economics. Voice communications are significantly less
expensive to transmit utilizing IP technology as compared to traditional circuit
switched networks. Additionally, incremental costs of new services and
applications are lowered because the common infrastructure is shared, network
management is simplified around a common set of tools and processes, and the use
of open standards can allow innovators to develop more enhanced applications
combining voice, data and video functionality. IP is the universal end-to-end
communications protocol that is used over the underlying packet technologies -
from ATM in the PSTN through frame relay in the enterprise WAN to Ethernet on
the LAN. Enhanced services and applications of IP telephony, reflecting
integration of voice and data functionality, are becoming increasingly common.
These support multimedia communications, collaboration or commerce. One example
is call-enabled web pages, which allows a visitor to a web site to select a
button on the web page which automatically establishes a call into
pre-programmed corporate location, such as the sales department or customer
service.

NETSPEAK'S STRATEGY

      The Company's objective is to become a leading provider of IP telephony
call management solutions to service providers, including traditional and new
telecommunications carriers, cable companies and business enterprises. From
inception to 1999, the Company's strategy and products development efforts
focused on integrating its technology and products into the product lines of its
strategic partners. In 1999, the Company revised its strategy and transformed
its product line to prepackaged call management solutions that can be easily
configured and combined with other vendors' gateway platforms to provide a
variety of voice over IP solutions. The Company's current strategic focus
includes the following key elements:

      PROVIDE A COMPREHENSIVE CALL MANAGEMENT PLATFORM THAT ENABLES QUICK, EASY
      AND COST EFFECTIVE DEPLOYMENTS OF MULTIPLE IP TELEPHONY APPLICATIONS

      NetSpeak's iTEL call management platform and architecture provides service
providers and

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enterprises with an efficient and scalable call management platform that can
quickly and easily be configured to deploy many voice over IP revenue-enhancing
value added services and applications. The iTEL call management platform
supports all of NetSpeak's IP telephony solutions, including Phone-to-Phone,
PC-to-Phone, Voice E-commerce and Internet Call Waiting. As a result, the iTEL
platform is a cost effective means for service providers to introduce IP
telephony applications over a single platform. The iTEL platform interoperates
seamlessly with the gateways from Cisco and Motorola. Through a collaborative
effort between the Company's customers and partners, NetSpeak will continue to
enhance the functionality of its iTEL platform and develop and introduce new IP
telephony applications.

     INCREASE INTERNATIONAL SALES PENETRATION

      The Company believes that international markets represent a significant
portion of the worldwide IP telephony market, and NetSpeak is concentrating its
sales and marketing efforts on expanding its sales presence and building brand
awareness in these primary growth markets.

     EXPAND INDIRECT SALES CHANNELS AND STRATEGIC ALLIANCES

      The Company is in process of expanding its global distribution channels.
NetSpeak's primary objective is to build an indirect sales channel, leveraging
the distribution capabilities of VARs, SIs and OEMs. NetSpeak is building an
indirect sales channel targeting VARs, SIs and OEMs that concentrate on the IP
telephony and data networking industries. The Company currently has distribution
partners in the Asia-Pacific region, Latin America and Europe. NetSpeak has also
established relationships with large OEMs that have extensive distribution
channels and broad sales coverage. The Company currently has OEM relationships
with Motorola and Fujitsu, in which these strategic partners are integrating
NetSpeak's products into their existing IP telephony product lines. The Company
intends to continue developing new strategic alliances. The Company is also
expanding its direct sales force in order to achieve a broader direct sales
coverage as well as to recruit resellers and support them with customer
proposals. The Company will continue to expand its sales channels, focusing on
the key markets for IP telephony.

     ESTABLISH AND MAINTAIN TECHNOLOGICAL LEADERSHIP

      The Company believes that its call management products are establishing
themselves as a leading call management platform in the IP telephony industry.
NetSpeak's call management architecture is unique to the industry, as the
Company has separated the gatekeeping and routing functions. This results in
enhanced performance and flexibility in constructing IP telephony networks.
NetSpeak's call management platform enables service providers and enterprises to
easily and cost effectively deploy a number of different IP telephony
applications on the industry's most widely used gateway platforms. The Company
is committed to performing ongoing research and development activities in order
to continue to build competitive advantages by extending the features and
functionality of its call management products as well as developing new IP
telephony applications.

TECHNOLOGY, SOLUTIONS AND PRODUCTS

     TECHNOLOGY

      NetSpeak has developed a core communications technology, which addresses
the challenges associated with real-time interactive voice transmission over
packetized data networks and integrates features commonly found in traditional
voice transmission networks into its products. The Company's

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core communications technology is the platform utilized throughout its products.
NetSpeak's technology is based on industry standards and provides vendor
interoperability, scalability, reliability, redundancy, data encryption, network
and system management, remote operation, administration and maintenance
features.

     SOLUTIONS

      NetSpeak's products can be quickly and easily configured and deployed with
Cisco and Motorala gateway platforms to provide a variety of solutions for IP
telephony end-users. NetSpeak's solutions include, Phone-to-Phone, PC-to-Phone,
Voice E-commerce and Internet Call Waiting.

       PHONE-TO-PHONE

      NetSpeak's Phone-to-Phone is a solution which enables end-users to place
calls from a traditional telephone to another traditional telephone. In this
solution the call is originated on the PSTN but is then converted to IP and
transmitted across a private IP network or the Internet. The call is then
converted back into a traditional PSTN call at its destination, therefore
avoiding the PSTN for the majority of the call transmission, resulting in the
elimination or reduction of traditional long distance calling charges.
NetSpeak's Phone-to-Phone is easy for service providers and enterprises to
deploy, offers users with a high voice quality that is almost indistinguishable
from PSTN calls and at a lower cost than traditional long distance circuits.
NetSpeak offers several types of its Phone-to-Phone solutions. Voice VPN, which
is targeted to enterprises who prefer to route voice and fax traffic over their
existing virtual private network. PrePaid or PostPaid Phone-to-Phone, enables
service providers to deploy their own voice over IP network with two separate
billing options. Wholesale Phone-to-Phone enables service providers to become a
voice over IP clearinghouse or application service provider.

       PC-TO-PHONE

      NetSpeak's PC-to-Phone is a solution that enables a service provider's
subscribers to place domestic and international calls from an end user's PC
equipped with NetSpeak's WebPhone client software to any traditional telephone.
Similar to NetSpeak's Phone-to-Phone solution, long distance charges are reduced
or avoided as a subscriber's calls are transmitted over an IP network.
NetSpeak's PC-to-Phone solution enables a service provider's subscribers to be
geographically independent, only requiring a connection to the Internet in order
to place calls. PC-to-Phone also supports prepaid and postpaid billing options.

       VOICE E-COMMERCE

      NetSpeak's Voice E-commerce solution enables enterprises and service
providers, who conduct e-commerce or customer support activities on the
Internet, to provide their customers the ability to quickly and easily speak
with a live company representative in real time while still logged onto the
Internet. Callers can receive immediate assistance and information on items such
as products and services, site navigation and security. NetSpeak's Voice
E-commerce provides e-commerce businesses with the ability to increase customer
satisfaction and ultimately their sales.

       INTERNET CALL WAITING

      NetSpeak's Internet Call Waiting solution enables individuals to make and
receive telephone calls over a single circuit while connected to the Internet.
This application offers telecommunications carriers the ability to increase call
completion rates and the associated revenue without customers having to install
a second telephone line in their home. NetSpeak's Internet Call Waiting solution
is an extremely flexible application with comprehensive call-control features.
For example, for each incoming call subscribers are

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given the ability to select whether they would like to answer the call via their
PC on their WebPhone, answer the call via the PSTN on their traditional
telephone and interrupt the current Internet session, send the call to voice
mail in which a .WAV file message is recorded and automatically forwarded to
your email, to redirect the call to another PSTN telephone number such as a
cellular phone, or to simply reject the call.

     PRODUCTS

      NetSpeak's core technology is concentrated in its call management and
client software products. In January 2000, NetSpeak introduced its iTEL call
management platform and architecture, which is the cornerstone of all of
NetSpeak's solutions. NetSpeak's iTEL platform is a scalable, open and
standards-compliant software platform that manages and maintains global IP
telephony networks. The iTEL platform provides fast time-to-market of advanced
call control and value-added features and applications. The center of the iTEL
platform is NetSpeak's iTEL Call Manager, which is essentially a multi-protocol
softswitch that is compatible with existing and emerging voice over IP
networking standards protecting customers' investment in network infrastructure.
The iTEL platform is modularly constructed, allowing users to quickly and easily
build the IP telephony networks.

       CALL MANAGEMENT SOFTWARE

      NetSpeak's call management products include:

      NetSpeak Infrastructure Gatekeeper. NetSpeak's Infrastructure Gatekeeper
is an IP telephony network infrastructure component, which manages voice
connections between H.323v2 gateways. The Infrastructure Gatekeeper maximizes
network throughput to meet stringent requirements for reliability, scalability
and performance. NetSpeak's Infrastructure Gatekeeper can process over 100 calls
per second, supports multi-domain and interdomain connectivity and incorporates
failover support.

      NetSpeak Applications Gatekeeper. NetSpeak's Applications Gatekeeper
provides call management functionality to IP telephony networks. The core of the
NetSpeak Gatekeeper is the iTEL Call Manager, which acts as the intelligence
that brings together separate components of IP telephony technology into a
cohesive solution. NetSpeak's Applications Gatekeeper, together with NetSpeak's
Route Server, is a single platform for deploying multiple IP telephony solutions
on the same infrastructure, including Prepaid and Postpaid Phone-to-Phone,
PC-to-Phone, Voice E-commerce and Internet Call Waiting. NetSpeak's Applications
Gatekeeper has full H.323v2-compatible call control and interoperates with Cisco
and Motorola gateways. The Application Gatekeeper incorporates a subscriber
database interface to allow user-specific call handling and has a
standards-based RADIUS interface for interoperable third party billing and
provisioning systems.

      NetSpeak Route Server. NetSpeak's Route Server is a central route and
resource application, which manages the routing of IP telephony calls between
gateways and client IP telephones. It provides simplified administration through
centralized route and resource management and defines the calling relationships
between the communicating elements in the network. The Route Server can be
configured with fail-over support, which ensures high network availability for
this critical network component. The Route Server is highly scalable as it
supports multi-domain and inter-domain connectivity. Inter-domain connectivity
allows operators of separate IP telephony networks to complete calls between the
networks. The Route Server also supports flexible public, private and customized
dialing plans and utilizes the format and structure identified in ITU E.164,
which supports national and international dialing. The Route Server provides
real-time IP address resolution for the NetSpeak WebPhone as well as other
standards-based PC client telephony applications and uses a relational database
to ensure high performance, scalability and reliability.

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      NetSpeak Media Server. NetSpeak's Media Server delivers real-time
streaming audio messages to subscribers of NetSpeak's solutions as well as
enables voice mail messages to be sent as e-mail attachments as .WAV files. The
Media Server is used to prompt subscribers' for such information as an account
number and PIN code, and supports industry standard H.323v2-compatible gateways
and IP telephony clients. The Media Server is a key component in NetSpeak's
Internet Call Waiting and Call Screening solutions.

      NetSpeak Event Management Server. NetSpeak's Event Management Server
stores critical data such as call detail records and NetSpeak's SNMP service
alarms in a centralized data repository. The Event Management Server stores the
data in an SQL database and reports can be generated using any ODBC third party
reporting and analysis tools.

       CLIENT SOFTWARE

      NetSpeak's client software applications include the WebPhone and
Mini-WebPhone. WebPhone is a fully functional client or end-user PC software
based IP telephone. The Mini WebPhone is similar in functionality to a WebPhone,
but it is smaller in size and can be more quickly downloaded and configured by
end-users. WebPhone provides users with the ability to engage in real-time
voice, video and data communications over the Internet and other IP based
networks directly from the end-users' PC. WebPhone is H.323v2 compliant and
offers many features commonly found in tradition telephones such as full-duplex
voice communications, integrated voice mail and caller identification
information, among others. The Company's client software applications are
components of NetSpeak's PC-to-Phone, Voice E-commerce and Internet Call Waiting
solutions.

       GATEWAY SYSTEMS

      During 1999 the Company focused on expanding the interoperability of its
call management software with the gateway platforms of Cisco and Motorola.
Accordingly, the Company has discontinued its gateway product line as NetSpeak
has elected not to compete in the gateway market in the future.

STRATEGIC ALLIANCES

      The Company has established strategic alliances with leaders in the
communications industry in an effort to facilitate and accelerate the acceptance
and distribution of its products and technology, by leveraging its partners'
sales and distribution channels. The Company's current significant strategic
relationships have been with larger OEMs, like Motorola and Fujitsu. The Company
intends to continue to establish additional strategic alliances as well as
expand and strengthen its existing strategic partnerships. The following
highlights NetSpeak's current strategic relationships:

     MOTOROLA

      In August 1996, the Company established a strategic alliance with
Motorola, as a part of which Motorola made a minority investment in the Company.
In March 1998, NetSpeak and Motorola expanded their existing strategic alliance
and entered into a joint development and technology license agreement
("Agreement") in which NetSpeak granted Motorola an exclusive license to develop
RF (Radio Frequency) products using the Company's technology. Under the
agreement, the companies seek to join their technologies to enable IP multimedia
communications on wireless networks. As such, Motorola is entitled to include
NetSpeak's technology in its wireless infrastructure products (such as cellular
phones, pagers, satellite phones, and two-way radios) to support real-time
multimedia communications (e.g. voice, fax, audio, video, data) over a variety
of wireless networks.

      The Agreement also included a $30 million multi-year minimum purchase
commitment for the Company's products, which was subject to certain conditions.
The acceptance of a specific technology platform (the "Platform") being
developed by the Company was defined in the Motorola contract as the milestone
for the minimum purchase commitment. Subsequently, a decision was made to
terminate any further development efforts for the Platform in favor of
aggressively pursuing the development of the Company's call management software
technology. In September 1999, the Company and Motorola amended the Agreement.
As part of the amendment, the acceptance of the Platform, which triggered the
purchase commitment, and other conditions regarding the receipt of the
commitment were eliminated. In addition, Motorola relinquished its exclusive
right to use the Company's technology in the cable and wireless markets. In
exchange, Motorola's remaining purchase commitment was reduced from

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$27.3 million to $14.0 million on September 16, 1999. The amended purchase
commitment is payable quarterly and terminates in December 2001. As of December
31, 1999, Motorola's remaining purchase commitment was $11.0 million. During
1999, Motorola accounted for 59% of the Company's net revenues.

      As of December 31, 1999, Motorola owned 29.5% of the Company's total
outstanding common stock. Motorola has the right to designate three members on
the Company's Board of Directors. As of December 31, 1999, Motorola has two
designees serving on the Company's Board of Directors.

    CISCO SYSTEMS

      During 1999, the Company established an operational partnership with
Cisco. The Company does not have any formal agreements with Cisco, but during
1999 NetSpeak and Cisco established several joint development programs. As part
of these programs NetSpeak obtained extensive interoperability between its call
management products and Cisco's gateway platforms. Cisco has also assisted
NetSpeak in identifying new product features and enhancements for its call
management products. As a result of the relationship, Cisco began inviting
NetSpeak on joint customer proposals. Many of the customer opportunities in
which NetSpeak is currently involved are joint proposals with Cisco. The Company
anticipates that this trend will continue in the future.

     FUJITSU

      In February 2000, NetSpeak entered into a OEM agreement with Fujitsu
Business Communications Systems in which it will integrate the primary
components of its iTEL platform, its gatekeeper, route server, event management
server and client products, with Fujitsu's advanced communications services for
Internet service providers and Internet telephony service providers. Under the
agreement, Fujitsu will purchase a minimum of $15.0 million of NetSpeak's
products throughout the term of the agreement. The agreement with Fujitsu
expires in February 2003.

SALES AND MARKETING

      The primary end-users of the Company's products and solutions are service
providers, including traditional and new telecommunications carriers, business
enterprises, cable companies and OEMs. The Company's primary focus is to offer
its products and solutions to the market through indirect sales channels, such
as VARs, SIs and OEMs as well as through its direct sales organization.

      The Company's marketing activities are focused on building a comprehensive
indirect global sales channel and establishing and building strategic
relationships with leaders in the communications industry in an effort to reduce
the Company's dependency for sales and customer prospects on its strategic
partners. The Company's marketing activities are also concentrated on creating
brand recognition for the Company's products. During 1999, the Company
implemented channel programs, in which it began recruiting VARs and SIs on a
global basis in order to expand the Company's international presence. The
Company intends to continue to expand its channel programs in the future, and as
a result, NetSpeak anticipates that it will continue to grow its internal sales
force, recruit new partners, educate partners on the Company's products, assist
partners in customer presentations and to address direct sales opportunities.
The Company is also establishing marketing and support programs to assist
channel partners' efforts in the sale of its products.

                                       10
<PAGE>

      The Company's primary external marketing activities consist of attending
industry trade shows, speaking with industry analysts, and other marketing
campaigns which are primarily intended to educate potential customers as to the
features, functionality, cost effectiveness and other benefits of NetSpeak's
products and solutions. In addition, the Company's web site at
http://www.netspeak.com (which is not deemed to be part of this Report) permits
prospective customers to obtain information about its products and solutions.
The Company intends to continue to intensify and expand its sales and marketing
efforts and, as a result, anticipates that sales and marketing expenses will
increase in future periods.

CUSTOMER SERVICE, PRODUCT MAINTENANCE AND SUPPORT

      NetSpeak is committed to maintaining customer satisfaction and loyalty.
The Company provides technical support services to its direct customers, VARs,
SIs and strategic partners. The Company maintains a technical support hotline in
which the Company's customer support specialists diagnose and resolve technical
problems related to the Company's products as well as other hardware and
software in which the Company's products may interact. Customer support
activities are tracked through customer databases. The Company uses customer
feedback as a source of ideas for product improvements and enhancements.

      Additionally, the Company provides maintenance for its products through
periodic technical upgrades. The Company provides various levels of maintenance
and support services to its customers for a fee.

RESEARCH AND DEVELOPMENT

      The IP telephony industry is characterized by rapidly changing technology,
evolving industry standards and frequent new product introductions. The Company
is involved in the review and establishment of industry standards by
participating in standard setting bodies. Management believes that the Company's
future success is highly dependent upon its ability to quickly adapt to changes
in the marketplace and to continue enhancing the functionality of its products.
The Company utilizes its customers to assist in identifying new and emerging
product requirements.

      The Company currently conducts the majority of its product development
efforts in-house. On occasion, the Company employs independent contractors and
its strategic partners to assist with product development and testing
activities. As of December 31, 1999 the Company had 61 employees in its research
and development department. Research and development expenses were approximately
$8.2 million for the year ended December 31, 1999 and approximately $9.6 million
and $5.5 million in 1998 and 1997, respectively. All of the Company's research
and development costs have been expensed as incurred. The Company anticipates
that research and development expenses will increase in future periods to
perform product enhancements and new product development and in order to
establish and maintain competitive advantages.

COMPETITION

      The IP telephony industry is in the early stages of development and is
rapidly changing as voice and data networks are beginning to converge. The
marketplace is extremely competitive and the Company anticipates that the
competition will continue to intensify in the future as companies in the
telecommunications and data networking industries continue to introduce new
products into the marketplace. NetSpeak principally competes with such companies
as Cisco Systems, Inc., Clarent Corporation, Lucent Technologies, Inc., Nortel
Networks Corporation ("Nortel"), Telcordia Technologies, Inc. and VocalTec
Communications Ltd. Although the Company faces increased competition in the
market, these companies may represent existing and

                                       11
<PAGE>

potential future customers and strategic partners to NetSpeak.

      Many of NetSpeak's current and potential future competitors are more
established industry participants, which possess longer operating histories,
greater name recognition, larger customer bases, longstanding customer
relationships, and significantly greater financial, technical and marketing
resources than the Company. Such competitors have certain inherent competitive
advantages over NetSpeak. The Company believes that the principal competitive
factors affecting its potential success include the Company's ability to adapt
to changing market conditions, maintain strong customer relationships, new
product development, time-to-market, product quality, product performance,
product features such as flexibility, scalability, interoperability,
functionality and ease of use, price, customer service and support, reputation
and the overall effectiveness of its global sales and marketing activities.

GOVERNMENT REGULATION

      At present, there are few laws or regulations that specifically address
access to or commerce on the Internet. The increasing popularity and use of the
Internet, however, enhances the risk that the governments of the United States
and other countries in which the Company sells or expects to sell its products
will seek to regulate IP telephony and the Internet with respect to, among other
things, user privacy, pricing, and the characteristics and quality of products
and services. The Company is unable to predict the impact, if any, that future
legislation, legal decisions or regulations may have on its business, financial
condition or results of operations.

      In March 1996, ACTA, a group of telecommunications common carriers, filed
the ACTA Petition with the FCC arguing that providers (such as the Company) of
computer software products that enable voice transmission over the Internet
(Internet "telephone" services) are operating as common carriers without
complying with various regulatory requirements and without paying certain
charges required by law. The ACTA Petition argues that the FCC has the authority
to regulate both the Internet and the providers of Internet "telephone" services
and requests that the FCC declare its authority over interstate and
international telecommunications services using the Internet, initiate
rule-making proceedings to consider rules governing the use of the Internet for
the provision of telecommunications services, and order providers of Internet
"telephone" software to immediately cease the sale of such software. Any action
by the FCC to grant the relief sought by ACTA or otherwise to regulate use of
the Internet as a medium of communication, including any action to permit local
exchange carriers to impose additional charges for connections used for Internet
access, could have a material adverse effect on the Company's business,
financial condition and results of operations.

PATENTS AND PROPRIETARY RIGHTS

      The Company generally relies upon patent, copyright, trademark and trade
secret laws to protect and maintain its proprietary rights for its products and
technology. The Company has been issued two U.S. patents and has approximately
23 U.S. utility patent applications pending and ten foreign patent applications
pending relating to various aspects of the Company's products. The Company
expects to routinely file patent applications, as deemed appropriate to protect
its technology and products.

      Generally, litigation, which could be costly and time consuming, may be
necessary to determine the scope and validity of others' proprietary rights, or
to enforce any patents issued to the Company, in either case, in judicial or
administrative proceedings. An adverse outcome could subject the Company to
significant liabilities to third-parties, require the Company to obtain licenses
from third-parties, or require the Company to cease product sales and possibly
alter the design of the products. There can be no assurance that any licenses
required under any third-party patents or proprietary rights would be made
available on acceptable terms, if at all. In addition, the laws of certain
countries may not protect the

                                       12
<PAGE>

Company's intellectual property.

      To help protect its rights, the Company currently requires employees,
consultants and strategic partners to enter into confidentiality agreements that
prohibit disclosure of the Company's proprietary information. The Company also
currently requires employees and consultants to assign to it their ideas,
developments, discoveries and inventions. NetSpeak has entered into agreements
with customers that require the Company to place its source code in escrow.
These agreements provide that customers will have a limited, non-exclusive right
to use such code in the event that there is a bankruptcy proceeding by or
against the Company, if the Company ceases to do business or if the Company
fails to meet its support obligations. The Company may enter into similar
agreements in the future which may increase the likelihood of misappropriation
by third parties.

EMPLOYEES

      As of February 29, 2000, the Company employed 118 persons, 67 in research
and development, 31 in sales, marketing and support and 20 in administration and
finance. The Company anticipates increasing its staff in future periods. None of
the Company's employees are subject to collective bargaining agreements. The
Company considers its relations with its employees to be satisfactory.

      Competition for technical personnel in the Company's industry is intense.
The Company believes that it has been successful in recruiting qualified
employees, but there is no assurance that it will continue to be as successful
in the future. There are a relatively small number of individuals who possess
the specialized technical skills that the Company requires, in close proximity
to the Company's current research and development facilities. The Company
believes that its future success depends in part on its continued ability to
hire, assimilate and retain qualified personnel.

EXECUTIVE OFFICERS AND KEY SENIOR MANAGERS OF THE COMPANY

      Lane Bess, 38, joined NetSpeak as Senior Vice President of Sales in
January 1999. Mr. Bess has 15 years of experience in business development,
channel strategy and sales management with extensive experience in emerging
technologies. From January 1995 until September 1997, Mr. Bess served as
Director of Product Marketing at AT&T WorldNet Service, where he managed all
marketing operations including the business and consumer Internet dial-up
service and channel development for dedicated/leased Internet access service. In
1994, Mr. Bess served as Director of Market Planning and Development in AT&T's
Emerging Technology Services unit where he led the development of the business
case for AT&T's entry into the commercial Internet business. Most recently, from
October 1998 though December 1998, Mr. Bess held the position of Vice President
of Marketing and Business Planning for Productivity Point International where he
co-led the strategy development for acquiring and integrating 29 regional
consulting and training companies.

      Harvey Kaufman, 68, is the only non director executive officer of the
Company. Mr. Kaufman has served as the Company's Executive Vice President,
Assistant Secretary, previously Secretary through June 1998, and Treasurer since
December 1995. Mr. Kaufman has over 25 years of expertise in the
telecommunications industry. He joined Telecom Plus International, Inc. ("TPI")
in 1979 as Vice President of Strategic Planning with additional responsibilities
for Applications Engineering and Product Management. Upon the sale of TPI's core
telecommunications business to Siemens in 1987, Mr. Kaufman joined Siemens as
Executive Director of Marketing for Siemens Information Systems and subsequently
served as Vice President of Product Management and Applications Engineering and
Director for Advanced Systems and Applications. Mr. Kaufman retired from Siemens
in October 1995.

      James Kwock, 36, joined NetSpeak as Vice President of Marketing in
February 1999. Mr. Kwock

                                       13
<PAGE>

brings over 10 years of marketing, product marketing and business planning. Most
recently, from January 1998 through January 1999, Mr. Kwock served as the
General Manager of Global IP Telephony Services at AT&T where he launched AT&T's
Carrier Services Voice over IP Program and created AT&T's IP Telephony
Interoperability Lab, promoting multi-vendor interoperability between service
providers. In 1997, Mr. Kwock served as Marketing Director of AT&T's Messaging
and Web Site Services where he implemented a comprehensive strategy for offering
enhanced messaging services for all Internet and Web-based services. In 1996,
Mr. Kwock served as Product Management Director of AT&T's Online Transaction
Services where he developed the market entry approach for AT&T's SecureBuy
service. From January 1994 through December 1995, Mr. Kwock served as Business
Planning Director for AT&T's EasyCommerce Services Unit.

      Neville O'Reilly, 59, joined NetSpeak as Vice President of Strategy and
Business Planning in February 1999. Mr. O'Reilly brings over 20 years of
telecommunications industry experience, with expertise in strategic planning,
business development and financial operations and management. Previously, from
November 1994 through June 1998, Mr. O'Reilly served as Director of Strategy and
Web Site Service Operations for AT&T where he developed the strategy for
expanding traditional value-added networking services into Internet and IP
networking services for the business market. Mr. O'Reilly was AT&T's recognized
spokesperson on business IP strategy and offer development, receiving the AT&T
Public Relations "Spokesperson of the Year" award in 1997. In his extensive
career at AT&T, from October 1989 through October 1994, Mr. O'Reilly held a
variety of executive management positions including Chief Financial Officer
roles for the Public Data Services, Business Market Services, New Business
Platforms and Outbound Business Services units.

      James Wilbanks, 54, has served as Vice President of Engineering for
NetSpeak since January 1998. Mr. Wilbanks brings over 25 years of experience in
project management, systems design and development. From 1984 through 1997, Mr.
Wilbanks was employed by IBM where he played an integral role in the development
of MWAVE and client network transport messaging tools. During his five-year
tenure at ROLM, Mr. Wilbanks oversaw the integration of PhoneMail with
third-party telecommunications switches and developed a proprietary
voice-editing product, generating several patents.

ITEM 2. PROPERTIES

     The Company occupies approximately 25,000 square feet of space in Boca
Raton, Florida, which it leases at a combined annual rental of $357,000. The
leases for the Company's facilities expire February 2001. The Company believes
that its existing facilities are adequate for its needs through the end of 2000.
Should the Company require additional space at that time or prior thereto, it
believes that such space can be secured on commercially reasonable terms and
without undue operational disruption.

                                       14
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

      During 1998, certain shareholder litigation was filed against the Company
and its senior officers and directors in the Circuit Court of the Fifteenth
Judicial Circuit of Florida, in and for Palm Beach County. The purported class
action alleges that the Company made false and misleading statements to
shareholders in connection with Motorola's partial tender offer and that certain
of the Company's senior officers and directors improperly tendered their shares.
In December 1999, the parties reached an agreement in principle to settle this
litigation at a cost of $7.0 million, of which the Company has agreed to pay
$500,000 toward the settlement, which was accrued in the December 31, 1999
financial statements, with the balance to be funded by the Company's insurance
carriers and the individual defendants in the action. This settlement is subject
to various contingencies, including obtaining court approval. Although there can
be no assurance that all of these contingencies will be satisfied, the Company
and its counsel believe that the settlement will be resolved in accordance with
the agreement in principle and will be consummated by the end of the second
quarter of 2000.

      The Company may, from time to time, be involved in certain legal actions
arising in the ordinary course of business. In the opinion of management, the
outcome of such actions known to date will not have a material adverse effect on
the Company's financial position or results of operations.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1999.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

(a) Market Information

      The Company's Common Stock has been listed for trading on the Nasdaq
National Market under the symbol "NSPK" since May 29, 1997. The following table
sets forth for the calendar quarter indicating the high and low sale prices as
quoted on The Nasdaq Stock Market.

                                                            HIGH          LOW
                                                            ----          ---

FISCAL YEAR 1998:

Quarter ended March 31, 1998............................... $31.50       $21.50

Quarter ended June 30, 1998 ............................... $32.38       $10.13

                                       15
<PAGE>

Quarter ended September 30, 1998........................... $14.25       $ 6.31

Quarter ended December 31, 1998............................ $12.69       $ 4.94

FISCAL YEAR 1999:

Quarter ended March 31, 1999............................... $16.00       $10.91

Quarter ended June 30, 1999................................ $14.25       $ 9.00

Quarter ended September 30, 1999........................... $13.06       $ 9.63

Quarter ended December 31, 1999............................ $21.25       $11.25

(b) Holders

      As of February 29, 2000 there were 107 holders of record and, the Company
believes, in excess of 7,500 beneficial holders of the Company's Common Stock.

(c) Dividends

      The Company has never declared or paid any cash dividends on its Common
Stock and does not intend to pay dividends for the foreseeable future. The
Company intends to retain earnings, if any, to finance the development and
expansion of its business. Payment of dividends in the future will depend upon,
among other things, the Company's ability to generate earnings, need for capital
and overall financial condition.

                                       16
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

      The selected consolidated financial data set forth below should be read in
conjunction with Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included in Item 8 of this Report.

<TABLE>
<CAPTION>
                                                Predecessor(1)    Successor(1)
                                                May 15, 1995    December 8, 1995              Year ended December 31,
                                                 to December     to December 31,   ---------------------------------------------
                                                  18, 1995             1995          1996        1997        1998         1999
                                                -------------   ----------------   -------     -------     --------     --------
                                                                     (In thousands, except per share amounts)
<S>                                                <C>               <C>           <C>         <C>         <C>          <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................      $   -             $    -        $   867     $ 5,353     $  7,719     $  7,637
Operating expenses:
      Cost of revenues.......................          -                  -             47         931        1,495          583
      Research and development...............        175                 28          2,256       5,496        9,586        8,239
      Sales and marketing....................          -                  -            722       2,919        7,678        9,185
      General and administrative.............          6                 57            837       1,631        3,105        3,710
      Purchased research and development.....          -                557              -           -            -            -
                                                   -----             ------        -------     -------     --------     --------
                 Total operating expenses....        181                642          3,862      10,977       21,864       21,717
Loss from operations.........................       (181)              (642)        (2,995)     (5,624)     (14,145)     (14,080)
Interest and other income....................          -                  -            172         753        2,500        1,902
Other charges................................          -                  -              -           -         (383)           -
                                                   -----             ------        -------     -------     --------     --------
Loss before income taxes.....................       (181)              (642)        (2,823)     (4,871)     (12,028)     (12,178)
Income taxes.................................          -                  -             43         209           35           34
                                                   -----             ------        -------     -------     --------     --------
Net loss.....................................      $(181)            $ (642)       $(2,866)    $(5,080)    $(12,063)    $(12,212)
                                                   =====             ======        =======     =======     ========     ========
Net loss per share (basic and diluted).......                        $(0.15)       $ (0.41)    $ (0.54)    $  (0.98)    $  (0.95)
                                                                     ======        =======     =======     ========     ========
Shares used in computing net loss per share..                         4,408          7,019       9,396       12,282       12,920
                                                                     ======        =======     =======     ========     ========
</TABLE>

<TABLE>
<CAPTION>
                                                                                            Successor (1)
                                                                                             December 31,
                                                                     -----------------------------------------------------------
                                                                      1995           1996        1997        1998         1999
                                                                     ------        -------     -------     --------     --------
<S>                                                                  <C>           <C>         <C>         <C>          <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments............        $  483        $ 6,295     $19,054     $ 44,922     $ 34,269
Working capital..............................................           391          4,304      18,413       43,077       34,473
Total assets.................................................           556          8,278      23,201       51,725       40,946
Shareholders' equity.........................................           448          5,679      21,108       47,684       37,795

<FN>
----------
(1) NetSpeak acquired Internet Telephone Company ("ITC") by issuing 2,500,000
    shares of Common Stock, valued at $500,000, in exchange for all of the
    outstanding shares of ITC. The acquisition was accounted for as a purchase,
    and the purchase price was allocated to the assets acquired, including
    purchased research and development in process, and liabilities assumed based
    upon their fair value on the date of acquisition. The financial information
    identified herein as for the Predecessor is for ITC for the period May 15,
    1995 (inception) to December 18, 1995, the date of its acquisition by
    NetSpeak. The financial information identified herein as for the Successor
    is for NetSpeak (including ITC on a consolidated basis from the date of
    acquisition) as of December 31, 1995, 1996, 1997, 1998 and 1999 and for the
    period from December 8, 1995 (inception) to December 31, 1995, for the years
    ended December 31, 1996, 1997, 1998 and 1999.
</FN>
</TABLE>

                                       17
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

INTRODUCTION

      The Company generates revenues from product licenses and fees for
services. The principal end-users of the Company's products and solutions are
service providers, including traditional and new telecommunications carriers,
Internet service providers and cable companies. The Company distributes its
products through VARs, SIs and OEMs and a direct sales organization. Product
license revenues are generally recognized upon product shipment provided that no
significant post-delivery obligations exist and payment is due within one year.
Service revenues include fees for customer support, product maintenance and
professional engineering services. Service revenues for customer maintenance and
support are recognized ratably over the term of the maintenance period, which is
typically 12 months. Professional service revenues are generally recognized when
the services are performed. Product license and service revenues are recognized
upon customer acceptance, if required. Advance payments of product licenses and
services are reported as unearned revenue until all conditions for revenue
recognition are met. All research and development costs to date have been
expensed as incurred.

      Since its inception, the Company has generated a significant percentage of
its revenues through several of its strategic partners and, as a result, is
highly dependent upon the sales and marketing activities of these partners for
its products. Motorola accounted for 59%, 17% and 0% of the Company's net
revenues in 1999, 1998 and 1997, respectively. In an effort to reduce its
dependency on Motorola, the Company transitioned itself to a product and market
focused company from a technology-oriented company. As part of its transition,
the Company spent the majority of 1999 refining its product strategy to offer
customers standards-based prepackaged solutions that meet end-users'
requirements with minimal customization. During 1999, the Company also began to
expand its direct sales force and develop an indirect sales channel, targeting
VARs, SIs and OEMs that concentrate on the data networking industry. The Company
will continue to expand its global distribution channels in the future.

      The market for the Company's products and solutions is in the early stages
of development and is characterized by rapid technological change, evolving
industry standards, changes in end-user requirements, intense competition by
more established industry participants and frequent new product introductions
and enhancements. As is typical in the case of new and rapidly emerging
technologies, demand and market acceptance are subject to a high level of
uncertainty. Broad acceptance of the Company's products by customers and
end-users is critical to the Company's success and ability to generate revenues.
The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. As of December 31, 1999, the Company had
an accumulated deficit of $32.9 million. Due to the Company's limited operating
history and the lack of maturity in the industry, the Company's operating
results are difficult to predict and may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside the Company's
control. These factors include, but are not limited to, those set forth under
"Forward Looking Statements" above.

RESULTS OF OPERATIONS

     YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

      Net revenues were $7.6 million, $7.7 million and $5.4 million for the
years ended December 31, 1999, 1998 and 1997, respectively.

                                       18
<PAGE>

      Sales of call management products and related client licenses for the
years ended December 31, 1999, 1998 and 1997 accounted for 65%, 44% and 11% of
net revenues, respectively. Sales of gateway systems for the years ended
December 31, 1999, 1998 and 1997 represented 9%, 41% and 35% of net revenues,
respectively. Gateway sales primarily consist of integrated systems, where the
Company combines its gateway software with third-party computer hardware and
software components.

      As discussed above, during 1999 the Company transitioned to a product and
market focused strategy from a technology oriented strategy. The Company spent
much of 1999 refining its call management product offerings to more effectively
address a broader market and obtaining extensive interoperability with third
party gateway platforms such as Cisco and Motorola. As a result, the Company's
sales mix shifted significantly towards a greater percentage of call management
systems. In January 2000, the Company discontinued its gateway product line as
it elected not to compete in the gateway market in the future, concentrating its
research and development and sales and marketing activities on its call
management software.

      Professional services revenues represented 22%, 8% and 22% of net revenues
for the years ended December 31, 1999, 1998 and 1997, respectively. Professional
service revenue during 1999 increased primarily due to a growth in the number of
customers subscribing to support contracts and professional service engagements
performed for the Company's strategic partners. The Company believes that
professional services revenues will increase in future periods.

      Net revenues from consumer client software represented 1%, 4% and 35% of
net revenues for the years ended December 31, 1999, 1998 and 1997, respectively.
Consumer client software revenues were primarily related to sales of the
Company's WebPhone software. The Company anticipates that net revenues generated
from consumer client software products will remain consistent with the current
year.

      During 1999, the majority of the Company's revenues were generated
domestically through the Company's direct sales organization. As discussed
above, the Company is in the process of expanding its global distribution
channels through the development of an indirect sales channel and the expansion
of its direct sales force.

      Cost of revenues for the years ended December 31, 1999, 1998 and 1997 were
$583,000, or 8% of net revenues, $1.5 million, or 19% of net revenues, and
$931,000, or 17% of net revenues, respectively. The decrease in cost of revenues
as a percentage of net revenues in 1999 was due to a shift in the Company's
sales mix towards its call management software products. Cost of revenues were
relatively consistent in 1998 and 1997. The Company anticipates that cost of
revenues as a percent of net revenues may increase as the Company believes that
revenues from professional services and integrated hardware and software
products may become a greater percentage of the Company's sales mix in future
periods.

      Research and development expenses for the years ended December 31, 1999,
1998 and 1997 were $8.2 million, $9.6 million and $5.5 million, respectively.
During 1999, the Company concentrated its development efforts on its call
management products as part of its revised strategic focus to become a product
and market oriented company. The Company also reviewed its other engineering
programs and, as a result, some research and development projects were
eliminated. The elimination of certain engineering programs resulted in lower
personnel costs and lower costs of hardware and software used in development.
During 1998, research and development expenses increased primarily due to the
expansion of the Company's research and development staff. All research and
development costs have been expensed as incurred. The Company anticipates that
research and development expenses will increase in future periods as it expands
its existing research and development programs in order to perform product
enhancements and new product development.

                                       19
<PAGE>

      Sales and marketing expenses for the years ended December 31, 1999, 1998
and 1997 were $9.2 million, $7.7 million and $2.9 million, respectively. The
increase in sales and marketing expenses in all periods was primarily due to the
expansion of the Company's sales and marketing staff. Additionally, during 1998
the Company also established an allowance for uncollectible customer accounts as
a result of the significant increase in trade credit sales from 1997. The
Company anticipates that sales and marketing expenses will increase in future
periods as the Company continues to expand its distribution channels and
marketing activities.

      General and administrative expenses for the years ended December 31, 1999,
1998 and 1997 were $3.7 million, $3.1 million and $1.6 million, respectively.
The increase in general and administrative expenses during 1999 was due to
charges associated with the proposed settlement of the Company's outstanding
shareholder litigation. The increase in general and administrative expenses
during 1998 was due to the expansion of the Company's corporate infrastructure
primarily through the addition of personnel as well as increased legal fees.

      Interest and other income for the years ended December 31, 1999, 1998 and
1997 was $1.9 million, $2.5 million and $753,000, respectively. The reduction in
interest and other income in 1999 was due to a decrease in the Company's cash
and short-term investment balances during the year.

      In connection with the expansion of its strategic partnership with
Motorola in March 1998, Motorola commenced a cash tender offer for 3.0 million
shares of the Company's Common Stock at a price of $30.00 per share. On April
22, 1998, Motorola consummated the tender offer, acquiring 2,686,470 shares of
the Company's Common Stock. Upon the consummation of the tender offer, Motorola
also purchased an additional 35,000 shares from two officers at the tender offer
price. The Company incurred $383,000 in other charges as a result of the cash
tender offer by Motorola. Such expenses were primarily the result of
professional fees incurred in connection with the tender offer.

      Income taxes for the years ended December 31, 1999, 1998 and 1997 were
$34,000, $35,000, and $209,000, respectively. Such taxes were primarily the
result of foreign and state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

      Since its inception, the Company has financed its operations through sales
of equity securities. The Company has raised $65.1 million, net of offering
costs, including $47.2 million in sales of private securities and $17.9 million
in the IPO. As of December 31, 1999, the Company had $34.3 million in cash, cash
equivalents and short-term investments. The Company currently does not have any
available lines of credit.

      Net cash used in operating activities during the years ended December 31,
1999, 1998 and 1997 was $12.2 million, $9.8 million and $5.9 million,
respectively. Net cash used in operating activities related to the Company's
expansion and funding of its research and development and sales and marketing
activities as well as its corporate infrastructure.

      Net cash used in investing activities during the year ended December 31,
1999 was $1.3 million. Net cash used in investing activities reflects $550,000
in net purchases of short-term investments and $776,000 primarily related to
purchases of computer equipment. Net cash provided by investing activities
during the year ended December 31, 1998 was $632,000. Net cash provided by
investing activities reflected $3.6 million in net sales of short-term
investments, which was reinvested in cash equivalents. This amount was offset by
$3.0 million in capital expenditures, primarily related to purchases of computer
and test equipment due to increases in personnel and the expansion of the
Company's system test facilities. Net cash used in investing activities during
the year ended December 31, 1997 was $16.1

                                       20
<PAGE>

million, which reflects $14.3 million in net purchases of short-term investments
and $1.7 million primarily related to purchases of computer equipment.

      Net cash provided by financing activities for the year ended December 31,
1999 was $2.5 million. The proceeds during the period resulted from exercises of
employee stock options for 608,000 shares of common stock and the issuance of
17,000 shares of common stock under the Company's Employee Stock Purchase Plan.
Net cash provided by financing activities for the year ended December 31, 1998
was $38.6 million. In February 1998, the Company issued 1.3 million shares of
common stock to Bay Networks, which was subsequently acquired by Nortel, for
$36.8 million, net of offering costs. The Company also received $1.8 million
from exercises of stock options and the issuance of common stock under its
Employee Stock Purchase Plan for 681,000 and 7,000 shares of common stock,
respectively. Net cash provided by financing activities for the year ended
December 31, 1997 was $20.4 million. On June 3, 1997, the Company consummated
the IPO in which it sold 2.4 million shares of common stock at an initial public
offering price of $8.75 per share, raising net proceeds of approximately $17.9
million. Upon consummation of the IPO, Motorola exercised a previously granted
warrant to purchase 453,000 shares of common stock for $2.5 million.

      The Company has no material commitments other than those under office and
equipment operating leases. As a result of the expansion of the Company's
research and development and sales and marketing activities, capital
expenditures may increase in future periods primarily due to the purchase of
computer-related equipment. The Company anticipates that, based on its present
plans and assumptions, the current cash balances will be sufficient to enable it
to sustain its current and planned operations for a period of at least 12
months. If the Company's estimates or assumptions prove to be incorrect, the
Company may require additional capital. Additional funding, whether obtained
through public or private debt or equity financing, or from strategic alliances,
may not be available when needed or may not be available on terms acceptable to
the Company. Failure to secure additional financing, if and when needed, may
have a material adverse effect on the Company's business, financial condition
and results of operations.

FORWARD LOOKING STATEMENTS

      Except for the historical information contained herein, this "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains forward looking statements that involve a number of risks
and uncertainties, including the risks described under "Forward Looking
Statements" above as well as elsewhere in this Report and as detailed from time
to time in the Company's filings with the Commission.

                                       21
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       NETSPEAK CORPORATION AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                        PAGE NO.
                                                                        --------
Independent Auditors' Report.............................................  23

Consolidated Balance Sheets as of December 31, 1998 and 1999.............  24

Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999......................................................  25

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1998 and 1999.........................................  26

Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999......................................................  27

Notes to Consolidated Financial Statements...............................  28

                                       22
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of NetSpeak Corporation:

We have audited the accompanying consolidated balance sheets of NetSpeak
Corporation and subsidiary (the "Company") as of December 31, 1998 and 1999, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1998
and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Certified Public Accountants

Fort Lauderdale, Florida
February 1, 2000 (February 1, 2000 as to the
                  employment agreements in Note 6)

                                       23
<PAGE>

                       NETSPEAK CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                                -------------------
                                                                                  1998       1999
                                                                                --------   --------
<S>                                                                             <C>        <C>
ASSETS

Cash and cash equivalents                                                       $ 34,117   $ 23,109
Short-term investments                                                            10,805     11,160
Accounts receivable, net of allowances for doubtful accounts of $709 and
$1,200 at December 31, 1998 and 1999, respectively                                   976      2,814
Inventory                                                                            798        211
Prepaid and other current assets                                                     422        330
                                                                                --------   --------
            Total current assets                                                  47,118     37,624

Property and equipment, net                                                        3,614      2,527
Other assets                                                                         993        795
                                                                                --------   --------
                                                                                $ 51,725   $ 40,946
                                                                                ========   ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable                                                                $    706   $    637
Accrued compensation                                                               1,289      1,073
Other accrued expenses                                                               436      1,080
Unearned revenue                                                                   1,610        361
                                                                                --------   --------
            Total current liabilities                                              4,041      3,151
                                                                                --------   --------
Commitments and contingencies (Notes 6 and 7)                                         --         --

Shareholders' equity:
     Preferred stock:  1,000,000 shares of $0.01 par value
         authorized; no shares issued or outstanding
     Common stock: 75,000,000 shares of $0.01 par value authorized at December
         31, 1998 and 1999, respectively; 12,750,803 and 13,375,716 shares
         issued and outstanding at December 31, 1998 and 1999,
         respectively                                                                127        134
     Additional paid-in capital                                                   68,147     70,658
     Accumulated deficit                                                         (20,651)   (32,863)
     Accumulated other comprehensive income                                           61       (134)
                                                                                --------   --------
            Total shareholders' equity                                            47,684     37,795
                                                                                --------   --------
                                                                                $ 51,725   $ 40,946
                                                                                ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       24
<PAGE>

                       NETSPEAK CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                             -----------------------------------
                                               1997         1998         1999
                                             --------     --------     --------
<S>                                          <C>          <C>          <C>
Net revenues ............................    $  5,353     $  7,719     $  7,637

Operating expenses:
      Cost of revenues ..................         931        1,495          583
      Research and development ..........       5,496        9,586        8,239
      Sales and marketing ...............       2,919        7,678        9,185
      General and administrative ........       1,631        3,105        3,710
                                             --------     --------     --------
              Total operating expenses...      10,977       21,864       21,717

Loss from operations ....................      (5,624)     (14,145)     (14,080)

Interest and other income ...............         753        2,500        1,902
Other charges ...........................          --         (383)          --
                                             --------     --------     --------
Loss before income taxes ................      (4,871)     (12,028)     (12,178)

Income taxes ............................         209           35           34
                                             --------     --------     --------
Net loss ................................    $ (5,080)    $(12,063)    $(12,212)
                                             ========     ========     ========
Net loss per share (basic and diluted) ..    $  (0.54)    $  (0.98)    $  (0.95)
                                             ========     ========     ========
Weighted-average shares outstanding .....       9,396       12,282       12,920
                                             ========     ========     ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       25
<PAGE>

                       NETSPEAK CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            ACCUMULATED
                                        COMMON STOCK          ADDITIONAL                      OTHER
                                   ----------------------       PAID-IN      ACCUMULATED   COMPREHENSIVE
                                    SHARES        AMOUNT        CAPITAL        DEFICIT        INCOME          TOTAL
                                   --------      --------     ----------     -----------   -------------    --------
<S>                                  <C>         <C>           <C>            <C>            <C>            <C>
Balance at December 31, 1996          7,699      $     77      $  9,110       $ (3,508)      $     --       $  5,679

Issuance of common stock ......       2,400            24        17,985             --             --         18,009
Exercise of warrant ...........         453             5         2,486             --             --          2,491
Exercises of stock options ....           3            --             9             --             --              9
Net loss ......................          --            --            --         (5,080)            --         (5,080)
                                   --------      --------      --------       --------       --------       --------
Balance at December 31, 1997         10,555           106        29,590         (8,588)            --         21,108

Issuance of common stock ......       1,334            13        36,740             --             --         36,753
Exercise of warrant ...........         174             2            (2)            --             --             --
Exercises of stock options ....         681             6         1,782             --             --          1,788
Stock issuance under employee
   stock purchase plan ........           7            --            37             --             --             37
Comprehensive income (loss):
  Net loss ....................          --            --            --        (12,063)            --        (12,063)
  Other comprehensive income...          --            --            --             --             61             61
                                   --------      --------      --------       --------       --------       --------
                                         --            --            --        (12,063)            61        (12,002)
                                   --------      --------      --------       --------       --------       --------
Balance at December 31, 1998         12,751           127        68,147        (20,651)            61         47,684

Exercises of stock options.....         608             7         2,342             --             --          2,349
Stock issuance under employee
   stock purchase plan ........          17            --           169             --             --            169
Comprehensive income (loss):
  Net loss ....................          --            --            --        (12,212)            --        (12,212)
  Other comprehensive income...          --            --            --             --           (195)          (195)
                                   --------      --------      --------       --------       --------       --------
                                         --            --            --        (12,212)          (195)       (12,407)
                                   --------      --------      --------       --------       --------       --------
Balance at December 31, 1999         13,376      $    134      $ 70,658       $(32,863)      $   (134)      $ 37,795
                                   ========      ========      ========       ========       ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       26
<PAGE>

                       NETSPEAK CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                     ----------------------------------
                                                                       1997         1998         1999
                                                                     --------     --------     --------
<S>                                                                  <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss .......................................................  $ (5,080)    $(12,063)    $(12,212)
   Adjustments to reconcile net loss to net cash
         used in operating activities:
      Depreciation ................................................       609        1,524        1,863
      Provision for bad debts .....................................        --          815          625
      Common stock issued for services ............................        66           --           --
      Changes in assets and liabilities:
           Accounts receivable ....................................      (558)        (893)      (2,463)
           Inventory ..............................................      (269)        (529)         587
           Prepaid and other current assets .......................       (17)        (137)          92
           Other assets ...........................................      (192)        (476)         198
           Accounts payable .......................................       584           30          (69)
           Accrued compensation ...................................       604          602         (216)
           Other accrued expenses .................................       292          (38)         644
           Unearned revenue .......................................    (1,986)       1,354       (1,249)
                                                                     --------     --------     --------
               Net cash used in operating activities ..............    (5,947)      (9,811)     (12,200)
                                                                     --------     --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of equipment ..........................................    (1,737)      (2,960)        (776)
   Purchase of short-term investments .............................   (26,996)     (12,647)     (15,064)
   Maturities and sales of short-term investments .................    12,660       16,239       14,514
                                                                     --------     --------     --------
              Net cash (used in) provided by investing activities..   (16,073)         632       (1,326)
                                                                     --------     --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock .........................    17,943       36,753           --
   Proceeds from exercise of warrant ..............................     2,491           --           --
   Proceeds from exercise of stock options ........................         9        1,788        2,349
   Proceeds from issuance of common stock under
      employee stock purchase plan ................................        --           37          169
                                                                     --------     --------     --------
             Net cash provided by financing activities ............    20,443       38,578        2,518
                                                                     --------     --------     --------
Net (decrease) increase in cash and cash equivalents ..............    (1,577)      29,399      (11,008)

Cash and cash equivalents, beginning of period ....................     6,295        4,718       34,117
                                                                     --------     --------     --------
Cash and cash equivalents, end of period ..........................  $  4,718     $ 34,117     $ 23,109
                                                                     ========     ========     ========
SUPPLEMENTAL INFORMATION:

Cash paid for income taxes ........................................  $     60     $     16     $     21
                                                                     ========     ========     ========
NONCASH INVESTING AND FINANCING ACTIVITIES - SEE NOTE 4
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

                       NETSPEAK CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

      ORGANIZATION AND OPERATIONS - NetSpeak Corporation ("NetSpeak") and its
subsidiary, Internet Telephone Company ("ITC"), (collectively, the "Company")
develops, markets, licenses, and supports a suite of intelligent software
products and solutions, which enable real-time, concurrent interactive voice,
video and data transmission over packetized data networks, such as the Internet
and local-area and wide-area networks.

      The market for the Company's products and solutions is in the early stages
of development and is characterized by rapid technological change, evolving
industry standards, changes in end-user requirements, intense competition by
more established industry participants and frequent new product introductions
and enhancements. As is typical in the case of new and rapidly emerging
technologies, demand and market acceptance are subject to a high level of
uncertainty. Broad acceptance of the Company's products by customers and
end-users is critical to the Company's success and ability to generate revenues.
The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. As of December 31, 1999, the Company had
an accumulated deficit of $32.9 million. Due to the Company's limited operating
history and the lack of maturity in the industry, the Company's operating
results are difficult to predict and may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside the Company's
control. These factors include, but are not limited to, the Company's limited
operating history, the Company's ability to develop a recurring revenue stream,
the volume of revenues generated from the Company's strategic partners from
sales of products incorporating the Company's technology, the Company's ability
to attract new partners and develop additional distribution channels for its
products and technology, the effectiveness of the Company's sales and marketing
activities, the need for ongoing product development in an environment of rapid
technological change, the Company's ability to transition from a technology
oriented to a product based company, the acceptance of the Company's products in
the marketplace, the timing and scope of deployments of the Company's products
by customers, technical difficulties with respect to the Company's products or
products in development, the emergence of new competitors in the marketplace,
the timing of new product announcements and releases by the Company and its
competitors, the amount and timing of capital expenditures and other costs
relating to the expansion of the Company's operations, the budgeting cycles of
potential customers, the uncertainty of the Internet and Internet Protocol
("IP") based networks as a medium for real-time voice and video communications,
the uncertainty of future governmental regulation, the Company's ability to
manage growth, obtain patent protection, obtain additional funds and general
economic conditions. The Company believes that it has adequate capital resources
to sustain its operations for a period of at least twelve months. If the
Company's estimates or assumptions prove to be incorrect, the Company may
require additional capital. Additional funding, whether obtained through
public or private debt or equity financing, or from strategic alliances, may not
be available when needed or may not be available on terms acceptable to the
Company. Failure to secure additional financing, if and when needed, may have a
material adverse effect on the Company's business, financial condition and
results of operations.

      CONSOLIDATION - The consolidated financial statements include the accounts
of NetSpeak and its wholly-owned subsidiary, ITC. Intercompany transactions and
balances have been eliminated in consolidation.

      FINANCIAL INSTRUMENTS - The Company considers all highly liquid
interest-earning investments with contractual maturities of three months or less
to be cash equivalents. Short-term investments generally mature between three
months and three years from the date of purchase. The Company follows the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". Short-term
investments are classified as available-for-sale and are recorded at fair value.
Unrealized gains and losses are reported as a separate component of
shareholders' equity. The Company minimizes its credit risk associated with cash
equivalents and short-term investments by using high quality credit instruments.

                                       28
<PAGE>

      FAIR VALUE OF FINANCIAL INSTRUMENTS - SFAS No. 107, "Disclosure about Fair
Value of Financial Instruments," requires disclosure of the fair value of
financial instruments, both assets and liabilities, recognized and not
recognized in the Consolidated Balance Sheets of the Company, for which it is
practicable to estimate fair value. The estimated fair values of financial
instruments, which are presented herein, have been determined by the Company
using available market information. As of December 31, 1998 and 1999, there were
no significant differences between cost and fair value of short-term
investments.

      Inventories - Inventories are stated at the lower of cost, determined
utilizing the first-in, first-out method, or market. Inventories consist
primarily of hardware components used in the assembly of integrated systems.

      PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
Depreciation is provided on the straight-line basis over the estimated useful
lives of the assets. Estimated useful lives range from three to five years.
Routine repairs and maintenance are expensed as incurred.

      REVENUE RECOGNITION - The Company recognizes revenue in accordance with
the American Institute of Certified Public Accountants ("AICPA") Statement of
Position ("SOP") 97-2, "Software Revenue Recognition", and SOP 98-9,
"Modification of SOP 97-2, With Respect to Certain Transactions". The Company
generates revenues from product licenses and fees for services. Product license
revenues are generally recognized upon product shipment provided that no
significant post-delivery obligations exist and payment is due within one year.
Service revenues include fees for customer support, product maintenance and
professional engineering services. Service revenues for customer support and
product maintenance are recognized ratably over the term of the maintenance
period, which is typically twelve months. Costs related to customer support are
included as a component of sales and marketing. Service revenues for
professional engineering services are generally recognized when the services are
performed. Product license and service revenues are recognized upon customer
acceptance, if required. Advance payments of product licenses and services are
reported as unearned revenue until all conditions for revenue recognition are
met.

      RESEARCH AND DEVELOPMENT COSTS - Research and development expenditures are
charged to operations as incurred. SFAS No. 86, "Accounting for Costs of
Computer Software to be Sold, Leased or Otherwise Marketed", requires research
and development costs to be capitalized upon the establishment of technological
feasibility. Based on the Company's product development process, technological
feasibility is established upon completion of a working model. Costs incurred
between completion of the working model and the point at which the product is
ready for general release have been insignificant. All research and development
costs have been expensed as incurred.

      ACCOUNTING FOR STOCK BASED COMPENSATION - The Company accounts for its
stock-based compensation in accordance with the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations (collectively, "APB 25"). The Company has adopted only
the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", which establishes required financial accounting and reporting
standards for stock-based employee compensation plans.

      INCOME TAXES - Income taxes are provided for based on the treatment
prescribed by SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires
accounting for income taxes based on the asset and liability method and,
accordingly, deferred income taxes are provided to reflect temporary differences
between financial and tax reporting bases of assets and liabilities and net
operating loss carryforwards.

                                       29
<PAGE>

      NET LOSS PER SHARE - The Company computes net loss per share under SFAS
No. 128, "Earnings Per Share", which requires a dual presentation of basic and
diluted earnings per share on the face of the income statement. Basic earnings
per share excludes dilution and is computed by dividing income or loss
attributable to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were converted into common stock, but such securities or contracts
are excluded if their effects would be anti-dilutive. The Company excluded stock
options and warrants to purchase 3,284,000 and 3,378,000 common shares from the
weighted-average shares outstanding calculation for the years ended December 31,
1998 and 1999, as their effect was anti-dilutive.

      COMPREHENSIVE INCOME (LOSS) - Other comprehensive income (loss) refers to
revenues, expenses, gains and losses that under generally accepted accounting
principles are included in comprehensive income (loss) but are excluded from net
income (loss) as these amounts are recorded directly as an adjustment to
shareholders' equity. The Company's other comprehensive income (loss) is
comprised of unrealized gains (losses) on investments. The tax benefit or
expense, as well as any reclassifications related to components of other
comprehensive income (loss), were not significant.

      Risks and Uncertanties - The Company's operating results and financial
condition have varied and may continue to vary significantly in the future
depending on a number of factors. The following factors may have a material
adverse effect upon the Company's business, financial condition and results of
operations.

       USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets 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 reporting period. Actual results could differ from those estimates.

       RELIANCE UPON STRATEGIC RELATIONSHIPS - Since its inception, the Company
has generated a significant percentage of its revenues through several of its
strategic partners and, as a result, is highly dependent upon the sales and
marketing activities of these partners for its products.

       TECHNOLOGICAL ADVANCEMENTS AND COMPETITION - The market for the Company's
products is in the early stages of development and is characterized by rapid
technological change, evolving industry standards, changes in end-user
requirements, intense competition by more established industry participants and
frequent new product introductions and enhancements. As a result, the timing of
demand and market acceptance of the Company's products and technologies is
subject to a high degree of uncertainty, which may cause uncertainty regarding
future sales of the Company's products, services and technology.

      Reclassifications - Certain reclassifications to the prior years'
Consolidated Financial Statements have been made to conform to the current year
presentation.

2. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

      Cash and cash equivalents and short-term investments consist of the
following:

                                       30
<PAGE>

                                                                 DECEMBER 31,
                                                             ------------------
                                                               1998       1999
                                                             -------    -------
                                                               (in thousands)
U.S. Treasury Notes .....................................    $10,788    $11,143
Certificate of Deposit ..................................         17         17
                                                             -------    -------
Short-term investments ..................................     10,805     11,160
Cash and cash-equivalents ...............................     34,117     23,109
                                                             -------    -------
Cash and cash equivalents and short-term investments ....    $44,922    $34,269
                                                             =======    =======

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                                                 DECEMBER 31,
                                                             ------------------
                                                               1998       1999
                                                             -------    -------
                                                               (in thousands)
Computer equipment .....................................    $ 4,690     $ 5,303
Furniture, fixtures and office equipment ...............        687         728
Leasehold improvements .................................        559         561
                                                            -------     -------
Property and equipment, cost ...........................      5,936       6,592
Accumulated depreciation ...............................     (2,322)     (4,065)
                                                            -------     -------
Property and equipment, net ............................    $ 3,614     $ 2,527
                                                            =======     =======

      Depreciation expense during 1997, 1998 and 1999 was $609,000, $1,524,000
and $1,863,000, respectively.

4. SHAREHOLDERS' EQUITY

      On June 3, 1997, the Company closed on the initial public offering of its
Common Stock. The Company offered and sold 2,400,000 shares of the common stock
at an initial public offering price of $8.75 per share, raising proceeds, net of
offering costs, of $17,943,000. Upon consummation of the offering, Motorola
exercised a previously granted warrant to purchase 453,000 shares of common
stock for $2,491,000.

      In January 1998, the Company entered into a joint development and equity
agreement with Bay Networks, Inc., which was subsequently acquired by Nortel
Networks Corporation. In conjunction with the agreement, on February 3, 1998,
the Company issued 1,334,000 shares of common stock to Bay Networks, Inc.,
raising $36,753,000, net of offering costs.

      On June 18, 1998, the Company's shareholders approved an increase in
authorized common stock from 25,000,000 shares, $0.01 par value per share, to
75,000,000 shares, $0.01 par value per share.

      During 1998, the Company received $1,788,000 from the exercise of
681,000 stock options, of which 532,000 were exercised by employees and 149,000
by non-employees.

                                       31
<PAGE>

      The Company received $2,349,000 during 1999 from the exercise of
608,000 stock options, of which 584,000 were exercised by employees and 24,000
by non-employees.

      The Company has authorized 1,000,000 shares of preferred stock, $0.01 par
value. No shares of preferred stock have been issued.

5. STOCK BASED COMPENSATION AND EMPLOYEE STOCK PURCHASE PLAN

      STOCK OPTION PLAN - Under the Company's 1995 Amended Stock Option Plan
(the "Plan"), the Company may grant stock options to key employees, consultants,
officers and directors. The exercise price of each option must not be less than
the fair market value of the Company's stock on the date of grant and an
option's maximum term is 10 years. Incentive stock options vest equally over
three years beginning on the first anniversary date of the grant, while
non-statutory options vest over various periods.

      A summary of the status of the Plan as of December 31, 1997, 1998 and
1999, and changes during the periods ended on those dates, is presented below:

<TABLE>
<CAPTION>
                                                                             PRICE PER SHARE
                                                                      ------------------------------
                                                                                           WEIGHTED-
                                                                                            AVERAGE
                                                         SHARES            RANGE             PRICE
                                                     --------------   --------------       ---------
                                                     (in thousands)
<S>                                                       <C>         <C>                   <C>
Outstanding at December 31, 1996.........                 1,986       $1.00 to  5.50        $ 2.76
  Granted................................                   294        5.50 to 26.88         10.71
  Exercised..............................                     3                 2.50          2.50
  Canceled...............................                    39        2.50 to  8.75          6.72
                                                          -----       --------------        ------
Outstanding at December 31, 1997.........                 2,238        1.00 to 26.88          3.70
  Granted................................                 1,480        6.94 to 31.81         12.64
  Exercised..............................                   532        1.00 to  8.75          2.66
  Canceled...............................                   242        2.50 to 31.81         13.15
                                                          -----       --------------        ------
Outstanding at December 31, 1998.........                 2,944        1.00 to 27.13          7.61
  Granted................................                 1,273        8.75 to 20.25         11.23
  Exercised..............................                   584        1.00 to 12.63          3.92
  Canceled...............................                   547        5.50 to 27.13         13.26
                                                          -----       --------------        ------
Outstanding at December 31, 1999.........                 3,086       $1.00 to 24.25        $ 8.80
                                                          =====       ==============        ======
</TABLE>

      The following table summarizes information about employee stock options
outstanding at December 31, 1999:

                                       32
<PAGE>

<TABLE>
<CAPTION>
                                         OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
                       ---------------------------------------------------------  -------------------------------------
                                            WEIGHTED-AVERAGE
                                               REMAINING          WEIGHTED-                              WEIGHTED-
      RANGE OF                                 CONTRACTUAL          AVERAGE                                AVERAGE
  EXERCISE PRICE           OUTSTANDING        LIFE (YEARS)     EXERCISE PRICE          EXERCISABLE      EXERCISE PRICE
----------------       -------------------  ----------------   --------------          -----------      --------------
                         (in thousands)                                               (in thousands)
<S>                           <C>                  <C>             <C>                    <C>               <C>
$ 1.00 to   5.50                982                6.2             $ 2.99                   982             $ 2.99
  7.00 to  11.00              1,167                9.2               9.81                   300               9.64
 11.13 to  24.25                937                8.9              13.63                   179              13.65
                              -----                ---             ------                 -----             ------
$ 1.00 to  24.25              3,086                8.1             $ 8.80                 1,461             $ 5.66
                              ======               ===             =======                =====             ======
</TABLE>

      The fair value of each employee stock option grant has been estimated on
the date of grant using the Black-Scholes option pricing model. The weighted
average fair value of employee stock options granted in 1997, 1998 and 1999 was
$4.69, $6.91 and $6.32, respectively. The following assumptions were used:

                                    DECEMBER 31,
                       --------------------------------------
                         1997           1998            1999
                       -------        -------         -------
Expected life          5 years        5 years         5 years
Interest rate            6.00%          6.00%           6.00%
Volatility                 60%            56%             59%
Dividends                 None           None            None

      STOCK PURCHASE PLAN - The NetSpeak Employee Stock Purchase Plan ("ESPP")
provides for the issuance of a maximum of 400,000 shares of Common Stock to all
eligible employees of the Company. To participate in the ESPP, an employee must
authorize the Company to deduct an amount not more than 15% of a participant's
compensation from his or her pay during six-month periods (each a "Purchase
Period"). The exercise price for the Purchase Period is 85% of the lesser of the
market price of the Common Stock on the first or last business day of the
Purchase Period. The Company issued 7,000 and 17,000 shares, at an average price
of $5.44 and $9.83 per share, in 1998 and 1999, respectively, under the ESPP.

      STOCK COMPENSATION PLANS - As of December 31, 1999, the Company has two
stock-based compensation plans, which are described above. The Company applies
APB 25 in accounting for its plans. Accordingly, no compensation expense has
been recognized for options granted under the Plan or for the ESPP. Had
compensation expense been determined based upon the fair value at the grant
dates for the awards under those plans consistent with the methods prescribed by
SFAS No. 123, the Company's net loss and net loss per share, on a pro forma
basis, would have been:

<TABLE>
<CAPTION>
                                                        1997          1998           1999
                                                     ---------     ----------     ----------
<S>                                                  <C>           <C>            <C>
Proforma net loss (in thousands) ................    $  (5,599)    $  (14,405)    $  (16,804)
Proforma net loss per share (basic and diluted)..    $   (0.60)    $    (1.17)    $    (1.30)
</TABLE>

6. COMMITMENTS

      The Company leases its office facility and certain equipment under
operating leases with remaining

                                       33
<PAGE>

lease terms in excess of one year. Future minimum lease payments as of December
31, 1999 are as follows (in thousands):

YEAR ENDING DECEMBER 31,
------------------------
          2000..................         $ 372
          2001..................            70
          2002..................             4
                                         -----
                                         $ 446
                                         =====

      Rent expense for the periods ended December 31, 1997, 1998 and 1999 was
approximately $168,000, $346,000 and $357,000, respectively.

      The Company has a 401(k) deferred compensation plan for all employees
meeting certain service requirements. The Company matches employee contributions
to the plan at its discretion. The Company's contributions during the years
ended December 31, 1997, 1998 and 1999 were $19,000, $38,000 and $115,000,
respectively. The administrative costs of the plan are paid by the Company.

      The Company has entered into employment agreements with five officers with
base salaries aggregating $1,110,000 annually. On January 31, 2000 and February
17, 2000, Robert Kennedy, the Company Vice-Chairman, and Stephen R. Cohen, the
Company's Chairman and Chief Executive Officer, resigned from the Company,
respectively. The Company incurred aggregate severance costs in the first
quarter of 2000 of $264,000 associated with these resignations. As of February
17, 2000, subsequent to Mr. Kennedy's and Mr. Cohen's resignations, the Company
had outstanding employment agreements with three officers with base salaries
aggregating $585,000 annually. The terms of these agreements are for two years,
with renewal provisions.

      The Company has entered into Indemnification Agreements with each of the
existing directors and officers, which provides for the maximum indemnification
permitted by law.

7. CONTINGENCIES

      LITIGATION -

      During 1998, certain shareholder litigation was filed against the Company
and its senior officers and directors in the Circuit Court of the Fifteenth
Judicial Circuit of Florida, in and for Palm Beach County. The purported class
action alleges that the Company made false and misleading statements to
shareholders in connection with Motorola's partial tender offer (see note 9) and
that certain of the Company's senior officers and directors improperly tendered
their shares. In December 1999, the parties reached an agreement in principle to
settle this litigation at a cost of $7.0 million, of which the Company has
agreed to pay $500,000 toward the settlement, which was accrued in the December
31, 1999 financial statements, with the balance to be funded by the Company's
insurance carriers and the individual defendants in the action. This settlement
is subject to various contingencies, including obtaining Court approval.
Although there can be no assurance that all of these contingencies will be
satisfied, the Company and its counsel believe that the settlement will be
resolved in accordance with the agreement in principle and will be consummated
by the end of the second quarter of 2000.

      The Company may, from time to time, be involved in certain legal actions
arising in the ordinary course of business. In the opinion of management, the
outcome of such actions known to date will not have a material adverse effect on
the Company's financial position or results of operations.

      At present, there are few laws or regulations that specifically address
access to or commerce on the Internet. The increasing popularity and use of the
Internet, however, enhances the risk that the governments of the United States
and other countries in which the Company sells or expects to sell its products
will seek to regulate computer telephony and the Internet with respect to, among
other things, user privacy, pricing and the characteristics and quality of
products and services. The Company is unable to predict the impact, if any, that
future legislation, legal decisions or regulations may have on its

                                       34
<PAGE>

business, financial condition or results of operations.

8. INCOME TAXES

      The Company's provision for income taxes consists of the following:

                                                    DECEMBER 31,
                                        ------------------------------------
                                         1997           1998            1999
                                        -----           ----            ----
                                                   (in thousands)
Current - State.....................    $   -           $  -            $ 20
Current - Foreign...................       60             16               -
Deferred - Foreign..................      149             19              14
                                        -----           ----            ----
                                        $ 209           $ 35            $ 34
                                        =====           ====            ===-

      Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their income tax bases. As of December 31, 1998 and 1999, the
Company had deferred tax assets as follows:

                                                        DECEMBER 31,
                                                  ------------------------
                                                    1998            1999
                                                  --------        --------
                                                       (in thousands)
Deferred tax assets:
Accrued liabilities........................            $ -        $    301
Unearned revenue - foreign.................             14               -
Allowance for doubtful accounts............              -             474
Fixed assets...............................            483             727
Other reserves.............................              -             279
Other......................................            527             (24)
Net operating loss carryforwards...........          9,406          15,798
Valuation allowance........................        (10,416)        (17,555)
                                                  --------        --------
     Net deferred tax asset................       $     14        $      -
                                                  ========        ========

      The valuation allowance has been established to reduce the deferred tax
asset to an amount that is more likely than not to be realized, and is based on
the uncertainty as to the utilization of the net operating loss carryforwards
due to the Company's short operating history and losses to date.

      As of December 31, 1999, the Company had approximately $41.4 million and
$30.8 million of federal and state net operating loss carryforwards,
respectively, available to offset future taxable income; such carryforwards
begin to expire in 2009. Under the Tax Reform Act of 1986, the amounts of and
benefits from net operating losses carried forward may be impaired or limited in
certain circumstances. Events which may cause limitations in the amount of net
operating losses that the Company may utilize in

                                       35
<PAGE>

any one year include, but are not limited to, a cumulative ownership change of
more than 50% over a three year period.

      The Company's income tax provisions differed from the statutory federal
rate of 34.0% as follows:

                                                   DECEMBER 31,
                                        -----------------------------------
                                         1997          1998          1999
Statutory rate applied to
   earnings before income taxes.......   34.0 %        34.0 %        34.0 %
State rate net of federal benefit.....    3.6           3.6           3.6
Foreign taxes and other...............   (4.3)         (0.3)         (0.3)
Valuation allowance...................  (37.6)        (37.6)        (37.6)
                                        -------       -------       ------
Income tax provision..................   (4.3)%        (0.3)%        (0.3)%
                                        =======       =======       ======

9. RELATED PARTY TRANSACTIONS

      On April 22, 1998, Motorola consummated a cash tender offer, acquiring
2,686,470 shares of the Company's Common Stock. The Company incurred $383,000 in
other charges as a result of the cash tender offer. Upon consummation of the
tender offer, Motorola purchased an additional 35,000 shares of common stock
from two officers at the tender offer price. As of December 31, 1999, Motorola
owned 29.5% of the total outstanding common shares of the Company.

      In November 1998 and March 1999, the Company advanced an aggregate of
$500,000 to an officer of the Company, which is evidenced by interest-bearing
promissory notes. The Company will forgive one third of the principal amount of
the loan, and accrued interest thereon, on the first, second and third
anniversary of the related promissory notes, provided that the officer continues
to be employed by the Company on such dates. During 1999, the Company forgave
$153,000 of principal and interest on the loan. In the event that the officer
leaves the Company or is terminated with cause, any unforgiven principal amount
of the loan, together with accrued interest thereon, will be payable in full.
The Company is providing for a reserve on this loan through a monthly pro-rata
charge to compensation expense.

10. CONCENTRATION OF RISK

      A limited number of customers have historically accounted for a
significant portion of the Company's net revenues. Customers that represented in
excess of 10% of the Company's total net revenues are as follows:

                                  YEAR ENDED DECEMBER 31,
                          ---------------------------------------
                          1997              1998             1999
                          ====              ====             ----
Motorola                    0%               17%              59%
Customer A                 13%               30%              0%
Customer B                  0%               15%              1%
Customer C                 47%               8%               1%

                                       36
<PAGE>

11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

                                           QUARTER ENDED
                          ----------------------------------------------------
                          MARCH 31,     JUNE 30,   SEPTEMBER 30,  DECEMBER 31,
                          ---------     --------   -------------  ------------
                                 (in thousands, except per share data)

1998
Net revenues .......      $ 2,413       $ 2,930       $   769       $ 1,607
Operating loss .....       (2,339)       (2,826)       (5,105)       (3,875)
Net loss ...........       (2,235)       (2,109)       (4,434)       (3,285)
Net loss per share..      $ (0.19)      $ (0.17)      $ (0.35)      $ (0.27)

1999
Net revenues .......      $ 1,512       $ 1,024       $ 2,016       $ 3,085
Operating loss .....       (4,076)       (4,151)       (2,933)       (2,920)
Net loss ...........       (3,553)       (3,685)       (2,515)       (2,459)
Net loss per share..      $ (0.28)      $ (0.29)      $ (0.19)      $ (0.19)


                                       37
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE

      None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information concerning the Company's directors and regarding compliance
with Section 16 of the Securities Exchange Act of 1934 required by this Item
will be set forth in the Company's definitive Proxy Statement, to be filed
within 120 days after the end of the fiscal year covered by this Form 10-K, and
is incorporated by reference to the Company's Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

      The information required by this Item will be set forth in the Company's
definitive Proxy Statement, to be filed within 120 days after the end of the
fiscal year covered by this Form 10-K, and is incorporated by reference to the
Company's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information required by this Item will be set forth in the Company's
definitive Proxy Statement, to be filed within 120 days after the end of the
fiscal year covered by this Form 10-K, and is incorporated by reference to the
Company's Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required by this Item will be set forth in the Company's
definitive Proxy Statement, to be filed within 120 days after the end of the
fiscal year covered by this Form 10-K, and is incorporated by reference to the
Company's Proxy Statement.

                                       38
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

             (a)  Documents filed as part of this Report.

                 (1)  Consolidated Financial Statements

                 Reference is made to the Index to Consolidated Financial
                 Statements included in Part II, Item 8 of this Report.

                 (2)   Financial Statement Schedules

                Independent Auditors' Report
                Schedule II - Valuation Accounts

                 All other schedules for which provision is made in applicable
                 regulations of the Commission are omitted because they are not
                 applicable or the required information is in the Consolidated
                 Financial Statements or the notes thereto.

                                       39
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of NetSpeak Corporation:

      We have audited the consolidated financial statements of NetSpeak
Corporation and subsidiary (the "Company") as of December 31, 1999 and 1998, and
for each of the three years in the period ended December 31, 1999, and have
issued our report thereon dated February 1, 2000 (February 17, 2000 as to the
employment agreements in Note 6); such report is included elsewhere in this Form
10-K. Our audits also included the consolidated financial statement schedule of
the Company, listed in Item 14. The consolidated financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.


Deloitte & Touche LLP
Certified Public Accountants

Fort Lauderdale, Florida
February 1, 2000


                                       40
<PAGE>

                              NETSPEAK CORPORATION

                                   SCHEDULE II
                               VALUATION ACCOUNTS

<TABLE>
<CAPTION>
                                                               CHARGED TO
                                            BEGINNING      SALES & MARKETING                             END OF
                                            OF PERIOD           EXPENSES           WRITE-OFFS            PERIOD
                                           ----------      -----------------       ----------          ----------
<S>                                        <C>                 <C>                 <C>                 <C>
1997
Deducted from asset accounts:
  Allowance for doubtful accounts          $       --          $       --          $       --          $       --
                                           ----------          ----------          ----------          ----------
                                           $       --          $       --          $       --          $       --
                                           ==========          ==========          ==========          ==========

1998
Deducted from asset accounts:
  Allowance for doubtful accounts          $       --          $  815,000          $  106,000          $  709,000
                                           ----------          ----------          ----------          ----------
                                           $       --          $  815,000          $  106,000          $  709,000
                                           ==========          ==========          ==========          ==========

1999
Deducted from asset accounts:
  Allowance for doubtful accounts          $  709,000          $  625,000          $  134,000          $1,200,000
                                           ----------          ----------          ----------          ----------
                                           $  709,000          $  625,000          $  134,000          $1,200,000
                                           ==========          ==========          ==========          ==========
</TABLE>

                                       41
<PAGE>

             (b) Exhibits.

EXHIBIT
   NO.                               DESCRIPTION
   ---                               -----------
   3.1         Certificate of Incorporation, as amended.(1)
   3.2         Bylaws.(1)
   4.1         Specimen Certificate of Common Stock.(1)
  10.1         1995 Stock Option Plan, as amended.(1)*
  10.2         Form of Indemnification Agreement between the Registrant and each
               of its directors and executive officers.(1)*
  10.3         Employment Agreement between the Registrant and Stephen R.
               Cohen.(1)*
  10.4         Employment Agreement between the Registrant and Robert
               Kennedy.(1)*
  10.6         Employment Agreement between the Registrant and John W.
               Staten.(1)*
  10.7         Employment Agreement between the Registrant and Harvey
               Kaufman.(1)*
  10.9         Leases relating to premises at 902 Clint Moore Road, Boca Raton,
               Florida.(1)
  10.10        Common Stock and Warrant Purchase Agreement between the
               Registrant and Motorola, Inc.(1)
  10.11        Right of First Negotiation Agreement between the Registrant and
               Motorola, Inc.(1)
  10.18        Tender Agreement dated March 18, 1998 between the Registrant and
               Motorola, Inc. (3)
  10.19        Joint Development and License Agreement dated March 18, 1998
               between the Registrant and Motorola, Inc. (2)(3)
  10.20        Employment Agreement between the Registrant and Michael R.
               Rich.(4)*
  21.1         List of Subsidiaries of the Registrant.(1)
  23.2         Consent of Deloitte & Touche LLP, independent auditors.(5)
  27.1         Financial Data Schedule.(5)

                                       42
<PAGE>

------------------
*    Management compensation plan or arrangement
(1)  Previously filed and incorporated by reference to an Exhibit of the same
     number in the Company's Registration Statement on Form S-1 (File Number
     333-22123).
(2)  A request for confidential treatment pursuant to Rule 406 under the
     Securities Act of 1933, as amended has been granted for certain portions of
     this Exhibit.
(3)  Previously filed and incorporated by reference to an Exhibit in the
     Registrant's Schedule 14D-9 Solicitation/Accommodation Statement dated
     March 25, 1998.
(4)  Previously filed and incorporated by reference to an Exhibit in the
     Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
     1998.
(5)  Filed herewith.


         (b)  Reports on Form 8-K:

              No Current Report on Form 8-K was filed by the Company in the
              fourth quarter ended December 31,1999.

         (c)  Item 601 Exhibits

              The exhibits required by Item 601 of Regulation S-K are set forth
              in (A)(3) above.

         (d)  Financial Statement Schedules

              The financial statement schedules required by Regulation S-K are
              set forth in (A)(2) above.

                                       43
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15 (d) 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.

                                      NETSPEAK CORPORATION

                                      By: /s/ MICHAEL R. RICH
                                          --------------------------------------
                                              Michael R. Rich, Chairman of the
                                              Board, Chief Executive Officer,
                                              President, Chief Operating Officer

March 30, 2000

      Pursuant to the requirements of the Securities Act of 1934, this Form 10-K
has been signed by the following persons on behalf of the registrant in the
capacities and on the date stated.

<TABLE>
<CAPTION>
           SIGNATURE                               TITLE                               DATE
           ---------                               -----                               ----
<S>                                    <C>                                     <C>
/s/ JOHN W. STATEN                     Chief Financial Officer (Principal      March 30, 2000
--------------------------------       Financial and Accounting Officer)
    John W. Staten

/s/ STEPHEN EARHART                    Director                                March 30, 2000
--------------------------------
     Stephen Earhart

/s/ SCOTT POTERACKI                    Director                                March 30, 2000
--------------------------------
    Scott Poteracki

/s/ A. JEFFRY ROBINSON                 Director                                March 30, 2000
--------------------------------
    A. Jeffry Robinson

/s/ MARTIN SHUM                        Director                                March 30, 2000
--------------------------------
    Martin Shum
</TABLE>

                                       44

<PAGE>

                                 EXHIBIT INDEX

EXHIBIT            DESCRIPTION
-------            -----------
  23.2             Independent Auditors' Consent

  27               Financial Data Schedule

                                       45