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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   -----------

                                   FORM 10-K/A

                         (AMENDMENT NO. 1 TO 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, 2003

                        COMMISSION FILE NUMBER: 000-28063

                                DELTATHREE, INC.
               (Exact name of registrant as specified in charter)

          DELAWARE                                             13-4006766
(State or other jurisdiction of                            (I.R.S. employer
incorporation or organization)                             identification no.)

75 BROAD STREET, 31ST FLOOR
   NEW YORK, NEW YORK 10004                                  10004
(Address of principal executive offices)                   (Zip code)

                                   -----------

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 500-4850

      SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

      None.

      SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:


                                                 NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS                              THE SECURITIES ARE REGISTERED
-------------------                              -----------------------------
Class A Common Stock,
par value $0.001 per share                       Nasdaq SmallCap Market


      Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|

      The aggregate market value of the Class A common stock held by
non-affiliates of the Registrant based upon the closing price of the Class A
common stock as reported by The Nasdaq Stock Market on June 30, 2003 was
$5,377,878. Solely for purposes of this calculation, shares beneficially owned
by directors and officers of the Registrant and persons owning 5% or more of the
Registrant's Class A common stock have been excluded, in that such persons may
be deemed to be affiliates of the Registrant. Such exclusion should not be
deemed a determination or admission by the Registrant that such individuals or
entities are, in fact, affiliates of the Registrant.

      The number of shares outstanding of the Registrant's capital stock as of
April 28, 2004 is as follows:

                                                NUMBER OF SHARES OUTSTANDING
TITLE OF EACH CLASS                             AT APRIL 28, 2003
-------------------                             -----------------

Class A Common Stock, $0.001 par value            29,576,157


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<PAGE>

                                EXPLANATORY NOTE

      deltathree, Inc. (the "Company") hereby amends the following items of its
Annual Report on Form 10-K for the year ended December 31, 2003 (the "Original
Filing") filed with the Securities and Exchange Commission on March 30, 2004.
Each of the below referenced Items in Part III and IV are hereby amended by
deleting the Items in their entirety and replacing them with the Items set forth
herein. Any Item in the Original Filing not expressly changed hereby shall be as
set forth in the Original Filing.


                                       2
<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

THE BOARD OF DIRECTORS

      Our Amended and Restated Certificate of Incorporation provides that a
director shall hold office until the annual meeting for the year in which his or
her term expires except in the case of elections to fill vacancies or newly
created directorships. Each director is elected for a one-year term. Each of the
nominees is now serving as director on our Board. Set forth below are the name,
age and the positions and offices held by each of our directors, his principal
occupation and business experience during at least the past five years and the
names of other publicly-held companies of which he serves as a director.

      NOAM BARDIN, 33 - Chairman of the Board. Mr. Bardin co-founded deltathree
and served as Chief Executive Officer and President from July 2000 through June
2002. Mr. Bardin has served as Chairman of the Board since April 2002. Mr.
Bardin served as Vice President of Technology and Chief Technology Officer of
deltathree since June 1997 before being named President and Chief Executive
Officer in April 2000. He served as Global Network Director from November 1996
to May 1997. Prior to founding deltathree, he served as Director of Operations
at Ambient Corporation. Mr. Bardin graduated from the Hebrew University
(Jerusalem) with a BA in Economics and an MPA from Harvard University Kennedy
School in Public Administration.

      ILAN BIRAN, 57 - Director. Mr. Biran has served as a director of
deltathree since December 2003. Mr. Biran brings a wealth of business and
management experience from the telecom and defense industries. Most recently,
from 1999 to 2003, Mr. Biran served as the President and CEO of Bezeq Ltd. - the
Israeli PTT, with annual sales of over $2 billion and approximately 16,000
employees. Mr. Biran holds the rank of Major General (res.) in the Israeli
Defense Force where, as Commander of the IDF's Central Command, he played an
active role in reaching the peace agreements with Jordan and the Palestinian
Authority. From 1996 to 1999, he served as the Director General of the Israeli
Ministry of Defense, and prior to that command, he held a wide variety of
senior-level positions in other Israeli units, since 1964. Mr. Biran holds a
B.A. in Economics and Business Administration from Bar-Ilan University, and
holds an Associate Diploma in Strategy and Political Economic Research from
Georgetown University. He is also a graduate of the U.S. Marine Corps Command
and Staff College. In addition, Mr. Biran's public activities include: serving
as the Israeli Prime Minister's Special Coordinator for POWs and MIAs; is a
member of the Board of Trustees of Haifa University; is a member of the
Shevach-Mofet High School Executive Committee and; since 1996, has served as the
Chairman of the Board of Directors of the Israeli Oil Refineries, Ltd.

      EHUD EREZ, 48 - Director. Mr. Erez has served as a director of deltathree
since February 2002. Mr. Erez has served as the Chief Executive Officer of
Atarey and President and Chief Financial Officer of El-Ad Group (Canada) since
July 2001. Prior to July 2001, Mr. Erez was Auditor, Accountant and Partner of
several accounting firms, including KPMG and Arthur Andersen. Prior to January
1985 Mr. Erez was a Revenue Inspector/Auditor for the Treasury Department in
Jerusalem. Mr. Erez was an active member of the Auditing Standards Board of the
Institute of Certified Public Accountants. He is a graduate of Hebrew University
with a BA in Economics and Accounting and holds a CPA.

      AMIR GERA, 43 - Director. Mr. Gera has served as a director of deltathree
since June 2001. Since January 2002, Mr. Gera has served as the Chief Executive
Officer of Green Venture Capital Ltd., an investment holding company which
engages primarily in acquiring holdings in venture capital funds, where he had
previously served as the Assistant Director General since January 2001. In
addition, Mr. Gera is also the Chief Executive Officer of Commutech Holding &
Investments Ltd and has served in this capacity since March 2001. From 1993
through 2000, Mr. Gera was the Assistant Director General of Emet Neveh Savion
Ltd., which owns and manages real estate assets.

      JOSHUA MAOR, 68 - Director. Mr. Maor has served as a director of
deltathree since June 2001. Mr. Maor has served as the Chairman of Commutech
Holding & Investments Ltd., an investment holding company which engages
primarily in investments in high tech companies, since January 2002, and as the
Chairman of the board of Mofet Venture Capital since 2001. Mr. Maor served as
both the Chairman and Chief Executive Officer Green Venture Capital Ltd from
1997 to January 2002. From 1996 through 1997, Mr. Maor was the Chairman of
I.B.M. Israel Ltd., which distributes and provides services for I.B.M. products,
and I.B.M. Science and Technology Ltd., a research and development company. Mr.
Maor served as a member of our Advisory Board from 1997 through 1998.


                                       3
<PAGE>


      LIOR SAMUELSON, 55 - Director. Mr. Samuelson has served as a director of
deltathree since August 2001. Since August 1999, Mr. Samuelson has served as a
Co-Founder and Principal of Mercator Capital. His experience includes advising
clients in the Technology, Communications and Consumer sectors on mergers,
acquisitions and private placements. From March 1997 to August 1999, Mr.
Samuelson was the President and CEO of PricewaterhouseCoopers Securities. Prior
to that, he was the President and CEO of The Barents Group, a merchant bank
specializing in advising and investing in companies in emerging markets. Mr.
Samuelson was also the Co-Chairman of Peloton Holdings, a Private Equity
management company. Before that, he was a managing partner with KPMG and a
senior consultant at Booz, Allen & Hamilton. Mr. Samuelson earned B.S. and M.S.
degrees in Economics from Virginia Polytechnic University.

      SHIMMY ZIMELS, 38 - President and Chief Executive Officer and Director.
Mr. Zimels has served as Chief Executive Office and President since June 2002,
and served as Vice President of Operations and Chief Operating Officer of
deltathree since June 1997, before being named President and Chief Executive
Officer in June 2002. Prior to joining deltathree, Mr. Zimels was the Controller
and Vice President of Finance at Net Media Ltd., a leading Israel-based Internet
Service Provider, from June 1995 to June 1997. From April 1991 to May 1995, Mr.
Zimels was a senior tax auditor for the Income Tax Bureau of the State of
Israel. Mr. Zimels graduated with distinction from Hebrew University with a
degree in Economics and Accounting and holds a Masters in Economics from Hebrew
University.

      Our Board has determined that the following members of the Board qualify
as independent under the definition promulgated by the Nasdaq Stock Market: Ilan
Biran, Ehud Erez, Amir Gera, Joshua Maor and Lior Samuelson.

EXECUTIVE OFFICERS

      Set forth below is a brief description of the present and past business
experience of each of the persons who serve as our executive officers or key
employees who are not also serving as directors.

      PAUL C. WHITE, 41 - Chief Financial Officer and Secretary. Mr. White has
served as our Chief Financial Officer since September 2000 and is responsible
for corporate finance and all financial aspects of our operations, including
accounting, tax, treasury, financial analysis, billing, internal audit, investor
relations, real estate and procurement functions. Mr. White brings a vast array
of experience in both the telecommunications and Internet industries having
served as President and Chief Executive Officer of TelecomRFQ, Inc., a
business-to-business start-up designed to facilitate telecommunications
procurement between business buyers and major suppliers. Mr. White cultivated
his expertise in both telecommunications and the Internet with senior level
positions at Buyersedge.com, where he served as Vice President of Operations &
Finance, and at Southern New England Telecommunications (SNET), the SBC
Communications, Inc. subsidiary, where he served as Director of IT Strategy &
Finance, Director of Corporate Development and Director of Finance & Business
Development between 1995 and 1999. Mr. White has also worked in senior level
positions at Ernst & Young, LLP and Arthur Andersen, LLP. Mr. White has a BBA
and an MBA from Hofstra University, as well as a CPA.

BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

      Our Amended and Restated Certificate of Incorporation provides that the
number of members of our Board shall be not less than three and not more than
thirteen. There are currently seven directors on the Board. At each annual
meeting of stockholders, directors will be elected to hold office for a term of
one year and until their respective successors are elected and qualified. All of
the officers identified above under "Executive Officers" serve at the discretion
of our Board.

      The Board had seven regular and no special meetings during the fiscal year
ended December 31, 2003. During the fiscal year ended December 31, 2003, each
member of the Board participated in at least 75% of all Board and applicable
committee meetings held during the period for which he was a director. One of
our directors attended our annual meeting of stockholders held in 2003. The
Board has established an executive committee, a compensation committee and an
audit committee to devote attention to specific subjects and to assist the Board
in the discharge of its responsibilities. The functions of these committees and
their current members are set forth below.


                                       4
<PAGE>


      The Executive Committee is empowered to act on any matter except those
matters specifically reserved to the full Board by applicable law. The Executive
Committee had no meetings during 2003. Amir Gera and Joshua Maor are the current
members of the Executive Committee.

      The Compensation Committee is responsible for evaluating our compensation
policies, determining our executive compensation policies and guidelines and
administering our stock option and compensation plans. The Compensation
Committee is responsible for the determination of the compensation of our Chief
Executive Officer, and shall conduct its decision making process with respect to
that issue without the Chief Executive Officer present. All members of the
Compensation Committee qualify as independent under the definition promulgated
by the Nasdaq Stock Market. The Compensation Committee had one meeting during
2003. Amir Gera and Joshua Maor are the current members of the Compensation
Committee. Please see also the report of the Compensation Committee set forth
elsewhere in this report.

      The Nominating and Governance Committee is responsible for assisting
identifying and recommending qualified candidates for director nominees to the
Board, and leading the Board in its annual review of the Board's performance.
All members of the Nominating Committee qualify as independent under the
definition promulgated by the Nasdaq Stock Market. There was no standing
Nominating and Governance Committee during 2003. On March 16, 2004 Amir Gera and
Joshua Maor were named as members of the Nominating and Governance Committee.

      The Audit Committee recommends to the Board the appointment of the firm
selected to serve as our independent auditors and our subsidiaries and monitors
the performance of such firm; reviews and approves the scope of the annual audit
and evaluates with the independent auditors our annual audit and annual
financial statements; reviews with management the status of internal accounting
controls; evaluates issues having a potential financial impact on us which may
be brought to the Audit Committee's attention by management, the independent
auditors or the Board; evaluates our public financial reporting documents;
reviews the non-audit services to be performed by the independent auditors, if
any; and considers the effect of such performance on the auditor's independence.
Ilan Biran, Ehud Erez and Lior Samuelson are the current members of the Audit
Committee. During the year ended December 31, 2003, the Board examined the
composition of the Audit Committee in light of the adoption of new rules by the
Nasdaq Stock Market and Securities and Exchange Commission in connection with
the Sarbanes-Oxley Act of 2002. Under these rules, while Messrs. Biran and
Samuelson meet the required criteria for audit committee member independence,
Mr. Erez does not meet the required criteria due to his position with Atarey, an
affiliate of the Company. The SEC has stated that listed issuers will be
required to comply with the new listing rules by the earlier of the date of
their first annual meeting of shareholders after January 15, 2004 or October 31,
2004, and the Company intends to replace Mr. Erez on the Audit Committee with a
new member who meets the criteria for audit committee independence prior to such
date. The Board has determined that each of Mr. Biran, Mr. Erez and Mr.
Samuelson are "audit committee financial experts," as the Securities and
Exchange Commission has defined that term in Item 401 of Regulation S-K. The
Audit Committee had five meetings during 2003.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than 10% of a
registered class of our equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
beneficial ownership of Common Stock and other equity securities of us.
Directors, officers and greater than 10% stockholders are required by SEC
regulations to furnish us with all Section 16(a) forms they file.

      To our knowledge, based solely upon our review of the copies of such
reports furnished to us, we believe that all of our directors, officers and
greater than 10% stockholders have complied with the applicable Section 16(a)
reporting requirements except that: an initial report of ownership was filed
late by Ilan Biran; three reports of change in beneficial ownership, covering an
aggregate of sixteen transactions, were filed late by Noam Bardin; two reports
of change in beneficial ownership, covering an aggregate of two transactions,
were filed late by Shimmy Zimels; two reports of change in beneficial ownership,
covering an aggregate of two transactions, were filed late by Paul White; and
one report of change in beneficial ownership, covering one transaction, was
filed late by Lior Samuelson.

CODE OF CONDUCT AND ETHICS

      On March 25, 2004, we adopted a Corporate Code of Conduct and Ethics
applicable to all employees and directors of deltathree, including our principal
executive officer, principal financial and accounting officer and controller. A
copy of the Code of Conduct and Ethics is attached as an exhibit to this Annual
Report. We intend to post on our website any amendments to, or waivers from, our
Code of Conduct and Ethics that apply to our principal executive officer,
principal financial and accounting officer and controller.


                                       5
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

      The following table sets forth certain summary information concerning the
compensation paid or awarded for services rendered during each of our last three
fiscal years to our chief executive officer and each of our other most highly
compensated executive officers in 2001, 2002 and 2003 whose total salary and
bonus exceeded $100,000. These two executive officers are referred to in this
report as "named executive officers".

<TABLE>
<CAPTION>
                                                            ANNUAL COMPENSATION      LONG-TERM COMPENSATION
                                                          -----------------------   -------------------------
                                                                                    SECURITIES
                                                                                    UNDERLYING     ALL OTHER
NAME AND PRINCIPAL POSITION                 YEAR          SALARY ($)     BONUS ($)  OPTIONS (#)  COMPENSATION
---------------------------                 ----          ----------     ---------  -----------  ------------
<S>                                         <C>           <C>            <C>        <C>          <C>
Shimmy Zimels (1)                           2003           180,000            --       85,000         --
    President and Chief Executive Officer   2002           182,335            --      100,000         --
   and former Chief Operating Officer.....  2001           214,395            --       80,000         --

                                            2003           180,000            --       65,000         --
Paul C. White                               2002           182,335            --      100,000         --
  Chief Financial Officer.................  2001           201,391            --           --         --
</TABLE>

OPTION GRANTS DURING 2003

      The following table sets forth information regarding each stock option
granted during fiscal year 2003 to each of the named executive officers.

<TABLE>
<CAPTION>
                                                              INDIVIDUAL GRANTS
                                                              -----------------
                                                                                           POTENTIAL REALIZABLE VALUE
                                    SHARES OF        % OF TOTAL                                         AT
                                  COMMON STOCK         OPTIONS     EXERCISE                 ASSUMED RATES OF STOCK
                                   UNDERLYING        GRANTED TO     PRICE                            PRICE
                                 OPTIONS GRANTED    EMPLOYEES IN     PER     EXPIRATION    APPRECIATION FOR OPTION
                                     (#)(1)          FISCAL YEAR    SHARE       DATE              TERM (2)
NAME                                                                ($/SH)                    5%           10%
-------------------------------------------------------------------------------------------------------------------
<S>                            <C>                  <C>            <C>       <C>          <C>            <C>
Shimmy Zimels .............           85,000             24.7%       1.75     11/04/10    $60,556         $141,122
Paul C. White..............           65,000             18.9%       1.75     11/04/10    $46,308         $107,917
</TABLE>

(1) The options were granted pursuant to the Company's 1999 Stock Incentive Plan
(the "Plan"). The options granted to the named executive officers are
non-qualified stock options and vest annually in three equal installments
commencing one year from the date of grant.

(2) The amounts shown in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
These gains are based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise price, but do
not include deductions for taxes or other expenses associated with the exercise.
Actual gains, if any, on stock option exercises will depend on the future
performance of the Common Stock, the optionee's continued employment through the
option period and the date on which the options are exercised.

OPTION EXERCISES IN FISCAL 2003 AND YEAR-END OPTION VALUES

      The following table sets forth information for the named executive
officers with respect to option exercises during 2003 and the value as of
December 31, 2003 of unexercised in-the-money options held by each of the named
executive officers.

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                                                 NUMBER OF
                                                                                 SECURITIES                VALUE OF
                                                                                 UNDERLYING              UNEXERCISED
                                                                                UNEXERCISED              IN-THE-MONEY
                                                                                 OPTIONS AT               OPTIONS AT
                                        SHARES                                  YEAR END (#)             YEAR-END ($)
                                       ACQUIRED               VALUE             EXERCISABLE              EXERCISABLE
NAME                                ON EXERCISE (#)        REALIZED ($)        /UNEXERCISABLE           /UNEXERCISABLE
--------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                    <C>                <C>                     <C>
Shimmy Zimels..............               --                   --             417,271/151,667          407,783/226,117
Paul C. White..............               --                   --             193,333/131,667          310,553/202,717
</TABLE>


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      Executive compensation decisions in 2003 were made by the Compensation
Committee. During 2003, no interlocking relationship existed between our Board
and the board of directors or compensation committee of any other company.

DIRECTOR COMPENSATION

      At our Annual Meeting on December 8, 2003, each of our outside directors
(Noam Bardin, Ilan Biran, and Lior Samuelson) became eligible to receive $10,000
for their services as directors, through the next Annual meeting date. We
anticipate paying $10,000 to each outside director in 2004.

      Directors are reimbursed for the expenses they incur in attending meetings
of the Board and Board committees. Under our 1999 Directors' Plan, each "new"
director (i.e., a director that was not on the board in the previous year) who
is not our employee receives options to purchase 24,848 shares of Common Stock
on the date such director is initially elected to the Board. In addition, under
our 1999 Directors' Plan, each "existing" non-employee director (i.e., a
director that was on the board in the previous year) will be eligible to receive
on an annual basis options to purchase 10,000 shares of Common Stock on the date
such director is re-elected to the Board. In all cases, the exercise price is
equal to the fair market value on the date of grant at the time of our Annual
Meeting.

1999 DIRECTORS' PLAN

      The purposes of the 1999 Directors' Plan are to enable us to attract,
maintain and motivate qualified directors and to enhance a long-term mutuality
of interest between our directors and stockholders of our Common Stock by
granting our directors options to purchase our shares.

      Under the Directors' Plan, on the first business day following each annual
meeting of our stockholders during the term of the Directors' Plan, each
existing director who is not our employee will be granted options to acquire
10,000 shares of our Common Stock with an exercise price per share equal to the
fair market value of a share of our Common Stock on the date of grant. These
options will have a seven-year term and will become exercisable on the first
anniversary of the date of grant. In addition, each director who was not our
employee on the date of the completion of our initial public offering was
granted options to acquire 24,848 shares of our Common Stock with an exercise
price per share equal to the initial public offering price. Each individual who
becomes a new director will be granted options to acquire 24,848 shares of our
Common Stock with an exercise price per share equal to the fair market value on
the date of grant. These options will have a seven-year term and will be
immediately exercisable. The maximum number of shares that may be issued under
the Directors' Plan is 600,000 shares of Common Stock. The plan will terminate
December 31, 2009, unless sooner terminated by our stockholders.

EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

      We currently have employment agreements in place with Messrs. Zimels and
White, each with the following principal terms:

o     The agreements, dated as of April 26, 2004, and are effective until August
      31, 2006, and March 31, 2007, for Messrs. Zimels and White, respectively,
      and shall thereafter be automatically extended for the same duration on
      the expiration date and on each expiration date thereafter unless either
      party provides the other party with written notice of non-renewal at least
      90 days prior to expiration of a term, provided that the executive
      provides notice of renewal to the Compensation Committee six (6) months
      prior to expiration of the term.


                                       7
<PAGE>


o     Pursuant to the agreements, Mr. Zimels and Mr. White are entitled to
      receive a base salary of $239,000 and $226,000, respectively. Such base
      salary shall be increased on each January 1, commencing January 1, 2005,
      by an amount equal to his base salary then in effect, multiplied by the
      applicable cost of living index during the prior year. The employee's base
      salary, as adjusted for cost of living increases, may be further increased
      at the option and in the discretion of the Board.

o     The employee's options are immediately exercisable in full upon a change
      of control. The employee's options, following any termination of the
      employee's employment, other than for cause, remain exercisable for the
      lesser of two years and the remaining term of his options.

o     If employee's employment is terminated by us without cause or by the
      employee for good reason (which includes, without limitation, a reduction
      in salary and/or bonus opportunity, a change of control and a material
      reduction in duties and responsibilities), the employee is entitled to
      receive previously earned, but unpaid salary, vested benefits and a
      payment equal to his base salary as in effect immediately prior to the
      termination date.

o     If employee dies or is unable to perform his duties, he or his
      representative, estate or beneficiary will be paid, in addition to any
      previously earned but unpaid salary and vested benefits, 12 months' total
      base salary reduced, in the case of disability, by any disability benefits
      he receives.

      On March 31, 2002, Messrs. White and Zimels each took a voluntary pay
reduction for an unspecified time, from their then current salaries of $213,210,
and $213,210, respectively, to $180,000 each. Messrs. Zimels' and White's have
kept their voluntary pay reduction in effect at $180,000 each, whereas their
current contractual salaries had increased to $232,650 and $220,242,
respectively, for 2003, due to a cost-of-living increase clause included in
their respective contracts.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

      The Compensation Committee is responsible for recommending to the Board of
Directors the overall executive compensation strategy of the Company and for the
ongoing monitoring of the compensation strategy's implementation. In addition to
recommending and reviewing the compensation of the executive officers, it is the
responsibility of the Compensation Committee to recommend new incentive
compensation plans and to implement changes and improvements to existing
compensation plans, including the 1999 Stock Incentive Plan, the 1999
Performance Incentive Plan, the 1999 Employee Stock Purchase Plan and the 1999
Directors' Plan. The Compensation Committee makes its compensation
determinations based upon its own analysis of information it compiles and the
business experience of its members.

Overall Policy

      The Compensation Committee believes that the stability of the Company's
management team, as well as the Company's ability to continue to incentivize
management and to attract and retain highly qualified executives for its
expanding operations, will be a contributing factor to the Company's continued
growth and success. In order to promote stability, growth and performance, and
to attract new executives, the Company's strategy is to compensate its
executives with an overall package that the Company believes is competitive with
those offered by similarly situated companies and which consists of (i) a stable
base salary set at a sufficiently high level to retain and motivate these
officers but generally targeted to be in the lower half of its peer group
comparables, (ii) an annual bonus linked to the Company's overall performance
each year and to the individual executive's performance each year and (iii)
equity-related compensation which aligns the financial interests of the
Company's executive officers with those of the Company's stockholders by
promoting stock ownership and stock performance through the grant of stock
options and stock appreciation rights, restricted stock and other equity and
equity-based interests under the Company's various plans.

      Executive officers are also entitled to customary benefits generally
available to all employees of the Company, including group medical and life
insurance. Base salary, bonuses and benefits are paid by the Company and its
subsidiaries.


                                       8
<PAGE>


Federal Income Tax Deductibility of Executive Compensation

      Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the amount of compensation a publicly held corporation may
deduct as a business expense for Federal income tax purposes. The limit, which
applies to a company's chief executive officer and the four other most highly
compensated executive officers, is $1 million (the "Deductibility Limit"),
subject to certain exceptions. The exceptions include the general exclusion of
performance-based compensation from the calculation of an executive officer's
compensation for purposes of determining whether his or her compensation exceeds
the Deductibility Limit. The Compensation Committee has determined that
compensation payable to the executive officers should generally meet the
conditions required for full deductibility under section 162(m) of the Code.
While the Company does not expect to pay its executive officers compensation in
excess of the Deductibility Limit, the Compensation Committee also recognizes
that in certain instances it may be in the best interest of the Company to
provide compensation that is not fully deductible.

Base Salary

      The base salaries for the named executive officers are based upon
employment agreements between the Company and such officers.

Annual Incentive Bonuses

      The Board of Directors approved the 1999 Performance Incentive Plan
established by RSL COM. The Company established the Performance Incentive Plan
to enable the Company and its subsidiaries to attract, retain, motivate and
reward the best qualified executive officers and key employees by providing them
with the opportunity to earn competitive compensation directly linked to the
Company's performance. The Performance Incentive Plan is effective through and
including the year 2005, unless extended or earlier terminated by the Board of
Directors. As part of the Performance Incentive Plan, the Compensation Committee
may determine that any bonus payable under the Performance Incentive Plan be
paid in cash, in shares of Common Stock or in any combination thereof, provided
that at least 50% of such bonus is required to be paid in cash. In addition, the
Performance Incentive Plan permits a participant to elect to defer payment of
his or her bonus on terms and conditions established by the Compensation
Committee. No more than 400,000 shares of Common Stock may be issued under the
Performance Incentive Plan.

      Under the 1999 Performance Incentive Plan, bonuses may be payable if the
Company meets any one or more of the following performance criteria, which are
set annually by the Compensation Committee: (i) revenues; (ii) operating income;
(iii) gross profit margin; (iv) net income; (v) earnings per share; (vi) maximum
capital or marketing expenditures; or (vii) targeted levels of customers.

      Under the 1999 Performance Incentive Plan, bonus amounts are determined as
follows: if 100% of such targets are achieved, the bonus potentially payable to
participants will generally equal 35% of their base salary for such year, if 80%
of such targets are achieved, the bonus potentially payable to participants will
generally equal 25% of their base salary for such year, and if less than 80% of
such targets are achieved, the participants will generally not be entitled to
receive any bonus for such year. To the extent the Company's results exceed 80%
of the targets but is less that 100% of the targets, the amount of the bonus
payable to participants will be adjusted proportionately based on where such
results fall within the ranges set forth above. Any such bonus will consist of
two components. Fifty percent of the amount determined pursuant to the formula
described above will be payable if the targets are achieved. Up to an additional
50% of such amount will be payable in the discretion of the Compensation
Committee. In addition, the 1999 Performance Incentive Plan permits the
Compensation Committee to grant discretionary bonuses to participants,
notwithstanding that a bonus would not otherwise be payable under the 1999
Performance Incentive Plan, to recognize extraordinary individual performance.

      With respect to 2003, there were no bonuses awarded to any executive
officer, under the 1999 Performance Incentive Plan. Pursuant to the terms of the
1999 Performance Incentive Plan, any awards would have been paid in the current
year, promptly following the completion of the audit of the Company's 2003
financial statements.

Long-Term Incentive Compensation

      The Company reinforces the importance of producing satisfactory returns to
stockholders over the long term through the operation of the 1999 Stock
Incentive Plan and the 1999 Directors' Plan. For a discussion relating to the
1999 Directors' Plan, refer to the section entitled "1999 Directors' Plan" in
this annual report. Grants of stock, stock options, stock unit awards and stock
appreciation rights under such plans provide executives with the opportunity to
acquire an equity interest in the Company and align the executive's interest
with that of the stockholders to create stockholder value as reflected in growth
in the market price of the Common Stock.


                                       9
<PAGE>


1999 Stock Incentive Plan

      The Board of Directors adopted the 1999 Stock Incentive Plan in
conjunction with the Company's initial public offering. The purposes of the 1999
Stock Incentive Plan are to foster and promote the long-term financial success
of the Company and materially increase stockholder value by (i) motivating
superior performance by means of performance-related incentives, (ii)
encouraging and providing for the acquisition of an ownership interest in the
Company by executive officers and other key employees and (iii) enabling the
Company to attract and retain the services of an outstanding management team
upon whose judgment, interest and special effort the successful conduct of its
operations is largely dependent.

      Under the 1999 Stock Incentive Plan, the Compensation Committee is
authorized to grant options for up to 4,000,000 shares of Common Stock. This
represented, upon completion of the initial public offering, approximately 15%
of the outstanding shares of the Company, on a fully diluted basis. Options
granted under the 1999 Stock Incentive Plan are to be granted to certain
officers of the Company and to other employees and consultants of the Company.
Directors who are non-employees of the Company are prohibited from participating
in the 1999 Stock Incentive Plan.

      The 1999 Stock Incentive Plan is administered by the Compensation
Committee and provides for the grant of (i) incentive and non-incentive stock
options to purchase Common Stock; (ii) stock appreciation rights, which may be
granted in tandem with or independently of stock options; (iii) restricted stock
and restricted units; (iv) incentive stock and incentive units; (v) deferred
stock units; and (vi) stock in lieu of cash. The maximum number of shares for
which options or stock appreciation rights may be granted to any one participant
in a calendar year is 600,000. As of December 31, 2003, the Company has granted
options to acquire an aggregate of 2,822,311 shares of Common Stock.

Chief Executive Officer's Fiscal 2003 Compensation

      Mr. Shimmy Zimels was our chief executive officer for all of 2003. Under
the terms of his employment agreement, Mr. Zimels was entitled to receive an
aggregate annual base salary of $232,650. However, during 2003, Mr. Zimels
received an aggregate annual base salary of $180,000, due to his voluntary pay
reduction, and his participation in the 1999 Performance Incentive Plan resulted
in no bonus compensation for 2003.


                                  Submitted by:

                                  The Compensation Committee
                                  Amir Gera
                                  Joshua Maor


                                       10
<PAGE>

                             STOCK PERFORMANCE CHART

      The following chart compares the cumulative total stockholder return on
our Common Stock from the date of our initial public offering (November 22,
1999) through December 31, 2003 with the cumulative total return on The Nasdaq
Stock Market (U.S.) Index and the Nasdaq Telecommunications Index. For purposes
of the chart, it is assumed that the value of the investment in our Common Stock
and each index was $100 on November 22, 1999. Shareholder returns over the
indicated period should not be considered indicative of future shareholder
returns.

<TABLE>
<CAPTION>
                                                                       CUMULATIVE TOTAL RETURN
                                   ------------------------------------------------------------------------------------------------
                                     11/23/99     12/99       3/00       6/00      9/00     12/00       3/01      6/01        9/01
                                   ----------- --------- ---------- ---------- --------- ---------  --------- --------- -----------
<S>                                 <C>        <C>        <C>         <C>        <C>        <C>       <C>       <C>         <C>
deltathree, Inc.                      $100.00   $171.67    $139.59     $97.09     24.17      7.92       8.33      4.93        5.33
Nasdaq Stock Market (U.S.)             100.00    121.58     136.57     118.74    109.49     73.31      54.71     64.52       44.77
Nasdaq Telecommunications Market       100.00    113.28     120.35      94.98     75.76     48.24      42.51     40.28       29.34


                                   ------------------------------------------------------------------------------------------------
                                        12/01      3/02      6/02        9/02     12/02      3/03       6/03      9/03       12/03
                                   ----------- --------- ---------  ---------- --------- ---------  --------- --------- -----------
deltathree, Inc.                         6.00      7.13      4.14        3.20      3.17      3.67       4.33     11.00       19.47
Nasdaq Stock Market (U.S.)              58.19     55.14     43.95       35.26     40.23     40.47      48.80     53.73       60.15
Nasdaq Telecommunications               32.31     23.03     13.89       12.74     14.88     17.02      21.02     21.31       24.74
Market
</TABLE>


                                       11
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

      The following table sets forth information with respect to the beneficial
ownership of shares of our Common Stock as of April 28, 2004 by:

      o     each person who we know owns beneficially more than 5% of our Common
            Stock;

      o     each of our directors individually;

      o     each of our named executive officers individually; and

      o     all of our executive officers and directors as a group.

      Unless otherwise indicated, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of Common
Stock. Each person listed below disclaims beneficial ownership of their shares,
except to the extent of their pecuniary interests therein. Shares of Common
Stock that an individual or group has the right to acquire within 60 days of
April 28, 2004 pursuant to the exercise of options are deemed to be outstanding
for the purpose of computing the percentage ownership of such person or group,
but are not deemed outstanding for the purpose of calculating the percentage
owned by any other person listed.

<TABLE>
<CAPTION>
                                                                         NUMBER                 PERCENTAGE(1)
                                                                         ------                 -------------
                                                                    SHARES OF DELTATHREE CLASS A COMMON STOCK
                                                                                BENEFICIALLY OWNED
                                                                                ------------------
<S>                                                                <C>                          <C>
PRINCIPAL STOCKHOLDER:
Atarey Hasharon Chevra Lepituach
   Vehashkaot Benadlan (1991)
   Ltd......................................................           14,783,752                   50.0%
   7 Giborey Israel St., P.O. Box 8468.
   South Netanya Industrial Zone 42504, Israel.

EXECUTIVE OFFICERS AND DIRECTORS:
Noam Bardin(2)(3)...........................................            776,304                     2.6%
Shimmy Zimels(2)(4).........................................            633,407                     2.1%
Paul C. White(2)(5).........................................            325,000                     1.1%
Ilan Biran (2)(5)...........................................             24,848                       *
Ehud Erez (2)(5)(6).........................................             10,000                       *
Amir Gera (2)(5)............................................             24,848                       *
Joshua Maor (2)(7)..........................................             40,999                       *
Lior Samuelson (2)(5).......................................             34,848                       *
All Directors and Executive Officers as a group (8 persons)(8)         1,870,254                    6.3%
</TABLE>

-------------
*     Less than 1%.

(1)   Percentage of beneficial ownership is based on 29,576,157 shares of Common
      Stock outstanding as of April 28, 2004.

(2)   The address for the director or executive officer listed is c/o the
      Company.

(3)   Includes (a) 187,366 shares of Common Stock and (b) options to purchase
      588,938 shares of Common Stock.

(4)   Includes (a) 64,469 shares of Common Stock and (b) options to purchase
      568,938 shares of Common Stock.

(5)   Represents options to purchase shares of Common Stock.


                                       12
<PAGE>

(6)   Excludes the 14,783,752 shares of Common Stock owned by Atarey. Mr. Erez
      is currently the Chief Executive Officer of Atarey.

(7)   Includes (a) 16,151 shares of Common Stock and (b) options to purchase
      24,848 shares of Common Stock.

(8)   Includes (a) 267,986 shares of Common Stock and (b) options to purchase
      1,602,116 shares of Common Stock.

EQUITY COMPENSATION PLAN INFORMATION

      The following table provides certain aggregate information with respect to
all of our equity compensation plans in effect as of December 31, 2003:

<TABLE>
<CAPTION>
----------------------------- --------------------------------- --------------------------------- ---------------------------------
Plan Category                 Number of Securities to be        Weighted Average Exercise Price   Number of Securities Remaining
                              Issued Upon Exercise of           of Outstanding Options,           Available for Future Issuance
                              Outstanding Options, Warrants     Warrants and Rights               Under Equity Compensation Plans
                              and Rights                                                          (excluding securities reflected
                                                                                                  in first column)
----------------------------- --------------------------------- --------------------------------- ---------------------------------
<S>                           <C>                               <C>                               <C>
Equity Compensation Plans                2,753,130                           $2.55                           1,515,846
Approved by Security
Holders (1)
----------------------------- --------------------------------- --------------------------------- ---------------------------------
Equity Compensation Plans
not Approved by Security
Holders                                     N/A                               N/A                               N/A
----------------------------- --------------------------------- --------------------------------- ---------------------------------
Total                                    2,753,130                           $2.55                           1,515,846
----------------------------- --------------------------------- --------------------------------- ---------------------------------
</TABLE>

(1)   These plans consist of our 1999 Stock Incentive Plan, 1999 Directors'
      Plan, and 1999 Employee Stock Purchase Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      We are not, and have not been during the last two fiscal years, a party to
any related-party agreements. All transactions between us and our officers,
directors, principal stockholders and affiliates must be reviewed and approved
in advance by the Audit Committee.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The following table presents fees for professional audit services rendered
by Brightman Almagor & Co. for the audit of the Company's annual financial
statements for the years ended December 31, 2003, and December 31, 2002, and
fees billed for other services rendered by Brightman Almagor & Co. during those
periods.

                                                 2003           2002
                                                 ----           ----
AUDIT FEES                                     $ 54,000       $ 54,000
AUDIT RELATED FEES                                4,000          4,000
TAX FEES                                              -              -
ALL OTHER FEES                                        -              -
-------------------------------------------------------------------------
TOTAL                                          $ 58,000       $ 58,000
-------------------------------------------------------------------------

      In the above table, in accordance with the SEC's definitions and rules,
"audit fees" are fees we paid Brightman Almagor & Co. for professional services
for the audit of our annual financial statements and review of financial
statements included in our quarterly reports filed with the SEC, as well as work
generally only the independent auditor can reasonably be expected to provide,
such as statutory audits and consultation regarding financial accounting and/or
reporting standards; "audit-related fees" are fees billed by Brightman Almagor &
Co. for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements, including due
diligence related to a potential merger; "tax fees" are fees for tax compliance,
tax advice and tax planning; and "all other fees" are fees billed by Brightman
Almagor & Co for any services not included in the first three categories.


                                       13
<PAGE>

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS

      Consistent with SEC policies regarding auditor independence, the Audit
Committee has responsibility for appointing, setting compensation and overseeing
the work of the independent auditor. In recognition of this responsibility, the
Audit Committee has established a policy to pre-approve all audit and
permissible non-audit services provided by the independent auditor.

      Prior to engagement of the independent auditor for the next year's audit,
management will submit an aggregate of services expected to be rendered during
that year for each of four categories of services to the Audit Committee for
approval.

      1. AUDIT services include audit work performed in the preparation of
financial statements, as well as work that generally only the independent
auditor can reasonably be expected to provide, including comfort letters,
statutory audits, and attest services and consultation regarding financial
accounting and/or reporting standards.

      2. AUDIT-RELATED services are for assurance and related services that are
traditionally performed by the independent auditor, including due diligence
related to mergers and acquisitions, employee benefit plan audits, and special
procedures required to meet certain regulatory requirements.

      3. TAX services include all services performed by the independent
auditor's tax personnel except those services specifically related to the audit
of the financial statements, and includes fees in the areas of tax compliance,
tax planning, and tax advice.

      4. OTHER FEES are those associated with services not captured in the other
categories. The Company generally does not request such services from the
independent auditor.

      Prior to engagement, the Audit Committee pre-approves these services by
category of service. The fees are budgeted and the Audit Committee requires the
independent auditor and management to report actual fees versus the budget
periodically throughout the year by category of service. During the year,
circumstances may arise when it may become necessary to engage the independent
auditor for additional services not contemplated in the original pre-approval.
In those instances, the Audit Committee requires specific pre-approval before
engaging the independent auditor.

      The Audit Committee may delegate pre-approval authority to one or more of
its members. The member to whom such authority is delegated must report, for
informational purposes only, any pre-approval decisions to the Audit Committee
at its next scheduled meeting.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a)(1) Financial Statements.

      The Consolidated Financial Statements filed as part of this Annual Report
on Form 10-K are identified in the Index to Consolidated Financial Statements on
page F-1 hereto.

      (a)(2) Financial Statement Schedules.

      Financial Statement Schedules have been omitted because the information
required to be set forth therein is not applicable or is shown on the financial
statements or notes thereto.

                                       14
<PAGE>

      (a)(3) Exhibits.

      The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the Securities and Exchange Commission.


EXHIBIT
NUMBER            DESCRIPTION
------            -----------

3.1.1*         Form of Restated Certificate of Incorporation of deltathree, Inc.

3.1.2***       Form of Amendment to Restated Certificate of Incorporation of
               deltathree, Inc.

3.2*           Form of Amended and Restated By-laws of deltathree, Inc.

4.1*           Specimen Certificate of Common Stock.

4.2*           Specimen Certificate of Class B Common Stock.

10.1*          Form of deltathree, Inc. 1999 Stock Incentive Plan.

10.2*          Form of deltathree, Inc. 1999 Employee Stock Purchase Plan.

10.3*          Form of deltathree, Inc. 1999 Performance Incentive Plan.

10.4*          Form of deltathree, Inc. 1999 Directors' Plan.

10.5*          Employment Agreement, effective as of April 1, 1999, between Noam
               Bardin and deltathree, Inc.

10.6**         Amendment No. 1 to Employment Agreement, effective as of June 1,
               2000, between Noam Bardin and deltathree, Inc.

10.7           Employment Agreement, effective as of April 26, 2004, between
               Shimmy Zimels and deltathree, Inc.

10.8           Employment Agreement, effective as of April 26, 2004, between
               Paul White and deltathree, Inc.

14.1##         deltathree, Inc. Corporate Code of Conduct and Ethics

23.1##         Consent of Brightman Almagor & Co.

31.1           Certification of the Chief Executive Officer, as adopted pursuant
               to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2           Certification of the Chief Financial Officer, as adopted pursuant
               to Section 302 of the Sarbanes-Oxley Act of 2002

32##           Certifications of the Chief Executive Officer and Chief Financial
               Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
               to Section 906 of the Sarbanes-Oxley Act of 2002

----------

      *     Incorporated by reference to the Company's registration statement on
            Form S-1 (Registration No. 333-86503).

      **    Incorporated by reference to the Company's quarterly report on Form
            10-Q filed on November 14, 2000.

      ***   Incorporated by reference to the Company's annual report on Form
            10-K/A filed on April 30, 2001.

      #     Incorporated by reference to the Company's quarterly report on Form
            10-Q filed on November 14, 2002.

      ##    Incorporated by reference to the Company's annual report on Form
            10-K filed on March 30, 2004.

      (b) Reports on Form 8-K.

      We furnished a report on Form 8-K dated November 6, 2003 reporting under
Item 12 our press release regarding our earnings for the quarter ended September
30, 2003.


                                       15
<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 Amendment No. 1 to its
Annual Report on Form 10-K/A to be signed on its behalf by the undersigned,
thereunto duly authorized, in New York, New York on April 28, 2004.


                                     DELTATHREE, INC.

                                     BY: /S/ PAUL C. WHITE
                                         --------------------------------------
                                         PAUL C. WHITE, CHIEF FINANCIAL OFFICER

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed by the following persons in the capacities and on
the dates indicated:


<TABLE>
<CAPTION>
                SIGNATURE                                              TITLE                                   DATE
<S>                                                     <C>                                               <C>

*                                                       Chief Executive Officer, President                April 28, 2004
---------------------------------------------           and Director
Shimmy Zimels                                           (Principal Executive Officer)


/s/ Paul C. White                                       Chief Financial Officer (Principal                April 28, 2004
---------------------------------------------           Accounting and Financial Officer)
Paul C. White


/s/ Noam Bardin                                         Chairman of the Board of Directors                April 28, 2004
---------------------------------------------
Noam Bardin


*                                                                      Director                           April 28, 2004
---------------------------------------------
Ilan Biran


*                                                                      Director                           April 28, 2004
---------------------------------------------
Ehud Erez


*                                                                      Director                           April 28, 2004
---------------------------------------------
Amir Gera


*                                                                      Director                           April 28, 2004
---------------------------------------------
Joshua Maor


*                                                                      Director                           April 28, 2004
---------------------------------------------
Lior Samuelson


* By: /s/ Paul C. White
      ---------------------------------------
      Paul C. White, Chief Financial Officer
      (Attorney-in-fact)
</TABLE>


                                       16