<PAGE>

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

X    Annual Report Pursuant to Section 13 or 15(d) of the Securities and
     Exchange Act of 1934 (No Fee Required) for the year ended June 30, 1999

     Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 (No Fee Required) for the transition period from
              to

                          Commission File No.000-24969

          MPHASE TECHNOLOGIES, INC. (FORMERLY TECMA LABORATORIES, INC.)
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

              NEW JERSEY                                   22-2287503
  -----------------------------------        -----------------------------------
    (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization                 Identification Number)

   587 CONNECTICUT AVE., NORWALK, CT                      06854-0566
  -----------------------------------        -----------------------------------
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:   (203) 838 - 2741

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                           COMMON STOCK, NO PAR VALUE
                           --------------------------
                                (Title of Class)

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 shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X)  No

Indicate by check mark if the 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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendments to
the Form 10-KSB. (X)

Transitional Small Business Disclosure Format:  Yes (X)  No

Registrant had 25,771,825 shares of Common Stock, no par value, outstanding on
November 30, 1999.


<PAGE>

Item 1. BUSINESS

GENERAL DESCRIPTION OF BUSINESS

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

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

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

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

In addition to our Traverser product, we have also designed a proprietary line
of component products which consist of low pass filters for G.LITE and full rate
DSL applications, POTS Splitter modules configured for a full range of central
office applications and POTS Splitter applications for the end user customer
premise (or "CPE"). These component products will be marketed to other DSL
vendors providing integrated DSL equipment to their customers. We do not believe
our inherent competitive advantage will be impaired by the sale of these
component products to potential competitors.


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

                                      -2-
<PAGE>

additional administrative personnel to support our expansion as we begin
commercial production of our products.

mPhase TV.net

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

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

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

Our Traverser product line is designed to provide a cost-effective solution for
high-speed digital data transmission over the installed twisted pair, copper
wire infrastructure, and as an alternative to cable access television as well as
direct broadcast satellite services. By using the installed public telephone
infrastructure, the Traverser product line supports high-speed communication
solutions without requiring costly upgrades from copper to coaxial cable or
fiber optics.

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

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

We rely significantly on Georgia Tech for research involved with the development
of our products. We have entered into a Basic Ordering Research Agreement with
Georgia Tech, which includes a series of delivery orders providing guidelines
for the research and development of portions or components of the Traverser.
Although Georgia Tech has been able to develop working prototypes of our DSL
product, these products are not yet in a commercially salable form. Our business
will be materially adversely affected if Georgia Tech does not perform its
responsibilities on an acceptable basis or terminates our relationship, and we


                                      -3-
<PAGE>

are unable to replace their development services on a prompt basis.

We have recently secured a third party, Flextronics, Inc. to manufacture our
Beta version of Traverser DVDDS and the initial production runs of our DSL
products.

Even though we have secured a third party to manufacture our products, the
potential for dependence on a third party manufacturer is inherently risky. If
there is a disruption in supply from Flextronics or another vendor that supplies
the Company with products and or components, we may be unable to complete the
products we desire to sell. Our sales would suffer as a result of a disruption
in the operations of any of our manufacturers.

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

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

EMPLOYEES AND CONSULTANTS

We presently have eight individuals who are employees and consultants, two of
whom are concurrently employed by Microphase Corporation.

Item 2.  PROPERTIES

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




                                      -4-
<PAGE>




Item 3.  LEGAL PROCEEDINGS

As of June 30, 1999 we were involved in a litigation with Global Music and Media
Inc. which has asserted it had the exclusive right to market our technology.
This litigation was resolved in August 1999 in a settlement agreement wherein
Global Music surrendered its claim to the Company's technology in exchange for
the Company to settle claims of Hal Willis against Global for a cash payment of
$100,000, the issuance of 75,000 shares of the Company's common stock and option
to purchase another 75,000 shares at $5.6275 per share and the payment of
$90,000 to Global to settle employee claims, the cost of which has been recorded
in the financial statements as of June 30, 1999. The agreement also called for
the repurchase of 75,000 shares of the Company's common stock from the owners of
Global by the Company or its co-defendant, Microphase Corporation.

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

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

          NONE.



                                      -5-
<PAGE>


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

(a)      MARKET PRICES OF COMMON STOCK

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

<TABLE>
<CAPTION>
          YEAR/QUARTER                                    HIGH                LOW
          ------------                                  ---------         ----------
<S>                                                     <C>               <C>
          Fiscal year ended June 30, 1998
          First Quarter                                   $  2.00            $ 1.375
          Second Quarter                                    1.375              0.625
          Third Quarter                                      1.75              0.875
          Fourth Quarter                                    2.375             1.1875

          Fiscal year ended June 30, 1999
          First Quarter                                      4.25              0.75
          Second Quarter                                  3.65625            1.5625
          Third Quarter                                     5.625             1.875
          Fourth Quarter                                     8.75           2.90625

          Fiscal year ended June 30, 2000
          First Quarter                                      9.25              3.00
          Second Quarter (through November 30, 1999)       6.1875              2.50
</TABLE>

(b)      HOLDERS

As of November 30, 1999, we had 25,771,825 shares of common stock outstanding
and approximately 1,425 stockholders of record.

(c)      DIVIDENDS

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




                                      -6-
<PAGE>




Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS AND PLAN OF OPERATIONS

The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated financial
statements, as well as information relating to the plans of the Company's
current management.

RESULTS OF OPERATIONS

Twelve Months Ended June 30, 1999 vs. June 30, 1998

The Company recorded a net loss of $22,838,344 for the year ended June 30,
1999 as compared to a loss of $4,341,059 for the comparable period ended June
30, 1998. This represents a loss per common share of $1.42 for the year ended
June 30, 1999 as compared to a loss per common share of $.46 for the period
ended June 30, 1998. Research and development expenses were $3,562,901 in
fiscal 1999 compared to $2,297,282 in fiscal 1998 and general and
administrative expenses rose to $4,683,109 in fiscal '99 from $1,259,801 for
the comparable period in fiscal '98. The increase in the administrative costs
primarily relate to the hiring of full time employees, implementation of
management employment agreements, market making expenses relating to investor
relations and an increase in the Company's marketing efforts as the Company
is preparing for the release of its first commercial product which is
expected to be available in the year 2000. Additionally, the Company recorded
non-cash charges of $13,002,605 for stock options and stock grants, primarily
rewarded on June 25, 1999 after the completion of a successful series of
private placements of the Company's stock.

PLAN OF OPERATIONS

Year 2000 Issues

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

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

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

Research and Development Activities

Georgia Tech conducts a significant amount of research and development for us
pursuant to a basic ordering agreement comprised of a series of delivery orders,
which outline the timing, necessary actions and form of payment for specific
tasks related to the completion of certain components of the Traverser product
lines. After the development of the Traverser DVDDS version 1.1, we expect




                                      -7-
<PAGE>

Georgia Tech to continue research and development of the Traverser product to
enhance features and functionality, as well as to coordinate the effort to
develop the Traverser, version 2.0 and additional products utilizing Traverser
technology.

For the years ended June 30, 1998, 1999 and for the period since inception
(October 2, 1996) to June 30, 1999, approximately $2,100,000, $2,450,000 and
$4,600,000 respectively, has been billed to mPhase for research and development
conducted by Georgia Tech, of which approximately $290,500 was included in
accrued expenses as of June 30, 1999.

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

The amount of research and development costs we have expended from October 2,
1996, our inception date, through June 30, 1999 was approximately $6,053,000.
During the year ended June 30, 1999, we incurred research and development
expenses of approximately $3,563,000 as a consequence of the continued
development of our current DSL products.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1999 the Company had working capital of $4,936,361.

As a result of anticipated required research and development, capital
expenditures and operating losses, we raised additional capital of approximately
$14,450,000 through the issuance of common stock to sophisticated investors in a
transaction exempt from registration pursuant to Rule 506 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933. As a result of this private offering, we anticipate having sufficient
working capital through the end of fiscal year ending June 2000 and beyond. We
do anticipate that, in connection with the full commercial production of our
Traverser DVDDS product, we will need to raise significant additional funds
through a public or private offering of our common stock or otherwise during the
upcoming fiscal year which will end on June 30, 2000.



                                      -8-
<PAGE>

Forward looking and other statements

We have made statements in this document that are forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You should
read statements that contain these words carefully because they: (1) discuss our
future expectations; (2) contain projections of our future results of operations
or of our fiscal condition; or (3) state other "forward looking" information.

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

Item 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         (a) (1) The following documents are filed as part of this report:

a.       Consolidated Financial Statements of the Registrant,
         mPhase Technologies, Inc.

<TABLE>
<CAPTION>
                                                                                             PAGES
                                                                                             -----
<S>                                                                                          <C>
         (a)      Financial Statements

         Report of Arthur Andersen, LLP                                                        F-1

         Report of Schuhalter, Coughlin & Suozzo, LLC                                          F-2

         Consolidated Balance Sheet as of June 30, 1999                                        F-3

         Consolidated Statements of Operations for the years ended June 30, 1999
           and 1998 and for the period from inception (October 2, 1996) through
           June 30, 1999                                                                       F-4

         Consolidated Statements of Changes in Stockholders' Deficit for the
           years ended June 30, 1999 and 1998 and for the period from inception
           (October 2, 1996) through June 30, 1999                                             F-5

         Consolidated Statements of Cash Flows for the years ended June 30, 1999
           and 1998 and for the period from inception (October 2, 1996) through
           June 30, 1999                                                                       F-6

         Notes to Consolidated Financial Statements                                            F-7
</TABLE>



                                      -9-

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheet of mPhase
Technologies, Inc. (a New Jersey corporation in the development stage) and
subsidiaries as of June 30, 1999, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the year then
ended and the related consolidated statements of operations and cash flows for
the period from inception (October 2, 1996) to June 30, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We did not audit the financial statements of
mPhase for the period from inception to June 30, 1998. Such statements are
included in the cumulative from inception to June 30, 1999 totals of the
statements of operations, changes in stockholders' equity and cash flows and
reflect total net loss of 18 percent of the related cumulative totals. Those
consolidated statements were audited by other auditors whose report has been
furnished to us and our opinion, insofar as it relates to amounts for the period
from inception to June 30, 1998, included in the cumulative total, is based
solely upon the report of the other auditors.

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

In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of mPhase Technologies, Inc. and
subsidiaries as of June 30, 1999, and the results of their operations and their
cash flows for the year then ended and for the period from inception (October 2,
1996) to June 30, 1999, in conformity with generally accepted accounting
principles.

                                                  Arthur Andersen, LLP


Stamford, Connecticut
November 30, 1999

                                       F-1


<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

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

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

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

                                             Schuhalter, Coughlin & Suozzo, LLC


Raritan, New Jersey
January 28, 1999

                                       F-2


<PAGE>


                            mPHASE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 1999

<TABLE>
<CAPTION>
                                     ASSETS

<S>                                                                                                     <C>
Current assets:
    Cash                                                                                                $     7,977,860
    Stock subscription receivable                                                                               510,500
    Prepaid expenses and other current assets                                                                    98,100
                                                                                                        ---------------
                 Total current assets                                                                         8,586,460

    Property and equipment, net                                                                                 294,952
    Patents and licenses, net                                                                                 1,742,693
                                                                                                        ---------------
                 Total assets                                                                           $    10,624,105
                                                                                                        ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY


Liabilities:
    Accounts payable                                                                                    $       433,769
    Accrued expenses                                                                                          3,161,995
    Due to affiliates                                                                                            14,335
    Deferred revenue                                                                                             40,000
                                                                                                        ---------------
                 Total liabilities                                                                            3,650,099
                                                                                                        ---------------

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
    Common stock, no par value, 50,000,000 shares authorized; 23,367,741 shares issued                       18,239,120
    Additional paid-in capital                                                                               16,843,508
    Deferred compensation                                                                                      (140,000)
    Deficit accumulated during development stage                                                            (27,960,649)
    Less- treasury stock, 13,750 shares, at cost                                                                 (7,973)
                                                                                                        ---------------
                 Total stockholders' equity                                                                   6,974,006
                                                                                                        ---------------
                 Total liabilities and stockholders' equity                                             $    10,624,105
                                                                                                        ===============

</TABLE>


                  The accompanying notes are an integral part of this
                  consolidated balance sheet.

                                       F-3


<PAGE>


                            mPHASE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
       FOR THE YEARS ENDED JUNE 30 1998 AND 1999 AND FROM OCTOBER 2, 1996
                      (DATE OF INCEPTION) TO JUNE 30, 1999

<TABLE>
<CAPTION>

                                                                                                         From October 2,
                                                                                                          1996 (Date of
                                                                           For the Years Ended            Inception) to
                                                                                 June 30                     June 30,
                                                                     ---------------------------------
                                                                          1998              1999               1999
                                                                     ---------------  ----------------   ---------------
<S>                                                                  <C>              <C>                <C>
TOTAL REVENUES                                                       $            -   $             -    $             -
                                                                     ---------------  ----------------   ---------------
COSTS AND EXPENSES:
    Research and development                                              2,297,282         3,562,901          6,052,685
    General and administrative                                            1,259,801         4,683,109          6,483,632
    Licensing fees                                                          450,000                -             487,500
    Depreciation and amortization                                            29,131           410,303            449,956
    Non-cash charges for stock-based employee compensation                       -         13,002,605         13,002,605
                                                                    ---------------  ----------------   ----------------
                 Total costs and expenses                                 4,036,214        21,658,918         26,476,378
                                                                    ---------------  ----------------   ----------------
                 Loss from operations                                     4,036,214        21,658,918         26,476,378
                                                                    ---------------  ----------------   ----------------

OTHER INCOME (EXPENSE):
    Loss from unconsolidated subsidiary                                    (304,845)       (1,161,622)        (1,466,467)
    Interest expense, net                                                        -            (17,804)           (17,804)
                                                                    ---------------  ----------------   ----------------
                 Total other expense                                       (304,845)       (1,179,426)        (1,484,271)
                                                                    ---------------  ----------------   ----------------
                 Net loss                                           $    (4,341,059) $    (22,838,344)  $    (27,960,649)
                                                                    ===============  ================   ================

LOSS PER COMMON SHARE, basic and diluted                            $          (.46) $          (1.42)  $          (2.46)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, basic and diluted             9,336,340        16,038,009         11,349,154

</TABLE>

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

                                       F-4


<PAGE>


                            mPHASE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
             FOR THE PERIOD FROM OCTOBER 2, 1996 (DATE OF INCEPTION)
                 TO JUNE 30, 1997 AND FOR EACH OF THE TWO YEARS
                       IN THE PERIOD ENDING JUNE 30, 1999

<TABLE>
<CAPTION>

                                                                                          Common Stock
                                                                                --------------------------------

                                                                                                                        Treasury
                                                                                     Shares       No Par Value           Stock
                                                                                ---------------  ---------------     -------------
<S>                                                                             <C>              <C>                 <C>
BALANCE, October 2, 1996 (date of inception)                                    $     1,140,427  $       471,157     $        -

    Issuance of common stock of Tecma Laboratories, Inc.,
       for 100% of the Company                                                        6,600,000         (471,157)             -

    Issuance of common stock, in private placement, net of
       offering costs of $138,931                                                       594,270          758,474              -

    Net loss                                                                                 -                -               -
                                                                                ---------------  ---------------   -------------

BALANCE, June 30, 1997                                                                8,334,697          758,474              -

    Issuance of common stock with warrants, in private
       placement, net of offering costs of $84,065                                      999,502          801,869              -

    Issuance of common stock for services                                               300,000               -               -

    Issuance of common stock in connection with investment
       in unconsolidated subsidiary                                                     250,000          125,000              -

    Repurchase of 13,750 shares of common stock                                              -                -           (7,973)

    Issuance of common stock with warrants in private
       placement, net of offering costs of $121,138                                   1,095,512          670,146              -

    Issuance of common stock for financing services                                     100,000               -               -

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

    Net loss                                                                                 -                -               -
                                                                                ---------------  ---------------   -------------

BALANCE, June 30, 1998                                                               13,579,711        4,065,489          (7,973)

    Issuance of common stock in private placements,
       net of offering costs of $107,000                                              3,120,000        3,013,000              -

    Issuance of common stock for services                                             1,599,332               -               -

    Issuance of common stock with warrants in private
       placement, net of offering costs of $45,353                                      642,000          773,197              -

    Issuance of common stock in private placement,
       net of offering costs of $679,311                                              4,426,698       10,387,434              -

    Issuance of stock options for services                                                   -                -               -

    Issuance of warrants for services                                                        -                -               -

    Deferred employee stock option compensation                                              -                -               -

    Net loss                                                                                 -                -               -
                                                                                ---------------  ---------------   -------------

BALANCE, June 30, 1999                                                               23,367,741  $    18,239,120     $    (7,973)
                                                                                ===============  ===============     ===========

</TABLE>

<TABLE>
<CAPTION>


                                                                                                                          Total
                                                               Additional                                              Stockholders'
                                                                Paid-in            Deferred          Accumulated        (Deficit)
                                                                Capital          Compensation          Deficit           Equity
                                                             --------------    ----------------   ----------------   ---------------
<S>                                                          <C>               <C>                <C>                <C>
BALANCE, October 2, 1996 (date of inception)                 $           -     $            -     $      (537,707)   $      (66,550)

    Issuance of common stock of Tecma Laboratories, Inc.,
       for 100% of the Company                                           -                  -             537,707            66,550

    Issuance of common stock, in private placement, net of
       offering costs of $138,931                                        -                  -                  -            758,474

    Net loss                                                             -                  -            (781,246)         (781,246)
                                                              --------------   ----------------   ----------------   ---------------

BALANCE, June 30, 1997                                                   -                  -            (781,246)          (22,772)

    Issuance of common stock with warrants, in private
       placement, net of offering costs of $84,065                       -                  -                  -            801,869

    Issuance of common stock for services                           150,000                 -                  -            150,000

    Issuance of common stock in connection with investment
       in unconsolidated subsidiary                                      -                  -                  -            125,000

    Repurchase of 13,750 shares of common stock                          -                  -                  -             (7,973)

    Issuance of common stock with warrants in private
       placement, net of offering costs of $121,138                      -                  -                  -            670,146

    Issuance of common stock for financing services                      -                  -                  -                 -

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

    Net loss                                                             -                  -          (4,341,059)       (4,341,059)
                                                              --------------   ----------------   ----------------   ---------------

BALANCE, June 30, 1998                                              150,000                 -          (5,122,305)         (914,789)

    Issuance of common stock in private placements,
       net of offering costs of $107,000                                 -                  -                  -          3,013,000

    Issuance of common stock for services                         8,760,866                 -                  -          8,760,866

    Issuance of common stock with warrants in private
       placement, net of offering costs of $45,353                  786,450                 -                  -          1,559,647

    Issuance of common stock in private placement,
       net of offering costs of $679,311                                 -                  -                  -         10,387,434

    Issuance of stock options for services                        7,129,890                 -                  -          7,129,890

    Issuance of warrants for services                                16,302                 -                  -             16,302

    Deferred employee stock option compensation                          -            (140,000)                -           (140,000)

    Net loss                                                             -                  -         (22,838,344)      (22,838,344)
                                                              --------------   ----------------   ----------------   ---------------

BALANCE, June 30, 1999                                       $   16,843,508    $      (140,000)   $   (27,960,649)   $    6,974,006
                                                              ==============    ===============    ===============    ==============

</TABLE>

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

                                       F-5
<PAGE>


                            mPHASE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FOR THE YEARS ENDED JUNE 30 1998 AND 1999 AND
            FROM OCTOBER 2, 1996 (DATE OF INCEPTION) TO JUNE 30, 1999

<TABLE>
<CAPTION>


                                                                                                              From
                                                                           For the Years Ended            October 2, 1996
                                                                                June 30,                (Date of Inception)
                                                                   ----------------------------------       to June 30,
                                                                         1998               1999               1999
CASH FLOWS FROM OPERATING ACTIVITIES:                              ----------------   ----------------  -----------------
<S>                                                                <C>                <C>               <C>
    Net loss                                                       $    (4,341,059)   $   (22,838,344)  $    (27,960,649)
    Adjustments to reconcile net loss to net cash used in
       operating activities-
          Depreciation and amortization                                     56,505            454,494            523,574
          Loss on disposal of fixed assets                                      -               7,062              7,062
          Loss on unconsolidated subsidiary                                304,845          1,161,622          1,466,467
          Non-cash common stock, common stock option and warrant
              expense                                                      150,000         15,768,058         15,918,058
          Changes in assets and liabilities-
              Prepaid expenses and other current assets                     (9,295)           (82,100)           (98,100)
              Cash overdraft                                                 8,432             (8,432)                -
              Receivables from subsidiary                                 (150,000)                -            (150,000)
              Accounts payable                                           1,620,387         (1,272,815)           433,769
              Accrued expenses                                             452,180          1,360,779          2,040,157
              Due to affiliates                                             78,294           (511,394)          (421,335)
              Deferred revenue                                                  -              40,000             40,000
                                                                   ---------------    ---------------   ----------------
                    Net cash used in operating activities               (1,829,711)        (5,921,070)        (8,200,997)
                                                                   ---------------    ---------------   ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Investment in unconsolidated subsidiary                               (300,000)                -            (300,000)
    Proceeds from defaulted license agreement with
       unconsolidated subsidiary                                           300,000                 -             300,000
    Investment in licensing rights and organizational costs                     -             (59,907)          (114,672)
    Purchase of property and equipment                                     (16,918)          (280,744)          (378,568)
                                                                   ---------------    ---------------   ----------------
                    Net cash used in investing activities                  (16,918)          (340,651)          (493,240)
                                                                   ---------------    ---------------   ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    (Repayment of) proceeds from loan payable                              210,000           (210,000)                -
    Net proceeds from issuance of common stock                           1,482,815         14,449,581         16,680,070
    Repurchase of treasury stock at cost                                    (7,973)                -              (7,973)
                                                                   ---------------    ---------------   ----------------
                    Net cash provided by financing
                        activities                                       1,684,842         14,239,581         16,672,097
                                                                   ---------------    ---------------   ----------------
                    Net (decrease) increase in cash                       (161,787)         7,977,860          7,977,860
CASH, beginning of period                                                  161,787                 -                  -
                                                                   ---------------    ---------------   ---------------
CASH, end of period                                                $            -     $     7,977,860   $      7,977,860
                                                                   ===============    ===============   ================

</TABLE>

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

                                       F-6


<PAGE>


                            mPHASE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999

1.  ORGANIZATION AND NATURE OF BUSINESS

mPhase Technologies, Inc. (the "Company") was organized on October 2, 1996.

On February 17, 1997, the Company acquired Tecma Laboratories, Inc., ("Tecma")
in a transaction accounted for as a reverse merger whereby Tecma issued
6,600,000 shares of its common stock for all of the issued and outstanding
shares of the Company. Tecma was primarily engaged in research and development
of certain patented products in the health care field.

On June 25, 1998, the Company acquired Microphase Telecommunications, Inc.
("MicroTel") a Delaware corporation, through the issuance of 2,500,000 shares of
its common stock in exchange for all the issued and outstanding shares of
MicroTel (Note 4). The assets acquired in this acquisition were patents and
patent applications utilized in the Company's proprietary Traverser-TM-
Digital Video Data Deliver System ("Traverser-TM-").

On August 21, 1998, the Company incorporated a 100% wholly owned subsidiary
called mPhaseTV.net, Inc., a Delaware corporation. The Company intends for this
subsidiary to be the marketing vehicle for its cable business.

The primary business of mPhase is to design, develop, manufacture and market
high-bandwidth telecommunications products incorporating direct subscriber line
("DSL") technology. The present activities of the Company are focused on the
completion of its proprietary Traverser-TM- utilizing existing twisted pair
copper wire infrastructure in "plain old telephone systems" ("POTS").

2.  LOSSES DURING THE DEVELOPMENT STAGE

The Company has incurred operating losses totaling $27,960,649 from October 2,
1996 (date of inception) through June 30, 1999.

The Company is in the development stage and its present activities are focused
on the completion of its proprietary Traverser-TM-. Because mPhase is in the
development stage, the accompanying financial statements should not be regarded
as typical for normal operating periods.

Additional equity financing will be required to complete the product development
stage, and the transition, ultimately, to profitable operations. Sufficient
capital resources are available for the Company to maintain its present level of
development stage operations for the near term, defined as one year. Management
believes that it will be able to continue to raise sufficient capital to
complete the development stage of the Traverser-TM-.

                                       F-7


<PAGE>


3.  SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.

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.

CASH AND EQUIVALENTS

The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. The Company had no cash equivalents
at June 30, 1999.

PROPERTY AND EQUIPMENT

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

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations as incurred.

INCOME TAXES

The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using currently enacted tax rates. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in results of operations in the period that includes the enactment
date. Because of the uncertainty regarding the Company's future profitability,
the future tax benefits of its losses have been fully reserved for. Therefore,
no benefit for the net operating loss has been recorded in the accompanying
consolidated financial statements.

PATENTS AND LICENSES

Patents and licenses are stated at cost. Amortization is computed using the
straight-line method over the estimated useful life of the asset, generally five
years.

Amortization expense was $24,252 and $400,299 for the years ended June 30, 1998
and 1999, respectively.


                                       F-8
<PAGE>


FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash, cash equivalents and accounts payable approximate
their fair values due to their short maturities.

LOSS PER COMMON SHARE, BASIC AND DILUTED

The Company accounts for net loss per common share in accordance with the
provisions of Statements of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share" ("EPS"). SFAS No. 128 reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Common equivalent shares
have been excluded from the computation of diluted EPS since their effect is
antidilutive.

LONG-LIVED ASSETS

The Company accounts for long-lived assets under the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
Be Disposed of," which states that whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and
long-lived assets and certain identifiable intangibles are to be disposed of,
they should be reported at the lower of carrying amount or fair value less cost
to sell. The Company does not believe that any such changes in circumstances
have occurred.

STOCK-BASED COMPENSATION

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

The Company accounts for nonemployee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more readily determinable.

4.  ACQUISITION OF MICROTEL

In June 1998, the Company issued 2,500,000 shares of common stock in exchange
for all of the issued and outstanding shares of MicroTel, a wholly owned
subsidiary of Microphase, Inc. The transaction was accounted for as a purchase
pursuant to APB 16. The total purchase price of approximately $1,870,000 which
was based on the fair market value of the shares issued, was allocated to the
patents and is being amortized over an estimated useful life of five years.
Pursuant to the agreement of merger, MicroTel has become a wholly owned
subsidiary.


                                       F-9
<PAGE>
5.  PROPERTY AND EQUIPMENT

<TABLE>
<S>                                                                                <C>
Property and equipment, at cost, at June 30, 1999 is as follows:

           Equipment used in research and development                              $    318,870

           Office equipment                                                              53,399
                                                                                   ------------
                                                                                        372,269
           Less- Accumulated depreciation                                               (77,317)
                                                                                   ------------
                                                                                   $    294,952
                                                                                   ============
</TABLE>

Depreciation expense for the years ended June 30, 1998 and 1999 was $32,253 and
$54,195, respectively. Depreciation expense included in research and development
for the years ended June 30, 1998 and 1999 was $27,374 and $44,191,
respectively.

6.  INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

On July 31, 1997, the Company agreed to purchase up to a 50% interest in
Complete Telecommunications, Inc. ("CTI"), with Global Music and Medica, Inc.
("Global"), in which a 41.724% interest was acquired for $425,000, representing
cash of $300,000 and 250,000 shares of mPhase common stock valued at $0.50 per
share, its fair market value. CTI was intended to be a local cable provider and
a marketing vehicle for the Company's technology in certain markets in the
United States. The investment, which was accounted for using the equity method,
was written off during 1998. The Company recorded a loss from unconsolidated
subsidiary as a result of the Company's share in the net losses of CTI. The loss
is included in the accompanying consolidated statement of operations for the
year ended June 30, 1998.

7.  STOCKHOLDERS' EQUITY

The Company has authorized capital of 50,000,000 shares of common stock with no
par value.

Tecma issued 6,600,000 shares of common stock for all of the issued and
outstanding shares of the Company in the reverse acquisition (Note 1).

In June 1997, the Company sold 594,270 shares of its common stock in a private
placement at $1.51 per share, for proceeds of $758,474, net of offering costs of
$138,931.

In October 1997, the Company issued 250,000 shares of its common stock in
connection with its investment in CTI (Note 6).

During the year ended June 30, 1998, the Company sold, pursuant to private
placements, 2,095,014 shares of its common stock together with 1,745,179
warrants for proceeds to the Company of $1,472,015, net of offering costs of
$205,203 . The warrants were issued to purchase one share each of common stock
at an exercise price of $0.75. Included in offering costs are 100,000 shares of
common stock issued for services provided by a third party at $0.50, its fair
market value. All warrants were exercised subsequent to June 30, 1999.

During the year ended June 30, 1998, the Company issued 300,000 shares of common
stock to consultants for services at $.50 per share, its fair market value. The
Company recorded a charge to operations of $150,000 in the accompanying
consolidated statement of operations.

On June 25, 1998, the Company issued 2,500,000 shares of its common stock for
all of the outstanding stock of MicroTel (Note 4) for approximately $1,710,000,
its fair market value.

In November 1998, the Company sold, pursuant to private placements, 3,120,000
shares of its common stock to several investors at a price of $1.00 per share,
net of offering costs of approximately $107,000.

                                       F-10
<PAGE>


During the year ended June 30, 1999, the Company issued 1,599,332 shares of
common stock to employees and consultants for services performed. The Company
recognized a charge to operations of $8,760,866, based on the fair market value
of the shares.

During the year ended June 30, 1999, the Company sold, pursuant to private
placements, 642,000 shares of common stock together with 642,000 warrants, each
to purchase one share of the Company's common stock at a price of $2.50. The
warrants expire on June 30, 2004. The total proceeds received for the offering
were $1,559,647, net of offering costs of $45,353. The Company allocated
approximately $786,450 to the warrants based on the relative fair values of the
common stock and the warrants.

In June 1999, the Company sold, pursuant to private placements, 4,426,698 shares
of its common stock at a price of $2.50 per share for $10,387,434, net of
offering costs of $679,311, of which $510,500 represented a stock subscription
receivable at June 30, 1999. This amount was received by the Company subsequent
to year-end.

STOCK INCENTIVE PLAN

On August 15, 1997, the Company established its Long Term Stock Incentive Plan.
Included as part of the Long Term Stock Incentive Plan, is the Stock Option Plan
(the "Plan"), in which incentive stock options and nonqualified stock options
may be granted to officers, employees and consultants of the Company. Vesting
terms of the options range from immediately to two years and generally expire in
five years.

A summary of the stock option activity for the years ended June 30, 1998 and
1999, pursuant to the terms of the Plan, all of which were nonqualified stock
options, is set forth below:

<TABLE>
<CAPTION>

                                                                                             Weighted
                                                                           Number of         Average
                                                                            Options       Exercise Price
                                                                        --------------    --------------
<S>                                                                     <C>               <C>
          Outstanding at June 30, 1997                                              -     $          -
              Granted                                                        3,700,000             1.00
              Exercised                                                             -                -
              Canceled                                                              -                -
                                                                        --------------    -------------
          Outstanding at June 30, 1998                                       3,700,000             1.00
              Granted                                                        2,857,500             1.67
              Exercised                                                             -                -
              Canceled                                                         750,000             1.00
                                                                        --------------   --------------
          Outstanding at June 30, 1999                                       5,807,500    $        1.33
                                                                        ==============    =============
          Exercisable at June 30, 1999                                       5,737,500    $        1.33
                                                                        ==============    =============

</TABLE>

The weighted average fair value of options granted in 1998 and 1999 was
estimated as of the date of grant using the Black-Scholes stock option pricing
model, based on the following weighted average assumptions: annual expected
return of 0%, annual volatility of 90%, risk-free interest rate ranging from
4.85 to 6.18 and expected option life of 3 years.

The per share weighted-average fair value of stock options granted during 1998
and 1999 was $1.00 and $4.59, respectively. The per share weighted average
remaining life of the options outstanding at June 30, 1998 and 1999 is 4.17 and
3.96 years, respectively.

                                       F-11


<PAGE>


The Company has elected to continue to account for stock-based compensation
under APB Opinion No. 25, under which no compensation expense has been
recognized for stock options granted to employees at fair market value. Had
compensation expense for stock options granted under the Plan been determined
based on fair value at the grant dates, the Company's net loss for 1998 and 1999
would have been increased to the pro forma amounts shown below.

<TABLE>
<CAPTION>

                                                                                     June 30
                                                                                ----------------
                                                                             1998              1999
          Net loss:                                                      --------------  --------------
<S>                                                                      <C>             <C>
              As reported                                                $   4,341,059   $   22,838,344
              Pro forma                                                  $   6,421,867   $   24,576,165

</TABLE>

For the year ended June 30, 1999, the Company recorded noncash charges and
deferred compensation totaling $7,129,890 and $140,000, respectively, in
connection with the grant of 1,607,500 options to employees and 1,250,000
options to consultants for services rendered. Such charges are the result of the
differences between the quoted market value of the Company's common stock on the
date of grant and the exercise price for options issued to employees and
Black-Scholes calculations for options issued to consultants. For the year ended
June 30, 1998, options were granted at exercise prices based upon recent sales
transactions of the Company's stock, which management deems to be the best
estimate of fair value for that period.

WARRANTS

In January and April 1998, the Company issued 25,000 and 50,000 warrants,
respectively, each to purchase one share of common stock at an exercise price of
$1.06 and $2.44, respectively, for consulting services . The warrants expire
five years from the date of issuance. At any time after the date of issuance,
the Company may, at its option, elect to redeem all of these warrants at $0.01,
subject to adjustment, as defined, per warrant, provided that the average
closing price of the common stock for 20 business days within any period of 30
consecutive business days exceeds $5.00 per share. As of June 30, 1999, all of
these warrants remain outstanding. The fair market values of these warrants were
not material.

In July 1998, in connection with the private placements, the Company issued
400,000 warrants, each to purchase one share of common stock at an exercise
price of $1.00 per share. The Company allocated the net proceeds from the sale
of the common stock to the common stock and the warrants. The warrants expire
five years from the date of issuance. The warrant agreement allows the warrant
to be exercised through the transfer of cash or through a cashless exercise
whereby the number of shares issued to the warrant holder would be reduced by
the value of shares necessary to pay for the exercise of the warrants based on
the fair market value of the Company's common stock on the date of exercise. The
warrants were exercised in July 1999.

In September 1998, the Company issued approximately 6,000 warrants for services,
each to purchase one share of common stock at an exercise price of $0.75 per
share. The warrants expire five years from the date of grant. The Company
determined the fair market value of the warrants issued under the Black-Scholes
Option Pricing Model to be $16,302. This amount is included in the Company's
selling, general and administrative expenses in the accompanying consolidated
statement of operations as of June 30, 1999.

In June 1999, in connection with the private placements, the Company also issued
400,000 warrants each to purchase one share of common stock at an exercise price
of $2.50 per share. The Company allocated the net proceeds from the sale of the
common stock to the common stock and the warrants. The warrants expire five

                                       F-12


<PAGE>


years from the date of grant. At any time after the date of issuance, the
Company may, at its option, elect to redeem all of these warrants at $0.01,
subject to adjustment, as defined, per warrant, provided that the average
closing price of the common stock for 20 business days within any period of 30
consecutive business days exceeds $10.00 per share. As of June 30, 1999, all of
these warrants remain outstanding.

8.  RELATED PARTY TRANSACTIONS

The management of the Company are also employees of Microphase, Inc.
("Microphase") (Note 4). On May 1, 1997, the Company entered into an agreement
with Microphase, whereby the Company will use office space as well as the
administrative services of Microphase including the use of accounting personnel.
This Agreement was for $5,000 per month and was on a month-to-month basis. In
July 1998, the office space agreement was revised to $10,000 per month.
Additionally, in July 1998, the Company entered into an agreement with
Microphase, whereby the Company reimburses Microphase $40,000 per month for
technical research and development assistance. During the period ended June 30,
1998 and 1999, $60,000 and $600,000 have been charged to expense under these
Agreements and is included in operating expenses in the accompanying statements
of operations. As of June 30, 1999, the Company has $14,335 as due to affiliates
included in the accompanying consolidated balance sheet.

On February 15, 1997, the Company entered into a Technology, Patent and
Trademark License Agreement (the "Agreement") with MicroTel (Note 4). The
agreement permits the Company to utilize the patent and trademark technology of
MicroTel under a licensing arrangement. The Company made payments of $37,500 per
month, commencing June 1, 1997 for technology development. During the period
ended June 30, 1997 and 1998, $37,500 and $450,000 has been charged to expense
under this Agreement and is included in licensing fees in the accompanying
statement of operations. As of June 25, 1998, the Company acquired MicroTel and
as of that date this Agreement is no longer in effect.

During the period ended June 30, 1997, the Company paid $95,141 in offering
costs to a securities firm owned by a director, and during the period ended June
30, 1998, the Company paid offering costs to the same firm totaling $153,999.

The Company will be obligated to pay a 3% royalty to Microphase on revenues from
the Company's proprietary Traverser-TM- Digital Video Data Delivery System.

9.   COMMITMENTS AND CONTINGENCIES

The Company has entered into various agreements with Georgia Tech Research
Corporation ("GTRC"), pursuant to which the Company receives technical
assistance in developing the commercialization of its digital video and data
system. The dollar amount incurred by the Company for GTRC technical assistance
with respect to its research and development activities during the years ended
June 30, 1998 and 1999 totaled $2,100,644 and $2,450,253, respectively. If and
when sales commence utilizing this particular technology, the Company will be
obligated to pay to GTRC a royalty of 3% to 5% of product sales as defined.


                                       F-13
<PAGE>

10.  INCOME TAXES

No provision has been made for corporate income taxes due to cumulative losses
incurred. The Company has available unrealized tax benefits of approximately
$5,125,000 in the form of net operating loss ("NOL") carryforwards of
approximately $12,292,500 for federal income tax purposes and $12,004,700 for
state income tax purposes to reduce future taxable income. If not utilized, the
state's NOLs expire at various times through 2005 and the federal NOL's expire
at various dates through 2019. Certain changes in stock ownership can result in
a limitation in the amount of net operating loss and tax credit carryovers that
can be utilized each year.

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

11.  SUBSEQUENT EVENTS

On July 26, 1999, 400,000 warrants were converted into 352,239 shares of common
stock (Note 7). In accordance with the warrant agreement, the warrant holder had
the right to initiate a cashless exercise to convert the warrants into shares of
common stock in lieu of exchanging cash. The number of shares received was
determined by dividing the aggregate fair market value of the shares minus the
aggregate exercise price of the warrants by the fair market value of one share.

As a result of certain disputes with Global (Note 6) which arose prior to June
30, 1999, a settlement agreement was signed on August 16, 1999 which provided
for the dissolution of CTI. The settlement agreement provided for the following
by the Company: the payment of $100,000 cash, issuance of 75,000 shares of the
Company's common stock and the grant of 75,000 options with an exercise price
equal to the fair market value on the date of settlement to a former officer of
CTI, and the repurchase by the Company or Microphase, the co-defendant of 75,000
shares owned by Global at a price equal to the closing bid for the stock on the
date of execution of the agreement less two dollars, the granting of 75,000
options and $90,000 in cash to settle employee claims. Approximately $1,200,000
has been accrued for in the accompanying balance sheet as of June 30, 1999 and
included in the loss from unconsolidated subsidiary in the accompanying
statement of operations.

                                       F-14


<PAGE>

                                    ITEM III

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Our present executive officers and directors are:

<TABLE>
<CAPTION>
NAME                    AGE       POSITION(S)
<S>                     <C>       <C>
Necdet F. Ergul          75       Chairman of the Board and Director

Ronald A. Durando        42       Chief  Executive  Officer and Director (principal  executive officer)

Gustave T. Dotoli        62       Chief  Operating  Officer and Director (principal  financial and accounting officer)

David Klimek             44       Chief Technology Officer and Director

Hal L. Willis            45       Executive Vice President - Corporate Development

Susan E. Cifelli         41       Executive Vice President - Sales and Marketing

J. Lee Barton            45       Director
</TABLE>

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

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

     RONALD A. DURANDO is a co-founder of mPhase and has served as our President
and Chief Executive Officer since our inception in October 1996. Prior to
joining us, Mr. Durando was President and Chief Executive Officer of Nutley
Securities, Inc., a registered broker-dealer. In addition, Mr. Durando currently
serves as the Chief Operating Officer of Microphase Corporation, a leading
developer of telecommunications technology. He is also Chairman of the Board of
Janifast Ltd., a U.S. Holding Corp. for operational and manufacturing companies
in Hong Kong and China. on November 26, 1999 Mr. Durando acquired, via a 100%
ownership of Packet Port Inc., a controlling interest in Linkon Corporation, now
known as PacketPort.Com Inc.

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

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



                                      III-1
<PAGE>

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

     SUSAN E. CIFELLI joined us in the capacity of Executive Vice President -
Marketing during February 1999. Ms. Cifelli has 18 years of experience in the
telecommunications industry with Bell Atlantic, NYNEX and New England Telephone
Company. Most recently, she was Project Manager for the "Infospeed" DSL Services
Marketing Project at Bell Atlantic. Prior to this, she was the Project and
Product Manager for marketing InfoFone Services in the State of New York. Ms.
Cifelli holds a Masters of Science degree in Telecommunications & Computing
Management from Polytechnic University and a Bachelors of Art from the State
University of New York at Buffalo.

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

Item 10.  EXECUTIVE COMPENSATION

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

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                  ANNUAL COMPENSATION                   LONG-TERM COMPENSATION
                                           ------------------------------------     -----------------------------
                                                                                      RESTRICTED      UNDERLYING
                                                                                        STOCK          OPTIONS
                                           YEAR         SALARY         BONUS           AWARD(S)         /SARS
                                           ----         ------         -----           -------         -------
<S>                                        <C>         <C>           <C>               <C>             <C>
Ronald A. Durando                           1999        250,000       275,000           400,000         562,500
 Chief Executive Officer                    1998        150,000             -                 -               -
 and President                              1997         75,000             -                 -       1,000,000

Gustave Dotoli                              1999        175,000       100,000           175,000         300,000
 Chief Operating Officer                    1998        120,000             -                 -               -
                                            1997         60,000             -                 -         750,000

David Klimek                                1999         77,138        35,000           275,000         150,000
 Chief Technology Officer                   1998         68,500             -                 -               -
                                            1997         63,100             -                 -         500,000

Hal L. Willis                               1999        105,000             -                 -         100,000
 Executive Vice President-                  1998              -             -                 -               -
 Corporate Development                      1997              -             -                 -               -
</TABLE>

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

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


                                      III-2
<PAGE>


                        OPTION GRANTS IN LAST FISCAL YEAR
                               (INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>
                                        PERCENTAGE
                                         OF TOTAL
                           NUMBER OF     OPTIONS
                           SECURITIES   GRANTED TO
                           UNDERLYING    EMPLOYEES
                            OPTIONS      IN FISCAL      EXERCISE     EXPIRATION
                           GRANTED (#)     YEAR       PRICE ($/SH)      DATE
                           -----------  ----------    ------------   -----------
<S>                        <C>          <C>           <C>            <C>
Ronald A. Durando            312,500       21.2           1.00          2004
                             250,000       17.0           2.50          2004

Gustave T. Dotoli            150,000       10.2           1.00          2004
                             150,000       10.2           2.50          2004

David Klimek                  50,000        3.4           1.00          2004
                             100,000        6.8           2.50          2004

Hal L. Willis                 50,000        3.4           1.00          2004
                              50,000        3.4           2.50          2004
</TABLE>


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

                          FISCAL YEAR-END OPTION VALUES

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


                                      III-3
<PAGE>


Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of November 30, 1999 certain information
regarding the beneficial ownership of shares of our common stock:

     -    by each of our directors;

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

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

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

<TABLE>
<CAPTION>
                                                  OPTIONS
                                                 AMOUNT AND
                                                 NATURE OF         PERCENTAGE
                                                 BENEFICIAL        OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER (1)         OWNERSHIP         STOCK (2)
------------------------------------             ---------         ---------
<S>                                              <C>               <C>
Necdet F. Ergul                                   1,425,000            5.5
Ronald A. Durando (3)(6)                          3,383,648           13.1
Gustave Dotoli (6)                                1,775,000            6.9
J. Lee Barton (4)                                 2,720,000           10.6
David Klimek                                      1,190,000            4.6
Hal L. Willis                                       100,000             .5
Susan E. Cifelli                                    130,000             .5
Lintel, Inc. (5)                                  1,945,000            7.5
All executive officers and directors as
 a group (seven people)                          10,723,648           41.6
</TABLE>


*    Less than 1%

(1)  Unless otherwise indicated, the address of each beneficial owner is 587
     Connecticut Avenue, Norwalk, Connecticut 06854-0566

(2)  Unless otherwise indicated, we believe that all persons named in the table
     have sole voting and investment power with respect to all shares of common
     stock beneficially owned by them. The percentage for each beneficial owner
     listed above is based on 25,771,825 shares outstanding on November 30,
     1999. In accordance with the rules of the Securities and Exchange
     Commission, options to purchase shares of common stock that are exercisable
     as of August 5, 1999 or exercisable within 60 days thereafter, are deemed
     to be outstanding and beneficially owned by the person holding such options
     for the purpose of computing such person's percentage ownership, but are
     not deemed to be outstanding for the purpose of computing the percentage
     ownership of any other person. The number of shares indicated in the table
     include the following number of shares issuable upon the exercise of
     warrants or options: Necdet F. Ergul - 325,000; Ronald A. Durando -
     1,487,500; Gustave Dotoli - 1,000,000; J. Lee Barton - 100,000; David
     Klimek - 650,000; Hal L. Willis - 100,000; and Susan E. Cifelli - 130,000.

(3)  Includes 320,000 shares held by Nutley Securities, Inc., and 315,000 shares
     held by Packet Port, Inc. which are wholly-owned by Mr. Durando.

(4)  Includes 1,945,000 shares held by Lintel, Inc., of which Mr. Barton is the
     president and chief executive officer.

(5)  The address for Lintel, Inc. is 196 North Forest Avenue, P.O. Box 388,
     Hartwell, GA 30643.

(6)  Does not include 75,000 and 50,000 options to purchase, at $1.00 per share,
     assigned to unrelated parties.



                                      III-4
<PAGE>


Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our management are affiliated by employment at and/or ownership of a related
group of companies, including Microphase Corporation, Complete
Telecommunications, Inc. (which was dissolved subject to a settlement dated
August 16, 1999), Packet Port, Inc. and PacketPort.com and Janifast Holdings,
Ltd., which may record material transactions with us. As a result of such
affiliations, our management in the future may have conflicting interests with
these affiliated companies.

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

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

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

     -    At June 30, 1999, we owed Microphase $14,335 in respect to research
          and development and general administrative expenses.

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

Ronald A. Durando is the owner/sole shareholder of Nutley Securities, Inc., a
former registered broker-dealer, which is not a private investment company under
the Investment Advisors Act of 1940.

     -    In February 1997 we issued 600,000 shares to Nutley Securities as a
          "finder's fee" in connection with the acquisition of Lightpaths, Inc.
          of which 280,000 shares were contemporaneously assigned to co-finders.

     -    During the period ended June 30, 1997, we paid $95,141 to Nutley
          Securities in offering costs, and during the period ended June 30,
          1998, we incurred offering costs with Nutley Securities totaling
          $153,999.

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



                                      III-5
<PAGE>

In October 1997, in connection with a planned joint venture licensing agreement
with Global Music & Media, Inc., a Tennessee corporation, we became the 41.724%
owner of Complete Telecommunications, Inc. mPhase invested $300,000 in Complete
Telecommunications and issued to Global Music & Media 250,000 shares of our
common stock. We also loaned $150,000 to the joint venture. No payments have
been received by us from the joint venture with Global Music & Media. During the
fiscal year 1998, Global Music & Media commenced an action against us alleging
it was the holder of an exclusive license to market our Traverser technology and
related projects, which action was settled on August 16, 1999, the effect of
which was included in the Loss on Unconsolidated Subsidiaries for the year ended
June 30, 1999. See "Legal Proceedings."

One of our directors, J. Lee Barton, is the president and chief executive
officer of Lintel Inc. Lintel is the parent corporation of Hart Telephone
Company, our beta customer located in Hartwell, Georgia, where we have installed
our prototype product and commenced beta testing. In December 1998, we issued
3,115,000 shares in a private placement to J. Lee Barton, several members of his
family, Lintel, several employees of Lintel and two employees of Microphase for
a purchase price of approximately $1.03 per share, or an aggregate purchase
price of $3,197,416.

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

On November 26, 1999, PacketPort, Inc. a company owned 100% by Mr. Durando,
acquired controlling interest in Linkon Corp., which subsequently changed its
name to PacketPort.com, Inc. In connection with this transaction, Mr. Durando
transferred 350,000 shares of mPhase common stock to Packet Port, Inc. Mr.
Durando was elected president and Mr. Dotoli vice president of PacketPort.com,
Inc.

(a)      (1)

Following is a list of exhibits filed as part of this Annual Report on Form
10-KSB. Where so indicated by footnote, exhibits which were previously filed are
incorporated by reference.

<TABLE>
<CAPTION>
Exhibit Number
 Reference               Description
<S>                      <C>
    (3a)*                Articles of Incorporation, as amended

    (3b)*                By-laws, as amended

    (4)*                 Specimen of Common Stock certificate

    (10b)*               Incentive Stock Option Plan

    (10c)*               Form of Incentive Stock Option
</TABLE>


                                      III-6
<PAGE>


                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant, caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        mPHASE TECHNOLOGIES, INC.
                                        Formerly Tecma Laboratories, Inc.



Dated: December 30, 1999                By: /s/ RONALD A. DURANDO
                                            ------------------------------------
                                            Ronald A. Durando, President, CEO



                                      III-7