<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               -------------------

                                    FORM 10-Q

                               -------------------


   (MARK ONE)

       [X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934.

          FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                                 OR

       [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACT OF 1934.

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________.

                        COMMISSION FILE NUMBER: 000-27871

                            GRIC COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                DELAWARE                                     77-0368092
    (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

                               1421 MCCARTHY BLVD.
                           MILPITAS, CALIFORNIA 95035
                                 (408) 955-1920
    (ADDRESS, INCLUDING ZIP CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES
             AND REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                ----------------


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

    The number of shares of the registrant's common stock outstanding as of
October 31, 2000 was 19,573,624 shares.

================================================================================
<PAGE>



                            GRIC COMMUNICATIONS, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                PAGE NO.
                                                                                                                --------
                        PART I. FINANCIAL INFORMATION
<S>        <C>                                                                                                  <C>
Item 1.    Condensed Consolidated Financial Statements:
           Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999...............      3
           Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
           September 30, 2000 and 1999........................................................................      4
           Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
           September 30, 2000 and 1999........................................................................      5
           Notes to Condensed Consolidated Financial Statements...............................................      6
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations..............      8
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.........................................     18

                         PART II. OTHER INFORMATION

Item 1.    Legal Proceedings..................................................................................     19
Item 2.    Changes in Securities and Use of Proceeds..........................................................     19
Item 3.    Defaults Upon Senior Securities....................................................................     19
Item 4.    Submission of Matters to a Vote of Security Holders................................................     19
Item 5.    Other Information..................................................................................     19
Item 6.    Exhibits and Reports on Form 8-K...................................................................     19
SIGNATURE.....................................................................................................     20
</TABLE>

                                       2
<PAGE>



                          PART I. FINANCIAL INFORMATION


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                            GRIC COMMUNICATIONS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                        September 30,         December 31,
                                                                                             2000               1999 (1)
                                                                                       -----------------    -----------------
                                                                                           (unaudited)
<S>                                                                                    <C>                  <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents.......................................................         $ 26,617         $ 64,655
     Short-term investments..........................................................           24,739           13,030
     Accounts receivable, net of allowances of $1,733 and $701 at
         September 30, 2000 and December 31, 1999, respectively......................            5,970            2,596
     Other current assets............................................................              358              401
                                                                                           -----------      -----------
 Total current assets................................................................           57,684           80,682

Property and equipment, net..........................................................            9,767            4,404
Other assets.........................................................................              286              291
                                                                                           -----------      -----------
Total assets.........................................................................         $ 67,737         $ 85,377
                                                                                           ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable................................................................          $ 8,481          $ 5,302
     Accrued compensation and benefits...............................................            2,327            1,620
     Other current liabilities.......................................................              977              829
     Current portion of long-term debt and capital lease obligations.................              670              626
                                                                                           -----------      -----------
 Total current liabilities...........................................................           12,455            8,377

Long-term debt and capital lease obligations.........................................              658            1,147
Commitments and contingencies
Stockholders' equity:
     Preferred stock, 5,000 shares authorized at September 30, 2000 and
         December 31, 1999, respectively; no shares issued and outstanding...........               --               --
     Common stock, $0.001 par value; 50,000 shares authorized; 19,594 and
         19,162 shares issued and outstanding at September 30, 2000 and
         December 31, 1999, respectively.............................................               20               19
     Additional paid-in capital......................................................          126,738          125,057
     Deferred stock-based compensation...............................................           (1,159)          (1,479)
     Accumulated deficit.............................................................          (70,961)         (47,744)
     Accumulated other comprehensive loss............................................              (14)              --
                                                                                           -----------      -----------
         Total stockholders' equity..................................................           54,624           75,853
                                                                                           -----------      -----------
         Total liabilities and stockholders' equity..................................         $ 67,737         $ 85,377
                                                                                           ===========      ===========
</TABLE>

------------------

(1)      Amounts as of December 31, 1999 were derived from the audited
         consolidated financial statements at that date but do not include all
         of the information and footnotes required by generally accepted
         accounting principles for complete financial statements.

                             See accompanying notes



                                       3
<PAGE>

                            GRIC COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                         Three Months Ended                Nine Months Ended
                                                                           September 30,                     September 30,
                                                                           -------------                     -------------
                                                                        2000           1999               2000         1999 (1)
                                                                    -------------------------         --------------------------
                                                                     (unaudited)    (unaudited)        (unaudited)
<S>                                                                 <C>            <C>                <C>            <C>
Revenues:
     Settlement...................................................    $   8,152     $   2,156          $   19,894     $    4,122
     Software and other...........................................          855           323               1,353          1,315
                                                                    -----------    ----------         -----------    -----------
         Total revenues...........................................        9,007         2,479              21,247          5,437
Costs and expenses:
     Cost of settlement revenues..................................        7,317         1,806              17,790          3,329
     Cost of software and other revenues..........................            7            21                  83             96
     Network and operations.......................................        2,171           864               5,346          2,027
     Research and development ....................................        2,757         2,425               8,023          5,852
     Sales and marketing .........................................        3,321         2,282               9,434          5,844
     General and administrative...................................        2,345         1,410               6,205          3,276
     Other expense reversals......................................           --          (925)                 --           (925)
     Amortization of stock-based compensation (2).................          107           107                 320            193
                                                                    -----------    ----------         -----------    -----------
         Total costs and expenses.................................       18,025         7,990              47,201         19,692
                                                                    -----------    ----------         -----------    -----------
Operating loss....................................................       (9,018)       (5,511)            (25,954)       (14,255)
Interest income and other, net....................................          908           139               2,986            298
Interest expense..................................................          (46)          (51)               (134)        (1,292)
                                                                    -----------    ----------         -----------    -----------
Operating loss before income taxes................................       (8,156)       (5,423)            (23,102)       (15,249)
Provision for income taxes........................................           38            20                 115             38
                                                                    -----------    ----------         -----------    -----------
Net loss..........................................................    $  (8,194)    $  (5,443)         $  (23,217)    $  (15,287)
                                                                    ===========    ==========         ===========    ===========
Basic and diluted net loss per share..............................    $   (0.42)    $   (2.68)         $    (1.20)    $    (7.61)
                                                                    ===========    ==========         ===========    ===========
Shares used to compute basic and diluted net
loss per share....................................................       19,436         2,028              19,275          2,009
                                                                    ===========    ==========         ===========    ===========
</TABLE>

-------------------


(1)      Amounts for the nine months ended September 30, 1999 were derived from
         the audited consolidated financial statements at that date but do not
         include all of the information and footnotes required by generally
         accepted accounting principles for complete financial statements.

(2)      For each of the three months ended September 30, 2000 and 1999,
         included in amortization of stock-based compensation is $2 for network
         and operations, $43 for research and development, $17 for sales and
         marketing and $45 for general and administrative. For the nine months
         ended September 30, 2000 and 1999, included in amortization of
         stock-based compensation is $6 and $3 for network and operations, $129
         and $71 for research and development, $51 and $28 for sales and
         marketing and $134 and $91 for general and administrative,
         respectively.


                             See accompanying notes


                                       4
<PAGE>

                            GRIC COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                                          Nine Months Ended
                                                                                                            September 30,
                                                                                                            -------------
                                                                                                         2000          1999 (1)
                                                                                                     -----------------------------
                                                                                                     (unaudited)
<S>                                                                                                   <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................................................................       $  (23,217)      $  (15,287)
     Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation and amortization of property and equipment...............................            2,546            1,182
         Amortization of stock-based compensation..............................................              320              193
         Noncash issuance of stock.............................................................               --              150
         Noncash interest expense..............................................................               --              275
         Noncash warrant expenses - preferred stock............................................               12              922
         Noncash warrant expenses - common stock...............................................               69               81
     Net changes in assets and liabilities:
         Accounts receivable...................................................................           (3,374)            (854)
         Inventories...........................................................................               --               69
         Other current assets..................................................................               43           (1,023)
         Other assets..........................................................................              (76)              --
         Accounts payable......................................................................            3,179              594
         Accrued compensation and benefits.....................................................              707              146
         Other current liabilities.............................................................              148              288
         Other long-term liabilities...........................................................               26                4
                                                                                                     -----------      -----------
              Net cash used in operating activities............................................          (19,617)         (13,260)
                                                                                                     -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Available-for-sale investments:
         Purchases.............................................................................          (30,150)              --
         Sales.................................................................................           18,427               --
     Capital expenditures......................................................................           (7,909)          (1,739)
                                                                                                     -----------      -----------
              Net cash used in investing activities............................................          (19,632)          (1,739)
                                                                                                     -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of debt and capital lease obligations.............................................             (471)          (1,680)
     Proceeds from sales of preferred stock....................................................               --           25,174
     Proceeds from sales of common stock, net..................................................            1,682              324
                                                                                                     -----------      -----------
              Net cash provided by financing activities........................................            1,211           23,818
                                                                                                     -----------      -----------

Net (decrease) increase in cash and cash equivalents...........................................          (38,038)           8,819
Cash and cash equivalents at beginning of period...............................................           64,655            1,362
                                                                                                     -----------      -----------
Cash and cash equivalents at end of period.....................................................       $   26,617       $   10,181
                                                                                                     ===========      ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Income taxes paid.........................................................................       $        2       $        1
     Interest paid.............................................................................       $      124       $      436

SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
     Conversion of 1998 bridge notes principal and interest into Series D preferred stock .....       $       --       $    2,801
     Conversion of 1999 bridge notes interest into Series D preferred stock ...................       $       --       $      175
     Purchase of equipment under capital leases ...............................................       $       --       $      502
</TABLE>

-----------------

(1)      Amounts for the nine months ended September 30, 1999 were derived from
         the audited consolidated financial statements at that date but do not
         include all of the information and footnotes required by generally
         accepted accounting principles for complete financial statements.

                             See accompanying notes



                                       5
<PAGE>

                            GRIC COMMUNICATIONS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements,
with the exception of (i) the December 31, 1999 consolidated balance sheet,
which was derived from the audited consolidated financial statements included in
the GRIC Communications, Inc. (the "Company") Form 10-K, and (ii) the
consolidated statements of operations and the consolidated statements of cash
flows for the nine months ended September 30, 1999, which were derived from the
audited consolidated financial statements included in the Company's Form S-1
dated December 14, 1999, have been prepared in accordance with generally
accepted accounting principles for interim financial information, the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair representation have been included. The results for the nine
months ended September 30, 2000 are not necessarily indicative of the results
that may be expected for future periods. The following information should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 and the prospectus on Form S-1 dated December 14, 1999.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NET LOSS PER SHARE

     Net loss per common share for each of the three and nine months ended
September 30, 2000 and 1999 was computed by dividing the net loss by the
weighted average shares outstanding during the respective periods in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." In accordance with SFAS No. 128, basic and diluted net loss per share
has been computed using the weighted-average number of shares of common stock
outstanding during the period. Potentially dilutive securities have been
excluded from the computation of basic and diluted net loss per share, as their
effect is antidilutive.

     Weighted-average options outstanding to purchase approximately 862,000 and
1.3 million shares of common stock for the three months ended September 30, 2000
and 1999, respectively, and 1.8 million and 1.1 million shares of common stock
for the nine months ended September 30, 2000 and 1999, respectively, were not
included in the computation of diluted net loss per share because the effect
would be antidilutive. Such securities, had they been dilutive, would have been
included in the computation of diluted net loss per share using the treasury
stock method.

     RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1999, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities,
Deferral of the effective date of SFAS No. 133, which amends the effective
date of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 133 provides a comprehensive and consistent standard for
the recognition and measurement of derivatives and hedging activities. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000 and is
not anticipated to have an impact on the Company's results of operations or
financial condition when adopted as the Company holds no derivative financial
instruments and does not currently engage in hedging activities.

     In December 1999, the Securities and Exchange Commission ("SEC")
released Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements, as amended by SAB No. 101A and No. 101B, which provides
guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB No. 101 outlines the basic
criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition policies. In October 2000, the SEC
issued further guidance with respect to adoptions of specific views addressed
by SAB No. 101. We are currently reviewing the impact of SAB No. 101 and will
adopt SAB No. 101 in the fourth quarter of 2000.

                                       6
<PAGE>
                            GRIC COMMUNICATIONS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

     In March 2000, the FASB issued Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation, an interpretation of
Accounting Principles Board ("APB") Opinion No. 25. This Interpretation
clarifies the application of Opinion No. 25 for certain issues including: (a)
the definition of employee for purposes of applying Opinion No. 25, (b) the
criteria for determining whether a plan qualifies as a non-compensatory plan,
(c) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an
exchange of stock compensation awards in a business combination. The adoption
of Interpretation No. 44 did not have a material effect on our results of
operations, financial position, or cash flows.

3.   COMPREHENSIVE LOSS

     The components of comprehensive loss for the three and nine months ended
September 30, 2000 and 1999, respectively, are as follows:

<TABLE>
<CAPTION>
(in thousands)                                                 Three Months Ended                  Nine Months Ended
                                                                  September 30,                      September 30,
                                                                  -------------                      -------------
                                                              2000             1999             2000            1999
                                                              ----             ----             ----            ----
<S>                                                         <C>              <C>              <C>              <C>
Net loss                                                    $(8,194)         $(5,443)        $(23,217)        $(15,287)
Other comprehensive loss:
     Unrealized loss on available-for-sale
     investments                                                 --               --              (14)              --
                                                            --------         --------        ---------        ---------
                                                            $(8,194)         $(5,443)        $(23,231)        $(15,287)
                                                            ========         ========        =========        =========
</TABLE>

     The only component of accumulated other comprehensive loss at
September 30, 2000 was unrealized loss on available-for-sale investments.

4.   SEGMENT INFORMATION

     The Company operates solely in one segment, providing a global network for
Internet service providers and telecommunications companies.

     The following is a summary of revenue for the periods presented:

<TABLE>
<CAPTION>
(in thousands)                                                  Three Months Ended              Nine Months Ended
                                                                  September 30,                    September 30,
                                                                  -------------                    -------------
                                                               2000             1999           2000             1999
                                                               ----             ----           ----             ----
<S>                                                        <C>              <C>            <C>              <C>
Revenue by external customers:
     United States                                            $5,624           $1,066        $12,642           $1,802
     Southeast Asia                                            1,083              405          2,775            1,280
     Japan                                                       641              388          1,668              894
     Europe                                                    1,138              254          2,788              534
     China                                                       209              139            600              359
     Rest of world                                               312              227            774              568
                                                              ------           ------        -------           ------
                                                              $9,007           $2,479        $21,247           $5,437
                                                              ======           ======        =======           ======
</TABLE>


                                       7
<PAGE>


                            GRIC COMMUNICATIONS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


4.   SEGMENT INFORMATION (CONTINUED)

     The following is a summary of long-lived assets by geographical area for
the periods presented:

(in thousands)

<TABLE>
<CAPTION>
                                                                  September 30, 2000                  December 31, 1999
                                                                  ------------------                  -----------------
<S>                                                               <C>                                 <C>
Long-lived assets:
     United States                                                            $9,533                             $4,223
     Rest of world                                                               234                                181
                                                                              ------                             ------
                                                                              $9,767                             $4,404
                                                                              ======                             ======
</TABLE>

     Revenue by external customer is based on the customer's billing location.
Long-lived assets are those assets used in each geographic location.

5.   COMMITMENTS AND CONTINGENCIES

     The Company is subject to various legal proceedings and claims arising in
the ordinary course of business. The Company's management does not expect that
the results in any of these legal proceedings will have a material adverse
effect on the Company's financial condition, results of operations, or cash
flows.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion should be read in conjunction with our condensed
consolidated financial statements and accompanying notes, which appear elsewhere
in this Quarterly Report on Form 10-Q. The following discussion contains
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 and Section 27A of the Securities Act of 1933 that involve
risks and uncertainties. Forward-looking statements are identified by words such
as "believes," "anticipates," "expects," "intends," "will," "may," "could," and
other similar expressions. In addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. In addition, the section labeled
"Factors That May Affect Future Results" consists primarily of forward-looking
statements. We assume no obligation to update any such forward-looking
statements. Actual results could differ materially from those anticipated in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those detailed from time to time in
our filings with the Securities and Exchange Commission and those discussed
below and elsewhere in this Form 10-Q, particularly in "Factors That May Affect
Future Results."

     Unless expressly stated or the content otherwise requires, the terms "we",
"our", "us", "the Company" and "GRIC" refer to GRIC Communications, Inc. and its
subsidiaries.

OVERVIEW

     We provide services and software that enable our customers to offer
Internet-based products and services. Our customers include telecommunications
companies, Internet service providers and newly-emerging communication service
providers.

     Settlement revenues are generated when we provide settlement services to
customers whose end users initiate Internet communications. For each global
Internet roaming transaction, we use our software to track the usage, collect
the amount that a roamer's "home" service provider owes us, pay the appropriate
amount to the service provider enabling local access, and provide the underlying
usage data to our customer to enable billing of its end user. For each Internet
telephony call, we use our software to track the usage, settle the amounts owed
to GRIC and owed by GRIC as a result of the transaction, and provide the
underlying usage data to our customers to enable billing of their end users.

     We have incurred substantial losses since our inception as a result of
expenses associated with building our GRIC Alliance and related network
infrastructure and developing our software products. As of September 30, 2000,
we had an accumulated deficit of

                                       8
<PAGE>

approximately $71.0 million. We anticipate that our operating expenses will
increase in the future as we continue to expand our network and develop our
software products. Accordingly, we expect to incur additional losses for the
foreseeable future, and we cannot assure you that we will achieve or sustain
profitability. See "Factors That May Affect Future Results."

     Our business model has evolved in the course of our development and we
believe that period-to-period comparisons of our operating results should not be
relied upon as indicative of future performance. Our future prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in early stages of development, particularly companies
-- like us -- that are in new and rapidly evolving markets. See "Factors That
May Affect Future Results."

RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 1999

REVENUES

     Total revenues increased 263% to $9.0 million in the three months ended
September 30, 2000 from $2.5 million in the three months ended
September 30, 1999. Total revenues increased 291% to $21.2 million in the nine
months ended September 30, 2000 from $5.4 million in the nine months ended
September 30, 1999. The primary reason for the growth was increased
settlement revenues.

     SETTLEMENT REVENUES. Settlement revenues increased to $8.2 million in the
three months ended September 30, 2000 from $2.2 million in the three months
ended September 30, 1999, representing an increase of 278%. Settlement revenues
increased to $19.9 million in the nine months ended September 30, 2000 from
$4.1 million in the nine months ended September 30, 1999, representing an
increase of 383%. The increases reflect higher volumes of both Internet
telephony and Internet roaming transactions. We expect settlement revenues
from Internet telephony in the future to increase at a faster rate than
revenues from Internet roaming.

     SOFTWARE AND OTHER REVENUES. Software, hardware, and maintenance and
services revenues increased to $855,000 in the three months ended
September 30, 2000 from $323,000 in the three months ended September 30, 1999,
representing an increase of 165%. The increase was primarily due to the sale
of a license to use certain components of our Internet roaming clearinghouse
software. Software, hardware, and maintenance and services revenues increased
to $1.4 million in the nine months ended September 30, 2000 from $1.3 million
in the nine months ended September 30, 1999, representing an increase of 3%.
The increase was primarily due to the sale of a license to use certain
components of our Internet roaming clearinghouse software, offset by lower
sales of our prepaid Internet telephony software and discontinued sales of
hardware.

COSTS AND EXPENSES

     COST OF SETTLEMENT REVENUES. Cost of settlement revenues represents the
amounts we pay to access the Internet for Internet roaming services for our
customers, and to terminate Internet telephony services for our customers. Cost
of settlement revenues increased to $7.3 million in the three months ended
September 30, 2000 from $1.8 million in the three months ended
September 30, 1999, representing an increase of 305%. Cost of settlement
revenues increased to $17.8 million in the nine months ended
September 30, 2000 from $3.3 million in the nine months ended
September 30, 1999, representing an increase of 434%. The increases were due to
higher sales volumes of our Internet telephony services as well as the higher
proportion of our total services revenue mix that these volumes represented.

     COST OF SOFTWARE AND OTHER REVENUES. Cost of software, hardware and
maintenance and services revenues represents the cost of Internet telephony
equipment, software and professional services. Cost of software, hardware and
maintenance and services revenues decreased to $7,000 in the three months
ended September 30, 2000 from $21,000 in the three months ended September 30,
1999, representing a decrease of 67%. The decrease was primarily attributed
to lower costs in delivering professional services. Cost of software,
hardware, and maintenance and services revenues decreased to $83,000 in the
nine months ended September 30, 2000 from $96,000 in the nine months ended
September 30, 1999, representing a decrease of 14%. The decrease was
primarily due to the discontinued sales of hardware, partially offset by the
increase in costs in delivering professional services.

     NETWORK AND OPERATIONS. Network and operations expenses include salaries,
benefits, allocated facility and management information systems costs, costs of
co-location of network equipment and leased telecommunication lines, and
depreciation on network equipment. Network and operations expenses increased to
$2.2 million in the three months ended

                                       9
<PAGE>

September 30, 2000 from $864,000 in the three months ended September 30, 1999,
representing an increase of 151%. Network and operations expenses increased to
$5.3 million in the nine months ended September 30, 2000 from $2.0 million in
the nine months ended September 30, 1999, representing an increase of 164%. The
increases were due to higher levels of business activity and higher costs
associated with the expansion of our customer support and network operation
centers to a 24 hours-a-day, seven days-a-week basis. We expect that network and
operations expenses will continue to increase in absolute dollars as we expand
our network infrastructure to meet anticipated increases in transaction
processing volume.

     RESEARCH AND DEVELOPMENT. Research and development expenses include
salaries, benefits and recruiting costs of employees and outside consultants, as
well as quality assurance, allocated facility and depreciation costs. Research
and development expenses increased to $2.8 million in the three months ended
September 30, 2000 from $2.4 million in the three months ended
September 30, 1999, representing an increase of 14%. Research and development
expenses increased to $8.0 million in the nine months ended
September 30, 2000 from $5.9 million in the nine months ended
September 30, 1999, representing an increase of 37%. The increases were
primarily due to the continuing development of future versions of our GRIC
Convergent Services Platform software, also known as GRIC CSP. To date, all
software development costs have been expensed in the period incurred. We
believe that continued investment in research and development is critical to
achieving our strategic objectives. We expect the dollar amount of research
and development expenses to increase in the future.

     SALES AND MARKETING. Sales and marketing expenses include salaries,
benefits and commissions earned by sales and marketing personnel, allocated
facility, management information systems and depreciation costs, costs for
marketing and promotional programs, and costs associated with our domestic and
international sales offices. Sales and marketing expenses increased to
$3.3 million in the three months ended September 30, 2000 from $2.3 million
in the three months ended September 30, 1999, representing an increase of
46%. Sales and marketing expenses increased to $9.4 million in the nine
months ended September 30, 2000 from $5.8 million in the nine months ended
September 30, 1999, representing an increase of 61%. The increases reflect
the hiring of additional personnel to expand our geographic coverage and to
support the growth of both our Internet telephony and Internet roaming
transactions. We expect the dollar amount of sales and marketing expenses to
increase in the future as we seek to expand our customer base and increase
brand awareness.

     GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
general corporate and facility costs as well as salary, benefits and related
costs for executive, finance, legal, administrative, human resources, investor
relations and management information systems functions, as well as provisions
for uncollectible receivables. General and administrative expenses increased to
$2.3 million in the three months ended September 30, 2000 from $1.4 million in
the three months ended September 30, 1999, representing an increase of 66%.
General and administrative expenses increased to $6.2 million in the nine months
ended September 30, 2000 from $3.3 million in the nine months ended September
30, 1999, representing an increase of 89%. The increases reflect the hiring of
additional personnel, including key executives, and consultants to provide the
infrastructure to support future growth, as well as increases in the provision
for uncollectible receivables. We expect that general and administrative
expenses will continue to increase in absolute dollars in the future as a result
of the continued expansion of our administrative staff and the expenses
associated with being a public company, including annual and other public
reporting costs, directors' and officers' liability insurance premiums, investor
relations programs and professional services fees.

     OTHER EXPENSE REVERSALS. Other expense reversals in the third quarter 1999
of $925,000 reflects a reduction of a previously expensed commitment to purchase
software, as a result of the completion of a settlement agreement with the
software vendor. The previous expense was recorded in the fourth quarter of 1998
when we determined that the software product was not salable and expensed
$1.5 million.

     AMORTIZATION OF STOCK-BASED COMPENSATION. Some stock options previously
granted through December 14, 1999 are considered compensatory because the
estimated fair value for accounting purposes was greater than the stock option
exercise price as determined by the board of directors on the date of grant. As
a result, we have recorded expenses of $107,000 in the three months ended
September 30, 2000 and $320,000 in the nine months ended September 30, 2000
relating to the amortization of deferred compensation expense. We had an
aggregate of $1.2 million of deferred compensation remaining to be amortized at
September 30, 2000. Deferred compensation is amortized on a straight-line basis
over the vesting period of the options. We expect amortization of approximately
$427,000 in each of fiscal 2000, 2001, and 2002, and $198,000 in fiscal 2003.

INTEREST INCOME AND OTHER, NET

     Interest income and other, net, primarily represents interest income on
cash balances. Interest income and other, net, increased to $908,000 in the
three months ended September 30, 2000 from $139,000 in the three months ended
September 30, 1999. Interest

                                       10
<PAGE>

income and other, net, increased to $3.0 million in the nine months ended
September 30, 2000 from $298,000 in the nine months ended September 30, 1999.
The increases were due to higher average cash balances during the quarter
resulting from the Company's initial public offering in December 1999.

INTEREST EXPENSE

     Interest expense consists of amortization of the fair value of warrants
issued in connection with our financing activities and interest expense
associated with capital leases and bridge financing. Interest expense decreased
to $46,000 in the three months ended September 30, 2000 from $51,000 in the
three months ended September 30, 1999. Interest expense decreased to $134,000 in
the nine months ended September 30, 2000 from $1.3 million in the nine months
ended September 30, 1999. The decrease was primarily due to the reduction in
warrant expense from $922,000 to $12,000, as well as the conversion of bridge
loans to preferred stock in the second quarter of 1999.

INCOME TAXES

     The provision for income taxes increased to $38,000 in the three months
ended September 30, 2000 from $20,000 in the three months ended
September 30, 1999. The provision for income taxes increased to $115,000 in
the nine months ended September 30, 2000 from $38,000 in the nine months
ended September 30, 1999. The provision for income taxes consists of foreign
taxes.

LIQUIDITY AND CAPITAL RESOURCES

     OPERATING ACTIVITIES. Net cash used in operating activities was
$19.6 million and $13.3 million in the nine months ended September 30, 2000
and 1999, respectively. Net cash used in operating activities in the nine
months ended September 30, 2000 and 1999 was primarily a result of net
operating losses.

     INVESTING ACTIVITIES. Net cash used in investing activities was
$19.6 million and $1.7 million in the nine months ended September 30, 2000
and 1999, respectively. Our recent investing activities have consisted
primarily of purchases of short-term investments arising from the funds
received from the Company's initial public offering. Other uses of cash in
investing activities consisted of purchases of computer hardware, relating to
the network infrastructure, and of computer hardware and software, for our
increasing employee base. We expect that capital expenditures will increase
due to continued expansion of our network infrastructure as well as our
increasing employee base.

     FINANCING ACTIVITIES. Net cash provided by financing activities was
$1.2 million and $23.8 million in the nine months ended September 30, 2000
and 1999, respectively. In the nine months ended September 30, 2000, the
financing activity consisted primarily of the exercise of stock options. In
the nine months ended September 30, 1999, the financing activity consisted
primarily of the issuance of our Series D preferred stock, raising
$25.2 million net of issuance costs and interest expense.

    COMMITMENTS. We lease all of our facilities under operating leases that
expire at various dates through 2003. As of September 30, 2000, we had
$2.5 million in future operating lease commitments and $1.3 million of
capital lease obligations and equipment promissory notes.

     SUMMARY OF LIQUIDITY. We believe that the existing cash, cash equivalents
and short-term investments will be sufficient to meet our working capital
requirements for at least the next 12 months. We may require additional funds to
support our working capital requirements or for other purposes and may seek to
raise these additional funds through public or private debt or equity financing
or from other sources. There can be no assurance that additional funding will be
available at all or that if available such financing will be obtainable on terms
favorable to the Company.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities, Deferral of the effective date of SFAS No.
133, which amends the effective date of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 is effective for fiscal years beginning after
June 15, 2000 and is not anticipated to have an impact on the Company's results
of operations or financial condition when adopted as the Company holds no
derivative financial instruments and does not currently engage in hedging
activities.

                                       11
<PAGE>

     In December 1999, the SEC released SAB No. 101, Revenue Recognition in
Financial Statements, as amended by SAB No. 101A and No. 101B, which provides
guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB No. 101 outlines the basic
criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition policies. In October 2000, the SEC
issued further guidance with respect to adoptions of specific views addressed
by SAB No. 101. We are currently reviewing the impact of SAB No. 101 and will
adopt SAB No. 101 in the fourth quarter of 2000.

     In March 2000, the FASB issued Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25. This Interpretation clarifies the application of Opinion No.
25 for certain issues including: (a) the definition of employee for purposes
of applying Opinion No. 25, (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting consequence of
various modifications to the terms of a previously fixed stock option or
award, and (d) the accounting for an exchange of stock compensation awards in
a business combination. The adoption of Interpretation No. 44 did not have a
material effect on our results of operations, financial position, or cash
flows.

FACTORS THAT MAY AFFECT FUTURE RESULTS

     In addition to other information in this Quarterly Report on Form 10-Q, the
following factors may affect the Company's future operating results.

OUR OPERATING HISTORY IS MORE LIMITED THAN THAT OF MANY OTHER COMPANIES, SO YOU
MAY FIND IT DIFFICULT TO EVALUATE OUR BUSINESS IN MAKING AN INVESTMENT DECISION.

     We have limited experience in developing and providing our products and
services. Since our inception, we have had limited revenues from our current
Internet-based communications software products and services, and have never
generated revenues from licensing our GRIC Convergent Services platform
Software, or GRIC CSP Software, as a separately licensed product. Many members
of our senior management team and other employees have worked with us for
only a short period of time. Consequently, we have not demonstrated that our
business can succeed.

WE HAVE NOT BEEN PROFITABLE TO DATE, AND WE ANTICIPATE CONTINUED LOSSES FOR THE
FORESEEABLE FUTURE.

     To date, we have not been profitable. When we will achieve profitability
and whether we can sustain it is uncertain. We expect to incur operating losses
for the foreseeable future. In particular, we expect to continue to invest
heavily in research and development and sales and marketing, and we expect to
face pressure to adopt new pricing arrangements, including volume discounts,
that may lower our gross margins. If revenues do not meet levels we anticipate,
or if our costs and expenses exceed our expectations, we will continue to
sustain losses, and our business and the price of our common stock may be
harmed.

IF WE FAIL TO DEVELOP GRIC CSP SOFTWARE PRODUCTS OR WE OR OTHERS FAIL TO DEVISE
AN APPROPRIATE PRICING MODEL FOR THESE PRODUCTS, WE ARE UNLIKELY TO ACHIEVE OUR
REVENUE GOALS.

     Our future growth and profitability, if any, depend to a great extent on
our being able to develop and market future versions of our GRIC CSP software
that can be licensed to current and potential customers as separate products.
This is a complex, long-term development effort in a rapidly changing and
competitive arena. We may not be able to complete the effort successfully or in
a timely fashion, particularly given our lack of experience in development
projects of this magnitude.

     Even if we succeed in developing future versions of our GRIC CSP software,
we do not know whether they will achieve market acceptance at all or, if they
do, that they will support the pricing levels or generate the revenues we
anticipate. We have not yet established pricing for any GRIC CSP software
products or related services. We have limited experience with the
transaction-based revenue models that we hope to use with our GRIC CSP software.
If we fail to establish a pricing model acceptable to our customers, our GRIC
CSP software products will not be commercially successful. Further, we do not
know whether third-party developers of Internet communications applications will
be willing to develop new applications that interface with our GRIC CSP software
platform, or that we will be able to develop any applications of this type
ourselves. If no such applications are developed, our GRIC

                                       12
<PAGE>

CSP software will not achieve market acceptance. These uncertainties make it
difficult to make any judgment about our future business prospects.

OUR SUCCESS DEPENDS ON OUR ABILITY TO MAINTAIN AND INCREASE OUR CUSTOMER BASE.

     Our goal of achieving profitability depends on our ability to maintain and
expand our customer base. However, our customers are generally free to use
competing products and services, and the costs of switching are low, so we could
face significant customer losses. Our customers are generally not obligated to
generate minimum revenues, and some generate very little revenue for us. These
factors make it difficult to anticipate what our future revenues from existing
customers will be. In addition, our success depends on our ability to expand our
customer base. If we lose any significant customer or are unable to expand our
customer base and to increase our average revenues per customer, our business
will be harmed.

WE DEPEND ON OUR CUSTOMERS TO MARKET NEW INTERNET-BASED SERVICES TO THEIR END
USERS, SO OUR REVENUES DEPEND ON THE ACTIVITIES OF OTHERS AND THE MARKET
ACCEPTANCE OF THOSE NEW SERVICES.

     Our business depends on the efforts and success of our customers in
marketing Internet-based services to their end users. Our ability to promote
those services is limited. Many Internet-based services, such as Internet
telephony, are new and have not achieved widespread acceptance in the
marketplace. As a result, our customers may be reluctant to promote these
services until they gain greater commercial acceptance, which may never occur.
If our customers fail to market Internet-based services effectively, for any
reason, our revenues would be reduced.

WE FACE SIGNIFICANT COMPETITION IN THE MARKETS IN WHICH WE OPERATE, INCLUDING
COMPETITION FROM LARGE TELEPHONE COMPANIES, WHICH COULD MAKE IT MORE DIFFICULT
FOR US TO SUCCEED.

     There are low barriers to entry by new or existing businesses seeking to
offer services on the Internet. As a result, our business environment is
intensely competitive, highly fragmented and rapidly changing. Competition can
come from many sources and may be focused on different parts of our business.
For example, we compete directly with iPass in the market for Internet roaming
and related settlement services, and iPass has a network that competes with our
global network of our customers we call the GRIC Alliance. Our competitor,
Transnexus, offers a software-based clearinghouse solution that, like our
Convergent Services Platform, operates in multiple hardware and software
environments. Providers of Internet telephony services, such as iBasis and ITXC,
compete with our Internet telephony offerings. Potential competitors to future
stand-alone products based on GRIC CSP software may include independent software
vendors and vendors of operations support system software, such as Cap Gemini
Ernst & Young, EDS and Lucent Technologies. Large telephone companies such as
AT&T and MCI Worldcom have the ability and resources to compete in any or all of
our markets or future markets if they choose to do so.

     Many of our competitors have substantially greater resources, larger
customer bases, longer operating histories, greater name recognition and more
established relationships in the industry than we have. Any of these competitors
may combine or form strategic partnerships, gaining competitive advantages as a
result. Our competitors may be able to develop and market products and services
that are superior to our own in terms of features, quality, pricing or other
factors. In that event, our products and services may not achieve the market
acceptance necessary for us to achieve success.

IF WE ARE UNABLE TO MANAGE RAPID GROWTH, THE GRIC ALLIANCE AND OUR PRODUCT
DEVELOPMENT EFFORTS EFFECTIVELY, OUR BUSINESS AND THE PRICE OF OUR STOCK WILL BE
HARMED.

     In recent periods, rapid growth of the GRIC Alliance and acceleration of
our product development efforts have strained our network operations, product
development and other managerial, operating and financial resources. We expect
these strains to continue if we continue our growth, and our financial
performance and our ability to compete effectively will depend, in part, on our
ability to manage any future growth effectively. To that end, we must:

         -   manage our research and development efforts;

         -   expand the capacity, scalability and performance of our network and
             software infrastructure;

         -   develop our administrative, accounting and management information
             systems and controls;

         -   improve coordination among our engineering, accounting, finance,
             marketing and operations personnel; and

         -   hire and train additional qualified personnel.

     We may not be able to accomplish these tasks, which would harm our business
and the price of our stock.


                                       13
<PAGE>


INTERNET TELEPHONY HAS NOT ACHIEVED, AND MAY NEVER ACHIEVE, WIDESPREAD MARKET
ACCEPTANCE.

     Using Internet telephony for voice traffic may never achieve widespread
acceptance. The Internet telephony market is relatively new; according to a
recent Probe Research Report, less than 1% of all voice minutes worldwide are
currently transmitted over Internet-based networks. We expect both
telecommunications companies and telephone users to resist changing to
Internet-based telephony unless it offers clear benefits. Historically, the
sound quality of Internet telephone calls has not been toll quality. Due to
capacity constraints on the Internet over which Internet telephone calls
travel, callers sometimes experience transmission delays or transmission
errors. If Internet telephone calls do not achieve commercial acceptance at
all or as soon as anticipated, our efforts to increase our Internet telephone
call business, which is key to our business strategy, could suffer.

THE SUCCESS OF OUR INTERNET TELEPHONY BUSINESS DEPENDS ON RELATIONSHIPS WITH
THIRD PARTIES, WHICH MAY BE DIFFICULT TO ESTABLISH AND MAINTAIN.

     The development of our Internet telephony business will depend on our
ability to establish and maintain strategic relationships with technology
leaders. For example, we must maintain compatibility of our products with the
Internet telephony equipment of Lucent Technologies and Cisco Systems since they
are currently the most significant manufacturers of Internet telephony
equipment. We must also remain compliant with industry standards set by third
parties. Further, to increase traffic for our Internet telephony service, we
must continue to make arrangements with third parties to originate and terminate
customer calls and to expand our network. If we fail to develop and maintain
relationships of this sort, we will be unable to increase our Internet telephony
business, which is key to our business strategy.

WE EXPECT THE PRICING ADVANTAGE OF INTERNET TELEPHONY TO DECLINE, WHICH WOULD
HAMPER OUR EFFORTS TO EXPAND THIS KEY COMPONENT OF OUR BUSINESS.

     Today, Internet telephony generally enjoys a price advantage over
traditional international long distance rates. We expect this price differential
to decline, and it may decline more rapidly than we expect. If prices of
traditional international long distance calls decline to a point where Internet
telephony no longer offers a price advantage, Internet telephony will lose an
important competitive advantage and the prospects for this key component of our
business will decline.

OUR INTERNET TELEPHONY REVENUE IS CONCENTRATED IN ONLY A SMALL NUMBER OF
CUSTOMERS, THE LOSS OF ANY ONE OF WHICH COULD HARM OUR REVENUES AND
PROFITABILITY.

     Only a small number of customers originate or terminate Internet telephone
calls using our Internet telephony services. The loss of any of these customers
could have a material adverse effect on our Internet telephony business because
it would be difficult to replace that business. Future growth depends in large
part on our ability to establish relationships with new customers wishing to
originate or terminate Internet telephone calls and to expand the volume of
Internet telephone calls originated and terminated by our existing customers.

OUR CUSTOMERS REQUIRE A HIGH DEGREE OF RELIABILITY IN THE DELIVERY OF OUR
SERVICES, AND IF WE CANNOT MEET THEIR EXPECTATIONS FOR ANY REASON, DEMAND FOR
OUR PRODUCTS AND SERVICES WILL SUFFER.

     Our success depends in large part on our ability to assure generally
error-free clearinghouse services, uninterrupted operation of our network and
software infrastructure, and a satisfactory experience for our customers' end
users when they use Internet-based communications services. To achieve these
objectives, we depend on the quality, performance and scalability of our
products and services, the responsiveness of our technical support and the
capacity, reliability and security of our network operations. We also depend on
third parties over which we have no control. For example, our ability to serve
approximately 60 countries is based solely on our network access agreement with
one service provider and on that service provider's ability to provide reliable
Internet access points in those countries. In the past, we have experienced
problems due to our inability to detect system malfunctions and due to errors in
collecting or processing account usage and settlement data. Due to the high
level of performance required for critical communications traffic, any failure
to deliver a satisfactory experience to end users, whether or not caused by our
own failures, and any failure to provide accurate settlement data in connection
with acting as a clearinghouse, could reduce demand for our products and
services.

AS A CLEARINGHOUSE, WE HAVE GREATER COLLECTION RISKS THAN MANY OTHER COMPANIES.

     Difficulties in collecting accounts receivable will harm our financial
results, and this collection risk is inherently greater for us as

                                       14
<PAGE>

a clearinghouse service provider because we are obligated to pay amounts owed to
each customer whether or not we have collected all the amounts due to us from
other customers. In addition, if end users or unauthorized third parties engage
in unauthorized or otherwise fraudulent roaming or telephony activity, we may
face difficulty collecting the resulting accounts receivable. If we are not able
to manage this problem, our financial results will suffer.

IF WE ARE UNABLE TO DEVELOP AND INTRODUCE NEW PRODUCTS AND SERVICES, WE WILL BE
LESS LIKELY TO ATTRACT OR RETAIN CUSTOMERS.

     We expect the market for Internet communications products and services to
continue to change rapidly. To succeed, we will be required to adapt to those
changes by improving and enhancing our existing products and services, and
developing and introducing new products and services. We have not demonstrated
that we can consistently develop and market product enhancements and new
products or services on a timely or on a cost-effective basis. On several
occasions, we have altered the course of our product development efforts or
discontinued products after their introduction, which has resulted in delays and
increased research and development expenses. If we fail to produce
technologically competitive products and services in a cost-effective manner and
on a timely basis, our business will be harmed.

OUR OPERATING RESULTS FLUCTUATE AND ARE DIFFICULT TO PREDICT, SO WE MAY FAIL TO
SATISFY THE EXPECTATIONS OF INVESTORS OR MARKET ANALYSTS AND OUR STOCK PRICE MAY
DECLINE.

     Our quarterly operating results have fluctuated in the past, and we expect
them to continue to fluctuate in the future. Factors that cause these
fluctuations, many of which are beyond our control, include:

         -   the volume of transaction-based revenues;

         -   management of growth;

         -   the rate at which customers use our services;

         -   our dependence on the timely and successful launch of future
             products, including future versions of our stand-alone GRIC CSP
             software products;

         -   the mix of services used by our customers' end users;

         -   economic conditions specific to the Internet, as well as general
             economic and market conditions;

         -   our ability to avoid problems in managing the GRIC Alliance
             network;

         -   intense competition;

         -   our ability to collect accounts receivable; and

         -   the domestic and international regulatory environment.

     Business models relying on the Internet to provide Internet-based
communications services are still evolving. As a result, we believe that
period-to-period comparisons of our historical operating results are not
meaningful. Additionally, if our operating results in one or more quarters do
not meet or exceed securities analysts' or market expectations, the price of our
common stock is likely to decline.

OUR LONG SALES CYCLE MAKES IT PARTICULARLY DIFFICULT FOR US TO FORECAST
REVENUES, REQUIRES US TO INCUR HIGH COSTS OF SALES, AND AGGRAVATES FLUCTUATIONS
IN QUARTERLY FINANCIAL RESULTS.

     Our business is characterized by a long sales cycle between the time a
potential customer is contacted and a new customer relationship is established,
and between the time the new customer is won and when we begin to realize
significant transaction-based revenues. In part this is because the markets for
Internet-based communications services are new and demand is uncertain. This
makes it difficult for us to predict future revenues. In addition, we incur
substantial sales costs before we win a customer or recognize any related
revenues, which increases the volatility of our results because we may have high
costs without associated offsetting revenues.

                                       15
<PAGE>

BECAUSE MUCH OF OUR BUSINESS IS CONDUCTED INTERNATIONALLY, WE ENCOUNTER SPECIAL
PAYMENT AND REGULATORY DIFFICULTIES, WHICH MAY REDUCE OUR PROFITABILITY AND HARM
THE PRICE OF OUR COMMON STOCK.

     Because the generation of our revenues is based upon the conduct of
business in multiple countries, we are subject to special risks. Those risks
include:

         -   longer payment cycles for foreign customers, including delays due
             to currency controls and fluctuations;

         -   negative impacts of changes in foreign currency exchange rates;

         -   potentially high taxes in foreign countries;

         -   difficulties complying with a variety of foreign laws, trade
             standards and tariffs and of overcoming trade barriers; and

         -   difficulties complying with telecommunications and other
             Internet-related regulations in many foreign jurisdictions.

     We are also exposed to general geopolitical risks, such as political and
economic instability and changes in diplomatic and trade relationships. Any of
these factors may reduce our profitability and harm the price of our common
stock.

WE NEED TO HIRE AND RETAIN QUALIFIED PERSONNEL TO SUSTAIN THE GROWTH OF OUR
BUSINESS, WHICH IS PARTICULARLY DIFFICULT FOR US BECAUSE WE COMPETE WITH OTHER
INTERNET-RELATED COMPANIES IN THE SAN FRANCISCO BAY AREA WHERE WE ARE BASED.

     Our future success depends, in part, on the continued service of our key
executive, management and technical personnel, many of whom we hired only
recently, and our ability to attract new skilled employees. From time to time we
have experienced difficulty in hiring and retaining highly skilled employees and
executives, and we expect to continue to experience this sort of difficulty.
Competition for employees and executives in our industry is intense,
particularly in the San Francisco Bay area where we are located, and we have
experienced significant attrition. Declines in the market price of our common
stock could also hurt employee morale and retention. If we are not able to
retain our key employees or to attract, assimilate or retain other highly
qualified employees in the future, our business could be harmed because our
growth might be slowed or executive leadership might be disrupted.

LITIGATION ARISING OUT OF INTELLECTUAL PROPERTY INFRINGEMENT OR OTHER COMMERCIAL
DISPUTES COULD BE EXPENSIVE AND DISRUPT OUR BUSINESS.

     We cannot be certain that our products do not, or will not, infringe upon
patents, trademarks, copyrights or other intellectual property rights held by
third parties. In addition, since we rely on third parties to help us develop,
market and support our product and service offerings, we cannot assure you that
litigation will not arise from disputes involving those third parties. From time
to time we have been, and we expect to continue to be, parties to disputes with
these third parties. We may incur substantial expenses in defending against
these claims, regardless of their merit. Successful claims against us may result
in substantial monetary liability, significantly impact our results of
operations in one or more quarters or materially disrupt the conduct of our
business.

WE ANTICIPATE THE NEED FOR ADDITIONAL CAPITAL TO FUND OUR OPERATIONS AND GROWTH;
IF FINANCING IS NOT AVAILABLE ON ACCEPTABLE TERMS, OUR ABILITY TO SUCCEED WILL
BE HAMPERED.

     We expect to be required to raise additional capital to fund our
operations, to finance investments in the equipment and corporate infrastructure
needed for the expansion of our network, to enhance and expand the range of
products and services we offer and to respond to competitive pressures and
perceived opportunities. To date, our cash flow from operations has not been
sufficient to cover our expenses and capital needs, and we cannot assure you
that it will be sufficient in the future. We also cannot assure you that any
financing will be available on terms favorable to us or at all. If adequate
funds are not available on acceptable terms or at all, we may be forced to
curtail or cease our operations.

OUR EXECUTIVE OFFICERS AND DIRECTORS HOLD A SIGNIFICANT PERCENTAGE OF OUR STOCK
AND WILL BE ABLE TO CONTROL MATTERS REQUIRING STOCKHOLDER APPROVAL.

     As of September 30, 2000, our executive officers and directors and their
affiliated entities owned approximately 30% of our outstanding common stock.
Accordingly, these stockholders, acting together, will have a substantial
influence on all matters requiring approval by our stockholders, including the
election of directors and the approval of significant corporate transactions.
This

                                       16
<PAGE>

concentration could also have the effect of delaying or preventing a change in
control of our company.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER AND DEPRESS OUR STOCK PRICE.

     Provisions of our certificate of incorporation, bylaws and Delaware law
make it difficult for a third party to acquire us, despite the possible benefit
to our stockholders, and this may potentially lower the price of our common
stock. These provisions of our certificate of incorporation and bylaws:

         -   authorize the board to issue preferred stock without stockholder
             approval;

         -   prohibit cumulative voting in the election of directors;

         -   limit the persons who may call special meetings of stockholders;
             and

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

     In addition, we may adopt a shareholder rights plan, or "poison pill," and
we have elected to remain subject to the anti-takeover provisions of the
Delaware General Corporation Law. These factors may discourage takeover
attempts.

OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD LEAD TO LOSSES BY INVESTORS WHICH
COULD LEAD TO SHAREHOLDER LAWSUITS.

     The stock market frequently experiences extreme price and volume
fluctuations. In particular, the market prices of the securities of
Internet-related companies have been especially volatile recently, and often
these fluctuations have been unrelated or disproportionate to operating
performance. This increases the risk that if you wish to sell our stock the
market price may be lower than the price at which you may have purchased our
stock. If the market value of our stock experiences adverse fluctuations and we
become involved in class actions lawsuits by security holders, we could incur
substantial legal costs and management's attention could be diverted, to the
detriment of our operations and results.

     We expect the market price for our common stock to continue to be subject
to wide fluctuations as a result of factors including:

         -   quarterly variations in our operating results;

         -   announcements of technological innovations by us or our
             competitors;

         -   announcements of new products or services by us or our competitors;

         -   investor perception of us, the market for Internet-based
             communications services or the Internet in general;

         -   changes in financial estimates by securities analysts; and

         -   general economic and market conditions.

     In addition, the market price of our common stock could decrease as a
result of sales of substantial amounts of common stock in the public market or
the perception that substantial sales could occur.

FUTURE DEVELOPMENTS IN INTERNET-BASED COMMUNICATIONS SERVICES, WHICH ARE
CRITICAL TO OUR SUCCESS, ARE UNCERTAIN.

     For us to increase our revenues, the Internet must be validated as an
effective medium for the delivery of Internet roaming, Internet telephony and
other Internet-based communications services. The infrastructure of the public
Internet may not be able to support increased demands placed on it, and the
performance of the Internet may be adversely affected. Our business will be
harmed if the Internet does not continue to grow as a telecommunications medium,
and that growth may be inhibited by factors such as:

         -   unreliability of the Internet infrastructure;

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<PAGE>

         -   inability of vendors to develop Internet networking equipment that
             offers telecommunications-grade communications services over the
             Internet;

         -   security concerns;

         -   new regulatory requirements;

         -   inconsistent quality of service; and

         -   lack of availability of cost-effective service.

SECURITY CONCERNS MAY DETER THE USE OF THE INTERNET FOR INTERNET-BASED
COMMUNICATIONS WHICH WOULD REDUCE DEMAND FOR OUR PRODUCTS AND SERVICES.

     The secure transmission of confidential information over public networks is
a significant barrier to widespread adoption of electronic commerce and
internet-based communications. The Internet is a public network and information
is sent over this network from many sources. Advances in computer capabilities,
new discoveries in the field of cryptography or other developments could result
in compromised security on our network or the networks of others. If any
well-publicized compromises of confidential information were to occur, it could
reduce demand for Internet-based communications and our products and services.

U.S. OR FOREIGN GOVERNMENTAL REGULATIONS REGARDING INTERNET TELEPHONY OR THE
INTERNET GENERALLY MAY BE ENACTED, WHICH COULD IMPEDE OUR BUSINESS.

     To date, governmental laws and regulations applicable to access to or
commerce on the Internet or use of the Internet to provide telephone service
have not materially restricted use of the Internet in our markets. However, the
legal and regulatory environment that pertains to the Internet is uncertain and
may change. For example, the Federal Communications Commission has at times
considered proposals to impose surcharges or other common carrier regulations
upon direct providers of Internet telephony to end users located within the U.S.
It is also possible that the FCC may adopt a regulatory framework, other than
traditional common carrier regulation, that would apply to Internet telephony
providers. In addition, Congress and other federal entities have adopted or are
considering other legislative and regulatory proposals that would further
regulate the Internet. Further, a number of foreign countries prohibit Internet
telephony or permit but regulate Internet telephony. Other foreign countries
have considered or are considering whether to regulate Internet telephony. The
European Union has also enacted several directives relating to the Internet,
including one which affects U.S. companies that collect or transmit information
over the Internet from individuals in European Union member states. New domestic
or foreign taxes could also be adopted that would apply to the delivery or use
of communications services over the Internet. Uncertainty about and adoption of
new regulations could increase our costs of doing business, or prevent us from
delivering our products and services over the Internet or significantly slow the
growth of the Internet. This could delay growth in demand for our products and
services and harm our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     FOREIGN CURRENCY RISK. We have limited exposure to financial market risks,
including changes in foreign currency exchange rates and interest rates.
Although we have foreign operations in Europe and Asia, to date, our exposure to
foreign currency fluctuations has not been significant.

     INTEREST RATE RISK. The Company's exposure to interest rate risk relates
primarily to its investment portfolio and debt obligations. Interest rate risk
occurs when the Company cannot hold a purchased investment to its maturity. The
Company limits the weighted-average maturity of its investment portfolio to 90
days. The Company has the intent to hold its securities until maturity and,
therefore, does not expect to recognize an adverse impact on income or cash
flows, although there can be no assurance of this. The Company has established
policies and business practices regarding its investment portfolio to preserve
principal while obtaining reasonable rates of return without significantly
increasing risk. The Company places investments with high credit quality issuers
according to the Company's investment policy. We do not use derivative financial
instruments in our investment portfolio. All investments are carried at fair
market value. Due to the short-term nature of our investments and the immaterial
amount of our debt obligation, we believe that there is no material exposure to
interest rate fluctuation. Therefore, no accompanying table has been provided.

                                       18
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     The Company is subject to various legal proceedings and claims arising in
the ordinary course of business. The Company's management does not expect that
the results in any of these legal proceedings will have a material adverse
effect on the Company's financial condition, results of operations, or cash
flows.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     On December 14, 1999, a registration statement on Form S-1 (No. 333-87497)
was declared effective by the Securities and Exchange Commission, pursuant to
which 5,290,000 shares of our common stock were offered and sold for our account
at a price of $14.00 per share, generating gross proceeds of approximately
$74.0 million. Each outstanding share of preferred stock was automatically
converted into one share of common stock upon the closing of the initial
public offering. The managing underwriters were CIBC World Markets, U.S.
Bancorp Piper Jaffray and Prudential Volpe Technology.

     In connection with the offering, we incurred $5.2 million in underwriting
discounts and commissions, and $2.0 million in other related expenses. The net
proceeds from the offering, after deducting the foregoing expenses, were
$66.8 million. From the effective date of the registration statement through
September 30, 2000, the Company applied $24.7 million of the proceeds towards
short-term investments, $7.9 million of the proceeds towards capital
expenditures and the balance of the proceeds to working capital.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

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

     Not applicable

ITEM 5. OTHER INFORMATION

     Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS

     The following exhibits are filed herewith or incorporated by reference
herein:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER              DESCRIPTION
------              -----------
<S>                <C>
      10.25         Offer letter dated July 27, 2000 by the Registrant to
                    Stanley Hayami.
      10.26         Offer letter dated September 21, 2000 by the Registrant to
                    Bharat Dave.
      27.1          Financial Data Schedule (EDGAR only).
</TABLE>

(b)   REPORTS ON FORM 8-K

     No reports on Form 8-K were filed for the three months ended
September 30, 2000.

                                       19
<PAGE>


                                    SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 14, 2000.


<TABLE>
<S>                                   <C>
                                        GRIC COMMUNICATIONS, INC.


                                                                 /s/ JOSEPH M. ZAELIT
                                         ------------------------------------------------------------------
                                                                   Joseph M. Zaelit
                                                 Senior Vice President, Finance and Administration and
                                                               Chief Financial Officer
                                                             (Principal Financial Officer)



                                                                 /s/ KIM S. SILVERMAN
                                         ------------------------------------------------------------------
                                                                   Kim S. Silverman
                                                                 Corporate Controller
                                                            (Principal Accounting Officer)
</TABLE>



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