<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 MARCH 31, 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 May
8, 2000 was 19,274,064 shares.

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

<PAGE>

<TABLE>
<CAPTION>
                            GRIC COMMUNICATIONS, INC.

                                      INDEX

                                                                                                                          PAGE NO.
                          PART I. FINANCIAL INFORMATION

<S>               <C>                                                                                                       <C>
  Item 1.         Condensed Consolidated Financial Statements..........................................................      3
                  Condensed Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999.....................      3
                  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and 1999...      4
                  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 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...........................................     17

                           PART II. OTHER INFORMATION

  Item 1.         Legal Proceedings....................................................................................     18
  Item 2.         Changes in Securities and Use of Proceeds............................................................     18
  Item 3.         Defaults Upon Senior Securities......................................................................     18
  Item 4.         Submission of Matters to a Vote of Security Holders..................................................     18
  Item 5.         Other Information....................................................................................     18
  Item 6.         Exhibits and Reports on Form 8-K.....................................................................     18
  SIGNATURE............................................................................................................     19
</TABLE>


                                       2
<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.       CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                            GRIC COMMUNICATIONS, INC.

<TABLE>
<CAPTION>
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


                                                                                                       Mar. 31,        Dec. 31,
                                                                                                         2000            1999(1)
                                                                                                     -------------    ------------
ASSETS                                                                                               (Unaudited)
<S>                                                                                                   <C>             <C>
CURRENT ASSETS:
     Cash and cash equivalents.................................................................          $50,171         $ 64,655
     Short-term investments....................................................................           18,649           13,030
     Accounts receivable, net of allowances of $750 and $701 at
         March 31, 2000 and December 31, 1999, respectively....................................            3,103            2,596
     Other current assets......................................................................              667              401
                                                                                                     -----------      -----------

Total current assets...........................................................................           72,590           80,682
Property and equipment, net....................................................................            6,321            4,404
Other assets...................................................................................              272              291
                                                                                                     -----------      -----------

         Total assets..........................................................................         $ 79,183         $ 85,377
                                                                                                     ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable..........................................................................          $ 5,819          $ 5,302
     Accrued compensation and benefits.........................................................            1,665            1,620
     Other current liabilities.................................................................              828              829
     Current portion of long-term debt and capital lease obligations...........................              640              626
                                                                                                     -----------      -----------

Total current liabilities......................................................................            8,952            8,377
Long-term debt and capital lease obligations...................................................            1,000            1,147
Commitments and contingencies
Stockholders' equity:
     Preferred stock, 5,000 shares authorized at March 31, 2000 and December 31, 1999,
         respectively; no shares issued and outstanding........................................               --               --
     Common stock, $0.001 par value; 50,000 shares authorized; 19,242 and 19,162 shares issued
         and outstanding at March 31, 2000 and December 31, 1999, respectively.................               19               19
     Additional paid-in capital................................................................          125,264          125,057
     Deferred stock-based compensation.........................................................          (1,372)          (1,479)
     Accumulated comprehensive loss............................................................             (18)               --
     Accumulated deficit.......................................................................         (54,662)         (47,744)
                                                                                                     -----------      -----------

         Total stockholders' equity............................................................           69,231           75,853
                                                                                                     -----------      -----------

         Total liabilities and stockholders' equity............................................         $ 79,183         $ 85,377
                                                                                                     ===========      ===========
</TABLE>

(1)  Amounts as of December 31, 1999 were derived from the audited
     consolidated financial statements at that date but does 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.

<TABLE>
<CAPTION>
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                                                                                                          Three Months Ended
                                                                                                     -----------------------------
                                                                                                       Mar. 31,         Mar. 31,
                                                                                                         2000             1999
                                                                                                     -------------    ------------
<S>                                                                                                   <C>              <C>
Revenues:
     Settlement................................................................................          $ 4,968            $ 736
     Software and other........................................................................              234              431
                                                                                                     -----------      -----------

         Total Revenues........................................................................            5,202            1,167
Costs and Expenses:
     Cost of settlement revenues...............................................................            4,611              631
     Cost of software and other revenues.......................................................               --               25
     Network and operations (1)................................................................            1,347              561
     Research and development (2)..............................................................            2,466            1,458
     Sales and marketing (3)...................................................................            2,915            1,645
     General and administrative (4)............................................................            1,701              924
     Amortization of stock-based compensation..................................................              107               24
                                                                                                     -----------      -----------

         Total costs and expenses..............................................................           13,147            5,268
                                                                                                     -----------      -----------

Operating loss.................................................................................          (7,945)          (4,101)
Interest income and other, net.................................................................            1,108               40
Interest expense...............................................................................             (53)            (391)
                                                                                                     -----------      -----------

Loss before income taxes.......................................................................          (6,890)          (4,452)
Provision for income taxes.....................................................................               28                8
                                                                                                     -----------      -----------

Net loss.......................................................................................        $ (6,918)        $ (4,460)
                                                                                                     ===========      ===========

Basic and diluted net loss per share...........................................................         $ (0.36)         $ (2.27)
                                                                                                     ===========      ===========

Shares used to compute basic and diluted net loss per share....................................           19,163            1,967
                                                                                                     ===========      ===========
</TABLE>


(1) Excludes $2 and $0, separately stated in amortization of stock-based
    compensation, for the three months ended March 31, 2000 and 1999,
    respectively.

(2) Excludes $43 and $9, separately stated in amortization of stock-based
    compensation, for the three months ended March 31, 2000 and 1999,
    respectively.

(3) Excludes $17 and $3, separately stated in amortization of stock-based
    compensation, for the three months ended March 31, 2000 and 1999,
    respectively.

(4) Excludes $45 and $12, separately stated in amortization of stock-based
    compensation, for the three months ended March 31, 2000 and 1999,
    respectively.


                             See accompanying notes


                                       4
<PAGE>



                            GRIC COMMUNICATIONS, INC.

<TABLE>
<CAPTION>
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                                                                                          Three Months Ended
                                                                                                     -----------------------------
                                                                                                       Mar. 31,        Mar. 31,
                                                                                                         2000            1999
                                                                                                     -------------    ------------
<S>                                                                                                   <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................................................................        $  (6,918)        $ (4,460)
     Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation and amortization of property and equipment...............................              760              352
         Amortization of stock-based compensation..............................................              107               24
         Noncash interest expense..............................................................               --              100
         Noncash warrant expenses - preferred stock............................................                4              166
         Noncash warrant expenses - common stock...............................................               34               23
     Net changes in assets and liabilities:
         Accounts receivable...................................................................             (507)            (629)
         Inventories...........................................................................               --               31
         Other current assets..................................................................             (266)             (73)
         Accounts payable......................................................................              517             (687)
         Accrued compensation and benefits.....................................................               45              106
         Other current liabilities.............................................................               (1)             170
         Other assets..........................................................................              (19)              --
         Other long-term liabilities...........................................................               18               28
                                                                                                     -----------      -----------

              Net cash used in operating activities............................................           (6,226)          (4,849)
                                                                                                     -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Available-for-sale investments:
         Purchases.............................................................................          (16,700)              --
         Sales.................................................................................           11,063               --
     Capital expenditures......................................................................           (2,677)            (128)
                                                                                                     -----------      -----------

              Net cash used in investing activities............................................           (8,314)            (128)
                                                                                                     -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of debt and capital lease obligations.............................................             (151)          (1,511)
     Proceeds from sales of preferred stock....................................................               --           12,450
     Proceeds from sales of common stock, net..................................................              207               --
                                                                                                     -----------      -----------

              Net cash provided by financing activities........................................               56           10,939
                                                                                                     -----------      -----------

Net increase (decrease) in cash and cash equivalents...........................................          (14,484)           5,962
Cash and cash equivalents at beginning of quarter..............................................           64,655            1,362
                                                                                                     -----------      -----------

Cash and cash equivalents at end of quarter....................................................        $  50,171          $ 7,324
                                                                                                     ===========      ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Income taxes paid.........................................................................        $       2          $    --
     Interest paid.............................................................................        $      49          $    52

SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
     Conversion of 1998 bridge notes principal and interest into Series D preferred stock .....        $      --          $ 2,801
</TABLE>



                             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
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with 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 three months ended March 31, 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 GRIC Communications,
Inc. (the "Company") Annual Report on Form 10-K for the year ended December
31, 1999.

2.   NET LOSS PER SHARE

     Basic loss per common share for the three months ended March 31, 2000 and
1999 was computed by dividing the net loss by the weighted average shares
outstanding during the period in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). In accordance
with SFAS 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 2.0 million
and 818,000 shares of common stock for the three months ended March 31, 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.

3.   COMPREHENSIVE LOSS

     The components of comprehensive loss for the three months ended March 31,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>
(in thousands)                                           Three months ended     Three months ended
                                                             March 31, 2000         March 31, 1999
                                                             --------------         --------------
<S>                                                     <C>                    <C>
Net loss                                                            $(6,918)               $(4,460)
Other comprehensive loss:
     Unrealized loss on available-for-sale securities                   (18)                    --
                                                                    --------               --------
Comprehensive loss                                                  $(6,936)               $(4,460)
                                                                    ========               ========
</TABLE>


     The only component of accumulated comprehensive loss at March 31, 2000 was
unrealized loss on available-for-sale securities.



                                       6
<PAGE>

                            GRIC COMMUNICATIONS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

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 and long-lived assets by geographical
area for the periods presented:



<TABLE>
<CAPTION>
(in thousands)                                        Three months ended         Three months ended
                                                          March 31, 2000             March 31, 1999
                                                          --------------             --------------
<S>                                                  <C>                         <C>
Revenue by external customers:
     United States                                                $2,811                       $223
     South East Asia                                                 763                        406
     Japan                                                           472                        203
     Europe                                                          747                        155
     China                                                           193                         81
     Rest of World                                                   216                         99
                                                                  ------                     ------
                                                                  $5,202                     $1,167
                                                                  ======                     ======
</TABLE>



<TABLE>
<CAPTION>
(in thousands)
                                                          March 31, 2000          December 31, 1999
                                                          --------------          -----------------
<S>                                                       <C>                     <C>
Long-lived assets:
     United States                                                $6,097                     $4,223
     Rest of World                                                   224                        181
                                                                  ------                     ------
                                                                  $6,321                     $4,404
                                                                  ======                     ======
</TABLE>


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

5.   COMMITMENTS AND CONTINGENCIES

     The Company is involved in certain claims and may in the future become
involved in claims and legal actions arising in the normal course of
business. Management does not expect that the outcome of these existing
claims will have a material effect on the Company's financial position or
results of operations.

                                       7
<PAGE>

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. These forward-looking
statements include statements that reflect our plans, estimates and beliefs,
based on information available to us at the time of this report. 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 March 31, 2000, we
had an accumulated deficit of approximately $54.7 million. We anticipate that
our operating expenses will increase substantially 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."



                                       8
<PAGE>

RESULTS OF OPERATIONS

FIRST QUARTER ENDED MARCH 31, 2000 COMPARED TO FIRST QUARTER ENDED MARCH 31,
1999

REVENUES

     Total revenues increased 346% to $5.2 million in the three months ended
March 31, 2000 from $1.2 million in the three months ended March 31, 1999. The
primary reason for this growth is increased settlement revenues.

     SETTLEMENT REVENUES. Settlement revenues increased to $5.0 million in the
three months ended March 31, 2000 from $736,000 in the three months ended March
31, 1999, an increase of 575%. This increase reflects 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 decreased to $234,000 in the three months ended March 31, 2000
from $431,000 during the three months ended March 31, 1999, representing a
decrease of 46%. This decrease is primarily due to lower sales of our prepaid
Internet telephony software and discontinued sales of hardware, partially offset
by an increase in revenues of our Internet roaming software and related
maintenance and services.

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 $4.6 million in the three months ended March
31, 2000 from $631,000 in the three months ended March 31, 1999, representing an
increase of 631%. The increase was due to higher sales volumes in our Internet
telephony and Internet roaming services.

     COST OF SOFTWARE AND OTHER REVENUES. Cost of software, hardware and
maintenance and services revenues represents the cost of Internet telephony
equipment. Cost of software, hardware and maintenance and services revenues
decreased to zero in the three months ended March 31, 2000 from $25,000 in
the three months ended March 31, 1999. The decrease is primarily due to the
discontinued sales of hardware.

     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
$1.3 million in the three months ended March 31, 2000 from $561,000 in the three
months ended March 31, 1999, representing an increase of 140%. This increase was
due to higher 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,
quality assurance, allocated facility, management information systems and
depreciation costs. Research and development increased to $2.5 million in the
three months ended March 31, 2000 from $1.5 million in the three months ended
March 31, 1999, representing an increase of 69%. This increase was primarily due
to the continuing development 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, and
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 $2.9
million in the three months ended March 31, 2000 from $1.6 million during the
three months ended March 31, 1999, representing an increase of 77%. This
increase reflects the hiring of additional personnel to expand our geographic
coverage and to support the growth of our Internet telephony service. 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.


                                       9
<PAGE>
     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 $1.7 million in the three months ended March 31, 2000 from
$924,000 for the three months ended March 31, 1999, representing an increase
of 84%. This increase reflects the hiring of additional personnel to provide
the infrastructure to support future growth. 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,
investor relations programs and professional services fees.

     AMORTIZATION OF STOCK-BASED COMPENSATION. Some stock options previously
granted through December 31, 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 for the three
months ended March 31, 2000 relating to the amortization of deferred
compensation expense and had an aggregate of $1.4 million of deferred
compensation remaining to be amortized at March 31, 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 $1.1 million for the
three months ended March 31, 2000 from $40,000 in the three months ended March
31, 1999. This increase was 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 $53,000 for the three months ended March 31, 2000 from $391,000 for the three
months ended March 31, 1999. This decrease is primarily due to bridge financing
that converted to preferred stock in the second quarter of 1999.

INCOME TAXES

     The provision for income taxes consists of foreign taxes. Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes," provides
for the recognition of deferred tax assets if realization of these assets is
more likely than not. Based upon the weight of available evidence, which
includes the Company's historical operating performance and the reported
cumulative net losses in all prior years, the Company has provided a full
valuation allowance against its deferred tax assets. We intend to evaluate the
ability to realize the deferred tax assets on a quarterly basis.

LIQUIDITY AND CAPITAL RESOURCES

     OPERATING ACTIVITIES. Net cash used in operating activities was $6.2
million and $4.8 million during the three months ended March 31, 2000 and 1999,
respectively. Net cash used in operating activities in the three months ended
March 31, 2000 and 1999 was primarily a result of net operating losses.

     INVESTING ACTIVITIES. Net cash used in investing activities was $8.3
million for three months ended March 31, 2000 and $128,000 for the three
months ended March 31, 1999. 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 $56,000
in the three months ended March 31, 2000 and $10.9 million in the three months
ended March 31, 1999. In the three months ended March 31, 1999, the financing
activity consisted primarily of the issuance of bridge financing of $12.8
million.

                                       10
<PAGE>
     COMMITMENTS. We lease all of our facilities under operating leases that
expire at various dates through 2003. As of March 31, 2000, we had $3.0 million
in future operating lease commitments and $1.6 million of capital lease
obligations and equipment promissory notes.

     SUMMARY OF LIQUIDITY. We believe that the existing cash, cash equivalents
and short-term investments, in addition to funds available under existing credit
facilities, will be sufficient to meet our working capital requirements for the
foreseeable future. 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.

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, WE MAY NEVER BE PROFITABLE AND WE
ANTICIPATE CONTINUED LOSSES FOR THE FORESEEABLE FUTURE.

     To date, we have not been profitable. We cannot assure you that we will
ever achieve or sustain profitability. We reported operating losses of $22.6
million for 1999, $17.9 million for 1998 and $3.8 million for 1997. As of March
31, 2000, our accumulated deficit was $54.7 million. 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 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

                                       11
<PAGE>

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 segments 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 the
GRIC Alliance. Our competitor, Transnexus, offers a clearinghouse service for
Internet telephony and, like us, their service operates in multiple hardware and
software environments. Providers of Internet telephony services, such as iBasis
(formerly VIP Calling) 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, 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.


                                       12
<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; less than 1% of all
voice calls 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 been poor. 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 have end users that 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. Any
future growth depends in large part on our ability to establish relationships
with new customers wishing to originate or terminate Internet telephone calls.

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 150 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.


                                       13
<PAGE>

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

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


                                       14
<PAGE>
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.

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

     Because we generate most of our revenues from business conducted
internationally, 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 we expect to continue to experience this sort of difficulty. Competition for
employees 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.

                                       15
<PAGE>

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

     As of March 31, 2000, our executive officers and directors and their
affiliated entities owned approximately 34% 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 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. On June 12, 2000,
approximately 12,537,807 shares become eligible for public sale when lockup
agreements in connection with our initial public offerings are due to expire.


                                       16
<PAGE>
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;

         -        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
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,

                                       17
<PAGE>

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.

                           PART II. OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

     The Company is involved in certain claims and may in the future become
involved in claims and legal actions arising in the normal course of
business. Management does not expect that the outcome of these existing
claims will have a material effect on the Company's financial position or
results of operations.

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 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 March 31, 2000, the Company applied $18.6 million of the
proceeds towards short term investments, $2.7 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>
     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 March 31,
2000.

                                       18
<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 May 15, 2000.


                 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)


                                       19