SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-23087
STARTEC GLOBAL COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 52-1660985
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
10411 MOTOR CITY DRIVE, BETHESDA, MD 20817
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(301) 365-8959
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(b) of the Act:
Common Stock, $0.01 per value
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants' knowledge, in definitive proxy or information
statements
<PAGE>
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Non-affiliates of Startec Global Communications Corporation held 3,977,500
shares of Common Stock as of March 20, 1998. The fair market value of the stock
held by non-affiliates is $101,426,250 based on the sale price of the shares on
March 20, 1998.
As of March 20, 1998, 8,919,615 shares of Common Stock, par value $0.01,
were outstanding.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE Company
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information regarding the Company's
directors, executive officers and key employees as of April 27, 1998.
Directors and Executive Officers
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- ----- --------------------------------------------------
<S> <C> <C>
Ram Mukunda ................. 39 President, Chief Executive Officer, Treasurer and
Director
Prabhav V. Maniyar .......... 38 Senior Vice President, Chief Financial Officer,
Secretary and Director
Nazir G. Dossani ............ 56 Director
Richard K. Prins ............ 41 Director
Vijay Srinivas .............. 45 Director
Certain Key Employees
NAME AGE POSITION
- -------------------------- ----- ----------------------------------------------
Anthony Das ................. 44 Vice President of Corporate and International
Affairs
Gustavo Pereira ............. 44 Vice President of Engineering
Dhruva Kumar ................ 28 Vice President of Global Carrier Services
Subhash Pai ................. 31 Controller and Assistant Secretary
Tracy Behzad ................ 35 Director of Human Resources
Ron Vassallo ................ 32 Senior Manager, New Markets and Customer
Relations
</TABLE>
RAM MUKUNDA is the founder of Startec Global. Prior to founding STARTEC in
1989, Mr. Mukunda was an Advisor in Strategic Planning with INTELSAT, an
international consortium responsible for global satellite services. While at
INTELSAT, he was responsible for issues relating to corporate, business,
financial planning and strategic development. Prior to joining INTELSAT, he
worked as a fixed-income analyst with Caine, Gressel. Mr. Mukunda earned a M.S.
in Electrical Engineering from the University of Maryland. Mr. Mukunda and Mr.
Srinivas are brothers-in-law.
PRABHAV V. MANIYAR joined Startec Global as Chief Financial Officer in
January 1997. From June 1993 until he joined the Company, Mr. Maniyar was the
Chief Financial Officer of Eldyne, Inc., Unidyne Corporation and Diversified
Control Systems, LLC, collectively know as the Witt Group of Companies. The Witt
Group of Companies was acquired by the Titan Corporation in May 1996. From June
1985 to May 1993, he held progressively more responsible positions with
NationsBank. Mr. Maniyar earned a B.S. in Economics from Virginia Commonwealth
University and an M.A. in Economics from Old Dominion University.
NAZIR G. DOSSANI joined Startec Global as a director in October 1997 at the
completion of the Initial Public Offering. Mr. Dossani has been Vice President
for Asset/Liability Management at Freddie Mac since January 1993. Prior to this
position, Mr. Dossani was Vice President -- Pricing and Portfolio Analysis at
Fannie Mae. Mr. Dossani received a Ph.D. in Regional Science from the University
of Pennsylvania and an M.B.A. from the Wharton School of the University of
Pennsylvania.
RICHARD K. PRINS joined Startec Global as a director in October 1997 at the
completion of the Initial Public Offering. Mr. Prins is currently Senior Vice
President with Ferris, Baker Watts, Incorporated. From July 1988 through March
1996, he served as Managing Director of Investment Banking with Crestar
Securities Corporation. Mr. Prins received an M.B.A. from Oral Roberts
University and a B.A. from Colgate University. He currently serves on the Board
of Directors of Path Net, Inc., a domestic telecommunications company, and The
Association for Corporate Growth, National Capital Chapter.
<PAGE>
VIJAY SRINIVAS is the brother-in-law of Ram Mukunda and is a founding
director of the Company. He has a Ph.D. in Organic Chemistry from the University
of North Dakota and is a senior research scientist at ELF Atochem, North
America, a diversified chemical company.
ANTHONY DAS joined Startec Global as Vice President of Corporate and
International Affairs in February 1997. Prior to joining the Company, Mr. Das
was a Senior Consultant at Armitage Associates from April 1996 to January 1997.
Prior to joining Armitage Associates, he served as a Senior Career Executive in
the Office of the Secretary, Department of Commerce from 1993 to 1995. From 1990
to 1993, Mr. Das was the Director of Public Communication at the State
Department.
GUSTAVO PEREIRA joined Startec Global in August 1995 and is Vice President
for Engineering. From 1989 until he joined the Company in 1995, Mr. Pereira
served as Director of Switching Systems for Marconi in Portugal. In this
capacity he supervised more than 100 engineers and was responsible for
Portugal's international telecommunications network.
DHRUVA KUMAR joined Startec Global in April 1993 and is Vice President of
Global Carrier Services. Prior to managing the Carrier Services group, Mr. Kumar
held a series of progressively more responsible positions within the Company.
SUBHASH PAI joined Startec Global in January 1992 and serves as Controller
and Assistant Secretary. He is a CA/CPA. Prior to joining the Company, Mr. Pai
held various positions with a multinational shipping company.
TRACY BEHZAD joined Startec Global in January 1998 and is Director of Human
Resources. Ms. Behzad's background includes over 15 years of progressively
responsible positions in human resources management, including experience in
labor relations and in the development of human resources departments within
organizations.
RON VASSALLO joined Startec Global in January 1998 and serves as Senior
Manager, New Markets and Customer Relations. Prior to joining the Company, Mr.
Vassallo was Vice President and a founding partner of MultiServices, Inc., a
strategic marketing firm, and General Manager of World Access, Inc., an
international affinity marketing company.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain summary information concerning
compensation for services in all capacities awarded to, earned by or paid to,
the Company's Chief Executive Officer and the other most highly compensated
officers of the Company, whose aggregate cash and cash equivalent compensation
exceeded $100,000 (the "Named Officers"), with respect to the last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------------- ---------------------------------------
OTHER RESTRICTED SECURITIES ALL
NAME AND ANNUAL STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS(#) COMPENSATION
- ----------------------------- ------ ---------------- ---------- ----------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ram Mukunda ................. 1997 345,833(1) -- 30,800(2) -- -- --
President & Chief 1996 165,875 -- 18,000(2) -- -- --
Executive Officer 1995 150,000 -- -- -- -- --
Prabhav Maniyar(3) .......... 1997 149,585 -- -- -- 157,616 --
Chief Financial Officer & 1996 -- -- -- -- -- --
Secretary 1995 -- -- -- -- -- --
Gustavo Pereira(4) .......... 1997 110,000 -- -- -- 7,500 --
Vice President--Engineering 1996 110,000 -- -- -- -- --
1995 32,000 -- -- -- -- --
</TABLE>
- ----------
(1) Includes $150,000 accrued salary for prior periods.
(2) This amount includes the value of an automobile allowance.
(3) Mr. Maniyar joined the Company in January 1997.
(4) Mr. Pereira joined the Company in August 1995.
STOCK OPTION GRANTS
The following table sets forth certain information regarding grants of
options to purchase Common Stock made by the Company during the fiscal year
ended December 31, 1997 to each of the Named Officers. No stock appreciation
rights were granted during fiscal 1997.
OPTION GRANTS IN 1997 -- INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT
ASSUMED ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE/ EXPIRATION -------------------------
NAME GRANTED(#) 1997(%)(1) SHARE($)(2) DATE 5% 10%
- ------------------------- ------------ -------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ram Mukunda ............. -- -- -- -- -- --
Prabhav Maniyar ......... 107,616 16.10 1.85 1/19/2007 2,694,103 3,137,551
50,000 7.48 10.00 8/17/2007 811,050 944,550
Gustavo Pereira ......... 7,500 1.12 10.00 8/17/2007 121,658 141,683
</TABLE>
- ----------
(1) During 1997, the Company granted options to purchase a total of 668,366
shares of Common Stock.
(2) The exercise price was equal to the fair market value of the shares of
Common Stock underlying the options on the date of grant.
(3) Amounts reflected in these columns represent amounts that may be realized
upon exercise of options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) on the
Common Stock over the term of the options. Actual gains, if any, on the
stock option exercises and Common Stock holdings are dependent upon the
timing of such exercise and the future performance of the Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by the
holder of the option.
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information as of December 31, 1997
regarding the number and year end value of unexercised options to purchase
Common Stock held by each of the Named Officers. No stock appreciation rights
were exercised during fiscal 1997.
FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED"
UNDERLYING UNEXERCISED "IN-THE-MONEY"
OPTIONS AT FISCAL OPTIONS AT
YEAR END(#) FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ($)(1)
- ------------------------- --------------------------- ---------------------------------
<S> <C> <C>
Ram Mukunda ............. -- --
Prabhav Maniyar ......... 107,616/50,000 2,208,818/618,750
Gustavo Pereira ......... 0/7,500 0/92,813
</TABLE>
- ----------
(1) Options are "in-the-money" if the fair market value of underlying securities
exceeds the exercise price of the options. The amounts set forth represent
the difference between $22.375 per share, the fair market value of the
Common Stock issuable upon exercise of options at December 31, 1997 and the
exercise price of the option, multiplied by the applicable number of shares
underlying the options.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Ram Mukunda on July
1, 1997 (the "Mukunda Employment Agreement"), pursuant to which Mr. Mukunda
holds the positions of President, Chief Executive Officer and Treasurer of the
Company, is paid an annual base salary of $250,000 per year, is entitled to
participate in the Company's 1997 Performance Incentive Plan, is eligible to
receive a bonus of up to 40% of his base salary, as determined by the
Compensation Committee of Board of Directors of the Company based upon the
financial and operating performance of the Company, and is entitled to receive
an automobile allowance of $1,500 per month. In addition, the Mukunda Employment
Agreement provides that if there is a "Change of Control" (as defined herein),
Mr. Mukunda will receive, for the longer of 12 months or the balance of the term
under his employment agreement (which initially could be for a period of up to
three years), the following benefits: (1) a severance payment equal to $20,830
per month; (2) a pro rata portion of the bonus applicable to the calendar year
in which such termination occurs; (3) all accrued but unpaid base salary and
other benefits as of the date of termination; and (4) such other benefits as he
was eligible to participate in at and as of the date of termination.
<PAGE>
The Company also entered into an employment agreement with Prabhav Maniyar
on July 1, 1997 (the "Maniyar Employment Agreement"), pursuant to which Mr.
Maniyar holds the positions of Senior Vice President, Chief Financial Officer
and Secretary of the Company, is paid an annual base salary of $175,000 per
year, is entitled to participate in the Company's 1997 Performance Incentive
Plan, is eligible to receive a bonus of up to 40% of his base salary, as
determined by the Compensation Committee of Board of Directors of the Company
based upon the financial and operating performance of the Company, and is
entitled to receive an automobile allowance of $750 per month. In addition, the
Maniyar Employment Agreement provides that if there is a "Change of Control" (as
defined herein), Mr. Maniyar will receive, for the longer of 12 months or the
balance of the term under his employment agreement (which initially could be for
a period of up to three years), the following benefits: (1) a severance payment
equal to $14,580 per month; (2) a pro rata portion of the bonus applicable to
the calendar year in which such termination occurs; (3) all accrued but unpaid
base salary and other benefits; and (4) such other benefits as he was eligible
to participate in at and as of the date of termination.
The Mukunda Employment Agreement and the Maniyar Employment Agreement each
has an initial term of three years and is renewable for successive one year
terms. In addition, the agreements also contain provisions which restrict the
ability of Messrs. Mukunda and Maniyar to compete with the Company for a period
of one year following termination.
For purposes of the Mukunda Employment Agreement and the Maniyar Employment
Agreement, a "Change of Control" shall be deemed to have occurred if (A) any
person becomes a beneficial owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of all classes of
the Company's then outstanding voting securities; or (B) during any period of
two consecutive calendar years individuals who at the beginning of such period
constitute the Board of Directors, cease for any reason to constitute at least a
majority thereof, unless the election or nomination for the election by the
Company's stockholders of each new director was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the two-year period or whose election or nomination for
election was previously so approved; or (C) the stockholders of the Company
approve a merger or consolidation of the Company with any other company or
entity, other than a merger or consolidation that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation (exclusive of the situation where the merger or consolidation
is effected in order to implement a recapitalization of the Company in which no
person acquires more than 30% of the combined voting power of the Company's then
outstanding securities); or (D) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
The Board of Directors is currently in the process of considering increases
in the compensation of Messrs. Mukunda and Maniyar, which increases, if granted,
would be effective as of July 1, 1998 and would be consistent with compensation
levels of other comparable companies in the telecommunications industry.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth information, as of April 24, 1998, regarding
beneficial ownership of the Company's Common Stock, by (i) each person or group
known by the Company to beneficially own more than 5% or more of the Common
Stock; (ii) each director of the Company; (iii) each executive officer of the
Company that is a Named Officer; and (iv) all directors and executive officers
of the Company as a group. All information with respect to beneficial ownership
has been furnished to the Company by the respective stockholders.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
BENEFICIAL OWNER(1) OWNED(2) CLASS
- --------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
Ram Mukunda ......................................................... 3,579,675 40.0%
Blue Carol Enterprises Ltd(3) ....................................... 807,124 9.0%
Vijay Srinivas(4) ................................................... 311,200 3.5%
Prabhav V. Maniyar .................................................. 108,616 1.2%
Nazir G. Dossani(5) ................................................. 9,000 *
Richard K. Prins(6) ................................................. 5,000 *
All directors and executive officers as a group (5 persons) ......... 4,013,491 44.9%
</TABLE>
- ----------
* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Unless otherwise noted, the address of all persons listed is c/o Startec
Global Communications Corporation, 10411 Motor City Drive, Bethesda, MD
20817.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission. Shares of Common Stock subject to options, warrants or other
rights to purchase which are currently exercisable or are exercisable
within 60 days of April 24, 1998 are deemed outstanding for computing the
percentage ownership of the persons holding such options, warrants or
rights, but are not deemed outstanding for computing the percentage
ownership of any other person. Unless otherwise indicated, each person
possesses sole voting and investment power with respect to the shares
identified as beneficially owned.
(3) The address of Blue Carol Enterprises Ltd. is 930 Ocean Center Harbour
City, Kowloon, Hong Kong. Blue Carol Enterprises Ltd. is an affiliate of
Portugal Telecom International.
(4) Such shares are held by Mr. Srinivas and his wife as joint tenants.
(5) Consists of options to purchase 5,000 shares of Common Stock.
(6) Consists of options to purchase 5,000 shares of Common Stock. Excludes
warrants to purchase 33,000 shares of Common Stock. In addition, Mr. Prins
is a Senior Vice President of Ferris, Baker Watts, Incorporated, one of the
underwriters of the Initial Public Offering, which received warrants to
purchase up to 150,000 shares of the Common Stock in connection with the
closing of Initial Public Offering, of which Mr. Prins received the 33,000
warrants referred to above. Such warrants are not currently exercisable.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
The Company has an agreement with Companhia Santomensed De
Telecommunicacoes ("CST"), an affiliate of Blue Carol Enterprises Ltd. ("Blue
Carol"), which currently holds 9% of the outstanding shares of Common Stock, for
the purchase and sale of long distance services. Revenues generated from this
affiliate amounted to approximately $1,035,000, $1,501,000 and $1,900,000, or
10%, 5% and 2% of the Company's total revenues for the years ended December 31,
1995, 1996 and 1997, respectively. Services provided to the Company by this
affiliate amounted to approximately $134,000, $663,000 and $680,000 of the
Company's costs of services for the years ended December 31, 1995, 1996 and
1997, respectively. The Company also has a lease agreement with an affiliate of
Blue Carol, Companhia Portuguesa Radio Marconi, S.A. ("Marconi"), for rights to
use undersea fiber optic cable under which the Company is obligated to pay
Marconi $38,330 semi-annually for five years on a resale basis.
The Company provided long distance services to EAA, Inc. ("EAA"), an
affiliate owned by Ram Mukunda, the Company's President and Chief Executive
Officer. Payments received by the Company from EAA amounted to approximately
$396,000 and $262,000 for the years ended December 31, 1995 and 1996,
respectively. No services were provided in 1997. Accounts receivable from EAA
were $167,000 and $64,000 as of December 31, 1995 and 1996, respectively. The
Company believes that the services provided were on standard commercial terms,
which are no less favorable than those available on an arms-length basis with an
unaffiliated third party.
The Company was indebted to Vijay and Usha Srinivas and Mrs. B.V. Mukunda
under certain notes payable in the amounts of $46,000 and $100,000,
respectively, which amounts were repaid in July 1997. Mr. and Mrs. Srinivas are
the brother-in-law and sister, and Mrs. B.V. Mukunda is the mother, of Ram
Mukunda, the Company's President and Chief Executive Officer. The interest rates
on these notes ranged from 15% to 25%.
In July 1997, the Company offered to exchange shares of its voting Common
Stock for all of the issued and outstanding shares of its non-voting common
stock, or alternatively, to repurchase such shares of non-voting common stock
for cash. In connection therewith, Mr. Mukunda exchanged 17,175 shares of
non-voting stock for an equal number of shares of voting Common Stock.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
STARTEC GLOBAL COMMUNICATIONS CORPORATION
Registrant
By: /s/ PRABHAV V. MANIYAR
--------------------------------------
Prabhav V. Maniyar
Senior Vice President and Chief
Financial Officer
April 30, 1998
