================================================================================
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, 1998
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)
DELAWARE 52-2099559
(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 incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Non-affiliates of Startec Global Communications Corporation held 5,364,324
shares of Common Stock as of March 19, 1999. The fair market value of the stock
held by non-affiliates is $46,937,835 based on the sale price of the shares on
March 19, 1999.
As of March 19, 1999, 9,389,815 shares of Common Stock, par value $0.01,
were outstanding.
================================================================================
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Company's
directors and executive officers as of April 28, 1999.
Directors and Executive Officers
NAME AGE POSITION
- --------------------- ---- -----------------------------------
Ram Mukunda ......... 40 President, Chief Executive Officer, Treasurer and
Director
Prabhav V. Maniyar .. 39 Senior Vice President, Chief Financial Officer,
Secretary and Director
Nazir G. Dossani .... 57 Director
Richard K. Prins .... 42 Director
Vijay Srinivas ...... 46 Director
Anthony Das.......... 45 Senior Vice President
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
<PAGE>
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.
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.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
ANNUAL COMPENSATION
The following table sets forth certain summary financial 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 ("Named Officers"), with respect to the last
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- --------------
SECURITIES ALL
NAME AND UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION(1)
------------------ ---- ------ ----- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Ram Mukunda .......... 1998 $ 401,117 30,000 $35,000
President/Chief 1997 $ 345,833(2) -- -- $30,800
Executive Officer 1996 $ 165,872 -- -- $18,000
Prabhav V. Maniyar(3) 1998 $ 180,042 15,00 $18,000
Chief Financial 1997 $ 149,585 -- 157,616 --
Officer/Secretary 1996 -- -- -- --
Gustavo Pereira ...... 1998 $ 129,583
Vice President- 1997 $ 110,000 -- 7,500 --
Engineering 1996 $ 110,000 -- -- --
Anthony Das(4)........ 1998 $ 124,167 -- 15,000 --
Senior Vice 1997 $ 79,167 -- 30,000 --
President 1996 -- -- -- --
Dhruva Kumar ......... 1998 $ 104,167 -- -- --
Vice President 1997 $ 77,209 -- 34,000 --
1996 $ 43,008 -- 19,950 --
</TABLE>
- ----------
(1) This amount includes the value of an automobile allowance
(2) Includes $102,000 accrued salary for prior periods.
(3) Mr. Maniyar joined the Company in January 1997.
(4) Mr. Das joined the Company in February 1997.
<PAGE>
CERTAIN EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Ram Mukunda on July
1, 1997 (the "Mukunda 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 1997 Performance Incentive Plan (the "1997 Plan"), is eligible to receive a
bonus of up to 40% of his base salary as determined by the Compensation
Committee 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 Agreement provides that, if there is a "Change of Control" (as
defined therein), 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. Effective July 1, 1998, Mr. Mukunda's annual base salary was
increased to $325,000.
The Company also entered into an employment agreement with Prabhav V.
Maniyar on July 1, 1997 (the "Maniyar 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 1997 Plan, is eligible to receive a bonus of up
to 40% of his base salary, as determined by the Compensation Committee 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
Agreement provides that if there is a "Change of Control" (as defined therein),
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. Effective July 1, 1998, Mr. Maniyar's
annual base salary was increased to $225,000.
<PAGE>
The Mukunda Agreement and the Maniyar 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 Agreement and the Maniyar 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.
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, 1998, to each of the Named Officers. No stock appreciation
rights were granted during fiscal 1998. On April 28, 1999, the closing price of
the Company Common Stock was $10.75.
<TABLE>
<CAPTION>
PERCENTAGE REALIZED VALUE AT
NUMBER OF OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTIONS TERM(3)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------
NAME GRANTED(#) IN 1997(1) ($/SH)(2) DATE 5%($) 10%($)
---- ---------- ---------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Ram Mukunda ............ 30,000 3.07% 14.25 6/8/08 29,778 281,726
Prabhav V. Maniyar ..... 15,000 1.53% 14.25 6/8/08 14,889 140,863
Gustavo Pereira ........ -- -- -- -- -- --
Anthony Das............. 15,000 1.53% 9.00 6/8/08 93,639 219,613
Dhruva Kumar............ -- -- -- -- -- --
</TABLE>
<PAGE>
- ----------
(1) During 1998, the Company granted options to purchase a total of 977,900
shares of Company Common Stock.
(2) The exercise price was equal to the per share fair market value of the
Company Common Stock underlying the options on the date of grant. In
December 1998, options for non-executive officers were repriced to $9.00.
(3) Amounts reflected in these columns represent amounts that may be realized
upon exercise of options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) on the
Common Stock over the term of the options. Actual gains, if any, on the
stock option exercises and Company Common Stock holdings are dependent upon
the timing of such exercise and the future performance of the Company Common
Stock. There can be no assurance that the rates of appreciation assumed in
this table can be achieved or that the amounts reflected will be received by
the holder of the option.
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information as of December 31, 1998,
regarding the number and year end value of unexercised stock options to purchase
Company Common Stock held by each of the Named Officers. No stock appreciation
rights were exercised during fiscal 1998.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED NUMBER OF
"IN-THE-MONEY" SECURITIES UNDERLYING
OPTIONS AT UNEXERCISED OPTIONS
FISCAL YEAR-END($)(1) AT FISCAL YEAR-END(#)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------- ------------------------- --------------------------
<S> <C> <C>
Ram Mukunda ............. 0/0 0/30,000
Prabhav V. Maniyar ...... 0/0 10,000/55,000
Gustavo Pereira ......... 14,445/57,780 1,500/6,000
Anthony Das.............. 43,335/317,790 4,500/33,000
Dhruva Kumar............. 46,224/184,896 4,800/19,200
- ----------
</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 $9.63 per share, the fair market value of the Company
Common Stock issuable upon exercise of options at December 31, 1998 and the
exercise price of the option, multiplied by the applicable number of shares
underlying the options. On April 28, 1999, the closing price of the Company
Common Stock was $10.75.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the ownership of the
Company's voting securities on the Record Date, including options and warrants
by (i) each person known by the Company to be the beneficial owner of more than
five percent of any class of its voting securities, (ii) each director and
executive officer, and (iii) all directors and executive officers as a group.
COMMON STOCK PERCENTAGE
BENEFICIALLY OF OUTSTANDING
NAME AND ADDRESS(1) OWNED(2) COMMON STOCK
------------------- -------- ------------
Ram Mukunda ........................ 3,583,675 38.2%
Blue Carol Enterprises(3) .......... 807,124 8.6%
Vijay Srinivas(4) .................. 311,200 3.3%
Prabhav V. Maniyar ................. 118,616 1.3%
Nazir G. Dossani(5) ................ 10,000 *
Richard K. Prins(6) ................ 47,000 *
Anthony Das(7) ..................... 12,000
All Directors and Executive Officers
as a group (6 persons) ........... 4,889,615 52.1%
- ----------
* Represents beneficial ownership of one percent or less of the outstanding
shares of Company Common Stock.
(1) Unless otherwise indicated, the address of all persons listed is c/o Startec
Global Communications Corporation, 10411 Motor City Drive, Bethesda, MD
20817.
(2) Unless otherwise indicated, each person possesses sole voting and investment
power with respect to the shares identified as beneficially owned in the
table. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission. Shares of Company Common Stock
subject to options, warrants or other rights to purchase which are currently
exercisable within 60 days of the Record Date 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.
(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. Mr. and
Mrs. Srinivas are the brother-in-law and sister of Ram Mukunda, the
Company's President and Chief Executive Officer.
(5) Includes options to purchase 1,000 shares of Company Common Stock.
(6) Includes options to purchase 1,000 shares of Company Common Stock and a
warrant to purchase 33,000 shares of Company Common Stock. Mr. Prins is a
Senior Vice President of Ferris, Baker Watts, Incorporated, one of the
underwriters of the Company's initial public offering, which received
warrants to purchase up to 150,000 shares of Company Common Stock in
connection with the closing of the initial public offering. Mr. Prins
received 33,000 of such warrants, which amount is reflected in the first
sentence of this footnote.
(7) Includes options to purchase 4,500 shares of Company Common Stock.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED 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 Company Common
Stock, for the purchase and sale of long distance services. Revenues generated
from this affiliate amounted to approximately $1,501,000, 1,900,000, and
1,900,000 or 5%, 2% and 1% of the Company's total revenues for the years ended
December 31, 1996, 1997 and 1998, respectively. Services provided to the Company
by this affiliate amounted to approximately $663,000, $680,000 and $366,000 of
the Company's costs of services for the years ended December 31, 1996, 1997 and
1998, 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
$262,000 for the year ended December 31, 1996. No services were provided in 1997
or 1998. Accounts receivable from EAA were $64,000 as of December 31, 1996. 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>
During the second quarter of 1998, the Company made loans to certain of
its employees including executive officers. These loans were all made on
substantially the same terms, including interest rates. In this regard, the
Company advanced an aggregate of $1,488,238 to the employees, including $400,000
to the Company's Chief Executive Officer, Ram Mukunda, and $550,000 to the
Company's Chief Financial Officer, Prabhav V. Maniyar. The Company made a loan
to Mr. Mukunda in connection with the payment of taxes and certain other
obligations. Mr. Maniyar's loan was granted in connection with his exercise of
certain outstanding options to purchase Company Common Stock and the payments of
taxes related thereto. Both loans bear interest at a rate of 7.87 % per year.
For Mr. Mukunda, principal and interest on the loan are due December 31, 1999
and may not be pre-paid. For Mr. Maniyar, principal and interest on the loan are
due June 30, 1999 and may not be pre-paid.
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, 1999
