<PAGE> 1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------
Form 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000
------------------------------------
GT GROUP TELECOM INC.
Suite 700 - 20 Bay Street
Toronto, Ontario, Canada
M5J 2N8
(416) 848-2000
(Address of principal executive offices)
------------------------------------
<TABLE>
<C> <S>
[indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F]
Form 20-F X Form 40-F ___
[indicate by check mark whether the registrant by furnishing information contained
in this Form is also thereby furnishing the information to the Commission pursuant to
rule 12g3-2(b) under the Securities Exchange Act of 1934]
Yes __ No X
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
GT GROUP TELECOM INC.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000, 1999 AND 1998
(expressed in thousands of Canadian dollars)
<PAGE> 3
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
GT GROUP TELECOM INC.
We have audited the consolidated balance sheets of GT GROUP TELECOM INC. as
at September 30, 2000 and 1999 and the consolidated statements of operations and
deficit and cash flows for the years ended September 30, 2000, 1999 and 1998.
These consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with Canadian and United States
generally accepted auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at September 30,
2000 and 1999 and the results of its operations and its cash flows for the years
ended September 30, 2000, 1999 and 1998 in accordance with Canadian generally
accepted accounting principles.
<TABLE>
<S> <C>
Toronto, Canada /s/ PricewaterhouseCoopers LLP
November 3, 2000 Chartered Accountants
</TABLE>
<PAGE> 4
GT GROUP TELECOM INC.
CONSOLIDATED BALANCE SHEETS
(expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
2000 1999
--------- -------
$ $
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... 444,050 59,851
Accounts receivable (note 4)................................ 49,952 3,783
Prepaid expenses............................................ 5,939 526
Inventory................................................... 436 545
--------- -------
500,377 64,705
PROPERTY, PLANT AND EQUIPMENT (note 5)...................... 954,917 73,817
PREPAYMENTS ON PROPERTY, PLANT AND EQUIPMENT (notes 3(a) and
3(b))..................................................... 203,703 --
LONG-TERM INVESTMENT (note 6)............................... 43,238 --
GOODWILL AND OTHER ASSETS (note 7).......................... 227,033 1,292
--------- -------
1,929,268 139,814
========= =======
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (note 8)........... 111,395 14,926
Unearned revenue (note 9)................................... 544 656
Current portion of long-term debt (note 10)................. 4,348 1,253
--------- -------
116,287 16,835
LONG-TERM UNEARNED REVENUE (note 9)......................... 1,255 1,494
LONG-TERM DEBT (note 10).................................... 948,928 47,557
--------- -------
1,066,470 65,886
--------- -------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (note 11)
Authorized
Common shares
Unlimited number of Class A voting and convertible Class
B non-voting common shares without par value
Preferred
50,000,000 Series A convertible first preference shares
without par value
100,000,000 Series B convertible first preference shares
without par value
Issued and outstanding
Common shares
79,542,239 Class A voting shares (1999 -- 18,261,149)... 463,333 12,573
41,105,767 Class B non-voting shares (1999 --
4,148,569)............................................. 495,370 5,026
Preferred shares
Nil Series A first preference shares (1999 --
41,500,002)............................................ -- 67,281
--------- -------
958,703 84,880
ADDITIONAL PAID-IN CAPITAL.................................. 255 255
WARRANTS (note 11(f))....................................... 58,776 --
LOANS TO OFFICERS (note 11(g)).............................. (3,868) --
SHARES TO BE ISSUED (note 11(h))............................ -- 1,875
DEFICIT..................................................... (151,068) (13,082)
--------- -------
862,798 73,928
--------- -------
1,929,268 139,814
========= =======
COMMITMENTS AND CONTINGENCIES (note 15)
SUBSEQUENT EVENTS (note 18)
</TABLE>
APPROVED BY THE BOARD OF DIRECTORS
<TABLE>
<S> <C>
Director Director
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-1
<PAGE> 5
GT GROUP TELECOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
2000 1999 1998
-------- ------- ------
$ $ $
<S> <C> <C> <C>
REVENUE..................................................... 73,251.. 2,705 1,823
COST OF SERVICES............................................ 51,336 1,808 1,131
-------- ------- ------
21,915 897 692
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 100,959 10,219 3,038
-------- ------- ------
(79,044) (9,322) (2,346)
AMORTIZATION................................................ 43,055 853 255
INTEREST AND FINANCE ITEMS
Interest income............................................. (22,208) (920) (58)
Interest on long-term debt.................................. 81,207 262 147
Finance charges............................................. 4,631 192 --
Foreign exchange loss (gain)................................ (9,276) 93 (251)
-------- ------- ------
54,354 (373) (162)
-------- ------- ------
LOSS BEFORE INCOME TAXES.................................... (176,453) (9,802) (2,439)
PROVISION FOR (RECOVERY OF) INCOME TAXES (note 13)
Current..................................................... 3,833 165 --
Future...................................................... (42,300) -- --
-------- ------- ------
(38,467) 165 --
-------- ------- ------
LOSS FOR THE YEAR........................................... (137,986) (9,967) (2,439)
DEFICIT - BEGINNING OF YEAR................................. (13,082) (3,115) (676)
-------- ------- ------
DEFICIT - END OF YEAR....................................... (151,068) (13,082) (3,115)
======== ======= ======
LOSS PER SHARE.............................................. (1.83) (0.56) (0.26)
======== ======= ======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (in
thousands)................................................ 75,442 17,859 9,542
======== ======= ======
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-2
<PAGE> 6
GT GROUP TELECOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
2000 1999 1998
--------- ------ ------
$ $ $
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Loss for the year........................................... (137,986) (9,967) (2,439)
Items not affecting cash
Amortization.............................................. 43,055 853 255
Non-cash interest expense................................. 79,832 -- --
Additional paid-in capital................................ -- -- 84
Shares issued for interest on long-term debt.............. -- 171 62
Recovery of future income taxes........................... (42,300) -- --
--------- ------ ------
(57,399) (8,943) (2,038)
--------- ------ ------
Changes in non-cash working capital items
Increase in accounts receivable........................... (44,112) (2,417) (723)
Increase in prepaid expenses.............................. (5,179) (500) (1)
Decrease (increase) in inventory.......................... 343 (545) --
Increase in accounts payable and accrued liabilities...... 57,771 1,295 1,363
Increase (decrease) in unearned revenue................... (605) 2,077 39
--------- ------ ------
8,218 (90) 678
--------- ------ ------
Cash flows used in operating activities..................... (49,181) (9,033) (1,360)
--------- ------ ------
FINANCING ACTIVITIES
Proceeds from long-term debt................................ 690,711 4,421 1,762
Issuance of shares.......................................... 396,120 71,526 5,924
Proceeds from issuance of warrants.......................... 58,776 -- --
--------- ------ ------
1,145,607 75,947 7,686
--------- ------ ------
INVESTING ACTIVITIES
Business acquisitions....................................... (446,720) -- --
Purchase of property, plant and equipment................... (153,569) (8,454) (3,738)
Increase in other assets.................................... (64,832) (1,085) (173)
Purchase of long-term investment............................ (43,238) -- --
Issuance of loans to officers............................... (3,868) -- --
--------- ------ ------
(712,227) (9,539) (3,911)
--------- ------ ------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 384,199 57,375 2,415
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR.............. 59,851 2,476 61
--------- ------ ------
CASH AND CASH EQUIVALENTS -- END OF YEAR.................... 444,050 59,851 2,476
========= ====== ======
</TABLE>
Additional cash flow disclosures (note 16)
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
<PAGE> 7
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts expressed in thousands of Canadian dollars)
1 NATURE OF BUSINESS
GT Group Telecom Inc. ("GT") was incorporated on April 12, 1996 under the
Canada Business Corporations Act. GT through its wholly owned subsidiaries
GT Group Telecom Services Corp. and GT Group Telecom Services USA Corp.
(collectively known as "the company") markets and sells telecommunications
services and related products over GT's owned fiber optic infrastructure to
small and medium-sized businesses. The company also uses digital subscriber
lines and fixed wireless technology to extend the reach of its network. The
company provides data, internet applications and voice services and derives
revenue from network usage and access, equipment sales, co-location and
installation services.
2 SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada which, in the case of
the company, conform in all material respects with those in the United
States, except as outlined in note 20.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the company
and its wholly owned subsidiaries. All intercompany transactions and
balances have been eliminated on consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturity at the date of
purchase of three months or less. The short-term interest bearing
securities are recorded at cost plus accrued interest earned, which
approximates current market value.
REVENUE RECOGNITION
Revenue from network usage and access is recognized when services are
provided. Revenue from equipment sales is recognized at the time the
equipment is delivered and accepted by the customer. Revenue from
installation services and from co-locations, where the company provides a
location and services for the customers' servers and telecommunication
equipment, are recognized as services are rendered.
Unearned revenue is recorded for services when cash payment has been
received in advance and is recognized as revenue in the period in which the
services are provided.
Income from operating leases of fiber optic facilities is recognized on a
straight-line basis over the term of the lease.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost less accumulated
amortization. Amortization is provided over estimated useful lives on a
straight-line basis at the following annual rates:
<TABLE>
<S> <C>
Buildings............................................ 7%
Furniture and fixtures............................... 20%
Computer equipment and software...................... 33%
Telecommunication networks........................... 5% to 20%
Leasehold improvements............................... over the term of the leases (4-8 years)
</TABLE>
F-4
<PAGE> 8
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
Telecommunication networks, which are installed on rights of way granted by
others, include construction costs, costs of acquiring rights of way,
interest costs and network design costs, all of which are incurred in
developing new networks or expanding existing networks. Amortization
commences when the assets are available for use.
Management reviews the carrying values of its property, plant and equipment
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. In performing its
review for recoverability, management estimates the future cash flows
expected to result from the use of the asset and its eventual disposition.
If the sum of the expected future cash flows is less than the carrying
amount of the asset, an impairment loss is recognized.
LONG-TERM INVESTMENT
The long-term investment is accounted for on the cost basis. The carrying
value of the investment is written down to net realizable value if there is
a loss of value that is considered to be other than temporary.
GOODWILL AND OTHER ASSETS
Goodwill represents the excess of the cost of business acquisitions over
the fair value of the identifiable net assets acquired. Goodwill is
amortized over its estimated useful life ranging from 3 to 20 years. The
company reviews the carrying value of its goodwill to determine whether
there has been a permanent impairment in value. The measurement of possible
impairment is based primarily on the ability to recover the carrying value
from expected future operating cash flows on an undiscounted basis.
Non-compete agreements, license rights and deferred charges are amortized
on a straight-line basis over the term of the agreements or estimated
useful life ranging from 3 to 10 years.
Financing costs are amortized on a straight-line basis over the terms of
the related debt financing.
STOCK-BASED COMPENSATION PLAN
The company has a stock-based compensation plan, which is described in note
11(f). No compensation expense is recognized for the plan when stock
options are issued to employees. Any consideration paid by employees on
exercise of stock options is credited to share capital.
FOREIGN CURRENCY TRANSLATION
The company translates all foreign currency denominated monetary assets and
liabilities at year-end exchange rates. Revenues and expenses are
translated at the rates prevailing on the respective transaction dates.
Exchange gains and losses resulting from movements in rates are reflected
in net income in the year except for: (i) gains or losses relating to
long-term monetary liabilities which are deferred and amortized over the
remaining term of the assets and liabilities; and (ii) hedged balances
which are described in note 14.
INCOME TAXES
The company uses the liability method of accounting for income taxes under
which future tax assets and liabilities are recognized for differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Future tax assets and
liabilities are measured using substantively enacted tax rates in effect in
the period in which those temporary differences are expected
F-5
<PAGE> 9
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
to be recovered or settled. The effect on future tax assets and liabilities
of a change in tax rates is recognized as part of the provision for income
taxes in the period that includes the enactment date. A valuation allowance
is recorded to the extent there is uncertainty regarding realization of
future tax assets.
LOSS PER COMMON SHARE
Loss per common share is calculated using the weighted average number of
common shares outstanding during the years. The exercise of options and
warrants outstanding at September 30, 2000, 1999 and 1998 would have had an
anti-dilutive effect on loss per common share.
SEGMENTED INFORMATION
The company is a Canadian national facilities based provider of high-speed
data, internet application and voice services comprising a single operating
segment. Substantially all of the company's assets are located in Canada
and revenue is derived from telecommunications services provided in Canada.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
F-6
<PAGE> 10
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
3 BUSINESS ACQUISITIONS
Summary of the assets acquired and liabilities assumed during the year
ended September 30, 2000:
<TABLE>
<CAPTION>
SHAW VIDEON CABLE
FIBERLINK FIBERLINK ATLANTIC
(A) (B) (C) OTHER TOTAL
---------- --------- --------- ------- ----------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
ASSETS
Indefeasible right to use
agreements
Property, plant and equipment
for constructed fibers...... 329,000 88,359 29,689 -- 447,048
Prepayment for fibers to be
constructed................. 223,000 7,600 -- -- 230,600
Property, plant and equipment.... 100,000 7,397 17,560 435 125,392
License rights................... 13,800 -- -- -- 13,800
Non-compete agreements........... 15,000 -- 1,200 -- 16,200
Goodwill including acquisition
costs.......................... 119,513 -- 25,025 3,261 147,799
Other current assets............. 204 784 1,107 24 2,119
---------- --------- --------- ------- ----------
800,517 104,140 74,581 3,720 982,958
========== ========= ========= ======= ==========
LIABILITIES
Current liabilities.............. 246 -- 881 -- 1,127
Future income taxes.............. 28,200 -- 14,100 -- 42,300
---------- --------- --------- ------- ----------
28,446 -- 14,981 -- 43,427
========== ========= ========= ======= ==========
PURCHASE CONSIDERATION
Cash paid........................ 360,000 68,784 15,226 2,710 446,720
Class A voting shares............ -- -- -- 1,010 1,010
Class B non-voting shares........ 400,071 32,356 42,374 -- 474,801
Acquisition costs................ 12,000 3,000 2,000 -- 17,000
---------- --------- --------- ------- ----------
772,071 104,140 59,600 3,720 939,531
========== ========= ========= ======= ==========
NUMBER OF SHARES ISSUED
Class A voting shares............ -- -- -- 336,666 336,666
========== ========= ========= ======= ==========
Class B non-voting shares........ 29,096,097 1,667,000 1,740,196 -- 32,503,293
========== ========= ========= ======= ==========
</TABLE>
The acquisitions of business' assets and liabilities are accounted for by
the purchase method of accounting under which the assets and liabilities
purchased are recorded at their fair values with the excess of the purchase
price over the fair value of identifiable assets and liabilities acquired
recorded as goodwill. The results of operations are included in the
company's consolidated statement of operations from the dates of
acquisition.
(A) SHAW FIBERLINK
On February 16, 2000, the company purchased from Shaw Communications
Inc. ("Shaw Communications") and Shaw FiberLink Ltd. ("Shaw FiberLink")
all of the property and assets of Shaw FiberLink used in connection with
the high-speed data and competitive access business.
F-7
<PAGE> 11
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
The company and Shaw FiberLink also entered into an indefeasible right
to use agreement which grants the company an indefeasible right to use
certain specifically identified existing fibers in the fiber optic cable
networks of Shaw Communications for 60 years. Certain of the existing
fibers located in New Brunswick Canada under the indefeasible right to
use agreement will be available for use in 2003. In addition, the
company will receive an indefeasible right to use fibers to be built
over the next three years in mutually agreed regions. As at September
30, 2000, the carrying value of newly constructed fibers obtained for
use by the company amounts to $27 million.
(B) VIDEON FIBERLINK
On April 27, 2000, the company purchased from Moffat Communications
Limited ("Moffat Communications") all the property and assets used as a
competitive access provider in its Videon FiberLink business. The
company and Moffat Communications also entered into an indefeasible
right to use agreement which granted the company an indefeasible right
to use certain specifically identified existing fibers in the fiber
optic cable networks of Moffat Communications for 30 years. In addition,
the company will receive an infeasible right to use fibers to be built
over the next three years in mutually agreed upon regions.
(C) CABLE ATLANTIC
On July 21, 2000, the company purchased from Cable Atlantic Inc. ("Cable
Atlantic") all the property and assets used in connection with the fiber
optic telecom business. The company also entered into an indefeasible
right to use agreement which granted the company an indefeasible right
to use certain specifically identified existing fibers in the fiber
optic cable networks of Cable Atlantic for 30 years.
The following unaudited pro forma data summarizes the results of operations
for the years indicated as if the Shaw FiberLink acquisition had been
completed as of the beginning of the years presented. The pro forma data
give effect to actual operating results prior to the acquisition, adjusted
to give effect to interest expense on long-term debt of $360 million and
amortization of the assets acquired. These pro forma amounts do not purport
to be indicative of the results that would have actually been obtained if
the acquisition occurred as of the beginning of the years presented or that
may be obtained in the future.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
2000 1999
----------- ----------
$ $
(UNAUDITED)
<S> <C> <C>
Revenue..................................................... 73,448 43,176
Income (loss) before amortization, interest and finance
items and income tax...................................... (75,729) 2,863
Net loss.................................................... (165,714) (53,195)
Loss per share.............................................. (1.76) (2.98)
Weighted average number of common shares outstanding (in
thousands)................................................ 88,639 17,859
</TABLE>
Pro forma results including the other acquisitions completed by the company
during the year ended September 30, 2000 have not been provided as the
results of operations are not considered significant and the information is
not readily available.
F-8
<PAGE> 12
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
4 ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
2000 1999
------ -----
$ $
<S> <C> <C>
Trade receivables........................................... 34,759 1,191
Sales tax receivable........................................ 12,568 2,140
Employee receivables........................................ 3,105 487
Other....................................................... 4,026 --
Allowance for doubtful accounts............................. (4,506) (35)
------ -----
49,952 3,783
====== =====
</TABLE>
5 PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
----------------------------------
ACCUMULATED
COST AMORTIZATION NET
------- ------------ -------
$ $ $
<S> <C> <C> <C>
Land.................................................... 550 -- 550
Buildings............................................... 3,950 139 3,811
Furniture and fixtures.................................. 4,694 664 4,030
Computer equipment and software......................... 40,786 3,094 37,692
Telecommunication networks.............................. 927,734 27,059 900,675
Leasehold improvements.................................. 8,702 543 8,159
------- ------ -------
986,416 31,499 954,917
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
ACCUMULATED
COST AMORTIZATION NET
------- ------------ -------
$ $ $
<S> <C> <C> <C>
Land.................................................... 490 -- 490
Buildings............................................... 887 87 800
Furniture and fixtures.................................. 877 56 821
Computer equipment and software......................... 4,551 361 4,190
Telecommunication networks.............................. 67,638 476 67,162
Leasehold improvements.................................. 452 98 354
------- ------ -------
74,895 1,078 73,817
======= ====== =======
</TABLE>
Included in telecommunication networks as at September 30, 2000 are costs
of $87 million (1999 -- $40 million) relating to assets not yet available
for use on which no amortization has been charged.
Included in telecommunication networks are assets under capital lease with
a cost of $447 million (1999 -- $nil) and accumulated amortization of $13
million.
Furniture and fixtures, and computer equipment and software, as at
September 30, 2000 include capital lease asset costs of $4 million and $1
million (1999 -- $0.3 million and $0.9 million) respectively, and related
accumulated amortization of $nil. (1999 -- $nil).
F-9
<PAGE> 13
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
For the year ended September 30, 2000, interest and finance charges of $3
million were capitalized on projects under construction (1999 -- $2
million).
6 LONG-TERM INVESTMENT
On April 12, 2000, the company purchased a less than 1% equity interest in
360networks Inc. for $43 million in cash. The market value of the
investment at September 30, 2000 is $77 million.
7 GOODWILL AND OTHER ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
2000 1999
------- -----
$ $
<S> <C> <C>
Goodwill net of accumulated amortization of $4,319 (1999 --
$nil)..................................................... 131,464 --
Non-compete agreements and license rights net of accumulated
amortization of $4,098 (1999 -- $nil)..................... 26,172 --
Deferred charges net of accumulated amortization of $527
(1999 -- $32)............................................. 19,122 605
Deferred financing charges net of accumulated amortization
of $2,684 (1999 -- $38)................................... 48,609 457
Deferred foreign exchange loss net of accumulated
amortization of $179 (1999 -- $1)......................... 1,666 12
Deposits.................................................... -- 218
------- -----
227,033 1,292
======= =====
</TABLE>
8 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
2000 1999
------- ------
$ $
<S> <C> <C>
Trade accounts payable...................................... 53,404 2,017
Accounts payable and accruals for purchases of property,
plant and equipment....................................... 32,498 9,355
Accrued vacation and bonuses................................ 10,795 1,139
Capital tax, large corporations tax and sales taxes
payable................................................... 6,786 622
Other accrued liabilities................................... 7,912 1,383
Accrual for inventory purchases............................. -- 410
------- ------
111,395 14,926
======= ======
</TABLE>
F-10
<PAGE> 14
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
9 UNEARNED REVENUE
Unearned revenue represents amounts related to an operating lease
arrangement entered into in April 1999, whereby the company is the lessor
of 24 strands of dark fiber including rights of way. The company received
an up-front fee for installation costs related to placement of fiber optic
cable, building entrances and fiber optic cable connections to the lessee's
existing cable facilities which is presented as unearned revenue and being
recognized as income over the initial term of the lease. Under this
contract, the company also receives annual payments for lease and rights of
way which are being recognized as income in equal annual amounts. The lease
period ends in April, 2009, however the lessee has the option to extend the
lease for an additional ten years. Minimum lease payments receivable for
the next five years and thereafter are as follows:
<TABLE>
<CAPTION>
$
---
<S> <C>
Year ending September 30,
2001................................................... 500
2002................................................... 500
2003................................................... 500
2004................................................... 250
2005................................................... 250
Thereafter............................................. 750
</TABLE>
10 LONG TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
2000 1999
------- ------
$ $
<S> <C> <C>
Senior discount notes (a)................................... 662,661 --
Vendor financing (b)........................................ 153,565 40,398
Vendor financing (c)........................................ 31,859 6,481
Senior bank facility (d).................................... 100,144 --
Capital leases payable (f).................................. 4,292 1,155
Note payable (e)............................................ 755 776
------- ------
953,276 48,810
Less: Current portion....................................... 4,348 1,253
------- ------
948,928 47,557
======= ======
</TABLE>
F-11
<PAGE> 15
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
Repayments of long-term debt in each of the next five years are as follows:
<TABLE>
<CAPTION>
SENIOR SENIOR CAPITAL LEASES
DISCOUNT VENDOR BANK AND NOTES
NOTES FINANCING FACILITY PAYABLE
-------- --------- -------- --------------
$ $ $ $
<S> <C> <C> <C> <C>
Year ending September 30,
2001.................................. -- 1,615 -- 2,463
2002.................................. -- 1,479 -- 1,676
2003.................................. -- 8,783 4,907 1,155
2004.................................. -- 10,703 10,014 339
2005.................................. -- 13,727 10,014 --
Thereafter............................ 662,661 149,117 75,209 --
-------- ------- -------- -----
662,661 185,424 100,144 5,633
Less: Amounts representing interest... -- -- -- (586)
-------- ------- -------- -----
662,661 185,424 100,144 5,047
======== ======= ======== =====
</TABLE>
SENIOR DISCOUNT NOTES
(a) Pursuant to an indenture dated February 1, 2000, the company issued
855,000 units, consisting of US$855 million (issued at a price of
52.651% of the stated amount) of 13.25% senior discount notes due 2010
and 855,000 warrants to purchase 4,198,563 Class B non-voting shares.
Gross proceeds amounted to US$450 million, equivalent to approximately
Cdn.$651 million. Expenses related to the offering amounted to
approximately $20 million. Of the total proceeds, $592 million was
allocated to the senior discount notes and $59 million was allocated
to the share purchase warrants (note 11(f)).
The senior discount notes accrue interest at 13.25% on the face value of
the notes until February 1, 2005. The interest accrued to February 1,
2005 is payable at maturity together with the face value of the notes.
After February 1, 2005, interest is payable semi-annually in cash in
arrears February 1 and August 1 of each year, at an annual rate of
13.25%. The effective interest rate on the senior discount notes is
14.9%.
On or after February 1, 2003, the company can elect to commence the
payment of interest in cash semi-annually on February 1 and August 1 of
each year, thereby reducing the stated amount of the note.
The company has an early redemption option at any time after February 1,
2005 for all or part of the senior discount notes. The redemption prices
for the notes for each year ending February 1, are as follows: 106.625%
in 2005, 104.417% in 2006, 102.208% in 2007 and 100% thereafter, plus
unpaid interest. In addition, prior to February 1, 2005, the company may
redeem up to 35% of the notes at a redemption price of 113.25% of the
outstanding amounts of the notes at the time of redemption.
The notes are unsecured obligations of the company and the indenture
contains certain restrictive covenants including limitation on
indebtedness, restriction on the payment of dividends and other
payments, limitations on liens, asset dispositions, change of control
and limitation on transactions with subsidiaries.
F-12
<PAGE> 16
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
To reduce the exposure to U.S. dollar exchange rate fluctuations, the
company has entered into cross currency swaps as described in note 14.
VENDOR FINANCING
(b) On May 28, 1999, the company entered into a credit facility to finance
the company's purchase of telecommunication equipment and services to
a value of US$40 million.
On February 3, 2000, the company entered into a US$315 million facility
with this vendor to finance the purchase and installation of
telecommunication equipment and services. The initial borrowings under
this vendor facility were used to repay amounts outstanding under the
existing credit facility with this vendor.
The balance of vendor financing at September 30, 2000 of $154 million is
comprised of amounts payable to the vendor of $17 million, and
additional amounts drawn on the vendor credit facility of $137 million
(denominated as US$91 million).
The vendor facility matures on June 30, 2008 with quarterly principal
repayments at the rate of 1.25% of the amount outstanding, starting on
March 31, 2003 until December 31, 2007. In March and June of 2008, the
principal is repayable in two instalments of 37.5% of the outstanding
amount.
Availability under the credit facility is by way of multiple draw-downs.
At the option of the company, draw-downs under the credit facility bear
interest at either LIBOR plus an applicable margin or U.S. Prime Rate
plus an applicable margin. Depending on the ratio of consolidated total
debt to annualized earnings before interest, taxes and amortization, the
margin added to the LIBOR is between 3.0% and 4.5% and the margin added
to the U.S. Prime Rate is between 2.0% and 3.5%. The effective interest
rate on outstanding amounts during the year ended September 30, 2000 was
11.5% (1999 -- 10.2%).
In addition, a commitment fee varying between 0.75% and 1.50% depending
on the level of utilization of the vendor facility is payable on the
undrawn portion.
The credit facility agreement contains certain covenants that restrict
the ability of the company and its subsidiaries to incur additional
indebtedness and issue certain preferred stock, pay dividends or make
other distributions, engage in sale and leaseback transactions, create
certain liens, enter into certain transactions with affiliates, sell
assets of the company or its subsidiaries, issue or sell equity
interests of the company's subsidiaries or enter into certain mergers
and consolidations.
(c) On July 27, 1999 the company entered into an agreement for a US$15
million credit facility with a vendor. The credit facility is
available in tranches of US$9 million, US$1 million and US$5 million.
The final payments on these facilities are due in 2003, 2001 and 2001
respectively. They are repayable in equal principal instalments plus
12% interest per annum on the last day of each quarter.
On September 29, 2000, the company entered into a new vendor credit
facility for $120 million to finance the purchase and installation of
telecommunication equipment and services provided by this vendor. The
vendor credit facility matures September 29, 2007 with annual principal
repayment at a rate of 4.89% of the outstanding amount on September 30,
2003, 10% on September 30, 2004 and September 30, 2005, 20% on September
20, 2006, and 55.11% on September 30, 2007. The initial borrowing under
this vendor facility was used to repay amounts outstanding under the
existing credit facility. Availability under the vendor credit facility
is by way of multiple drawdowns.
F-13
<PAGE> 17
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
The balance of vendor financing at September 30, 2000 of $32 million is
comprised of amounts payable to the vendor of $16 million, and
additional amounts drawn on the credit facility of $16 million
(denominated as US$10 million).
At the option of the company, the credit facility bears interest at
either the Prime Rate (published rate of a Schedule I Canadian Bank) or
the quoted banker acceptances rate ("BA rate") plus an applicable
margin. The applicable margin on Prime Rate loans ranges from 2.00% to
3.25% and the margin applicable to BA Rate loans ranges from 3.00% to
4.25%, depending upon the company's consolidated ratio of total debt to
annualized earnings before interest, taxes and amortization. The
effective interest rate on outstanding amounts during the year ended
September 30, 2000 and 1999 was 12.0%.
In addition, a commitment fee of 0.5% per annum is payable on the
undrawn portion of the credit facility.
The credit facility agreement contains certain covenants that restrict
the ability of the company and its subsidiaries to incur additional
indebtedness and issue certain preferred stock, pay dividends or make
other distributions, engage in sale and leaseback transactions, create
certain liens, enter into certain transactions with affiliates, sell
assets of the company or its subsidiaries, issue or sell equity
interests of the company's subsidiaries or enter into certain mergers
and consolidations.
SENIOR BANK FACILITY
(d) On February 3, 2000, the company entered into a credit agreement for a
senior bank facility for an amount of $220 million to finance part of
the acquisition of the business of Shaw FiberLink (note 3(a)). The
bank facility is comprised of a $120 million seven year revolving
reducing term loan and a $100 million reducing term loan.
The $120 million revolving term loan reduces, starting February 3, 2003
to $108 million and reduces on every anniversary thereafter to $90
million in 2004, $72 million in 2005, $48 million in 2006 and nil in
2007. The $100 million reducing term loan is amortized annually by 4.9%
on February 3, 2003, 10% on February 3, 2004 and 2005, 20% on February
3, 2006 and 55.1% on February 3, 2006.
At the option of the company, the bank facility may be used as LIBOR
loans denominated in U.S. dollars, bankers acceptances in Canadian
dollars, U.S. Base rate loans in U.S. dollars and standby letters of
credit in Canadian or U.S. dollars. The margins added to the applicable
interest rates may vary from 2.0% to 4.5%, depending upon the company's
consolidated ratio of total debt to annualized earnings before interest,
taxes and amortization. The effective interest rate on outstanding
amounts during the year ended September 30, 2000 was 11.9%.
The credit facility agreement contains certain covenants that restrict
the ability of the company and its subsidiaries to incur additional
indebtedness and issue certain preferred stock, pay dividends or make
other distributions, engage in sale and leaseback transactions, create
certain liens, enter into certain transactions with affiliates, sell
assets of the company or its subsidiaries, issue or sell equity
interests of the company's subsidiaries or enter into certain mergers
and consolidations.
COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
The company has granted the lenders under the vendor credit facilities
and the senior bank credit facility general security agreements
providing the lenders a first priority lien on all the present and
F-14
<PAGE> 18
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
future property and assets of a subsidiary of the company. The parties
to the various credit agreements have entered into an amended and
restated Collateral Agency and Intercreditor Agreement, which among
other things, sets out the agreement between the lenders for the
priority and security of the obligations of the company's subsidiaries
to the lenders, and rights enforcement and allocation of proceeds.
NOTES PAYABLE
(e) In 1998, the company purchased land and a building for $900 thousand,
which was financed substantially by a note payable to a vendor. The
note bears interest at 10.5% per annum and is payable in monthly
instalments of principal and interest of $8 thousand per month, a lump
sum payment against principal of $100 thousand on February 15, 1999,
and the remaining balance on February 15, 2001. The land and building
acquired have been pledged as collateral.
CAPITAL LEASES PAYABLE
(f) Capital leases are payable in equal monthly instalments of $37
thousand including principal and interest at rates varying between 6%
and 10%. The leases are collateralized by the underlying assets and
expire in 2002.
11 SHARE CAPITAL
Authorized
Common
Unlimited number of Class A voting shares without nominal or par
value, each Class A share has one vote; unlimited number of
convertible Class B non-voting shares without nominal or par value.
Other than with respect to voting rights and limited conversion
rights, the two classes of common shares have identical rights.
Each Class B non-voting share may, under certain limited
circumstances at the option of the holder, be converted into one
Class A voting share. The holders of Class A and B shares are
entitled to receive dividends as determined by the Board of
Directors, subject to the rights of the holders of the preferred
shares. The holders of Class A voting and Class B non-voting shares
are also entitled to participate equally in the event of
liquidation of the company, subject to the rights of the holders of
the preferred shares.
Preferred
Unlimited number of non-voting first and second preference shares
without nominal or par value. The first and second preference
shares may be issued in one or more series. Each share is
convertible at the option of the holder into either Class A voting
shares or Class B non-voting shares depending on foreign ownership
restrictions then in place and automatically upon an initial public
offering of such shares, initially on a one-to-one basis to May 7,
2000, with a compound increase of 10%, subject to adjustment. The
Board of Directors of the company may fix the number of shares in
each series and designate rights, privileges, restriction,
conditions and other provisions. The first and second preference
shares shall be entitled to preference over any other shares of the
company with respect to the payment of dividends and in the event
of liquidation of the company.
On May 7, 1999 and February 14, 2000, Series A and Series B first
preference shares were created, respectively. In addition to the rights
and privileges of the first preference shares described above, the
Series A and Series B first preference shares have a liquidation value
equal to the price paid for
F-15
<PAGE> 19
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
the share plus a compound annual rate of return of 10% and have
anti-dilutive provisions protecting their conversion into Class A voting
shares or Class B non-voting shares. At September 30, 2000, there were
50,000,000 authorized Series A and 100,000,000 authorized Series B first
preference shares (1999: Series A -- 50,000,000 and Series B -- nil).
ISSUED
<TABLE>
<CAPTION>
NUMBER NUMBER NUMBER OF NUMBER OF
OF OF SERIES A SERIES B
CLASS A CLASS B FIRST FIRST
VOTING NON-VOTING PREFERENCE PREFERENCE
SHARES SHARES SHARES SHARES AMOUNT
---------- ---------- ----------- ----------- -------
$
<S> <C> <C> <C> <C> <C>
Balance as at September 30, 1997................ 7,095,132 -- -- -- 836
Class A voting shares issued for
Cash........................................ 4,880,629 -- -- -- 6,083
Upon exercise of options (e)................ 822,167 -- -- -- 332
Upon exercise of warrants (e)............... 7,900 -- -- -- 4
Upon conversion of debentures (d)........... 2,482,592 -- -- -- 1,886
Share issuance costs........................ -- -- -- -- (495)
---------- ---------- ----------- ----------- -------
Balance as at September 30, 1998................ 15,288,420 -- -- -- 8,646
Class A voting shares issued for
Cash........................................ 2,004,322 -- -- -- 3,480
Upon exercise of options (e)................ 630,000 -- -- -- 70
Upon conversion of debentures (d)........... 338,407 -- -- -- 423
Share issuance costs........................ -- -- -- -- (46)
Class B non-voting shares issued for
Cash........................................ -- 721,101 -- -- 901
Upon conversion of debentures (d)........... -- 3,427,468 -- -- 4,284
Share issuance costs........................ -- -- -- -- (159)
Series A first preference shares issued for
Cash........................................ -- -- 27,666,667 -- 41,500
Upon exercise of options (e)................ -- -- 13,833,335 -- 25,938
Share issuance costs........................ -- -- -- -- (157)
---------- ---------- ----------- ----------- -------
Balance at September 30, 1999................... 18,261,149 4,148,569 41,500,002 -- 84,880
Class A voting shares issued for
Cash........................................ 35,000 -- -- -- 280
Purchase of businesses (note 3)............. 336,666 -- -- -- 1,010
Upon exercise of options (e)................ 313,327 -- -- -- 336
Class B non-voting shares issued for
Cash (b).................................... -- 20,700,000 -- -- 422,280
Upon exercise of options (e)................ -- 1,850,000 -- -- 3,875
Purchase of businesses (note 3)............. -- 3,407,196 -- 29,096,097 474,801
Share issuance costs........................ -- -- -- -- (30,634)
Series A first preference shares issued for
acquisition of rights of way (h)............ -- -- 1,000,000 -- 1,875
Conversions (c)............................... 60,596,097 11,000,002 (42,500,002) (29,096,097) --
---------- ---------- ----------- ----------- -------
Balance at September 30, 2000................... 79,542,239 41,105,767 -- -- 958,703
========== ========== =========== =========== =======
</TABLE>
(A) REDESIGNATION OF COMMON SHARES
In September 1998, the company redesignated all authorized common
shares, both issued and unissued, as Class A voting shares and increased
authorized capital by creating an unlimited
F-16
<PAGE> 20
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
number of shares designated as Class B non-voting shares. This change in
classification for issued shares has been presented retroactively in
these financial statements.
(B) INITIAL PUBLIC OFFERING
Pursuant to an Initial Public Offering on March 15, 2000, the company
issued 18,000,000 Class B non-voting shares for aggregate cash proceeds
of US$232.9 million, net of US$19.1 million in underwriting commissions
and expenses of the offering. In addition, the underwriters exercised
their option to purchase an additional 2,700,000 Class B non-voting
shares for net proceeds of US$35.2 million to the company. Aggregate net
proceeds of the Initial Public Offering amounted to $391.7 million.
(C) CONVERSION OF SHARES
On completion of the company's initial public offering on March 15,
2000, 42,500,002 series A and 29,096,097 series B first preference
shares were automatically converted into 60,596,097 Class A voting
shares and 11,000,002 Class B non-voting shares on a one-for-one basis.
(D) CONVERTIBLE DEBENTURES
On December 15, 1998 and March 5, 1999, the company issued 12%
convertible debentures totalling $4,536,000 due March 31, 2000. The
debentures plus accrued interest could be converted by the company into
fully-paid Series A first preference shares at a conversion price of
$1.25 per preference share before July 1, 1999 ("Mandatory Conversion
Period"). If the company did not exercise its right to convert the
debentures into Series A first preference shares, each holder of
debentures had the option to convert the debentures into fully paid
Class A voting shares or Class B non-voting shares at a conversion price
of $1.25 per share, in compliance with CRTC foreign ownership
restrictions in effect at the time of conversion.
On April 30, 1999, the company waived the condition that the debentures
be converted to Series A first preference shares, and all debentures
including accrued interest were converted into 338,407 Class A voting
shares and 3,427,468 Class B non-voting shares.
(E) PREFERENCE SHARE PURCHASE OPTIONS
On May 7, 1999, the company issued 27,666,667 units to a group of
institutional shareholders at $1.50 per unit. Each unit consisted of one
Series A first preference share and an option to purchase half of one
Series A first preference share at a share price of $1.875 until August
10, 1999 and at $2.25 until November 10, 1999. At September 30, 1999,
all the options had been exercised, resulting in the issuance of
13,833,335 Series A first preference shares.
(F) COMMON SHARE OPTIONS AND WARRANTS
OPTIONS
The Board of Directors has established a stock option plan under which
options to purchase Class A voting shares and Class B non-voting shares
are granted to directors, officers and employees of the company. Options
are granted at exercise prices estimated to be at least equal to the
fair value of the shares, vest over a three-year period and generally
expire five years from the date of grant.
F-17
<PAGE> 21
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
At September 30, 2000, there were 5,594,635 (1999 -- 2,161,842) options
to purchase Class A voting shares and 1,770,600 (1999 -- 2,300,000)
options to purchase Class B non-voting shares outstanding. These options
expire between April 2001 and September 2005.
Option activity for the year is as follows:
<TABLE>
<CAPTION>
2000 1999
---------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
---------- -------- --------- --------
$ $
<S> <C> <C> <C> <C>
Outstanding -- Beginning of year....... 4,461,842 1.64 1,854,978 0.69
Class A voting shares
Granted.............................. 4,076,700 9.09 1,658,228 1.34
Exercised............................ (313,327) 1.07 (630,000) 0.11
Class B non-voting shares
Granted.............................. 1,320,600 5.20 2,300,000 2.04
Exercised............................ (1,850,000) 2.10 -- --
Expired................................ -- -- (682,003) 0.50
Cancelled.............................. (330,580) 7.76 (39,361) 1.25
---------- ---- --------- ----
Outstanding -- End of year............. 7,365,235 6.36 4,461,842 1.64
========== ==== ========= ====
Exercisable -- End of year
Class A voting shares.................. 2,289,626 3.47 1,726,564 1.19
Class B non-voting shares.............. 715,525 2.83 1,883,333 2.16
---------- ---- --------- ----
Total.................................. 3,005,151 3.32 3,609,897 1.69
========== ==== ========= ====
</TABLE>
A summary of stock options outstanding at September 30, 2000 is set out
below:
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS
------------------------------------ EXERCISABLE STOCK OPTIONS
WEIGHTED -------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICE NUMBER LIFE PRICE NUMBER PRICE
-------------- --------- ----------- -------- ----------- ----------
$ $ $
<S> <C> <C> <C> <C> <C>
0.50 - 1.875............... 2,437,513 3.01 years 1.42 1,908,634 1.40
3.00....................... 2,025,932 3.97 years 3.00 599,463 3.00
8.00....................... 1,890,289 4.38 years 8.00 380,097 8.00
20.40 - 20.86.............. 666,801 4.63 years 20.52 94,241 20.48
24.08...................... 300,700 4.79 years 24.08 20,882 24.08
26.21...................... 44,000 4.88 years 26.21 1,833 26.21
--------- ---------- ----- --------- -----
7,365,235 3.86 years 6.36 3,005,151 3.32
========= ========== ===== ========= =====
</TABLE>
F-18
<PAGE> 22
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
A summary of stock options outstanding at September 30, 1999 is set out
below:
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS
------------------------------------ EXERCISABLE STOCK OPTIONS
WEIGHTED -------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICE NUMBER LIFE PRICE NUMBER PRICE
-------------- --------- ----------- -------- ----------- ----------
$ $ $
<S> <C> <C> <C> <C> <C>
0.50....................... 277,224 1.29 years 0.50 277,224 0.50
1.00....................... 37,500 1.08 years 1.00 37,500 1.00
1.25....................... 1,239,118 3.76 years 1.25 972,062 1.25
1.50....................... 1,108,000 4.60 years 1.50 523,111 1.50
1.875...................... 1,300,000 4.59 years 1.875 1,300,000 1.875
3.00....................... 500,000 4.92 years 3.00 500,000 3.00
--------- ---------- ----- --------- -----
4,461,842 4.17 years 1.64 3,609,897 1.69
========= ========== ===== ========= =====
</TABLE>
WARRANTS
Warrant activity for each of the years is as follows:
<TABLE>
<CAPTION>
2000 1999
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- --------
$ $
<S> <C> <C> <C> <C>
Outstanding -- Beginning of year.......... 100,000 0.50 415,000 0.50
Class A voting shares
Expired................................. -- -- (313,311) 0.50
Cancelled............................... -- -- (1,689) 0.50
Class B non-voting shares
Issued.................................. 855,000 -- -- --
------- ---- -------- ----
Outstanding -- End of year................ 955,000 0.05 100,000 0.50
======= ==== ======== ====
</TABLE>
The warrants for Class A voting shares vested on the date of grant and
expire on November 30, 2000.
The warrants for Class B non-voting shares were issued at a value of $59
million pursuant to an indenture dated February 1, 2000 (note 10(a)).
The warrants entitle the holders to purchase 4,198,563 Class B
non-voting shares in the aggregate through to February 1, 2010 for nil
consideration. The warrants are exercisable upon a registration
statement, relating to the resale of warrants and the Class B non-voting
shares issuable upon exercise of the warrants, becoming effective
providing that the Class B non-voting shares continue to be listed on a
stock exchange.
(G) LOANS TO OFFICERS
Pursuant to employment contracts, certain officers have been provided
option-exercise loans which bear interest at the effective applicable
federal interest rate of the Internal Revenue Code and are due the
earlier of: (i) five years from the date of purchase ranging from
September 1, 2004 to
F-19
<PAGE> 23
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
January 4, 2005, (ii) cessation of employment or (iii) upon the sale of
the shares purchased. The option exercise loans are secured by a first
charge against the shares purchased. These loans amount to $4 million at
September 30, 2000 (1999 -- $nil).
(H) SHARES TO BE ISSUED
At September 30, 1999, 1,000,000 Series A first preference shares at
$1.875 per share remained to be issued in connection with the
acquisition of rights of way in August 1999. These Series A first
preference shares were issued in December 1999.
13 INCOME TAXES
The tax effects of temporary differences that give rise to future income
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
2000 1999
------- ------
$ $
<S> <C> <C>
Future income tax assets
Accounts receivable....................................... 1,876 --
Property, plant and equipment............................. -- 27
Deferred charges.......................................... -- 63
Long-term debt............................................ 6,149 --
Debt and share issue costs................................ 8,381 257
Operating loss carry forwards............................. 57,403 5,709
------- ------
73,809 6,056
Valuation allowance......................................... (44,219) (6,056)
------- ------
29,590
Future income tax liabilities
Property, plant and equipment............................. (27,465) --
Deferred charges and other assets......................... (2,125) --
------- ------
(29,590) 6,056
------- ------
-- --
======= ======
</TABLE>
Management has recorded a valuation allowance for the net amount of future
income tax assets.
F-20
<PAGE> 24
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
The company has non-capital losses available to reduce taxable income in
future years. These losses expire as follows:
<TABLE>
<CAPTION>
$
-------
<S> <C>
Year ending September 30,
2002................................................... 11
2003................................................... 315
2004................................................... 522
2005................................................... 4,523
2006................................................... 7,764
2007................................................... 112,769
-------
125,884
=======
</TABLE>
The income tax provision for the year differs from the amount obtained by
applying the statutory Canadian federal and provincial income tax rates to
loss before income taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------
2000 1999 1998
------- ------ ------
$ $ $
<S> <C> <C> <C>
Statutory Canadian federal and provincial income tax
rates..................................................... 45.6% 45.6% 45.6%
------- ------ ------
Income tax recovery based on the statutory rates............ (80,463) (4,470) (1,112)
Differences from statutory rates relating to
Change in valuation allowance............................. 38,163 4,470 1,112
Large corporations tax.................................... 3,833 165 --
------- ------ ------
(38,467) 165 --
======= ====== ======
</TABLE>
14 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
The fair values of cash and cash equivalents, accounts receivable, and
accounts payable and accrued liabilities approximate their carrying values
due to the short-term nature of these instruments. At September 30, 2000,
and 1999, using discounted cash flow analysis, the carrying value of
long-term debt approximates its fair value, except for the senior discount
notes. The fair value of the senior discount notes is $649 million based on
its trading price at September 30, 2000.
CREDIT RISK
Financial instruments that potentially subject the company to a
concentration of credit risk consist of cash and cash equivalents, and
accounts receivable. The company's cash and cash equivalents are deposited
with highly rated financial institutions. The company's accounts receivable
are derived from revenue earned from customers located in Canada. The
company performs ongoing credit evaluations on its customers' financial
condition and, generally, requires no collateral from its customers. The
company maintains an allowance for doubtful accounts receivable based upon
expected collectibility of accounts receivable.
For the year ended September 30, 2000, one customer of the company
accounted for approximately 15% of revenue (note 17) and for the year ended
September 30, 1999, three customers of the company
F-21
<PAGE> 25
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
accounted for approximately 48% of revenue (one customer accounted for 26%,
a second customer accounted for 12% and a third customer accounted for
10%). For the year ended September 30, 1998, two customers of the company
accounted for approximately 55% of the company's revenue (one customer
accounted for 37% and a second customer accounted for 18%).
INTEREST RATE AND FOREIGN CURRENCY RISK
The company is exposed to foreign currency fluctuations on its U.S. dollar
denominated trade payables and long-term debt to the extent that these
liabilities exceed the U.S. dollar cash and cash equivalents. The following
table summarizes the company's exposure to interest rate foreign currency
risk:
<TABLE>
<CAPTION>
FIXED RATE
FLOATING WITHIN FIXED RATE FIXED RATE NON-INTEREST
RATE ONE YEAR 1-5 YEARS 6-10 YEARS BEARING
-------- ---------- ---------- ---------- ------------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
September 30,
Financial assets
Cash and cash equivalents
Canadian dollars........... 123,203 -- -- -- --
U.S. dollars
(US$213,329)............ 320,847 -- -- -- --
Accounts receivable.......... -- -- -- -- 49,952
Loans to officers............ -- -- 3,868 -- --
Financial liabilities
Accounts payable and accrued
liabilities
Canadian dollars........... -- -- -- -- 90,218
U.S. dollars (US$14,431)... -- -- -- -- 21,177
Long-term debt
Canadian dollars........... 115,367 755 4,292 -- --
U.S. dollars
(US$565,871)............ 170,201 -- -- 662,661 --
September 30, 1999
Financial assets
Cash and cash equivalents
Canadian dollars........... 39,794 -- -- -- --
U.S. dollars (US$13,657)... 20,057 -- -- -- --
Accounts receivable.......... -- -- -- -- 3,783
Financial liabilities
Accounts payable and accrued
liabilities
Canadian dollars........... -- -- -- -- 9,554
U.S. dollars (US$3,660).... -- -- -- -- 5,372
Long-term debt
Canadian dollars........... -- 327 1,603 -- --
U.S. dollars (US$31,815)... 40,398 926 5,556 -- --
</TABLE>
F-22
<PAGE> 26
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
CROSS CURRENCY SWAP
On February 15 and August 14, 2000, the company entered into cross currency
swaps with several financial institutions to convert approximately 69%
(representing a notional amount of U.S. $590 million) of the future U.S.
dollar payments on the senior discount notes to Canadian dollars at a fixed
average exchange rate of approximately $1.4450. The payments represent the
semi-annual interest payments from August 1, 2005 to August 1, 2009 and the
principal repayment on February 1, 2010. As a result of the cross currency
swap, the average fixed interest rate on the portion of the senior discount
notes decreased from 13.25% to approximately 12.96%. The company and the
financial institutions each have the right to terminate the swap on
February 1, 2005. As at September 30, 2000, the fair value of these swap
agreements is not significant.
From the date the swap agreements were entered, the portion of the senior
discount notes to which the exchange rate has been fixed by the swap has
been converted to Canadian dollars using the swap forward rate.
15 COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURES
(A) AGREEMENT WITH 360NETWORKS
On May 24, 2000, the company completed a multiple element agreement with
360networks Inc. Pursuant to this transaction, the company:
i) Purchased certain dark fibers to be constructed along Canadian
route paths for $137 million. Of this amount, $32 million was paid
in the year ended September 30, 2000 which is included in
property, plant and equipment. The balance will be paid over the
next three years when the fiber becomes available to the company;
and
ii) Purchased an indefeasible right to use certain dark fibers to be
constructed along United States route paths for $140 million. In
addition, the company acquired fiber optic capacity along a
diverse route in Canada and the United States under long-term
lease arrangements giving the company exclusive telecommunication
rights on certain specific wavelengths and acquired options to
purchase additional wavelengths on similar terms. Assets and
obligations under these arrangements, which will be accounted for
as capital leases over 20 years commencing in 2001 when the fiber
becomes available to the company, amount to approximately $85
million. In October 2000, the company accepted approximately 28%
of the fiber optic capacity under the long-term capacity lease
arrangement.
(B) VENDOR FINANCING AGREEMENT
The company has entered into a vendor financing agreement (note 10(b))
to purchase and license certain engineering and construction services
together with digital switches and related network software and
equipment from a supplier. The minimum future purchase commitment is
US$213 million over the next twenty months.
LETTER OF CREDIT
As of September 30, 2000, the company has letters of credit in favour of
network equipment suppliers in the amount of $0.5 million.
F-23
<PAGE> 27
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
OPERATING LEASES
The company has entered into operating leases for its premises, certain
equipment and for rights of way. Minimum lease payments for the next five
years and thereafter are as follows:
<TABLE>
<CAPTION>
$
------
<S> <C>
Year ending September 30,
2001................................................... 8,410
2002................................................... 8,422
2003................................................... 8,442
2004................................................... 8,412
2005................................................... 8,345
Thereafter............................................. 50,740
</TABLE>
The rent expense under operating leases for the following years was as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
----- ---- ----
$ $ $
<S> <C> <C> <C>
Operating lease expense..................................... 5,733 197 165
</TABLE>
16 ADDITIONAL CASH FLOW DISCLOSURES
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
2000 1999 1998
------ ----- -----
$ $ $
<S> <C> <C> <C>
Interest paid............................................... 7,862 95 53
Income taxes paid........................................... 819 -- --
</TABLE>
NON-CASH TRANSACTIONS
Purchases of property, plant and equipment of $159 million for the year
ended September 30, 2000 (1999 -- $55 million) and purchases of other
assets of $6 million at September 30, 2000 (1999 -- $nil) were financed
through long-term debt, notes payable and through accounts payable and
accrued liabilities. In addition, the company issued $476 million in Class
A voting and Class B non-voting shares in respect of businesses acquired
during the year ended September 30, 2000 (note 3). Accordingly, these
transactions are not reflected in the Statement of Cash Flows.
17 RELATED PARTY TRANSACTIONS
During the year ended September 30, 2000, the company earned $11 million
(1999 -- $nil) of revenues and incurred $2 million (1999 -- $nil) of
administrative expenses in respect of transitional processing fees on the
Shaw FiberLink operations from a minority shareholder. The company has also
engaged this related company to process certain cash disbursements on its
behalf. Included in accounts receivable is $11 million (1999 -- $nil)
receivable from this customer, $4 million of which relates to balances
acquired upon the company's acquisition of Shaw FiberLink. Included in
accounts payable and accrued liabilities is $2 million (1999 -- $nil)
payable as at September 30, 2000 to this related company. The above
transactions were entered into in the ordinary course of business and were
recorded at the exchange amount.
F-24
<PAGE> 28
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
18 SUBSEQUENT EVENT
On October 16, 2000, the company entered into an asset purchase agreement
with C1 Communications Inc. ("C1"). Under the purchase agreement, the
company will purchase from C1 all the property and assets used in its
Atlantic Cable competitive local exchange carrier business. The company
will also assume an indefeasible right to use agreement which will grant
the company an indefeasible right to use certain specifically identified
existing fibers in the fiber optic networks of C1 for 19 years.
The purchase consideration consists of rights to acquire 2,372,000 Class B
non-voting shares of the company and the assumption of C1's obligations
under the indefeasible right to use agreement, which amount to $22 million
on a present value basis. Acquisition costs are estimated to be $2 million.
19 PRIOR YEAR COMPARATIVE AMOUNTS
Certain prior years comparative numbers have been reclassified to conform
to the current year's presentation.
20 RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
The company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") in
Canada, which, in the case of the company conform in all material respects
with GAAP in the United States of America ("U.S. GAAP") except as outlined
below:
(A) NET LOSS AND SHAREHOLDERS' EQUITY
The following summary sets out the adjustments to the company's loss and
shareholders' equity which would be made to conform to U.S. GAAP:
<TABLE>
<CAPTION>
2000 1999 1998
-------- ------- ------
$ $ $
<S> <C> <C> <C>
Loss for the year in accordance with Canadian GAAP... (137,986) (9,967) (2,439)
Impact of U.S. accounting principles
Amortization of purchase price adjustment (c)...... (617) -- --
Deferred charges................................... (15) (301) (87)
Stock based compensation (d)....................... (11,430) (56) (1,056)
Deferred foreign exchange (e)...................... (1,655) (12) --
Recovery of future income taxes (f)................ 11,055 -- --
-------- ------- ------
Net loss for the year in accordance with U.S. GAAP... (140,648) (10,336) (3,582)
Unrealized gains on securities, net of tax of $10,366
(f)................................................ 23,926 -- --
-------- ------- ------
Comprehensive loss in accordance with U.S. GAAP...... (116,722) (10,336) (3,582)
======== ======= ======
Net loss per share in accordance with U.S. GAAP...... (1.86) (0.58) (0.38)
======== ======= ======
</TABLE>
F-25
<PAGE> 29
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
The reconciliation of the change in shareholders' equity from Canadian
to U.S. GAAP is as follows:
<TABLE>
<CAPTION>
2000 1999
------- ------
$ $
<S> <C> <C>
Shareholders' equity in accordance with Canadian GAAP at
September 30.............................................. 862,798 73,928
Purchase price adjustment, net of amortization of $617 (1999
and 1998 -- $nil) (c)..................................... 17,035 --
Deferred charges............................................ (417) (403)
Cumulative stock-based compensation expense (d)............. (11,651) (1,118)
Deferred stock based compensation expense (d)............... (34,266) (287)
Net change in stock options (d)............................. 45,917 1,405
Deferred foreign exchange (e)............................... (1,666) (12)
Recovery of future income taxes (f)......................... 11,055 --
Other comprehensive income (f).............................. 23,926 --
------- ------
Shareholders' equity in accordance with U.S. GAAP at
September 30.............................................. 912,731 73,513
======= ======
</TABLE>
(B) CONSOLIDATED BALANCE SHEETS
The following table indicates the restated amounts for the items in the
consolidated balance sheets of the company that would be affected had
the financial statements been prepared in accordance with U.S. GAAP:
<TABLE>
<CAPTION>
2000 1999
--------- -------
$ $
<S> <C> <C>
Property, plant and equipment (c)........................... 957,957 73,817
Long-term investment (f).................................... 77,530 --
Goodwill and other assets (c)............................... 239,327 877
Share capital (c)........................................... 1,032,079 85,480
Additional paid-in capital.................................. 337 337
Deferred stock-based compensation expense (d)............... (34,266) (287)
Stock options outstanding (d)............................... 45,917 723
Deficit..................................................... (155,263) (14,615)
Other comprehensive income (f).............................. 23,926 --
</TABLE>
F-26
<PAGE> 30
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
(C) PURCHASE PRICE ADJUSTMENT
For U.S. GAAP, the company has recorded the purchase price of the assets
acquired from Moffat Communications (note 2(b)), based on the fair value
of consideration agreed to on March 27, 2000, when the company entered
into an asset purchase agreement. The purchase consideration consisted
of $68 million cash and the rights to acquire 1,667,000 Class B
non-voting shares of the company, which had an aggregate value of
approximately $50 million at March 27, 2000. For U.S. GAAP purposes,
details of assets and liabilities acquired at their fair value are as
follows:
<TABLE>
<CAPTION>
$
-------
<S> <C>
ASSETS ACQUIRED
Indefeasible Right to Use Agreement
Property, plant and equipment for constructed fibers...... 91,748
Prepayment for fibers to be constructed................... 7,600
Videon FiberLink acquisition
Property, plant and equipment............................. 7,397
Non-competition agreement................................. 2,360
Goodwill.................................................. 12,594
Other current assets...................................... 784
-------
122,483
=======
LIABILITIES ASSUMED
Future income taxes......................................... 689
=======
</TABLE>
For Canadian GAAP, the fair value of the shares to be issued as partial
consideration of the purchase price has been determined based on the
average stock price on April 27, 2000, the date the transaction closed.
(D) STOCK-BASED COMPENSATION
For U.S. GAAP, the company has chosen to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees". This method recognizes compensation cost as the amount by
which the fair value of the stock exceeds the exercise price at the date
of grant. The compensation cost is recognized over the vesting period of
the options. For U.S. GAAP, the compensation cost not yet recognized is
presented as deferred stock-based compensation charge, with a
corresponding amount included in stock options outstanding, both of
which form part of shareholders' equity. For Canadian GAAP, stock-based
compensation expense is not recorded in the financial statements of the
company.
F-27
<PAGE> 31
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
Had the company determined compensation costs based on fair value at the
date of grant for its awards under a method prescribed by Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" the company's loss and loss per share would be
as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- ------- ------
$ $ $
<S> <C> <C> <C>
Loss in accordance with U.S. GAAP.................... (140,648) (10,336) (3,582)
Additional compensation expense...................... (2,106) (174) (18)
-------- ------- ------
Pro forma net loss................................... (142,754) (10,510) (3,600)
======== ======= ======
Pro forma loss per share............................. (1.89) (0.59) (0.38)
======== ======= ======
</TABLE>
The pro-forma compensation expense reflected above has been estimated
using the Black Scholes option-pricing model. Assumptions used in the
pricing model included: (i) risk free interest rate between
4.10% - 6.41%; (ii) expected volatility ranging between nil - 70%; (iii)
expected dividend yield of nil; and (iv) an estimated average life
ranging from 2.17 - 3 years.
(E) DEFERRED FOREIGN EXCHANGE
U.S. GAAP requires immediate recognition in income of unrealized foreign
currency exchange gains and losses on long-term monetary items with a
fixed or ascertainable life whereas Canadian GAAP requires that these
unrealized gains and losses be deferred and amortized over the remaining
term of the long-term monetary items.
(F) UNREALIZED GAIN ON SECURITIES
Under U.S. GAAP, portfolio investments which are considered to be
"available for sale" securities are measured at market value, with the
unrealized gains and losses included in comprehensive income/loss. Under
Canadian GAAP, the company's long-term investment is recorded at cost.
Under U.S. GAAP, this also resulted in an additional $11 million
recovery of future income taxes. The concept of comprehensive
income/loss does not exist under Canadian GAAP.
(G) DETAILS OF AMORTIZATION EXPENSE
<TABLE>
<CAPTION>
2000 1999 1998
------ ---- ----
$ $ $
<S> <C> <C> <C>
Amortization expense for the year consists of:
Property, plant and equipment............................. 30,510 839 213
Goodwill, non-complete agreements and license rights...... 8,417 -- 33
Deferred charges.......................................... 4,128 14 9
------ --- ---
43,055 853 255
====== === ===
</TABLE>
(H) RECENT ACCOUNTING PRONOUNCEMENTS
(I) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes methods of
F-28
<PAGE> 32
GT GROUP TELECOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(tabular amounts expressed in thousands of Canadian dollars)
accounting for derivative instruments, including certain derivatives
embedded in other contracts, and for hedging activities. The
statement requires that entities recognize all derivatives as either
assets or liabilities in the balance sheet and measure those
instruments at fair value.
The company will adopt SFAS No. 133 effective October 1, 2000 and
will record a cumulative effect-type adjustment of $18 million, net
of tax of $nil, as a charge to other comprehensive income to
recognize derivatives designated as cash flow hedges at fair value.
The resulting effect is that foreign exchange gains and losses on
the hedged portion of the long-term debt will be reflected in other
comprehensive income, together with the change in the fair value of
the hedging instruments.
As the Financial Accounting Standards Board continues to issue
additional guidance and interpretations on SFAS No. 133, the company
will review its accounting practises for derivative instruments, and
make adjustments, if necessary.
(II) REVENUE RECOGNITION
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 on Revenue Recognition. The
adoption of this pronouncement will not have a material impact on
the company's financial statements.
F-29
<PAGE> 33
GT GROUP TELECOM INC.
SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(thousands of Canadian dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
2000 2000 2000 1999
------------- --------- --------- ------------
$ $ $ $
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................... 444,050 526,231 732,053 29,348
Accounts receivable
Trade..................................... 30,253 32,799 12,801 1,922
Other..................................... 19,699 7,786 2,456 3,858
Prepaid expenses............................ 5,939 8,958 5,227 2,074
Inventory................................... 436 201 201 545
--------- --------- --------- -------
500,377 575,975 752,738 37,747
PROPERTY, PLANT AND EQUIPMENT............... 954,917 778,926 567,568 108,009
PREPAYMENT ON PROPERTY, PLANT AND
EQUIPMENT................................. 203,703 230,600 223,000 --
LONG-TERM INVESTMENT........................ 43,238 43,238 -- --
GOODWILL AND OTHER ASSETS................... 227,033 199,710 192,366 14,902
--------- --------- --------- -------
1,929,268 1,828,449 1,735,672 160,658
========= ========= ========= =======
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities.... 111,395 88,485 42,583 34,963
Unearned revenue............................ 544 1,325 925 676
Current portion of long-term debt........... 4,348 1,204 6,203 3,746
--------- --------- --------- -------
116,287 91,014 49,711 39,385
LONG-TERM UNEARNED REVENUE.................. 1,255 1,080 1,219 1,356
LONG-TERM DEBT.............................. 948,928 853,123 781,447 57,028
FUTURE INCOME TAXES......................... -- -- 28,200 --
--------- --------- --------- -------
1,066,470 945,217 860,577 97,769
--------- --------- --------- -------
SHAREHOLDERS' EQUITY
SHARE CAPITAL AND OTHER EQUITY ITEMS........ 1,013,866 971,468 937,550 88,035
DEFICIT..................................... (151,068) (88,236) (62,455) (25,146)
--------- --------- --------- -------
862,798 883,232 875,095 62,889
--------- --------- --------- -------
1,929,268 1,828,449 1,735,672 160,658
========= ========= ========= =======
</TABLE>
F-30
<PAGE> 34
GT GROUP TELECOM INC.
SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(thousand of Canadian dollars)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED,
------------------------------------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
2000 2000 2000 1999
------------- -------- --------- ------------
$ $ $ $
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE...................................... 32,167 25,558 13,259 2,267
COST OF SERVICES............................. 21,230 17,415 10,553 2,138
-------- ------- ------- -------
10,937 8,143 2,706 129
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................... 38,901 30,984 20,286 10,788
-------- ------- ------- -------
(27,964) (22,841) (17,580) (10,659)
AMORTIZATION................................. 20,241 15,447 6,169 1,198
INTEREST AND FINANCING CHARGES............... 26,488 14,488 13,237 141
-------- ------- ------- -------
LOSS BEFORE INCOME TAXES..................... (74,693) (52,776) (36,986) (11,998)
PROVISION (RECOVERY) OF FUTURE INCOME
TAXES...................................... (11,861) (26,995) 323 66
-------- ------- ------- -------
LOSS FOR THE PERIOD.......................... (62,832) (25,781) (37,309) (12,064)
DEFICIT -- BEGINNING OF PERIOD............... (88,236) (62,455) (25,146) (13,082)
-------- ------- ------- -------
DEFICIT -- END OF PERIOD..................... (151,068) (88,236) (62,455) (25,146)
======== ======= ======= =======
LOSS PER SHARE............................... (0.52) (0.22) (0.90) (0.54)
======== ======= ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (in thousands)................. 120,256 118,376 41,506 22,474
======== ======= ======= =======
</TABLE>
F-31
<PAGE> 35
SIGNATURES
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.
<TABLE>
<S> <C>
GT GROUP TELECOM INC.
(Registrant)
Date: November 14, 2000 By /s/ STEPHEN H. SHOEMAKER
----------------------------------------------
Stephen H. Shoemaker
Executive Vice-President
and Chief Financial Officer
</TABLE>
