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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------------------------------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to _______________
Commission file number: 000-28113
TELEMONDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1795931
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
230 Park Avenue, 10th Floor, New York, New York 10169
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (646) 435-5645
Indicate by check 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
--- ---
As of November 1, 2000, Telemonde, Inc. had outstanding 102,575,493
shares of common stock, $.001 par value per share.
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TELEMONDE, INC.
---------------
INDEX
Page Number
-----------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Accountant's Report 2
Consolidated Financial Statements:
Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Income -
Three and Nine Months ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flow -
Nine Months ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
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INDEPENDENT ACCOUNTANT'S REPORT
To the Stockholders of
Telemonde Inc
We have reviewed the accompanying condensed consolidated balance sheet of
Telemonde, Inc. and subsidiaries as of September 30, 2000, and the related
consolidated statements of income for the three and nine-month periods ended
September 30, 2000 and September 30, 1999 and the related statements of cash
flows for the nine months ended September 30, 2000 and September 30, 1999. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet as of December 31,
1999 and the related consolidated statements of income, and cash flows for the
year then ended, not presented herein, and in our report dated February 7, 2000,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion the information set forth in the accompanying consolidated
balance sheet as of December 31, 1999 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
MOORE STEPHENS
Chartered Accountants
St. Paul's House
London EC4P 4BN
November 10, 2000
2
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PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TELEMONDE, INC.
Consolidated Balance Sheets
(US Dollars expressed in thousands)
<TABLE>
<CAPTION>
at September 30, 2000 at December 31, 1999
--------------------- --------------------
Assets (unaudited) (audited)
<S> <C> <C>
Cash and Cash Equivalents (Pledged $1,419 and $0, $ 2,332 $ 62
respectively)
Trade accounts receivable, net of allowance
for doubtful debts of $32 and $923, respectively 8,132 4,852
Inventories 21,465 21,465
Prepaid expenses 9,683 1,605
-------- --------
Total current assets 41,612 27,984
-------- --------
Property, plant and equipment 18,653 19,439
Intangible assets 24,573 31,051
-------- --------
Total assets $ 84,838 $ 78,474
======== ========
Liabilities and stockholders' equity
Accounts payable 78,572 84,578
Accrued expenses 13,937 5,720
Deferred income 1,326 2,657
Short term notes 11,638 9,141
-------- --------
Total current liabilities 105,473 102,096
-------- --------
Stockholders' equity
Capital stock 106 73
Retained deficit (90,852) (72,849)
Additional paid in capital 70,036 49,154
Minority interests 75 0
-------- --------
Total stockholders' deficit (20,635) (23,622)
-------- --------
Total liabilities and stockholders' equity $ 84,838 $ 78,474
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
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TELEMONDE, INC.
Consolidated Statements of Income
(US Dollars expressed in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
------------------------------- -------------------------------
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $ (5,409) $ 612 $ 32,621 $ 5,857
Cost of goods sold 1,701 41,407 22,587 46,005
-------- -------- -------- --------
Gross margin (7,110) (40,795) 10,034 (40,148)
-------- -------- -------- --------
Operating Expenses:
Selling, general & admin. exp 4,774 2,948 13,135 5,604
Research and Development 534 226 1,611 395
Amortization of goodwill 3,837 11 7,917 11
Financing Costs 1,710 4,343 3,784 9,476
Reserve for doubtful accounts 32 0 32 923
-------- -------- -------- --------
Operating expenses 10,887 7,528 26,479 16,409
-------- -------- -------- --------
Operating loss (17,997) (48,323) (16,445) (56,557)
-------- -------- -------- --------
Other income (expense):
Interest income 171 268 658 580
Interest expense 356 (1,065) (2,378) (1,109)
Share of losses of associate 0 0 (400) 0
Exchange gains 174 0 621 0
-------- -------- -------- --------
Other income (expense) 701 (797) (1,499) (529)
-------- -------- -------- --------
Net loss before minority $(17,296) $(49,120) $(17,944) $(57,086)
interests -------- -------- -------- --------
Minority interests (36) 0 (59) 0
-------- -------- -------- --------
Net loss $(17,332) $(49,120) $(18,003) $(57,086)
-------- -------- -------- --------
Net loss per share
- basic $ (0.19) $ (0.83) $ (0.21) $ (1.27)
- fully diluted $ (0.19) $ (0.83) $ (0.21) $ (1.27)
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements of
income.
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TELEMONDE, INC.
Consolidated Statements of Cash Flow
(US Dollars expressed in thousands)
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
<S> <C> <C>
Operating Activities
Net loss $(18,003) $(57,086)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Amortization of goodwill 7,917 11
Depreciation of property, plant and equipment 1,922 101
Reserve for doubtful accounts 32 924
Expenses satisfied by issuance of stock 12,211 347
Goodwill of acquired subsidiary (1,404) 0
Net assets of acquired subsidiary (34) 0
Amortization of financing costs 0 8,976
Reserve for inventory 0 40,690
(Increase) decrease in accounts receivable (3,027) 4,357
(Increase) decrease in inventories 0 (10,365)
(Increase) decrease in prepaid expenses (7,783) (3,164)
Increase (decrease) in accounts payable 1,893 7,276
Increase (decrease) in accrued expenses 8,218 (9,570)
Increase (decrease) in deferred income (1,331) (2,461)
Increase in minority interests 75 0
-------- --------
Net cash provided by (used in) operating activities 686 (19,964)
-------- --------
Investing activities
Purchase of property, plant & equipment (786) (807)
Cash acquired on acquisition of subsidiary 170 0
-------- --------
Net cash used in investing activities (616) (807)
-------- --------
Financing activities
Proceeds from short term notes 2,497 7,500
Proceeds from shareholder loans 0 10,712
Issuance (redemption) of stock (297) 29
-------- --------
Net cash provided by financing activities 2,200 18,241
-------- --------
Net increase (decrease) in cash and
cash equivalents 2,270 (2,530)
Cash and cash equivalents at start of period 62 2,655
-------- --------
Cash and cash equivalents at end of period $ 2,332 $ 125
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 823 $ 10,585
Income taxes paid 19 0
</TABLE>
The accompanying notes are an integral part of these consolidated statements of
cash flow.
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TELEMONDE, INC.
Notes to Consolidated Financial Statements
September 30, 2000
(US Dollars expressed in thousands, except per share data)
1. Reference is made to the Notes to Consolidated Financial Statements contained
in the Company's December 31, 1999 audited consolidated financial statements
included in the Company's 1999 Annual Report and the Company's 1999 Annual
Report on Form 10-K filed with the SEC on March 30, 2000. In the opinion of
Management, the interim unaudited financial statements included herein reflect
all adjustments necessary, consisting of normal recurring adjustments, for a
fair presentation of such data on a basis consistent with that of the audited
data presented therein. The consolidated results of operations for interim
periods are not necessarily indicative of the results to be expected for a full
year.
2. At September 30, 2000, Telemonde had 102,560,493 shares issued and 3,456,004
shares to be issued, totaling 106,016,497 shares. At December 31, 1999,
Telemonde had 65,211,584 shares issued and 7,892,858 shares to be issued,
totaling 73,104,442 shares.
3. The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 128, "Basic and Diluted EPS." Basic
earnings per share are computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding for the
period. The weighted number of common shares outstanding totaled 86,155,670 and
44,828,829 for the nine months ended September 30, 2000 and September 30, 1999,
respectively. On May 14, 1999, the corporation issued 35,297,000 shares of
common stock in exchange for the 35,297 ordinary shares of Telemonde Investments
Limited. For purposes of calculating earnings per share, the increase in nominal
share capital was deemed to take effect on January 1, 1999. Diluted earnings per
share reflect the potential dilution that could occur if options and warrants
were exercised. The dilutive effect of the assumed exercise of stock options and
warrants was zero for both the nine months ended September 30, 2000 and
September 30, 1999 since the assumed exercise of stock options and warrants
would be anti-dilutive due to the associated net losses in those periods.
4. The Company follows the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." Reportable operating
segments are determined based on the Corporation's management approach. The
management approach, as defined by SFAS No. 131, is based on the way that the
chief operating decision maker organizes the segments within an enterprise for
making operating decisions and assessing performance. While the Corporation's
results of operations are primarily reviewed on a consolidated basis, the chief
operating decision maker also manages the enterprise in two segments: (i)
bandwidth and related services and (ii) the international telecommunications
traffic and card services business of EquiTel Communications Limited
("EquiTel") which was acquired by the Corporation in November 1999. The
following represents selected consolidated financial information for the
Corporation's segments for the three and nine months ended September 30, 2000
and 1999:
Three months ended
September 30, 2000 Bandwidth EquiTel Total
--------- ------- --------
Sales $ (8,088) $ 2,679 $ (5,409)
Gross margin (8,397) 1,287 (7,110)
Net income (loss) (17,578) 246 (17,332)
Total assets 81,856 2,982 84,838
Three months ended
September 30, 1999 Bandwidth EquiTel Total
--------- ------- --------
Sales $ 612 -- $ 612
Gross margin (40,795) -- (40,795)
Net loss (49,120) -- (49,120)
Total assets 56,711 -- 56,711
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Nine months ended
September 30, 2000 Bandwidth EquiTel Total
--------- ------- --------
Sales $ 28,413 $ 4,208 $ 32,621
Gross margin 8,545 1,489 10,034
Net loss (16,611) (1,392) (18,003)
Total assets 81,856 2,982 84,838
Nine months ended
September 30, 1999 Bandwidth EquiTel Total
--------- ------- --------
Sales $ 5,857 -- $ 5,857
Gross margin (40,148) -- (40,148)
Net loss (57,086) -- (57,086)
Total assets 56,711 -- 56,711
5. The FASB has issued SFAS No. 130, "Comprehensive Income Reporting." In the
nine months ended September 30, 2000 and September 30, 1999, there were no
components of comprehensive income for the Company other than net income.
6. The FASB has issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and how it is designated. For example, gains or losses
related to changes in the fair value of a derivative, not designated as a
hedging instrument, are recognized in earnings in the period of the change,
while certain types of hedges may be initially reported as a component of other
comprehensive income until the consummation of the underlying transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter. On that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS No. 133 is
not to be applied retroactively to financial statements of prior periods. The
Company believes that the adoption of this standard will not have a material
effect on the Company's consolidated results of operations or financial
position. The FASB has delayed the effective date of SFAS No. 133 by one year,
to years beginning after June 15, 2000, by the issuance of SFAS No. 137.
7. In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 provides guidance on the financial reporting of start-up
costs and organization costs, and requires that such costs be expensed as
incurred. SOP 98-5 applies to all non-governmental entities and is generally
effective for fiscal years beginning after December 15, 1998. Earlier
application is encouraged in fiscal years for which annual financial statements
previously have not been issued. The adoption of SOP 98-5 is not expected to
have a material impact on results of operations, financial position, or cash
flows of the Company as the Company's current policy is substantially in
accordance with SOP 98-5.
8. In June 1999 the Financial Accounting Standards Board issued Interpretation
No. 43 ("FIN 43") which states that SFAS No. 66 applies to all sales of real
estate, including real estate with property improvements or integral equipment.
The Company adopted FIN 43 on July 1, 1999. As a result, capacity sales
agreements entered into subsequent to June 30, 1999 are bifurcated into an
equipment portion and a real estate portion. The real estate portion is
classified as an operating lease. Revenues are recognized on a straight line
basis over the life of the agreement. The equipment portion of a capacity sales
agreement is classified as a direct financing sub lease. The difference between
the gross investment in the capacity sales agreement and the cost of the
capacity is initially recorded as deferred interest income. Deferred interest
income is amortized to interest income so as to produce a constant periodic rate
of return on the net investment in the capacity sales agreement. Under the terms
of substantially all capacity sales
7
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agreements, the purchase price is due in full when the capacity is ready for
service. In such cases, revenue is recognized when the capacity is ready for
service.
Capacity purchase agreements entered into subsequent to June 30, 1999 are
bifurcated into an equipment portion and a real estate portion. The real estate
portion is classified as an operating lease. Leasing costs are recognized on a
straight line basis over the life of the agreement. The equipment portion of a
capacity purchase agreement is classified as a capital lease. Capacity acquired
under capital leases is initially recorded as an obligation at an amount equal
to the present value at the beginning of the lease term of minimum lease
payments during the lease term. Thereafter it is stated at the lower of carrying
value and fair value.
9. On July 25, 2000, Telemonde entered into a Debt Conversion Agreement with
MCI WorldCom. MCI WorldCom agreed to accept 15,766,792 shares of Telemonde
common stock in satisfaction of $9 million of the existing debt. These shares
were issued to MCI WorldCom on September 27, 2000. Under the terms of the
Standstill Letter with MCI WorldCom, as in effect on September 30, 2000,
Telemonde agreed to repay all of its existing non-equity debt to MCI WorldCom,
with (i) $2 million due on September 29, 2000, (ii) $2 million due on November
30, 2000, and (iii) the balance of the existing debt plus all accrued interest
due on December 31, 2000. Under the terms of the Standstill Letter in effect on
September 30, 2000, if Telemonde failed to pay the installments due on September
29, 2000 and December 31, 2000, an additional $1 million and $1.9 million,
respectively, would become due and payable to MCI WorldCom. Since September 30,
2000, we have renegotiated the repayment terms with MCI WorldCom. The $2 million
payment due and not paid on September 29, 2000 now will be due on November 30,
2000. The additional $1 million payment originally due if the September 29, 2000
payment were not timely made is now due on November 30, 2000. In the event
Telemonde fails to discharge or repay the outstanding debt by December 31, 2000,
then Telemonde must (x) pledge to MCI WorldCom, by January 7, 2001, a number of
shares of Telemonde common stock valued at 150% of the then-outstanding balance
of the debt, and (y) issue to MCI WorldCom, by January 31, 2001, $2 million of
shares of Telemonde common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
You should read the following discussion and analysis together with Telemonde's
financial statements, including the notes, appearing elsewhere in this Quarterly
Report.
Forward-Looking Statements
Certain information contained in this Quarterly Report on Form 10-Q, including,
without limitation, information appearing under Part I, Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," are
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Factors set
forth in the Company's 1999 Annual Report on Form 10-K, filed March 30, 2000
(and any subsequent amendments to the Form 10-K), under Item 1, "Business - Risk
Factors," together with other factors that appear with the forward-looking
statements, or in the Company's other Securities and Exchange Commission
filings, including its Registration Statement on Form 10 dated November 15, 1999
(and any subsequent amendments to the Form 10), could affect the Company's
actual results and could cause the Company's actual results to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company in this Quarterly Report on Form 10-Q.
Overview
We are an international communications company that has developed an on-demand
international network. Over this network we offer a broad range of services,
including wholesale capacity (bandwidth), voice services and broadband (high-
speed) Internet access and content delivery. Concurrently, we establish local
joint ventures in developing world markets to offer intelligent network and
Internet solutions (such as calling card services and voice-over-Internet-
Protocol (VoIP) services), thereby expanding the global reach of our local
partners and "loading" our networks with high value voice and data traffic.
We have expanded our geographic coverage in Europe, North America, Asia Pacific
and the Middle East through the development of local facilities, the provision
of customer networks and through contracted correspondent voice agreements.
8
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We now offer our global customer base a comprehensive and integrated set of
basic and value-added services:
. Bandwidth provision and management services with flexible buy/lease contract
terms
. High-quality international wholesale voice services from London and New York
via correspondent agreements
. Local intelligent network services
. Route management and advisory services
. Carrier hotel and data center consultancy and facilities management services
. Managed wholesale Internet transit services
. High-speed internet content delivery and streaming services
Industry Trends
A number of key industry trends are emerging:
. Oversupply of bandwidth in the European market
It is estimated that current operational demand for bandwidth in the
European market is 50 gigabits, current supply is 500 gigabits and the
potential availability by mid-2001 will be 1000 terabits. However, capacity
into emerging markets remains highly controlled and therefore priced at a
premium.
. Resilience in the value of international voice traffic
The rate of decline has moderated for pricing of voice traffic to emerging
markets, which remain predominantly monopolies. We have seen some major
PTTs, such as VSNL, take robust action to prevent refile and bypass of the
correspondent trading system.
. Emerging global demand for carrier hotel and data centers and facilities
management services for them.
Ovum has forecast basic carrier hotel space to grow from 2.8 million square
meters in 2000 to 10.5 million square meters by 2005. It is forecast that the
proportion of available carrier hotel space used to provide facilities
management services will grow by 2003 to be between 35% and 40%, driving
higher revenues and margins per square meter of telecoms hotel space.
. Emergence of broadband local access
As broadband local Internet access becomes more widespread, the premium
charged by providers for connectivity will decline. Merrill Lynch forecasts
that by 2005 connectivity will account for only 56% of the value of
broadband access pricing. This decline in the relative value of broadband
access connectivity will require providers to increase the value that is
delivered on-line through content services that are bundled into
connectivity.
Telemonde is responding to these market trends by continuing to develop higher-
margin services that address the market opportunities and ensure that we are
able to maximize the value to Telemonde of the declining value of infrastructure
upon which our services are offered.
Notwithstanding the above, the Company believes that bandwidth demand is
expected to more than double in the next two years. This future growth of
bandwidth demand will be met by the building of new cable infrastructure. This
will be particularly visible in Western Europe and in the United States, where a
significant number of cable systems will be brought into service within the next
two years (including TAT-14, Flag-Atlantic, Level 3's Yellow System, Hibernia,
and Southern Cross). As Asia progresses with liberalization of the
telecommunications industry, we would expect to see the same broad pattern
develop during the next five years.
We believe that following the sharp decline in market price in 1999, existing
supply and demand are now better matched. However, demand volatility is still
prevalent in the short term. Current prices are cost based to ensure that
existing inventories are run down prior to new cable systems becoming
operational. The future market pricing of
9
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bandwidth will be affected by any future imbalances between supply of capacity
and demand for bandwidth and therefore by the timing of new generation cable
systems.
These developments have impacted buyer behavior by shifting some purchase
decisions away from outright capacity ownership (IRUs) to short-term leases
(typically less than 1 year in duration), in anticipation of lower prices in the
near future. Buyers are balancing the cost of purchasing short-term bandwidth to
meet user-driven demand for bandwidth and service quality in a competitive
market against a forward view of prices for IRUs on the new cable systems and
delivery date expectations. We believe that the demand for bandwidth will be
driven primarily from Internet Protocol (IP) based services and the growing
availability of broadband capacity on the wireline and wireless access
networks. This, coupled with the radically reduced cost of international
bandwidth, will increase the demand for new high-speed data and Internet
services over the next 18 months due to an abundance of high-quality,
cost-effective bandwidth, particularly on transatlantic and intra-European
routes. Services such as high capacity streaming video and content via the
Internet, previously thought to be uneconomical, will develop rapidly as prices
for the underlying bandwidth steps down to the next, technology driven, level.
As the Internet user market continues to be redefined into smaller and more
focused user groups, a key dynamic of this market will be the large number of
smaller service providers using the Internet as a distribution channel for their
content. This presents a major opportunity for wholesale operators to provide a
range of bandwidth, telehousing, commodity content and support services to these
service providers, enabling them to concentrate on their core capabilities. Our
subsidiary, telemonde.net, is ideally placed to exploit these increases in
demand for bundled support services.
The Internet service provider market is new and rapidly evolving. Whether, and
the manner in which, the market for our products and services to Internet
service providers will continue to grow is uncertain. Any decline in the
Internet service provider market will adversely affect our business.
Our business would be damaged if Internet usage does not continue to grow.
Internet usage may be inhibited for a number of reasons, including:
. access costs;
. inadequate network infrastructure;
. security concerns;
. uncertainty of legal and regulatory issues concerning the use of the Internet;
. inconsistent quality of service; and
. lack of availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to support
the demands placed on it or the Internet's performance and reliability may
decline. Similarly, Web sites have experienced interruptions in their services
as a result of outages and other delays occurring throughout the Internet
network infrastructure. If these outages or delays occur frequently, use of the
Internet as a commercial or business medium could, in the future, grow more
slowly or decline. This could adversely affect our business.
We have recently begun offering terrestrial network platforms and high-speed
Internet connectivity, based upon the supply of fiber optic bandwidth between
New York, London and other European cities. We intend to expand our services
worldwide and we anticipate offering a full-range of global connectivity
solutions for European Internet and multimedia service providers over our
existing global network infrastructure, as well as specialist and geographic
Internet packages for our customer base in emerging markets. We have limited
experience in the Internet business and there can be no assurances that we will
successfully establish or expand the business. Currently, we only provide
capacity to two European Internet service providers.
The market for network platforms and value-added Internet services is extremely
competitive. Our primary competitors include other telecommunications businesses
that have a significant national or international presence. Many of these
carriers have substantially greater resources, capital and operational
experience than we do. We also expect we will experience increased competition
from traditional telecommunications carriers that expand into the market for
Internet services. In addition, we will require substantial additional capital
to make investments in our Internet operations, and we may not be able to obtain
that capital on favorable terms or at all.
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Operating Risks
We have a limited operating history. Our financial information relates
principally to a period in which we were obtaining trans-Atlantic capacity and
were establishing our business and market presence. While we incurred $8.2
million in sales, $60.4 million in operating losses and $19.4 million negative
operating cash flow from our inception through December 1999, the first nine
months of 2000 evidenced a reversal of that trend. The Company recognized $32.6
million in revenue in the period from January 1, 2000 through September 30,
2000, which contributed to a $16.4 million operating loss and a modest operating
cash flow of $0.7 million.
While we are encouraged by the results for the first nine months of 2000, we are
continuing to establish our networks and expand our services. The continuation
of this expansion could give rise to operating losses and negative cash flows in
the future. The magnitude of these operating losses and negative cash flows will
be affected by a variety of factors, which include:
. The ability to put in place working capital facilities and to increase our
capital base.
. The rate at which we add new customers and the prices those customers pay for
our bandwidth and Internet services.
. The mix of our business, including, among other factors, the proportion of
capacity sales compared to leases and short term rentals we sell to our
customers.
. The ability and cost to obtain transatlantic and other bandwidth capacity, in
particular the cost of bandwidth under the major supplier agreements currently
under re-negotiation.
. Customer payment terms where customers require a deferred payment plan for
their purchase of capacity from us.
. The ability to predict demand for our networking and other related services,
including but not limited to our telehousing facilities.
. The ability of our local relationships in emerging markets to support our
customers and meet our obligations.
. The rate at which we can expand our customer base and services mix.
. The completion of our planned networks and infrastructure and the expansion of
our networks generally, with completion being achieved by currently expected
completion dates.
. General economic, financial, competitive, legislative, regulatory, licensing,
and other factors that are beyond our control.
We have financed, and expect to continue to finance, our net losses, debt
service, capital expenditures and other cash needs principally from sales and
the issuance of debt and the proceeds from sales of shares of common stock.
However, we cannot guarantee that liquidity will continue to be sufficient from
these sources and others to sustain the business.
The transition from a progressing early stage company to an operating company
places significant demands on our management and operations. Although our senior
management team has substantial industry knowledge and experience, this team has
been built up during the course of 1999 and the early part of 2000, and has
only recently been completed. We are in the process of expanding the management
and operational capabilities necessary for this transition. Our ability to
manage this transition successfully will depend on, among other things:
. expanding, training and managing our employee base, including attracting,
retaining and motivating highly skilled personnel;
. creating customer interface and operations, administrative and maintenance
systems;
. procuring terrestrial capacity to provide connectivity to inland cities.
EquiTel was formed in late 1998, signed its initial customer contracts in 1999
and still needs to be fully integrated into Telemonde. Although we expect
EquiTel's intelligent network services to contribute to our revenue stream and
initially contribute start-up losses and/or modest profitability towards the
Company's bottom line in the future, our operations relating to the pre-paid
card business face a number of risks, which include:
. the increased entry into the market by pre-paid card vendors, including
vendors that are larger than us;
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. our reliance on a small number of independent distributors to place pre-paid
cards in retail outlets;
. our inability to create exclusive pre-paid phone card distribution
arrangements in certain markets;
. the availability of alternative telephony methods;
. the cost sensitive nature of consumer demand; and
. the lack of customer loyalty to any particular pre-paid card company.
Many of these risks may cause prices to drop throughout the pre-paid card
industry. Because we depend on informal relationships with independent
distributors to market and sell our products, increased competition and lower
prices could force us to further lower our prices to continue to sell pre-paid
cards to these distributors. We cannot guarantee that we will be able to
continue to provide competitively priced pre-paid cards to our distributors or
that lower prices in the pre-paid card marketplace will not have a negative
effect on the results of our operations.
We will derive substantial revenues from international operations, and a key
element of our business strategy is to expand our operations in international
markets. Accordingly, our business is subject to certain risks inherent in
international operations. These risks include:
. unexpected changes in regulatory requirements, tariffs, customs, duties and
other trade barriers;
. difficulties in staffing and managing overseas operations;
. problems in collecting accounts receivable;
. political risks;
. fluctuations in currency exchange rates;
. foreign exchange controls which restrict or prohibit repatriation of funds;
. technology export and import restrictions or prohibitions;
. delays from customs brokers or government agencies; and
. potentially adverse tax consequences resulting from operating in multiple
jurisdictions with different tax laws.
During our limited operating history we have not experienced any material
adverse effects with respect to our overseas operations arising from such
factors. However, problems associated with such risks could arise in the future.
Finally, managing operations in multiple jurisdictions will place further strain
on our ability to manage our overall growth.
In addition, EquiTel's targeted markets are in emerging markets, including
Africa, the Middle East, most of the Asia Pacific region, the Indian
sub-continent, Southern and Central America, and parts of Eastern Europe.
Political and social instability is widespread in many such areas and EquiTel is
subject to greater risks and potential losses due to unexpected changes in
political regimes.
We rely on local relationships in these emerging markets to support our
customers. Failure on the part of our local contacts to fulfill their
obligations may harm our reputation, business and operations. We, and in
particular our switched services business, utilize local persons to market our
services and provide local training and support. The quality of the local
training and support may be inconsistent and may not reach our "benchmark" of
quality service levels. In this event, customer relations, and possible future
business, may be jeopardized. In addition, our senior management may be diverted
to remedy the failure of our local relationships and this diversion may impede
other projects.
There can be no assurance that we will succeed in developing all or any of these
capabilities or effectively manage the business risks, and any failure to do so
could have a material adverse effect on our results of operations.
Revenues
Sales for the three months ended September 30, 2000 totaled $(5.4) million
compared with $0.6 million for the three months ended September 30, 1999. The
current quarter's sales reflect a $10.2 million downward adjustment on a sale
previously recorded in the first half of 2000. This downward adjustment was
required due to a recent adoption of longer term, installment basis payment
terms than originally anticipated with this customer. Net of this adjustment,
the current quarter's sales would have been $4.8 million.
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The principal reason for the rise in revenues (viewed on a basis prior to the
recent downward adjustment) for the three months ended September 30, 2000
chiefly can be attributed to: (1) the normalization of prices in the
transatlantic bandwidth capacity industry after its rapid decline in 1999; (2)
the increase in international switched voice traffic generated through our
global correspondent relationships; and (3) the expansion of our consultancy
program to cover advisory services relating to the development of carrier
hotels in Europe and Asia. Customers were reluctant to purchase capacity while
prices were falling (and we were unable to sell capacity profitably until we had
renegotiated terms with our suppliers) but have now gone ahead and procured
bandwidth in an environment whereby supply and demand are more equalized.
However, demand volatility is still prevalent in the short term.
A relatively small number of customers currently account for a significant
amount of our total revenues. In our overall businesses three customers
accounted for approximately 90% of our revenues in 1999. In the first nine
months of 2000, nine customers accounted for approximately 90% of our revenues.
Although we intend to expand our customer base as our business grows and through
acquisitions, this dependence on a relatively small number of customers may
continue for the foreseeable future. Most of our arrangements with large
customers do not provide any guarantees that they will continue using our
services at current levels. In addition, if (1) our customers build their own
facilities, (2) our competitors build additional facilities, or (3) our
customers are involved in further consolidations in the telecommunications
industry, we could experience a reduction in the use of our services, which
could have a material adverse effect on our business.
To offset the possible impact of future bandwidth capacity market fluctuations,
we have diversified our revenue streams through the acquisition of EquiTel, the
creation of a new wholesale switched voice services revenue stream, the
formation of telemonde.net S.A. and the expansion of our consultancy unit to
cover advisory services relating to development of carrier hotels. We believe
that these businesses will contribute to our revenue stream and initially
contribute start-up losses and/or modest profitability towards the Company's
bottom line during the later part of 2000 and into the early part of 2001.
Results of Operations
For the three months ended September 30, 2000 compared with the three months
ended September 30, 1999
Sales decreased $6.0 million from $0.6 million for the three months ended
September 30, 1999 to $(5.4) million for the three months ended September 30,
2000. Bandwidth capacity and leasing sales decreased $10.1 million from $0.1
million in the three months ended September 30, 1999 to $(10.0) million in the
three months ended September 30, 2000. The decrease in bandwidth capacity and
leasing sales can be attributed to a $10.2 million downward adjustment (from a
prior first half 2000 sale) due to a recent adoption of longer term, installment
basis payment terms than originally anticipated with this customer. Backhaul,
maintenance and recharge revenues remained unchanged from $0.5 million in the
three months ended September 30, 1999 to $0.5 million in the three months ended
September 30, 2000. Revenues from international switched wholesale voice
services increased $2.0 million from $0.0 million in the three months ended
September 30, 1999 to $2.0 million in the three months ended September 30, 2000.
During the quarter, we delivered in excess of 18 million switched minutes for
our customers through traditional correspondent routes and through a voice-over-
Internet Protocol trial in association with Telecom Malaysia. We have also
completed and have live customer traffic running over interconnects into
Southern Europe and the Middle East. Advisory services and other sales increased
to $2.1 million in the three months ended September 30, 2000 from $0.0 million
in the three months ended September 30, 1999. The increase in advisory services
and other revenue is primarily due to services rendered regarding the
establishment of two third party co-location facilities and the Desertel joint
venture. Revenues for both periods are overwhelmingly attributable to the
subsidiaries of Telemonde Investments Limited.
Cost of goods sold decreased $39.7 million from $41.4 million in the three
months ended September 30, 1999 to $1.7 million in the three months ended
September 30, 2000. The decrease in cost of goods sold is predominantly
attributable to the writedowns of our bandwidth inventory, and our property,
plant and equipment, network in the third quarter of 1999 to adequately reflect
the severe decline in market pricing in that period partially offset by stronger
gross profit margins on the advisory services revenue. Cost of goods sold are
primarily attributable to the subsidiaries of Telemonde Investments Limited.
Selling, general and administrative expenses increased $1.9 million or 62% from
$2.9 million in the three months ended September 30, 1999 to $4.8 million in the
three months ended September 30, 2000. Staff costs increased
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from $0.5 million in the three months ended September 30, 1999 to $2.8 million
in the three months ended September 30, 2000. The increase in staff costs is
attributable to the fact that Telemonde Networks Limited was incorporated on
February 16, 1999 to perform the sales and marketing functions previously
undertaken outside the Company by Telemonde Limited (now known as Iaxis
Limited), to build infrastructure and staff, to a non-qualified stock option,
non-cash compensation expense and to a non-cash compensation expense associated
with stock options granted to certain employees as funded by shares from a
current third party stockholder. Other selling, general and administrative
expenses decreased from $2.4 million in the three months ended September 30,
1999 to $2.0 million in the three months ended September 30, 2000, primarily as
a result of a decrease in legal and sales commission expenses partially offset
by an increase in public company, marketing and Desertel joint venture costs.
Research and development expenses increased $0.3 million or 136% from $0.2
million in the three months ended September 30, 1999 to $0.5 million in the
three months ended September 30, 2000. The increase results from a continued
build-up of the Company's technological capabilities commensurate with the
expansion of Telemonde's customer's worldwide network build out. In the first
quarter of 1999, the Company's engineering staff was just beginning to be
assembled and by the third quarter of 2000, it continues to grow predominately
in London but also in Geneva as well.
Amortization of goodwill increased to $3.8 million in the three months ended
September 30, 2000 from a relatively non-existent level in the three months
ended September 30, 1999. Telemonde's goodwill is mostly attributable to the
purchase of EquiTel late in 1999. The current quarter's expense includes a
downward revaluation of the goodwill associated with the TGA Limited acquisition
since the related individuals are no longer employed by the Company.
Financing costs decreased $2.6 million or 61% from $4.3 million in the three
months ended September 30, 1999 to $1.7 million in the three months ended
September 30, 2000. The decrease predominantly results from a smaller expense
associated with warrant and/or potential share issuances involving
Communications Collateral Limited debt in the third quarter of 2000 as compared
to the third quarter of 1999.
Interest income decreased $0.1 million or 43% from $0.3 million in the three
months ended September 30, 1999 to $0.2 million in the three months ended
September 30, 2000. The decrease is primarily attributable to a decrease in
income from sales interest on capacity sold on deferred payment terms partially
offset by income earned on a temporary increased level of pledged cash and cash
equivalents.
Interest expense decreased to $(0.4) million in the three months ended September
30, 2000 from $1.1 million in the three months ended September 30, 1999 due to a
reversal of a planned third party financing of a particular customer's accounts
receivable partially offset by borrowings that have materialized over the past
few quarters for working capital purposes.
Net loss decreased to $(17.3) million in the three months ended September 30,
2000 from a net loss of $(49.1) million in the three months ended September 30,
1999. The decrease of $31.8 million of net loss arises principally from the
greatly increased gross margins and increased other income partially offset by
an increase in operating expenses.
For the nine months ended September 30, 2000 compared with the nine months ended
September 30, 1999
Sales increased $26.8 million from $5.8 million for the nine months ended
September 30, 1999 to $32.6 million for the nine months ended September 30,
2000. Bandwidth capacity and leasing sales increased $11.8 million from $3.7
million in the nine months ended September 30, 1999 to $15.5 million in the nine
months ended September 30, 2000. The current nine month period results were
affected by a $10.2 million downward adjustment (from a prior first half 2000
sale) due to a recent adoption of longer term, installment basis payment terms
than originally anticipated with this customer. The increase in bandwidth
capacity and leasing sales can be attributed to accelerated customer purchases
in an environment whereby bandwidth supply and demand has begun to normalize.
However, demand volatility is still prevalent in the short term. Backhaul,
maintenance and recharge revenues increased $1.6 million from $2.1 million in
the nine months ended September 30, 1999 to $3.7 million in the nine months
ended September 30, 2000. The increase in backhaul, maintenance and recharge
revenues reflects the fact that the Company experienced higher use on its
established circuits during the first three quarters of 2000. Revenues from
international switched wholesale voice services increased $5.4 million from $0.0
million in the nine months ended
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September 30, 1999 to $5.4 million in the nine months ended September 30, 2000.
During the first nine months of 2000, we delivered in excess of 36 million
switched minutes for our customers through traditional correspondent routes and,
more recently, through a voice-over-Internet Protocol trial in association with
Telecom Malaysia. We have also completed and have live customer traffic running
over interconnects into Southern Europe and the Middle East. Advisory services
and other sales increased to $8.0 million in the nine months ended September 30,
2000 from $0.0 million in the nine months ended September 30, 1999. The increase
in advisory services and other revenue is due to services rendered regarding the
sale of a switching co-location business, the establishment of three third party
co-location facilities and the Desertel joint venture. Revenues for both periods
are overwhelmingly attributable to the subsidiaries of Telemonde Investments
Limited.
Cost of goods sold decreased $23.4 million or 51% from $46.0 million in the nine
months ended September 30, 1999 to $22.6 million in the nine months ended
September 30, 2000. The decrease in cost of goods sold is predominantly
attributable to the writedowns of our bandwidth inventory, and our property,
plant and equipment network, in the third quarter of 1999 to adequately reflect
the severe decline in market pricing in that period partially offset by higher
cost of goods sold on our traffic and Desertel revenues and stronger gross
profit margins on the advisory services revenue. Cost of goods sold are
primarily attributable to the subsidiaries of Telemonde Investments Limited.
Selling, general and administrative expenses increased $7.5 million or 134% from
$5.6 million in the nine months ended September 30, 1999 to $13.1 million in the
nine months ended September 30, 2000. Staff costs increased from $0.8 million in
the nine months ended September 30, 1999 to $6.3 million in the nine months
ended September 30, 2000. The increase in staff costs are attributable to the
fact that Telemonde Networks Limited was incorporated on February 16, 1999 to
perform the sales and marketing functions previously undertaken outside the
Company by Telemonde Limited (now known as Iaxis Limited), to build
infrastructure and staff, to a non-qualified stock option, non-cash compensation
expense and to a non-cash compensation expense associated with stock options
granted to certain employees as funded by shares from a current third party
stockholder. Other selling, general and administrative expenses increased from
$4.8 million in the nine months ended September 30, 1999 to $6.8 million in the
nine months ended September 30, 2000, primarily as a result of an increase in
consultant fees, travel and public company expenses as well as a stock issuance
expense for Telemonde's non-delivery of a DS-3 partially offset by EquiTel
support costs incurred in the first nine months of 1999 and reduced legal
expenses.
Research and development expenses increased $1.2 million from $0.4 million in
the nine months ended September 30, 1999 to $1.6 million in the nine months
ended September 30, 2000. The increase results from a continued build-up of the
Company's technological capabilities commensurate with the expansion of
Telemonde's customer's worldwide network build-out. In the first quarter of
1999, the Company's engineering staff was just beginning to be assembled and by
the third quarter of 2000, it continues to grow predominately in London but also
in Geneva as well.
Amortization of goodwill increased to $7.9 million in the nine months ended
September 30, 2000 from a relatively non-existent level in the nine months ended
September 30, 1999. Telemonde's goodwill is mostly attributable to the purchase
of EquiTel late in 1999. The current nine month expense includes two downward
revaluations involving an abandoned EquiTel joint venture in South Africa and
the TGA Limited acquisition since the related individuals are no longer employed
by the Company.
Financing costs decreased $5.7 million or 60% from $9.5 million in the nine
months ended September 30, 1999 to $3.8 million in the nine months ended
September 30, 2000. The decrease predominantly results from a smaller expense
associated with warrant and/or potential share issuances involving
Communications Collateral Limited debt in the nine month period of 2000 as
compared to the nine month period of 1999 partially offset by funding
facilitation fees in the first three quarters of 2000.
Reserve for doubtful debts decreased from $0.9 million in the nine months ended
September 30, 1999 to $0.0 million in the nine months ended September 30, 2000.
The provision in 1999 related to a capacity sale made by Telemonde International
Bandwidth (Bermuda) Limited.
Interest income increased $0.1 million or 13% from $0.6 million in the nine
months ended September 30, 1999 to $0.7 million in the nine months ended
September 30, 2000. The increase is primarily attributable to income earned on a
temporary increased level of pledged cash and cash equivalents.
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Interest expense increased to $2.4 million in the nine months ended September
30, 2000 from $1.1 million in the nine months ended September 30, 1999 primarily
due to the Company's inability to pay by September 29, 2000 the first
installment due under the MCI WorldCom Debt Conversion Agreement.
Share of losses of associate increased from $0.0 million in the nine months
ended September 30, 1999 to $0.4 million in the nine months ended September 30,
2000. The losses relate to start up costs attributable to Desert
Telecommunication Services LLC, a joint venture of EquiTel established in the
Sultanate of Oman.
Net loss decreased to $(18.0) million in the nine months ended September 30,
2000 from a net loss of $(57.1) million in the nine months ended September 30,
1999. The decrease of $39.1 million of net loss arises principally from the
greatly increased sales and gross margins partially offset by an increase in
operating and other expenses.
Liquidity and Capital Resources
Telemonde's liquidity requirements arise from:
. purchases and maintenance of bandwidth capacity and network equipment;
. development of intelligent network platforms, which includes pre-paid
calling cards and other value-added telephony services;
. development of our content delivery and streaming services;
. interest and principal payments on outstanding indebtedness;
. net cash used in operating activities; and
. acquisitions of, and strategic investments in, businesses.
Telemonde has satisfied its liquidity requirements to date through operating
cash flows, vendor finance, short-term bridge financing, shareholder loans and
equity subscriptions.
Net cash provided by operating activities was $0.7 million in the nine months
ended September 30, 2000 compared to net cash used in operating activities of
$20.0 million in the nine months ended September 30, 1999. The increase in net
cash provided by operating activities was primarily due to lower losses, an
increase in accrued expenses for uninvoiced bandwidth and content, an increase
in expenses satisfied by issuance of stock and a static inventory level
partially offset by an inventory reserve in the first nine months of 1999, a
decrease in accounts payable and amortization of financing costs also in the
first nine months of 1999.
Net cash provided by financing activities was $2.2 million in the nine months
ended September 30, 2000 compared with $18.2 million in the nine months ended
September 30, 1999. The decrease in short term notes for the current nine month
period relate to repayments to Communications Collateral Limited, Kingsfame
Investments Limited, The Atlas Corporation Limited and other investors partially
offset by higher borrowings with Home Run Limited. The decrease in shareholder
loans relates to the GestiBroker working capital infusion during the first nine
months of 1999.
Telemonde's ability to meet its liquidity requirements is dependent on its
ability to generate cash from operations and raise short term or permanent
finance. While the Company incurred operating losses and negative operating cash
flow from its inception through December 31, 1999, the first nine months of 2000
evidenced a reversal of that trend. However, Telemonde incurred a net loss of
$11.7 million from its inception through December 31, 1998 and a substantial net
loss of $61.1 million in the fiscal year ended December 31, 1999. On a pro forma
basis, after giving effect to the acquisition of EquiTel, Telemonde would have
had a net loss of $13.6 million in the inception period ended December 31, 1998
and $72.6 million in the fiscal year ended December 31, 1999.
We also expect to make capital expenditures over the next few quarters building
our infrastructure, organizing our bandwidth and switched services businesses,
developing our Internet content and streaming services, and developing our
carrier hotels facilities management services. We hope to fund these
expenditures from short-term bridge financing, vendor financing and from planned
equity funding, as well as from proceeds of future sales. Our failure to obtain
funding from any of the foregoing sources may significantly delay or prevent
capital expenditures. If we are unable to make our capital expenditures as
planned, our business may grow slower than expected with a material adverse
effect on our business, financial condition, results of operations, and the
value of our securities.
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We currently do not have the full capital base or working capital facilities to
meet our current and projected commitments. If we fail to successfully obtain
necessary capital, or to obtain an insufficient amount of capital, we would harm
our prospects and could jeopardize our existence. We have benefited from the
willingness of suppliers to reschedule commitments and payments and may continue
to require and take advantage of such flexibility in the future. However, this
reliance on supplier flexibility for short term credit facilities inevitably
leads to pressure from suppliers, which weakens our commercial position. In
addition, it could result and has resulted in formal events of default, which
could endanger us if this supplier flexibility ceased to be available. This is a
significant reason for our plan to seek substantial external equity and debt
funding.
The independent auditors reported that the financial statements for the fiscal
year ended December 31, 1999 were prepared assuming that the Company will
continue as a going concern. As discussed in note 1 to the fiscal year 1999
financial statements as reported in the Company's Annual Report on Form 10-K (as
amended), Telemonde has incurred a net loss of $61.1 million. In addition, at
September 30, 2000, total current liabilities exceeded total current assets by
$63.9 million. These factors, and the others discussed in note 1 identified
above, raise substantial doubt about the ability of the Company to continue as a
going concern if it fails to raise additional debt and equity financing. The
financial statements do not include any adjustments relating to the
recoverability of recorded assets, or the amounts of liabilities that might be
necessary in the event the Company fails to raise additional financing and
cannot continue in existence.
We have incurred a high level of debt. As of September 30, 2000, Telemonde had
$105.5 million in total liabilities, including:
. $69.2 million to capacity suppliers relating to undrawn bandwidth.
Undrawn bandwidth comprises transatlantic bandwidth capacity, which we
have not yet drawn-down and taken delivery of, but to which we are
committed to draw down at scheduled dates under the terms of Capacity
Purchase Agreements with our suppliers. We are in discussions with our
suppliers to reduce this level of commitment.
. $9.4 million to all other suppliers.
. $2.8 million owed to Communications Collateral Limited under a Capacity
Option Agreement.
The amount of our debt could have important consequences for our future,
including, among other things:
. cash from operations may be insufficient to meet the principal and
interest on our indebtedness as it becomes due;
. payments of principal and interest on borrowings may leave us with
insufficient cash resources for our operations; and
. restrictive debt covenants may impair our ability to obtain additional
financing.
We are in ongoing discussions with investment bankers for the potential
provisioning of short-term debt and equity financing. We are in ongoing
discussions with our capacity suppliers relating to undrawn bandwidth with a
view to significantly reducing the level of undrawn bandwidth commitment. The
amount of financing which is required to meet our commitments is significant. We
cannot assure you that our ongoing negotiations and discussions will be
successful. Failure to successfully complete our ongoing negotiations and
discussions will not only impair our ability to develop our business but may
also result in the termination of our operations.
Due to our lack of liquidity resulting from a decline in the market for
wholesale fiber optic bandwidth, we have been unable to generate sufficient cash
flow to meet certain of our debt service requirements and have triggered events
of default under our monetary obligations on a number of our material contracts.
We have renegotiated our capacity purchase agreements with our two major
suppliers, MCI WorldCom and Atlantic Crossing, and we are in discussions with
MCI WorldCom about further renegotiation of our capacity purchase agreement.
MCI WorldCom Capacity Purchase Agreements. In December of 1998 and on March 31,
1999, Telemonde, through its now wholly owned subsidiary Telemonde International
Bandwidth Limited, entered into agreements for the purchase of five units
(STM-1's) of bandwidth capacity on the Gemini network. Specifically, Telemonde
acquired the IRUs in three units of capacity under the December 1998 agreement,
and acquired the right for two additional units of capacity under the March 1999
agreement. Under these agreements, Telemonde is also required to pay
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annual maintenance charges. As a result of the significant decrease in bandwidth
prices and the resulting difficulties in making bandwidth sales, Telemonde was
unable to fulfill its obligations under these agreements, including being
delinquent on its annual maintenance charges, resulting in an overall default to
MCI WorldCom in the amount of approximately $26 million.
In light of these circumstances, Telemonde executed a Standstill Letter from MCI
WorldCom on December 31, 1999 in which MCI WorldCom has agreed to refrain from
(a) taking any action to enforce payment of the sums owed to MCI WorldCom under
the capacity purchase agreements; (b) taking any action to enforce or make a
demand under any guarantee, indemnity or security related to the capacity
purchase agreements; and (c) commencing any insolvency proceedings against
Telemonde or any of its subsidiaries. The Standstill Letter was to expire upon
the earlier of (i) the full payment of the sums owed under the capacity purchase
agreements; (ii) June 8, 2000; or (iii) Telemonde's failure to comply with a
number of terms and conditions, which includes the prohibition against the sale
of assets, dividends and the borrowing of any additional funds without the
signed written consent of MCI WorldCom's agent other than permitted borrowings.
On May 11, 2000, July 25, 2000, September 19, 2000 and November 13, 2000,
Telemonde entered into Amendments No. 1, 2, 3 and 4, respectively, to the
Standstill Letter. Under these amendments, MCI WorldCom, in part, extended the
expiration date of the Standstill Letter.
Telemonde has also executed a letter of intent dated December 31, 1999 termed a
"Capacity Swap Letter" in which MCI WorldCom has agreed to enter into a binding
agreement with Telemonde to permit Telemonde to swap the bandwidth purchased
under the above capacity purchase agreements for bandwidth on MCI WorldCom's
European Ulysses network. The Capacity Swap Letter is conditional on
satisfaction by Telemonde of its obligations under the Standstill Letter.
On July 25, 2000, Telemonde entered into a Debt Conversion Agreement with MCI
WorldCom. MCI WorldCom agreed to accept 15,766,792 shares of Telemonde common
stock in satisfaction of $9 million of the existing debt. These shares were
issued to MCI WorldCom on September 27, 2000. Under the terms of the Standstill
Letter, as amended, Telemonde also agreed to repay all of its existing non-
equity debt to MCI WorldCom, with (i) $5 million due on November 30, 2000, and
(ii) the balance of the existing debt plus all accrued interest due on December
31, 2000. If Telemonde fails to pay the installments due on December 31, 2000,
an additional $1.9 million will become due and payable to MCI WorldCom. In the
event Telemonde fails to discharge or repay the outstanding debt by December 31,
2000, then Telemonde must issue to MCI WorldCom by January 31, 2001 $2 million
of shares of Telemonde common stock and must provide to MCI WorldCom by January
7, 2001 a pledge of shares of Telemonde common stock valued at 150% of the then
outstanding balance of the debt. We are in ongoing discussions with MCI WorldCom
regarding the rescheduling of the outstanding debt.
In addition to the foregoing, as partial inducement to MCI WorldCom to defer
from demanding immediate payment of the existing debt, Fastfirm Limited, an
affiliate of Telemonde, pledged 9,917,356 shares of Telemonde common stock to
MCI WorldCom as security for Telemonde's obligations to MCI WorldCom. Telemonde
issued the 9,917,356 shares to Fastfirm on February 2, 2000.
Atlantic Crossing Limited Capacity Purchase Agreement. Telemonde, through its
now wholly owned subsidiary Telemonde Bandwidth (Bermuda) Limited, agreed to
acquire an aggregate of 16 STM-1(s) on Segment S-1 from Atlantic Crossing
Limited, under a Capacity Purchase Agreement dated June 10, 1998. Since the
summer of 1999, we have not drawn down any capacity from Atlantic Crossing and
have not made any payments under this agreement and are in default under the
payment terms in the amount of approximately $52 million, in addition to
interest and outstanding maintenance payments. Management is in discussions with
Global Crossing, the parent company of Atlantic Crossing, to renegotiate the
terms of the contract, including the extension of capacity drawdowns to include
the entire Global Crossing system, rather than just transatlantic capacity. This
will allow Telemonde to expand according to its overall business strategy.
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It is the opinion of Telemonde's management that the ongoing negotiations with
Atlantic Crossing will lead to a successful conclusion of the outstanding
default and provide Telemonde with a much more flexible supply contract. If we
remain in default, Atlantic Crossing could foreclose on our capacity and other
assets of Telemonde Bandwidth (Bermuda) Limited up to the value of the amount
owed to them.
Gemini Capacity Purchase Agreement. On April 3, 1998, Telemonde, through its now
wholly owned subsidiary Telemonde International Bandwidth (Bermuda) Limited,
purchased Indefeasible Rights of Use relating to transatlantic capacity from
Gemini Submarine Cable System Limited. Specifically, Telemonde agreed to acquire
up to a maximum of STM-16. Due to a subsequent and rapid decline in the market
for wholesale telecommunications bandwidth, the capacity sale agreement was
amended by five letter agreements dated January 27, April 16, April 22 and
November 5, 1999 and April 30, 2000. These amendments provided that an IRU for
only one (1) STM-1 would be acquired, and a second STM-1 would be leased for a
lump sum payment plus monthly payments for a three-month period ending July 16,
1999. Further negotiations between the parties provided that the lump sum
payment would fall due on October 7, 1999 in the form of two promissory notes.
Telemonde has paid Gemini the full balance owing for the IRU relating to the
first STM-1. However, Telemonde has not fulfilled its obligations under two
original promissory notes in the amount of $2.7 million. Although this default
gives Gemini the right to immediately terminate the Indefeasible Rights of Use,
Gemini has not done so as of the date of this filing. Furthermore, such a
termination would not substantially effect Telemonde's bandwidth sales
contracts, as it only has one customer operating on the Gemini network under
this particular capacity purchase agreement, and this customer is protected
under the agreement with Gemini.
On July 6, 2000, in exchange for Gemini's agreement not to exercise its rights
of termination before September 30, 2000, Telemonde agreed that it would pay
Gemini $0.1 million per month in July, August and September 2000. The
outstanding Gemini balance totaled $2.5 million at September 30, 2000. The
September 2000 payment under the above agreement was made in early October 2000.
On October 27, 2000, Telemonde and Gemini agreed to mutually acceptable payment
terms to the end of 2000 in order to continue to effectively deal with the
current outstanding balance.
Current Obligations to Communications Collateral Limited. On April 15, 1999,
Telemonde, through its now wholly owned subsidiary Telemonde Investments
Limited, entered into a series of agreements with Communications Collateral
Limited, including, among others, agreements for: (1) the sale of an IRU for
bandwidth to Communications Collateral Limited; (2) the grant of an option to
Communications Collateral Limited which, among other things, required Telemonde
to repurchase the bandwidth upon Communications Collateral Limited's request;
and (3) a $1 million loan by Communications Collateral Limited to Telemonde due
and repaid on August 12, 1999. In connection with these principle agreements,
the three subsidiaries of Telemonde Investments Limited guaranteed the
obligations of Telemonde Investments Limited under those agreements, including
its obligation to pay back the loan and to repurchase the bandwidth in the event
that Communications Collateral Limited exercised its option.
On August 14, 1999, Communications Collateral Limited exercised its option to
require Telemonde to repurchase the capacity. Telemonde was unable to complete
this repurchase. As of September 30, 2000, $2.8 million is owed to
Communications Collateral Limited. As a result, Communications Collateral
Limited has the right to foreclose on essentially all of the assets of Telemonde
Investments Limited, including its ownership interests in the three subsidiaries
of Telemonde Investments Limited, all of the assets in any of the foregoing
subsidiaries, including their rights under Telemonde's bandwidth sale contracts;
and any ownership interest the foregoing subsidiaries might have in any other
Telemonde entities until the default is cured. The amount of the foreclosure,
however, would not have exceeded the amount of the indebtedness.
Liabilities at September 30, 2000. As of September 30, 2000, Telemonde had
$105.5 million of total liabilities. This included $62.9 million owed to
capacity suppliers relating to undrawn bandwidth and $2.8 million owed to
Communications Collateral Limited. As of September 30, 2000, we therefore had
incurred events of default in respect of $65.7 million of the total liabilities.
We also had the following obligations, included in the total liabilities of
$105.5 million at September 30, 2000:
. 7.4 million in loans to Telemonde from Home Run Limited; and
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<PAGE>
. $1.0 million in loans to EquiTel from Rhone Financial Indemnity Re
Limited, repayable when EquiTel's resources permit.
At September 30, 2000 we had no material capital commitments. We intend to
establish our own operations center, as described in the Network Section of Item
1 of the Company's 1999 Annual Report on Form 10-K. This will involve capital
expenditures in respect of network equipment and connectivity. The intended
sources of funds for these types of expenditures are described below.
Fund Raising Plans. We currently do not have the full capital base or working
capital facilities to meet our projected commitments. We are currently seeking
short-term debt finance, primarily to repay the obligations to Communications
Collateral Limited. In addition, we plan to raise additional equity in order to
provide us with an increased capital base for the future.
We can give no assurance that our plans to raise additional equity will be
successful. If we fail to obtain the necessary capital, or if we obtain an
insufficient amount of capital, this would harm our prospects and could
jeopardize our existence. We have benefited in the past from the willingness of
suppliers to reschedule commitments and payments and may continue to require and
take advantage of such flexibility in the future. However, this reliance on
supplier flexibility for short term funding inevitably leads to pressure from
suppliers. In addition, it has resulted in the past and could result in the
future in formal events of default, which could endanger us, especially if this
supplier flexibility ceased to be available. It is for this reason that we plan
to seek substantial external funding.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Telemonde's primary market risk exposure relates to changes in foreign currency
rates. Telemonde is exposed to the risk of fluctuations in foreign currency
exchange rates due to the international nature and scope of its operations. In
the future, Telemonde expects to continue to derive a significant portion of its
net revenue and incur a significant portion of its operating costs outside the
United States, and changes in foreign currency exchange rates may have a
significant effect on Telemonde's results of operations. Telemonde historically
has not engaged in hedging transactions to mitigate foreign exchange risk.
Telemonde's main exchange risk currently arises from fluctuations between the US
dollar and pounds sterling. Its revenue from bandwidth sales is in US dollars.
Although capacity purchases are also made in dollars, Telemonde's sales, general
and administrative costs are mostly incurred in pounds sterling because most of
its employees are based in its executive and administrative offices in London,
England.
EquiTel's revenues will be mainly received in the local currency of the country
of operations (for example, in Omani rigals in the case of the current contract
in Oman). As EquiTel's contracts are mainly contracted through local joint
ventures and partnerships, much of the costs of the contract are also incurred
in the same local currency. However, there will be an exchange risk on the
profit or loss of the local operations or joint venture arising from the
fluctuation of the local currency, against the pounds sterling (in which
currency EquiTel's central sales, general and administrative costs in London are
mainly incurred).
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<PAGE>
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is party to litigation or other legal proceedings
that each company considers to be a part of the ordinary course of its business.
The Company is not involved in any legal proceedings nor is it party to any
pending or threatening claims that could reasonably be expected to have a
material adverse effect on its financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
No securities of Telemonde which were not registered under the Securities Act of
1933, as amended (the "Securities Act"), have been sold by Telemonde during the
third quarter of 2000, except as follows:
(a) On September 1, 2000, Telemonde issued 1,000,000 shares of its common stock
to Challis International Limited as consideration towards investment
advisory services and the facilitation of funding for the Company as part
of an agreement between the companies. An exemption from registration is
claimed under Section 4(2) of the Securities Act.
(b) On September 27, 2000, Telemonde issued 15,766,792 shares of its common
stock to WorldCom in satisfaction of $9 million of Telemonde's existing
debt obligations arising from bandwidth capacity purchase agreements with
WorldCom. An exemption from registration is claimed under Section 4(2) of
the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 6, 2000, the Company held its annual meeting of stockholders. The
matters on which the stockholders voted, in person or by proxy, were (i) for the
election of two nominees to serve as directors in Class I of the Board of
Directors for a term of three years or until their respective successors are
duly elected and qualified and (ii) for the ratification of Moore Stephens as
the Company's independent auditors and accountants for fiscal 2000. The nominees
were elected and the ratification of Moore Stephens as the Company's independent
auditors and accountants for fiscal 2000 was approved. The results of the voting
are shown below:
Election of Directors:
<TABLE>
<CAPTION>
Votes Cast Abstentions or
Directors Votes Cast For Against or Withheld Broker-Non-Votes
--------- -------------- ------------------- ----------------
<S> <C> <C> <C>
Paul E. Donofrio 58,269,280 121,100 0
Count Gottfried A. von Bismarck 58,250,280 140,100 0
</TABLE>
Ratification of Moore Stephens as the Company's independent auditors and
accountants for fiscal 2000:
<TABLE>
<CAPTION>
Votes Cast Abstentions or
Votes Cast For Against or Withheld Broker-Non-Votes
-------------- ------------------- ----------------
<S> <C> <C> <C>
58,338,280 15,400 36,700
</TABLE>
Adam Bishop and Miguel Tirado are in Class II of the Board of Directors and have
been elected to serve as directors until the 2001 stockholder meeting. Kevin
Maxwell and Mark Hollo are in Class III of the Board of Directors and have been
elected to serve as directors until the 2002 stockholder meeting. Accordingly,
Messrs. Bishop, Tirado, Maxwell and Hollo continued to hold office as directors
following the 2000 stockholder meeting.
ITEM 5. OTHER INFORMATION.
Effective as of October 31, 2000, Paul E. Donofrio, the Company's Executive Vice
President and Chief Financial Officer, resigned from his employment with the
Company to pursue other opportunities. However, Mr. Donofrio
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<PAGE>
will remain as a member of Telemonde's Board of Directors until the annual
meeting of the Company's stockholders in 2003. In connection with Mr. Donofrio's
resignation, Mr. Donofrio and the Company executed a Termination of Executive
Services Agreement, providing for the continuation of certain of Mr. Donofrio's
benefits until certain dates. A copy of the Termination of Executive Services
Agreement is attached as Exhibit 10.15 hereto.
Following Mr. Donofrio's resignation, Telemonde named Alan Thompson, its
Corporate Controller, to the position of Executive Vice President, Finance. With
the assistance of Mr. Thompson, Mr. Donofrio will continue to work with
Telemonde's representatives on an occasional "as-needed" basis regarding certain
tasks identified in the Termination of Executive Services Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-K are incorporated herein by
reference and are listed on the attached Exhibit Index.
(b) On September 19, 2000, Telemonde filed a Current Report on Form 8-K
reporting under Item 5 that Telemonde had completed certain negotiations
with WorldCom involving: (i) the rescheduling of approximately $26.3
million of Telemonde's debt obligations to WorldCom; and (ii) the
acceptance by WorldCom of 15,766,792 shares of Telemonde common stock in
satisfaction of $9 million of the existing debt.
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<PAGE>
SIGNATURES
TELEMONDE, INC.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
TELEMONDE, INC.
Date: November 14, 2000 By:/s/ Adam N. Bishop
--------------------- -------------------------------
Adam N. Bishop, President and
Chief Executive Officer
23
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1* Stock Purchase Agreement among Pac-Rim Consulting, Inc.,
Thomas Gelfand, Telemonde Investments Limited, and Rhone
Financial Indemnity Re Limited, dated as of May 14, 1999.
2.2* Agreement Relating to the Sale and Purchase of Shares in the
Capital of EquiTel Communications Limited among (1)
Telcoworld Limited and Others, (2) Telemonde, Inc., and (3)
Harry Pomeroy and Larry Trachtenberg, dated November 8,
1999.
2.3* Agreement and Plan of Merger of Telemonde, Inc., a Nevada
corporation, into Telemonde, Inc., a Delaware corporation,
dated October 29, 1999.
2.4* Share Purchase Agreement for the Sale and Purchase of all
the issued share capital of TGA (UK) Limited, between the
shareholders of TGA (UK) and Telemonde, Inc., dated August
9, 1999.
2.5(a)* Share Purchase Agreement for the sale and purchase of all
the issued capital shares of Carnival Enterprises Limited
and 10% of the issued share capital of ITS Europe, S.L.
among (1) Market Consultant Limited, (2) Volim Holding B.V.,
(3) Callaway Continental Limited and (4) EquiTel
Communications, dated October 22, 1999.
2.5(b)* Share Purchase Agreement for the sale and purchase of
400,000 shares of common stock of Telemonde, Inc. between
Market Consultant Limited and Callaway Continental Limited,
dated October 22, 1999.
3.1(a)* Certificate of Incorporation of Telemonde, Inc., filed June
29, 1999.
3.1(b)* Certificate of Merger between Telemonde, Inc., a Nevada
corporation, and Telemonde, a Delaware corporation.
3.2* By-Laws of Telemonde, Inc.
4.1* Form of Common Stock Certificate.
4.2* Registration Rights Agreement between Telemonde, Inc. and
Communications Collateral Limited, dated September 1, 1999.
4.3* Registration Rights Agreement between Telemonde, Inc. and
Atlantic Crossing, Ltd. dated August 25, 1999.
4.4+ Registration Rights Agreement, dated September 19, 2000, by
and among Telemonde, Inc., MCI WorldCom Global Networks
U.S., Inc. and MCI WorldCom Global Networks Limited.
10.1* Warrant from Telemonde, Inc. to Communications Collateral
Limited, dated September 1, 1999.
10.2* Warrant from Telemonde, Inc. to Atlantic Crossing, Ltd.,
dated August 25, 1999.
10.3* Consulting Agreement between Telemonde, Inc. and Gottfried
von Bismarck, dated November 2, 1999 and effective as of
July 1, 1999.
10.4* Form of Employment Agreement between Executive Officers and
Telemonde.
10.4(a)* Schedule of Employees covered by Form of Employment
Agreement.
10.5* Capacity Sales Agreement between Gemini Submarine Cable
System Limited and Telemonde International Bandwidth
(Bermuda) Limited, April 3, 1998.
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<PAGE>
10.5(a)* Promissory Note from Telemonde, Inc. to Gemini Submarine
Cable System Limited, dated August 27, 1999 for $1,300,000.
10.5(b)* Promissory Note from Telemonde, Inc. to Gemini Submarine
Cable System Limited, dated August 27, 1999 for $1,400,000.
10.5(c) Letter Agreement, dated October 27, 2000, from Gemini
Submarine Cable System Limited to Telemonde International
Bandwidth (Bermuda) Limited.
10.6* Capacity Purchase Agreement between Atlantic Crossing Ltd.
and Telemonde Bandwidth (Bermuda) Limited, dated June 10,
1998.
10.7* Transmission Capacity Agreement among MCI WorldCom Global
Networks U.S., Inc., and MFS Cableco (Bermuda) Limited, and,
EquiTel Bandwidth Limited, dated December 1998.
10.8* Transmission Capacity Agreement among MCI WorldCom Global
Networks U.S., Inc., and MCI WorldCom Global Networks
Limited, and Telemonde International Bandwidth Limited,
dated March 31, 1999.
10.8(a)** MCI WorldCom Global Networks U.S., Inc. Standstill Letter to
and accepted by Telemonde, Inc., Telemonde International
Bandwidth Limited, Telemonde Networks Limited, Kevin Maxwell
and Adam Bishop, dated 31 December 1999.
10.8(b)** MCI WorldCom Global Networks U.S., Inc. Capacity Swap Letter
to and accepted by Telemonde International Bandwidth
Limited, dated 31 December 1999.
10.8(c)**** Amendment No. 1 to MCI WorldCom Global Networks U.S., Inc.
Standstill Letter, dated May 11, 2000, to and accepted by
Telemonde, Inc., Telemonde Networks Limited and Telemonde
International Bandwidth Limited.
10.8(d)**** Pledge Agreement, dated May 2, 2000, by and between Fastfirm
Limited and MCI WorldCom Global Networks U.S., Inc. on
behalf of itself and MCI WorldCom Global Network Limited.
10.8(e)+ Debt Conversion Agreement, dated July 25, 2000, by and among
Telemonde, Inc., MCI WorldCom Global Networks U.S., Inc. and
MCI WorldCom Global Networks Limited.
10.8(f)+ Amendment No. 2 to MCI WorldCom Global Networks U.S., Inc.
Standstill Letter, dated July 25, 2000, to and accepted by
Telemonde, Inc., Telemonde Networks Limited, Telemonde
International Bandwidth Limited.
10.8(g)+ Amendment No. 3 to MCI WorldCom Global Networks U.S., Inc.
Standstill Letter, dated September 19, 2000, to and accepted
by Telemonde, Inc., Telemonde Networks Limited, Telemonde
International Bandwidth Limited.
10.8(h) Amendment No. 4 to MCI WorldCom Global Networks U.S., Inc.
Standstill Letter, dated November 13, 2000, to and accepted
by Telemonde, Inc., Telemonde Networks Limited and Telemonde
International Bandwidth Limited.
10.9* Transmission Capacity Agreement between Telemonde
International Bandwidth Limited and Communications
Collateral Limited and Capacity Option Agreement between
Telemonde Investments Limited and Communications Collateral
Limited, both dated April 15, 1999.
10.10* Composite Guarantee and Debenture, among (1) Telemonde
Investments Limited, (2) Telemonde International Bandwidth
(Bermuda) Limited, Telemonde Bandwidth (Bermuda) Limited,
Telemonde International Bandwidth Limited, and (3)
Communications Collateral Limited, dated April 12, 1999.
10.11* Loan Facility Agreement between Telemonde Investments
Limited and Communications Collateral Limited, dated April
15, 1999.
10.12** Forbearance Agreement, dated 12 January 2000, entered into
by and among Communications Collateral Limited, Telemonde
Investments Limited, Telemonde International Bandwidth
Limited, Telemonde, Inc. and Kevin Maxwell.
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<PAGE>
10.13** Advisor Agreement between Sand Brothers & Co., Ltd. and
Telemonde, Inc., dated October 27, 1999, and Amendment No. 1
to Advisor Agreement, dated November 10, 1999.
10.14*** Executive Services Agreement by and between Telemonde, Inc.
and Paul E. Donofrio, dated February 22, 2000.
10.15 Termination of Executive Services Agreement by and between
Telemonde, Inc. and Paul E. Donofrio, dated as of October
31, 2000.
21* Subsidiaries of Registrant.
27 Financial Data Schedule.
99.1* Heads of Agreement between Telemonde, Inc. and the
shareholders of Global Communications Holdings (Limited) and
Telemonde, Inc., dated November 5, 1999.
99.2* Agreement relating to a Lease and Services Agreement between
Global Switch (London) Limited and Telemonde Networks
Limited, dated November 8, 1999.
99.3* Term Sheet for the purchase of 16% to 51% of DeserTel, dated
November 8, 1999.
* Previously filed as an exhibit to the Company's Registration
Statement on Form 10, as filed with the SEC on November 15, 1999.
** Previously filed as an exhibit to the Company's Registration
Statement on Form 10/A-1, as filed with the SEC on March 3, 2000.
*** Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, as filed with
the SEC on March 30, 2000.
**** Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2000, as filed with
the SEC on August 14, 2000.
+ Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated September 19, 2000, as filed with the SEC on
September 21, 2000.
26
