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EX-32.2 - EX-32.2 - GTT Communications, Inc. | w82680exv32w2.htm |
EX-32.1 - EX-32.1 - GTT Communications, Inc. | w82680exv32w1.htm |
EX-31.2 - EX-31.2 - GTT Communications, Inc. | w82680exv31w2.htm |
EX-31.1 - EX-31.1 - GTT Communications, Inc. | w82680exv31w1.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2011
Commission File Number 000-51211
Global Telecom & Technology, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 20-2096338 | |
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) | |
Incorporation or Organization) |
8484 Westpark Drive
Suite 720
McLean, Virginia 22102
(703) 442-5500
(Address including zip code, and telephone number, including area
code of principal executive officers)
Suite 720
McLean, Virginia 22102
(703) 442-5500
(Address including zip code, and telephone number, including area
code of principal executive officers)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o | Accelerated Filer o | Non-Accelerated Filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of May 13, 2011, 18,687,491 shares of common stock, par value $.0001 per share, of the
registrant were outstanding.
Table of Contents
PART 1 Financial Information
ITEM 1. FINANCIAL STATEMENTS
Global Telecom & Technology, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except for share and per share data)
(Amounts in thousands, except for share and per share data)
March 31, 2011 | December 31, 2010 | |||||||
(Note 1) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 5,620 | $ | 6,562 | ||||
Accounts receivable, net of allowances of $4,887 and $4,123, respectively |
4,960 | 5,787 | ||||||
Deferred contract costs |
1,403 | 536 | ||||||
Prepaid expenses and other current assets |
1,072 | 1,105 | ||||||
Total current assets |
$ | 13,055 | 13,990 | |||||
Property and equipment, net |
1,594 | 1,674 | ||||||
Intangible assets, net |
5,265 | 5,732 | ||||||
Other assets |
3,553 | 3,519 | ||||||
Goodwill |
29,046 | 29,046 | ||||||
Total assets |
$ | 52,513 | $ | 53,961 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 9,988 | $ | 9,279 | ||||
Accrued expenses and other current liabilities |
5,222 | 6,831 | ||||||
Short-term debt |
2,150 | 2,245 | ||||||
Deferred revenue |
5,689 | 5,898 | ||||||
Total current liabilities |
23,049 | 24,253 | ||||||
Long-term debt |
10,902 | 12,020 | ||||||
Deferred revenue and other long-term liabilities |
631 | 605 | ||||||
Total liabilities |
34,582 | 36,878 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock, par value $.0001 per share, 80,000,000
shares authorized, 18,687,491 and 17,880,254 shares issued and
outstanding as of March 31, 2011 and December 31, 2010, respectively |
2 | 2 | ||||||
Additional paid-in capital |
61,905 | 61,497 | ||||||
Accumulated deficit |
(43,666 | ) | (44,129 | ) | ||||
Accumulated other comprehensive loss |
(310 | ) | (287 | ) | ||||
Total stockholders equity |
17,931 | 17,083 | ||||||
Total liabilities and stockholders equity |
$ | 52,513 | $ | 53,961 | ||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
Global Telecom & Technology, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for share and per share data)
(Unaudited)
(Amounts in thousands, except for share and per share data)
Three Months Ended | ||||||||
March 31, 2011 | March 31, 2010 | |||||||
Revenue: |
||||||||
Telecommunications services sold |
$ | 20,402 | $ | 20,600 | ||||
Operating expenses: |
||||||||
Cost of telecommunications services provided |
14,383 | 14,930 | ||||||
Selling, general and administrative expense |
4,472 | 4,276 | ||||||
Depreciation and amortization |
676 | 738 | ||||||
Total operating expenses |
19,531 | 19,944 | ||||||
Operating income |
871 | 656 | ||||||
Other income (expense): |
||||||||
Interest expense, net |
(316 | ) | (355 | ) | ||||
Other expense, net |
(58 | ) | (123 | ) | ||||
Total other income (expense) |
(374 | ) | (478 | ) | ||||
Income before income taxes |
497 | 178 | ||||||
Provision for income taxes |
34 | 21 | ||||||
Net income |
$ | 463 | $ | 157 | ||||
Earnings per share: |
||||||||
Basic |
$ | 0.03 | $ | 0.01 | ||||
Diluted |
$ | 0.03 | $ | 0.01 | ||||
Weighted average shares: |
||||||||
Basic |
18,239,307 | 16,427,275 | ||||||
Diluted |
18,463,174 | 16,682,204 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
Global Telecom & Technology, Inc.
Condensed Consolidated Statement of Stockholders Equity
(Unaudited)
(Amounts in thousands, except for share data)
(Unaudited)
(Amounts in thousands, except for share data)
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid -In | Accumulated | Comprehensive | |||||||||||||||||||||
Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||
Balance, December 31, 2010 |
17,880,254 | $ | 2 | $ | 61,497 | $ | (44,129 | ) | $ | (287 | ) | $ | 17,083 | |||||||||||
Share-based compensation for options issued |
| | 45 | | | 45 | ||||||||||||||||||
Share-based compensation for restricted
stock issued |
397,237 | | 116 | | | 116 | ||||||||||||||||||
Shares issued related to December 2009
acquisition |
210,000 | | | | | | ||||||||||||||||||
Shares issued in February 2011 units offering |
200,000 | | 247 | | | 247 | ||||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||
Net income |
| | | 463 | | 463 | ||||||||||||||||||
Change in accumulated foreign currency
translation loss |
| | | | (23 | ) | (23 | ) | ||||||||||||||||
Comprehensive income |
440 | |||||||||||||||||||||||
Balance, March 31, 2011 |
18,687,491 | $ | 2 | $ | 61,905 | $ | (43,666 | ) | $ | (310 | ) | $ | 17,931 | |||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial
Statements.
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Table of Contents
Global Telecom & Technology, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
(Unaudited)
(Amounts in thousands)
Three Months Ended | ||||||||
March 31, 2011 | March 31, 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 463 | $ | 157 | ||||
Adjustments to reconcile net income to net cash provided by (used in)
operating activities |
||||||||
Depreciation and amortization |
676 | 738 | ||||||
Shared-based compensation |
161 | 211 | ||||||
Debt discount amortization |
66 | | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable, net |
862 | (1,257 | ) | |||||
Deferred contract cost, prepaid expenses, income tax
refund receivable and other current assets |
(807 | ) | 176 | |||||
Other assets |
42 | (41 | ) | |||||
Accounts payable |
506 | (1,066 | ) | |||||
Accrued expenses and other current liabilities |
(1,677 | ) | 52 | |||||
Deferred revenue and other long-term liabilities |
(213 | ) | (590 | ) | ||||
Net cash provided by (used in) operating activities |
79 | (1,620 | ) | |||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(74 | ) | (18 | ) | ||||
Net cash used in investing activities |
(74 | ) | (18 | ) | ||||
Cash flows from financing activities: |
||||||||
Promissory note repayment |
| (50 | ) | |||||
Principal payments on capital lease |
(94 | ) | (83 | ) | ||||
Borrowing (repayment) on line of credit |
(838 | ) | 111 | |||||
Repayment of Term Loan |
(500 | ) | | |||||
Issuance of subordinated notes |
153 | 1,546 | ||||||
Issuance of units offering common shares |
247 | 935 | ||||||
Net cash (used in) provided by financing activities |
(1,032 | ) | 2,459 | |||||
Effect of exchange rate changes on cash |
85 | (126 | ) | |||||
Net increase (decrease) in cash and cash equivalents |
(942 | ) | 695 | |||||
Cash and cash equivalents at beginning of period |
6,562 | 5,548 | ||||||
Cash and cash equivalents at end of period |
$ | 5,620 | $ | 6,243 | ||||
Supplemental disclosure of cash flow information |
||||||||
Cash paid for interest |
$ | 208 | $ | 93 |
The accompanying notes are an integral part of these Condensed Consolidated Financial
Statements.
6
Table of Contents
Global Telecom & Technology, Inc.
Notes to Condensed Consolidated Financial Statements
NOTE 1 ORGANIZATION AND BUSINESS
Organization and Business
Global Telecom & Technology, Inc. (GTT or the Company) is a Delaware corporation which was
incorporated on January 3, 2005. GTT is a global telecommunications carrier and leading network
integrator serving the data communications needs of large enterprise, government and carrier
clients in over 80 countries. We combine our own network assets with the networks of over 800
suppliers worldwide to deliver cost-effective, scalable solutions supporting each clients unique
requirements. Through our proprietary Client Management Database (CMD), GTT provides streamlined
service design and quotation, rapid service implementation, and global 24x7 monitoring and support.
GTT is headquartered in the Washington, DC metro region with offices in London, Dusseldorf, and
Denver.
GTT serves as the holding company for two operating subsidiaries, Global Telecom & Technology
Americas, Inc. (GTTA) and GTT EMEA Ltd. (GTTE) and their respective subsidiaries
(collectively, hereinafter, the Company).
Unaudited Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and should
be read in conjunction with the Companys audited financial statements and footnotes thereto for
the year ended December 31, 2010, included in the Companys Annual Report on Form 10-K filed on
March 11, 2011. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United
States of America (GAAP) have been omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to prevent the information from being
misleading. The condensed consolidated financial statements reflect all adjustments (consisting
primarily of normal recurring adjustments) that are, in the opinion of management, necessary for a
fair presentation of the Companys consolidated financial position and the results of operations.
The operating results for the three months ended March 31, 2011, are not necessarily indicative of
the results to be expected for the full fiscal year 2011 or for any other interim period. The
December 31, 2010 condensed consolidated balance sheet has been derived from the audited financial
statements as of that date, but does not include all disclosures required by GAAP.
There have been no significant changes in the Companys significant accounting policies as of
March 31, 2011 as compared to the significant accounting policies disclosed in Note 2, Significant
Accounting Policies in the 2010 Annual Report on Form 10-K.
Use of Estimates and Assumptions
The preparation of financial statements in accordance with GAAP requires management to make
estimates and assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results can, and in
many cases will, differ from those estimates.
Fair Value of Financial Instruments
The fair values of the Companys assets and liabilities that qualify as financial instruments
under Accounting Standard Codification Topic 825, Financial Instruments, including cash and cash
equivalents, accounts receivable, accounts payable, short-term debt, and accrued expenses are
carried at cost, which approximates fair value due to the short-term maturity of these instruments.
The reported amounts of long-term obligations approximate fair value, given managements evaluation
of the instruments current rates compared to market rates of interest and other factors.
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Comprehensive Income
Comprehensive income consists of net income and other comprehensive income (loss). Other
comprehensive income (loss) includes certain changes in equity that are excluded from net income.
Specifically, cumulative foreign currency translation adjustments are included in comprehensive
income and accumulated other comprehensive loss.
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Net income |
$ | 463 | $ | 157 | ||||
Other comprehensive income (loss) |
||||||||
Change in accumulated foreign currency
translation loss |
(23 | ) | (114 | ) | ||||
Total comprehensive income |
$ | 440 | $ | 43 | ||||
NOTE 2 RECENT ACCOUNTING PRONOUNCEMENTS
There have been no updates to the Companys disclosure of recent accounting pronouncements as
of March 31, 2011, as compared to those disclosed in Note 2, Significant Accounting Policies in
our Annual Report on Form 10-K filed March 11, 2011.
NOTE 3 EMPLOYEE SHARE-BASED COMPENSATION BENEFITS
The Company adopted its 2006 Employee, Director and Consultant Stock Plan (the Plan) in
October 2006. In addition to stock options, the Company may also grant restricted stock or other
stock-based awards under the Plan. The maximum number of shares issuable over the term of the Plan,
as amended, is limited to 3,500,000 shares.
Stock Options
The Company recognized compensation expense for stock options of approximately $45,000 and
$42,000 for the three months ended March 31, 2011 and 2010, respectively, related to stock options
issued to employees and consultants, which is included in selling, general and administrative
expense on the accompanying condensed consolidated statements of income. The Company granted to
employees 282,000 and 241,000 stock options with a total fair value of $264,000 and $236,000 during
the three months ended March 31, 2011 and 2010, respectively.
Restricted Stock
During the three months ended March 31, 2011, the Company granted to certain employees and
members of its Board of Directors restricted stock. This includes shares issued to non-employee
members of the Companys Board of Directors who elected to be paid a portion of their annual fees
in restricted stock. Total noncash compensation expense is recorded in selling, general and
administrative (SG&A) expenses.
Non-Employee | ||||||||||||
Members of Board | ||||||||||||
Amounts in thousands | Employees | of Directors | Total | |||||||||
Three months ended March 31, 2011 |
||||||||||||
Restricted stock shares granted |
242 | 31 | 273 | |||||||||
Fair value of shares granted |
$ | 292 | $ | 37 | $ | 329 | ||||||
Restricted stock compensation expense |
$ | | $ | | $ | 116 |
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NOTE 4 DEBT
The following table summarizes the debt activity of the Company during the three months ended March
31, 2011 (amounts in thousands):
Subordinated | Promissory Note / | |||||||||||||||||||
Total Debt | Term Loan | Line of Credit | Notes | Capital Lease | ||||||||||||||||
Debt obligation as of December 31, 2010 |
$ | 14,265 | $ | 9,500 | $ | 2,338 | $ | 2,183 | $ | 244 | ||||||||||
Subordinated notes issuance |
153 | | | 153 | | |||||||||||||||
Debt discount amortization |
66 | | | 66 | | |||||||||||||||
Repayment on Line of Credit |
(838 | ) | | (838 | ) | | | |||||||||||||
Principal payments on capital lease |
(94 | ) | | | | (94 | ) | |||||||||||||
Retirement of Term Loan |
(500 | ) | (500 | ) | | | | |||||||||||||
Debt obligation as of March 31, 2011 |
$ | 13,052 | $ | 9,000 | $ | 1,500 | $ | 2,402 | $ | 150 | ||||||||||
Term Loan and Line of Credit
On September 30, 2010, the Company entered into a Loan and Security Agreement (the Loan
Agreement) with Silicon Valley Bank. The Loan Agreement provides for a term loan facility of $10
million (the Term Loan), and a revolving line of credit facility, in the aggregate principal
amount of up to $5 million (the Line of Credit). The Loan Agreement contains customary
representations and warranties of the Borrower and customary events of default. The obligations of
the Company under the Loan Agreement are secured by substantially all of the Companys tangible and
intangible assets pursuant to the Loan Agreement.
The Term Loan matures on September 30, 2015. The Company shall repay the Term Loan in sixty
equal installments of principal and interest, with interest accruing at a floating per annum rate
equal to Silicon Valley Banks prime rate plus 3%, unless the Company achieves certain performance
criteria, in which case the interest rate shall be equal to Silicon Valley Banks prime rate plus
2%. The Company had $9.0 million outstanding on the Term Loan as of March 31, 2011.
The availability under the Line of Credit is calculated during any month as a percentage of
eligible accounts receivable and is subject to certain conditions, including the continued accuracy
of the Companys representations, warranties and covenants. The Line of Credit matures on
September 29, 2012. The principal amount outstanding under the Line of Credit shall accrue
interest at a floating per annum rate equal to Silicon Valley Banks prime rate plus 2%, unless the
Company achieves certain performance criteria, in which case the interest rate shall be equal to
the banks prime rate plus 1%. The Company had $1.5 million outstanding on the Line of Credit at
March 31, 2011.
Subordinated Notes
On February 8, 2010, the Company completed a units offering (February 2012 Units) in which
it sold 500 units consisting of debt and common stock at a purchase price of $10,000 per unit,
resulting in $5.0 million of proceeds to the Company. Each unit consisted of 2,970 shares of the
Companys common stock, and $7,000 in principal amount of the Companys subordinated promissory
notes due February 8, 2012. The subordinated promissory notes were issued at a discount to face
value of $0.2 million and the discount is being amortized, into interest expense, over the life of
the notes. Interest on the subordinated promissory notes accrues at 10% per annum. Accrued but
unpaid interest will be payable on February 8, 2011 and 2012.
The proceeds from the February 2012 Units were to be applied by the Company to finance a
portion of the purchase price under an asset purchase agreement with Global Capacity. On April 30,
2010, the asset purchase agreement with Global Capacity expired without consummation of the
acquisition. On May 13, 2010, investors representing $1.5 million in aggregated principal amount
of the Companys subordinated promissory notes and $0.9 million of the Companys common stock
waived the right to receive their refund
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and elected to retain some or all of their subordinated
promissory notes, which are recorded in long-term debt on the Companys condensed consolidated
balance sheet as of March 31, 2011.
On December 31, 2010, the Company completed a financing transaction in which it issued 212
Units, valued at $10,000 per unit (December 2013 Units). Each unit consisted of 5,000 shares of
the Companys common stock, and $5,000 in principal amount of the Companys subordinated promissory
notes due December 31, 2013. The subordinated promissory notes were issued at a discount to face
value of $0.2 million and the discount is being amortized, into interest expense, over the life of
the notes. In total, the Company issued 1,060,000 shares of the Companys common stock and $1.1
million in principal amount of subordinated promissory notes.
On February 16, 2011, the Company and the holders of the December 2013 Units amended the
offering solely to increase the aggregate principal amount available for issuance from $1.1 million
to $1.6 million. On February 16, 2011, the Company also completed a financing transaction in which
it issued 40 Units, at a purchase price of $10,000 per Unit, for gross proceeds of $0.4 million.
Each Unit was comprised of 5,000 shares of the Companys common stock, and $5,000 in principal
amount of subordinated promissory notes. The subordinated promissory notes were issued at a
discount to face value of $47,000 and the discount is being amortized, into interest expense, over
the life of the notes.
As of March 31, 2011, the subordinated notes payable had a balance of $2.4 million. The
balance includes notes totaling $1.9 million due to a related party, Universal Telecommunications,
Inc. H. Brian Thompson, the Companys Executive Chairman of the Board of Directors, is also the
head of Universal Telecommunications, Inc., his own private equity investment and advisory firm.
Also, included in the balance is $0.2 million of the notes held by officers and directors of the
Company.
Promissory Note and Capital Lease
As part of the December 2009 acquisition, the Company assumed in the acquisition approximately
$0.6 million in capital lease obligations payable in monthly installments through April 2011 and
issued approximately $0.3 million in subordinated seller notes to the sellers, due in monthly
installments and payable in full by October 2010. The Company paid the $0.3 million in
subordinated seller notes in full and has approximately $0.2 million outstanding in capital lease
obligations as of March 31, 2011.
NOTE 5 INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the year in which those
temporary differences are expected to be recovered or settled. Valuation allowances are recorded
against deferred tax assets when it is more likely than not that some portion or all of a deferred
tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the period in which those temporary differences
become deductible. The scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies are evaluated in determining whether it is more likely than not
that deferred tax assets will be realized.
The Company and certain of its subsidiaries file income tax returns in the U.S. federal
jurisdiction, various states and foreign jurisdictions. The Companys foreign jurisdictions are
primarily the United Kingdom and Germany.
A valuation allowance has been recorded against the Companys deferred tax assets to the
extent those assets are not offset by deferred tax liabilities which have a structural certainty of
reversal, or those assets that cannot be realized against prior period taxable income.
NOTE 6 EARNINGS PER SHARE
Basic income per share is computed by dividing net income available to common stockholders by
the weighted average number of common shares outstanding. Diluted earnings per share reflect, in
periods with earnings and in which they have a dilutive effect, the effect of common shares
issuable upon exercise of stock options, warrants, and convertible securities.
10
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The
table below details the calculations of earnings per share (in
thousands, except for share amounts):
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Numerator for basic and diluted EPS income available to common
stockholders |
$ | 463 | $ | 157 | ||||
Denominator for basic EPS weighted average shares |
18,239,307 | 16,427,275 | ||||||
Effect of dilutive securities |
223,867 | 254,929 | ||||||
Denominator for diluted EPS weighted average shares |
18,463,174 | 16,682,204 | ||||||
Earnings per share: Basic and diluted |
$ | 0.03 | $ | 0.01 | ||||
The table below details the anti-dilutive items that were excluded in the computation of earnings per share (in thousands): | ||||||||
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Class W warrants |
| 12,090 | ||||||
Class Z warrants |
12,090 | 12,090 | ||||||
Convertible notes |
| 2,819 | ||||||
Stock options |
321 | 568 | ||||||
Series A units |
| 250 | ||||||
Series B units |
| 460 | ||||||
Totals |
12,411 | 28,277 | ||||||
At March 31, 2011, we had 12,090,000 Class Z warrants outstanding, each of which entitles
the holder to purchase a share of our common stock at an exercise price of $5.00 per share on or
before April 10, 2012.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our financial statements and related notes that appear elsewhere
in this report and in our annual report on Form 10-K for the year ended December 31, 2010. In
addition to historical consolidated financial information, the following discussion contains
forward-looking statements that reflect plans, estimates and beliefs of management of the Company.
When used in this document, the words anticipate, believe, plan, estimate and expect and
similar expressions, as they relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current views of management with respect to
future events and are subject to certain risks, uncertainties and assumptions. Our actual results
could differ materially from those discussed in the forward-looking statements. For a more detailed
description of these risks and factors, please see the Companys 2010 Annual Report on Form 10-K
filed with the Securities and Exchange Commission and Item 1A Part II of this quarterly report on
Form 10-Q.
Overview
GTT is a global telecommunications carrier and leading network integrator serving the data
communications needs of large enterprise, government and carrier clients in over 80 countries. We
combine our own network assets with the networks of over 800 suppliers worldwide to deliver
cost-effective, scalable solutions supporting each clients unique requirements. Through our
proprietary Client Management Database (CMD), GTT provides streamlined service design and
quotation, rapid service implementation, and global 24x7 monitoring and support. GTT is
headquartered in the Washington, DC metro region with offices in London, Dusseldorf, and Denver.
The Company sells services largely through a direct sales force located across the globe, as
well as strong agent channel relationships. The Company generally competes with traditional,
facilities-based providers and other services providers in each of our global markets. As of March
31, 2011, our customer base was comprised of over 700 businesses. Our five largest customers
accounted for approximately 23% of consolidated revenues during the quarter ended March 31, 2011.
Costs and Expenses
The Companys cost of revenue consists of the expenses directly related to the services
provided to customers. The key terms and conditions appearing in both supplier and customer
agreements are substantially the same, with margin applied to the suppliers costs. There are no
wages or overheads included in these costs. From time to time, the Company has agreed to certain
special commitments with vendors in order to obtain better rates, terms and conditions for the
procurement of services from those vendors. These commitments include volume purchase commitments
and purchases on a longer-term basis than the term for which the applicable customer has committed.
Our supplier contracts do not have any market related net settlement provisions. The Company
has not entered into, and has no plans to enter into, any supplier contracts which involve
financial or derivative instruments. The supplier contracts are entered into solely for the direct
purchase of telecommunications capacity, which is resold by the Company in its normal course of
business.
Other than cost of revenue, the Companys most significant operating expenses are employment
costs. As of March 31, 2011, the Company had 84 employees and employment costs comprised
approximately 13% of total operating expenses for the year ended March 31, 2011.
Locations of Offices and Origins of Revenue
We are headquartered just outside of Washington, DC, in McLean, Virginia, and have offices in
London, Düsseldorf and Denver. For the three months ended March 31, 2011, approximately 75% of our
consolidated revenue was earned from operations based in the United States. Approximately 17% of
our revenue was generated from operations based in the United Kingdom and 8% from operations in
Germany.
Critical Accounting Policies and Estimates
There have been no significant changes in the Companys critical accounting policies and
estimates as of March 31, 2011, as compared to the critical accounting policies and estimates
disclosed in Note 2, Significant Accounting Policies in the 2010 Annual Report on Form 10-K.
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Results of Operations of the Company
Three months ended March 31, 2011 Compared to Three months ended March 31, 2010
Overview. The financial information presented in the tables below is comprised of the unaudited
condensed consolidated financial information of the Company for the three months ended March 31,
2011 and 2010 (amounts in thousands):
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Revenue |
$ | 20,402 | $ | 20,600 | ||||
Cost of revenue |
14,383 | 14,930 | ||||||
Gross margin |
6,019 | 5,670 | ||||||
29.5 | % | 27.5 | % | |||||
Operating expenses, depreciation and amortization |
5,148 | 5,014 | ||||||
Operating income |
$ | 871 | $ | 656 | ||||
Net income |
$ | 463 | $ | 157 | ||||
Revenue. Revenue for the three months ended March 31, 2011, was $20.4 million, generated
by services provided during the period to existing customers and new sales generated by the
Companys global sales organization. Revenue during the three months ended March 31, 2010 was $20.6
million. The decrease in revenue in the first quarter 2011 is due, in part, to the delayed
installation of newly contracted services related to a large complex global network project with
end-point locations in certain under-developed countries.
Cost of Revenue and Gross Margin. Cost of revenue and gross margin for the three months ended
March 31, 2011, were $14.4 million and $6.0 million, respectively. For the three months ended March
31, 2010, cost of revenue and gross margin were $14.9 million and $5.7 million, respectively. The
decrease in cost of revenue and the increase in gross margin during the three months ended March
31, 2011, were primarily due to an initiative in 2010 to reduce network costs which were related to
the December 2009 acquisition.
Operating Expenses. Operating expenses, exclusive of cost of revenue, were $5.2 million and
$5.0 million for the three months ended March 31, 2011 and 2010, respectively. The primary cause of
the increase is due to the rise in agent commissions expense which is related to the sales
novations entered into during the third quarter of 2010. These changes are illustrated in the
table below (amounts in thousands):
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Selling, general and administrative expenses (excluding
noncash compensation) |
$ | 4,311 | $ | 4,066 | ||||
Noncash compensation |
161 | 210 | ||||||
Amortization of intangible assets |
461 | 501 | ||||||
Depreciation |
215 | 237 | ||||||
Totals |
$ | 5,148 | $ | 5,014 | ||||
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Liquidity and Capital Resources
Debt
The following table summarizes the debt activity of the Company during the three months ended March
31, 2011 (amounts in thousands):
Subordinated | Promissory Note / | |||||||||||||||||||
Total Debt | Term Loan | Line of Credit | Notes | Capital Lease | ||||||||||||||||
Debt obligation as of December 31, 2010 |
$ | 14,265 | $ | 9,500 | $ | 2,338 | $ | 2,183 | $ | 244 | ||||||||||
Subordinated notes issuance |
153 | | | 153 | | |||||||||||||||
Debt discount amortization |
66 | | | 66 | | |||||||||||||||
Repayment on Line of Credit |
(838 | ) | | (838 | ) | | | |||||||||||||
Principal payments on capital lease |
(94 | ) | | | | (94 | ) | |||||||||||||
Retirement of Term Loan |
(500 | ) | (500 | ) | | | | |||||||||||||
Debt obligation as of March 31, 2011 |
$ | 13,052 | $ | 9,000 | $ | 1,500 | $ | 2,402 | $ | 150 | ||||||||||
Term Loan and Line of Credit
On September 30, 2010, the Company entered into a Loan and Security Agreement (the Loan
Agreement) with Silicon Valley Bank. The Loan Agreement provides for a term loan facility of $10
million (the Term Loan), and a revolving line of credit facility, in the aggregate principal
amount of up to $5 million (the Line of Credit). The Loan Agreement contains customary
representations and warranties of the Borrower and customary events of default. The obligations of
the Company under the Loan Agreement are secured by substantially all of the Companys tangible and
intangible assets pursuant to the Loan Agreement.
The Term Loan matures on September 30, 2015. The Company shall repay the Term Loan in sixty
equal installments of principal and interest, with interest accruing at a floating per annum rate
equal to Silicon Valley Banks prime rate plus 3%, unless the Company achieves certain performance
criteria, in which case the interest rate shall be equal to Silicon Valley Banks prime rate plus
2%. The Company had $9.0 million outstanding on the Term Loan as of March 31, 2011.
The availability under the Line of Credit is calculated during any month as a percentage of
eligible accounts receivable and is subject to certain conditions, including the continued accuracy
of the Companys representations, warranties and covenants. The Line of Credit matures on
September 29, 2012. The principal amount outstanding under the Line of Credit shall accrue
interest at a floating per annum rate equal to Silicon Valley Banks prime rate plus 2%, unless the
Company achieves certain performance criteria, in which case the interest rate shall be equal to
the banks prime rate plus 1%. The Company had $1.5 million outstanding on the Line of Credit at
March 31, 2011.
Subordinated Notes
On February 8, 2010, the Company completed a units offering (February 2012 Units) in which
it sold 500 units consisting of debt and common stock at a purchase price of $10,000 per unit,
resulting in $5.0 million of proceeds to the Company. Each unit consisted of 2,970 shares of the
Companys common stock, and $7,000 in principal amount of the Companys subordinated promissory
notes due February 8, 2012. The subordinated promissory notes were issued at a discount to face
value of $0.2 million and the discount is being amortized, into interest expense, over the life of
the notes. Interest on the subordinated promissory notes accrues at 10% per annum. Accrued but
unpaid interest will be payable on February 8, 2011 and 2012.
The proceeds from the February 2012 Units were to be applied by the Company to finance a
portion of the purchase price under an asset purchase agreement with Global Capacity. On April 30,
2010, the asset purchase agreement with Global Capacity expired without consummation of the
acquisition. On May 13, 2010, investors representing $1.5 million in aggregated principal amount
of the Companys subordinated promissory notes and $0.9 million of the Companys common stock
waived the right to receive their refund
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and elected to retain some or all of their subordinated
promissory notes, which are recorded in long-term debt on the Companys condensed consolidated
balance sheet as of March 31, 2011.
On December 31, 2010, the Company completed a financing transaction in which it issued 212
Units, valued at $10,000 per unit (December 2013 Units). Each unit consisted of 5,000 shares of
the Companys common stock, and $5,000 in principal amount of the Companys subordinated promissory
notes due December 31, 2013. The subordinated promissory notes were issued at a discount to face
value of $0.2 million and the discount is being amortized, into interest expense, over the life of
the notes. In total, the Company issued 1,060,000 shares of the Companys common stock and $1.1
million in principal amount of subordinated promissory notes.
On February 16, 2011, the Company and the holders of the December 2013 Units amended the
offering solely to increase the aggregate principal amount available for issuance from $1.1 million
to $1.6 million. On February 16, 2011, the Company also completed a financing transaction in which
it issued 40 Units, at a purchase price of $10,000 per Unit, for gross proceeds of $0.4 million.
Each Unit was comprised of 5,000 shares of the Companys common stock, and $5,000 in principal
amount of subordinated promissory notes. The subordinated promissory notes were issued at a
discount to face value of $47,000 and the discount is being amortized, into interest expense, over
the life of the notes.
As of March 31, 2011, the subordinated notes payable had a balance of $2.4 million. The
balance includes notes totaling $1.9 million due to a related party, Universal Telecommunications,
Inc. H. Brian Thompson, the Companys Executive Chairman of the Board of Directors, is also the
head of Universal Telecommunications, Inc., his own private equity investment and advisory firm.
Also, included in the balance is $0.2 million of the notes held by officers and directors of the
Company.
Promissory Note and Capital Lease
As part of the December 2009 acquisition, the Company assumed in the acquisition approximately
$0.6 million in capital lease obligations payable in monthly installments through April 2011 and
issued approximately $0.3 million in subordinated seller notes to the sellers, due in monthly
installments and payable in full by October 2010. The Company paid the $0.3 million in
subordinated seller notes in full and has approximately $0.2 million outstanding in capital lease
obligations as of March 31, 2010.
Liquidity Assessment
Cash provided by operating activities for the three months ended March 31, 2011 was $0.1
million. Cash used in operating activities for the three months ended March 31, 2010, was $1.6
million.
Cash used in financing activities was approximately $1.0 million for the three months ended
March 31, 2011, driven primarily by the repayment on the Line of Credit and the Term Loan. Cash
flows provided by financing activities were $2.5 million for the three months ended March 31, 2010.
Management monitors cash flow and liquidity requirements. Based on the Companys cash and cash
equivalents, the Silicon Valley Bank credit facility, and analysis of the anticipated working
capital requirements, Management believes the Company has sufficient liquidity to fund the business
and meet its contractual obligations. The Companys current planned cash requirements for 2011 are
based upon certain assumptions, including its ability to manage expenses and the growth of revenue
from services arrangements. In connection with the activities associated with the services, the
Company expects to incur expenses, including provider fees, employee compensation and consulting
fees, professional fees, sales and marketing, insurance and interest expense. Should the expected
cash flows not be available, management believes it would have the ability to revise its operating
plan and make reductions in expenses.
The Company believes that cash currently on hand, expected cash flows from future
operations and existing borrowing capacity are sufficient to fund operations for the next twelve
months, including the scheduled repayment, of indebtedness pursuant to the Silicon Valley Bank Term
Loan. If our operating performance differs significantly from our forecasts, we may be required to
reduce our operating expenses and curtail capital spending, and we may not remain in compliance
with our debt covenants. In addition, if the Company were unable to fully fund its cash
requirements through operations and current cash on hand, the Company would need to obtain
additional financing through a combination of equity and subordinated debt financings and/or
renegotiation of terms of its existing debt. If any such activities become necessary, there can be
no assurance that the Company would be successful in obtaining additional financing or modifying
its existing debt terms.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity
Interest due on the Companys loans is based upon the applicable stated fixed contractual rate
with the lender. Interest earned on the Companys bank accounts is linked to the applicable base
interest rate. For the three months ended March 31, 2011 and 2010, the Company had interest
expense, net of income, of approximately $0.3 million and $0.4 million, respectively. The Company
believes that its results of operations are not materially affected by changes in interest rates.
Exchange Rate Sensitivity
Approximately 25% of the Companys revenues for the three months ended March 31, 2011 are
derived from services provided outside of the United States. As a consequence, a material
percentage of the Companys revenues are billed in British Pounds Sterling or Euros. Since we
operate on a global basis, we are exposed to various foreign currency risks. First, our
consolidated financial statements are denominated in U.S. Dollars, but a significant portion of our
revenue is generated in the local currency of our foreign subsidiaries. Accordingly, changes in
exchange rates between the applicable foreign currency and the U.S. Dollar will affect the
translation of each foreign subsidiarys financial results into U.S. Dollars for purposes of
reporting consolidated financial results.
In addition, because of the global nature of our business, we may from time to time be
required to pay a supplier in one currency while receiving payments from the underlying customer of
the service in another currency. Although it is the Companys general policy to pay its suppliers
in the same currency that it will receive cash from customers, where these circumstances arise with
respect to supplier invoices in one currency and customer billings in another currency, the
Companys gross margins may increase or decrease based upon changes in the exchange rate. Such
factors did not have a material impact on the Companys results in the three months ended March 31,
2011.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Companys management carried out an evaluation required by Rule 13a-15 under the
Securities Exchange Act of 1934, as amended (the Exchange Act), under the supervision of and with
the participation of its Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of
the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15
under the Exchange Act (Disclosure Controls).
Based on our evaluation, our CEO and CFO concluded that our disclosure controls and procedures
are designed at a reasonable assurance level and are effective to provide reasonable assurance that
information we are required to disclose in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and that such information is accumulated and communicated to
our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding
required disclosure.
The CEO and the CFO, with assistance from other members of management, have reviewed the
effectiveness of our disclosure controls and procedures as of March 31, 2011 and, based on their
evaluation, have concluded that the disclosure controls and procedures were effective as of such
date.
Changes in Internal Control over Financial Reporting
There have not been any changes in the Companys internal control over financial reporting
during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
Limitations on the Effectiveness of Controls
Management, including our CEO and CFO, does not expect that Disclosure Controls and internal
controls will prevent all error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that
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the objectives of the control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people or by management override of the controls.
The design of any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, a control may become
inadequate because of changes in conditions or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and may not be detected.
PART II Other Information
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 2011, the Company was not subject to any material legal proceedings. From time
to time, however, the Company or its operating companies may be involved in legal actions arising
from normal business activities.
ITEM 1A. RISK FACTORS
The Company operates in a rapidly changing environment that involves a number of risks, some
of which are beyond its control. In addition to the other information set forth in this report, the
reader should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in the
Companys Annual Report on Form 10-K for the year ended December 31, 2010, which could materially
affect our business, financial condition or future results. Additional risks and uncertainties not
presently known to us, which we currently deem to be immaterial or which are similar to those faced
by other companies in this industry or business in general, may also affect our business, financial
condition and/or operating results. If any of these risks or uncertainties actually occur, our
business, financial condition and operating results would likely suffer. We do not believe that the
risks and uncertainties described in the Risk Factors included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2010, have materially changed other than as set forth
below.
Risks Relating to Our Business and Operations
We depend on several large customers, and the loss of one or more of these customers, or a
significant decrease in total revenues from any of these customers, would likely reduce our
revenue and income.
For the three months ended March 31, 2011, our five largest customers accounted for
approximately 23% of our total service revenues. If we were to lose all of the underlying services
from one or more of our large customers, or if one or more of our large customers were to
significantly reduce the services purchased from us or otherwise renegotiate the terms on which
services are purchased from us, our revenues could decline and our results of operations would
suffer.
If our customers elect to terminate their agreements with us, our business, financial condition
and results of operations may be adversely affected.
Our services are sold under agreements that generally have initial terms of between one and
three years. Following the initial terms, these agreements generally automatically renew for
successive month-to-month, quarterly, or annual periods, but can be terminated by the customer
without cause with relatively little notice during a renewal period. In addition, certain
government customers may have rights under federal law with respect to termination for convenience
that can serve to minimize or eliminate altogether the liability payable by that customer in the
event of early termination. Our customers may elect to terminate their agreements as a result of a
number of factors, including their level of satisfaction with the services they are receiving,
their ability to continue their operations due to budgetary or other concerns, and the availability
and pricing of competing services. If customers elect to terminate their agreements with us, our
business, financial condition, and results of operation may be adversely affected.
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Competition in the industry in which we do business is intense and growing, and our failure to
compete successfully could make it difficult for us to add and retain customers or increase or
maintain revenues.
The markets in which we operate are rapidly evolving and highly competitive. We currently or
potentially compete with a variety of companies, including some of our transport suppliers, with
respect to their products and services, including global and regional telecommunications service
providers such as AT&T, British Telecom, NTT, Level 3, Qwest and Verizon, among others.
The industry in which we operate is consolidating, which is increasing the size and scope of
our competitors. Competitors could benefit from assets or businesses acquired from other carriers
or from strategic alliances in the telecommunications industry. New entrants could enter the market
with a business model similar to ours. Our target markets may support only a limited number of
competitors. Operations in such markets with multiple competitive providers may be unprofitable for
one or more of such providers. Prices in the data transmission and internet access business have
declined in recent years and may continue to decline.
Many of our potential competitors have certain advantages over us, including:
| substantially greater financial, technical, marketing, and other resources, including brand or corporate name recognition; | ||
| substantially lower cost structures, including cost structures of facility-based providers who have reduced debt and other obligations through bankruptcy or other restructuring proceedings; | ||
| larger client bases; | ||
| longer operating histories; | ||
| more established relationships in the industry; and | ||
| larger geographic presence. | ||
Our competitors may be able to use these advantages to: | |||
| develop or adapt to new or emerging technologies and changes in client requirements more quickly; | ||
| take advantage of acquisitions and other opportunities more readily; | ||
| enter into strategic relationships to rapidly grow the reach of their networks and capacity; | ||
| devote greater resources to the marketing and sale of their services; | ||
| adopt more aggressive pricing and incentive policies, which could drive down margins; and | ||
| expand their offerings more quickly. |
If we are unable to compete successfully against our current and future competitors, our
revenues and gross margins could decline and we would lose market share, which could materially and
adversely affect our business.
We might require additional capital to support business growth, and this capital might not be
available on favorable terms, or at all.
Our operations or expansion efforts may require substantial additional financial, operational,
and managerial resources. As of March 31, 2011, we had approximately $5.6 million in cash and cash
equivalents and current liabilities $10.0 million greater than current assets. We may have
insufficient cash to fund our working capital or other capital requirements and may be required to
raise additional funds to continue or expand our operations. If we are required to obtain
additional funding in the future, we may have to sell assets, seek debt financing, or obtain
additional equity capital. Our ability to sell assets or raise additional equity or debt capital
will depend on the condition of the capital and credit markets and our financial condition at such
time. Accordingly, additional capital may not be available to us, or may only be available on terms
that adversely affect our existing stockholders, or that restrict our
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operations. For example, if we raise additional funds through issuances of equity or
convertible debt securities, our existing stockholders could suffer dilution, and any new equity
securities we issue could have rights, preferences, and privileges superior to those of holders of
our common stock. Also, if we were forced to sell assets, there can be no assurance regarding the
terms and conditions we could obtain for any such sale, and if we were required to sell assets that
are important to our current or future business, our current and future results of operations could
be materially and adversely affected. We have granted security interests in substantially all of
our assets to secure the repayment of our indebtedness maturing in 2012 and 2015, and if we are
unable to satisfy our obligations the lenders could foreclose on their security interests.
Because our business consists primarily of reselling telecommunications network capacity purchased
from third parties, the failure of our suppliers and other service providers to provide us with
services, or disputes with those suppliers and service providers, could affect our ability to
provide quality services to our customers and have an adverse effect on our operations and
financial condition.
The majority of our business consists of integrating and reselling network capacity purchased
from facility-based telecommunications carriers. Accordingly, we will be largely dependent on third
parties to supply us with services. Occasionally in the past, our operating companies have
experienced delays or other problems in receiving services from third party providers. Disputes
also arise from time to time with suppliers with respect to billing or interpretation of contract
terms. Any failure on the part of third parties to adequately supply us or to maintain the quality
of their facilities and services in the future, or the termination of any significant contracts by
a supplier, could cause customers to experience delays in service and lower levels of customer
care, which could cause them to switch providers. Furthermore, disputes over billed amounts or
interpretation of contract terms could lead to claims against us, some of which if resolved against
us could have an adverse impact on our results of operations and/or financial condition. Suppliers
may also attempt to impose onerous terms as part of purchase contract negotiations. Although we
know of no pending or threatened claims with respect to past compliance with any such terms, claims
asserting any past noncompliance, if successful, could have a material adverse effect on our
operations and/or financial condition. Moreover, to the extent that key suppliers were to attempt
to impose such provisions as part of future contract negotiations, such developments could have an
adverse impact on the companys operations. Finally, some of our suppliers are potential
competitors. We cannot guarantee that we will be able to obtain use of facilities or services in a
timely manner or on terms acceptable and in quantities satisfactory to us.
Industry consolidation may affect our ability to obtain services from suppliers on a timely or
cost-efficient basis.
A principal method of connecting with our customers is through local transport and last mile
circuits we purchase from incumbent carriers such as AT&T and Verizon, or competitive carriers such
as Time Warner Telecom, XO, or Level 3. In recent years, AT&T, Verizon, and Level 3 have acquired
competitors with significant local and/or long-haul network assets. Industry consolidation has
occurred on a lesser scale as well through mergers and acquisitions involving regional or smaller
national or international competitors. Generally speaking, we believe that a marketplace with
multiple supplier options for transport access is important to the long-term availability of
competitive pricing, service quality, and carrier responsiveness. It is unclear at this time what
the long-term impact of such consolidation will be, or whether it will continue at the same pace as
it has in recent years; we cannot guarantee that we will continue to be able to obtain use of
facilities or services in a timely manner or on terms acceptable and in quantities satisfactory to
us from such suppliers.
We may occasionally have certain sales commitments to customers that extend beyond the Companys
commitments from its underlying suppliers.
The Companys financial results could be adversely affected if the Company were unable to
purchase extended service from a supplier at a cost sufficiently low to maintain the Companys
margin for the remaining term of its commitment to a customer. While the Company has not
encountered material price increases from suppliers with respect to continuation or renewal of
services after expiration of initial contract terms, the Company cannot be certain that it would be
able to obtain similar terms and conditions from suppliers. In most cases where the Company has
faced any price increase from a supplier following contract expiration, the Company has been able
to locate another supplier to provide the service at a similar or reduced future cost; however, the
Companys suppliers may not provide services at such cost levels in the future.
We may make purchase commitments to vendors for longer terms or in excess of the volumes committed
by our underlying customers.
The Company attempts to match its purchase of network capacity from its suppliers and its
service commitments from its customers. However, from time to time the Company has obligations to
its suppliers that exceed the duration of the Companys related
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customer contracts or that are for capacity in excess of the amount for which it has Customer
commitments. This could arise based upon the terms and conditions available from the Companys
suppliers, from an expectation of the Company that we will be able to utilize the excess capacity,
as a result of a breach of a customers commitment to us, or to support fixed elements of the
Companys network. Under any of these circumstances, the Company would incur the cost of the
network capacity from its supplier without having corresponding revenues from its customers, which
could result in a material and adverse impact on the Companys operating results.
The networks on which we depend may fail, which would interrupt the network availability they
provide and make it difficult to retain and attract customers.
Our customers depend on our ability to provide network availability with minimal interruption.
The ability to provide this service depends in part on the networks of third party transport
suppliers. The networks of transport suppliers may be interrupted as a result of various events,
many of which they cannot control, including fire, human error, earthquakes and other natural
disasters, disasters along communications rights-of-way, power loss, telecommunications failures,
terrorism, sabotage, vandalism, or the financial distress or other event adversely affecting a
supplier, such as bankruptcy or liquidation.
We may be subject to legal claims and be liable for losses suffered by customers due to our
inability to provide service. If our network failure rates are higher than permitted under the
applicable customer contracts, we may incur significant expenses related to network outage credits,
which would reduce our revenues and gross margins. Our reputation could be harmed if we fail to
provide a reasonably adequate level of network availability, and in certain cases, customers may be
entitled to seek to terminate their contracts with us in case of prolonged or severe service
disruptions or other outages.
System disruptions could cause delays or interruptions of our service due to terrorism, natural
disasters and other events beyond our control, which could cause us to lose customers or incur
additional expenses.
Our success depends on our ability to provide reliable service. Although we have attempted to
design our network services to minimize the possibility of service disruptions or other outages, in
addition to risks associated with third party provider networks, our services may be disrupted by
problems on our own systems, including events beyond our control such as terrorism, computer
viruses, or other infiltration by third parties that affect our central offices, corporate
headquarters, network operations centers, or network equipment. Such events could disrupt our
service, damage our facilities, and damage our reputation. In addition, customers may, under
certain contracts, have the ability to terminate services in case of prolonged or severe service
disruptions or other outages. Accordingly, service disruptions or other outages may cause us to,
among other things, lose customers and could harm our results of operations.
If the products or services that we market or sell do not maintain market acceptance, our results
of operations will be adversely affected.
Certain segments of the telecommunications industry are dependent on developing and marketing
new products and services that respond to technological and competitive developments and changing
customer needs. We cannot assure you that our products and services will gain or obtain increased
market acceptance. Any significant delay or failure in developing new or enhanced technology,
including new product and service offerings, could result in a loss of actual or potential market
share and a decrease in revenues.
The communications market in which we operate is highly competitive; we could be forced to
reduce prices, may lose customers to other providers that offer lower prices and have problems
attracting new customers.
The communications industry is highly competitive and pricing for some of our key service
offerings, such as our dedicated IP transport services, have been generally declining. If our costs
of service, including the cost of leasing underlying facilities, do not decline in a similar
fashion, we could experience significant margin compression, reduction of profitability and loss of
business.
If carrier and enterprise connectivity demand does not continue to expand, we may experience a
shortfall in revenues or earnings or otherwise fail to meet public market expectations.
The growth of our business will be dependent, in part, upon the increased use of carrier and
enterprise connectivity services and our ability to capture a higher proportion of this market.
Increased usage of enterprise connectivity services depends on numerous factors, including:
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| the willingness of enterprises to make additional information technology expenditures; | ||
| the availability of security products necessary to ensure data privacy over the public networks; | ||
| the quality, cost, and functionality of these services and competing services; | ||
| the increased adoption of wired and wireless broadband access methods; | ||
| the continued growth of broadband-intensive applications; and | ||
| the proliferation of electronic devices and related applications. |
Our long sales and service deployment cycles require us to incur substantial sales costs that may
not result in related revenues.
Our business is characterized by long sales cycles, which are often in the range of 45 days or
more, between the time a potential customer is contacted and a customer contract is signed.
Furthermore, once a customer contract is signed, there is typically an extended period of between
30 and 120 days before the customer actually begins to use the services, which is when we begin to
realize revenues. As a result, we may invest a significant amount of time and effort in attempting
to secure a customer, which investment may not result in near term, if any, revenues. Even if we
enter into a contract, we will have incurred substantial sales-related expenses well before we
recognize any related revenues. If the expenses associated with sales increase, if we are not
successful in our sales efforts, or if we are unable to generate associated offsetting revenues in
a timely manner, our operating results could be materially and adversely affected.
Because much of our business is international, our financial results may be affected by foreign
exchange rate fluctuations.
Approximately 25% of our revenue comes from countries outside of the United States. As such,
other currencies, particularly the Euro and the British Pound Sterling, can have an impact on the
Companys results (expressed in U.S. Dollars). Currency variations also contribute to variations in
sales in impacted jurisdictions. Accordingly, fluctuations in foreign currency rates, most notably
the strengthening of the dollar against the euro and the pound, could have a material impact on our
revenue growth in future periods. In addition, currency variations can adversely affect margins on
sales of our products in countries outside of the United States and margins on sales of products
that include components obtained from suppliers located outside of the United States.
Because much of our business is international, we may be subject to local taxes, tariffs, or other
restrictions in foreign countries, which may reduce our profitability.
Revenues from our foreign subsidiaries, or other locations where we provide or procure
services internationally, may be subject to additional taxes in some foreign jurisdictions.
Additionally, some foreign jurisdictions may subject us to additional withholding tax requirements
or the imposition of tariffs, exchange controls, or other restrictions on foreign earnings. Any
such taxes, tariffs, controls, and other restrictions imposed on our foreign operations may
increase our costs of business in those jurisdictions, which in turn may reduce our profitability.
If our goodwill or amortizable intangible assets become further impaired we may be required to
record a significant charge to earnings.
Under generally accepted accounting principles, we review our amortizable intangible assets
for impairment when events or changes in circumstances indicate the carrying value may not be
recoverable. Goodwill is tested for impairment at least annually. Factors that may be considered a
change in circumstances indicating that the carrying value of our goodwill or amortizable
intangible assets may not be recoverable include reduced future cash flow estimates, a decline in
stock price and market capitalization, and slower growth rates in our industry. During the three
months ended March 31, 2011 and the year ended December 31, 2010, the Company recorded no
impairment to goodwill and amortizable intangible assets. We may be required to record a
significant charge to earnings in our financial statements during the period in which any
impairment of our goodwill or amortizable intangible assets is determined, negatively impacting our
results of operations.
The ability to implement and maintain our databases and management information systems is a
critical business requirement, and if we cannot obtain or maintain accurate data or maintain these
systems, we might be unable to cost-effectively provide solutions to our customers.
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To be successful, we must increase and update information in our databases about network
pricing, capacity, and availability. Our ability to provide cost-effective network availability and
access cost management depends upon the information we collect from our transport suppliers
regarding their networks. These suppliers are not obligated to provide this information and could
decide to stop providing it to us at any time. Moreover, we cannot be certain that the information
that these suppliers share with us is accurate. If we cannot continue to maintain and expand the
existing databases, we may be unable to increase revenues or to facilitate the supply of services
in a cost-effective manner.
Furthermore, we are in the process of reviewing, integrating, and augmenting our management
information systems to facilitate management of client orders, client service, billing, and
financial applications. Our ability to manage our businesses could be materially adversely affected
if we fail to successfully and promptly maintain and upgrade the existing management information
systems.
If we are unable to protect our intellectual property rights, competitors may be able to use our
technology or trademarks, which could weaken our competitive position.
We own certain proprietary programs, software, and technology. However, we do not have any
patented technology that would preclude competitors from replicating our business model; instead,
we rely upon a combination of know-how, trade secret laws, contractual restrictions, and copyright,
trademark and service mark laws to establish and protect our intellectual property. Our success
will depend in part on our ability to maintain or obtain (as applicable) and enforce intellectual
property rights for those assets, both in the United States and in other countries. Although our
Americas operating company has registered some of its service marks in the United States, we have
not otherwise applied for registration of any marks in any other jurisdiction. Instead, with the
exception of the few registered service marks in the United States, we rely exclusively on common
law trademark rights in the countries in which we operate.
We may file applications for patents, copyrights and trademarks as our management deems
appropriate. We cannot assure you that these applications, if filed, will be approved, or that we
will have the financial and other resources necessary to enforce our proprietary rights against
infringement by others. Additionally, we cannot assure you that any patent, trademark, or copyright
obtained by us will not be challenged, invalidated, or circumvented, and the laws of certain
foreign countries may not protect intellectual property rights to the same extent as do the laws of
the United States or the member states of the European Union. Finally, although we intend to
undertake reasonable measures to protect the proprietary assets of our combined operations, we
cannot guarantee that we will be successful in all cases in protecting the trade secret status of
certain significant intellectual property assets. If these assets should be misappropriated, if our
intellectual property rights are otherwise infringed, or if a competitor should independently
develop similar intellectual property, this could harm our ability to attract new clients, retain
existing customers, and generate revenues.
Intellectual property and proprietary rights of others could prevent us from using necessary
technology to provide our services or otherwise operate our business.
We utilize data and processing capabilities available through commercially available
third-party software tools and databases to assist in the efficient analysis of network engineering
and pricing options. Where such technology is held under patent or other intellectual property
rights by third parties, we are required to negotiate license agreements in order to use that
technology. In the future, we may not be able to negotiate such license agreements at acceptable
prices or on acceptable terms. If an adequate substitute is not available on acceptable terms and
at an acceptable price from another software licensor, we could be compelled to undertake
additional efforts to obtain the relevant network and pricing data independently from other,
disparate sources, which, if available at all, could involve significant time and expense and
adversely affect our ability to deliver network services to customers in an efficient manner.
Furthermore, to the extent that we are subject to litigation regarding the ownership of our
intellectual property or the licensing and use of others intellectual property, this litigation
could:
| be time-consuming and expensive; | ||
| divert attention and resources away from our daily business; | ||
| impede or prevent delivery of our products and services; and |
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| require us to pay significant royalties, licensing fees, and damages. |
Parties making claims of infringement may be able to obtain injunctive or other equitable
relief that could effectively block our ability to provide our services and could cause us to pay
substantial damages. In the event of a successful claim of infringement, we may need to obtain one
or more licenses from third parties, which may not be available at a reasonable cost, if at all.
The defense of any lawsuit could result in time-consuming and expensive litigation, regardless of
the merits of such claims, and could also result in damages, license fees, royalty payments, and
restrictions on our ability to provide our services, any of which could harm our business.
We continue to evaluate merger and acquisition opportunities and may purchase additional companies
in the future, and the failure to integrate them successfully with our existing business may
adversely affect our financial condition and results of operations.
We continue to explore merger and acquisition opportunities, and we may face difficulties if
we acquire other businesses in the future, including:
| integrating the personnel, services, products and technologies of the acquired businesses into our existing operations; | ||
| retaining key personnel of the acquired businesses; | ||
| failing to adequately identify or assess liabilities of acquired businesses; | ||
| failing to achieve the synergies, revenue growth and other expected benefits we used to determine the purchase price of the acquired businesses; | ||
| failing to realize the anticipated benefits of a particular merger and acquisition; | ||
| incurring significant transaction and acquisition-related costs; | ||
| incurring significant amounts of additional debt; | ||
| creating significant contingent earn-out obligations and other financial liabilities; | ||
| incurring unanticipated problems or legal liabilities; | ||
| being subject to business uncertainties and contractual restrictions while an acquisition is pending that could adversely affect our business; and | ||
| diverting our managements attention from the day-to-day operation of our business. |
These difficulties could disrupt our ongoing business and increase our expenses. As of the
date of this Form 10-K, we have no agreement or memorandum of understanding to enter into any
acquisition transaction.
In addition, our ability to complete acquisitions may depend, in part, on our ability to
finance these acquisitions, including both the costs of the acquisition and the cost of the
subsequent integration activities. Our ability may be constrained by our cash flow, the level of
our indebtedness, restrictive covenants in the agreements governing our indebtedness, conditions in
the securities and credit markets and other factors, most of which are generally beyond our
control. If we proceed with one or more acquisitions in which the consideration consists of cash,
we may use a substantial portion of our available cash to complete such acquisitions, thereby
reducing our liquidity. If we finance one or more acquisitions with the proceeds of indebtedness,
our interest expense and debt service requirements could increase materially. Thus, the financial
impact of future acquisitions, including the costs to pursue acquisitions that do not ultimately
close, could materially affect our business and could cause substantial fluctuations in our
quarterly and yearly operating results.
Our efforts to develop new service offerings may not be successful, in which case our revenues may
not grow as we anticipate or may decline.
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The market for telecommunications services is characterized by rapid change, as new
technologies are developed and introduced, often rendering established technologies obsolete. For
our business to remain competitive, we must continually update our service offerings to make new
technologies available to our customers and prospects. To do so, we may have to expend significant
management and sales resources, which may increase our operating costs. The success of our
potential new service offerings is uncertain and would depend on a number of factors, including the
acceptance by end-user customers of the telecommunications technologies which would underlie these
new service offerings, the compatibility of these technologies with existing customer information
technology systems and processes, the compatibility of these technologies with our then-existing
systems and processes, and our ability to find third-party vendors that would be willing to provide
these new technologies to us for delivery to our users. If we are unsuccessful in developing and
selling new service offerings, our revenues may not grow as we anticipate, or may decline.
If we do not continue to train, manage and retain employees, clients may reduce purchases of
services.
Our employees are responsible for providing clients with technical and operational support,
and for identifying and developing opportunities to provide additional services to existing
clients. In order to perform these activities, our employees must have expertise in areas such as
telecommunications network technologies, network design, network implementation, and network
management, including the ability to integrate services offered by multiple telecommunications
carriers. They must also accept and incorporate training on our systems and databases developed to
support our operations and business model. Employees with this level of expertise tend to be in
high demand in the telecommunications industry, which may make it more difficult for us to attract
and retain qualified employees. If we fail to train, manage, and retain our employees, we may be
limited in our ability to gain more business from existing clients, and we may be unable to obtain
or maintain current information regarding our clients and suppliers communications networks,
which could limit our ability to provide future services.
The regulatory framework under which we operate could require substantial time and resources for
compliance, which could make it difficult and costly for us to operate the businesses.
In providing certain interstate and international telecommunications services, we must comply,
or cause our customers or carriers to comply, with applicable telecommunications laws and
regulations prescribed by the Federal Communications Commission (FCC) and applicable foreign
regulatory authorities. In offering services on an intrastate basis, we may also be subject to
state laws and to regulation by state public utility commissions. Our international services may
also be subject to regulation by foreign authorities and, in some markets, multinational
authorities, such as the European Union. The costs of compliance with these regulations, including
legal, operational, and administrative expenses, may be substantial. In addition, delays in
receiving or failure to obtain required regulatory approvals or the enactment of new or adverse
legislation, regulations, or regulatory requirements may have a material adverse effect on our
financial condition, results of operations, and cash flow.
If we fail to obtain required authorizations from the FCC or other applicable authorities, or
if we are found to have failed to comply, or are alleged to have failed to comply, with the rules
of the FCC or other authorities, our right to offer certain services could be challenged and/or
fines or other penalties could be imposed on us. Any such challenges or fines could be substantial
and could cause us to incur substantial legal and administrative expenses as well; these costs in
the forms of fines, penalties, and legal and administrative expenses could have a material adverse
impact on our business and operations. Furthermore, we are dependent in certain cases on the
services other carriers provide, and therefore on other carriers abilities to retain their
respective licenses in the regions of the world in which they operate. We are also dependent, in
some circumstances, on our customers abilities to obtain and retain the necessary licenses. The
failure of a customer or carrier to obtain or retain any necessary license could have an adverse
effect on our ability to conduct operations.
Future changes in regulatory requirement, new interpretations of existing regulatory requirements,
or determinations that we violated existing regulatory requirements may impair our ability to
provide services, result in financial losses or otherwise reduce our profitability.
Many of the laws and regulations that apply to providers of telecommunications services are
subject to frequent changes and different interpretations and may vary between jurisdictions.
Changes to existing legislation or regulations in particular markets may limit the opportunities
that are available to enter into markets, may increase the legal, administrative, or operational
costs of operating in those markets, or may constrain other activities, including our ability to
complete subsequent acquisitions, or purchase services or products, in ways that we cannot
anticipate. Because we purchase telecommunications services from other carriers, our costs and
manner of doing business can also be adversely affected by changes in regulatory policies affecting
these other carriers.
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In addition, any determination that we, including companies that we have acquired, have
violated applicable regulatory requirements could result in material fines, penalties, forfeitures,
interest or retroactive assessments. For example, a determination that we have not paid all
required universal service fund contributions could result in substantial retroactive assessment of
universal service fund contributions, together with applicable interest, penalties, fines or
forfeitures.
We depend on key personnel to manage our businesses effectively in a rapidly changing market, and
our ability to generate revenues will suffer if we are unable to retain key personnel and hire
additional personnel.
The future success, strategic development, and execution of our business will depend upon the
continued services of our executive officers and other key sales, marketing, and support personnel.
We do not maintain key person life insurance policies with respect to any of our employees, nor
are we certain if any such policies will be obtained or maintained in the future. We may need to
hire additional personnel in the future, and we believe the success of the combined business
depends, in large part, upon our ability to attract and retain key employees. The loss of the
services of any key employees, the inability to attract or retain qualified personnel in the
future, or delays in hiring required personnel could limit our ability to generate revenues and to
operate our business.
Risks Relating to Our Indebtedness
Our failure to comply with covenants in our Loan Agreement could result in our indebtedness being
immediately due and payable and the loss of our assets.
Pursuant to the terms of our Loan Agreement with Silicon Valley Bank we have pledged
substantially all of our assets to the lender as security for our payment obligations under the
Loan Agreement. If we fail to pay any of our indebtedness under this Loan Agreement when due, or if
we breach any of the other covenants in the Loan Agreement, it may result in one or more events of
default. An event of default under our Loan Agreement would permit the lender to declare all
amounts owing to be immediately due and payable and, if we were unable to repay any indebtedness
owed, the lender could proceed against the collateral securing that indebtedness.
Covenants in our Loan Agreement and outstanding notes, and in any future debt agreement, may
restrict our future operations.
The indenture governing the notes and the Loan Agreement will impose financial restrictions that
limit our discretion on some business matters, which could make it more difficult for us to expand
our business, finance our operations and engage in other business activities that may be in our
interest. These restrictions include compliance with, or maintenance of, certain financial tests
and ratios and restrictions that limit our ability and that of our subsidiaries to, among other
things:
| incur additional indebtedness or place additional liens on our assets; | ||
| pay dividends or make other distributions on, redeem or repurchase our capital stock; | ||
| make investments or repay subordinated indebtedness; | ||
| enter into transactions with affiliates; | ||
| sell assets; | ||
| engage in a merger, consolidation or other business combination; or | ||
| change the nature of our businesses. |
Any additional indebtedness we may incur in the future may subject us to similar or even more
restrictive conditions.
Our substantial level of indebtedness and debt service obligations could impair our financial
condition, hinder our growth and put us at a competitive disadvantage.
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As of March 31, 2011, our indebtedness was substantial in comparison to our available cash and
our net income. Our substantial level of indebtedness could have important consequences for our
business, results of operations and financial condition. For example, a high level of indebtedness
could, among other things:
| make it more difficult for us to satisfy our financial obligations; | ||
| increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; | ||
| increase the risk that a substantial decrease in cash flows from operating activities or an increase in expenses will make it difficult for us to meet our debt service requirements and will require us to modify our operations; | ||
| require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund future business opportunities, working capital, capital expenditures and other general corporate purposes; | ||
| limit our ability to borrow additional funds to expand our business or ease liquidity constraints; | ||
| limit our ability to refinance all or a portion of our indebtedness on or before maturity; | ||
| limit our ability to pursue future acquisitions; | ||
| limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and | ||
| place us at a competitive disadvantage relative to competitors that have less indebtedness. |
Risks Related to our Common Stock and the Securities Markets
Because we do not currently intend to pay dividends on our common stock, stockholders will benefit
from an investment in our common stock only if it appreciates in value.
We do not currently anticipate paying any dividends on shares of our common stock. Any
determination to pay dividends in the future will be made by our Board of Directors and will depend
upon results of operations, financial conditions, contractual restrictions, restrictions imposed by
applicable law, and other factors our Board of Directors deems relevant. Accordingly, realization
of a gain on stockholders investments will depend on the appreciation of the price of our common
stock. There is no guarantee that our common stock will appreciate in value or even maintain the
price at which stockholders purchased their shares.
Our outstanding warrants may have an adverse effect on the market price of our common stock.
As of March 31, 2011, we had 12,090,000 Class Z warrants, each of which entitles the holder to
purchase a share of our common stock at an exercise price of $5.00 per share on or before April 10,
2012. The common stock underlying the warrants has been registered for sale under the Securities
Act or is entitled to registration rights or are otherwise generally eligible for sale in the
public market at or soon after exercise or conversion. If, and to the extent, these warrants are
exercised, stockholders may experience dilution to their ownership interests in the Company. The
presence of this additional number of shares of common stock and warrants eligible for trading in
the public market may have an adverse effect on the market price of our common stock.
The concentration of our capital stock ownership will likely limit a stockholders ability to
influence corporate matters, and could discourage a takeover that stockholders may consider
favorable and make it more difficult for a stockholder to elect directors of its choosing.
H. Brian Thompson, the Companys Executive Chairman of the Board of Directors, and Universal
Telecommunications, Inc., his own private equity investment and advisory firm, owned 5,419,829
shares of our common stock and 699,750 Class Z warrants, each exercisable to purchase one share of
our common stock. Based on the number of shares of our common stock outstanding on March 31, 2011
without taking into account their unexercised warrants, these funds would beneficially own
approximately 29% of our common stock. Based on public filings with the SEC made by J. Carlo
Cannell, we believe that as of March 31, 2011, funds associated with Cannell Capital LLC owned
3,659,381 shares of our common stock and 923,900 Class Z warrants, each exercisable to purchase one
share of our common stock. Based on the number of shares of our common stock outstanding on March
31, 2011 without taking
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into account their unexercised warrants, these funds would beneficially own approximately 20%
of our common stock. In addition, as of March 31, 2011, our executive officers, directors and
affiliated entities, excluding H. Brian Thompson and Universal Telecommunications, together
beneficially owned common stock, without taking into account their unexercised and unconverted
warrants and options, representing approximately 12% of our common stock. As a result, these
stockholders have the ability to exert significant control over matters that require approval by
our stockholders, including the election of directors and approval of significant corporate
transactions. The interests of these stockholders might conflict with your interests as a holder of
our securities, and it may cause us to pursue transactions that, in their judgment, could enhance
their equity investments, even though such transactions may involve significant risks to you as a
security holder. The large concentration of ownership in a small group of stockholders might also
have the effect of delaying or preventing a change of control of our company that other
stockholders may view as beneficial.
It may be difficult for you to resell shares of our common stock if an active market for our
common stock does not develop.
Our common stock is not actively traded on a securities exchange and we currently do not meet
the initial listing criteria for any registered securities exchange, including the NASDAQ National
Market System. It is quoted on the less recognized Over-the-Counter Bulletin Board. This factor, in
addition to the concentrated ownership of our capital stock, may further impair your ability to
sell your shares when you want and/or could depress our stock price. As a result, you may find it
difficult to dispose of, or to obtain accurate quotations of the price of our securities because
smaller quantities of shares could be bought and sold, transactions could be delayed, and security
analyst and news coverage of our company may be limited. These factors could result in lower prices
and larger spreads in the bid and ask prices for our shares.
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ITEM 6. EXHIBITS
The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are
filed herewith or, as noted, incorporated by reference herein:
Exhibit | ||
Number | Description of Document | |
31.1*
|
Certification of Chief Executive Officer pursuant to Rules 13a-15e and 15d-15e page 34 promulgated under the Securities Exchange Act of 1934. | |
31.2*
|
Certification of Chief Financial Officer pursuant to Rules 13a-15e and 15d-15e page 34 promulgated under the Securities Exchange Act of 1934. | |
32.1*
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2*
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith |
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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.
GLOBAL TELECOM & TECHNOLOGY, INC. |
||||
By: | /s/ Richard D. Calder, Jr. | |||
Richard D. Calder, Jr. | ||||
President and Chief Executive Officer | ||||
Date: May 13, 2011
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EXHIBIT INDEX
Exhibit | ||
Number | Description of Document | |
31.1*
|
Certification of Chief Executive Officer pursuant to Rules 13a-15e and 15d-15e promulgated under the Securities Exchange Act of 1934. | |
31.2*
|
Certification of Chief Financial Officer pursuant to Rules 13a-15e and 15d-15e promulgated under the Securities Exchange Act of 1934. | |
32.1*
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2*
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
* | Filed herewith |
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