<PAGE>

================================================================================
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                               -----------------

                                   FORM 10-K

(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

   For the Fiscal Year Ended December 31, 2001

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

   For the transition period from ____________ to ____________

                       Commission file number: 000-28113

                               -----------------

                                TELEMONDE, INC.
            (Exact name of registrant as specified in its charter)

                      Delaware                 62-1795931
                   (State or other            (IRS Employer
                   jurisdiction of       Identification Number)
                  incorporation or
                    organization)

             230 Park Avenue, 10th Floor, New York, New York 10169
              (Address of Principal Executive Offices) (Zip Code)

      Registrant's telephone number, including area code: (646) 435-5645

                               -----------------

          Securities registered pursuant to Section 12(b) of the Act:

                                     None

          Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, $.001 Par Value Per Share
                               (Title of Class)

                               -----------------
   Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [_]

   As of April 1, 2002, Telemonde, Inc. had outstanding 123,626,118 shares of
common stock, $.001 par value per share.

   The aggregate market value of Telemonde, Inc. common stock held by
nonaffiliates of Telemonde, Inc., was $ 0.93 million as of February 16, 2002
(based on February 16, 2002 closing stock price of $0.01/share).

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the registrant's definitive proxy statement pursuant to
Regulation 14A, which statement will be filed not later than 120 days after the
end of the fiscal year covered by this Report, are incorporated by reference in
Part III hereof.

================================================================================

<PAGE>

                                TELEMONDE, INC.
                        2000 ANNUAL REPORT ON FORM 10-K

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                             Page
                                                                            Number
                                                                            ------
 <C>       <C>      <S>                                                     <C>
 PART I....................................................................    1
           ITEM 1.  BUSINESS...............................................    1
           ITEM 2.  PROPERTIES.............................................    8
           ITEM 3.  LEGAL PROCEEDINGS......................................    8
           ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....    8
 PART II...................................................................    8
           ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                    STOCKHOLDER MATTERS....................................    8
           ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA...................   10
           ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS....................   11
           ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                    RISK...................................................   17
           ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............   17
           ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                    ACCOUNTING AND FINANCIAL DISCLOSURE....................   17
 PART III..................................................................   17
           ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....   17
           ITEM 11. EXECUTIVE COMPENSATION.................................   17
           ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                    MANAGEMENT.............................................   17
           ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........   18
 PART IV...................................................................   18
           ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                    FORM 10-K..............................................   18
</TABLE>

                                       i

<PAGE>

FORWARD-LOOKING STATEMENTS

   This Annual Report on Form 10-K includes "forward-looking statements" within
the meaning of the federal securities laws. Forward-looking statements are any
statements other than those relating to historical information or current
condition, including without limitation, statements regarding future margin
performance, customer retention capabilities, future revenues, strategy, and
pricing of services. Forward-looking statements can often be identified by the
use of forward-looking words such as "believes," "estimates," "expects,"
"intends," "may," "will," should," or "anticipates". In addition, from time to
time, we or our representatives have made or may make forward-looking
statements, orally or in writing. Forward-looking statements also may be
included in various filings that we have made or may make with the Securities
and Exchange Commission, in press releases or in oral statements made by or
with the approval of one of our authorized executive officers.

   The forward-looking statements referred to above involve predictions. We
cannot assure you that the future results will be achieved or that, if
achieved, such results will be indicative of the results in later periods. The
inclusion of forward-looking statements in this Annual Report should not be
regarded as a representation by us or any other person that our objectives or
plans will be achieved or that our operating expectations will be realized.
Actual events or results may differ materially as a result of certain risks
which are described in this Annual Report, including but not limited to, in the
Business section under the caption "Risk Factors".

   We undertake no obligation to publicly update or revise any forward-looking
statement. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained in this Annual Report.

                                    PART I

Item 1.  Business

   You should read this description of our business together with our
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Financial Statements and related notes appearing elsewhere
in this Annual Report.

Introduction

   We are an international communications business that offers
telecommunications and related services.

   Our principal areas of business are switched voice services--both wholesale
switching of international traffic and international route management-and
telecommunications advisory services. Our customers include telecommunications
carriers, telecoms hotel developers and investors in telecommunication
companies.

PRODUCTS AND SERVICES

Voice Services

  Wholesale Switched Minutes

   We offer wholesale-switched voice traffic services, being the collection,
transportation and delivery of telephone calls on a local, long distance and
international basis, which meet internationally recognized standards. We focus
on providing high quality services by interconnecting our network with the
networks of other carriers, principally through dedicated circuit connections.
We seek to enhance our customers' margins by carrying their switched minutes at
highly competitive rates.

   We have points of presence in New York and London, where customers that wish
to buy minutes from us interconnect their telephony systems with ours. We
provide a number of high quality, niche interconnect routes.

                                      1

<PAGE>

Advisory Services

   We offer a wide range of advisory services in the telecommunications field
to owners of and investors in telecommunication companies particularly telecoms
hotel developers and operators. Our services range from financial restructuring
to detailed assistance in the management of individual telecoms hotels.

Bandwidth Services

   We have provided bandwidth services including the sourcing, supply and
management of high-capacity bandwidth on terrestrial and satellite
telecommunications systems across the globe to existing customers. We have,
however, been actively removing ourselves from this market, for example, by
reselling IRU's previously purchased back to the underlying provider. This has
assisted in our eliminating or reducing liabilities to suppliers, and reducing
ongoing associated costs and overhead costs.

DEVELOPMENT OF BUSINESS

   We commenced operations in 1998 through subsidiary companies that are now
wholly owned. We generally conduct our business through the following wholly
owned subsidiaries:

<TABLE>
<C>                <C> <S>
Bandwidth Services :   Telemonde Networks Limited/Telemonde Investments Limited
Voice Services     :   Telemonde Networks Limited/Equitel Communications Limited
Emerging Markets   :   EquiTel Communications Limited
Advisory Services  :   Telemonde Inc/Equitel Communications Limited
</TABLE>

   We were formed on March 10, 1998 as Telemonde Investments Limited, a British
Virgin Islands company. We began to purchase and sell trans-atlantic bandwidth
through various wholly owned subsidiaries in April 1998. Pac-Rim Consulting,
Inc., a dormant shell company with no operating history but listed on the NASD
Over-the-Counter Bulletin Board acquired Telemonde Investments Limited on May
14, 1999. Subsequently the name was changed its name to Telemonde, Inc. On
November 9, 1999, Telemonde, Inc. became a Delaware corporation.

   For historical reasons we use certain Bermudan and BVI subsidiaries owned
via Telemonde Investments Limited for the resale of bandwidth. We own 49% of
Desert Telecommunications LLC (DeserTel), a company registered in Oman, which
is no longer trading.

   In November 1999 we acquired EquiTel, a company providing telecommunications
route management and intelligent network services mainly to emerging markets.

   During the course of 2001, we ceased actively marketing our traditional core
business of bandwidth purchase and sale in light of current market conditions.
We have terminating, where possible, contracts with providers and concluding
negotiations to hand back certain network elements with associated customers
and almost wholly removed ourselves from this market. We have been therefore
concentrating on our advisory service businesses and our specialized voice
services.

   Our Principal Operating Companies

                                Telemonde, Inc.

           100%                      100%                      100%
         Telemonde                  EquiTel                  Telemonde
         Networks               Communications              Investments
          Limited                   Limited                   Limited
                                      49%
                                   Desertel
                                Communications
                                      LLC

                                      2

<PAGE>

   During the first quarter of 2002, Desertel, our joint venture in Oman,
ceased trading because of the expiry of relevant contracts. As part of the
closure negotiations with our partner, we reduced our stake in DeserTel to 49%.

   During the second quarter of 2001, we closed telemonde.net, our subsidiary
based in Switzerland, which was developing our internet business. We determined
to cease this business because this market did not mature as quickly as
anticipated and we did not believe it appropriate to continue to support this
loss making business. We anticipate, if we are unable to provide further funds
to telemonde.net that it may be declared insolvent. We are working to avoid
this, but may be unable to prevent it. We do not believe this will have a
material effect on our business.

   Our bespoke telecoms hotel development subsidiary, Metrolinx Limited, did
not earn any revenues. It has now ceased trading. A winding-up petition has
been presented by the one and only creditor of this subsidiary in the English
High Court in London, despite various offers having been made by us to that
creditor to make partial payments. We may not be able to defend this petition.

   We have been refocusing our business particularly on advisory services and
cash-positive voice services. We have reduced our overhead substantially, and
are continuing to do so. We have seen a collapse in our markets which has made
the selling of telecommunications bandwidth services extremely difficult. We
have seen oversupply resulting in many of our competitors, suppliers and
customers ceasing to trade or seeking the protection of the courts. Generally
we have seen that our customers are not purchasing additional capacity whilst
consolidation in our market places continues. We are working to ensure that our
cash liabilities do not increase, whilst working with our creditors to reduce
or eliminate historic debt. We believe that by continuing to trade and with the
continued forbearance and active forgiveness by creditors of portions of their
debts, our creditors may obtain some repayment. We have not sought the
protection of the courts for any of our companies, but may be forced to do so
should any of our creditors otherwise threaten the continuance of the group.

MARKETS

Voice

   The international switch voice market continues to grow despite the turmoil
and consolidation in the industry and a backdrop of low margins and bad debt.

   Growth in this market is driven by a number of key factors:

  .   Deregulation in emerging markets resulting in privatization of formerly
      state owned operators and the emergence of new competing operators.

  .   Technological advancements and lower barriers to entry driving down price
      and stimulating demand.

  .   Continued globalization of world economies creating increased
      communications needs.

  .   Proliferation of high-quality undersea fiber-optic cable systems around
      the world improving quality to the end-user and increasing competitive
      pressures resulting in further price decline.

   The consolidation in the industry and the removal of a number of low-cost /
low-margin providers will lead to a period of price stability at the wholesale
end of the switch voice market. We believe that operators with high-quality
niche routes will be able to play a role in the international voice market in
the short to medium term whilst ensuring sustainable margins are developed and
maintained once again.

Advisory Services

   The market for advisory services on a strategic corporate basis is based on
our individual contacts and is therefore not subject to normal market dynamics.
The development of our advisory services is based on our view of the market
need and the opportunity that exists to assist other companies to fulfil their
aims and objectives.

                                      3

<PAGE>

   The continued downturn in the global telecommunications industry (with
particular emphasis on North America and Europe) has led to a number of short
term tactical opportunities as companies strive to reduce costs and remove
themselves from market sectors or supply contracts as part of corporate
recovery plans.

STRATEGY

   Our strategy is to work with owners of and investors in telecommunication
companies particularly telecoms hotel developers and operators to assist them
in improving their efficiency, profitability and market positioning.

FINANCIAL INFORMATION REGARDING INDUSTRY SEGMENTS

   We have included in this Annual Report financial information up to December
31, 2001. From our inception on March 10, 1998 to November 1999, our business
consisted entirely of the sale of trans-atlantic bandwidth and the management
of bandwidth through maintenance contracts with our customers. Following our
acquisition of EquiTel in November 1999, we expanded our service offerings to
include voice and emerging markets services. We have further expanded into
advisory services. The segmental analysis is more fully discussed in note 14 of
the Financial Statements.

CUSTOMERS AND GEOGRAPHIC CONCENTRATION

   Our customers include telecommunications carriers and owners of and
investors in telecommunication companies.

   Our business is global; while customers may have a specific geographic
location, the services that we provide can be, and are, located anywhere in the
world. We provide services to customers with principal places of business in
Europe, North America, Asia-Pacific and the Middle East. In 2001, two customers
accounted for over 10% of our revenues, Teleglobe to whom we provided
short-term bandwidth leases and Europe Online Networks to whom we provided
international bandwidth and IP transit services. The Teleglobe short-term
leases expired in the fourth quarter of 2001 and we transferred the remaining
contract for services with Europe Online Networks to Ebone Broadband Services
to reduce our outstanding debt to them.

ORDER BOOK

   We have developed a number of relationships with Carrier Hotel companies,
investors in, and customers of, such companies. We have proposed a number of
advisory service offerings to these companies with a view to being awarded
ongoing contracts for our services or fees based upon the successful
implementation of our proposals. There is no guarantee that these proposals
will generate revenues in 2002.

GOVERNMENT REGULATION

   As an international telecommunications company, we are and will be subject
to varying degrees of regulation in each of the jurisdictions in which we
provide services. Local laws and regulations, and the interpretation of these
laws and regulations, differ significantly among each of the jurisdictions in
which we operate and intend to operate.

   With regard to our current operations, we have the necessary licenses which
we believe are required to undertake our business and to implement our
short-term plans. We hold a Public Telephone Operators License from the
Department of Trade and Industry in the United Kingdom, where our international
operations center and network infrastructure is based, and a Section 214
License in the United States of America.

EMPLOYEES

   At December 31, 2001, we employed a total of 27 persons. Of these, 7 are
executive officers, 10 provide network support and customer services and the
remainder perform administrative functions.

                                      4

<PAGE>

RISK FACTORS

   Our business involves a significant number of material risks. The risks and
uncertainties described below may not be the only ones we face. Additional
risks and uncertainties not presently known to us or that we currently deem
immaterial may be, or may become, material and impair our business and
operations.

   During our limited operating history we have experienced operating losses,
negative cash flow from operations and net losses.

   We were organized in March 1998 and have a limited operating history. We
have incurred operating losses and negative cash flow since our inception. From
the date of inception to December 31, 2001 we have incurred losses of $189.8
million. Despite recognizing $98.5 million in revenues, we incurred a deficit
on total stockholders' equity of $117.4 million for the period from March 10,
1998 through December 31, 2001. We may continue to incur losses and negative
cash flow in 2002 as we expand our services and customer base.

   The continuation and size of our operating losses and negative cash flows in
the future will be affected by a variety of factors, including:

  .   The ability to put in place working capital facilities and to increase
      our capital base.

  .   The rate at which we add new customers and the prices those customers pay
      for our services.

  .   The ability to predict demand for our services.

  .   The ability of our local relationships in emerging markets to support our
      customers and meet our obligations.

  .   General economic, financial, competitive, legislative, regulatory,
      licensing, and other factors that are beyond our control.

   We have financed, and expect to continue to finance, our net losses, debt
service, capital expenditures and other cash needs through flexible supplier
and creditor payments, the issuance of debt primarily by way of short-term loan
financing and the proceeds from sales of shares of common stock.

   Our business requires periodic amounts of capital expenditure and our
existing working capital facilities may be insufficient to meet our needs.

   Our failure to accomplish any of the foregoing sources may significantly
hinder expenditures. If we are unable to make capital expenditures, our
business may grow more slowly or indeed we may be unable to continue trading.
Our share price and the associated liquidity has significantly reduced our
ability to sell our stock or to swap debt for equity reducing the financing
options open to us.

   We currently do not have the capital base or working capital facilities to
meet our current and projected commitments. If we fail to successfully obtain
necessary capital, or to obtain an insufficient amount of capital, we would
harm our prospects. We have benefited from the willingness of suppliers to
reschedule commitments and payments and may continue to require and take
advantage of such flexibility in the future. However, this reliance on supplier
flexibility for short term funding could lead to pressure from suppliers that
may weaken our commercial position and if this flexibility ceased to be
available, this could endanger us. In addition, it could result and has in the
past resulted in events of default. We plan to seek external debt and equity
funding to reduce this level of reliance on supplier flexibility but this may
not be available to us.

   We have a substantial level of indebtedness.

   We have incurred a high level of debt. As of December 31, 2001, we had a
combined total liability of $119.5 million, including: $17.3 million due to
WorldCom, $50.3 million due to Global Crossing and a loan from Home Run Limited
of $7.3 million convertible into shares of Common Stock at their option. We are
also indebted to Communications Collateral Limited in the sum of $3.3 million
and Gemini in the sum of $2.1 million and the Inland Revenue in the sum of $2.2
million.

                                      5

<PAGE>

   The amount of our debt could have important consequences for our future,
including, among other things:

  .   Cash from operations may be insufficient to meet the principal and
      interest on our debts as they become due.

  .   Payments of principal and interest on borrowings may leave us with
      insufficient cash resources for our operations.

  .   Restrictive debt covenants may impair our ability to obtain additional
      financing.

   We have been unable to generate sufficient cash flow to meet certain of our
debt service requirements, and have triggered events of default on those
obligations. Failure to generate sufficient sums to maintain debt repayments
may impair our ability to develop our business and our ability to continue
trading. Certain of our subsidiary companies including Metrolinx Limited and
telemonde.net may be declared insolvent if they do not receive further funds
from us.

   The domestic and international telecommunications industry is highly
competitive and we may not be able to compete effectively.

   The telecommunications industry is highly competitive and is influenced
significantly by the marketing and pricing decisions of the larger industry
participants. The industry has relatively limited barriers to entry in the more
deregulated countries with numerous entities competing for the same customers.
We believe that competition in all of our markets is likely to increase. This
increase in competition could adversely affect our revenues. Many of our
competitors are significantly larger than we are.

   Many of our competitors have:

  .   Substantially greater financial, technical, and marketing resources.

  .   Larger infrastructure.

  .   A greater ability to support the portfolio of services.

  .   Stronger name recognition and customer loyalty.

  .   Long-standing relationships with our prospective customers.

   We expect that competition in the international telecommunications market
will intensify in the future.

   We do not expect to pay dividends for the foreseeable future.

   We plan to retain all earnings for investment in our business and do not
plan to pay dividends at any time in the foreseeable future. See Part II, Item
5, "Dividend Policy."

   A portion of our net revenue and expenses is denominated, and is expected to
continue to be denominated in currencies other than US dollars.

   Changes in exchange rates may have a significant effect on the results of
our operations. Historically, we have not engaged in hedging transactions, and
currently do not contemplate engaging in hedging transactions, to mitigate
foreign exchange risk.

   The results of our operations may be affected by fluctuations in currency
exchange rates. While most revenues have been earned in US dollars, a portion
of operating costs are incurred in currencies other than US dollars, such as
pounds sterling. A partial mismatch in operating revenues and expenses could
lead to fluctuations in the results of our operations due to changes in the
value of the US dollar relative to other currencies.

                                      6

<PAGE>

   Our operations are substantially dependent on key personnel.

   Our success will depend to a significant degree upon the efforts of senior
management with longstanding industry relationships and technical knowledge.
Competition for such personnel is intense and we may not be able to retain
highly skilled qualified personnel. Loss of services of one or more key
personnel could adversely affect our business. We have entered into employment
agreements with all key personnel.

Where You Can Find More Information

   We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and will file periodic reports, and other information
relating to our business, financial statements and other matters with the
Securities and Exchange Commission. Our SEC filings are available to the public
over the Internet at the SEC's web site at http://www.sec.gov.

Glossary of Certain Telecommunications Terms

   Bandwidth--The range of frequencies that can be passed through a medium,
such as glass fibers, without distortion. The greater the bandwidth, the
greater the information-carrying capacity of such medium. For fiber optic
transmission, electronic transmitting devices determine the bandwidth, not the
fibers themselves. Bandwidth is measured in Hertz (analog) or bits per second
(digital).

   Carrier--A third party provider of communications services by wire, fiber or
radio.

   Carrier-Neutral Telecoms Hotel--A telecoms hotel operated by a company that
is not itself a telecoms carrier--generally a property developer. Other
telecoms hotels are operated by carriers making them less appealing to rival
carriers than carrier-neutral telecoms hotels.

   Co-location--The sharing of physical space and support services for
telecommunications companies typically for the equipment required to host data
services and interconnection facilities, for example, telecommunications
companies may co-locate their switching facilities for the purpose of
interconnection. Unique in its market design, this service allows buyers to
define requirements within standardized terms and have sellers bid
competitively for their business.

   Indefeasible Right of Use (IRU)--A measure of currency in the fiber optic
cable business. The owner of an IRU has the right to use the capacity for the
time and bandwidth to which the IRU applies. In telecommunications, an IRU is
the effective long term lease (temporary ownership) of the capacity of an
international cable.

   Internet--Interconnected computer networks, originally known as the Defense
Advanced Research Projects Agency connecting government and academic sites. It
currently links about 50 million people worldwide who use it for everything
from scientific research to simple electronic mail.

   Internet Protocol (IP)--The Internet protocol that defines the unit of
information passed between systems providing a basis packet delivery service
within the transmission control protocol/Internet protocol (TCP/IP). IP is used
in gateways to link networks at an open systems interconnection (OSI) network
Level 3 and above. IP is a standard that describes how packets of data are
transported across the Internet and recognized as an incoming message.

   Public Telephone Operator (PTO)--Originally a government owned national
provider of telecommunications services. In countries where deregulation has
occurred, the public telephone operator may be privatized whereas in countries
where deregulation has not occurred, the public telephone operator remains
government owned.

                                      7

<PAGE>

   Switch--A sophisticated computer that accepts instructions from a caller in
the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits or
selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnection circuits to form a transmission path
between users. Switches allow local telecommunications service providers to
connect calls directly to their destination, while providing advanced features
and recording connection information for future billing.

   Telecoms hotel--A building (or part of a building) that has either been
specifically designed and built or has been adapted for use by
telecommunications companies to meet their specific co-location requirements
(also known as telehouses and carrier hotels).

Item 2.  Properties

   As of the date of this filing, Telemonde owned none of its office or
operations facilities. All of Telemonde's operations were located at leased
properties, as set forth below.

<TABLE>
<CAPTION>
                    Location           Type
                    --------           ----
                    <S>                <C>
                    New York, USA
                    230 Park Avenue    Office Facilities
                    111 8th Avenue     Equipment co-location
                    60 Hudson Street   Equipment co-location
                    London, England
                    40 Portman Square  Office Facilities
                    1 Coriander Avenue Equipment co-location
</TABLE>

   We consider the offices and facilities described above to be appropriate for
the current position and size of our business.

Item 3.  Legal Proceedings

   From time to time, the Company is party to litigation or other legal
proceedings that it considers to be a part of the ordinary course of its
business. The Company is not involved in any legal proceedings nor is it party
to any pending or threatened claims that could reasonably be expected to have a
material adverse effect on its financial condition or results of operations.
Metrolinx Limited is subject to a petition to be wound up in the English High
Court. We may be unable to provide sufficient funds to Metrolinx Limited to
enable this to be avoided. telemonde.net is subject of insolvency proceedings
in Geneva. We may be unable to provide sufficient funds to telemonde.net to
enable this to be avoided.

Item 4.  Submission Of Matters To A Vote Of Security Holders

   No matters were submitted to a vote of stockholders of Telemonde during the
fourth quarter of 2001.

                                    PART II

Item 5.  Market For Registrant's Common Equity And Related Stockholder Matters

  Holders

   The approximate number of record holders of common stock of Telemonde, Inc.
at December 31, 2001 was 254.

                                      8

<PAGE>

  Dividend Policy

   We have never declared or paid any dividends on our common stock and we do
not anticipate paying cash dividends on the common stock in the foreseeable
future. We do not expect to generate any net income in the foreseeable future
but anticipate that future earnings generated from operations, if any, will be
retained to finance the expansion and continued development of our business.
Any future dividends will be at the discretion of the board of directors and
will depend upon, among other things, our operations, capital requirements and
surplus, general financial condition, contractual restrictions and such other
factors as the board of directors may deem relevant.

  Price Range of Common Stock

   During 2001 our common stock was traded on the NASD Over-the-Counter
Bulletin Board under the symbol "TLMD".

   The following table provides the reported high and low sales prices for our
common stock on the NASD Over-the-Counter Bulletin Board for the quarterly
periods indicated. The prices reflect inter- dealer prices and do not include
retail markups, markdowns or commissions. The stock is not traded on any
foreign public trading markets.

<TABLE>
<CAPTION>
                                          High Low
                                          ---- ----
                           <S>            <C>  <C>
                           Fiscal 2001
                           Fourth Quarter 0.04 0.01
                           Third Quarter. 0.06 0.01
                           Second Quarter 0.19 0.05
                           First Quarter. 0.34 0.11

                                          High Low
                                          ---- ----
                           Fiscal 2000
                           Fourth Quarter 0.41 0.11
                           Third Quarter. 1.02 0.34
                           Second Quarter 1.20 0.52*
                           First Quarter. 1.78 0.75*
</TABLE>
--------
*  From March 9 until July 24, 2000 our common stock was traded on the EQS Pink
   Sheets.

RECENT SALES OF UNREGISTERED SECURITIES

   None of our securities which are not registered under the Securities Act of
1933, as amended (the "Securities Act"), have been sold by us during the fourth
quarter of 2001.

                                      9

<PAGE>

Item 6.  Selected Consolidated Financial Data

   The following selected consolidated financial data as of and for the years
ended December 31, 2000 and 1999 have been derived from, and are qualified by
reference to, the Consolidated Financial Statements of the Company audited by
Moore Stephens, Chartered Accountants, included in this Annual Report and
should be read in conjunction with those Consolidated Financial Statements and
Notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations.

<TABLE>
<CAPTION>
                                                             Fiscal Year  Fiscal Year  Fiscal Year
                                                                Ended        Ended        Ended
                                                             December 31, December 31, December 31,
                                                                 2001         2000         1999
                                                             ------------ ------------ ------------
                                                              (in millions, except per share data)
<S>                                                          <C>          <C>          <C>
Revenues....................................................   $  20.7       $ 40.3       $  8.2
Cost of sales...............................................      20.5         29.4          6.4
                                                               -------       ------       ------
Gross margin................................................       0.2         10.9          1.8
Operating expenses
   Selling, general and administrative expenses.............      10.3         16.6          9.5
   Amortization of goodwill.................................       3.8          3.7          0.5
   Financing costs..........................................       2.1          2.6         10.6
   Impairment of goodwill...................................      19.7          5.2          0.0
   Impairment of property, plant and equipment..............      14.7          0.0          0.0
   Impairment of investments................................       2.1          0.0          0.0
   Reserve for doubtful debts...............................       6.0          2.1          0.9
   Reserve for inventory....................................       0.0          0.0         40.7
   Contract terminations and penalties......................      46.6          0.0          0.0
                                                               -------       ------       ------
Operating expenses..........................................     105.3         30.2         62.2
                                                               -------       ------       ------
Operating loss..............................................    (105.1)       (19.3)       (60.4)
Other income (expense)
   Interest income..........................................       0.2          0.9          0.6
   Interest expense.........................................      (9.5)        (1.8)        (1.3)
   Share of loss of associate...............................      (0.0)        (0.4)         0.0
   Foreign exchange gains...................................       0.0          0.5          0.0
                                                               -------       ------       ------
       Total other income (expense).........................      (9.3)        (0.8)        (0.7)
                                                               -------       ------       ------
Loss before minority interests and extraordinary item.......    (114.4)       (20.1)       (61.1)
Minority interests..........................................      (0.0)        (0.1)        (0.0)
                                                               -------       ------       ------
Loss before extraordinary item..............................    (114.4)       (20.2)       (61.1)
Extraordinary item--Gain on restructuring of debt...........       0.0         17.6          0.0
                                                               -------       ------       ------
Loss for the year...........................................    (114.4)        (2.6)       (61.1)
Loss per share--before extraordinary item--basic and diluted   $ (0.97)      $(0.22)      $(1.22)
Loss per share--basic and diluted...........................   $ (0.97)      $(0.03)      $(1.22)

                                                                  At           At           At
                                                             December 31, December 31, December 31,
                                                                 2001         2000         1999
                                                             ------------ ------------ ------------
Consolidated balance sheet data:
   Cash and cash equivalents................................   $   0.0       $  1.4       $  0.1
   Total assets.............................................       2.1         58.9         78.5
   Total liabilities........................................     119.5         62.7        102.1
   Total stockholders' equity...............................    (117.4)        (3.8)       (23.6)
</TABLE>

                                      10

<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operation

   You should read the following discussion and analysis together with our
Financial Statements, including the notes, appearing elsewhere in this Annual
Report.

  Overview

   We are an international communications company that offers
telecommunications and related services.

   Telemonde Investments Limited, a British Virgin Islands company and the
holding company for the Telemonde business, was formed in March 1998.
Telemonde, Inc. (formerly Pac-Rim Consulting, Inc.) acquired Telemonde
Investments Limited on May 14, 1999.

   We have a limited operating history. We have incurred operating losses and
negative cash flow since our inception. Whilst we continue to expect to incur
negative cash flow as we expand our services, we are taking significant steps
to reduce our unfunded liabilities and therefore move to a position where we
can record operating profits.

Results of Operations

   For the fiscal year ended December 31, 2001 compared with the fiscal year
ended December 31, 2000.

   Revenues for 2001 decreased by 49% to $20.7 million compared to $40.3
million for 2000.

   Bandwidth capacity and leasing revenues decreased by 37% to $10.8 million
for 2001 compared to $17.2 million for 2000 due to over capacity in the
bandwidth market. Backhaul, maintenance and recharge revenues related to
bandwidth capacity decreased by 15% to $2.3 million for 2001 compared to $2.7
million for 2000.

   Voice services revenues decreased by 62% to $2.7 million for 2001 from $7.1
million for 2000.

   Attributable revenues for DeserTel, predominantly selling pre-paid calling
cards in the Muscat region, were $4.8 for 2001 compared to $3.7 million for
2000.

   Advisory services revenues decreased to $0.1 million for 2001 compared to
$7.8 million for 2000.

   There were no other revenues in 2001 compared with $1.8 million in 2000.

   Cost of sales decreased 30% to $20.5 million for 2001 compared to $29.4
million for 2000. This increase is related to the decrease in revenues.

   Costs of bandwidth services decreased by 14% to $13.5 million for 2001
compared to the $15.7 million for 2000.

   Costs of voice services decreased by 56% to $3.8 million for 2001 compared
with $8.7 million for 2000.

   The attributable costs relating to DeserTel were $3.0 million for both 2001
and 2000.

   Selling, general and administrative expenses decreased by 38% to $10.3
million for 2001 compared to $16.6 million for 2000. This was a result of a
full review of costs including a reduction in staff from 49 to 27.

   Amortization of goodwill was similar in 2001 at $3.8 million compared with
2000. However, it became apparent the underlying strength of acquired
businesses no longer justified the remaining goodwill of $19.7 million so this
has been written off as an impairment adjustment.

   Financing costs decreased by 19% to $2.1 million for 2001 compared to $2.6
million for 2000.

   Similar to the impairment of goodwill the carrying values of both bandwidth
assets and investments have been reviewed. In view of the serious over capacity
in the bandwidth market the bandwidth asset has been written down to a nil
value with an impairment adjustment of $14.7 million. Investments have been
written down to the value of the underlying assets by providing for an
impairment adjustment of $2.1 million.

   Reserve for doubtful debts increased to $6.0 million for 2001 compared to
$2.1 million for 2000 mainly as a result of an impairment adjustment to a
long-term prepayment for a traffic facility.

                                      11

<PAGE>

   Three contracts with suppliers/customers were terminated during 2001
resulting in a net charge of $3.7 million. In addition the reinstatement of the
Global Crossing liability (see discussion in the Liquidity and Capital
Resources section of this Item) resulted in a total charge for contract
terminations and penalties of $46.6 million.

   Interest income decreased to $0.2 million for 2001 compared to $0.9 million
for 2000 mainly arising from the completion of an interest bearing installment
sales contract.

   Interest expense increased to $9.5 million for 2001 compared to $1.8 million
for 2000, in line with higher average borrowings and provision of contract
interest.

   Foreign exchange gains of $0.5 million in 2000 were not repeated in 2001.

   The gain on restructuring of debt of $17.6 million in 2000 arises from the
renegotiations of a contract with a bandwidth supplier.

   The loss for the year increased to $115.4 million for 2001 compared to $2.6
million for 2000 principally from the impairment review of assets and the
Global Crossing reinstatement.

   For the fiscal year ended December 31, 2000 compared with the fiscal year
ended December 31, 1999.

   Revenues for 2000 increased by 391% to $40.3 million compared to $8.2
million for 1999.

   Bandwidth capacity and leasing revenues increased by 213% to $17.2 million
for 2000 compared to $5.5 million for 1999. This is as a result of the
activation of circuits for a number of new European-based customers and the
successful renewal of lease contracts with existing customers, mainly on the
transatlantic section of the network. Backhaul, maintenance and recharge
revenues related to bandwidth capacity were $2.7 million in both years.

   Voice services revenues increased to $7.1 million for 2000 from nil for
1999, following the acquisition of EquiTel in the last quarter of 1999 allowing
for the development of new wholesale switched voice services.

   Attributable revenues for DeserTel, predominantly selling pre-paid calling
cards in the Muscat region, were $3.7 million for 2000. This reflected our
obtaining 75% control in the joint venture from April 1, 2000. Approximately
650,000 pre-paid calling cards were sold by DeserTel to retail customers in
Muscat during 2000. Revenues from pre-paid calling card services are recognized
at the time of usage or upon the expiry of a card, if any balance remains
unused.

   Advisory services revenues increased to $7.8 million for 2000 from nil for
1999. These sales are attributable to corporate advisory services provided by
senior management to a number of global communications operators and property
development companies.

   Other revenues in 2000 were $1.8 million compared with nil in 1999.

   Cost of sales increased 359% to $29.4 million for 2000 compared to a base
cost of $6.4 million for 1999. This increase is directly related to the similar
increase in revenues.

   Costs of bandwidth services increased by 145% to $15.7 million for 2000
compared with the $6.4 million base for 1999.

   Costs of voice services increased to $8.7 million for 2000 from a zero base
in 1999. Costs are associated with the transportation of calls over our
networks and termination onto our own or our suppliers' switches.

   The attributable costs relating to DeserTel were $3.0 million for 2000,
arising from our obtaining a controlling interest in DeserTel from April 1,
2000.

   Other costs of sales in 2000 increased to $2.0 million compared with nil in
1999.

                                      12

<PAGE>

   Selling, general and administrative expenses increased by 75% to $16.6
million for 2000 compared to $9.5 million for 1999.

   Staff costs increased by 223% to $8.4 million for 2000 compared to $2.6
million for 1999. The increase in staff costs reflects the phased recruitment
of sales, technical and professional staff required to provide the
infrastructure of a diverse telecommunications business and $1.5 million cost
of employee share option awards.

   Legal and professional fees decreased 28% to $2.6 million for 2000 compared
to $3.6 million for 1999.

   Other selling, general and administrative expenses increased 77% to $5.6
million for 2000 compared to $3.3 million for 1999. Primarily, this was a
result of an increase in travel costs, consultancy costs and the inclusion of
corporate overhead costs for a full business year.

   Amortization of goodwill increased to $3.7 million for 2000 compared with
$0.5 million in 1999 due to a full years amortization for the goodwill of
EquiTel which was acquired in November 1999.

   Financing costs decreased by 75% to $2.6 million for 2000 compared to $10.6
million for 1999. The decrease can be attributed to the warrants issued to
Communications Collateral Limited and Global Crossing in 1999. Generally
accepted accounting principles in the United States require that the fair value
of the warrants be recorded as an expense over the period of the related
financing. The $2.4 million cost of the Global Crossing warrants was written
back in the fiscal year ended December 31, 2000, following cancellation of the
warrants.

   There is a $5.2 million charge for impairment of goodwill in 2000 as we do
not anticipate any future cash flows from TGA (UK) Limited, which has now
essentially ceased trading in its own right, or from our joint ventures in
Africa. There was no corresponding charge in 1999.

   Reserve for doubtful debts increased 133% to $2.1 million for 2000 compared
to $0.9 million for 1999. The higher provision relates mainly to one customer
against which legal action is being pursued to seek to recover the sums owing.

   There was no charge for reserve for inventory in 2000 compared with the
$40.7 million charge in 1999 which arose from the severe decline in market
prices during that year.

   Interest income increased to $0.9 million for 2000 compared to $0.6 million
for 1999 mainly arising from interest earned from customers.

   Interest expense increased to $1.8 million for 2000 compared to $1.3 million
for 1999, in line with higher average borrowings.

   Share of loss of associate increased to $0.4 million for 2000 from nil in
1999. These losses relate to the start up costs of DeserTel prior to our
obtaining a controlling interest in April 2000.

   Foreign exchange gains of $0.5 million resulted from the strength of the US
dollar against other currencies during the year.

   The gain on restructuring of debt of $17.6 million in 2000 arises from the
renegotiations of a contract with a bandwidth supplier.

   The loss for the year decreased to $2.6 million for 2000 compared to $61.1
million for 1999. The decrease in the net loss arises principally from the
increased sales, the prior year inventory reserve and the gain on debt
restructuring.

Liquidity and Capital Resources

   Our liquidity requirements arise from:

  .   Net cash used in operating activities.

  .   Interest and principal payments on outstanding indebtedness.

                                      13

<PAGE>

   We have satisfied our liquidity requirements to date through operating cash
flows, short-term bridge financing, shareholder loans and equity subscriptions.
Our illiquidity remains a key challenge facing the business. The Board believes
that it is in the best interests of all stakeholders for us to continue to
trade in order to be able to repay debt. The Board has been meeting regularly
to review this position. We are in discussion with most creditors in an effort
to reduce the level of our indebtedness. Without the continued forbearance of
its creditors, one or more of the operating subsidiaries may be declared
insolvent, which ultimately may affect us. We believe that by being able to
continue trading, there is a greater likelihood of creditors receiving some
payment. We are actively working to ensure that no new debts are incurred.

   Net cash used in operating activities was $2.1 million in the year ended
December 31, 2001, compared with $1.4 million used in 2000.

   Net cash used in investing activities was $0.3 million in 2001 compared with
$0.8 million in 2000.

   Net cash provided by financing activities was $0.9 million in 2001 compared
with $3.5 million in 2000.

   Since inception through December 31, 2001, we have had negative cash flow
from operating activities of $20.2 million.

   Our independent auditors, Moore Stephens, have reported that there is
substantial doubt about our ability to continue as a going concern. Adjustments
have been made in the consolidated financial statements to reduce the carrying
value of assets to estimated recoverable amounts, and to reclassify
liabilities, on the basis that we may not be able to continue as a going
concern.

   The level of indebtedness has been materially increased from $62.7 million
in 2000 to $119.5 million in 2001.

   As a consequence of the significant fall of the market prices for bandwidth
and its impact on our operations and financial results in 2000 and continuing
in 2001 and the failure to generate anticipated revenue from other sources, we
have been unable to generate sufficient cash flow to meet certain of our debt
service requirements. We are continuing to negotiate relief from our creditors.

   In 1998, Telemonde Bandwidth (Bermuda) Limited agreed to acquire 16 STM-1
transatlantic IRU telecommunications circuits for an agreed price of
approximately $64.8 million from Atlantic Crossing Limited (a Global Crossing
subsidiary). As of December 2001, we owed Global Crossing $11.4 million for
circuits which we had been supplied with and related maintenance charges and
had a continuing obligation to draw-down 10 STM-1s for $42.9 million.

   In December 2000, Global Crossing released us from our outstanding
commitment to purchase $42.9 million worth of transatlantic capacity. In
addition, Global Crossing agreed to reschedule our $11.9 million debt for
services supplied but not paid for. In exchange for this release, we have
authorized and issued to Global Crossing 5 million shares of Series A
Convertible Preferred Stock, $.01 par value per share. These Preferred Shares
are convertible into 23 million of our Common Stock at an issue value of $4
million. We entered into a new commitment to purchase $8 million of services
from the Global Crossing portfolio over the next five years at the market
prices prevailing at the time of purchase. We failed to make a payment due to
Global Crossing under this Standstill Agreement, causing the Agreement to
terminate. Prior to this default, we had already commenced renegotiations with
Global Crossing. In November 2001, a conditional Settlement Agreement was
reached with Global Crossing. The circuits with which we had been supplied were
ceased and the contract with a customer who had purchased an IRU from us was
transferred to Global Crossing. Global Crossing agreed that if we were able to
pay or provide value in the amount of (Pounds)1,050,000 by December 31, 2001,
it would release us from all our remaining liabilities. We had reached
agreement in principle with a third party to provide this value. For
administrative reasons, this condition was not fulfilled by December 31,
however Global Crossing management indicated that they would stand by the
offer. Detailed negotiations concerning how the value would be provided between
the third party and Global Crossing were in progress when Global Crossing sought

                                      14

<PAGE>

Chapter 11 protection in the US Courts which meant that Global Crossing was
unable to conclude this transaction with the third party. We anticipate that
this transaction will be completed during Global Crossing's administration or
soon after it exits from it and Global Crossing will then release us from our
liabilities. Nevertheless, because of the uncertainty, we have treated the
standstill agreement as having terminated and written back the original
purchase commitment, including interest. No value has been attributed to the
issuance of the Preferred Shares. If the settlement is achieved, this would
reduce the total liabilities and total stockholder's liabilities by $61.8
million.

   In December 1998 and March 1999 (through wholly-owned subsidiaries) we
entered into agreements for the purchase of five STM-1 transatlantic IRU
telecommunications circuits from WorldCom. We did not activate four of these
circuits resulting in a default of $26.3 million.

   Since December 1999, WorldCom has not taken proceedings in respect of the
outstanding liability pursuant to the terms of a standstill letter (as
amended). Pursuant to the standstill letter, in September 2000, WorldCom
released us from $9 million of our liability in exchange for 15,766,792 shares
of our common stock. Our current liability is $17.8 million. The standstill
arrangements have expired. Management had intended to seek to renegotiate a
standstill in light of the settlement of the Global Crossing liability. This
remains management's intention.

   We have a debt obligation under a Capacity Option Agreement with
Communications Collateral Limited (CCL) under which we have been unable to
complete an agreed repurchase of capacity. Under the terms of a Forbearance
Agreement entered into in February 2000, as at December 31, 2002 our
outstanding debt to CCL was $2.9 million. Interest is accruing on the
outstanding amount at the rate of 12.5% per annum. Under a Registration Rights
Agreement dated September 1, 1999 and under the Forbearance Agreement we have
an obligation to issue CCL 8.2 million shares which shares relate to penalty
obligations for failure to register CCL's shares for public resale prior to
February 15, 2000. There is also a penalty payment due of $2 million due for
failure to issue these as free trading shares although we are in discussions
with CCL regarding the waiving of this penalty.

   We have a debt obligation under a Capacity Purchase Agreement to Gemini. As
at December 31, 2001, the outstanding debt was $2.1 million. As at December 31,
2001, we had paid Gemini $1.1 million, of which $0.6 million had reduced the
original principal sum. Interest is accruing at LIBOR plus 3%. Gemini have now
ceased the circuits supplied and taken them back.

   We have a debt liability to the Inland Revenue, the collector of payroll
taxes in the United Kingdom in the amount of $2.2 million. Management is in
discussion with the Inland Revenue regarding this debt. The Inland Revenue may
take steps to recover this debt in the event that it is not settled or a
settlement reached. This is likely to have a material effect on one or more of
our UK operating subsidiaries which could materially affect our ability to
continue to trade.

   We entered into a convertible loan facility with Home Run Limited on April
27, 2000. Home Run provided us with a facility of $7.3 million. This sum is
repayable on April 27, 2001, however it may be converted at the option of Home
Run into shares of Common Stock on the basis of one share of Common Stock for
every $0.16 of loan value outstanding. We are discussing with Home Run the
extension of this facility and they have indicated that they are willing to
agree to such an extension.

   At December 31, 2001 we had no material capital commitments.

   We currently do not have the capital base or working capital facilities to
meet our projected commitments. We are currently seeking short-term debt
finance.

   The Board of Telemonde is concerned about our illiquidity and general
financial position. The Board is meeting regularly to keep the position under
review. The Board has not taken the decision to cease trading, as it believes
that on balance the stakeholders in the business, including our creditors and
shareholders, are likely to be better served if we continue trading.

                                      15

<PAGE>

   There is substantial doubt about our ability to continue as a going concern.
Management is addressing the ongoing solvency issues facing the company by
cutting costs, seeking fresh financing and focussing on the provision of
high-margin advisory services to the telecommunications sector. We have reduced
our cost base by substantially reducing the number of employees, closing our
subsidiary, telemonde.net in Switzerland and by agreed reductions in pay to
certain employees. The operations of EquiTel and Telemonde Networks Limited
have been merged with effect from December 31, 2001 to assist in this
reduction. All senior management have been served with notice of termination of
employment. Once these notices expire, in June 2002 or December 2002, as
relevant, certain management may be re-employed on a rolling monthly basis on a
case-by-case basis dependent on the prevailing circumstances and requirements
at that time.

Critical Accounting Policies

   Our significant accounting policies are described in Note 2 to the
consolidated financial statements included in Item 8 of this Form 10-K. We
believe some of our most critical accounting policies include:

  .   revenue recognition

  .   impairment of long lived assets

Revenue Recognition

   Bandwidth customers of the Company entered into either (1) operating lease
agreements, or (2) capacity sales agreements.

   The operating lease agreements granted the customer a right to use fiber
optic cable capacity for periods of time which are substantially less than the
design life of the capacity. Revenue is recognised on a straight line basis
over the life of the lease.

   The capacity sales agreements granted the customer an indefeasible right of
use in units of fiber optic cable capacity. In accordance with the provisions
of Financial Accounting Standards Board Interpretation No. 43 ("FIN43"), the
capacity sales agreements were bifurcated into an equipment portion and a real
estate portion. The real estate portion was classified as an operating lease.
Revenues were recognised on a straight line basis over the life of the
agreement. The equipment portion of a capacity sales agreement was classified
as a direct financing sub lease, as defined by Statement of Financial
Accounting Standards ("SFAS") 13. Under the terms of substantially all capacity
sales agreements, the purchase price was due in full when the capacity was
ready for service. In such cases, revenue attributable to the equipment portion
was recognised when the capacity was ready for service. If the purchase price
was payable on deferred terms, revenues were deferred and amortised to the
income statement so as to produce a constant periodic rate of return on the net
investment in the equipment portion of the capacity sales agreement. Customers
who entered into capacity sales agreements paid deposits toward the purchase
price and such amounts were included as deferred revenue in the consolidated
balance sheet. Maintenance revenues due under capacity sales agreements are
recognised in the year when services are rendered.

   Telecommunications traffic revenues are recognised in the year when the
traffic is transmitted. Telephone card service income earned by Desert
Telecommunication Services LLC, was initially deferred then recognised rateably
over the period of the card. Route management service income earned is
recognised rateably over the period when services are rendered.

   Advisory services revenues are recognised in the period that the service is
rendered.

Impairment of long lived assets

   For the purposes of the consolidated statements of cash flows, demand and
time deposits with original maturities of three months or less are considered
equivalent to cash.

Recent Events and Transactions

   With effect from October 3, 2001, Mr Mark Hollo resigned as Director. Mr
Hollo confirmed that he had not resigned his Directorship because of any
disagreement with Telemonde Inc or his fellow directors or any matter relating
to Telemonde Inc's operations, policies or practices.

                                      16

<PAGE>

   On December 31, 2001, Mr Bradford W. Harris resigned as Director. Mr Harries
confirmed that he had not resigned his Directorship because of any disagreement
with Telemonde Inc or his fellow directors or any matter relating to Telemonde
Inc's operations, policies or practices.

   On December 31, 2001, we concluded a settlement agreement with Ebone
Broadband Services Limited. Under agreements with Ebone we had a liability,
actual and continguent of $4.2 million. To settle the liability, we negotiated
with Europe Online Networks, our customer who was using the circuit to which
the principal liability related, to take service directly from Ebone. Telemonde
also provided a reducing guarantee for three years that Europe Online Networks
would make payments to Ebone.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

   Our primary market risk exposures relate to changes in foreign currency
rates. We are exposed to the risk of fluctuations in foreign currency exchange
rates due to the international nature and scope of our operations. In the
future, we expect to continue to derive a significant portion of our net
revenue and incur a significant portion of our operating costs outside the
United States, and changes in foreign currency exchange rates may have a
significant effect on our results of operations. We historically have not
engaged in hedging transactions to mitigate foreign exchange risk.

   Our main exchange risk currently arises from fluctuations between the US
dollar and pounds sterling. Our revenue from bandwidth sales is in US dollars.
Although capacity purchases are also made in dollars, our sales, general and
administrative costs are mostly incurred in pounds sterling because most of our
employees are based in our executive and administrative offices in London,
England.

Item 8.  Financial Statements And Supplementary Data

   The Report of Independent Accountants, Consolidated Financial Statements and
supplemental financial data required by this Item 8 are set forth on pages F-1
through F-18 of this Report and are incorporated herein by reference.

Item 9.  Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure

   None.

                                   PART III

Item 10.  Directors And Executive Officers Of The Registrant

   Information relating to our directors and executive officers will be
contained in a definitive Proxy Statement involving the election of directors
that we will file with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934 not later than 120
days after December 31, 2001, and such information is incorporated herein by
reference.

Item 11.  Executive Compensation

   Information relating to executive compensation will be contained in the
Proxy Statement referred to above in Item 10, "Directors and Executive Officers
of the Registrant," and such information is incorporated herein by reference.

Item 12.  Security Ownership Of Certain Beneficial Owners And Management

   Information relating to security ownership of certain beneficial owners and
management will be contained in the Proxy Statement referred to in Item 10,
"Directors and Executive Officers of the Registrant," and such information is
incorporated herein by reference.

                                      17

<PAGE>

Item 13.  Certain Relationships And Related Transactions

   Information relating to certain relationships and related transactions will
be contained in the Proxy Statement referred to in Item 10, "Directors and
Executive Officers of the Registrant," and such information is incorporated
herein by reference.

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules, And Reports On Form 10-K

   (a)  Financial Statements

<TABLE>
<S>                                                                                      <C>
Consolidated Balance Sheet at December 31, 2001, 2000 and 1999..........................      F-3
Consolidated Statement of Income for the years ended December 31, 2001, 2000 and 1999...      F-4
Statement of Stockholders' Equity for the year ended December 31, 2001, 2000 and 1999...      F-5
Consolidated Statement of Cash Flows for the year ended December 31, 2001, 2000 and 1999      F-6
Notes to Consolidated Financial Statements.............................................. F-7-F-18
</TABLE>

   (c)  Exhibits

<TABLE>
<CAPTION>
Exhibit No.                                          Description
-----------                                          -----------
<C>         <S>

 2.1*       Stock Purchase Agreement among Pac-Rim Consulting, Inc., Thomas Gelfand, Telemonde
            Investments Limited, and Rhone Financial Indemnity Re Limited, dated as of May 14, 1999.

 2.2*       Agreement Relating to the sale and Purchase of Shares in the Capital of EquiTel Communications
            Limited among (1) Telcoworld Limited and others, (2) Telemonde, Inc., and (3) Harry Pomeroy
            and Larry Trachtenberg, dated November 8, 1999.

 2.3*       Agreement and Plan of Merger of Telemonde, Inc., a Nevada corporation, into Telemonde, Inc., a
            Delaware corporation, dated October 29, 1999.

 2.4*       Share Purchase Agreement for the Sale and Purchase of all the issued share capital of TGA (UK)
            Limited, between the shareholders of TGA (UK) and Telemonde, Inc., dated August 9, 1999.

 3.1(a)*    Certificate of Incorporation of Telemonde, Inc., filed June 29, 1999.

 3.1(b)*    Certificate of Merger between Telemonde, Inc., a Nevada corporation, and Telemonde, Inc., a
            Delaware corporation.

 3.1(c)++   Certificate of Designation for Series A Convertible Preferred Stock, $.01 par value.

 3.2*       By-Laws of Telemonde, Inc.

 4.1*       Form of Common Stock Certificate.

 4.2*       Registration Rights Agreement between Telemonde, Inc. and Communications Collateral Limited,
            dated September 1, 1999.

 4.3++      Amended and Restated Registration Rights Agreement, dated as of December 14, 2000, among
            Telemonde, Inc., MCI WorldCom Global Networks U.S. Inc., MCI WorldCom Global Networks
            Limited, and Global Crossing Limited.

 10.1*      Warrant from Telemonde, Inc. to Communications Collateral Limited, dated September 1, 1999.

 10.2*      Consulting Agreement between Telemonde, Inc. and Gottfried von Bismarck, dated November 2,
            1999 and effective as of July 1, 1999.
</TABLE>

                                      18

<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                                        Description
-----------                                        -----------
<C>          <S>

10.3*        Form of Employment Agreement between Executive Officers and Telemonde.

10.3(a)*     Schedule of Employees covered by Form of Employment Agreement.

10.4*        Capacity Sales Agreement between Gemini Submarine Cable System Limited and Telemonde
             International Bandwidth (Bermuda) Limited, April 3, 1998.

10.4(a)*     Promissory Note from Telemonde, Inc. to Gemini Submarine Cable System Limited, dated
             August 27, 1999 for $1,300,000.

10.4(b)*     Promissory Note from Telemonde, Inc. to Gemini Submarine Cable System Limited, dated
             August 27, 1999 for $1,400,000.

10.4(c)+     Letter Agreement, dated October 27, 2000, from Gemini Submarine Cable System Limited to
             Telemonde International Bandwidth (Bermuda) Limited.

10.5*        Capacity Purchase Agreement between Atlantic Crossing Ltd. And Telemonde Bandwidth
             (Bermuda) Limited, dated June 10, 1998.

10.6*        Transmission Capacity Agreement among MCI WorldCom Global Networks U.S., Inc., and
             MFS Cableco (Bermuda) Limited, and, EquiTel Bandwidth Limited, dated December 1998.

10.7*        Transmission Capacity Agreement among MCI WorldCom Global Networks U.S., Inc., and
             MCI Worldcom Global Networks Limited, and Telemonde International Bandwidth Limited,
             dated March 31, 1999.

10.7(a)**    MCI WorldCom Global Networks U.S., Inc. Standstill Letter to and accepted by Telemonde,
             Inc., Telemonde International Bandwidth Limited, Telemonde Networks Limited, Kevin
             Maxwell and Adam Bishop, dated December 31, 1999.

10.7(b)**    MCI WorldCom Global Networks U.S., Inc. Capacity Swap Letter to and accepted by
             Telemonde International Bandwidth Limited, dated December 31, 1999.

10.7(c)****  Amendment No. 1 to MCI WorldCom Global Networks U.S., Inc. Standstill Letter, dated
             May 11, 2000, to and accepted by Telemonde, Inc., Telemonde Networks Limited and
             Telemonde International Bandwidth Limited.

10.7(d)****  Pledge Agreement, dated May 2, 2000, by and between Fastfirm Limited and MCI WorldCom
             Global Networks U.S., Inc. on behalf of itself and MCI WorldCom Global Network Limited.

10.7(e)***** Debt Conversion Agreement, dated July 25, 2000, by and among Telemonde, Inc., MCI
             WorldCom Global Networks U.S., Inc. and MCI WorldCom Global Networks Limited.

10.7(f)***** Amendment No. 2 to MCI WorldCom Global Networks U.S., Inc. Standstill Letter, dated
             July 25, 2000, to and accepted by Telemonde, Inc., Telemonde Networks Limited, Telemonde
             International Bandwidth Limited.

10.7(g)***** Amendment No. 3 to MCI WorldCom Global Networks US., Inc. Standstill Letter, dated
             September 19, 2000, to and accepted by Telemonde, Inc., Telemonde Networks Limited,
             Telemonde International Bandwidth Limited.

10.7(h)+     Amendment No. 4 to MCI WorldCom Global Networks U.S., Inc. Standstill Letter, dated
             November 13, 2000, to and accepted by Telemonde, Inc., Telemonde Networks Limited and
             Telemonde International Bandwidth Limited.

10.8*        Transmission Capacity Agreement between Telemonde International Bandwidth Limited and
             Communications Collateral Limited and Capacity Option Agreement between Telemonde
             Investments Limited and Communications Collateral Limited, both dated April 15, 1999.
</TABLE>

                                      19

<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                                          Description
-----------                                          -----------
<C>         <S>

 10.9*      Composite Guarantee and Debenture, among (1) Telemonde Investments Limited, (2) Telemonde
            International Bandwidth (Bermuda) Limited, Telemonde Bandwidth (Bermuda) Limited,
            Telemonde International Bandwidth Limited, and (3) Communications Collateral Limited, dated
            April 5, 1999.

 10.10*     Loan Facility Agreement between Telemonde Investments Limited and Communications
            Collateral Limited, dated April 15, 1999.

 10.11**    Forbearance Agreement, dated 12 January 2000, entered into by and among Communications
            Collateral Limited, Telemonde Investments Limited, Telemonde International Bandwidth Limited,
            Telemonde, Inc. and Kevin Maxwell.

 10.12**    Advisor Agreement between Sand Brothers & Co., Ltd. and Telemonde, Inc., dated October 27,
            1999, and Amendment No. 1 to Advisor Agreement, dated November 10, 1999.

 10.13***   Executive Services Agreement by and between Telemonde, Inc. and Paul E. Donofrio, dated
            February 22, 2000.

 10.14+     Termination of Executive Services Agreement by and between Telemonde, Inc. and Paul E.
            Donofrio, dated as of October 31, 2000.

 10.15++    Standstill Agreement, dated November 30, 2000, by and among Telemonde, Inc., Telemonde
            Bandwidth (Bermuda) Ltd., Global Crossing USA Inc., GT U.K. Ltd, GT Landing Corp. and
            Atlantic Crossing Ltd.

 10.16++    Capacity Commitment Agreement, dated December 14, 2000, by and between Global Crossing
            Bandwidth Inc. and Telemonde Inc.

 21         Subsidiaries of Registrant.
</TABLE>
--------
*    Previously filed as an exhibit to the Registration Statement on Form 10,
     as filed with the SEC on November 15, 1999.
**   Previously filed as an exhibit to the Registration Statement on Form
     10/A-1, as filed with the SEC on March 3, 2000.
***  Previously filed as an exhibit to the Annual Report for the year ended
     December 31, 1999 on Form 10-K, as filed with the SEC on March 30, 2000.
****  Previously filed as an exhibit to the Company's Quarterly Report on Form
      10-Q for the fiscal quarter ended June 30, as filed with the SEC on
      August 14, 2000.
***** Previously filed as an exhibit to the Company's Current Report on Form
      8-K dated September 19, 2000, as filed with the SEC on September 21, 2000.
+    Previously filed as an exhibit to the Company's Quarterly Report on Form
     10-Q for the fiscal quarter ended September 29, 2000 as filed with the SEC
     on November 14, 2000.
++   Previously filed as an exhibit to the Company's Current Report on Form 8-K
     dated December 29, 2000, as filed with the SEC on December 29, 2000.

                                      20

<PAGE>

                                  SIGNATURES

TELEMONDE, INC.

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereto duly authorized.

                                          TELEMONDE, INC.


                                               By:      /s/  ADAM N. BISHOP
                                                   -----------------------------
                                                          Adam N. Bishop
                                                          President and Chief
                                                         Executive Officer
Date:  April 12, 2002

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

          Signature                       Title                  Date
          ---------                       -----                  ----

     /S/  KEVIN MAXWELL       Chairman and Director         April 12, 2002
-----------------------------
        Kevin Maxwell

      /S/  ADAM BISHOP        President, Chief Executive    April 12, 2002
-----------------------------   Officer, Treasurer and
         Adam Bishop            Director

    /S/  MIGUEL D. TIRADO     Director                      April 12, 2002
-----------------------------
      Miguel D. Tirado

    /S/  PAUL E. DONOFRIO     Director                      April 12, 2002
-----------------------------
      Paul E. Donofrio

                                      21

<PAGE>







                                TELEMONDE, INC.

                       CONSOLIDATED FINANCIAL STATEMENTS

                       DECEMBER 31, 2001, 2000 AND 1999

<PAGE>

                                TELEMONDE, INC.

                       INDEX TO THE FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                        <C>
Independent Auditors' Report..............................................................       F-2
Consolidated Balance Sheets as of December 31, 2001 and 2000..............................       F-3
Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999....       F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001,....
2000 and 1999.............................................................................       F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999       F-6
Notes to Consolidated Financial Statements................................................ F-7--F-18
</TABLE>

                                      F-1

<PAGE>

                         INDEPENDENT AUDITORS' REPORT

To the Stockholders of
  Telemonde, Inc.

   We have audited the accompanying consolidated balance sheets of Telemonde
Inc as of December 31, 2001 and 2000 and the related consolidated statements of
income, stockholders' equity and cash flows for the years ended December 31,
2001, 2000 and 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Telemonde Inc as of December 31, 2001 and 2000, and the consolidated results
of operations and cash flows for the years ended December 31, 2001, 2000 and
1999, in conformity with accounting principles generally accepted in the United
States.

   As discussed in note 1 to the financial statements, the Company has incurred
accumulated losses of $ 189.8 million and at December 31, 2001, total
liabilities exceeded total assets by $ 117.4 million. Management plans in this
regard are also disclosed in note 1. There is substantial doubt about the
ability of the Company to continue as a going concern. Adjustments have been
made in these consolidated financial statements to reduce the carrying value of
assets to estimated recoverable amounts, and to reclassify liabilities, on the
basis that the Company may not be able to continue as a going concern.

Moore Stephens
Chartered Accountants
St. Paul's House
London EC4P 4BN                                      April 11, 2002
United Kingdom

                                      F-2

<PAGE>

                                TELEMONDE, INC.

                          CONSOLIDATED BALANCE SHEETS
                       As at December 31, 2001 and 2000
                      (US Dollars expressed in thousands)

<TABLE>
<CAPTION>
                                                                               Note     2001       2000
                                                                               ----   ---------  --------
<S>                                                                            <C>    <C>        <C>
Assets
Cash and cash equivalents.....................................................        $      26  $  1,430
Trade accounts receivable, net of allowance for doubtful debts of $559 in 2001
  and $2,025 in 2000..........................................................              861     6,313
Prepayments and other debtors, net allowance for impairment of
  $5,400 in 2001..............................................................   7          801     9,403
                                                                                      ---------  --------
Total current assets..........................................................            1,688    17,146
Property, plant and equipment.................................................   8          194    18,113
Intangible assets.............................................................   9           --    23,618
Investment....................................................................  17(b)       180        --
                                                                                      ---------  --------
Total assets..................................................................        $   2,062  $ 58,877
                                                                                      =========  ========
Liabilities and stockholders' equity
Trade accounts payable........................................................  10    $  72,689  $ 29,025
Other creditors and accrued expenses..........................................  11       28,248    12,094
Deferred income...............................................................            5,683     3,595
Short term notes..............................................................  12       12,842    11,895
                                                                                      ---------  --------
Total current liabilities.....................................................          119,462    56,609
                                                                                      ---------  --------
Trade accounts payable non-current............................................               --     6,000
                                                                                      ---------  --------
Commitments and Contingencies.................................................               --        --
Minority interests............................................................               --        90
                                                                                      ---------  --------
Stockholders' equity
Preferred stock...............................................................  13           50        50
Common stock..................................................................  13          122       109
Additional paid in capital....................................................           72,257    71,437
Retained earnings (deficit)...................................................         (189,829)  (75,418)
                                                                                      ---------  --------
Total stockholders' deficit...................................................         (117,400)   (3,822)
                                                                                      ---------  --------
Total liabilities and stockholders' equity....................................        $   2,062  $ 58,877
                                                                                      =========  ========
</TABLE>




                See notes to consolidated financial statements


                                      F-3

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


                                TELEMONDE, INC.

                       CONSOLIDATED STATEMENTS OF INCOME

             For the years ended December 31, 2001, 2000 and 1999
         (US Dollars expressed in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                 Note   2001       2000      1999
                                                                 ---- ---------  --------  --------
<S>                                                              <C>  <C>        <C>       <C>
Revenues........................................................  15  $  20,725  $ 40,305  $  8,165
Cost of sales...................................................         20,517    29,357     6,391
                                                                      ---------  --------  --------
Gross margin....................................................            208    10,948     1,774
                                                                      ---------  --------  --------
Operating expenses
Selling, general and administrative expenses....................         10,319    16,636     9,405
Amortisation of goodwill........................................          3,846     3,681       527
Financing costs.................................................          2,050     2,653    10,591
Impairment of goodwill..........................................         19,697     5,249        --
Impairment of property, plant and equipment.....................         14,707        --        --
Impairment of investments.......................................          2,129        --        --
Reserve for doubtful debts......................................          5,959     2,055       923
Reserve for inventory...........................................             --        --    40,690
Contract terminations and penalties.............................         46,637        --        --
                                                                      ---------  --------  --------
Operating expenses..............................................        105,344    30,274    62,136
                                                                      ---------  --------  --------
Operating loss..................................................       (105,136)  (19,326)  (60,362)
                                                                      ---------  --------  --------
Other income (expense)
Interest income.................................................            193       885       582
Interest expense................................................         (9,513)   (1,786)   (1,337)
Share of loss of associate......................................             --      (400)       --
Foreign exchange gains..........................................             33       508        --
                                                                      ---------  --------  --------
Total other expense.............................................         (9,287)     (793)     (755)
                                                                      ---------  --------  --------
Loss before minority interests and extraordinary item...........       (114,423)  (20,119)  (61,117)
Minority interests..............................................             12       (74)       --
                                                                      ---------  --------  --------
Loss before extraordinary item..................................       (114,411)  (20,193)  (61,117)
Extraordinary item--Gain on restructuring of debt (no applicable
  income taxes).................................................   4         --    17,624        --
                                                                      ---------  --------  --------
Loss for the year...............................................      $(114,411) $ (2,569) $(61,117)
                                                                      =========  ========  ========
Loss per share before extraordinary item--basic and diluted.....      $   (0.97) $  (0.22) $  (1.22)
                                                                      =========  ========  ========
Loss per share--basic and diluted...............................   6  $   (0.97) $  (0.03) $  (1.22)
                                                                      =========  ========  ========
</TABLE>

                See notes to consolidated financial statements


                                      F-4

<PAGE>

                                TELEMONDE, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

             For the years ended December 31, 2001, 2000 and 1999
                      (US Dollars expressed in thousands)

<TABLE>
<CAPTION>
                                                                      Additional
                                                     Preferred Common  Paid in   Retained
                                                       Stock   Stock   Capital   Earnings     Total
                                                     --------- ------ ---------- ---------  ---------
<S>                                                  <C>       <C>    <C>        <C>        <C>
At January 1, 1999..................................    $--     $ 30   $    --   $ (11,732) $ (11,702)
Net loss............................................     --       --        --     (61,117)   (61,117)
Common stock issued.................................     --       43    16,244          --     16,287
Stock issued to acquire subsidiaries and investments     --       --    23,530          --     23,530
Financing costs satisfied by issuance of warrants...     --       --     8,976          --      8,976
Fees satisfied by issuance of stock.................     --       --       404          --        404
                                                        ---     ----   -------   ---------  ---------
At December 31, 1999................................     --       73    49,154     (72,849)   (23,622)
Net loss............................................     --       --        --      (2,569)    (2,569)
Preferred stock issued..............................     50       --     3,975          --      4,025
Common stock issued.................................     --       34     6,133          --      6,167
Common stock cancelled..............................     --       --      (300)         --       (300)
Stock issued to acquire subsidiaries and investments     --        2     2,835          --      2,837
Fees satisfied by issuance of stock.................     --       --     9,640          --      9,640
                                                        ---     ----   -------   ---------  ---------
At December 31, 2000................................    $50     $109   $71,437   $ (75,418) $  (3,822)
Net loss............................................     --       --        --    (114,411)  (114,411)
Stock issued as deferred consideration to acquire
  subsidiaries......................................     --       12     1,619          --      1,631
Common stock cancelled..............................     --       --      (912)         --       (912)
Fees satisfied by issuance of stock.................     --       --        69          --         69
Common stock issued to non Executive directors......     --        1        44          --         45
                                                        ---     ----   -------   ---------  ---------
At December 31, 2001................................    $50     $122   $72,257   $(189,829) $(117,400)
                                                        ===     ====   =======   =========  =========
</TABLE>


                See notes to consolidated financial statements

                                      F-5

<PAGE>

                                TELEMONDE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

             For the years ended December 31, 2001, 2000 and 1999
                      (US Dollars expressed in thousands)

<TABLE>
<CAPTION>
                                                                                2001       2000      1999
                                                                              ---------  --------  --------
<S>                                                                           <C>        <C>       <C>
Operating activities
Net Loss                                                                      $(114,411) $ (2,569) $(61,117)
Adjustments to reconcile net loss to net cash provided by (used in) operating
  activities:
 Reserve for doubtful debts..................................................       559     2,055       923
 Reserve for inventory.......................................................        --        --    40,690
 Amortisation of goodwill....................................................     3,846     3,681       527
 Financing costs satisfied by issuance of warrants...........................        --     1,548     8,976
 Depreciation................................................................     2,396     2,760       590
 Fees satisfied by issuance of stock.........................................       114     3,524       404
 Common stock cancelled......................................................      (912)       --        --
 Extraordinary gain on restructuring of debt.................................        --   (17,624)       --
 Impairment of goodwill......................................................    19,697     5,249        --
 Impairment of property, plant and equipment.................................    14,707        --        --
 Adjustment for real estate element..........................................       826        --        --
 Impairment of investments...................................................       168        --        --
 Stock issued as deferred consideration......................................     1,631        --        --
 Minority interests..........................................................       (90)       74        --
 (Increase) decrease in trade accounts receivable............................     4,893     2,804     3,792
 (Increase) decrease in prepayments & other debtors..........................     8,602    (6,816)   (1,120)
 (Increase) decrease in inventory............................................        --        --    (3,865)
 Increase (decrease) in trade accounts payable...............................    37,664    (4,398)    8,680
 Increase (decrease) in accrued expenses.....................................    16,154     7,414   (16,920)
 Increase (decrease) in deferred income......................................    (2,088)      938      (943)
                                                                              ---------  --------  --------
Net cash provided by (used in) operating activities..........................    (2,068)   (1,360)  (19,383)
                                                                              ---------  --------  --------
Investing activities
Pre-acquisition advances to subsidiary.......................................        --        --    (6,014)
Purchases of investments.....................................................      (273)       --        --
Purchase of property, plant and equipment....................................       (10)     (921)   (1,330)
Cash acquired in acquisitions................................................        --       170         6
                                                                              ---------  --------  --------
Net cash provided by (used in) investing activities..........................      (283)     (751)   (7,338)
                                                                              ---------  --------  --------
Financing activities
Proceeds from short and long-term debt.......................................     1,168     7,660    10,941
Repayment of short and long term debt........................................      (221)   (4,182)   (3,100)
Issuance of stock............................................................        --         1    16,287
                                                                              ---------  --------  --------
Net cash provided by (used in) financing activities..........................       947     3,479    24,128
                                                                              ---------  --------  --------
Net increase (decrease) in cash and cash equivalents.........................    (1,404)    1,368    (2,593)
Cash and cash equivalents beginning of period................................     1,430        62     2,655
                                                                              ---------  --------  --------
Cash and cash equivalents end of period...................................... $      26  $  1,430  $     62
                                                                              =========  ========  ========
Supplemental disclosure of cash flow information:
Interest paid................................................................ $       5  $    950  $    844
                                                                              =========  ========  ========
</TABLE>


                See notes to consolidated financial statements

                                      F-6

<PAGE>

                                TELEMONDE, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


1.  Business, organisation and liquidity

   Telemonde, Inc. and its subsidiaries (the "Company") is a telecommunications
carrier and service company, providing a range of bandwidth, voice, emerging
markets, internet and advisory services to the global telecommunications
industry.

   The Company has incurred accumulated losses of $ 189,829 and as at December
31, 2001 its total liabilities exceeded its total assets by $ 117,400. As a
result of the losses, and continuing uncertainties in the global
telecommunications industry, there is substantial doubt about the ability of
the Company to continue as a going concern. As more fully explained in note 19,
the Company has defaulted on the terms of payment of amounts due its principal
suppliers and the Inland Revenue. The Company's creditors may seek to use their
powers to force the Company or its subsidiaries to enter bankruptcy
proceedings. A supplier has applied to the United Kingdom Courts for the
compulsory winding up of Metrolinx Limited, a subsidiary of Telemonde Inc. The
Company has been actively negotiating with its creditors to restructure its
liabilities and provide more favourable payment terms. It is proposed to
withdraw from the bandwidth market, and negotiate an exit from long-term supply
contracts. The Company will focus on high margin advisory services and voice
services.

   The Company has reviewed the recoverability and classification of recorded
assets, and the amounts and classification of liabilities, in order to reflect
the fact that the Company may not be able to continue as a going concern.
Adjustments have been made in these consolidated financial statements to reduce
the carrying value of assets to estimated recoverable amounts, and to
reclassify liabilities, on the basis that the Company may not be able to
continue as a going concern.

2.  Accounting policies

   The following are the significant accounting policies adopted by the Company:

   (a) Basis of accounting

   The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.

   The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.

   Actual results could differ from those estimates. In 2001 assets are
presented at their estimated recoverable amounts.

   Estimates are used when accounting for allowance for doubtful debts, fair
value adjustments to inventory, goodwill, accrued line costs and contingencies.

   (b) Consolidation

   The consolidated financial statements incorporate the assets and liabilities
of the Company and its wholly-owned or majority controlled subsidiaries. All
intercompany balances and transactions have been eliminated upon consolidation.
Minority interest in the results of operations and share of net assets is
recognised unless the relevant subsidiary has a net asset deficit and there is
no binding obligation on the minority to make good the deficit.

                                      F-7

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


   (c) Revenues

   Bandwidth customers of the Company entered into either (1) operating lease
agreements, or (2) capacity sales agreements.

   The operating lease agreements granted the customer a right to use fiber
optic cable capacity for periods of time which are substantially less than the
design life of the capacity. Revenue is recognised on a straight line basis
over the life of the lease.

   The capacity sales agreements granted the customer an indefeasible right of
use in units of fiber optic cable capacity. In accordance with the provisions
of Financial Accounting Standards Board Interpretation No. 43 ("FIN43"), the
capacity sales agreements were bifurcated into an equipment portion and a real
estate portion. The real estate portion was classified as an operating lease.
Revenues were recognised on a straight line basis over the life of the
agreement. The equipment portion of a capacity sales agreement was classified
as a direct financing sub lease, as defined by Statement of Financial
Accounting Standards ("SFAS") 13. Under the terms of substantially all capacity
sales agreements, the purchase price was due in full when the capacity was
ready for service. In such cases, revenue attributable to the equipment portion
was recognised when the capacity was ready for service. If the purchase price
was payable on deferred terms, revenues were deferred and amortised to the
income statement so as to produce a constant periodic rate of return on the net
investment in the equipment portion of the capacity sales agreement. Customers
who entered into capacity sales agreements paid deposits toward the purchase
price and such amounts were included as deferred revenue in the consolidated
balance sheet. Maintenance revenues due under capacity sales agreements are
recognised in the year when services are rendered.

   Telecommunications traffic revenues are recognised in the year when the
traffic is transmitted. Telephone card service income earned by Desert
Telecommunication Services LLC, was initially deferred then recognised rateably
over the period of the card. Route management service income earned is
recognised rateably over the period when services are rendered.

   Advisory services revenues are recognised in the period that the service is
rendered.

   (d) Cost of Sales

   The Company entered into agreements with its bandwidth suppliers which took
the form of either (1) operating lease agreements, or (2) capacity purchase
agreements.

   The operating lease agreements granted the Company a right to use fiber
optic cable capacity for periods of time which were substantially less than the
design life of the capacity. Operating lease costs were recognised on a
straight line basis over the life of the lease.

   The capacity purchase agreements granted the Company an indefeasible right
of use in units of fiber optic cable capacity. In accordance with the
provisions of FIN43, the capacity purchase agreements were bifurcated into an
equipment portion and a real estate portion. The real estate portion was
classified as an operating lease. Operating lease costs were recognised on a
straight line basis over the life of the agreement. The equipment portion of a
capacity purchase agreement was classified as a capital lease, as defined by
SFAS 13. Capacity acquired under capital leases was initially recorded as an
obligation at an amount equal to the present value at the beginning of the
lease term of minimum lease payments during the lease term.

                                      F-8

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


   (e) Fair value of financial instruments

   The carrying amounts for cash, cash equivalents, accounts receivable,
accounts payable, accrued liabilities and short term notes approximate their
fair value.

   (f) Cash and cash equivalents

   For the purposes of the consolidated statements of cash flows, demand and
time deposits with original maturities of three months or less are considered
equivalent to cash.

   (g) Property, plant and equipment

   The Company's fiber optic cable network acquired under capital leases was
initially recorded as an asset and an obligation at an amount equal to the
present value at the beginning of the lease term of the minimum lease payments
during the lease term. Thereafter it was depreciated on a straight line basis
over the estimated useful life of 10 years from the date of being brought into
use. Telecommunications and office equipment is depreciated on a straight line
basis over 4 years. See Note 1.

   (h) Goodwill

   Goodwill arising on the acquisition of subsidiaries is capitalised and
amortised on a straight line basis over its estimated useful life, taken to be
10 years from the date of acquisition.

   (i) Intangible assets

   Intangible assets other than goodwill are recorded at cost and amortised on
a straight line basis over their estimated useful lives, taken to be 5 years
from the date of acquisition.

   (j) Impairment of long-lived assets

   As prescribed by SFAS 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed of", the Company assesses the
recoverability of its long-lived assets (including goodwill) by determining
whether the asset balance can be recovered over the remaining depreciation or
amortisation period through projected undiscounted future cash flows. Cash flow
projections, although subject to a degree of uncertainty, are based on trends
of historical performance and management's estimate of future performance,
giving consideration to existing and anticipated competitive and economic
conditions.

   (k) Investments in joint ventures

   Investments in joint ventures are accounted for under the equity method,
whereby the Company recognises its share of profits and losses reported by the
joint venture. In cases where the Company's funding commitments are uncertain,
full provision is made for 100% of losses reported by joint ventures.

   (l) Financing costs

   The costs associated with short and long term debt are amortised over the
life of the related debt on a straight line basis.

                                      F-9

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


   (m) Foreign currencies

   The Company's functional currency is the US Dollar as the majority of
revenues are received in US Dollars and the majority of operating expenditures
are made in US Dollars. Transactions in foreign currencies are translated into
US Dollars at the rates of exchange in effect at the date of transaction.
Foreign currency monetary assets and liabilities are translated using rates of
exchange at the balance sheet date.

   (n) Concentrations of credit risk

   Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of cash and accounts
receivable. The Company is exposed to concentrations of credit risk from
accounts receivable to the extent that it has a limited number of customers,
all of which operate in the telecommunications sector. The Company performs
on-going evaluations of its customers' financial condition.

   The Company maintains its cash balances at financial institutions which do
not provide insurance on amounts under deposit arrangements. The Company has
not experienced any losses in such accounts and believes it is not exposed to
any significant credit risk on cash.

   (o) Reclassifications

   Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.

3.  Adoption of new accounting standards

   On January 1, 2001, the Company adopted SFAS 133 "Accounting for Derivative
Instruments and Hedging Activities", as amended, which establishes the
accounting and reporting standards for derivative instruments and hedging
activities. The adoption of the standard did not have a material effect on the
Company's consolidated financial statements.

   In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
141 "Business Combinations". This standard prohibits the use of the pooling of
interests method for all business combinations initiated after June 30, 2001.
The adoption of SFAS 141 did not have a material effect on the Company's
consolidated financial statements.

   In July 2001, the FASB issued SFAS 142 "Goodwill and Other Intangible
Assets". Under this standard, goodwill is no longer amortized but reviewed for
impairment at least annually. The standard also provides guidance on the
accounting for other intangible assets. An acquired intangible asset (other
than goodwill) with an indefinite useful life should not be amortized until its
useful economic life is determined to be finite. These assets should be tested
for impairment at least annually. An acquired intangible asset (other than
goodwill) with a limited useful life should be amortized over its useful
economic life and reviewed for impairment in accordance with SFAS 121. The
effective date of SFAS 142 is for fiscal years beginning after December 15,
2001. Goodwill and other intangible assets acquired after June 30, 2001 were
immediately subject to the nonamortization and amortization provisions of the
standard. SFAS 142 will be adopted in full on January 1, 2002. Application of
the standard would not have affected net income in the year ended December 31,
2001. Amortization of goodwill would have been reduced by $3,846 to nil, and
impairment of goodwill would have increased by the same amount.

                                     F-10

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


   In October 2001, the FASB issued SFAS 144 "Accounting for the Impairment or
Disposal of Long Lived Assets". This standard supersedes SFAS 121 but retains
the basic requirements regarding when to recognize and how to measure an
impairment loss. SFAS 144 applies to long lived assets but specifically
excludes goodwill and intangible assets not being amortized. Adoption of SFAS
144 is required for fiscal years beginning after December 15, 2001. SFAS 144
will be adopted on January 1, 2002. The adoption of SFAs 144 is not expected to
have a material effect on the Company's consolidated financial statements.

4.  Extraordinary item

   Under terms of the standstill agreement dated December 4, 2000 with Global
Crossing, the Company extinguished liabilities and cancelled bandwidth
contracts valued at $55,025 and $21,465, respectively, in exchange for a note
payable totalling $11,911 and 5,000,000 shares of the Company's convertible
preferred stock.The estimated fair value of 5,000,000 shares of preferred stock
was $4,025, resulting in an extraordinary gain on restructuring of debt of
$17,624. The effect of the extraordinary gain on restructuring of debt on net
loss per share amounted to $0.19 per share.

5.  Taxation

   The Company has incurred operating losses. In the event that the Company
generates taxable earnings in the future, operating losses incurred in 2001,
2000 and 1999 would not necessarily be applied against future taxable earnings.
Accordingly, no tax provisions or deferred tax benefit was recorded in 2001,
2000 or 1999.

6.  Loss per share

   The calculation of basic earnings per share is as follows:

<TABLE>
<CAPTION>
                                                 2001         2000        1999
                                             ------------  ----------  -----------
<S>                                          <C>           <C>         <C>
Loss attributable to common stockholders.... $   (114,411) $   (2,569) $   (61,117)
Average common shares issued and outstanding  118,179,845   90,858,46   50,186,654
                                             ------------  ----------  -----------
Basic and diluted loss per share............ $      (0.97) $    (0.03) $     (1.22)
                                             ============  ==========  ===========
</TABLE>

   No adjustment to earnings per share arises on the issue of warrants as the
effect is antidilutive.

7.  Prepayments and other debtors


<TABLE>
<CAPTION>
                                                         2001 2000
                                                         ---- -----
            <S>                                          <C>  <C>
            Prepaid traffic, bandwidth and network costs 522  7,543
            Other....................................... 279  1,860
                                                         ---  -----
            Total....................................... 801  9,403
                                                         ===  =====
</TABLE>

                                     F-11

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


8.  Property, plant and equipment


<TABLE>
<CAPTION>
                                                                                2001      2000
                                                                            ------------ ------
                                                                            (See Note 1)
<S>                                                                         <C>          <C>
Fiber optic network, net of accumulated depreciation of $759 in 2000.......      --       5,783
Undrawn capacity, net of accumulated depreciation of $1,315 in 2000........      --      10,520
Telecommunications equipment, net of accumulated depreciation of $1,521 in
  2001 and $1,182 in 2000..................................................     149       1,701
Office equipment, net of accumulated depreciation of $77 in 2001 and $94 in
  2000.....................................................................      45         109
                                                                                ---      ------
                                                                                194      18,113
                                                                                ===      ======
</TABLE>

   Depreciation expense amounted to $ 2,396, $2,760 and $590 for the years
ended December 31, 2001, 2000 and 1999, respectively.

9.  Intangible assets

<TABLE>
<CAPTION>
                                                                  2001  2000
                                                                  ---- ------
   <S>                                                            <C>  <C>
   Goodwill, net of accumulated amortization of $3,074 in 2000...  --  19,908
   Customer base, net of accumulated amortization of $774 in 2000  --   3,018
   Employees, net of accumulated amortisation of $182 in 2000....  --     692
                                                                   --  ------
                                                                   --  23,618
                                                                   ==  ======
</TABLE>

   Goodwill and other intangible assets related to the Company's investments in
Equitel Communications Limited were written off to loss on impairment of
goodwill during the year ended December 31, 2001, resulting in an impairment
loss of $ 19,697. Impairment is assessed based on the fair values of the
assets. Fair values are estimated using discounted future cash flows based on
current market interest rates. As the Company does not anticipate future cash
flows from Equitel Communications Limited, following a decline in its markets
and the termination of contracts in Oman, the carrying value of related
goodwill has been reduced to nil.
   Goodwill related to the Company's investment in TGA (UK) Limited and
investments in joint ventures in Africa, arising upon acquisition of Equitel
Communications Limited, were written off to loss as impairment of goodwill
during the year ended December 31, 2000, resulting in a loss of $5,249.

10.  Trade accounts payable

   Included in trade accounts payable is an amount due to Gemini Submarine
Cable System Limited ("Gemini") in the form of two promissory notes executed in
August 1999, as more fully discussed in Note 19. Interest accrues on the
outstanding balance at a rate of 3% over LIBOR. The outstanding debt is secured
by the capacity. The balance of accounts payable due to Gemini under these
promissory notes amounted to $2,139 and $1,825 as of December 31, 2001 and
2000, respectively. Accrued interest of $ Nil and $365 as of December 31, 2001
and 2000, respectively is included in other creditors and accrued expenses.

   Included in trade accounts payable is an amount due to WorldCom in
connection with capacity purchase agreements entered into in December 1998 and
March 1999, as more fully described in Note 19. The balance due to WorldCom
under these capacity purchase agreements amounted to $ 17,300 and $17,300 as of
December 31, 2001 and 2000 respectively.

                                     F-12

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


   Included in trade accounts payable is an amount due to Global Crossing in
connection with a capacity purchase agreement entered into in June, 1998,
backhaul agreements entered into in December 1998, and a capacity commitment
agreement entered into in December 2000, as more fully described in Note 19.
The balance due to Global Crossing under these agreements amounted to $ 50,341
and $ 10,541 as of December 31, 2001 and 2000 respectively. Related accrued
interest of $ 7,526 and $61 is included in other creditors and accrued expenses.

11.  Other creditors and accrued expenses

<TABLE>
<CAPTION>
                                                         2001   2000
                                                        ------ ------
           <S>                                          <C>    <C>
           Accrued traffic, bandwidth and network costs  7,409  6,321
           Payroll taxes...............................  2,152  1,137
           Contract penalties..........................  3,605  1,105
           Accrued interest............................  8,841    971
           Other.......................................  6,241  2,560
                                                        ------ ------
           Total....................................... 28,248 12,094
                                                        ====== ======
</TABLE>

12.  Short term notes


<TABLE>
<CAPTION>
                                                                                  2001   2000
                                                                                 ------ ------
<S>                                                                              <C>    <C>
Communications Collateral Limited including principal and accrued interest at
  12.5%, payable in one lump sum, due on demand secured by substantially all the
  assets of Telemonde Investments Limited and its subsidiaries..................  3,263  2,924
Convertible note payable, bearing interest at LIBOR plus 2%, payable in one lump
  sum, due April 2001, convertible to common stock at $0.80 per share unsecured.  7,300  7,450
Note payable, non interest bearing, payable in one lump sum, due on demand,
  unsecured.....................................................................  1,000  1,000
Other notes payable, interest at various rates, due on demand, unsecured........  1,279    521
                                                                                 ------ ------
                                                                                 12,842 11,895
                                                                                 ====== ======
</TABLE>

                                     F-13

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


13.  Capital stock

   The Company has two classes of stock, Common Stock and Series A Convertible
Preferred Stock ("Preferred Stock"). Each share of Preferred Stock may be
converted into approximately 4.6 shares of the Company's Common Stock and
carries voting rights equal to the voting rights and powers of the Common
Stock. Holders of Preferred Stock are entitled to the number of votes equal to
the number of shares of Common Stock for which it is convertible. Additionally,
certain corporate actions require the affirmative vote of holders of at least
66 2/3% of the shares of Preferred Stock. Holders of Preferred Stock are
entitled to participate in dividends and distributions and receive preference
to any distributions in the event of liquidation, dissolution or winding up.

   The Company's authorised and issued consisted of the following:

<TABLE>
<CAPTION>
                                                                   2001 2000
                                                                   ---- ----
    <S>                                                            <C>  <C>
    Authorised:
     145,000,000 shares of common stock $0.001 par value per share $145 $145
                                                                   ==== ====
     5,000,000 shares of preferred stock $0.01 par value per share $ 50 $ 50
                                                                   ==== ====
    Issued:
     121,876,118 (2000: 108,982,546) shares of common stock....... $122 $109
     5,000,000 (2000: 5,000,000) shares of preferred stock........   50   50
                                                                   ---- ----
                                                                   $172 $159
                                                                   ==== ====
</TABLE>

   In September 1999, the Company issued warrants to Communications Collateral
Limited providing rights to purchase shares equal to 7% of the issued share
capital of the Company immediately prior of issuance. The exercise price was
set at the lesser of (i) $5.25 per share or (ii) if the price per share is
below $5.25 for 20 consecutive trading days prior to an equity offering by the
Company of at least $10 million, the average of the per share price during such
20 day period. The warrants are exercisable for up until 3 years from the date
of the equity offering.

   Using the Black-Scholes option pricing model, the warrants have been valued
at $ 6,600. This has been treated as additional paid in capital and financing
costs in 1999. The valuation model is based on the prevailing stock price of
$5.25 per share and a 65% volatility factor. During the year ended December 31,
2000 the exercise price of $5.25 was reduced to $2.70. The value of the
warrants remained substantially unchanged at $6,600.

   The Company has entered into Registration Rights Agreements with
Communications Collateral Limited, WorldCom and Global Crossing providing for
participation as selling shareholders beginning with the first underwritten
public offering of at least $10 million. In addition the agreements provide
certain additional demand and piggyback registration rights.

   In 2001, the Company issued 800,000 shares of common stock to its
non-executive directors, resulting in a charge to the income statement of $40.

14.  Segments

   The Company follows provisions of SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 establishes standards
for reporting information about operating segments in

                                     F-14

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)

annual financial statements and requires selected information about operating
segments in financial reports issued to stockholders. It also establishes
standards for disclosures about products and services and geographic areas.
Operating segments are components of an enterprise for which separate financial
information is available and which is evaluated regularly by the Company's
chief operating decision maker, or decision making group, in deciding how to
allocate resources and assess performance. Operating segments are managed
separately and represent strategic business units that offer different products
and serve different markets.
   The Company's reportable segments include bandwidth services, voice
services, and advisory services. Other primarily includes developing business
lines such as internet services and other corporate assets including goodwill
and overhead not attributable to a specific segment.

<TABLE>
<CAPTION>
                           Bandwidth  Voice   Advisory  Other
                           Services  Services Services Services Total
                           --------- -------- -------- -------- ------
                                     (US dollars in millions)
        <S>                <C>       <C>      <C>      <C>      <C>
        2001
        Revenues..........    13.1      7.5     0.1       0.0     20.7
        Gross margin......    (0.4)     0.7     0.1      (0.2)     0.2
        Net income (loss).   (21.5)    (3.5)    0.1     (89.5)  (114.4)
        Total assets......     0.7      0.7     0.0       0.7      2.1

        2000
        Revenues..........    19.9     10.8     7.8       1.8     40.3
        Gross margin......     4.2     (0.9)    7.4       0.2     10.9
        Extraordinary gain    17.6       --      --        --     17.6
        Net income (loss).    12.0     (7.4)    5.5     (12.7)    (2.6)
        Total assets......    21.0      9.4     2.6      25.9     58.9

        1999
        Revenues..........     8.2       --      --        --      8.2
        Gross margin......     1.8       --      --        --      1.8
        Net income (loss).   (61.1)      --      --        --    (61.1)
</TABLE>

15.  Concentrations

   The following are the customers, together with their country of
incorporation, that comprise 10% or more of operating revenues:

<TABLE>
<CAPTION>
                                                   2001  2000  1999
                                                   ----- ----- -----
           <S>                                     <C>   <C>   <C>
           Jazz Telecom S.A. (Spain)..............   324 7,026    --
           Telecom Italia (Italy).................   109   140 4,621
           Trans Global Network Services (England)   811 4,003 2,000
           Wholesale Telecom Company (USA)........   406 5,355    --
           Europe On Line (Switzerland)........... 2,436 2,312    --
           Teleglobe.............................. 6,953   787    --
</TABLE>

   None of the above bandwidth revenues are expected to be recurring sources of
revenue.

                                     F-15

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


16.  Related party transactions

   (a) During the year the Company made payments to Argonaut Limited and Harley
       Consultants Limited amounting to $ Nil (2000: $45, 1999: $225) for
       directors and consultancy services. Mr. Michael Collins, a director of
       Telemonde Investments Limited, is a director of both Argonaut Limited
       and Harley Consultants Limited and has a controlling interest in
       Argonaut Limited.

   (b) During the year Meynard Freres Limited (Formerly Hoolcross Limited)
       advanced $90 to the Company (2000: $70, 1999: $ Nil). Advisory fees
       billed by the Company to Meynard Freres Limited amounted to $792 (2000:
       Nil, 1999: Nil) of which $141 was outstanding at 31 December. Kevin
       Maxwell is a director and shareholder of Meynard Freres Limited.

17.  Acquisitions and Disposals

   (a) Telemonde Investments Limited

   On May 14, 1999, the Company acquired Telemonde Investments Limited in a
reverse purchase stock transaction. Pursuant to the Stock Purchase Agreement,
the Company issued 35,297,000 shares of common stock to the sole shareholder of
Telemonde Investments Limited, in exchange for all of the issued and
outstanding shares of Telemonde Investments Limited. As a result, Telemonde
Investments Limited became a wholly owned subsidiary of the Company. The
transaction has been accounted for as a reverse purchase acquisition in a
manner similar to the pooling of interests method of accounting.

   (b) Desert Telecommunications Services LLC

   In March 2000, the Company entered into an agreement to acquire an
additional 26% interest in Desert Telecommunications Services LLC in Oman.
Through its subsidiary Equitel Communications Limited, the Company already held
a 49% interest in Desert Telecommunications Services LLC which had been
accounted for under the equity method.

   The acquisition was accounted for as a purchase. The purchase price was
allocated to the assets and liabilities acquired based on their fair market
values. The assets, liabilities and results of operations of Desert
Telecommunications Services LLC are included with those of the Company as of
April 1, 2000.

   The total purchase price amounted to $2,026 and was comprised of 1,750,000
shares of common stock of the Company. The excess of the purchase price over
the assets acquired and liabilities assumed of $2,202 was attributed to
goodwill.

   In December 2001, the Company reached agreement to dispose of its 26%
interest in Desert Telecommunications Services LLC to the minority shareholder,
in exchange for the return and cancellation of 1,750,000 shares of common stock
of the Company. There was no material difference between the fair value of the
proceeds and the fair value of the assets and liabilities disposed of. The
remaining 49% interest in Desert Telecommunications Services LLC is being
accounted for under the equity method.

                                     F-16

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


   (c) Equitel Communications Limited

   On November 8, 1999, the Company acquired the entire issued share capital of
Equitel Communications Limited, a telecommunications services company
incorporated in the United Kingdom. The vendors of Equitel Communications
Limited included Janet Pomeroy, Adam Bishop and Telcoworld Limited. Kevin
Maxwell is associated with Telcoworld Limited. Kevin Maxwell and Adam Bishop
are directors of Telemonde Inc. Harry Pomeroy is a director of Equitel
Communications Limited. The combination has been accounted for under the
purchase method and the results have been included from the date of
acquisition. Under the terms of the Share Purchase Agreement, the consideration
payable to the vendors was $20,632 satisfied by the issuance of 4,947,917
shares of common stock of the Company in 1999 and 12,434,286 shares of common
stock of the company in 2001.

   The purchase consideration was allocated as follows:-

<TABLE>
                <S>                                    <C>
                Fair value of net liabilities acquired  (11,402)
                Goodwill..............................   27,236
                Customer base.........................    3,898
                Employees.............................      900
                                                       --------
                                                       $ 20,632
                                                       ========
</TABLE>

18.  Commitments

   The Company has entered into long term agreements for its principal offices
and the acquisition of telecommunications services. Future minimum payments
under non-cancellable commitments are as follows.

<TABLE>
<CAPTION>
                                Year ended
                               December 31,
                               ------------
                               <S>          <C>
                                2002....... $350
                                2003.......  250
                                2004.......   75
                                2005.......   --
                                Thereafter.   --
</TABLE>

19.  Contingencies, risk and uncertainties

   (a) Communication Collateral Limited

   In April 1999, the Company entered into a capacity option agreement with
Communications Collateral Limited. The agreement granted a put option to
Communications Collateral Limited to require the Company to purchase certain
capacity for $6,500. Communications Collateral Limited exercised the option and
the Company has paid $2,500 of the purchase price but defaulted on the
remaining balance of $4,000. As of December 31, 2001 the Company remains in
default of the option agreement. The balance due to Communications Collateral
Limited under the option agreement, including interest thereon of $3,263 and
$2,924 as of December 31, 2001 and 2000 is classified in short term notes. The
amount due to Communications Collateral Limited is secured on substantially all
the Company's assets.

                                     F-17

<PAGE>

                                TELEMONDE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                    As of December 31, 2001, 2000 and 1999
                ($ amounts in thousands, except per share data)


   (b) WorldCom

   In December 1998 and March 1999, the Company entered into capacity purchase
agreements with Worldcom valued at $19,800 and $6,500 respectively. The Company
defaulted on the total liability under these agreements of $26,300. In July
2000 an agreement was reached with WorldCom whereby $9,000 of the outstanding
debt due to WorldCom was exchanged for shares in the Company with an equivalent
fair market value. As of December 31, 2001, the Company remains in default of
its obligations under the capacity purchase agreements. The outstanding balance
due to WorldCom under the capacity purchase agreements of $17,300 and $17,300
as of December 31, 2001 and 2000, respectively is classified in trade accounts
payable.

   (c) Global Crossing

   In June 1998, the Company entered into a capacity purchase agreement with
Global Crossing at a cost $64,800. In December 1998, the Company entered into
backhaul agreements and in November 1999 the Company entered into an
international private line service agreement. The Company defaulted on its
obligations under the capacity purchase agreement, the backhaul agreements and
the international private line service agreement, resulting in the Company
owing $9,000 (plus related charges of $2,911) for drawndown services, and
having an outstanding obligation to draw down further capacity of $ 42,930. In
December 2000, the Company and Global Crossing entered into a standstill
agreement to settle the terms of the Company's liabilities.

   The standstill agreement provided for the extinguishment of liabilities in
exchange for inventory, a new obligation to pay $11,911 and 5,000,000 shares of
the Company's Series A Convertible Preferred Stock. The Company defaulted on
its obligations under the standstill agreement, and hence the remaining amount
of $11,436 due under the standstill agreement is immediately payable.
Additionally, Global Crossing may take action to pursue debts arising under the
original capacity purchase agreement amounting to $42,930 plus accrued interest
of $7,526, calculated based on 3% over the One Month London Interbank Offered
Rate for U.S. Dollars.

   As of December 31, 2001 and 2000, the total liability amounted to $50,341
and $10,541 respectively. See Note 10.

   (d) Gemini Submarine Cable System Limited

   In April 1998, the Company entered into a capacity purchase agreement with
Gemini Submarine Cable System Limited ("Gemini"). Under the terms of the
capacity purchase agreement, as subsequently amended, the Company issued
promissory notes to Gemini amounting to $ 2,700. The Company has defaulted on
its obligations under the promissory notes, giving Gemini the right to
immediately terminate the Indefeasible Rights of Use granted to the Company. As
of December 31, 2001 and 2000 the Company owed $2,139 and $1,825, respectively,
under the promissory notes which is classified among trade accounts payable.

   (e) Inland Revenue

   As at December 31, 2001, the Company's liabilities to the United Kingdom
Inland Revenue for payroll taxes and social security contributions amounted to
$2,152 (2000: $1,137). The Company is in default with Inland Revenue, who may
exercise their powers of enforcement over the settlement of liabilities,
including petitioning for the winding up of the Company's UK subsidiaries.

   (f) Other

   The Company has guaranteed the obligations of a former customer to a
supplier amounting to a maximum of $1,700.

                                     F-18