<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549
--------------------------------------------------------------------------------

                                    FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended March 31, 2000

                                      OR

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

     For the transition period from __________ to _______________

                       Commission file number: 000-28113

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

               Delaware                                   62-1795931
    (State or other jurisdiction of                    (I.R.S. Employer
     incorporation or organization)                  Identification Number)

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

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


     Indicate by check whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

         Yes ___    No  X
                       ---

     As of May 8, 2000, Telemonde, Inc. had outstanding 82,375,784 shares of
common stock, $.001 par value per share.

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

                                       1
<PAGE>

                                TELEMONDE, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                             Page Number
                                                                             ----------
<S>                                                                          <C>
                         PART I - FINANCIAL INFORMATION

Item 1.   Independent Auditor's Report                                           3

          Consolidated Financial Statements:
          Consolidated Balance Sheets -
          March 31, 2000 and December 31, 1999                                   4

          Consolidated Statements of Income -
          Three Months ended March 31, 2000 and 1999                             5

          Consolidated Statements of Cash Flow -
          Three Months ended March 31, 2000 and 1999                             6

          Notes to Consolidated Financial Statements                             7

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                    8

Item 3.   Quantitative and Qualitative Disclosures About Market Risk            18

                         PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                     18

Item 2.   Changes in Securities and Use of Proceeds                             18

Item 6.   Exhibits and Reports on Form 8-K                                      19

Signatures                                                                      20
</TABLE>

                                       2
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Stockholders of
Telemonde Inc

We have reviewed the accompanying condensed consolidated balance sheet of
Telemonde, Inc. and subsidiaries as of March 31, 2000, and the related
consolidated statements of income and cash flows for the three month periods
ended March 31, 2000 and March 31, 1999. These financial statements are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet as of December 31,
1999 and the related consolidated statements of income, and cash flows for the
year then ended, not presented herein, and in our report dated February 7, 2000,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion the information set forth in the accompanying consolidated
balance sheet as of December 31, 1999 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.

                                                          MOORE STEPHENS
                                                          Chartered Accountants

St. Paul's House
London EC4P 4BN
May 4, 2000

                                       3
<PAGE>

                        PART I - FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                                TELEMONDE, INC.
                          Consolidated Balance Sheets
                      (US Dollars expressed in thousands)


<TABLE>
<CAPTION>
                                                              at March 31, 2000    at December 31, 1999
                                                              -----------------    --------------------
Assets                                                           (unaudited)             (audited)
<S>                                                           <C>                  <C>
Cash and Cash Equivalents                                            1,442              $      62
Trade accounts receivable, net of allowance
   for doubtful debts of $0 and $923, respectively                  17,885                  4,852
Inventories                                                         14,865                 21,465
Prepaid expenses                                                     1,421                  1,605
                                                                 ---------              ---------
Total current assets                                                35,613                 27,984
                                                                 ---------              ---------
Property, plant and equipment                                       38,455                 39,462
Investments in joint venture                                         2,025                      0
Intangible assets                                                   30,337                 31,127
                                                                 ---------              ---------
Total assets                                                     $ 106,430              $  98,573
                                                                 ---------              ---------
Liabilities and stockholders' equity

Accounts payable                                                    88,367                 85,528
Accrued expenses                                                     6,065                  5,721
Deferred income                                                      2,544                  2,657
Short term notes                                                    10,064                  9,141
                                                                 ---------              ---------
Total current liabilities                                          107,040                103,047
                                                                 ---------              ---------
Stockholders' equity

Capital stock                                                           86                     73
Retained deficit                                                   (52,944)               (53,701)
Additional paid in capital                                          52,248                 49,154
                                                                 ---------              ---------
Total stockholders' deficit                                           (610)                (4,474)
                                                                 ---------              ---------
Total liabilities and stockholders' equity                       $ 106,430              $  98,573
                                                                 ---------              ---------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

                                       4
<PAGE>

                                TELEMONDE, INC.
                       Consolidated Statements of Income
          (US Dollars expressed in thousands, except per share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                       For the Three Months Ended
                                                                 --------------------------------------
                                                                 March 31, 2000          March 31, 1999
                                                                 --------------          --------------
<S>                                                              <C>                     <C>
Sales                                                               $  18,297               $   4,847

Cost of goods sold                                                     13,222                   3,397
                                                                    ---------               ---------
Gross margin                                                            5,075                   1,450
                                                                    ---------               ---------

Operating Expenses:
Selling, general and administrative expenses                            2,611                   1,294
Research and Development                                                  503                      34
Amortization of goodwill                                                  790                       0
Reserve for doubtful accounts                                               0                     700
                                                                    ---------               ---------
Operating expenses                                                      3,904                   2,028
                                                                    ---------               ---------
Operating profit (loss)                                                 1,171                    (578)
                                                                    ---------               ---------

Other income (expense):
Interest income                                                           258                     157
Interest expense                                                         (502)                      0
Share of losses of associate                                             (255)                      0
Exchange gains                                                             85                       0
                                                                    ---------               ---------
Other income (expense)                                                   (414)                    157
                                                                    ---------               ---------
Net income (loss)                                                   $     757               $    (421)
                                                                    ---------               ---------
Net income (loss) per share - basic and fully diluted               $    0.01               $   (0.01)
                                                                    ---------               ---------
</TABLE>

The accompanying notes are an integral part of these consolidated statements
of income

                                       5
<PAGE>

                                TELEMONDE, INC.
                     Consolidated Statements of Cash Flow
                      (US Dollars expressed in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                             For the Three Months Ended
                                                                        ------------------------------------
                                                                        March 31, 2000        March 31, 1999
                                                                        --------------        --------------
<S>                                                                     <C>                   <C>
Operating Activities
Net income (loss)                                                       $          757        $         (422)
Adjustments to reconcile net income (loss) to net
  cash provided by (used in) operating activities:
  Amortization of goodwill                                                         790                     0
  Depreciation of property, plant and equipment                                  1,073                     0
  Reserve for doubtful accounts                                                      0                   700
  Expenses satisfied by issuance of stock                                        1,071                     0
  (Increase) decrease in accounts receivable                                   (13,033)                2,025
  (Increase) decrease in inventories                                             6,600               (10,365)
  (Increase) decrease in prepaid expenses                                          184                     0
  Increase (decrease) in accounts payable                                        2,839                12,259
  Increase (decrease) in accrued expenses                                          345                (2,468)
  Increase (decrease) in deferred income                                          (113)               (3,500)
                                                                        --------------        --------------
Net cash provided by (used in) operating activities                                513                (1,771)
                                                                        --------------        --------------
Investing activities
Purchase of property, plant & equipment                                            (66)                  (36)
                                                                        --------------        --------------
Net cash used in investing activities                                              (66)                  (36)
                                                                        --------------        --------------
Financing activities
Proceeds from short term notes                                                     923                     0
Issuance of stock                                                                   10                     0
                                                                        --------------        --------------
Net cash provided by financing activities                                          933                     0
                                                                        --------------        --------------
Net increase (decrease) in cash and
  cash equivalents                                                               1,380                (1,807)
Cash and cash equivalents at start of period                                        62                 2,655
                                                                        --------------        --------------
Cash and cash equivalents at end of period                              $        1,442        $          848

Supplemental disclosure of cash flow information:
Interest paid                                                           $          194        $            0
</TABLE>

The accompanying notes are an integral part of these consolidated statements of
cash flow.

                                       6
<PAGE>

                                TELEMONDE, INC.
                  Notes to Consolidated Financial Statements
                                March 31, 2000
          (US Dollars expressed in thousands, except per share data)

1.  Reference is made to the Notes to Consolidated Financial Statements
contained in the Company's December 31, 1999 audited consolidated financial
statements included in the Company's 1999 Annual Report and the Company's 1999
Annual Report on Form 10-K filed with the SEC on March 30, 2000. In the opinion
of Management, the interim unaudited financial statements included herein
reflect all adjustments necessary, consisting of normal recurring adjustments,
for a fair presentation of such data on a basis consistent with that of the
audited data presented therein. The consolidated results of operations for
interim periods are not necessarily indicative of the results to be expected for
a full year.

2.  At March 31, 2000, Telemonde had 80,613,355 shares issued and 5,193,609
shares to be issued, totaling 85,806,964 shares. At December 31, 1999, Telemonde
had 65,211,584 shares issued and 7,892,858 shares to be issued, totaling
73,104,442 shares.

3.  The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 128, "Basic and Diluted EPS". Basic
earnings per share are computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding for the
period. The weighted number of common shares outstanding totaled 80,546,191 and
35,326,630 for the three months ended March 31, 2000 and March 31, 1999,
respectively. On May 14, 1999, the corporation issued 35,297,000 shares of
common stock in exchange for the 35,297 ordinary shares of Telemonde Investments
Limited. For purposes of calculating earnings per share, the increase in nominal
share capital was deemed to take effect on January 1, 1999. Diluted earnings per
share reflect the potential dilution that could occur if options and warrants
were exercised. The dilutive effect of the assumed exercise of stock options and
warrants was 9,160,211 for the three months ended March 31, 2000 and zero for
the three months ended March 31, 1999.

4.  The FASB has issued SFAS No. 131," Segment Reporting". From our inception on
March 10, 1998 to November 1999, our business consisted entirely of the sale of
transatlantic bandwidth and of the management of bandwidth through maintenance
contracts with our customers. The corporation's principal activities are 1) the
purchase, sale and leasing of fiber optic bandwidth capacity, and 2)
telecommunications traffic and network services. Telecommunications traffic and
network services are in the early stages of development and contributed
negligible revenues in the three months ended March 31, 2000 and no revenues in
the three months ended March 31, 1999. In addition, the corporation's customers
are principally based in Europe and North America, and the corporation's assets
are principally located there as well.

5.  The FASB has issued SFAS No. 130, "Comprehensive Income Reporting". In the
three months ended March 31, 2000 and March 31, 1999, there were no components
of comprehensive income for the Company other than net income.

6.  The FASB has issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. SFAS No. 133 requires that an entity
recognizes all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The accounting
for changes in the fair value of a derivative depends on the intended use of the
derivative and how it is designated. For example, gains or losses related to
changes in the fair value of a derivative, not designated as a hedging
instrument, are recognized in earnings in the period of the change, while
certain types of hedges may be initially reported as a component of other
comprehensive income until the consummation of the underlying transaction.

SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter. On that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS

                                       7
<PAGE>

No. 133 is not to be applied retroactively to financial statements of prior
periods. The Company believes that the adoption of this standard will not have a
material effect on the Company's consolidated results of operations or financial
position. The FASB has delayed the effective date of SFAS No. 133 by one year to
years beginning after June 15, 2000 by the issuance of SFAS No. 137.

7.  In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 provides guidance on the financial reporting of start-up
costs and organization costs, and requires that such costs be expensed as
incurred. SOP 98-5 applies to all non-governmental entities and is generally
effective for fiscal years beginning after December 15, 1998. Earlier
application is encouraged in fiscal years for which annual financial statements
previously have not been issued. The adoption of SOP 98-5 is not expected to
have a material impact on results of operations, financial position, or cash
flows of the Company as the Company's current policy is substantially in
accordance with SOP 98-5.

8.  As a result of FASB Interpretation No. 43 "Real Estate Sales", an
interpretation of FASB Statement No. 66 (FIN 43), which became effective July 1,
1999, sales of terrestrial capacity may not be recognized as revenue at the time
the circuits are activated. The Company's revenues to date have been derived
from sales of indefeasible rights of use for submarine circuits and will
continue to recognize revenue from submarine capacity sales agreements upon
activation of those circuits, because our submarine capacity sales agreements
meet the conditions for sales type lease accounting. Revenue from the sale of
terrestrial backhaul circuits will be amortized over the life of the contracts.

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

You should read the following discussion and analysis together with Telemonde's
financial statements, including the notes, appearing elsewhere in this Quarterly
Report.

Forward-Looking Statements

Certain information contained in this Quarterly Report on Form 10-Q, including,
without limitation, information appearing under Part I, Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of Operations", are
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Factors set
forth in the Company's 1999 Annual Report on Form 10-K, filed March 30, 2000,
under Item 1, "Business - Risk Factors", together with other factors that appear
with the forward-looking statements, or in the Company's other Securities and
Exchange Commission filings, including its Registration Statement on Form 10
dated November 15, 1999 (and any subsequent amendments to the Form 10), could
affect the Company's actual results and could cause the Company's actual results
to differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company in this Quarterly Report on Form 10-Q.

Overview

We are an international communications company that is creating an international
network, which will connect countries in the developed world with regional
centers in emerging markets.

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. In exchange for all of the issued and outstanding shares of
Telemonde Investments Limited, Telemonde, Inc. issued 35,297,000 restricted
shares of Telemonde, Inc.'s common stock. Pac-Rim Consulting, Inc. was a dormant
shell company with no operating history but was listed on the NASD Over-the-
Counter Bulletin Board.

The issuance of common stock by Pac-Rim was accounted for as a reverse purchase
acquisition of Pac-Rim by Telemonde Investments Limited. Although Pac-Rim was
the surviving legal entity in the reverse, Telemonde Investments Limited is
considered to be the acquirer in the transaction because:

                                       8
<PAGE>

     .    the sole shareholder of Telemonde Investments Limited prior
          to the acquisition became the majority shareholder of Pac-Rim
          following the acquisition;
     .    Telemonde management became Pac-Rim management following the
          acquisition; and
     .    Pac-Rim was simply a shell company rather than an operating business.

Following the acquisition by Telemonde Investments Limited, Pac-Rim Consulting,
Inc.'s name was changed to Telemonde, Inc. On November 9, 1999, Telemonde, Inc.
became a Delaware corporation by merging into a newly formed Delaware
subsidiary.

We have a limited operating history. Our financial information relates
principally to a period in which we were obtaining trans-Atlantic capacity and
were establishing our business and market presence. While we incurred operating
losses and negative cash flow from our inception through December 1999, the
first quarter of 2000 evidenced an initial reversal of that trend. The Company
recognized $18.3 million in revenue in the period from January 1, 2000 through
March 31, 2000, which contributed to a $1.2 million operating profit and a
modest operating cash flow of $0.5 million.

While we are encouraged by these first quarter 2000 results, we are continuing
to establish our networks and expand our services. The continuation of this
expansion could give rise to operating losses and negative cash flows in the
future. The magnitude of these operating losses and especially negative cash
flows will be affected by a variety of factors, which include:

     .    The ability to put in place working capital facilities and to increase
          our capital base.
     .    The rate at which we add new customers and the prices those customers
          pay for our bandwidth and Internet services.
     .    The mix of our business, including, among other factors, the
          proportion of IRUs compared to leases and short term rentals we sell
          to our customers.
     .    The ability and cost to obtain transatlantic and other bandwidth
          capacity; in particular the cost of bandwidth under the major supplier
          agreements currently under re-negotiation.
     .    Customer payment terms where customers require a deferred payment plan
          for their purchase of our IRUs.
     .    The speed and extent to which we add networking and other related
          services, including but not limited to our telehousing facilities, to
          our portfolio of products and services.
     .    The ability to predict demand for our networking and other related
          services, including but not limited to our telehousing facilities.
     .    The ability of our local relationships in emerging markets to support
          our customers and meet our obligations.
     .    The completion of our planned networks and infrastructure and the
          expansion of our networks generally, with completion being achieved by
          currently expected completion dates.
     .    General economic, financial, competitive, legislative, regulatory,
          licensing, and other factors that are beyond our control.

We have financed, and expect to continue to finance, our net losses, debt
service, capital expenditures and other cash needs through flexible supplier
payments, the issuance of debt and the proceeds from sales of shares of common
stock.

While the Company is progressing, it still considers itself an early stage
company and, as such, we have not yet fully completed our transition to an
operating company. It is anticipated that our network and operations center will
be established by the end of the first half of 2000. Although our senior
management team has substantial industry knowledge and experience, this team has
been built up during the course of 1999 and has only recently been completed.
EquiTel was formed in late 1998, signed its initial customer contracts in 1999
and still needs to be fully integrated into Telemonde.

                                       9
<PAGE>

The transition from a progressing early stage company to an operating company
places significant demands on our management and operations. We are in the
process of expanding the management and operational capabilities necessary for
this transition. Our ability to manage this transition successfully will depend
on, among other things:

 .    expanding, training and managing our employee base, including attracting,
     retaining and motivating highly skilled personnel;
 .    creating customer interface and operations, administrative and maintenance
     systems;
 .    procuring terrestrial capacity to provide connectivity to inland cities.

There can be no assurance that we will succeed in developing all or any of these
capabilities, and any failure to do so could have a material adverse effect on
our results of operations.

Industry Trends

The Company believes that bandwidth demand is expected to more than double in
the next two years. This future growth of bandwidth demand will be met by the
building of new cable infrastructure. This will be particularly visible in
Western Europe and in the USA, where a significant number of cable systems will
be brought into service over the next 18-24 months (including TAT-14,
Flag-Atlantic, Level 3's Yellow System, Hibernia, Southern Cross). As Asia
progresses with liberalization, we would expect to see the same broad pattern
develop during the next five years.

We believe that following the recent sharp decline in market price, existing
supply and demand are now better matched. Current prices are cost based to
ensure that existing inventories are run down prior to new cable systems
becoming operational. The future market pricing of bandwidth will be affected by
any future imbalances between supply of capacity and demand of bandwidth and
therefore by the timing of new generation cable systems.

These developments have impacted buyer behavior by shifting some purchase
decisions away from outright capacity ownership (IRUs) to short-term leases
(typically less than 1 year in duration), in anticipation of lower prices in the
near future. Buyers are balancing the cost of purchasing short-term bandwidth to
meet user driven demand for bandwidth and service quality in a competitive
market against a forward view of prices for IRUs on the new cable systems and
delivery date expectations. We believe that the demand for bandwidth will be
driven primarily from Internet Protocol (IP) based services and the growing
availability of broad band capacity on the wireline and wireless access
networks. This, coupled with the radically reduced cost of international
bandwidth, will increase the demand for new high-speed data and Internet
services over the next 18 months due to an abundance of high-quality,
cost-effective bandwidth, particularly on transatlantic and intra-European
routes. Services such as high capacity streaming video and content via the
Internet, previously thought to be uneconomical, will develop rapidly as prices
for the underlying bandwidth steps down to the next, technology driven, level.

As the Internet user market continues to be redefined into smaller and more
focused user groups, a key dynamic of this market will be the large number of
smaller service providers using the Internet as a distribution channel for their
content. This presents a major opportunity for wholesale operators to provide a
range of bandwidth, telehousing, commodity content and support services to these
service providers, enabling them to concentrate on their core capabilities. Our
subsidiary, telemonde.net, is ideally placed to exploit these increases in
demand for bundled support services.

The Internet service provider market is new and rapidly evolving. Whether, and
the manner in which, the market for our products and services to Internet
service providers will continue to grow is uncertain. Any decline in the
Internet service provider market will adversely affect our business.

Our business would be damaged if Internet usage does not continue to grow.
Internet usage may be inhibited for a number of reasons, including:

     .    access costs;
     .    inadequate network infrastructure;
     .    security concerns;

                                       10
<PAGE>

     .    uncertainty of legal and regulatory issues concerning the use of the
          Internet;
     .    inconsistent quality of service; and
     .    lack of availability of cost-effective, high-speed service.

If Internet usage grows, the Internet infrastructure may not be able to support
the demands placed on it or the Internet's performance and reliability may
decline. Similarly, Web sites have experienced interruptions in their services
as a result of outages and other delays occurring throughout the Internet
network infrastructure. If these outages or delays occur frequently, use of the
Internet as a commercial or business medium could, in the future, grow more
slowly or decline. This could adversely affect our business.

We have recently begun offering terrestrial network platforms and high-speed
Internet connectivity, based upon the supply of fiber optic bandwidth between
New York, London and other European cities. We intend to expand our services
worldwide and we anticipate offering a full-range of global connectivity
solutions for European Internet and Multimedia Service Providers over our
existing global network infrastructure, as well as specialist and geographic
Internet packages for our customer base in emerging markets. We have limited
experience in the Internet business and there can be no assurances you that we
will successfully establish or expand the business. Currently, we only provide
capacity to two European Internet service providers.

The market for network platforms and value-added Internet services is extremely
competitive. Our primary competitors include other telecommunications businesses
that have a significant national or international presence. Many of these
carriers have substantially greater resources, capital and operational
experience than we do. We also expect we will experience increased competition
from traditional telecommunications carriers that expand into the market for
Internet services. In addition, we will require substantial additional capital
to make investments in our Internet operations, and we may not be able to obtain
that capital on favorable terms or at all.

Revenues

Sales for the three months ended March 31, 2000 totaled $18.3 million compared
with $4.8 million for the three months ended March 31, 1999. The principal
reason for the rise in revenues for the three months ended March 31, 2000 has
been the normalization of prices in the transatlantic bandwidth capacity
industry after its rapid decline in 1999. Customers were reluctant to purchase
capacity while prices were falling (and we were unable to sell capacity
profitably until we had renegotiated terms with our suppliers) but have now gone
ahead and procured bandwidth in an environment whereby supply and demand are
more equalized.

A relatively small number of customers currently account for a significant
amount of our total revenues. In our bandwidth business three customers
accounted for over 90% of our revenues in 1999. In the first three months of
2000, four customers accounted for over 90% of our revenues. Although we intend
to expand our customer base as our business grows and through acquisitions, this
dependence on a relatively small number of customers may continue for the
foreseeable future. Most of our arrangements with large customers do not provide
any guarantees that they will continue using our services at current levels. In
addition, if (1) our customers build their own facilities, (2) our competitors
build additional facilities, or (3) our customers are involved in further
consolidations in the telecommunications industry, we could experience a
reduction in the use of our services, which could have a material adverse effect
on our business.

Our medium-term contracts for the supply of transatlantic bandwidth were
contracted for in 1998 and early 1999 at fixed prices and before the
unexpectedly severe fall in market prices during the remainder of 1999. The
details of our Capacity Purchase Agreements with suppliers are described in
detail in the section on "Liquidity and Capital Resources" below. In order to
address this bandwidth price compression, we have reached agreements in
principle but have yet to sign definitive agreements with our principal
suppliers to replace old capacity with new capacity on higher-value networks
that encompass the Atlantic, Pacific, Europe and South American regions. The
Company believes that the final agreements will be executed within a reasonable
time on the terms already agreed upon in principle.

Although we believe that transatlantic market prices have now begun to
stabilize, we can give no assurance that prices will not fall further. We have
made in the past, and may make in the future, commitments to suppliers to

                                       11
<PAGE>

obtain bandwidth capacity. Market price reductions reduce and can eliminate the
expected margin on bandwidth sales over the purchase price from the supplier. In
addition, we would need to seek further price reductions from our suppliers for
future bandwidth capacity purchases in order to restore margins and the outcome
of such negotiations are inevitably uncertain. Therefore, our business,
financial condition and operating results could be materially and adversely
affected by market price declines.

A number of companies are constructing or have plans to construct new submarine
and terrestrial fiber optic systems. The additional capacity may create
over-capacity in the market and cause future prices to drop which could have an
adverse impact on our revenues and operational results. In the European
terrestrial market, lead times are short and there is significant competition
from new or upgraded systems. Therefore, it is possible that there will be
over-capacity in the European market and that prices may fall.

To further offset the possible impact of future bandwidth capacity market
fluctuations, we have diversified our revenue streams through the acquisition of
EquiTel and the formation of telemonde.net S.A. We believe that these businesses
will contribute to our revenue stream and/or net income (loss) during the later
part of 2000.

Although we expect EquiTel's switched services to contribute to our revenue
stream and/or net income (loss) in the future, our operations relating to the
pre-paid card business face a number of risks, which include:

     .    the increased entry into the market by pre-paid card vendors,
          including vendors that are larger than us;
     .    our reliance on a small number of independent distributors to place
          pre-paid cards in retail outlets;
     .    our inability to create exclusive pre-paid phone card distribution
          arrangements in certain markets;
     .    the availability of alternative telephony methods;
     .    the cost sensitive nature of consumer demand; and
     .    the lack of customer loyalty to any particular pre-paid card company.

Many of these risks may cause prices to drop throughout the pre-paid card
industry. Because we depend on informal relationships with independent
distributors to market and sell our products, increased competition and lower
prices could force us to further lower our prices to continue to sell pre-paid
cards to these distributors. We cannot guarantee that we will be able to
continue to provide competitively priced pre-paid cards to our distributors or
that lower prices in the pre-paid card marketplace will not have a negative
effect on the results of our operations.

We will derive substantial revenues from international operations and a key
element of our business strategy is to expand our operations in international
markets. Accordingly, our business is subject to certain risks inherent in
international operations. These risks include:

     .  unexpected changes in regulatory requirements, tariffs, customs, duties
        and other trade barriers;
     .  difficulties in staffing and managing overseas operations;
     .  problems in collecting accounts receivable;
     .  political risks;
     .  fluctuations in currency exchange rates;
     .  foreign exchange controls which restrict or prohibit repatriation of
        funds;
     .  technology export and import restrictions or prohibitions;
     .  delays from customs brokers or government agencies; and
     .  potentially adverse tax consequences resulting from operating in
        multiple jurisdictions with different tax laws.

During our limited operating history we have not experienced any material
adverse effects with respect to our overseas operations arising from such
factors. However, problems associated with such risks could arise in the future.
Finally, managing operations in multiple jurisdictions will place further strain
on our ability to manage our overall growth.

                                       12
<PAGE>

In addition, EquiTel's targeted markets are in emerging markets, including
Africa, the Middle East, most of the Asia Pacific region, the Indian
sub-continent, Southern and Central America, and parts of Eastern Europe.
Political and social instability is widespread in many such areas and EquiTel is
subject to greater risks and potential losses due to unexpected changes in
political regimes.

We rely on local relationships in these emerging markets to support our
customers. Failure on the part of our local contacts to fulfill their
obligations may harm our reputation, business and operations. We, and in
particular our switched services business, utilize local persons to market our
services and provide local training and support. The quality of the local
training and support may be inconsistent and may not reach our "benchmark" of
quality service levels. In this event, customer relations, and possible future
business, may be jeopardized. In addition, our senior management may be diverted
to remedy the failure of our local relationships and this diversion may impede
other projects.

Results of Operations

For the three months ended March 31, 2000 compared with the three months ended
March 31, 1999

Sales increased $13.5 million or 277% from $4.8 million for the three months
ended March 31, 1999 to $18.3 million for the three months ended March 31, 2000.
Bandwidth capacity and leasing sales increased $11.5 million or 260% from $4.4
million in the three months ended March 31, 1999 to $15.9 million in the three
months ended March 31, 2000. The increase in bandwidth capacity and leasing
sales can be attributed to accelerated customer purchases in an environment
whereby bandwidth supply and demand has begun to normalize. Backhaul,
maintenance, recharge and traffic revenues increased $2.0 million or 328% from
$0.4 million in the three months ended March 31, 1999 to $2.4 million in the
three months ended March 31, 2000. The increase in backhaul, maintenance,
recharge and traffic revenues reflects the fact that the Company began to earn
traffic revenue on its newly established circuits during the first quarter of
2000. Revenues for both periods are overwhelmingly attributable to the
subsidiaries of Telemonde Investments Limited.

Cost of goods sold increased $9.8 million or 289% from $3.4 million in the three
months ended March 31, 1999 to $13.2 million in the three months ended March 31,
2000. The increase reflects an equivalent increase in capacity sales partially
offset by slightly weaker gross profit margins on these bandwidth sales. Cost of
goods sold are primarily attributable to the subsidiaries of Telemonde
Investments Limited.

Provision for doubtful debts decreased from $0.7 million in the three months
ended March 31, 1999 to $0.0 million in the three months ended March 31, 2000.
The provision in early 1999 related to a capacity sale made by Telemonde
International Bandwidth (Bermuda) Limited.

Selling, general and administrative expenses increased $1.3 million or 102% from
$1.3 million in the three months ended March 31, 1999 to $2.6 million in the
three months ended March 31, 2000. Staff costs increased from $0.5 million in
the three months ended March 31, 1999 to $1.3 million in the three months ended
March 31, 2000. The increase in staff costs reflects the fact that Telemonde
Networks Limited was incorporated on February 16, 1999 to perform the sales and
marketing functions previously undertaken outside the Company by Telemonde
Limited and to build infrastructure and staff. Other selling, general and
administrative expenses increased from $0.8 million in the three months ended
March 31, 1999 to $1.3 million in the three months ended March 31, 2000,
primarily as a result of an increase in travel, accommodation costs and public
company expenses.

Research and development expenses increased $0.5 million or 1,379% from $0.03
million in the three months ended March 31, 1999 to $0.5 million in the three
months ended March 31, 2000. The increase results from a continued build-up of
the Company's technological capabilities commensurate with the expansion of
Telemonde's customer's worldwide network build out. In the first quarter of
1999, the Company's engineering staff was just beginning to be assembled and by
the first quarter of 2000, it continues to grow predominately in London but also
in New York and Geneva as well.

                                       13
<PAGE>

Amortization of goodwill increased to $0.8 million in the three months ended
March 31, 2000 from a non-existent level in the first three months of 1999.
Telemonde's goodwill is mostly attributable to the purchase of EquiTel late in
1999 and, to a much lesser extent, the acquisition of TGA.

Interest income increased $0.1 million or 64% from $0.2 million in the three
months ended March 31, 1999 to $0.3 million in the three months ended March 31,
2000. The increase is primarily attributable to an increase in income from sales
interest on capacity sold on deferred payment terms.

Interest expense increased to $0.5 million in the first three months of 2000
from a non-existent level in the three months ended March 31, 1999 since
borrowings for working capital purposes have materialized over the past few
quarters.

Share of losses of associate increased from $0.0 million in the three months
ended March 31, 1999 to $0.3 million in the three months ended March 31, 2000.
The losses relate to start up costs attributable to Desert Telecommunication
Services LLC, a joint venture of EquiTel established in the Sultanate of Oman.

Net income increased to $0.8 million in the three months ended March 31, 2000
from a net loss of $0.4 million in the three months ended March 31, 1999. The
increase of $1.2 million of net income arises principally from the greatly
increased sales and gross margins partially offset by an increase in operating
and other expenses.

Liquidity and Capital Resources

Telemonde's liquidity requirements arise from:

     .   purchases and maintenance of bandwidth capacity and network equipment;
     .   development of intelligent network platforms, which includes pre-paid
         calling cards and other value-added telephony services;
     .   interest and principal payments on outstanding indebtedness;
     .   net cash used in operating activities; and
     .   acquisitions of, and strategic investments in, businesses.

Telemonde has satisfied its liquidity requirements to date through operating
cash flows, vendor finance, short-term bridge financing, shareholder loans and
equity subscriptions.

Net cash provided by operating activities was $0.5 million in the three months
ended March 31, 2000, compared to net cash used in operating activities of $1.8
million in the three months ended March 31, 1999. The increase in net cash
provided by operating activities was primarily due to a decrease in inventories
on the higher capacity sales levels, an increase in trade accounts payable and
higher earnings before depreciation/amortization partially offset by a much
higher accounts receivable level on the increased sales.

Net cash provided by financing activities was $0.9 million in the three months
ended March 31, 2000 compared with $0.0 million in the three months ended March
31, 1999. The increase in short term notes for the current quarter relate to
higher borrowings with The Atlas Corporation Limited and La Hougue Financial
Management Services Ltd. partially offset by repayments to Communications
Collateral Limited.

Telemonde's ability to meet its liquidity requirements is dependent on its
ability to generate cash from operations and raise short term or permanent
finance. While the Company incurred operating losses and negative operating cash
flow from its inception through December 31, 1999, the first quarter of 2000
evidenced an initial reversal of that trend. However, Telemonde incurred a net
loss of $11.7 million from its inception through December 31, 1998 and a
substantial net loss of $42.0 million in the fiscal year ended December 31,
1999. On a pro forma basis, after giving effect to the acquisition of EquiTel,
Telemonde would have had a net loss of $13.6 million in the inception period
ended December 31, 1998 and $53.4 million in the fiscal year ended December 31,
1999.

We also expect to make capital expenditures over the next few quarters building
our infrastructure and in organizing our bandwidth and switched services
businesses. This includes the purchase of bandwidth capacity for our own

                                       14
<PAGE>

networks, for planned leasing and rental business, and to meet our customers'
requirements. We hope to fund these expenditures from short-term bridge
financing, vendor financing and from planned equity funding, as well as from
proceeds of future sales.

Beyond the initial amount, we will incur additional capital expenditures to
support our projected growth of the bandwidth business. In particular, we aim to
significantly grow our bandwidth leasing and rental business by purchasing
additional bandwidth capacity to be leased to our customers. We expect to meet
the cash requirements of our capital expenditures from:

     .    cash flow from fiber sales and operations;
     .    income from route management operations;
     .    income from our intelligent network services;
     .    additional equity and/or debt financing; and
     .    supplier financing, if available.

Our failure to accomplish any of the foregoing sources may significantly delay
or prevent capital expenditures. If we are unable to make our capital
expenditures as planned, our business may grow slower than expected with a
material adverse effect on our business, financial condition, results of
operations, and the value of our securities.

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

The independent auditors reported that the financial statements for the fiscal
year ended December 31, 1999 were prepared assuming that the Company will
continue as a going concern. As discussed in note 17 to the fiscal year 1999
financial statements as reported in the Company's Annual Report on Form 10-K,
Telemonde has incurred a net loss of $42.0 million. In addition, at March 31,
2000, total current liabilities exceeded total current assets by $71.4 million.
These factors, and the others discussed in note 17 identified above, raise
substantial doubt about the ability of the Company to continue as a going
concern if it fails to raise additional debt and equity financing. The financial
statements do not include any adjustments relating to the recoverability of
recorded assets, or the amounts of liabilities that might be necessary in the
event the Company fails to raise additional financing and cannot continue in
existence.

We have incurred a high level of debt. As of March 31, 2000, Telemonde had
$107.0 million in total liabilities, including:

       .  $80.9 million to capacity suppliers relating to undrawn bandwidth.
          Undrawn bandwidth comprises transatlantic bandwidth capacity, which we
          have not yet drawn-down and taken delivery of, but to which we are
          committed to draw down at scheduled dates under the terms of Capacity
          Purchase Agreements with our suppliers.
       .  $7.5 million to all other suppliers.

       .  $3.7 million owed to Communications Collateral Limited under a
          Capacity Option Agreement.

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

       .  cash from operations may be insufficient to meet the principal and
          interest on our indebtedness as it becomes due;
       .  payments of principal and interest on borrowings may leave
          us with insufficient cash resources for our operations; and

                                       15
<PAGE>

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

We are in discussions with investment bankers for the potential provisioning of
short-term debt and equity financing. The amount of financing which is required
to meet our commitments is significant. We cannot assure you that our current
negotiations and discussions will be successful. Failure to successfully
complete our current negotiations and discussions will not only impair our
ability to develop our business but may also result in the termination of our
operations.

Due to our lack of liquidity resulting from a decline in the market for
wholesale fiber optic bandwidth, we have been unable to generate sufficient cash
flow to meet certain of our debt service requirements and have triggered events
of default under our monetary obligations on a number of our material contracts.
We are, however, renegotiating our capacity purchase agreements with our two
major suppliers, MCI WorldCom and Atlantic Crossing.

MCI WorldCom Capacity Purchase Agreements. In December of 1998 and on March 31,
1999, Telemonde, through its now wholly owned subsidiary Telemonde International
Bandwidth Limited, entered into agreements for the purchase of five units
(STM-1's) of bandwidth capacity on the Gemini network. Specifically, Telemonde
acquired the IRUs in three units of capacity under the December 1998 agreement,
and acquired the right for two additional units of capacity under the March 1999
agreement. Under these agreements, Telemonde is also required to pay annual
maintenance charges. As a result of the Company's liquidity problems detailed
above, Telemonde was unable to fulfill its obligations under these agreements,
including being delinquent on its annual maintenance charges, resulting in an
overall default to MCI WorldCom in the amount of approximately $26 million.

In light of these circumstances, Telemonde has executed a Standstill Letter from
MCI WorldCom on December 31, 1999 in which MCI WorldCom has agreed to refrain
from (a) taking any action to enforce payment of the sums owed to MCI WorldCom
under the capacity purchase agreements; (b) taking any action to enforce or make
a demand under any guarantee, indemnity or security related to the capacity
purchase agreements; and (c) commencing any insolvency proceedings against
Telemonde or any of its subsidiaries. The Standstill Letter expires upon the
earlier of (i) the full payment of the sums owed under the capacity purchase
agreements; (ii) May 31, 2000; or (iii) Telemonde's failure to comply with a
number of terms and conditions, which includes the prohibition against the sale
of assets, dividends and the borrowing of any additional funds without the
signed written consent of MCI WorldCom's agent other than permitted borrowings.

Telemonde has also executed a letter of intent dated December 31, 1999 termed a
"Capacity Swap Letter" in which MCI WorldCom has agreed to enter into a binding
agreement with Telemonde to permit Telemonde to swap the bandwidth purchased
under the above capacity purchase agreements for bandwidth on MCI WorldCom's
European Ulysses network. The Capacity Swap Letter is conditional on
satisfaction by Telemonde of its obligations under the Standstill Letter.

We cannot assure you that the two re-negotiated letters will be contractually
closed. In the event that they are not closed, the existing contracts will
remain in force. We are currently behind with our payments based upon the
existing contracts and would therefore have to rely on the suppliers'
flexibility in rescheduling payment terms. The events of default under the
existing contracts could endanger our existence.

Atlantic Crossing Limited Capacity Purchase Agreement. Telemonde, through its
now wholly owned subsidiary Telemonde Bandwidth (Bermuda) Limited, agreed to
acquire an aggregate of 16 STM-1(s) on Segment S-1 from Atlantic Crossing
Limited, under a Capacity Purchase Agreement dated June 10, 1998. Since the
summer of 1999, we have not drawn down any capacity from Atlantic Crossing and
have not made any payments under this agreement and are in default under the
payment terms in the amount of approximately $52 million, in addition to
interest and outstanding maintenance payments. Management is in discussions with
Global Crossing, the parent company of Atlantic Crossing, to renegotiate the
terms of the contract, including the extension of capacity drawdowns to include
the entire Global Crossing system, rather than just transatlantic capacity. This
will allow Telemonde to expand according to its overall business strategy.

Despite the defaults with MCI WorldCom and Global Crossing detailed above,
Telemonde has been in extensive negotiations with senior management in both
organizations from the end of 1999 and continuing into May 2000. It

                                       16
<PAGE>

should also be noted that while these discussions have been held, Telemonde has
made payments to both suppliers for services. It is the opinion of Telemonde's
management that the ongoing negotiations with both suppliers will lead to a
successful conclusion of the outstanding defaults and provide Telemonde with
much more flexible supply contracts.

Gemini Capacity Purchase Agreement. On April 3, 1998, Telemonde, through its now
wholly owned subsidiary Telemonde International Bandwidth (Bermuda) Limited,
purchased Indefeasible Rights of Use relating to transatlantic capacity from
Gemini Submarine Cable System Limited. Specifically, Telemonde agreed to acquire
up to a maximum of STM-16. Due to a subsequent and rapid decline in the market
for wholesale telecommunications bandwidth, the capacity sale agreement was
amended by three letter agreements dated January 27, April 16, and April 22,
1999. These amendments provided that an IRU for only one (1) STM-1 would be
acquired, and a second STM-1 would be leased for a lump sum payment plus monthly
payments for a three-month period ending July 16, 1999. Further negotiations
between the parties provided that the lump sum payment would fall due on October
7, 1999 in the form of two promissory notes. Telemonde has paid Gemini the full
balance owing for the IRU relating to the first STM-1. However, Telemonde has
not fulfilled its obligations under two promissory notes in the amount of $2.7
million. Although this default gives Gemini the right to immediately terminate
the Indefeasible Rights of Use, Gemini has not done so as of the date of this
filing. Furthermore, such a termination would not substantially effect
Telemonde's bandwidth sales contracts, as it only has one customer operating on
the Gemini network under this particular capacity purchase agreement, and this
customer is protected under the agreement with Gemini.

Current Obligations to Communications Collateral Limited. On April 15, 1999,
Telemonde, through its now wholly owned subsidiary Telemonde Investments
Limited, entered into a series of agreements with Communications Collateral
Limited, including, among others, agreements for: (1) the sale of an IRU for
bandwidth to Communications Collateral Limited; (2) the grant of an option to
Communications Collateral Limited which, among other things, required Telemonde
to repurchase the bandwidth upon Communications Collateral Limited's request;
and (3) a $1 million loan by Communications Collateral Limited to Telemonde due
and repaid on August 12, 1999. In connection with these principle agreements,
the three subsidiaries of Telemonde Investments Limited guaranteed the
obligations of Telemonde Investments Limited under those agreements, including
its obligation to pay back the loan and to repurchase the bandwidth in the event
that Communications Collateral Limited exercised its option.

On August 14, 1999, Communications Collateral Limited exercised its option to
require Telemonde to repurchase the capacity. Telemonde was unable to complete
this repurchase. As of March 31, 2000, $3.7 million is owed to Communications
Collateral Limited. As a result, Communications Collateral Limited has the right
to foreclose on essentially all of the assets of Telemonde Investments Limited,
including its ownership interests in the three subsidiaries of Telemonde
Investments Limited, all of the assets in any of the foregoing subsidiaries,
including their rights under Telemonde's bandwidth sale contracts; and any
ownership interest the foregoing subsidiaries might have in any other Telemonde
entities until the default is cured. The amount of the foreclosure, however,
would not have exceeded the amount of the indebtedness.

Liabilities at March 31, 2000. As of March 31, 2000, Telemonde had $107.0
million of total liabilities. This included $80.9 million owed to capacity
suppliers relating to undrawn bandwidth and $3.7 million owed to Communications
Collateral Limited. As of March 31, 2000, we therefore had incurred events of
default in respect of $84.6 million of the total liabilities.

We also had the following obligations, included in the total liabilities of
$107.0 million at March 31, 2000:

 .    $1.0 million in loans to EquiTel from Rhone Financial Indemnity Re Limited,
     repayable when EquiTel's resources permit.
 .    $2.1 million in loans to Telemonde from The Atlas Corporation Limited.
 .    $1.2 million in loans from Kingsfame Investments Ltd.

At March 31, 2000 we had no material capital commitments. We intend to establish
our own operations center, as described in the Network Section of Item 1 of the
Company's 1999 Annual Report on Form 10-K. This will involve capital
expenditures in respect of network equipment and connectivity. The intended
sources of funds for these types of expenditures are described below.

                                       17
<PAGE>

Fund Raising Plans. We currently do not have the full capital base or working
capital facilities to meet our projected commitments. We are currently seeking
short-term debt finance, primarily to repay the obligations to Communications
Collateral Limited. In addition, we plan to raise additional equity in order to
provide us with an increased capital base for the future.

We can give no assurance that our plans to raise additional equity will be
successful. If we fail to obtain the necessary capital, or if we obtain an
insufficient amount of capital, this would harm our prospects and could
jeopardize our existence. In March 2000, Telemonde's listing on the National
Association of Securities Dealers Over-The-Counter Bulletin Board was suspended
and it is unlikely that new equity financing will be available until such time
as the listing is reinstated. We have benefited in the past from the willingness
of suppliers to reschedule commitments and payments and may continue to require
and take advantage of such flexibility in the future. However, this reliance on
supplier flexibility for short term funding inevitably leads to pressure from
suppliers. In addition, it has resulted in the past and could result in the
future in formal events of default, which could endanger us, especially if this
supplier flexibility ceased to be available. It is for this reason that we plan
to seek substantial external funding.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Telemonde's primary market risk exposure relates to changes in foreign currency
rates. Telemonde is exposed to the risk of fluctuations in foreign currency
exchange rates due to the international nature and scope of its operations. In
the future, Telemonde expects to continue to derive a significant portion of its
net revenue and incur a significant portion of its operating costs outside the
United States, and changes in foreign currency exchange rates may have a
significant effect on Telemonde's results of operations. Telemonde historically
has not engaged in hedging transactions to mitigate foreign exchange risk.

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

EquiTel's revenues will be mainly received in the local currency of the country
of operations (for example, in Omani rigals in the case of the current contract
in Oman). As EquiTel's contracts are mainly contracted through local joint
ventures and partnerships, much of the costs of the contract are also incurred
in the same local currency. However, there will be an exchange risk on the
profit or loss of the local operations or joint venture arising from the
fluctuation of the local currency, against the pounds sterling (in which
currency EquiTel's central sales, general and administrative costs in London are
mainly incurred).

                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

From time to time, the Company is party to litigation or other legal proceedings
that each company considers to be a part of the ordinary course of its business.
The Company is not involved in any legal proceedings nor is it party to any
pending or threatening claims that could reasonably be expected to have a
material adverse effect on its financial condition or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

No securities of Telemonde which were not registered under the Securities Act of
1933, as amended (the "Securities Act"), have been sold by Telemonde during the
first quarter of 2000, except as follows:

(a)  On January 14, 2000, Telemonde issued 1,560,166 shares of its common stock
     to Communications Collateral Limited pursuant to the terms of a Forbearance
     Agreement, dated January 12, 2000. An exemption from registration is
     claimed under Section 4(2) of the Securities Act.

                                       18
<PAGE>

(b)  On January 31, 2000, Telemonde issued 9,917,356 shares of its common stock
     to Fastfirm Limited at par for the purpose of assisting Telemonde in
     meeting additional financing requirements imposed under a Standstill
     Agreement with MCI WorldCom. Fastfirm pledged its shares of Telemonde to
     MCI WorldCom as a guaranty for Telemonde's obligations under the Standstill
     Agreement. An exemption from registration is claimed under Section 4(2) of
     the Securities Act.

(c)  On February 10, 2000, Telemonde issued 1,427,820 shares of its common stock
     to Atlas Corp. Ltd. as a security pledge against loans from Atlas to
     Telemonde. Upon repayment of the loan, Telemonde may redeem the shares. An
     exemption from registration is claimed under Section 4(2) of the Securities
     Act.

(d)  On March 21, 2000, Telemonde issued 1,750,000 shares of its common stock to
     Sheikh Ahmed Farid under the terms of an agreement between Telemonde,
     EquiTel Communications Limited, a wholly-owned subsidiary of Telemonde, and
     Sheikh Farid, regarding the acquisition by EquiTel of an additional 26%
     interest in Desert Telecommunications Services LLC in Oman. An exemption
     from registration is claimed under Section 4(2) of the Securities Act.

(e)  On March 21, 2000, Telemonde issued 71,429 shares of its common stock to
     Miguel Tirado in partial consideration for his service as a non-executive
     director of Telemonde. An exemption from registration is claimed under
     Section 4(2) of the Securities Act.

(f)  On March 22, 2000, Telemonde issued 425,000 shares of its common stock to
     John Havens, as a designee for Chirone Investments Limited. The shares were
     part of the 1,716,360 shares to be issued to Chirone as partial
     consideration for the forgiveness of an aggregate of $16.25 million
     previously loaned by Eaglescliff Investments Limited, Chirone Investments
     Limited, Hamptonne Limited and True Blue Enterprises. An exemption from
     registration is claimed under Section 4(2) of the Securities Act.

(g)  On March 22, 2000, Telemonde, issued 250,000 shares of its common stock to
     William Pomeroy, as a designee for Chirone Investments Limited. The shares
     were part of the 1,716,360 shares to be issued to Chirone as partial
     consideration for the forgiveness of an aggregate of $16.25 million
     previously loaned by Eaglescliff Investments Limited, Chirone Investments
     Limited, Hamptonne Limited and True Blue Enterprises. Exemption from
     registration is claimed under Section 4(2) of the Securities Act.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits required by Item 601 of Regulation S-K are incorporated herein
        by reference and are listed on the attached Exhibit list.

(b)     During the quarter ended March 31, 2000, Telemonde did not file any
        report of form 8-K.

                                       19
<PAGE>

                                  SIGNATURES
                                TELEMONDE, INC.

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

                                   TELEMONDE, INC.



Date: March 12, 2000               By: /s/ Paul E. Donofrio
      --------------                   -----------------------------------------
                                      Paul E. Donofrio, Executive Vice President
                                      and Chief Financial Officer

                                       20
<PAGE>

                                  EXHIBIT INDEX
                                  -------------

Exhibit No.      Description
----------       -----------

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

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

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

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

2.5(a)*          Share Purchase Agreement for the sale and purchase of all the
                 issued capital shares of Carnival Enterprises Limited and 10%
                 of the issued share capital of ITS Europe, S.L. among (1)
                 Market Consultant Limited, (2) Volim Holding B.V., (3) Callaway
                 Continental Limited and (4) EquiTel Communications, dated
                 October 22, 1999.

2.5(b)*          Share Purchase Agreement for the sale and purchase of 400,000
                 shares of common stock of Telemonde, Inc. between Market
                 Consultant Limited and Callaway Continental Limited, dated
                 October 22, 1999.

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

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

3.2*             By-Laws of Telemonde, Inc.

4.1*             Form of Common Stock Certificate.

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

4.3*             Registration Rights Agreement between Telemonde, Inc. and
                 Atlantic Crossing, Ltd. dated August 25, 1999.

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

10.2*            Warrant from Telemonde, Inc. to Atlantic Crossing, Ltd., dated
                 August 25, 1999.

10.3*            Consulting Agreement between Telemonde, Inc. and Gottfried von
                 Bismarck, dated November 2, 1999 and effective as of July 1,
                 1999.

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

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

                                       21
<PAGE>

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

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

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

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

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

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

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

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

10.9*            Transmission Capacity Agreement between Telemonde International
                 Bandwidth Limited and Communications Collateral Limited and
                 Capacity Option Agreement between Telemonde Investments Limited
                 and Communications Collateral Limited, both dated April 15,
                 1999.

10.10*           Composite Guarantee and Debenture, among (1) Telemonde
                 Investments Limited, (2) Telemonde International Bandwidth
                 (Bermuda) Limited, Telemonde Bandwidth (Bermuda) Limited,
                 Telemonde International Bandwidth Limited, and (3)
                 Communications Collateral Limited, dated April 12, 1999.

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

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

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

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

21*              Subsidiaries of Registrant.

27               Financial Data Schedule.

99.1*            Heads of Agreement between Telemonde, Inc. and the shareholders
                 of Global Communications Holdings (Limited) and Telemonde,
                 Inc., dated November 5, 1999.

                                       22
<PAGE>

99.2*            Agreement relating to a Lease and Services Agreement between
                 Global Switch (London) Limited and Telemonde Networks Limited,
                 dated November 8, 1999.

99.3*            Term Sheet for the purchase of 16% to 51% of DeserTel, dated
                 November 8, 1999.

*Previously filed as an exhibit to the 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 on Form 10/K, as filed
with the SEC on March 30, 2000.

                                       23