<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 June 30, 2002
                                   -------------

OR

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

    For the transition period from __________ to _______________

                       Commission file number: 000-28113

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

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

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

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

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

         Yes  X   No ____
             ---

         As of August 1, 2002, Telemonde, Inc. had issued and outstanding
121,876,118 shares of common stock, $.001 par value per share.

                                       1

<PAGE>

                                TELEMONDE, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                Page Number
                                                                                -----------
                               PART I - FINANCIAL INFORMATION
<S>                                                                             <C>
              Independent Accountant's Report                                             3

Item 1.       Financial Statements

              Consolidated Financial Statements:

              Consolidated Balance Sheets -
                  June 30, 2002 and December 31, 2001                                     4

              Consolidated Statements of Income -
                  Three and six months ended
                  June 30, 2002 and 2001                                                  5

              Consolidated Statements of Cash Flow -
                  Six months ended
                  June 30, 2002 and 2001                                                  6

              Notes to Consolidated Financial Statements                                  7

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                   9

              Forward-Looking statements                                                  9
              Introduction                                                               10
              Strategy                                                                   10
              Operating Risks                                                            10
              Results of Operations                                                      11
              Liquidity and commitments                                                  12

Item 3.       Quantitative and Qualitative Disclosures About Market Risk                 14

                                PART II - OTHER INFORMATION

Item 1.       Legal Proceedings                                                          14

Item 2.       Changes in Securities and Use of Proceeds                                  14

Item 5.       Other Information                                                          14

Item 6.       Exhibits and Reports on Form 8-K                                           15

Signatures                                                                               15

Exhibits index                                                                           15
</TABLE>

                                             2

<PAGE>

INDEPENDENT ACCOUNTANT'S REPORT

To the Stockholders of
Telemonde Inc

We have reviewed the accompanying consolidated balance sheet of Telemonde, Inc.
and subsidiaries as of June 30, 2002, and the related consolidated statements of
income and cash flows for the three and six month periods ended June 30, 2002
and 2001. 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.

As discussed in note 1 to the financial statements, the Company has incurred
accumulated losses of $193.0 million and at June 30, 2002, total liabilities
exceeded total assets of $120.6 million. Management plans in this regard are
disclosed in note 2. There is substantial doubt about the ability of the Company
to continue as a going concern. Adjustments have been made to 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.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet as of December 31,
2001 and the related consolidated statements of income, stockholders' equity and
cash flows for the year then ended, not presented herein, and in our report
dated April 11, 2002, we expressed an unqualified opinion with an explanatory
paragraph on those consolidated financial statements. We reported that there is
substantial doubt about the ability of the Company to continue as a going
concern. The financial statements include adjustments relating to the
recoverability of recorded assets, or the amounts of liabilities, that might be
necessary in the event that the Company cannot continue in existence. In our
opinion the information set forth in the accompanying consolidated balance sheet
as of December 31, 2001 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
August 13, 2002

                                       3

<PAGE>

PART I. - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                                 TELEMONDE, INC.
                          Consolidated Balance Sheets
                      (US Dollars expressed in thousands)
<TABLE>
<CAPTION>
                                                                    At June 30         At December 31
                                                                          2002                   2001
                                                                   (unaudited)              (audited)
Assets
<S>                                                                 <C>                    <C>
Cash and cash Equivalents                                           $       21             $       26
Trade accounts receivable, net of allowance
   for doubtful debts of $50 in 2002 and $468 in 2001                      105                    861
Prepayments and other debtors                                              286                    801
                                                                    ----------             ----------
Total current assets                                                       412                  1,688
                                                                    ----------             ----------

Property, plant and equipment                                               16                    194
Investment in associated company                                             0                    180
                                                                    ----------             ----------

Total assets                                                        $     428              $    2,062
                                                                    ----------             ----------


Liabilities and stockholders' equity
Trade accounts payable                                                  73,066                 72,689
Other creditors and accrued expenses                                    28,804                 28,248
Deferred income                                                          5,869                  5,683
Short term notes                                                        13,289                 12,842
                                                                    ----------             ----------
Total current liabilities                                              121,028                119,462
                                                                    ----------             ----------


Stockholders' equity
Preferred stock                                                             50                     50
Common stock                                                               122                    122
Additional paid in capital                                              72,257                 72,257
Retained deficit                                                      (193,029)              (189,829)
                                                                    ----------             ----------
Total stockholders' deficit                                           (120,600)              (117,400)
                                                                    ----------             ----------
Total liabilities and stockholders' equity                          $      428             $    2,062
                                                                    ==========             ==========
</TABLE>

See accompanying notes and independent accountants' report

                                       4

<PAGE>

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

<TABLE>
<CAPTION>
                                                                 Three months ended             Six months ended
                                                                 -------------------            ----------------
                                                                       June 30                       June 30
                                                                       -------                       -------
                                                                      2002           2001           2002          2001
                                                                      ----           ----           ----          ----
<S>                                                           <C>             <C>             <C>           <C>
Revenues                                                      $        824    $     2,764     $    1,773    $   10,921

Cost of sales                                                          534          4,103          1,227        11,164

                                                              ------------    -----------     ----------    ----------
Gross margin                                                           290         (1,339)           546          (243)
                                                              ------------    -----------     ----------    ----------

Operating expenses

Selling, general and administrative expenses                           981          2,856          2,037         5,915

Amortization of goodwill                                                 0            879              0         1,758

Provision for contract terminations                                   (228)         2,500         (1,156)        2,500

Financing costs                                                          0             50              0            50

Impairment of goodwill                                                   0          6,632              0         6,632

Impairment of investment                                                 0              0            119             0

Bad and doubtful debts                                                  33            279            604           401

                                                              ------------    -----------     ----------    ----------
Operating expenses                                                     786         13,196          1,604        17,256
                                                              ------------    -----------     ----------    ----------

Operating loss                                                        (496)       (14,535)        (1,058)      (17,499)
                                                              ------------    -----------     ----------    ----------

Other income (expense)
Interest income                                                          0             73              0           185

Interest expense                                                      (891)          (493)        (1,762)         (995)

Foreign exchange gains                                                (688)           113           (380)          620

                                                              ------------    -----------     ----------    ----------
Total other income (expense)                                        (1,579)          (307)        (2,142)         (190)
                                                              ------------    -----------     ----------    ----------

Loss for the period from continuing operations                      (2,075)       (14,842)        (3,200)      (17,689)

Discontinued operations                                                  0           (163)             0          (133)

                                                              ------------    -----------     ----------    ----------
Loss for the period                                                 (2,075)       (15,005)        (3,200)      (17,822)
                                                              ============    ===========     ==========    ==========

Loss per share - basic and diluted
Continuing Operations                                               ($0.02)        ($0.13)        ($0.03)       ($0.16)
$  (0.01)    $ (0.03)
                                                                         -         ($0.00)             -        ($0.00)
Discontinued operations                                       ------------    -----------     ----------    ----------

Loss for the period                                                 ($0.02)        ($0.13)        ($0.03)       ($0.16)
                                                              ============    ===========     ==========    ==========
</TABLE>

See accompanying notes and independent accountant's report.

                                       5

<PAGE>

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

<TABLE>
<CAPTION>
                                                                       Six months ended June 30
                                                                       ------------------------
                                                                            2002           2001
                                                                            ----           ----
<S>                                                                     <C>             <C>
Operating activities
           Loss                                                           $ (3,200)   $(17,822)

Adjustments to reconcile loss to net cash provided by (used in)
operating activities:
           Bad and doubtful debts                                              604         220
           Amortization of goodwill                                              -       6,978
           Depreciation                                                        178       1,339
           Fees satisfied by issuance of stock                                   -       1,445
           Fees satisfied by issuance of short term notes                        -         935
           Minority interests                                                    -          (1)
           Unrealized gains on foreign currency transactions                   200        (450)
           Decrease in investment in associated company                        180           -
           (Increase) decrease in trade accounts receivable                    699       2,937
           (Increase) decrease in prepayments and other debtors                (32)      6,390
           Increase (decrease) in trade accounts payable                       377         788
           Increase (decrease) in accrued expenses                             556      (1,573)
           Increase (decrease) in deferred income                              186        (955)

                                                                          --------    --------
Net cash provided by (used in) operating activities                           (252)        231
                                                                          --------    --------

Investing activities
           Purchase of property, plant and equipment                             -         (55)
                                                                          --------    --------
           Net cash used in investing activities                                 -         (55)
                                                                          --------    --------

Financing activities
          Repayment of short term notes                                          -        (267)
          Proceeds from short term notes                                       247           -
                                                                          --------    --------
          Net cash provided by (used in) financing activities                  247        (267)
                                                                          --------    --------

                                                                          --------    --------
Net cash provided by discontinued operations                                     0           0
                                                                          --------    --------

Net increase (decrease) in cash and cash equivalents                            (5)        (91)

Cash and cash equivalents beginning of period                                   26       1,430
                                                                          --------    --------

Cash and cash equivalents end of period                                   $     21    $  1,339
                                                                          ========    ========

Supplemental disclosure of cash flow information:

          Interest paid                                                   $      -    $      5
</TABLE>

See accompanying notes and independent accountants' report

                                       6

<PAGE>

                                TELEMONDE, INC.
                   Notes to Consolidated Financial Statements
                                 June 30, 2002

1. The financial statements have been prepared on the basis that we may not be
able to continue as a going concern. Adjustments have been made in these
Financial Statements to reduce the carrying value of assets to estimated
recoverable amounts, and to reclassify liabilities on this basis. As at June 30,
2002, we had a retained deficit of $193.0 million and an excess of liabilities
over assets of $120.6 million.

2. There is substantial doubt about our ability to continue as a going concern.
Management is addressing the ongoing solvency of the company including cutting
costs, seeking fresh financing and the focussing on the provision of high-margin
advisory services to the telecommunications sector. 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. Our UK subsidiary companies have recently reached
voluntary agreements with their creditors under Part I of the Insolvency Act
1986 (similar to Chapter 11 protection). This agreement is binding on all
creditors and was accepted by the vast majority in each case, including all the
principal creditors by value.

3. 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 June 30, 2002, 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 (pound)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. Detailed negotiations concerning how the value would
be provided between the third party and Global Crossing were in progress when
Global Crossing sought 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 $62.3
million.

4. 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 take delivery of 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

                                       7

<PAGE>

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
intended to seek to renegotiate a standstill once the Global Crossing liability
has been settled. On July 21, 2002, WorldCom filed voluntary petitions for
reorganization under Chapter 11 of the US Bankruptcy Code. The position
therefore is uncertain, nevertheless, it is Management's intention to ask
WorldCom to relieve us of this liability when WorldCom are in a position to
agree to such a request.

5.  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 June 30, 2002 our outstanding
debt to CCL was $3.3 million. Interest is accruing on the outstanding amount at
the rate of 12.5% per annum. We have agreed to repay the outstanding balance at
a rate of $100,000 per month but in any event as quickly as practicable. 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 of $2 million
due for failure to issue these as free trading shares.

6.  We have a debt obligation under a Capacity Purchase Agreement to Gemini. As
at June 30, 2002, the outstanding debt was $2.2 million. As at June 30, 2002, 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%.

7.  At June 30, 2002, our principal UK trading subsidiaries had debt liabilities
to the Inland Revenue, the collector of payroll taxes in the United Kingdom, in
the amount of $2.4 million.

8.  Reference is made to the Notes to Consolidated Financial Statements
contained in our December 31, 2001 audited consolidated financial statements
included in our 2001 Annual Report on Form 10-K filed with the SEC on April 19,
2002. 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.

9.  At August 1, 2002, we had issued and outstanding 121,876,118 shares of
common stock and 5,000,000 shares of preferred stock designated as Series A
Convertible Preferred Stock ("Series A Preferred Stock"). This has not changed
since December 31, 2001. Each share of Series A Preferred Stock may be converted
into approximately 4.6 shares of our common stock and carries voting rights
equal to the voting rights and powers of the common stock. Holders of Series A
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 Series A 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.

10. The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 128, "Basic and Diluted EPS." The
calculation of basic earnings per share in accordance with SFAS No. 128 is as
follows:

<TABLE>
<CAPTION>
                                                               Three months ended 30 June
                                                                 2002                2001
<S>                                                          <C>                  <C>
Loss attributable to common stockholders                     $ (2,075,000)        $(15,005,000)

Average common shares issued and outstanding                  121,876,118          113,050,186

Basic and diluted loss per share                             $      (0.02)        $      (0.13)

                                                                   Six months ended 30 June
                                                                    2002               2001

Loss attributable to common stockholders                     $ (3,200,000)        $(17,822,000)
</TABLE>

                                       8

<PAGE>

Average common shares issued and outstanding      121,876,118    113,036,452

Basic and diluted loss per share                 $      (0.03)  $      (0.16)


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

11. On March 29, 2001, we entered into an agreement with Home Run Limited to
extend the repayment period of the (pound)5.0 million ($7.5 million) facility
advanced by Home Run. The loan bears interest at LIBOR plus 2 per cent and was
repayable on April 26, 2002. Management is in discussion with Home Run Limited
regarding the extension of this facility. The loan is convertible into shares of
our common stock at the option of Home Run, based on a conversion price of $0.16
per share.

12. In May 2001, we sold our remaining interest in Desert Telecommunications
Services LLC. The operations of Desert Telecommunications Services LLC have been
reported separately as discontinued operations in the accompanying financial
statements.

13. In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of Statement No. 13, and Technical Corrections."
SFAS No. 145, rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt", and also rescinds an amendment of that Statement, SFAS
No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements".
This Statement also rescinds SFAS No. 44, "Accounting for Intangible Assets of
Motor Carriers", and amends SFAS No. 13, "Accounting for Leases", to eliminate
an inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. We do not believe the
adoption of SFAS 145 will have a material impact on the results of our
operations.

14. On August 9, 2002, voluntary arrangements for the satisfaction of
outstanding debts were agreed between our principal UK trading subsidiaries,
Telemonde Networks Limited, EquiTel Communications Limited and Telemonde Finance
Limited and their respective creditors and members. In the event that one or
more of these companies fails to make the necessary payments, the insolvency
practitioners appointed may seek to liquidate the relevant company.
Nevertheless, this provides certain stability for the UK operations and
management believes that this is the fairest way of securing an even
distribution to the creditors of these subsidiaries. The voluntary arrangements
were supported by virtually all creditors including all the most significant by
value.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q 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. Although we believe
that our expectations are based on reasonable assumptions, we can give no
assurance that our expectations will be achieved. The important factors that
could cause actual results to differ materially from those in the
forward-looking statements herein include certain risks identified in this
Quarterly Report and other risks referenced from time to time in our filings
with the SEC, including our 2001 Annual Report on Form 10-K filed with the SEC
on April 19, 2002.

                                       9

<PAGE>

You should read the following discussion and analysis together with our
Financial Statements, including the notes, appearing elsewhere in this Quarterly
Report and in our Annual Report on Form 10-K.

Introduction

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

Our principal areas of business are switched voice services and
telecommunications advisory services. Our customers include telecommunications
carriers, telecoms hotel developers and investors in telecommunication
companies. We have substantially wound down our trading activities. Whilst
certain residual business continues, we are concentrating on high-value advisory
work.

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.

Operating Risks

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

We were organized in March 1998. We have incurred operating losses and negative
cash flow since our inception. From the date of inception to June 30, 2002 we
have incurred losses of $120.6 million. We have incurred a deficit on total
stockholders' equity of $193.0 million for the period from March 10, 1998
through June 30, 2002. We may continue to incur losses and negative cash flow in
the foreseeable future.

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
payments, the issuance of debt primarily by way of short-term financing and the
proceeds from sales of shares of common stock.

We have a substantial level of indebtedness.

We have incurred a high level of debt. As of June 30, 2002, we had a combined
total liability of $121.0 million, including: $17.3 million due to WorldCom;
$50.3 million due to Global Crossing and a loan from Home Run Limited of $7.5
million convertible into shares of Common Stock at their option. We are also
indebted to Communications Collateral Limited in the sum of $3.4 million, Gemini
in the sum of $2.2 million and the Inland Revenue (the UK collector of taxes) in
the sum of $2.4 million.

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.

                                       10

<PAGE>

       .      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 or continue our current business and may cause us to cease
trading. Our principal UK trading subsidiaries have reached voluntary agreements
with their creditors in order to avoid being wound up and to assist an even
repayment of sums owed. Failure to generate sufficient funds to make the
relevant payments under the arrangement will result in one or more of the UK
subsidiaries being wound-up.

Results of Operations

For the three months ended June 30, 2002 compared with the three months ended
June 30, 2001.

Revenues for 2002 were $0.8 million compared with $2.8 million for 2001.
Bandwidth revenues from existing contracts were $0.4 million compared with $5.1
million for 2001. Voice services revenues fell to $0.2 million from $0.4 million
in 2001 and advisory services revenues were $0.3 million with no comparative in
2001.

Cost of sales for 2002 fell to $0.5 million compared with $4.1 million for 2001
largely as a result of the reduced revenue levels on bandwidth and voice
services.

Selling, general and administrative expenses were $1.0 million in 2002 compared
with $2.9 million in 2001. The decrease of $1.9 million consisted mainly of $0.9
million arising from lower staffing costs and $0.5 million lower professional
fees.

As goodwill has been fully written off there was no charge for amortization or
impairment of goodwill in 2002 compared with $0.9 million and $6.6 million
respectively in 2001.

Gains arising from contract negotiations with customers were $0.2 million in
2002 compared with a loss provision of $2.5 million in 2001.

The bad and doubtful debt charge was negligible in 2002 compared with the $0.3
million charge in 2001.

There was no interest income in 2002 compared with $0.1 million in 2001.

Interest expense increased to $0.9 million in 2002 compared with $0.5 million in
2001 due to accrual of interest on a supplier debt.

Foreign exchange losses were $0.7 million in 2002 compared with gains of $0.1
million in 2001 due to the deterioration in value of the US dollar in the
quarter.

The loss for the three months ended June 30, 2002 was $2.1 million compared with
$15.0 million in 2001.

For the six months ended June 30, 2002 compared with the six months ended June
30, 2001.

Revenues for 2002 were $1.8 million compared with $10.9 million for 2001.
Bandwidth revenues from existing contracts were $1.0 million compared with $8.7
million for 2001. Voice services revenues fell to $0.5 million from $1.4
million. Advisory services revenues were $0.3 million compared with $0.5 million
in 2001.

Cost of sales for 2002 fell to $1.2 million compared with $11.2 million for 2001
largely as a result of the reduced revenue levels on bandwidth and voice
services.

                                       11

<PAGE>

Selling, general and administrative expenses were $2.0 million in 2002 compared
with $5.9 million in 2001. The decrease of $3.9 million consisted mainly of $1.8
million arising from lower staffing costs and $1.0 million lower professional
fees.

As goodwill has been fully written off there was no charge for amortization or
impairment of goodwill in 2002 compared with $1.8 million and $6.6 million
respectively in 2001.

Gains arising from contract negotiations with customers were $1.2 million in
2002 compared with a loss provision of $2.5 million in 2001.

There was an impairment adjustment to investments of $0.1 million in 2002 with
no comparative in 2001.

The bad and doubtful debt charge was $0.6 million in 2002 compared with the $0.4
million in 2001.

There was no interest income in 2002 compared with $0.2 million in 2001.

Interest expense increased to $1.8 million in 2002 compared with $1.0 million in
2001 due to accrual of interest on a supplier debt.

Foreign exchange losses were $0.4 million in 2002 compared with gains of $0.6
million in 2001 due to the deterioration in value of the US dollar in the half
year.

The loss for the six months ended June 30, 2002 was $3.2 million compared with
$17.8 million in 2001.

Liquidity and commitments

Our liquidity requirements arise from:

       .      Net cash used in operating activities.

       .      Interest and principal payments on outstanding indebtedness.

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. In order to prevent any of the UK trading
companies being wound up, the relevant Directors took steps to reach agreement
with their creditors to ensure that all creditors were treated equitably and not
prejudiced by the act of a single creditor. Telemonde Inc has agreed, as far as
it is able, to provide funds to support the voluntary arrangements. 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, other than in the normal course which can be satisfied as
they occur.

Net cash used in operating activities was $0.3 million in the six months ended
June 30, 2002, compared with $0.2 million provided in the six months ended June,
30, 2001.

No cash was used in investing activities in 2002 compared with $55 thousand in
2001.

Net cash provided by financing activities was $0.2 million in 2002 compared with
$0.3 million used in 2001.

Since inception through June 30, 2002, we have had negative cash flow from
operating activities of $20.4 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.

                                       12

<PAGE>

The level of indebtedness at June 30, 2002 is $121.0 million.

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 2001 and
continuing in 2002 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 June 30, 2002, 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 (pound)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. Detailed negotiations concerning how the value would
be provided between the third party and Global Crossing were in progress when
Global Crossing sought 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 $62.3
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 intends to seek to renegotiate a standstill once the Global
Crossing liability has been settled, however whilst WorldCom is the subject of
Chapter 11 reorganization under the US Bankruptcy Code it is unlikely that a
settlement will be reached.

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 June 30, 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

                                       13

<PAGE>

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
June 30, 2002, the outstanding debt was $2.2 million. As at June 30, 2002, 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 entered into a convertible loan facility with Home Run Limited on April 27,
2000. Home Run provided us with a facility of $7.5 million. This sum was
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 June 30, 2002 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.

There is substantial doubt about our ability to continue as a going concern.

ITEM 3.  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 because whilst most of our fees are earned in US dollars,
many of our sales, general and administrative expenses are incurred in London in
pounds sterling.

                          PART II. - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

From time to time, Telemonde is party to litigation or other legal proceedings
that each company considers to be a part of the ordinary course of its business.

Telemonde 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

On May 20, 2002, 1,750,000 shares of common stock owned by Ahmed Bin Fareed Al
Aulaqui were surrendered to us as part of the sale of our remaining stake in
Desert Telecommunications Limited.

ITEM 5.  OTHER INFORMATION.

On August 9, 2002, our principal UK trading subsidiaries, Telemonde Networks
Limited, EquiTel Communications Limited and Telemonde Finance Limited reached
voluntary arrangements with their creditors and members under Part 1 of the
Insolvency Act 1986. The proposals were agreed by virtually all of the creditors
including all the principal creditors by value. The arrangements will be
supervised by K S Tan, 10/12 New College Parade, Finchley Road, London NW3 5EP.
In the event of a failure of a subsidiary to comply with the terms of the
voluntary arrangement, the supervisor may petition for the company to be
liquidated.

                                       14

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

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


                                   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:    August 13, 2002           /s/     ADAM N. BISHOP
     ---------------------         -------------------------------
                                   Adam N. Bishop, President and
                                   Chief Executive Officer

       This report fully complies with the requirements of Section 13 (a) or 15
(d) of the Securities Exchange Act of 1934. The information contained in this
report fairly presents in all material respects the Registrant's financial
condition and results of operations as of the periods stated.

                                   /s/     ADAM N. BISHOP
                                   -------------------------------
                                   Adam N. Bishop, President and
                                   Chief Executive Officer

                                   /s/     KEVIN MAXWELL
                                   -------------------------------
                                   Kevin Maxwell, Chairman and
                                   Director

                                   /s/     ALAN THOMPSON
                                   -------------------------------
                                   Alan Thompson, Corporate
                                   Controller and Executive Vice
                                   President of Finance

                                  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.

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

                                       15

<PAGE>

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.

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.

                                       16

<PAGE>

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.

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.


*             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.

                                       17

<PAGE>

****          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.

+++           Previously filed as an exhibit to the Annual Report for the year
              ended December 31, 2001 on Form 10-K, as filed with the SEC on
              April 19, 2002.

                                       18