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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NO. 0-23087
STARTEC GLOBAL COMMUNICATIONS CORPORATION
STARTEC EMPLOYEE 401(k) PLAN
STARTEC GLOBAL COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 52-2099559
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1151 SEVEN LOCKS RD. 20854
POTOMAC, MD (Zip Code)
(Address of principal executive offices)
301-365-8959
(Registrant's telephone number, including area code)
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STARTEC GLOBAL COMMUNICATIONS CORPORATION
STARTEC EMPLOYEE 401(k) PLAN
FORM 11-K
AS OF DECEMBER 31, 2000
TABLE OF CONTENTS
Part I. Financial Statements
Item 1. Report of Independent Public Accountants ........................................................3
Item 2. Financial Statements
Statements of Net Assets Available for Benefits
As of December 31, 2000 and 1999 ...............................................................4
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2000............................................................5
Item 3. Notes to Financial Statements ...................................................................6
Item 4. Supplemental Schedules
Schedule of Assets Held for Investment Purposes
As of December 31, 2000........................................................................11
Schedule of Nonexempt Transactions
For the year ended December 31, 2000...........................................................12
Schedules omitted because there were no such items For the year
ended December 31, 2000:
Loans or Fixed - Income Obligations
Leases in Default or Classified as Uncollectible
Schedule of Reportable Transactions
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees of the
Startec Employee 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Startec Employee 401(k) Plan (the "Plan") as of December 31, 2000 and
1999, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2000. These financial statements and the
schedules referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in its net assets available for
benefits for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the Plan
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Plan's sponsor has suffered recurring losses from operations and
has a net capital deficiency and a working capital deficit. Although the Plan's
sponsor has not announced plans to terminate the Plan or to discontinue its
matching contributions, the financial condition of the Plan's sponsor raises
substantial doubt about the Plan's ability to continue as a going concern.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes (Schedule I), and nonexempt transactions
(Schedule III) are presented for purposes of additional analysis and are not
a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Vienna, Virginia
June 25, 2001
3
STARTEC EMPLOYEE 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
ASSETS: DECEMBER 31,
----------------------------------
2000 1999
--------------- ----------------
Investments $ 1,915,440 $ 1,587,577
Receivables:
Participant contributions 84,161 30,219
Employer contributions 53,942 1,511
--------------- ----------------
Total receivables 138,103 31,730
--------------- ----------------
Total assets 2,053,543 1,619,307
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LIABILITIES:
Excess contributions payable 52,567 52,187
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NET ASSETS AVAILABLE FOR BENEFITS $ 2,000,976 $ 1,567,120
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The accompanying notes are an integral part of these statements.
4
STARTEC EMPLOYEE 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED
DECEMBER 31,
2000
------------
ADDITIONS:
Additions to net assets attributed to:
Investment income:
Net decrease in fair value of investments $ (580,146)
Interest and dividend income 144,199
------------
(435,947)
Contributions:
Participant 1,070,545
Employer 105,434
Participant rollovers 67,402
------------
Total contributions 1,243,381
------------
TOTAL ADDITIONS 807,434
------------
DEDUCTIONS:
Deductions from net assets attributed to:
Benefits paid to participants (373,578)
------------
Net increase in net assets 433,856
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 1,567,120
------------
End of year $ 2,000,976
============
The accompanying notes are an integral part of this statement.
5
STARTEC EMPLOYEE 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 2000 AND 1999
1. DESCRIPTION OF THE PLAN:
The following description of the Startec Employee 401(k) Plan (the "Plan") is
provided for general information purposes only. Participants should refer to the
Plan document for a complete description of the Plan's provisions.
Startec Global Communications Corporation (the "Company" or the "Sponsor")
has suffered recurring losses from operations and has a net capital
deficiency and a working capital deficit. It is also out of compliance with
certain financial and other subjective covenants. If the respective lenders
were to demand payment for such borrowings outstanding, it is unlikely that
the Company would have the available resources to make such payments at this
time. The Company is in discussions with its lenders to obtain additional
debt financing and with holders of its $160 million senior notes to
restructure the indebtedness outstanding under the senior notes. There can be
no assurance that such new financing will be available on terms the Company
finds acceptable or at all.
In the event that the Company is unable to obtain such additional financing or
restructure the senior notes, it will be required to further limit or curtail
its operations, and the Company may resort to selling assets to the extent
permitted by its debt facilities. Even with such actions, management believes
that if the Company cannot restructure the terms of the senior notes or raise
additional financing, it is unlikely that the Company will make the November
2001 interest payment of approximately $9.6 million on its senior notes.
Furthermore, if the Company cannot restructure the senior notes, there will be a
material and adverse effect on the financial condition of the Company, to the
extent that a restructuring, sale or liquidation of the Company will be required
in whole or in part.
Although the Company has not announced plans to terminate the Plan or to
discontinue its matching contributions, the financial condition of the Company
raises substantial doubt about the Plan's ability to continue. The contributions
receivable reflected in the December 31, 2000, statements of net assets
available for benefits were funded to the Plan by the Company during 2001.
GENERAL - The Plan, which was adopted on January 1, 1998, is a defined
contribution plan covering all eligible full-time employees over the age of
twenty. Prior to October 1, 2000, employees were eligible for Plan
participation on the employee's hiring date. Effective October 1, 2000, the
Company amended the employee eligibility requirements to participate in the
Plan such that employees become eligible after three months of service,
starting with the first day of employment. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS - Participants may contribute, subject to certain restrictions, up
to 15 percent of their compensation to the Plan. These contributions are
invested at the participant's direction into funds administered by John Hancock
Funds, Inc. ("John Hancock" or the "Custodian").
The Company may make discretionary contributions and/or matching contributions
at the option of the Company's board of directors, subject to certain
restrictions. There is no minimum number of hours of service requirement to
receive employer contributions if the participant is employed on the last day of
the Plan year. If the participant leaves the Company prior to the end of the
Plan year, the participant must have completed at least 500 hours of service
during the Plan year in order to receive employer matching contributions and/or
discretionary contributions. Effective October 2000, the Company amended the
employer matching
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contributions formula to 2% of the participants' compensation amount, which
is initially invested in the Company's common stock, but may be transferred
at the participant's discretion into other investment vehicles offered under
the Plan. Prior to October 2000, the Company matched 5% of the participants'
contributions into the Company's common stock. There were no discretionary
contributions made during the Plan year ended December 31, 2000.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
participant's contribution, the Company's contribution, and an allocation of the
Plan's earnings. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account.
VESTING - Participants are immediately vested in their contributions plus
actual earnings thereon. A participant becomes vested at the rate of 20% per
year in all employer contributions starting with the participant's hire date
and is fully vested after five years of continuous employment with the
Company.
FORFEITURES - A participant's nonvested employer contribution may be forfeited
if employment is terminated for any reason other than disability, death, or
normal retirement. If forfeiture occurs, the forfeited amount is first used to
pay the Plan's administrative expenses and the remaining balance is used to
reduce future employer contributions. There were forfeitures in the amount of
$7,895 for the year ended December 31, 2000.
BENEFITS - Participants are eligible to receive funds from their accounts under
the following circumstances:
o Attainment of normal retirement age
o Termination of employment
o Hardship withdrawal of elective deferrals
o Death or disability
If a participant's vested interest in the account is no more than $5,000,
benefits will be paid in a lump-sum amount. If a participant's vested balance is
more than $5,000, payouts will be in the form of an annuity unless the annuity
option is waived. Benefits are recorded when paid.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires the
Plan's management to make estimates and assumptions that affect the reported
amounts of net assets available for plan benefits, and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of additions to and deductions from net assets available
for plan benefits during the reporting period. Actual results could differ
from those estimates.
BASIS OF ACCOUNTING - The financial statements have been prepared on the accrual
basis of accounting in accordance with accounting principles generally accepted
in the United States.
EXCESS CONTRIBUTIONS PAYABLE - Employee contributions include excess
contributions, which will be refunded to participants subsequent to year-end, as
the contributions were determined to be in excess of maximum contribution levels
for certain participants. A liability for excess contributions payable has been
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reflected in the statements of net assets available for benefits of $52,567 and
$52,187 as of December 31, 2000 and 1999, respectively.
NEW ACCOUNTING PRONOUNCEMENT - In 1999, the Accounting Standards Executive
Committee issued Statement of Position 99-3, "Accounting for and Reporting of
Certain Defined Contribution Plan Investments and Other Disclosure Matters" (the
"SOP"), which eliminates the requirement for a defined contribution plan to
disclose participant-directed investment programs. The SOP was adopted for the
1999 financial statements.
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are stated
at fair value. John Hancock uses quoted market prices to value investments in
the Plan. Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
ADMINISTRATIVE EXPENSES - Administrative expenses of the Plan are paid by the
Company in accordance with the Plan document. Administrative fees paid by the
Company totaled $10,521 for 2000.
3. PLAN TERMINATION:
While it has not announced plans to terminate the Plan, the Company has the
right to discontinue contributions and terminate the Plan at any time,
subject to the provisions of ERISA. See Note 1 regarding the Company's
liquidity risk factors. Upon termination of the Plan, all participants would
become fully vested and the assets of the Plan would be distributed in
accordance with the Plan document.
5. INVESTMENTS:
The following tables present the fair values of investments as of December 31,
2000 and 1999:
2000 1999
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INVESTMENTS AT QUOTED MARKET VALUES:
John Hancock Global Technology Fund $455,878 * $469,490 *
John Hancock Large Cap Value Fund 428,393 * 353,566 *
John Hancock Small Cap Growth Fund 294,150 * 281,179 *
John Hancock Financial Industries Fund 290,145 * 145,720 *
John Hancock Money Market Fund 151,318 * 84,860 *
John Hancock Sovereign Investors Fund 123,987 * 70,798
John Hancock High Yield Bond Fund 81,849 52,933
Startec Company Stock ( Participant and nonparticipant-directed) 75,433 118,059 *
Loans Receivable 14,287 10,972
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Total Investments $1,915,440 $ 1,587,577
========== ============
* The above investments represent 5% or more of the Plan's net assets as of
December 31, 2000 and 1999, respectively.
During 2000, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by ($580,146) as follows:
Mutual funds $(427,137)
Common stock (153,009)
-----------
($580,146)
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5. PARTICIPANT LOANS:
Participants may borrow up to 50 percent of their vested account or $50,000,
whichever is less, with a minimum loan requirement of $1,000. Loans must be
repaid within five years and are repaid in equal installments through payroll
deductions. Loan repayments of principal and interest are invested based on the
participant's current investment elections. The loans are secured by the balance
in the participant's account and bear interest at a rate equal to one percentage
point above the prime-lending rate, as defined. Th interest rate remains fixed
for the term of the loan. As of December 31, 2000, interest rates ranged from
8.75% to 10.50%. There were participant loans outstanding of $14,287 and $10,972
as of December 31, 2000 and 1999, respectively.
6. INCOME TAX STATUS:
The Company's Plan is a prototype standardized profit sharing plan of John
Hancock Funds, Inc. with a cash or deferred arrangement, which has received a
favorable determination letter on March 4, 1997 from the Internal Revenue
Service stating that the Plan is designed in accordance with applicable
requirements of the Internal Revenue Code (the "IRC"). The Company's management
believes that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC.
7. PROHIBITED TRANSACTION:
Effective February 3, 1997, the Department of Labor regulations require
employers who sponsor pension plans to remit employee contributions as of the
earliest date on which such contributions can reasonably be segregated from the
employer's general assets, but in no event more than 15 business days following
the month in which the participant contribution was withheld or received by the
employer. Failure to remit or untimely remittance of participant contributions
may constitute a use of plan assets for the benefit of the employer or a
prohibited extension of credit. The Company did not remit participants'
contributions
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in a timely manner on several occasions during the year ended December 31, 2000
and 1999. Late remittances by the employer to the Plan are presented on the
accompanying schedule of nonexempt transactions (Schedule III). The Company will
pay all excise taxes and interest on behalf of the Plan to the Department of
Labor concurrent with the Plan's Form 5330 filing in order to resolve these
nonexempt transactions for the year ended December 31, 2000. Concurrent with the
Plan's Form 5330 filing for the year ended December 31, 1999, the Company paid
the Department of Labor all excise taxes and interest accrued on the untimely
remittances of employee contributions.
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SCHEDULE I
STARTEC EMPLOYEE 401(k) PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 2000
IDENTITY OF ISSUE, BORROWER,
LESSOR, OR SIMILAR PARTY DESCRIPTION OF INVESTMENT MARKET VALUE
----------------------------- ------------------------- ------------
PARTICIPANT-DIRECTED:
John Hancock Funds* Global Technology Fund $ 455,878
John Hancock Funds* Large Cap Value Fund 428,393
John Hancock Funds* Small Cap Growth Fund 294,150
John Hancock Funds* Financial Industries Fund 290,145
John Hancock Funds* Money Market Fund 151,318
John Hancock Funds* Sovereign Investors Fund 123,987
John Hancock Funds* High Yield Bond Fund 81,849
John Hancock Funds* Startec Company Stock 75,433
---------------
Total participant-directed 1,901,153
---------------
Participant Loans* Maturing at various dates;
interest rates ranging from
8.75% to 10.50% 14,287
---------------
TOTAL $ 1,915,440
===============
* Party-in-interest
The accompanying notes are an integral part of this schedule.
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SCHEDULE III
STARTEC EMPLOYEE 401(k) PLAN
SCHEDULE OF NONEXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
RELATIONSHIP TO PLAN DESCRIPTION OF TRANSACTIONS, INCLUDING
EMPLOYER, OR MATURITY DATE, RATE OF INTEREST,
IDENTITY OF PARTY INVOLVED OTHER PARTY-IN-INTEREST COLLATERAL, AND PAR OR MATURITY VALUE
--------------------------------------------- -------------------------- ----------------------------------------
Startec Global Communications Corporation Sponsor Lending of money from the Plan to the
employer (contributions not remitted on
a timely basis to the Plan), as follows:
Deemed loan dated April 30, 2000
maturing May 14, 2001 with
interest at 9.75% per annum.
Deemed loan dated October 29, 2000
maturing December 4, 2000 with
interest at 9.75% per annum.
INTEREST
EARNED ON
IDENTITY OF PARTY INVOLVED AMOUNT LOANED LOAN
--------------------------------------------- ------------- ------------
Startec Global Communications Corporation
$50,322 $3,420
$42,967 $221
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$93,489 $3,641
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The accompanying notes are an integral part of this schedule.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this annual report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARTEC GLOBAL COMMUNICATIONS CORPORATION
RETIREMENT SAVINGS PLAN
By: /s/ PRABHAV V. MANIYAR
---------------------------------------------
Chief Financial Officer and Director
(Principal Financial and Accounting Office)
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