Gaztransport & Technigaz
Annual Report 2010

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KGTT Communications, Inc. - GTTFiled: March 11, 2011 (period: December 31, 2010)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010Commission file number 000-51211Global Telecom & Technology, Inc.(Exact Name of Registrant as Specified in Its Charter)Delaware 20-2096338(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)8484 Westpark DriveSuite 720McLean, Virginia 22102(703) 442-5500(Address including zip code, and telephone number, including areacode, of principal executive offices)Securities registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:Common Stock, par value $.0001 per shareClass Z Warrants(Title of Class)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þNote — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act fromtheir obligations under those Sections.Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files). Yes o No oIndicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Actof 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 tosuch filing requirements for the past 90 days. Yes þ No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy statements or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filer oAccelerated filer oNon-accelerated filer oSmaller reporting company þ(Do not check if a smaller reporting company)Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þThe aggregate market value of the common stock held by non-affiliates of the registrant (7,077,710 shares) based on the $0.96 closing price ofthe registrant’s common stock as reported on the Over-the-Counter Bulletin Board on June 30, 2010, was $6,794,602. For purposes of thiscomputation, all officers, directors and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not bedeemed to be an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.As of March 11, 2011 there were outstanding 18,656,754 shares of the registrant’s common stock, par value $.0001 per share.Documents Incorporated by ReferencePortions of our definitive proxy statement for the 2011 Annual Meeting of Stockholders, to be filed within 120 days after the end of the fiscalyear covered by this Form 10-K, are incorporated by reference into Part III hereof.Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. TABLE OF CONTENTS PagePART I Item 1. Business 3 Item 1A. Risk Factors 7 Item 1B. Unresolved Staff Comments — N/A Item 2. Properties 17 Item 3. Legal Proceedings 18 Item 4. Reserved — N/A PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 18 Item 6. Selected Financial Data — N/A Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 28 Item 8. Financial Statements and Supplementary Data 29 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures — N/A Item 9A. Controls and Procedures 29 Item 9B. Other Information — N/A PART III Item 10. Directors, Executive Officers and Corporate Governance 30 Item 11. Executive Compensation 30 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 30 Item 13. Certain Relationships and Related Transactions, and Director Independence 30 Item 14. Principal Accounting Fees and Services 31 PART IV Item 15. Exhibits and Financial Statement Schedules 31 Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTSOur Form 10-K (“Annual Report”) includes certain “forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995, which reflect the current views of Global Telecom & Technology, Inc., with respect to current events andfinancial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “intend,”“anticipate,” “believe,” “estimate,” “plan,” “could,” “should,” and “continue” or similar words. These forward-looking statements mayalso use different phrases. From time to time, Global Telecom & Technology, Inc., which we refer to as “we”, “us” or “our” and in somecases, “GTT” or the “Company”, also provides forward-looking statements in other materials GTT releases to the public or files with theUnited States Securities & Exchange Commission (“SEC”), as well as oral forward-looking statements. You should consider any furtherdisclosures on related subjects in our quarterly reports on Form 10-Q and current reports on Form 8-K filed with the SEC.Such forward-looking statements are and will be subject to many risks, uncertainties and factors relating to our operations and thebusiness environment that may cause our actual results to be materially different from any future results, express or implied, by suchforward-looking statements. Factors that could cause GTT’s actual results to differ materially from these forward-looking statementsinclude, but are not limited to, the following: • our ability to develop and market new products and services that meet customer demands and generate acceptable margins; • our reliance on several large customers; • our ability to negotiate and enter into acceptable contract terms with our suppliers; • our ability to attract and retain qualified management and other personnel; • competition in the industry in which we do business; • failure of the third-party communications networks on which we depend; • legislation or regulatory environments, requirements or changes adversely affecting the businesses in which we are engaged; • our ability to maintain our databases, management systems and other intellectual property; • our ability to maintain adequate liquidity and produce sufficient cash flow to fund our capital expenditures and debt service; • our ability to obtain capital to grow our business; • technological developments and changes in the industry; • our ability to complete acquisitions or divestures and to integrate any business or operation acquired; • general economic conditions.You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual future results to differmaterially from those projected or contemplated in the forward-looking statements.1Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. All forward-looking statements included herein attributable to us or any person acting on our behalf are expressly qualified in theirentirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws andregulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date ofthis report or to reflect the occurrence of unanticipated events. You should be aware that the occurrence of the events described in the“Risk Factors” section and elsewhere in this report could have a material adverse effect on our business and our results of operations.Unless the context otherwise requires, when we use the words ‘‘the Company,” “GTT,” “we”, “us,” or “our Company” in thisForm 10-K, we are referring to Global Telecom & Technology, Inc., a Delaware corporation, and its subsidiaries, unless it is clear fromthe context or expressly stated that these references are only to Global Telecom & Technology, Inc.2Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IITEM 1. BUSINESSBackgroundGlobal Telecom & Technology, Inc. (“GTT” or the “Company”) is a Delaware corporation which was incorporated on January 3,2005. GTT is a global telecommunications carrier and leading network integrator serving the data communications needs of largeenterprise, government and carrier clients in over 80 countries. We combine our own network assets with the networks of over 800suppliers worldwide to deliver cost-effective, scalable solutions supporting each client’s unique requirements. Through our proprietaryClient Management Database (CMD), GTT provides streamlined service design and quotation, rapid service implementation, and global24x7 monitoring and support. GTT is headquartered in the Washington, DC metro region with offices in London, Dusseldorf, andDenver.Our CustomersAs of December 31, 2010, our customer base was comprised of over 700 businesses. For the year ended December 31, 2010, nosingle customer accounted for more than 5% of our total consolidated revenues. Our five largest customers accounted for approximately19% of consolidated revenues during the same period.We provide services in over 80 countries, with the ability to expand into new geographic areas by adding new regional partners andsuppliers. Our service expansion is largely customer-driven. We have designed, delivered, and subsequently managed services in all sixpopulated continents around the world.For the year ended December 31, 2010, approximately 76% of our revenue was attributable to our operations based in the UnitedStates, 15% was attributable to operations based in the United Kingdom, and 9% was attributable to operations based in Germany.Our customer contracts for network services and support are generally for initial terms of one to three years, with some contractscalling for terms in excess of five years. Following the initial terms, these agreements typically provide for renewal automatically forspecified periods ranging from one month to one year. Our prices are fixed for the duration of the contract, and we typically bill inadvance for such services. If a customer terminates its agreement, the terms of our customer contracts typically require full recovery ofany amounts due for the remainder of the term (or at a minimum, our liability to the underlying suppliers).Our Suppliers and NetworkAs of December 31, 2010, we had over 800 supplier relationships worldwide from which we source bandwidth and other servicesand combine our own network assets to meet our customers’ requirements. Through our extensive supplier relationships, our customershave access to an array of service providers without having to manage multiple contracts.GTT’s network has deployed assets in North America and Europe to provide Dedicated Internet Access and Ethernet Transportservices. GTT’s network has connectivity in all major U.S. hubs and major European cities, established Ethernet hubs with variouscarriers, multiple high speed connections to Tier 1 IP providers, highly competitive rates, and “on-net” provisioning time which resultsin faster deployment and installation.Our supplier management teams work with our suppliers to acquire updated pricing and network asset information and negotiatepurchase agreements when appropriate. In some cases, we have electronic interfaces into our suppliers’ pricing systems to provide ourcustomers with real time pricing updates. Our supplier management teams are constantly seeking out strategic partnerships with newcarriers, negotiating favorable terms on existing contracts, and looking to expand each supplier’s product portfolio. These partnershipsare reflected in long-term contracts, commonly referred to as Master Service Agreements. All of these efforts are aimed at providinggreater choice, flexibility, and cost savings for our customers. We are committed to using high-quality suppliers, and our suppliermanagement teams continually monitor supplier performance.3Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Sales and MarketingBecause our markets are highly competitive, we believe that personal relationships and quality of service delivery remainimportant in winning new and repeat customer business. We therefore sell our services largely through a direct sales force located acrossthe globe, as well as strong agent channel relationships, with principal concentration in the United States, the United Kingdom, andGermany. Most of our sales representatives have many years of experience in selling to multinational corporations, enterprises, serviceproviders, and carriers. We also employ sales engineers to provide presales support to our sales representatives. The average sales cyclecan be as little as two to six weeks for existing customers and three to six months or longer for new customers with complicated servicerequirements.Our sales and marketing efforts are focused on generating new business opportunities through industry contacts, new productofferings, and long-term relationships with new and existing customers. Our sales activities are specifically focused on recruitingseasoned industry experts with deep ties to the direct enterprise, system integrator and carrier markets, building relationships with ournew clients, and driving expansion within existing accounts. Our marketing activities are designed to generate awareness and familiarityof our value proposition with our target accounts, develop new products to meet the needs of our customer base, and communicate to ourtarget markets, thereby reinforcing our value proposition among our customers’ key decision makers.OperationsOur global operations consist of two parts: global customer operations, and global network operations and engineering.Customer operations include project management and development of our CMD system. The global project management teamassures the successful implementation of customer services after the sale. A project manager is assigned to each customer order to ensurethat the underlying network facilities required for the solution are provisioned, that the customer is provided with status reports on itsservice, and that any difficulties related to the installation of a customer order are proactively managed.Network operations and engineering is comprised of the global Network Operations Center (“NOC”), Engineering and Informationand Communications Technology (“ICT”). The NOC receives, prioritizes, tracks, and resolves network outages or other customer needs,along with provisioning and testing of new services. Engineering provides support for the NOC and the sales team, as well as carryingout all provisioning for services utilizing GTT’s owned network assets (GTT Network Services). ICT manages all internal desktop, andnetwork and server infrastructure.CompetitionOur competition consists primarily of traditional, facilities-based providers, including companies that provide networkconnectivity and internet access principally within one continent or geographical region, such as Level 3, Qwest, KPN, XO, ComcastCommunications, and COLT. We also compete against carriers who provide network connectivity on a multi-continent, or global basis,such as Verizon Business, AT&T, British Telecom, NTT and Deutsche Telekom.Government RegulationIn connection with certain of our service offerings, we may be subject to federal, state, and foreign regulations. United StatesFederal laws and Federal Communications Commission, or FCC, regulations generally apply to interstate telecommunications andinternational telecommunications that originate or terminate in the United States, while state laws and regulations apply totelecommunications transmissions ultimately terminating within the same state as the point of origination. A foreign country’s laws andregulations apply to telecommunications that originate or terminate in, or in some instances traverse, that country. The regulation of thetelecommunications industry is changing rapidly, and varies from state to state and from country to country.Where certification or licensing is required, carriers are required to comply with certain ongoing responsibilities. For example, wemay be required to submit periodic reports to various telecommunications regulatory4Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. authorities relating to the provision of services within the relevant jurisdiction. Another potential ongoing responsibility relates topayment of regulatory fees and the collection and remittance of surcharges and fees associated with the provision of telecommunicationsservices. Some of our services are subject to these assessments, depending upon the jurisdiction, the type of service, and the type ofcustomer.Federal RegulationGenerally, the FCC has chosen not to heavily regulate the charges or practices of non-dominant carriers. For example, we are notrequired to tariff the interstate inter-exchange private line services we provide, but need only to post terms and conditions for suchservices on our website. In providing certain telecommunications services, however, we may remain subject to the regulatoryrequirements applicable to common carriers, such as providing services at just and reasonable rates, filing the requisite reports, andpaying regulatory fees and contributing to universal service. The FCC also releases orders and takes other actions from time to time thatmodify the regulations applicable to services provided by carriers such as us; these orders and actions can result in additional (orreduced) reporting or payments requirements, or changes in the relative rights and obligations of carriers with respect to services theyprovide to each other or to other categories of customers. These changes in regulation can affect the services that we procure and/orprovide and, in some instances, may affect demand for or the costs of providing our services.State RegulationThe Telecommunications Act of 1996, as amended generally prohibits state and local governments from enforcing any law, rule, orlegal requirement that prohibits or has the effect of prohibiting any person from providing any interstate or intrastatetelecommunications service. However, states retain jurisdiction to adopt regulations necessary to preserve universal service, protectpublic safety and welfare, ensure the continued quality of communications services, and safeguard the rights of consumers. Generally,each carrier must obtain and maintain certificates of authority from regulatory bodies in states in which it offers intrastatetelecommunications services. In most states, a carrier must also file and obtain prior regulatory approval of tariffs containing the rates,terms and conditions of service for its regulated intrastate services. A state may also impose telecommunications regulatory fees, feesrelated to the support for universal service, and other costs and reporting obligations on providers of services in that state. We arecurrently authorized to provide intrastate services in more than 20 states and the District of Columbia as an interexchange carrier and/ora competitive local provider.Foreign RegulationGenerally, the provisioning to U.S. customers of international telecommunications services originating or terminating in the UnitedStates is governed by the FCC. In addition, the regulatory requirements to operate within a foreign country or to provide services tocustomers within that foreign country vary from jurisdiction to jurisdiction, although in some respects regulation in the WesternEuropean markets is harmonized under the regulatory structure of the European Union. As opportunities arise in particular nations, wemay need to apply for and acquire various authorizations to operate and provide certain kinds of telecommunications services. Althoughsome countries require complex applications procedures for authorizations and/or impose certain reporting and fee paymentrequirements, others simply require registration with or notification to the regulatory agency and some simply operate through generalauthorization with no filing requirement at all.Intellectual PropertyWe do not own any patent registrations, applications or licenses. We maintain and protect trade secrets, know-how, and otherproprietary information regarding many of our business processes and related systems and databases.EmployeesAs of December 31, 2010, we had a total of 81 employees.5Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Executive OfficersOur executive officers and their respective ages and positions as of March 11, 2011 are as follows:H. Brian Thompson, 72, has served as Chairman of our Board of Directors since January 2005, as our Executive Chairman sinceOctober 2006, and as our interim Chief Executive Officer from January 2005 to October 2006 and from February 2007 to May 2007.Mr. Thompson continues to head his own private equity investment and advisory firm, Universal Telecommunications, Inc. FromDecember 2002 to June 2007, Mr. Thompson was Chairman of Comsat International, one of the largest independent telecommunicationsoperators serving all of Latin America. He also served as Chairman and Chief Executive Officer of Global TeleSystems Group, Inc. fromMarch 1999 through September of 2000. Mr. Thompson was Chairman and CEO of LCI International from 1991 until its merger withQwest Communications International Inc. in June 1998, and became Vice Chairman of the board for Qwest until his resignation inDecember 1998. He previously served as Executive Vice President of MCI Communications Corporation from 1981 to 1990, and prior toMCI, was a management consultant with the Washington, DC offices of McKinsey & Company for nine years, where he specialized inthe management of telecommunications. Mr. Thompson currently serves as a member of the board of directors of Axcelis Technologies,Inc, ICO Global Communications (Holdings) Ltd, Penske Automotive Group, and Sonus Networks, Inc., and is a member of the IrishPrime Minister’s Ireland-America Economic Advisory Board. Mr. Thompson holds a Master of Business Administration from HarvardBusiness School, and holds an undergraduate degree in chemical engineering from the University of Massachusetts.Richard D. Calder, Jr., 47, has served as our President, Chief Executive Officer and Director since May 2007. Prior to joining us,from 2004 to 2006 Mr. Calder served as President & Chief Operating Officer of InPhonic, Inc., a publicly-traded online seller of wirelessservices and products. From 2001 to 2003, Mr. Calder served in a variety of executive roles for Broadwing Communications, Inc.,including President — Business Enterprises and Carrier Markets. From 1996 to 2001, Mr. Calder held several senior managementpositions with Winstar Communications, including Chief Marketing Officer, and President of the company’s South Division. In 1994Mr. Calder co-founded Go Communications, a wireless communications company, and served as its Vice President of CorporateDevelopment from its founding until 1996. Mr. Calder previously held a variety of marketing, business development, and engineeringpositions within MCI Communications, Inc. and Tellabs, Inc. Mr. Calder holds a Master of Business Administration from HarvardBusiness School and a Bachelor of Science in Electrical Engineering from Yale University.Eric Swank, 43, has served as our Chief Financial Officer since February 2009. Prior to joining us, Mr. Swank served as theTreasurer and Senior Vice President of Finance at Mobile Satellite Ventures (now Light Squared), a Reston, Virginia-based developerand supplier of mobile satellite communications services from November 2001 to April 2008. From 1994 to 2001, Mr. Swank served invarious positions, including Director, Corporate Development and Investor Relations, and Vice President, Corporate Planning andInvestor Relations, at Motient Corporation (now TerreStar Corporation), a publicly-held, Reston, Virginia-based integrated mobilesatellite and terrestrial communications network provider. Prior to joining Motient, from 1989 to 1994, Mr. Swank served as Director,Operations and Manager, Business Development for C-Tec Corporation, a diversified telecommunications holding company organizedto hold Commonwealth Telephone Inc. and other non-regulated telecommunications businesses. Mr. Swank received a Bachelor’sdegree in Finance from King’s College.Chris McKee, 43, has served as our General Counsel and Secretary since May 2008. Prior to joining us, Mr. McKee served as theVice President and General Counsel of StarVox Communications, Inc. from June, 2007 to April 2008. From 2005 to 2007, Mr. McKeewas the Vice President and Assistant General Counsel of Covad Communications Group Inc., a publicly held San Jose, California-basedbroadband provider of integrated voice and data communications nationwide. Prior to joining Covad, from 2002 to 2005, Mr. McKeeserved as Executive Director of Legal and Regulatory Affairs for XO Communications, Inc., a publicly held Reston, Virginia-basedbroadband provider of integrated voice and data communications nationwide. Mr. McKee previously, from 1998 to 2002, served asDeputy General Counsel of Net2000 Communications Inc., a publicly traded Herndon, Virginia-based telecommunications servicesprovider. Prior to that, from 1994 to 1998, Mr. McKee was an associate at Washington, D.C.-based law firms Dickstein Shapiro LLP andDow Lohnes PLLC. Mr. McKee received a Bachelor’s degree from Colby College and a Juris Doctor from Syracuse University.6Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Available InformationThe public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW.,Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments tosuch reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are availablefree of charge on the SEC website at www.sec.gov and on our website at www.gt-t.net as soon as reasonably practicable after suchmaterial is electronically filed with or furnished to the SEC.ITEM 1A. RISK FACTORSWe operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. Below arethe risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known tous, which we currently deem immaterial or which are similar to those faced by other companies in our industry or telecommunicationsand/or technology companies in general, may also impair our business operations. If any of these risks or uncertainties actually occurs,our business, financial condition and operating results could be materially adversely affected.Risks Relating to Our Business and OperationsWe depend on several large customers, and the loss of one or more of these customers, or a significant decrease in total revenuesfrom any of these customers, would likely reduce our revenue and income.For the year ended December 31, 2010, our five largest customers accounted for approximately 19% of our total service revenues. Ifwe were to lose all of the underlying services from one or more of our large customers, or if one or more of our large customers were tosignificantly reduce the services purchased from us or otherwise renegotiate the terms on which services are purchased from us, ourrevenues could decline and our results of operations would suffer.If our customers elect to terminate their agreements with us, our business, financial condition and results of operations may beadversely affected.Our services are sold under agreements that generally have initial terms of between one and three years. Following the initial terms,these agreements generally automatically renew for successive month-to-month, quarterly, or annual periods, but can be terminated bythe customer without cause with relatively little notice during a renewal period. In addition, certain government customers may haverights under federal law with respect to termination for convenience that can serve to minimize or eliminate altogether the liabilitypayable by that customer in the event of early termination. Our customers may elect to terminate their agreements as a result of a numberof factors, including their level of satisfaction with the services they are receiving, their ability to continue their operations due tobudgetary or other concerns, and the availability and pricing of competing services. If customers elect to terminate their agreements withus, our business, financial condition, and results of operation may be adversely affected.Competition in the industry in which we do business is intense and growing, and our failure to compete successfully could make itdifficult for us to add and retain customers or increase or maintain revenues.The markets in which we operate are rapidly evolving and highly competitive. We currently or potentially compete with a varietyof companies, including some of our transport suppliers, with respect to their products and services, including global and regionaltelecommunications service providers such as AT&T, British Telecom, NTT, Level 3, Qwest and Verizon, among others.The industry in which we operate is consolidating, which is increasing the size and scope of our competitors. Competitors couldbenefit from assets or businesses acquired from other carriers or from strategic alliances in the telecommunications industry. New entrantscould enter the market with a business model similar to ours. Our target markets may support only a limited number of competitors.Operations in such markets with multiple competitive7Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. providers may be unprofitable for one or more of such providers. Prices in the data transmission and internet access business havedeclined in recent years and may continue to decline.Many of our potential competitors have certain advantages over us, including: • substantially greater financial, technical, marketing, and other resources, including brand or corporate name recognition; • substantially lower cost structures, including cost structures of facility-based providers who have reduced debt and otherobligations through bankruptcy or other restructuring proceedings; • larger client bases; • longer operating histories; • more established relationships in the industry; and • larger geographic presence.Our competitors may be able to use these advantages to: • develop or adapt to new or emerging technologies and changes in client requirements more quickly; • take advantage of acquisitions and other opportunities more readily; • enter into strategic relationships to rapidly grow the reach of their networks and capacity; • devote greater resources to the marketing and sale of their services; • adopt more aggressive pricing and incentive policies, which could drive down margins; and • expand their offerings more quickly.If we are unable to compete successfully against our current and future competitors, our revenues and gross margins could declineand we would lose market share, which could materially and adversely affect our business.We might require additional capital to support business growth, and this capital might not be available on favorable terms, or atall.Our operations or expansion efforts may require substantial additional financial, operational, and managerial resources. As ofDecember 31, 2010, we had approximately $6.6 million in cash and cash equivalents and current liabilities $10.3 million greater thancurrent assets. We may have insufficient cash to fund our working capital or other capital requirements and may be required to raiseadditional funds to continue or expand our operations. If we are required to obtain additional funding in the future, we may have to sellassets, seek debt financing, or obtain additional equity capital. Our ability to sell assets or raise additional equity or debt capital willdepend on the condition of the capital and credit markets and our financial condition at such time. Accordingly, additional capital maynot be available to us, or may only be available on terms that adversely affect our existing stockholders, or that restrict our operations.For example, if we raise additional funds through issuances of equity or convertible debt securities, our existing stockholders couldsuffer dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of ourcommon stock. Also, if we were forced to sell assets, there can be no assurance regarding the terms and conditions we could obtain forany such sale, and if we were required to sell assets that are important to our current or future business, our current and future results ofoperations could be materially and adversely affected. We have granted security interests in substantially all of our assets to secure therepayment of our indebtedness maturing in 2012 and 2015, and if we are unable to satisfy our obligations the lenders could foreclose ontheir security interests.8Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Because our business consists primarily of reselling telecommunications network capacity purchased from third parties, the failureof our suppliers and other service providers to provide us with services, or disputes with those suppliers and service providers, couldaffect our ability to provide quality services to our customers and have an adverse effect on our operations and financial condition.The majority of our business consists of integrating and reselling network capacity purchased from facility-basedtelecommunications carriers. Accordingly, we will be largely dependent on third parties to supply us with services. Occasionally in thepast, our operating companies have experienced delays or other problems in receiving services from third party providers. Disputes alsoarise from time to time with suppliers with respect to billing or interpretation of contract terms. Any failure on the part of third parties toadequately supply us or to maintain the quality of their facilities and services in the future, or the termination of any significant contractsby a supplier, could cause customers to experience delays in service and lower levels of customer care, which could cause them to switchproviders. Furthermore, disputes over billed amounts or interpretation of contract terms could lead to claims against us, some of which ifresolved against us could have an adverse impact on our results of operations and/or financial condition. Suppliers may also attempt toimpose onerous terms as part of purchase contract negotiations. Although we know of no pending or threatened claims with respect topast compliance with any such terms, claims asserting any past noncompliance, if successful, could have a material adverse effect on ouroperations and/or financial condition. Moreover, to the extent that key suppliers were to attempt to impose such provisions as part offuture contract negotiations, such developments could have an adverse impact on the company’s operations. Finally, some of oursuppliers are potential competitors. We cannot guarantee that we will be able to obtain use of facilities or services in a timely manner oron terms acceptable and in quantities satisfactory to us.Industry consolidation may affect our ability to obtain services from suppliers on a timely or cost-efficient basis.A principal method of connecting with our customers is through local transport and last mile circuits we purchase from incumbentcarriers such as AT&T and Verizon, or competitive carriers such as Time Warner Telecom, XO, or Level 3. In recent years, AT&T,Verizon, and Level 3 have acquired competitors with significant local and/or long-haul network assets. Industry consolidation hasoccurred on a lesser scale as well through mergers and acquisitions involving regional or smaller national or international competitors.Generally speaking, we believe that a marketplace with multiple supplier options for transport access is important to the long-termavailability of competitive pricing, service quality, and carrier responsiveness. It is unclear at this time what the long-term impact of suchconsolidation will be, or whether it will continue at the same pace as it has in recent years; we cannot guarantee that we will continue tobe able to obtain use of facilities or services in a timely manner or on terms acceptable and in quantities satisfactory to us from suchsuppliers.We may occasionally have certain sales commitments to customers that extend beyond the Company’s commitments from itsunderlying suppliers.The Company’s financial results could be adversely affected if the Company were unable to purchase extended service from asupplier at a cost sufficiently low to maintain the Company’s margin for the remaining term of its commitment to a customer. While theCompany has not encountered material price increases from suppliers with respect to continuation or renewal of services after expirationof initial contract terms, the Company cannot be certain that it would be able to obtain similar terms and conditions from suppliers. Inmost cases where the Company has faced any price increase from a supplier following contract expiration, the Company has been able tolocate another supplier to provide the service at a similar or reduced future cost; however, the Company’s suppliers may not provideservices at such cost levels in the future.We may make purchase commitments to vendors for longer terms or in excess of the volumes committed by our underlyingcustomers.The Company attempts to match its purchase of network capacity from its suppliers and its service commitments from its customers.However, from time to time the Company has obligations to its suppliers that exceed the duration of the Company’s related customercontracts or that are for capacity in excess of the amount for which it has Customer commitments. This could arise based upon the termsand conditions available from the9Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Company’s suppliers, from an expectation of the Company that we will be able to utilize the excess capacity, as a result of a breach of acustomer’s commitment to us, or to support fixed elements of the Company’s network. Under any of these circumstances, the Companywould incur the cost of the network capacity from its supplier without having corresponding revenues from its customers, which couldresult in a material and adverse impact on the Company’s operating results.The networks on which we depend may fail, which would interrupt the network availability they provide and make it difficult toretain and attract customers.Our customers depend on our ability to provide network availability with minimal interruption. The ability to provide this servicedepends in part on the networks of third party transport suppliers. The networks of transport suppliers may be interrupted as a result ofvarious events, many of which they cannot control, including fire, human error, earthquakes and other natural disasters, disasters alongcommunications rights-of-way, power loss, telecommunications failures, terrorism, sabotage, vandalism, or the financial distress or otherevent adversely affecting a supplier, such as bankruptcy or liquidation.We may be subject to legal claims and be liable for losses suffered by customers due to our inability to provide service. If ournetwork failure rates are higher than permitted under the applicable customer contracts, we may incur significant expenses related tonetwork outage credits, which would reduce our revenues and gross margins. Our reputation could be harmed if we fail to provide areasonably adequate level of network availability, and in certain cases, customers may be entitled to seek to terminate their contractswith us in case of prolonged or severe service disruptions or other outages.System disruptions could cause delays or interruptions of our service due to terrorism, natural disasters and other events beyond ourcontrol, which could cause us to lose customers or incur additional expenses.Our success depends on our ability to provide reliable service. Although we have attempted to design our network services tominimize the possibility of service disruptions or other outages, in addition to risks associated with third party provider networks, ourservices may be disrupted by problems on our own systems, including events beyond our control such as terrorism, computer viruses, orother infiltration by third parties that affect our central offices, corporate headquarters, network operations centers, or networkequipment. Such events could disrupt our service, damage our facilities, and damage our reputation. In addition, customers may, undercertain contracts, have the ability to terminate services in case of prolonged or severe service disruptions or other outages. Accordingly,service disruptions or other outages may cause us to, among other things, lose customers and could harm our results of operations.If the products or services that we market or sell do not maintain market acceptance, our results of operations will be adverselyaffected.Certain segments of the telecommunications industry are dependent on developing and marketing new products and services thatrespond to technological and competitive developments and changing customer needs. We cannot assure you that our products andservices will gain or obtain increased market acceptance. Any significant delay or failure in developing new or enhanced technology,including new product and service offerings, could result in a loss of actual or potential market share and a decrease in revenues.The communications market in which we operate is highly competitive; we could be forced to reduce prices, may lose customers toother providers that offer lower prices and have problems attracting new customers.The communications industry is highly competitive and pricing for some of our key service offerings, such as our dedicated IPtransport services, have been generally declining. If our costs of service, including the cost of leasing underlying facilities, do notdecline in a similar fashion, we could experience significant margin compression, reduction of profitability and loss of business.10Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If carrier and enterprise connectivity demand does not continue to expand, we may experience a shortfall in revenues or earnings orotherwise fail to meet public market expectations.The growth of our business will be dependent, in part, upon the increased use of carrier and enterprise connectivity services and ourability to capture a higher proportion of this market. Increased usage of enterprise connectivity services depends on numerous factors,including: • the willingness of enterprises to make additional information technology expenditures; • the availability of security products necessary to ensure data privacy over the public networks; • the quality, cost, and functionality of these services and competing services; • the increased adoption of wired and wireless broadband access methods; • the continued growth of broadband-intensive applications; and • the proliferation of electronic devices and related applications.Our long sales and service deployment cycles require us to incur substantial sales costs that may not result in related revenues.Our business is characterized by long sales cycles, which are often in the range of 45 days or more, between the time a potentialcustomer is contacted and a customer contract is signed. Furthermore, once a customer contract is signed, there is typically an extendedperiod of between 30 and 120 days before the customer actually begins to use the services, which is when we begin to realize revenues.As a result, we may invest a significant amount of time and effort in attempting to secure a customer, which investment may not result innear term, if any, revenues. Even if we enter into a contract, we will have incurred substantial sales-related expenses well before werecognize any related revenues. If the expenses associated with sales increase, if we are not successful in our sales efforts, or if we areunable to generate associated offsetting revenues in a timely manner, our operating results could be materially and adversely affected.Because much of our business is international, our financial results may be affected by foreign exchange rate fluctuations.Approximately 24% of our revenue comes from countries outside of the United States. As such, other currencies, particularly theEuro and the British Pound Sterling, can have an impact on the Company’s results (expressed in U.S. Dollars). Currency variations alsocontribute to variations in sales in impacted jurisdictions. Accordingly, fluctuations in foreign currency rates, most notably thestrengthening of the dollar against the euro and the pound, could have a material impact on our revenue growth in future periods. Inaddition, currency variations can adversely affect margins on sales of our products in countries outside of the United States and marginson sales of products that include components obtained from suppliers located outside of the United States.Because much of our business is international, we may be subject to local taxes, tariffs, or other restrictions in foreign countries,which may reduce our profitability.Revenues from our foreign subsidiaries, or other locations where we provide or procure services internationally, may be subject toadditional taxes in some foreign jurisdictions. Additionally, some foreign jurisdictions may subject us to additional withholding taxrequirements or the imposition of tariffs, exchange controls, or other restrictions on foreign earnings. Any such taxes, tariffs, controls, andother restrictions imposed on our foreign operations may increase our costs of business in those jurisdictions, which in turn may reduceour profitability.If our goodwill or amortizable intangible assets become further impaired we may be required to record a significant charge toearnings.Under generally accepted accounting principles, we review our amortizable intangible assets for impairment when events orchanges in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at least annually. Factorsthat may be considered a change in circumstances indicating that the carrying11Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. value of our goodwill or amortizable intangible assets may not be recoverable include reduced future cash flow estimates, a decline instock price and market capitalization, and slower growth rates in our industry. During the years ended December 31, 2010 and 2009, theCompany recorded no impairment to goodwill and amortizable intangible assets. We may be required to record a significant charge toearnings in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets isdetermined, negatively impacting our results of operations.The ability to implement and maintain our databases and management information systems is a critical business requirement, and ifwe cannot obtain or maintain accurate data or maintain these systems, we might be unable to cost-effectively provide solutions toour customers.To be successful, we must increase and update information in our databases about network pricing, capacity, and availability. Ourability to provide cost-effective network availability and access cost management depends upon the information we collect from ourtransport suppliers regarding their networks. These suppliers are not obligated to provide this information and could decide to stopproviding it to us at any time. Moreover, we cannot be certain that the information that these suppliers share with us is accurate. If wecannot continue to maintain and expand the existing databases, we may be unable to increase revenues or to facilitate the supply ofservices in a cost-effective manner.Furthermore, we are in the process of reviewing, integrating, and augmenting our management information systems to facilitatemanagement of client orders, client service, billing, and financial applications. Our ability to manage our businesses could be materiallyadversely affected if we fail to successfully and promptly maintain and upgrade the existing management information systems.If we are unable to protect our intellectual property rights, competitors may be able to use our technology or trademarks, whichcould weaken our competitive position.We own certain proprietary programs, software, and technology. However, we do not have any patented technology that wouldpreclude competitors from replicating our business model; instead, we rely upon a combination of know-how, trade secret laws,contractual restrictions, and copyright, trademark and service mark laws to establish and protect our intellectual property. Our successwill depend in part on our ability to maintain or obtain (as applicable) and enforce intellectual property rights for those assets, both inthe United States and in other countries. Although our Americas operating company has registered some of its service marks in theUnited States, we have not otherwise applied for registration of any marks in any other jurisdiction. Instead, with the exception of the fewregistered service marks in the United States, we rely exclusively on common law trademark rights in the countries in which we operate.We may file applications for patents, copyrights and trademarks as our management deems appropriate. We cannot assure you thatthese applications, if filed, will be approved, or that we will have the financial and other resources necessary to enforce our proprietaryrights against infringement by others. Additionally, we cannot assure you that any patent, trademark, or copyright obtained by us willnot be challenged, invalidated, or circumvented, and the laws of certain foreign countries may not protect intellectual property rights tothe same extent as do the laws of the United States or the member states of the European Union. Finally, although we intend to undertakereasonable measures to protect the proprietary assets of our combined operations, we cannot guarantee that we will be successful in allcases in protecting the trade secret status of certain significant intellectual property assets. If these assets should be misappropriated, ifour intellectual property rights are otherwise infringed, or if a competitor should independently develop similar intellectual property,this could harm our ability to attract new clients, retain existing customers, and generate revenues.Intellectual property and proprietary rights of others could prevent us from using necessary technology to provide our services orotherwise operate our business.We utilize data and processing capabilities available through commercially available third-party software tools and databases toassist in the efficient analysis of network engineering and pricing options. Where such technology is held under patent or otherintellectual property rights by third parties, we are required to negotiate license12Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. agreements in order to use that technology. In the future, we may not be able to negotiate such license agreements at acceptable prices oron acceptable terms. If an adequate substitute is not available on acceptable terms and at an acceptable price from another softwarelicensor, we could be compelled to undertake additional efforts to obtain the relevant network and pricing data independently fromother, disparate sources, which, if available at all, could involve significant time and expense and adversely affect our ability to delivernetwork services to customers in an efficient manner.Furthermore, to the extent that we are subject to litigation regarding the ownership of our intellectual property or the licensing anduse of others’ intellectual property, this litigation could: • be time-consuming and expensive; • divert attention and resources away from our daily business; • impede or prevent delivery of our products and services; and • require us to pay significant royalties, licensing fees, and damages.Parties making claims of infringement may be able to obtain injunctive or other equitable relief that could effectively block ourability to provide our services and could cause us to pay substantial damages. In the event of a successful claim of infringement, we mayneed to obtain one or more licenses from third parties, which may not be available at a reasonable cost, if at all. The defense of anylawsuit could result in time-consuming and expensive litigation, regardless of the merits of such claims, and could also result indamages, license fees, royalty payments, and restrictions on our ability to provide our services, any of which could harm our business.We continue to evaluate merger and acquisition opportunities and may purchase additional companies in the future, and the failureto integrate them successfully with our existing business may adversely affect our financial condition and results of operations.We continue to explore merger and acquisition opportunities, and we may face difficulties if we acquire other businesses in thefuture, including: • integrating the personnel, services, products and technologies of the acquired businesses into our existing operations; • retaining key personnel of the acquired businesses; • failing to adequately identify or assess liabilities of acquired businesses; • failing to achieve the synergies, revenue growth and other expected benefits we used to determine the purchase price of theacquired businesses; • failing to realize the anticipated benefits of a particular merger and acquisition; • incurring significant transaction and acquisition-related costs; • incurring significant amounts of additional debt; • creating significant contingent earn-out obligations and other financial liabilities; • incurring unanticipated problems or legal liabilities; • being subject to business uncertainties and contractual restrictions while an acquisition is pending that could adversely affectour business; and • diverting our management’s attention from the day-to-day operation of our business.These difficulties could disrupt our ongoing business and increase our expenses. As of the date of this Form 10-K, we have noagreement or memorandum of understanding to enter into any acquisition transaction.In addition, our ability to complete acquisitions may depend, in part, on our ability to finance these acquisitions, including boththe costs of the acquisition and the cost of the subsequent integration activities. Our ability may be constrained by our cash flow, thelevel of our indebtedness, restrictive covenants in the13Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. agreements governing our indebtedness, conditions in the securities and credit markets and other factors, most of which are generallybeyond our control. If we proceed with one or more acquisitions in which the consideration consists of cash, we may use a substantialportion of our available cash to complete such acquisitions, thereby reducing our liquidity. If we finance one or more acquisitions withthe proceeds of indebtedness, our interest expense and debt service requirements could increase materially. Thus, the financial impact offuture acquisitions, including the costs to pursue acquisitions that do not ultimately close, could materially affect our business and couldcause substantial fluctuations in our quarterly and yearly operating results.Our efforts to develop new service offerings may not be successful, in which case our revenues may not grow as we anticipate or maydecline.The market for telecommunications services is characterized by rapid change, as new technologies are developed and introduced,often rendering established technologies obsolete. For our business to remain competitive, we must continually update our serviceofferings to make new technologies available to our customers and prospects. To do so, we may have to expend significant managementand sales resources, which may increase our operating costs. The success of our potential new service offerings is uncertain and woulddepend on a number of factors, including the acceptance by end-user customers of the telecommunications technologies which wouldunderlie these new service offerings, the compatibility of these technologies with existing customer information technology systems andprocesses, the compatibility of these technologies with our then-existing systems and processes, and our ability to find third-partyvendors that would be willing to provide these new technologies to us for delivery to our users. If we are unsuccessful in developing andselling new service offerings, our revenues may not grow as we anticipate, or may decline.If we do not continue to train, manage and retain employees, clients may reduce purchases of services.Our employees are responsible for providing clients with technical and operational support, and for identifying and developingopportunities to provide additional services to existing clients. In order to perform these activities, our employees must have expertise inareas such as telecommunications network technologies, network design, network implementation, and network management, includingthe ability to integrate services offered by multiple telecommunications carriers. They must also accept and incorporate training on oursystems and databases developed to support our operations and business model. Employees with this level of expertise tend to be in highdemand in the telecommunications industry, which may make it more difficult for us to attract and retain qualified employees. If we failto train, manage, and retain our employees, we may be limited in our ability to gain more business from existing clients, and we may beunable to obtain or maintain current information regarding our clients’ and suppliers’ communications networks, which could limit ourability to provide future services.The regulatory framework under which we operate could require substantial time and resources for compliance, which could makeit difficult and costly for us to operate the businesses.In providing certain interstate and international telecommunications services, we must comply, or cause our customers or carriers tocomply, with applicable telecommunications laws and regulations prescribed by the Federal Communications Commission (“FCC”) andapplicable foreign regulatory authorities. In offering services on an intrastate basis, we may also be subject to state laws and to regulationby state public utility commissions. Our international services may also be subject to regulation by foreign authorities and, in somemarkets, multinational authorities, such as the European Union. The costs of compliance with these regulations, including legal,operational, and administrative expenses, may be substantial. In addition, delays in receiving or failure to obtain required regulatoryapprovals or the enactment of new or adverse legislation, regulations, or regulatory requirements may have a material adverse effect onour financial condition, results of operations, and cash flow.If we fail to obtain required authorizations from the FCC or other applicable authorities, or if we are found to have failed to comply,or are alleged to have failed to comply, with the rules of the FCC or other authorities, our right to offer certain services could bechallenged and/or fines or other penalties could be imposed on us. Any such challenges or fines could be substantial and could cause usto incur substantial legal and administrative expenses as well; these costs in the forms of fines, penalties, and legal and administrativeexpenses could have a material adverse impact on our business and operations. Furthermore, we are dependent in certain cases on theservices other carriers14Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. provide, and therefore on other carriers’ abilities to retain their respective licenses in the regions of the world in which they operate. Weare also dependent, in some circumstances, on our customers’ abilities to obtain and retain the necessary licenses. The failure of acustomer or carrier to obtain or retain any necessary license could have an adverse effect on our ability to conduct operations.Future changes in regulatory requirement, new interpretations of existing regulatory requirements, or determinations that weviolated existing regulatory requirements may impair our ability to provide services, result in financial losses or otherwise reduceour profitability.Many of the laws and regulations that apply to providers of telecommunications services are subject to frequent changes anddifferent interpretations and may vary between jurisdictions. Changes to existing legislation or regulations in particular markets maylimit the opportunities that are available to enter into markets, may increase the legal, administrative, or operational costs of operating inthose markets, or may constrain other activities, including our ability to complete subsequent acquisitions, or purchase services orproducts, in ways that we cannot anticipate. Because we purchase telecommunications services from other carriers, our costs and mannerof doing business can also be adversely affected by changes in regulatory policies affecting these other carriers.In addition, any determination that we, including companies that we have acquired, have violated applicable regulatoryrequirements could result in material fines, penalties, forfeitures, interest or retroactive assessments. For example, a determination that wehave not paid all required universal service fund contributions could result in substantial retroactive assessment of universal service fundcontributions, together with applicable interest, penalties, fines or forfeitures.We depend on key personnel to manage our businesses effectively in a rapidly changing market, and our ability to generaterevenues will suffer if we are unable to retain key personnel and hire additional personnel.The future success, strategic development, and execution of our business will depend upon the continued services of our executiveofficers and other key sales, marketing, and support personnel. We do not maintain “key person” life insurance policies with respect toany of our employees, nor are we certain if any such policies will be obtained or maintained in the future. We may need to hire additionalpersonnel in the future, and we believe the success of the combined business depends, in large part, upon our ability to attract and retainkey employees. The loss of the services of any key employees, the inability to attract or retain qualified personnel in the future, or delaysin hiring required personnel could limit our ability to generate revenues and to operate our business.Risks Relating to Our IndebtednessOur failure to comply with covenants in our Loan Agreement could result in our indebtedness being immediately due and payableand the loss of our assets.Pursuant to the terms of our Loan Agreement with Silicon Valley Bank we have pledged substantially all of our assets to the lenderas security for our payment obligations under the Loan Agreement. If we fail to pay any of our indebtedness under this Loan Agreementwhen due, or if we breach any of the other covenants in the Loan Agreement, it may result in one or more events of default. An event ofdefault under our Loan Agreement would permit the lender to declare all amounts owing to be immediately due and payable and, if wewere unable to repay any indebtedness owed, the lender could proceed against the collateral securing that indebtedness.Covenants in our Loan Agreement and outstanding notes, and in any future debt agreement, may restrict our future operations.The indenture governing the notes and the Loan Agreement will impose financial restrictions that limit our discretion on some businessmatters, which could make it more difficult for us to expand our business, finance our operations and engage in other business activitiesthat may be in our interest. These restrictions include compliance15Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. with, or maintenance of, certain financial tests and ratios and restrictions that limit our ability and that of our subsidiaries to, amongother things: • incur additional indebtedness or place additional liens on our assets; • pay dividends or make other distributions on, redeem or repurchase our capital stock; • make investments or repay subordinated indebtedness; • enter into transactions with affiliates; • sell assets; • engage in a merger, consolidation or other business combination; or • change the nature of our businesses.Any additional indebtedness we may incur in the future may subject us to similar or even more restrictive conditions.Our substantial level of indebtedness and debt service obligations could impair our financial condition, hinder our growth and putus at a competitive disadvantage.As of December 31, 2010, our indebtedness was substantial in comparison to our available cash and our net income. Our substantiallevel of indebtedness could have important consequences for our business, results of operations and financial condition. For example, ahigh level of indebtedness could, among other things: • make it more difficult for us to satisfy our financial obligations; • increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; • increase the risk that a substantial decrease in cash flows from operating activities or an increase in expenses will make itdifficult for us to meet our debt service requirements and will require us to modify our operations; • require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, therebyreducing the availability of our cash flow to fund future business opportunities, working capital, capital expenditures and othergeneral corporate purposes; • limit our ability to borrow additional funds to expand our business or ease liquidity constraints; • limit our ability to refinance all or a portion of our indebtedness on or before maturity; • limit our ability to pursue future acquisitions; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • place us at a competitive disadvantage relative to competitors that have less indebtedness.Risks Related to our Common Stock and the Securities MarketsBecause we do not currently intend to pay dividends on our common stock, stockholders will benefit from an investment in ourcommon stock only if it appreciates in value.We do not currently anticipate paying any dividends on shares of our common stock. Any determination to pay dividends in thefuture will be made by our Board of Directors and will depend upon results of operations, financial conditions, contractual restrictions,restrictions imposed by applicable law, and other factors our Board of Directors deems relevant. Accordingly, realization of a gain onstockholders’ investments will depend on the appreciation of the price of our common stock. There is no guarantee that our commonstock will appreciate in value or even maintain the price at which stockholders purchased their shares.16Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our outstanding warrants may have an adverse effect on the market price of our common stock.As of December 31, 2010, we had 12,090,000 Class Z warrants, each of which entitles the holder to purchase a share of our commonstock at an exercise price of $5.00 per share on or before April 10, 2012. The common stocks underlying the warrants has been registeredfor sale under the Securities Act or is entitled to registration rights or are otherwise generally eligible for sale in the public market at orsoon after exercise or conversion. If, and to the extent, these warrants are exercised, stockholders may experience dilution to theirownership interests in the Company. The presence of this additional number of shares of common stock and warrants eligible for tradingin the public market may have an adverse effect on the market price of our common stock.The concentration of our capital stock ownership will likely limit a stockholder’s ability to influence corporate matters, and coulddiscourage a takeover that stockholders may consider favorable and make it more difficult for a stockholder to elect directors of itschoosing.H. Brian Thompson, the Company’s Executive Chairman of the Board of Directors, and Universal Telecommunications, Inc., hisown private equity investment and advisory firm, owned 5,294,829 shares of our common stock and 699,750 Class Z warrants, eachexercisable to purchase one share of our common stock. Based on the number of shares of our common stock outstanding onDecember 31, 2010 without taking into account their unexercised warrants, these funds would beneficially own approximately 30% ofour common stock. Based on public filings with the SEC made by J. Carlo Cannell, we believe that as of December 31, 2010, fundsassociated with Cannell Capital LLC owned 3,734,381 shares of our common stock and 923,900 Class Z warrants, each exercisable topurchase one share of our common stock. Based on the number of shares of our common stock outstanding on December 31, 2010without taking into account their unexercised warrants, these funds would beneficially own approximately 21% of our common stock. Inaddition, as of December 31, 2010, our executive officers, directors and affiliated entities, excluding H. Brian Thompson and UniversalTelecommunications, together beneficially owned common stock, without taking into account their unexercised and unconvertedwarrants and options, representing approximately 10% of our common stock. As a result, these stockholders have the ability to exertsignificant control over matters that require approval by our stockholders, including the election of directors and approval of significantcorporate transactions. The interests of these stockholders might conflict with your interests as a holder of our securities, and it maycause us to pursue transactions that, in their judgment, could enhance their equity investments, even though such transactions mayinvolve significant risks to you as a security holder. The large concentration of ownership in a small group of stockholders might alsohave the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.It may be difficult for you to resell shares of our common stock if an active market for our common stock does not develop.Our common stock is not actively traded on a securities exchange and we currently do not meet the initial listing criteria for anyregistered securities exchange, including the NASDAQ National Market System. It is quoted on the less recognized Over-the-CounterBulletin Board. This factor, in addition to the concentrated ownership of our capital stock, may further impair your ability to sell yourshares when you want and/or could depress our stock price. As a result, you may find it difficult to dispose of, or to obtain accuratequotations of the price of our securities because smaller quantities of shares could be bought and sold, transactions could be delayed,and security analyst and news coverage of our company may be limited. These factors could result in lower prices and larger spreads inthe bid and ask prices for our shares.ITEM 2. PROPERTIESThe Company does not own any real estate. Instead, all of the Company’s facilities are leased. GTT’s headquarters in McLean,Virginia are occupied under a lease that expires in December 2014. We also maintain offices in Denver, Colorado, London, England andDüsseldorf, Germany. The lease of our London, England facility expires in June 2012. The Company leases its facility in Düsseldorf,Germany under a multi-year lease that expires in July 2011. The Company’s offices in Denver, Colorado are leased under a three monthlease that renews for successive three month periods unless either GTT or the landlord gives a notice of non-renewal. We are currentlyevaluating our options with respect to our offices in Düsseldorf, Germany, and Denver, Colorado. We believe the necessary office spacein these locations will be available on commercially reasonable terms.17Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We believe our properties, taken as a whole, are in good operating condition and are adequate for our business needs.ITEM 3. LEGAL PROCEEDINGSThe Company is not currently subject to any material legal proceedings. From time to time, however, we or our operatingcompanies may be party to other various legal proceedings that arise in the normal course of business. In the opinion of management,none of these proceedings, individually or in the aggregate, are likely to have a material adverse effect on our consolidated financialposition, consolidated results of operations or cash flows. However, we cannot provide assurance that any adverse outcome would not bematerial to our consolidated financial position or consolidated results of operations or cash flows. PART IIITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIESMarket for Equity SecuritiesOur common stock trades on the Over-the-Counter Bulletin Board under the symbol GTLT, and our Class Z warrants trade underthe symbol GTLTZ. At March 11, 2011, we had outstanding 18,290,254 shares of our common stock and 12,090,000 Class Z Warrants.On April 10, 2010, our Class W Warrants of 12,090,000 expired at 5:00pm, New York City time.The Class Z warrant entitles the holder to purchase from us one share of common stock at an exercise price of $5.00. The Class Zwarrants will expire at 5:00 p.m., New York City time, on April 10, 2012, or earlier upon redemption. The trading of our securities,especially our Class Z warrants, is limited, and therefore there may not be deemed to be an established public trading market underguidelines set forth by the SEC.The following table sets forth, for the calendar quarters indicated, the quarterly high and low bid information of our common stock,warrants, and units as reported on the Over-the-Counter Bulletin Board. The quotations listed below reflect interdealer prices, withoutretail markup, markdown, or commission, and may not necessarily represent actual transactions. Common Stock Class Z Warrants High Low High Low2009 First Quarter $0.50 $0.36 $0.01 $0.01 Second Quarter $1.40 $0.62 $0.06 $0.00 Third Quarter $1.44 $1.26 $0.06 $0.01 Fourth Quarter $1.25 $0.95 $0.03 $0.01 2010 First Quarter $1.34 $0.90 $0.04 $0.02 Second Quarter $1.32 $0.96 $0.04 $0.02 Third Quarter $1.32 $0.82 $0.02 $0.01 Fourth Quarter $1.30 $0.95 $0.01 $0.01 As of March 11, 2011 there were approximately 15 holders of record of our Class Z warrants.DividendsWe have not paid any dividends on our common stock to date, and do not anticipate paying any dividends in the foreseeablefuture. Moreover, restrictive covenants existing in certain promissory notes that we have issued preclude us from paying dividends untilthose notes are paid in full.18Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis should be read in conjunction with the financial statements and accompanying notesincluded elsewhere in this report.Management’s Discussion and Analysis of Financial Condition and Results of Operations of the CompanyThe following discussion and analysis should be read together with the Company’s Consolidated Financial Statements and relatednotes thereto beginning on page F-1. Reference is made to “Cautionary Notes Regarding Forward-Looking Statements” on page 1hereof, which describes important factors that could cause actual results to differ from expectations and non-historical informationcontained herein.OverviewGTT is a global telecommunications carrier and leading network integrator serving the data communications needs of largeenterprise, government and carrier clients in over 80 countries. We combine our own network assets with the networks of over 800suppliers worldwide to deliver cost-effective, scalable solutions supporting each client’s unique requirements. Through our proprietaryClient Management Database (CMD), GTT provides streamlined service design and quotation, rapid service implementation, and global24x7 monitoring and support. GTT is headquartered in the Washington, DC metro region with offices in London, Dusseldorf, andDenver.The Company sells services largely through a direct sales force located across the globe, as well as strong agent channelrelationships. The Company generally competes with traditional, facilities-based providers and other services providers in each of ourglobal markets. As of December 31, 2010, our customer base was comprised of over 700 businesses. Our five largest customers accountedfor approximately 19% of consolidated revenues during the year ended December 31, 2010.Costs and ExpensesThe Company’s cost of revenue consists almost entirely of the costs for procurement of services associated with customer services.The key terms and conditions appearing in both supplier and customer agreements are substantially the same, with margin applied to thesuppliers’ costs. There are no wages or overheads included in these costs. From time to time, the Company has agreed to certain specialcommitments with vendors in order to obtain better rates, terms and conditions for the procurement of services from those vendors. Thesecommitments include volume purchase commitments and purchases on a longer-term basis than the term for which the applicablecustomer has committed.Our supplier contracts do not have any market related net settlement provisions. The Company has not entered into, and has noplans to enter into, any supplier contracts which involve financial or derivative instruments. The supplier contracts are entered intosolely for the direct purchase of telecommunications capacity, which is resold by the Company in its normal course of business.Other than cost of revenue, the Company’s most significant operating expenses are employment costs. As of December 31, 2010,the Company had 81 employees and employment costs comprised approximately 13% of total operating expenses for the year endedDecember 31, 2010.Critical Accounting Policies and EstimatesThe Company’s significant accounting policies are described in Note 2 to its accompanying consolidated financial statements. TheCompany considers the following accounting policies to be those that require the most significant judgments and estimates in thepreparation of its consolidated financial statements, and believes that an understanding of these policies is important to a properevaluation of the reported consolidated financial results.19Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Revenue RecognitionThe Company provides data connectivity solutions, such as dedicated circuit access, access aggregation and hubbing and managednetwork services to its customers. Certain of the Company’s current revenue activities have features that may be considered multipleelements. The Company believes that there is insufficient evidence to determine each element’s fair value and as a result, in thosearrangements where there are multiple elements, revenue is recorded ratably over the term of the arrangement.The Company’s services are provided under contracts that typically provide for an installation charge along with payments ofrecurring charges on a monthly (or other periodic) basis for use of the services over a committed term. Our contracts with customersspecify the terms and conditions for providing such services. These contracts call for the Company to provide the service in question(e.g., data transmission between point A and point Z), to manage the activation process, and to provide ongoing support (in the form ofservice maintenance and trouble-shooting) during the service term. The contracts do not typically provide the customer any rights to usespecifically identifiable assets. Furthermore, the contracts generally provide us with discretion to engineer (or re-engineer) a particularnetwork solution to satisfy each customer’s data transmission requirement, and typically prohibit physical access by the customer to thenetwork infrastructure used by the Company and its suppliers to deliver the services.The Company recognizes revenue as follows:Network Services and Support. The Company’s services are provided pursuant to contracts that typically provide forpayments of recurring charges on a monthly basis for use of the services over a committed term. Each service contract typically hasa fixed monthly cost and a fixed term, in addition to a fixed installation charge (if applicable). Variable usage charges are appliedwhen incurred for certain product offerings. At the end of the initial term of most service contracts the contracts roll forward on amonth-to-month or other periodic basis and continue to bill at the same fixed recurring rate. If any cancellation or terminationcharges become due from the customer as a result of early cancellation or termination of a service contract, those amounts arecalculated pursuant to a formula specified in each contract. Recurring costs relating to supply contracts are recognized ratably overthe term of the contract.Non-recurring fees, Deferred Revenue. Non-recurring fees for data connectivity typically take the form of one-time, non-refundable provisioning fees established pursuant to service contracts. The amount of the provisioning fee included in eachcontract is generally determined by marking up or passing through the corresponding charge from the Company’s supplier,imposed pursuant to the Company’s purchase agreement. Non-recurring revenues earned for providing provisioning services inconnection with the delivery of recurring communications services are recognized ratably over the contractual term of the recurringservice starting upon commencement of the service contract term. Fees recorded or billed from these provisioning services areinitially recorded as deferred revenue then recognized ratably over the contractual term of the recurring service. Installation costsrelated to provisioning incurred by the Company from independent third party suppliers, directly attributable and necessary tofulfill a particular service contract, and which costs would not have been incurred but for the occurrence of that service contract, arerecorded as deferred contract costs and expensed proportionally over the contractual term of service in the same manner as thedeferred revenue arising from that contract. Deferred costs do not exceed deferred upfront fees. The Company believes the initialcontractual term is the best estimate of the period of earnings.Other Revenue. From time to time, the Company recognizes revenue in the form of fixed or determinable cancellation (pre-installation) or termination (post-installation) charges imposed pursuant to the service contract. These revenues are earned when acustomer cancels or terminates a service agreement prior to the end of its committed term. These revenues are recognized whenbilled if collectability is reasonably assured. In addition, the Company from time to time sells equipment in connection with datanetworking applications. The Company recognizes revenue from the sale of equipment at the contracted selling price when title tothe equipment passes to the customer (generally F.O.B. origin) and when collectability is reasonably assured.20Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company does not use estimates in determining amounts of revenue to be recognized. Each service contract has a fixedmonthly cost and a fixed term, in addition to a fixed installation charge (if applicable). At the end of the initial term of most servicecontracts, the contracts roll forward on a month-to-month or other periodic basis and the Company continues to bill at the same fixedrecurring rate.Estimating Allowances and Accrued LiabilitiesThe Company employs the “allowance for bad debts” method to account for bad debts. The Company states its accounts receivablebalances at amounts due from the customer net of an allowance for doubtful accounts. The Company determines this allowance byconsidering a number of factors, including the length of time receivables are past due, previous loss history, and the customer’s currentability to pay.In the normal course of business from time to time, the Company identifies errors by suppliers with respect to the billing of services.The Company performs bill verification procedures to attempt to ensure that errors in its suppliers’ billed invoices are identified andresolved. The bill verification procedures include the examination of bills, comparison of billed rates to rates shown on the actualcontract documentation and logged in the Company’s operating systems, comparison of circuits billed to the Company’s database ofactive circuits, and evaluation of the trend of invoiced amounts by suppliers, including the types of charges being assessed. If theCompany concludes by reference to such objective factors that it has been billed inaccurately, the Company will record a liability for theamount that it believes is owed with reference to the applicable contractual rate and, in the instances where the billed amount exceedsthe applicable contractual rate, the likelihood of prevailing with respect to any dispute.These disputes with suppliers generally fall into four categories: pricing errors, network design, start of service date ordisconnection errors, and taxation and regulatory surcharge errors. In the instances where the billed amount exceeds the applicablecontractual rate the Company does not accrue the full face amount of obvious billing errors in accounts payable because to do so wouldpresent a misleading and confusing picture of the Company’s current liabilities by accounting for liabilities that are erroneous basedupon a detailed review of objective evidence. If the Company ultimately pays less than the corresponding accrual in resolution of anerroneously over-billed amount, the Company recognizes the resultant decrease in cost of revenue in the period in which the resolutionis reached. If the Company ultimately pays more than the corresponding accrual in resolution of an erroneously billed amount, theCompany recognizes the resultant cost of revenue increase in the period in which the resolution is reached and during which period theCompany makes payment to resolve such account.Although the Company disputes erroneously billed amounts in good faith and historically has prevailed in most cases, itrecognizes that it may not prevail in all cases (or in full) with a particular supplier with respect to such billing errors or it may choose tosettle the matter because of the quality of the supplier relationship or the cost and time associated with continuing the dispute. Carefuljudgment is required in estimating the ultimate outcome of disputing each error, and each reserve is based upon a specific evaluation bymanagement of the merits of each billing error (based upon the bill verification process) and the potential for loss with respect to thatbilling error. In making such a case-by-case evaluation, the Company considers, among other things, the documentation available tosupport its assertions with respect to the billing errors, its past experience with the supplier in question, and its past experience withsimilar errors and disputes. As of December 31, 2010, the Company had $1.9 million in billing errors disputed with suppliers, for whichwe have accrued $0.7 million in liabilities.In instances where the Company has been billed less than the applicable contractual rate, the accruals remain on the Company’sconsolidated financial statements until the vendor invoices for the under-billed amount or until such time as the obligations related tothe under-billed amounts, based upon applicable contract terms and relevant statutory periods in accordance with the Company’sinternal policy, have passed. If the Company ultimately determines it has no further obligation related to the under-billed amounts, theCompany recognizes a decrease in expense in the period in which the determination is made.Goodwill and Intangible AssetsGoodwill is the excess purchase price paid over identified intangible and tangible net assets of acquired companies. Goodwill isnot amortized, and is tested for impairment at the reporting unit level annually or when there are any indications of impairment, asrequired by the Financial Accounting Standards Board (“FASB”)21Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Accounting Standards Codification (“ASC”) Topic 350, Intangibles — Goodwill and Other (formerly Statement of Financial AccountingStandards “SFAS” No. 142). ASC Topic 350 provides guidance on financial accounting and reporting related to goodwill and otherintangibles, other than the accounting at acquisition for goodwill and other intangibles. A reporting unit is an operating segment, orcomponent of an operating segment, for which discrete financial information is available and is regularly reviewed by management. Wehave one reporting unit to which goodwill is assigned.A two-step approach is required to test goodwill for impairment. The first step tests for impairment by applying fair value-basedtests. The second step, if deemed necessary, measures the impairment by applying fair value-based tests to specific assets and liabilities.Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which isdependent on internal forecasts, estimation of the long-term rate of growth for the Company, the useful life over which cash flows willoccur, and determination of the Company’s cost of capital. Changes in these estimates and assumptions could materially affect thedetermination of fair value and conclusions on goodwill impairment.The Company performs its annual goodwill impairment testing in the third quarter of each year, or more frequently if events orchanges in circumstances indicate that goodwill may be impaired. The Company tested its goodwill during the third quarter of 2010 and2009 and concluded that no impairment existed.Intangible assets are assets that lack physical substance, and are accounted for in accordance with ASC Topic 350 and ASC Topic360, Impairment or Disposal of Long-Lived Assets (formerly SFAS 144). ASC Topic 360 provides guidance for recognition andmeasurement of the impairment of long-lived assets to be held, used and disposed of by sale. Intangible assets arose from businesscombinations and consist of customer contracts, acquired technology and restrictive covenants related to employment agreements thatare amortized, on a straight-line basis, over periods of up to five years. Intangible assets are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. During the third quarter of 2010 and 2009, theCompany tested their intangible assets and concluded that no impairment existed.Income TaxesThe Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (formerly SFAS 109). Under ASC Topic740, deferred tax assets are recognized for future deductible temporary differences and for tax net operating loss and tax credit carry-forwards, and deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years. Deferredtax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which thedeferred tax asset or liability is expected to be realized or settled. A valuation allowance is provided to offset the net deferred tax asset if,based upon the available evidence, management determines that it is more likely than not that some or all of the deferred tax asset willnot be realized.In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 was codifiedinto ASC Topic 740, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements,and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a taxposition taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on de-recognition, classification, interestand penalties, accounting in interim periods, disclosure and transition. The adoption of the new FASB ASC Topic did not have amaterial effect on the Company’s consolidated financial statements.We may from time to time be assessed interest and/or penalties by taxing jurisdictions, although any such assessments historicallyhave been minimal and immaterial to our financial results. The Company’s federal tax returns for 2006, 2007, 2008 and 2009 are stillopen. In the event we have received an assessment for interest and/or penalties, it has been classified in the statement of operations asother general and administrative costs.Share-Based CompensationOn October 16, 2006, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment” (“SFAS 123(R)”) which requiresthe measurement and recognition of compensation expense for all share-based22Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. payment awards made to employees, directors, and consultants based on estimated fair values. In March 2005, the Securities andExchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). The Company has applied theprovisions of SAB 107 in its adoption of SFAS 123(R). SFAS 123(R) was codified into ASC Topic 718, Compensation — StockCompensation.ASC Topic 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisiteservice periods in the Company’s consolidated statement of operations. The Company follows the straight-line single option method ofattributing the value of stock-based compensation to expense. As stock-based compensation expense recognized is based on awardsultimately expected to vest, it has been reduced for estimated forfeitures. ASC Topic 718 requires forfeitures to be estimated at the timeof grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based awards granted. TheCompany’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected bythe Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variablesinclude, but are not limited to the Company’s expected stock price volatility over the term of the awards and the expected term of theawards. The Company accounts for non-employee share-based compensation expense in accordance with ASC Topic 505, Equity —Based Payments to Non-Employees (formerly EITF Issue No. 96-18).Use of Estimates and AssumptionsThe preparation of financial statements in accordance with accounting principles generally accepted in the United States ofAmerica requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expensesduring the reporting period. Actual results can, and in many cases will, differ from those estimates.Recent Accounting PronouncementsReference is made to Note 2 (“Significant Accounting Policies”) of the consolidated financial statements, which commence onpage F-1 of this report, which Note is incorporated herein by reference.23Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Results of Operations of the CompanyFiscal Year Ended December 31, 2010 compared to Fiscal Year Ended December 31, 2009Overview. The financial information presented in the table below comprises the audited consolidated financial information of theCompany for the years ended December 31, 2010 and 2009 (amounts in thousands): Year Ended Year Ended December 31, 2010 December 31, 2009 Revenue Telecommunications services sold $81,075 $64,221 Operating expenses: Cost of telecommunications services provided 57,022 45,868 Selling, general and administrative expense 18,021 14,684 Restructuring costs, employee termination and non- recurring items — 641 Depreciation and amortization 2,791 1,733 Total operating expenses 77,834 62,926 Operating income 3,241 1,295 Other income (expense): Interest expense, net (1,407) (849)Other income (expense), net (368) 24 Total other income (expense) (1,775) (825)Income before income taxes 1,466 470 Provision for income taxes 96 16 Net income $1,370 $454 Earnings per share: Basic $0.08 $0.03 Diluted $0.08 $0.03 Weighted average shares: Basic 16,740,882 15,268,826 Diluted 16,971,396 15,470,763 Revenues. The table below presents the components of revenues for the years ended December 31, 2010 and 2009:Geographical Revenue 2010 2009 United States 76% 58%United Kingdom 15% 29%Germany 9% 13%Totals 100% 100%The shift in Revenue geographically is the result of the acquisition of WBS Connect which occurred on December 16, 2009 and thesales novations in the third quarter of 2010, both of which had predominantly US-based Revenues.Total revenue increased $16.9 million, or 26%, for the year ended December 31, 2010 compared to the year ended December 31,2009 primarily due to the over 400 new customers from the acquisition of WBS Connect which occurred on December 16, 2009 and newsales activities in the third quarter of 2010, including sales novations.24Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Costs of Service. Total costs of service increased $11.2 million, or 24%, for the year ended December 31, 2010 compared to theyear ended December 31, 2009 primarily due to the WBS Connect acquisition and new sales activities in the third quarter of 2010,including sales novations. As part of the WBS Connect acquisition, GTT added WBS Connect’s network infrastructure assets with over60 points of presence and a substantial increase in services to provide our new customers.Selling, General and Administrative Expenses. SG&A increased $3.3 million, or 23% for the year ended December 31, 2010compared to the year ended December 31, 2009. The increase was due primarily to the WBS Connect acquisition and new sales activitiesin the third quarter of 2010, including sales novations, which resulted in an increase in agent commission expenses.Depreciation and Amortization. Depreciation and amortization expense increased $1.1 million, or 61%, to $2.8 million for theyear ended December 31, 2010, compared to the year ended December 31, 2009. The increase was due primarily to the WBS Connectacquisition in which GTT added WBS Connect’s network infrastructure assets with over 60 points of presence.Interest Expense. Interest expense increased $0.6 million, or 66%, to $1.4 million for the year ended December 31, 2010 comparedto the year ended December 31, 2009. The increase was primarily due to additional debt assumed and incurred in connection with theWBS Connect acquisition.Liquidity and Capital Resources (amounts in thousands) December 31, December 31, 2010 2009Cash and cash equivalents and short-term investments $6,562 $5,548 Debt $14,265 $12,707 Management monitors cash flow and liquidity requirements. Based on the Company’s cash and cash equivalents, the SiliconValley Bank credit facility, and analysis of the anticipated working capital requirements, Management believes the Company hassufficient liquidity to fund the business and meet its contractual obligations for 2011. The Company’s current planned cash requirementsfor 2011 are based upon certain assumptions, including its ability to manage expenses and the growth of revenue from servicesarrangements. In connection with the activities associated with the services, the Company expects to incur expenses, including providerfees, employee compensation and consulting fees, professional fees, sales and marketing, insurance and interest expense. Should theexpected cash flows not be available, management believes it would have the ability to revise its operating plan and make reductions inexpenses.The Company believes that cash currently on hand, expected cash flows from future operations and existing borrowing capacity aresufficient to fund operations for at least the next twelve months, including the scheduled repayment of indebtedness pursuant to theSilicon Valley Bank Term Loan. If our operating performance differs significantly from our forecasts, we may be required to reduce ouroperating expenses and curtail capital spending, and we may not remain in compliance with our debt covenants. In addition, if theCompany were unable to fully fund its cash requirements through operations and current cash on hand, the Company would need toobtain additional financing through a combination of equity and subordinated debt financings and/or renegotiation of terms of itsexisting debt. If any such activities become necessary, there can be no assurance that the Company would be successful in obtainingadditional financing or modifying its existing debt terms.Operating Activities. Net cash used in operating activities was $2.2 million for the year ended December 31, 2010, driven primarilyby the reduction of approximately $7.0 million in accounts payable, accrued expenses and other current liabilities assumed in the WBSConnect acquisition, and payment of upfront cash to be applied as a recoverable draw on commissions of approximately $3.0 million,offset by net income excluding non-cash expenditures.During 2010 and 2009, we made cash payments for interest totaling $0.6 million and $0.3 million, respectively. The increase ininterest payments was a result of the term loan that was issued during the third quarter of 2010.25Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Investing Activities. Net cash used in investing activities decreased to $0.2 million for the year ended December 31, 2010 ascompared to $4.1 million for the year ended December 31, 2009. The decrease was primarily due to the purchase of WBS Connect inDecember 2009. The $0.2 million in investing activities for the year ended December 31, 2010 consists primarily of capitalexpenditures.Financing Activities. Net cash provided by financing activities increased to $3.5 million for the year ended December 31, 2010 ascompared to $3.1 million for the year ended December 31, 2009. This increase was due to the issuance of a new term loan andsubordinate notes in the third and fourth quarter of 2010, respectively.Effect of Exchange Rate Changes on Cash. Effect of Exchange Rate Changes decreased $0.5 million to $0.1 million for the yearended December 31, 2010 as compared to an effect of $0.6 million for the year ended December 31, 2009, due primarily to cash balancesdenominated in currencies that weakened against the US Dollar during 2010 as well as impacts to the Company’s current assets andliabilities denominated in currencies that weakened against the US Dollar.DebtThe following summarizes the debt activity of the Company for the year ended December 31, 2010 (amounts in thousands): Promissory Convertible Line of Subordinated Note/Capital Notes Notes Total Debt Term Loan Credit Notes Lease Payable Payable Debt obligation as of December 31, 2009 $12,707 $— $3,078 $— $833 $4,000 $4,796 Subordinated notes issuance 2,183 — — 2,183 — — — Net repayment on senior secured credit facility (740) — (740) — — — — WBS promissory note repayment (250) — — — (250) — — Principal payments on capital lease (339) — — — (339) — — Issuance of term loan 10,000 10,000 — — — — — Repayment of term loan (500) (500) — — — — — Retirement of notes payable (8,796) — — — — (4,000) (4,796)Debt obligation as of December 31, 2010 $14,265 $9,500 $2,338 $2,183 $244 $— $— Term Loan and Line of CreditIn December 2009, the Company and Silicon Valley Bank entered into a Second Amended and Restated Credit Facility (the“Restated Credit Facility”). Under the terms of the Restated Credit Facility, the Company’s revolving line of credit was increased to amaximum amount of $5.0 million, with the actual amount available being based on criteria related to the Company’s accountsreceivable in the United States (but not to exceed $3.4 million with respect to the United States receivables) and on criteria related to theCompany’s accounts receivable in Europe (but not to exceed $2.0 million with respect to the European receivables). The Restated CreditFacility had a 364-day term.On September 30, 2010, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon ValleyBank. The Loan Agreement provides for a term loan facility of $10 million (the “Term Loan”), and a revolving line of credit facility,which replaced the Second Amended and Restated Credit Facility, in the aggregate principal amount of up to $5 million (the “Line ofCredit”). The Loan Agreement contains customary representations and warranties of the Borrower and customary events of default. Theobligations of the Company under the Loan Agreement are secured by substantially all of the Company’s tangible and intangible assetspursuant to the Loan Agreement. The availability under the Line of Credit is calculated during any month as a percentage of26Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. eligible accounts receivable and is subject to certain conditions, including the continued accuracy of the Company’s representations,warranties and covenants. The Term Loan matures on September 30, 2015. The Company shall repay the Term Loan in sixty equalinstallments of principal and interest, with interest accruing at a floating per annum rate equal to Silicon Valley Bank’s prime rate plus3%, unless the Company achieves certain performance criteria, in which case the interest rate shall be equal to Silicon Valley Bank’sprime rate plus 2%. The Company had $9.5 million outstanding on the Term Loan as of December 31, 2010. The Line of Credit matureson September 29, 2012. The principal amount outstanding under the Line of Credit shall accrue interest at a floating per annum rateequal to Silicon Valley Bank’s prime rate plus 2%, unless the Company achieves certain performance criteria, in which case the interestrate shall be equal to the Bank’s prime rate plus 1%. The Company had $2.3 million outstanding on the Line of Credit at December 31,2010. On November 12, 2007, the holders of the $4.0 million of notes payable due on December 29, 2008 agreed to amend those notesto extend the maturity date to December 31, 2010, subject to increasing the interest rate to 10% per annum, beginning January 1, 2009.Under the terms of the notes, 50% of all interest accrued during 2008 and 2009 was payable on each of December 31, 2008 and 2009,respectively, and all principal and remaining accrued interest was payable on December 31, 2010.Subordinated NotesOn February 8, 2010, the Company completed a units offering (“February 2012 Units”) in which it sold 500 units consisting of debtand common stock at a purchase price of $10,000 per unit, resulting in $5.0 million of proceeds to the Company. Each unit consisted of2,970 shares of the Company’s common stock, and $7,000 in principal amount of the Company’s subordinated promissory notes dueFebruary 8, 2012. The subordinated promissory notes were issued at a discount to face value of $0.2 million and the discount is beingamortized, into interest expense, over the life of the notes. Interest on the subordinated promissory notes accrues at 10% per annum.Accrued but unpaid interest will be payable on February 8, 2011 and 2012.The proceeds from the February 2012 Units were to be applied by the Company to finance a portion of the purchase price under anasset purchase agreement with Global Capacity. On April 30, 2010 the asset purchase agreement with Global Capacity expired withoutconsummation of the acquisition. On May 13, 2010, investors representing $1.5 million in aggregated principal amount of theCompany’s subordinated promissory notes and $0.9 million of the Company’s common stock waived the right to receive their refundand elected to retain some or all of their subordinated promissory notes, which are recorded in long-term debt on the Company’scondensed consolidated balance sheet as of December 31, 2010On December 31, 2010, the Company completed a financing transaction in which it issued 212 Units, valued at $10,000 per unit(“December 2013 Units”). Each unit consisted of 5,000 shares of the Company’s common stock, and $5,000 in principal amount of theCompany’s subordinated promissory notes due December 31, 2013. The subordinated promissory notes were issued at a discount to facevalue of $0.2 million and the discount is being amortized, into interest expense, over the life of the notes. In total, the Company issued1,060,000 shares of the Company’s common stock and $1.1 million in principal amount of subordinated promissory notes.As of December 31, 2010, the subordinated notes payable had a balance of $2.2 million. The balance includes notes totaling$1.9 million due to a related party, Universal Telecommunications, Inc. H. Brian Thompson, the Company’s Executive Chairman of theBoard of Directors, is also the head of Universal Telecommunications, Inc., his own private equity investment and advisory firm. Also,included in the balance is $0.1 million of the notes held by officers and directors of the Company.Promissory Note and Capital LeaseAs part of the WBS Connect acquisition, the Company assumed in the acquisition approximately $0.6 million in capital leaseobligations payable in monthly installments through April 2011 and issued approximately $0.3 million in subordinated seller notes tothe sellers of WBS Connect, due in monthly installments and payable in full by October 2010. The Company paid the $0.3 million insubordinated seller notes in full and has approximately $0.3 million outstanding in capital lease obligations as of December 31, 2010.27Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Notes Payable and Convertible Notes PayableThe holders of the convertible notes payable (“December 2010 Notes”) had the right to convert the principal due under theDecember 2010 Notes into shares of the Company’s common stock, at any time, at a price per share equal to $1.70. The Company hadthe right to require the holders of the December 2010 Notes to convert the principal amount due under the December 2010 Notes at anytime after the closing price of the Company’s common stock shall be equal to or greater than $2.64 for 15 consecutive business days. Theconversion provisions of the December 2010 Notes included protection against dilutive issuances of the Company’s common stock,subject to certain exceptions. The Company had agreed to register with the Securities and Exchange Commission the shares ofCompany’s common stock issued to the holders of the December 2010 Notes upon their conversion, subject to certain limitations.On September 30, 2010, proceeds from the Term Loan were used to repay the Company’s $4.0 million of notes payable and$3.1 million of the December 2010 Notes, both due December 31, 2010, as well as $1.5 million in interest accrued on the notes payableand convertible notes.The December 2013 Units were issued in exchange for the repayment obligation created by the maturity of the December 2010Notes. The amount of the repayment obligation was equal to the outstanding principal amount (valued at face value) of $1.6 million andaccrued but unpaid interest of $0.5 million. Since this was a cashless exchange, there were no cash proceeds to the Company. TheDecember 2010 Notes involved in the exchange were held by Universal Telecommunications, Inc., which is an affiliate of H. BrianThompson, Howard E. Janzen and Theodore B Smith, III. Messrs. Thompson, Janzen and Smith are members of the Company’s Board ofDirectors. Given these relationships, the exchange and the terms of the December 2013 Units were reviewed and approved by anindependent committee of our Board of Directors.Contractual Obligations and CommitmentsAs of December 31, 2010, the Company had total contractual obligations of approximately $52.1 million. Of these obligations,approximately $38.6 million, or 74% are supplier agreements associated with the telecommunications services that the Company hascontracted to purchase from its vendors through 2015. The Company generally tries to structure its contracts so the terms and conditionsin the vendor and client customer contracts are substantially the same in terms of duration and capacity. The back-to-back nature of theCompany’s contracts means that the largest component of its contractual obligations is generally mirrored by its customer’s commitmentto purchase the services associated with those obligations. However, in certain instances relating to network infrastructure, the Companywill enter into purchase commitments with vendors that do not directly tie to underlying customer commitments.Approximately $11.7 million, or 23%, of the total contractual obligations are associated with subordinated promissory notes and aterm loan which mature between 2012 and 2015.Operating leases amount to $1.8 million, or 3% of total contractual obligations, which consist of building and vehicle leases.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest Rate SensitivityInterest due on the Company’s loans is based upon the applicable stated fixed contractual rate with the lender. Interest earned onthe Company’s bank accounts is linked to the applicable base interest rate. For the year ended December 31, 2010 and 2009, theCompany had interest expense, net of income, of approximately $1.4 million and $0.8 million, respectively. The Company believes thatits results of operations are not materially affected by changes in interest rates.Exchange Rate SensitivityApproximately 24% of the Company’s revenues for the year ended December 31, 2010 are derived from services provided outsideof the United States. As a consequence, a material percentage of the Company’s revenues28Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. are billed in British Pounds Sterling or Euros. Since we operate on a global basis, we are exposed to various foreign currency risks. First,our consolidated financial statements are denominated in U.S. Dollars, but a significant portion of our revenue is generated in the localcurrency of our foreign subsidiaries. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. Dollarwill affect the translation of each foreign subsidiary’s financial results into U.S. Dollars for purposes of reporting consolidated financialresults.In addition, because of the global nature of our business, we may from time to time be required to pay a supplier in one currencywhile receiving payments from the underlying customer of the service in another currency. Although it is the Company’s general policyto pay its suppliers in the same currency that it will receive cash from customers, where these circumstances arise with respect to supplierinvoices in one currency and customer billings in another currency, the Company’s gross margins may increase or decrease based uponchanges in the exchange rate. Such factors did not have a material impact on the Company’s results in the year ended December 31,2010.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAReference is made to the consolidated financial statements, the notes thereto, and the reports thereon, commencing on page F-1 ofthis report, which consolidated financial statements, notes, and report are incorporated herein by reference.ITEM 9A. CONTROLS AND PROCEDURESAs of the end of the period covered by this Annual Report, an evaluation was carried out under the supervision and with theparticipation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness ofthe design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the SecuritiesExchange Act of 1934) and internal control over financial reporting.The evaluation of the Company’s disclosure controls and procedures and internal control over financial reporting included areview of our objectives and processes, implementation by the Company and the effect on the information generated for use in thisAnnual Report. In the course of this evaluation and in accordance with Section 302 of the Sarbanes Oxley Act of 2002, we sought toidentify material weaknesses in our controls, to determine whether we had identified any acts of fraud involving personnel who have asignificant role in our internal control over financial reporting that would have a material effect on our consolidated financial statements,and to confirm that any necessary corrective action, including process improvements, were being undertaken. Our evaluation of ourdisclosure controls and procedures is done quarterly and management reports the effectiveness of our controls and procedures in ourperiodic reports filed with the SEC. Our internal control over financial reporting is also evaluated on an ongoing basis by personnel inthe Company’s finance organization. The overall goals of these evaluation activities are to monitor our disclosure controls andprocedures and internal control over financial reporting and to make modifications as necessary. We periodically evaluate our processesand procedures and make improvements as required.Because of its inherent limitations, disclosure controls and procedures and internal control over financial reporting may not preventor detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controlsmay become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures maydeteriorate. Management applies its judgment in assessing the benefits of controls relative to their costs. Because of the inherentlimitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,if any, within the company have been detected. The design of any system of controls is based in part upon certain assumptions about thelikelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potentialfuture conditions, regardless of how remote.Disclosure Controls and ProceduresDisclosure controls and procedures are designed with the objective of ensuring that (i) information required to be disclosed in theCompany’s reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and forms and (ii) information is29Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate toallow timely decisions regarding required disclosures. Our Chief Executive Officer and Chief Financial Officer evaluated theeffectiveness of the our disclosure controls and procedures in place at the end of the period covered by this Annual Report pursuant toRule 13a-15(b) of the Exchange Act. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded thatthe Company’s disclosure controls and procedures (as defined in the Exchange Act Rule 13(a)-15(e)) were effective as of December 31,2010.Management’s Report on Internal Control over Financial ReportingThe Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, assuch term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company management,including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internalcontrol over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — IntegratedFramework, our management concluded that our internal control over financial reporting was effective as of December 31, 2010.This annual report does not include an attestation report of the Company’s independent registered public accounting firmregarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independentregistered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide onlymanagement’s report in this Annual Report.Changes in Internal Control over Financial ReportingThere have been no significant changes in our internal control over financial reporting during the most recently completed fiscalquarter ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control overfinancial reporting. PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this Item relating to our directors and corporate governance is incorporated herein by reference to thedefinitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2011 Annual Meeting of Stockholders.The information required by this Item relating to our executive officers is included in Item 1, “Business — Executive Officers” of thisreport.ITEM 11. EXECUTIVE COMPENSATIONThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant toRegulation 14A of the Exchange Act for our 2011 Annual Meeting of Stockholders.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERSThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant toRegulation 14A of the Exchange Act for our 2011 Annual Meeting of Stockholders.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCEThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant toRegulation 14A of the Exchange Act for our 2011 Annual Meeting of Stockholders.30Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant toRegulation 14A of the Exchange Act for our 2011 Annual Meeting of Stockholders. PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a) Financial Statements (1) Financial Statements are listed in the Index to Financial Statements on page F-1 of this report. (2) Schedules have been omitted because they are not applicable or because the information required to be set forththerein is included in the consolidated financial statements or notes thereto.(b) ExhibitsThe following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted,incorporated by reference herein:EXHIBIT INDEXExhibit Number Description of Document 3.1(1) Second Amended and Restated Certificate of Incorporation dated October 16, 2006. 3.2(1) Amended and Restated Bylaws dated October 15, 2006. 4.1(4) Specimen of Common Stock Certificate of the Company. 4.2(4) Specimen of Class W Warrant Certificate of the Company. 4.3(4) Specimen of Class Z Warrant Certificate of the Company. 4.4(3) Unit Purchase Option granted to HCFP/Brenner Securities LLC. 4.5(3) Warrant Agreement between American Stock Transfer & Trust Company and the Registrant. 10.5(3) Investment Management Trust Agreement between American Stock Transfer & Trust Company and the Registrant. 10.6(1) Employment Agreement for H. Brian Thompson, dated October 15, 2006. 10.8(1) Form of Lock-up letter agreement entered into by the Registrant and the stockholders of Global Internetworking, Inc.,dated October 15, 2006. 10.9(4) 2006 Employee, Director and Consultant Stock Plan, as amended. On November 30, 2006, the Plan was amended to(i) change the termination date to May 21, 2016 and (ii) reflect the Company’s new corporate name. 10.10(2) Form of Registration Rights Agreement. 10.11(1) Form of Promissory Note issued to the stockholders of Global Internetworking, Inc., dated October 15, 2006. 10.12(5) Note Amendment Agreement entered into by the Registrant and the former stockholders of Global Internetworking,Inc., dated November 13, 2007. 10.13(6) Form of Stock Option Agreement. 10.14(6) Form of Restricted Stock Agreement. 10.15(7) Separation Agreement for D. Michael Keenan, dated February 23, 2007. 10.16(8) Employment Agreement for Richard D. Calder, Jr., dated May 7, 2007. 10.17(5) Form of Exchange Agreement entered into by the Registrant and certain holders of promissory notes. 10.18(5) Form of 10% Convertible Unsecured Subordinated Promissory Note. 10.19(9) Loan and Security Agreement entered into by the Registrant, its subsidiary Global Telecom & Technology Americas,Inc. and Silicon Valley Bank, dated March 17, 2008. 10.20(10) Amendment No. 1 to the Employment Agreement for Richard D. Calder, Jr., dated July 18, 2008.31Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit Number Description of Document 10.21(11) Employment Agreement for Eric A. Swank, dated February 2, 2009. 10.22(12) Amended and Restated Loan and Security Agreement, dated June 16, 2009, between Silicon Valley Bank, GlobalTelecom & Technology, Inc. and Global Telecom & Technology Americas, Inc. 10.23(13) Purchase Agreement, dated as of November 3, 2009, by and among Global Telecom & Technology Americas, Inc.,GTT-EMEA, Limited, WBS Connect, LLC, TEK Channel Consulting, LLC, WBS Connect Europe Ltd., Scott Charterand Michael Hollander. 10.24(14) Amendment, dated December 16, 2009, to the Purchase Agreement, dated as of November 2, 2009, by and amongGlobal Telecom & Technology Americas, Inc., GTT-EMEA, Limited, WBS Connect, LLC, TEK Channel Consulting,LLC, WBS Connect Europe Ltd., Scott Charter and Michael Hollander. 10.25(14) Waiver, dated December 16, 2009, executed by Global Telecom & Technology Americas, Inc. 10.26(14) Promissory Note, dated December 16, 2009, executed by Global Telecom & Technology Americas, Inc. in favor ofScott Charter. 10.27(14) Promissory Note, dated December 16, 2009, executed by Global Telecom & Technology Americas, Inc. in favorMichael Hollander. 10.28(14) Guaranty, dated December 16, 2009, between Global Telecom & Technology, Inc. and Scott Charter. 10.29(14) Guaranty, dated December 16, 2009, between Global Telecom & Technology, Inc. and Michael Hollander. 10.30(14) Second Amended and Restated Loan and Security Agreement, dated December 16, 2009, between Silicon Valley Bank,Global Telecom & Technology, Inc., Global Telecom & Technology Americas, Inc., WBS Connect, LLC and GTT-EMEA, Ltd. 10.31(14) Amended and Restated Unconditional Guaranty, dated December 16, 2009, executed by TEK Channel Consulting,LLC and GTT Global Telecom Government Services, LLC in favor of Silicon Valley Bank 10.32(14) GTT-EMEA, Ltd. Debenture in favor of Silicon Valley Bank. 10.33(15) Asset Purchase Agreement, dated December 31, 2009, by and among Capital Growth Systems, Inc., Global CapacityGroup, Inc., Global Capacity Direct, LLC (f/k/a Vanco Direct USA, LLC) and Global Telecom & Technology Americas,Inc. 10.34(16) Form of Promissory Note of Global Telecom & Technology, Inc. due February 8, 2012. 10.35(16) Form of Note Amendment No. 2, dated as of January 14, 2010, by and between Global Telecom & Technology, Inc. andeach holder of Global Telecom & Technology’s 10% promissory notes due December 31, 2010 and issued in October2006. 10.36(16) Note Amendment effective as of January 14, 2010, by and among Global Telecom & Technology, Inc. and the holdersof Global Telecom & Technology’s 10% promissory notes due December 31, 2010 and issued in November 2007. 21.1* Subsidiaries of the Registrant. 23.1* Consent of J.H. Cohn LLP. 24.1* Power of Attorney (included on the signature page to this report). 31.1* Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the SecuritiesExchange Act of 1934. 31.2* Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the SecuritiesExchange Act of 1934. 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002. 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.* Filed herewith(1)Previously filed as an Exhibit to the Registrant’s Form 8-K filed October 19, 2006, and incorporated herein by reference.(2)Previously filed as an Exhibit to the Registrant’s Amendment No. 1 to the Registration Statement on Form S-1 (RegistrationNo. 333-122303) and incorporated herein by reference.32Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (3)Previously filed as an Exhibit to the Registrant’s Annual Report on Form 10-K filed March 30, 2006, and incorporated herein byreference.(4)Previously filed as an Exhibit to the Registrant’s Form 10-Q filed November 14, 2006 and incorporated herein by reference.(5)Previously filed as an Exhibit to the Registrant’s Form 8-K filed November 14, 2007 and incorporated herein by reference.(6)Previously filed as an Exhibit to the Registrant’s Annual Report on Form 10-K filed April 17, 2007, and incorporated herein byreference.(7)Previously filed as an Exhibit to the Registrant’s Form 8-K filed February 23, 2007, and incorporated herein by reference.(8)Previously filed as an Exhibit to the Registrant’s Form 8-K filed May 10, 2007, and incorporated herein by reference.(9)Previously filed as an Exhibit to the Registrant’s Form 8-K filed March 20, 2008, and incorporated herein by reference.(10)Previously filed as an Exhibit to the Registrant’s Form 8-K filed August 4, 2008, and incorporated herein by reference.(11)Previously filed as an Exhibit to the Registrant’s Form 8-K filed February 5, 2009, and incorporated herein by reference.(12)Previously filed as an exhibit to the Registrant’s Form 8-K filed June 22, 2009, and incorporated herein by reference(13)Previously filed as an exhibit to the Registrant’s Form 8-K filed June 22, 2009, and incorporated herein by reference(14)Previously filed as an exhibit to the Registrant’s Form 8-K filed December 22, 2009, and incorporated herein by reference.(15)Previously filed as an exhibit to the Registrant’s Form 8-K filed January 6, 2010, and incorporated herein by reference.(16)Previously filed as an exhibit to the Registrant’s Form 8-K filed February 12, 2010, and incorporated herein by reference.33Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized.GLOBAL TELECOM & TECHNOLOGY, INC. By: /s/ Richard D. Calder, JrRichard D. Calder, Jr.President and Chief Executive OfficerDate: March 11, 2011POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints RichardD. Calder, Jr. and Eric A. Swank, jointly and severally, his attorney-in-fact, each with the full power of substitution, for such person, inany and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits theretoand other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact andagent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connectiontherewith, as fully to all intents and purposes as he might do or could do in person hereby ratifying and confirming all that each of saidattorneys-in-fact and agents, or his substitute, may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on or before March 11, 2011 bythe following persons on behalf of the registrant and in the capacities indicated.Signature Title /s/ Richard D. Calder, Jr.Richard D. Calder, Jr. President, Chief Executive Officer and Director (Principal Executive Officer) /s/ Eric A. SwankEric A. Swank Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer) /s/ H. Brian ThompsonH. Brian Thompson Chairman of the Board and ExecutiveChairman /s/ S. Joseph BrunoS. Joseph Bruno Director /s/ Didier DelepineDidier Delepine Director /s/ Rhodric C. HackmanRhodric C. Hackman Director34Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Signature Title /s/ Howard JanzenHoward Janzen Director /s/ Morgan E. O’BrienMorgan E. O’Brien Director /s/ Theodore B. Smith, IIITheodore B. Smith, III Director35Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. INDEX TO FINANCIAL STATEMENTSGlobal Telecom & Technology, Inc. Report of J.H. Cohn LLP, Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2010 and 2009 F-3 Consolidated Statements of Operations for the years ended December 31, 2010 and 2009 F-4 Consolidated Statements of Stockholders’ Equity for years ended December 31, 2010 and 2009 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009 F-6 Notes to Consolidated Financial Statements F-7 F-1Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Report of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of Global Telecom & Technology, Inc.We have audited the accompanying consolidated balance sheets of Global Telecom & Technology, Inc. and Subsidiaries as ofDecember 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and cash flows for the yearsthen ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidatedfinancial position of Global Telecom & Technology, Inc. and Subsidiaries as of December 31, 2010 and 2009, and their consolidatedresults of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the UnitedStates of America./s/ J.H. Cohn LLPJericho, New YorkMarch 11, 2011F-2Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Consolidated Balance Sheets(Amounts in thousands, except for share and per share data) December 31, December 31, 2010 2009 ASSETSCurrent assets: Cash and cash equivalents $6,562 $5,548 Accounts receivable, net 5,787 9,389 Deferred contract costs 536 454 Prepaid expenses and other current assets 1,105 937 Total current assets 13,990 16,328 Property and equipment, net 1,674 2,235 Intangible assets, net 5,732 7,613 Other assets 3,519 429 Goodwill 29,046 29,156 Total assets $53,961 $55,761 LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities: Accounts payable $9,279 $12,204 Accrued expenses and other current liabilities 6,831 11,372 Short-term debt 2,245 12,463 Deferred revenue 5,898 6,112 Total current liabilities 24,253 42,151 Long-term debt 12,020 244 Deferred revenue and other long-term liabilities 605 352 Total liabilities 36,878 42,747 Commitments and contingencies Stockholders’ equity: Common stock, par value $.0001 per share, 80,000,000 shares authorized, 17,880,254 and15,472,912 shares issued and outstanding as of December 31, 2010 and 2009, respectively 2 2 Additional paid-in capital 61,497 58,710 Accumulated deficit (44,129) (45,499)Accumulated other comprehensive loss (287) (199)Total stockholders’ equity 17,083 13,014 Total liabilities and stockholders’ equity $53,961 $55,761 The accompanying notes are an integral part of these Consolidated Financial Statements.F-3Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Consolidated Statements of Operations(Amounts in thousands, except for share and per share data) Year Ended Year Ended December 31, 2010 December 31, 2009 Revenue Telecommunications services sold $81,075 $64,221 Operating expenses: Cost of telecommunications services provided 57,022 45,868 Selling, general and administrative expense 18,021 14,684 Restructuring costs, employee termination and non-recurring items — 641 Depreciation and amortization 2,791 1,733 Total operating expenses 77,834 62,926 Operating income 3,241 1,295 Other income (expense): Interest expense, net (1,407) (849)Other income (expense), net (368) 24 Total other income (expense) (1,775) (825)Income before income taxes 1,466 470 Provision for income taxes 96 16 Net income $1,370 $454 Earnings per share: Basic $0.08 $0.03 Diluted $0.08 $0.03 Weighted average shares: Basic 16,740,882 15,268,826 Diluted 16,971,396 15,470,763 The accompanying notes are an integral part of these Consolidated Financial Statements.F-4Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Consolidated Statements of Stockholders’ Equity(Amounts in thousands, except for share and per share data) Accumulated Additional Other Common Stock Paid -In Accumulated Comprehensive Shares Amount Capital Deficit Income (loss) Total Balance, December 31, 2008 14,942,840 $1 $57,584 $(45,953) $498 $12,130 Share-based compensation for options issued — — 169 — — 169 Share-based compensation for restricted stock issued 443,115 1 381 — — 382 Share-based compensation for restricted stock issuedrelated to WBS acquisition 86,957 — 100 — — 100 Shares to be issued related to WBS acquisition — — 476 — — 476 Comprehensive income (loss) Net income — — — 454 — 454 Change in accumulated foreign currency gain ontranslation — — — — (697) (697)Comprehensive loss (243)Balance, December 31, 2009 15,472,912 2 58,710 (45,499) (199) 13,014 Share-based compensation for options issued — — 171 — — 171 Share-based compensation for restricted stock issued 417,682 — 473 — — 473 Common shares issued in February 2010 units offering,net of refund 925,660 — 1,139 — — 1,139 Stock options exercised 4,000 — 1 — — 1 Shares issued in connection with December 2010 unitsoffering 1,060,000 — 1,279 — — 1,279 Cancellation of shares to be issued related to WBSConnect acquisition — — (276) — — (276)Comprehensive income (loss) Net income — — — 1,370 — 1,370 Change in accumulated foreign currency loss ontranslation — — — — (88) (88)Comprehensive income 1,282 Balance, December 31, 2010 17,880,254 $2 $61,497 $(44,129) $(287) $17,083 The accompanying notes are an integral part of these Consolidated Financial Statements.F-5Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Consolidated Statements of Cash Flows(Amounts in thousands) Year Ended Year Ended December 31, 2010 December 31, 2009 Cash flows from operating activities: Net income $1,370 $454 Adjustments to reconcile net income to net cash (used in) provided by operating activities Depreciation and amortization 2,791 1,733 Shared-based compensation 644 551 Changes in operating assets and liabilities: Accounts receivable, net 3,310 3,191 Deferred contract cost, prepaid expenses, income tax refund receivable and othercurrent assets (265) 1,905 Other assets (3,120) 459 Accounts payable (2,981) (6,676)Accrued expenses and other current liabilities (3,988) 558 Deferred revenue and other long-term liabilities 51 (812)Net cash (used in) provided by operating activities (2,188) 1,363 Cash flows from investing activities: Acquisition of businesses, net of cash acquired — (3,711)Purchases of property and equipment (186) (389)Net cash used in investing activities (186) (4,100)Cash flows from financing activities: WBS promissory note repayment (250) — Principal payments on capital lease (339) — Borrowing (repayment) on line of credit (740) 3,078 Issuance of term loan 9,500 — Payment of covertible notes payable (3,171) — Payment of notes payable (4,000) — Issuance of subordinated notes 1,546 — Issuance of units offering common shares 936 — Net cash provided by financing activities 3,482 3,078 Effect of exchange rate changes on cash (94) (578)Net increase (decrease) in cash and cash equivalents 1,014 (237)Cash and cash equivalents at beginning of year 5,548 5,785 Cash and cash equivalents at end of year $6,562 $5,548 Supplemental disclosure of cash flow information Cash paid for interest $559 $343 Supplemental disclosure of non cash investing and financing activities Common shares issued 1,060 — Subordinated notes issued $1,060 $— Accrued interest payable on convertible notes payable retired $(400) $— Convertible notes payable retired $(1,625) $— The accompanying notes are an integral part of these Consolidated Financial Statements.F-6Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial StatementsNOTE 1 —ORGANIZATION AND BUSINESSOrganization and BusinessGlobal Telecom & Techonolgy, Inc. (“GTT” or the “Company”) is a Delaware corporation which was incorporated on January 3,2005. GTT is a global telecommunications carrier and leading network integrator serving the data communications needs of largeenterprise, government and carrier clients in over 80 countries. We combine our own network assets with the networks of over 800suppliers worldwide to deliver cost-effective, scalable solutions supporting each client’s unique requirements. Through our proprietaryClient Management Database (CMD), GTT provides streamlined service design and quotation, rapid service implementation, and global24x7 monitoring and support. GTT is headquartered in the Washington, DC metro region with offices in London, Dusseldorf, andDenver.GTT serves as the holding company for two operating subsidiaries, Global Telecom & Technology Americas, Inc. (“GTTA”) andGTT — EMEA Ltd. (“GTTE”) and their respective subsidiaries (collectively, hereinafter, the “Company”).NOTE 2 —SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation of Consolidated Financial Statements and Use of EstimatesThe consolidated financial statements include the accounts of the Company, GTTA, GTTE, and GTTA’s and GTTE’s operatingsubsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.GTTA’s subsidiaries:GTT Global Telecom, LLCGTT Global Telecom Government Services, LLCWBS Connect LLCTEK Channel Consulting, LLCGTTE’s subsidiaries:Global Telecom & Technology SARL (formerly called European Telecommunications & Technology SARL), a FrenchcorporationEuropean Telecommunications & Technology Inc., a Delaware corporationGlobal Telecom & Technology Deutschland GmbH (formerly called ETT European Telecommunications & TechnologyDeutschland GmbH), a German corporationETT (European Telecommunications & Technology) Private Limited, an Indian corporationEuropean Telecommunications & Technology (S) Pte Limited, a Singapore corporationETT Network Services Limited, a United Kingdom corporationWBS Connect Europe, Ltd., a company formed under the laws of IrelandThe preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenuesand expenses during the reporting period. Significant accounting estimates to be made by management include allowances for doubtfulaccounts, valuation of goodwill and other long-lived assets, accrual for billing disputes, and valuation of equity instruments. Because ofthe uncertainty inherent in such estimates, actual results may differ from these estimates.F-7Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)Revenue RecognitionThe Company provides data connectivity solutions, such as dedicated circuit access, access aggregation and hubbing and managednetwork services to its customers. Certain of the Company’s current revenue activities have features that may be considered multipleelements. The Company believes that there is insufficient evidence to determine each element’s fair value and as a result, in thosearrangements where there are multiple elements, revenue is recorded ratably over the term of the arrangement.Network Services and Support. The Company’s services are provided pursuant to contracts that typically provide for payments ofrecurring charges on a monthly basis for use of the services over a committed term. Each service contract has a fixed monthly cost and afixed term, in addition to a fixed installation charge (if applicable). At the end of the initial term of most service contracts the contractsroll forward on a month-to-month or other periodic basis and continue to bill at the same fixed recurring rate. If any cancellation ortermination charges become due from the customer as a result of early cancellation or termination of a service contract, those amounts arecalculated pursuant to a formula specified in each contract. Recurring costs relating to supply contracts are recognized ratably over theterm of the contract.Non-recurring fees, Deferred Revenue. Non-recurring fees for data connectivity typically take the form of one-time, non-refundable provisioning fees established pursuant to service contracts. The amount of the provisioning fee included in each contract isgenerally determined by marking up or passing through the corresponding charge from the Company’s supplier, imposed pursuant to theCompany’s purchase agreement. Non-recurring revenues earned for providing provisioning services in connection with the delivery ofrecurring communications services are recognized ratably over the contractual term of the recurring service starting upon commencementof the service contract term. Fees recorded or billed from these provisioning services are initially recorded as deferred revenue thenrecognized ratably over the contractual term of the recurring service. Installation costs related to provisioning incurred by the Companyfrom independent third party suppliers, directly attributable and necessary to fulfill a particular service contract, and which costs wouldnot have been incurred but for the occurrence of that service contract, are recorded as deferred contract costs and expensedproportionally over the contractual term of service in the same manner as the deferred revenue arising from that contract. Deferred costsdo not exceed deferred upfront fees. Due to its limited operating history, the Company believes the initial contractual term is the bestestimate of the period of earnings.Other Revenue. From time to time, the Company recognizes revenue in the form of fixed or determinable cancellation (pre-installation) or termination (post-installation) charges imposed pursuant to the service contract. These revenues are earned when acustomer cancels or terminates a service agreement prior to the end of its committed term. These revenues are recognized when billed ifcollectibility is reasonably assured. In addition, the Company from time to time sells equipment in connection with data networkingapplications. The Company recognizes revenue from the sale of equipment at the contracted selling price when title to the equipmentpasses to the customer (generally F.O.B. origin) and when collectibility is reasonably assured.Translation of Foreign CurrenciesThese consolidated financial statements have been reported in U.S. Dollars by translating asset and liability amounts at the closingexchange rate, equity amounts at historical rates, and the results of operations and cash flow at the average exchange rate prevailingduring the periods reported.F-8Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)A summary of exchange rates used is as follows: U.S. Dollars/ British Pounds U.S. Dollars/ Sterling Euro 2010 2009 2010 2009Closing exchange rate at December 31, 1.55 1.61 1.33 1.44 Average exchange rate during the period 1.55 1.57 1.33 1.39 Transactions denominated in foreign currencies are recorded at the rates of exchange prevailing at the time of the transaction.Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the balance sheetdate. Exchange differences arising upon settlement of a transaction are reported in the consolidated statements of operations in otherincome.Other Income (Expense)The Company recognized other expense (income), net of approximately $368,000 in expense and $24,000 of income for the yearsended December 31, 2010 and 2009, respectively, primarily comprised of the unrealized and realized gain and loss on foreign exchange.Accounts Receivable, NetAccounts receivable balances are stated at amounts due from the customer net of an allowance for doubtful accounts. Creditextended is based on an evaluation of the customer’s financial condition and is granted to qualified customers on an unsecured basis.The Company, pursuant to its standard service contracts, is entitled to impose a finance charge of a certain percentage per monthwith respect to all amounts that are past due. The Company’s standard terms require payment within 30 days of the date of the invoice.The Company treats invoices as past due when they remain unpaid, in whole or in part, beyond the payment time set forth in theapplicable service contract.The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time tradereceivables are past due, the customer’s current ability to pay its obligation to the Company, and the condition of the general economyand the industry as a whole. Specific reserves are also established on a case-by-case basis by management. The Company writes offaccounts receivable when they become uncollectible. Credit losses have historically been within management’s expectations. Actualbad debts, when determined, reduce the allowance, the adequacy of which management then reassesses. The Company writes offaccounts after a determination by management that the amounts at issue are no longer likely to be collected, following the exercise ofreasonable collection efforts, and upon management’s determination that the costs of pursuing collection outweigh the likelihood ofrecovery. As of December 31, 2010 and 2009, the total allowance for doubtful accounts was $4.1 million and $0.6 million, respectively.Other Comprehensive IncomeIn addition to net income, comprehensive income (loss) includes charges or credits to equity occurring other than as a result oftransactions with stockholders. For the Company, this consists of foreign currency translation adjustments.Share-Based CompensationASC Topic 718, Compensation — Stock Compensation (formerly SFAS 123(R)), requires the Company to measure and recognizecompensation expense for all share-based payment awards made to employees and directors based on estimated fair values.F-9Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)Share-based compensation expense recognized under ASC Topic 718 was $0.6 million for both the years ended December 31, 2010and 2009. Both 2010 and 2009 amounts consisted of approximately $0.2 million of share-based compensation expense related to stockoption grants and approximately $0.4 million in restricted stock awards. Share-based compensation expense is included in sellinggeneral and administrative expense on the accompanying consolidated statements of operations. See Note 9 for additional information.ASC Topic 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisiteservice periods in the Company’s consolidated statement of operations.Share-based compensation expense recognized in the Company’s consolidated statements of operations for the years endedDecember 31, 2010 and 2009, included compensation expense for share-based payment awards based on the grant date fair valueestimated in accordance with the provisions of ASC Topic 718. The Company follows the straight-line single option method ofattributing the value of stock-based compensation to expense. As stock-based compensation expense recognized in the consolidatedstatement of operations for the years ended December 31, 2010 and 2009 is based on awards ultimately expected to vest, it has beenreduced for estimated forfeitures. ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, insubsequent periods if actual forfeitures differ from those estimates.The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based awards granted. TheCompany’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected bythe Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, butare not limited to, the Company’s expected stock price volatility over the term of the awards and the expected term of the awards.The Company accounts for non-employee stock-based compensation expense in accordance with ASC Topic 505, Equity — BasedPayments to Non-Employees (formerly EITF Issue No. 96-18). The Company issued non-employee grants totaling 107,502 shares in2010.Cash and Cash EquivalentsIncluded in cash and cash equivalents are deposits with financial institutions as well as short-term money market instruments,certificates of deposit and debt instruments with maturities of three months or less when purchased.Accounting for Derivative InstrumentsThe Company accounts for derivative instruments in accordance with ASC Topic 815, Accounting for Derivative Instruments andHedging Activities, as amended (“SFAS 133”), which establishes accounting and reporting standards for derivative instruments andhedging activities, including certain derivative instruments imbedded in other financial instruments or contracts. The Company alsoconsiders ASC Topic 815-40-05, Contracts in Entity’s Own Entity, as amended (“EITF No. 00-19”) which provides criteria fordetermining whether freestanding contracts that are settled in a company’s own stock, including common stock warrants, should bedesignated as either an equity instrument, an asset or as a liability.The Company also considers ASC Topic 815-40-15, Evaluating Whether an Instrument is Considered Indexed to an Entity’s OwnStock, as amended (“EITF No. 07-5”), which was effective for the Company on January 1, 2009. This ASC Topic provides guidance fordetermining whether an equity-linked financial instrument (or embedded feature) issued by an entity is indexed to the entity’s stock, andtherefore, qualifying for the first part of the scope exception in paragraph 815-10-15. The Company evaluated the conversion featureembedded in its convertible notes payable based on the criteria of ASC Topic 815 to determine whether the conversion feature would berequired to be bifurcated from the convertible notes and accounted for separately as derivative liabilities. These instruments do not existat December 31, 2010.F-10Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)TaxesThe Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (formerly SFAS No. 109). Under ASCTopic 740, deferred tax assets are recognized for future deductible temporary differences and for tax net operating loss and tax creditcarry-forwards, and deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years.Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in whichthe deferred tax asset or liability is expected to be realized or settled. A valuation allowance is provided to offset the net deferred taxasset if, based upon the available evidence, management determines that it is more likely than not that some or all of the deferred taxasset will not be realized.In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109,Accounting for Income Taxes, and prescribes a recognition threshold and measurement attribute for the financial statement recognitionand measurement of a tax position taken or expected to be taken in a tax return. FIN 48 was codified into ASC Topic 740, whichprovides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.The Company may, from time to time, be assessed interest and/or penalties by taxing jurisdictions, although any such assessmentshistorically have been minimal and immaterial to its financial results. The Company’s federal tax returns for 2006, 2007, 2008 and 2009are still open. In the event the Company has received an assessment for interest and/or penalties, it has been classified in the statementsof operations as other general and administrative costs.The Company is liable in certain cases for collecting regulatory fees and/or certain sales taxes from its customers and remitting thefees and taxes to the applicable governing authorities. The Company records taxes applicable under ASC Topic 605, Subtopic 45,Revenue Recognition — Principal Agent Considerations (formerly EITF No. 06-3), on a net basis.Net Income Per ShareBasic income per share is computed by dividing income available to common stockholders by the weighted average number ofcommon shares outstanding. Diluted earnings per share reflect, in periods with earnings and in which they have a dilutive effect, theeffect of common shares issuable upon exercise of stock options, warrants, and convertible securities.The table below details the calculations of earnings per share (in thousands): Year Ended December 31, 2010 2009 Numerator for basic and diluted EPS — income available to common shareholders $1,370 $454 Denominator for basic EPS — weighted average shares 16,741 15,269 Effect of dilutive securities 230 202 Denominator for diluted EPS — weighted average shares 16,971 15,471 Earnings per share: Basic and diluted $0.08 $0.03 F-11Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)The table below details the anti-dilutive items that were excluded in the computation of earnings per share (in thousands): Year Ended December 31, 2010 2009 Class W warrants — 12,090 Class Z warrants 12,090 12,090 Convertible notes — 2,819 Stock options 504 414 Series A units — 250 Series B units — 460 Total 12,594 28,123 At December 31, 2010, we had 12,090,000 Class Z warrants outstanding, each of which entitles the holder to purchase a share ofour common stock at an exercise price of $5.00 per share on or before April 10, 2012.Software CapitalizationInternal Use Software — The Company recognizes internal use software in accordance with ASC Topic 350-40, Internal-UseSoftware (formerly SOP 98-1). This Statement requires that certain costs incurred in purchasing or developing software for internal use becapitalized as internal use software development costs and included in fixed assets. Amortization of the software begins when thesoftware is ready for its intended use.Property and EquipmentProperty and equipment are stated at cost, net of accumulated depreciation computed using the straight-line method. Depreciationon these assets is computed over the estimated useful lives of the assets ranging from three to seven years. Leasehold improvements areamortized over the shorter of the term of the lease, excluding optional extensions, or the useful life. Depreciable lives used by theCompany for its classes of assets are as follows:Furniture and Fixtures 7 yearsTelecommunication Equipment 5 yearsLeasehold Improvements up to 10 yearsComputer Hardware and Software 3-5 yearsInternal Use Software 3 yearsGoodwillGoodwill is the excess purchase price paid over identified intangible and tangible net assets of acquired businesses. Goodwill is notamortized, and is tested for impairment at the reporting unit level annually or when there are any indications of impairment, as requiredby ASC Topic 350, Intangibles — Goodwill and Other (formerly SFAS 142). ASC Topic 350 provides guidance on financial accountingand reporting related to goodwill and other intangibles, other than the accounting at acquisition for goodwill and other intangibles. Areporting unit is an operating segment, or component of an operating segment, for which discrete financial information is available andis regularly reviewed by management. We have one reporting unit to which goodwill is assigned.A two-step approach is required to test goodwill for impairment. The first step tests for impairment by applying fair value-basedtests. The second step, if deemed necessary, measures the impairment by applying fair values to specific assets and liabilities.Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which isdependent on internal forecasts, estimation of the long-term rate of growth for the Company, the useful life over which cash flows willoccur, and determination of the Company’s cost ofF-12Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)capital. Changes in these estimates and assumptions could materially affect the determination of fair value and conclusions on goodwillimpairment.IntangiblesIntangible assets are accounted for in accordance with ASC Topic 350 and ASC Topic 360, Impairment or Disposal of Long-LivedAssets. ASC Topic 360 provides guidance for recognition and measurement of the impairment of long-lived assets to be held, used anddisposed of by sale. Intangible assets arose from business combinations and consist of customer contracts, acquired technology andrestrictive covenants related to employment agreements that are amortized, on a straight-line basis, over periods of up to five years.In accordance with ASC Topic 350, the Company reviews long-lived assets to be held and used for impairment whenever events orchanges in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of an assetexceeds its estimated future undiscounted cash flows the asset is considered to be impaired. Impairment losses are measured as theamount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower ofthe carrying amount or fair value less costs to sell.Fair Value of Financial InstrumentsThe fair values of the Company’s assets and liabilities that qualify as financial instruments under ASC Topic 825, FinancialInstruments, including cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and accrued expenses arecarried at cost, which approximates fair value due to the short-term maturity of these instruments. The reported amounts of long-termobligations approximate fair value, given management’s evaluation of the instruments’ current rates compared to market rates of interestand other factors.Comprehensive IncomeComprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss)includes certain changes in equity that are excluded from net income. Specifically, cumulative foreign currency translation adjustmentsare included in accumulated other comprehensive income (loss).Accrued Carrier ExpensesThe Company accrues estimated charges owed to its suppliers for services. The Company bases this accrual on the suppliercontract, the individual service order executed with the supplier for that service, the length of time the service has been active, and theoverall supplier relationship.Disputed Carrier ExpensesIt is common in the telecommunications industry for users and suppliers to engage in disputes over amounts billed (or not billed) inerror or over interpretation of contract terms. The disputed carrier cost included in the consolidated financial statements includesdisputed but unresolved amounts claimed as due by suppliers, unless management is confident, based upon its experience and its reviewof the relevant facts and contract terms, that the outcome of the dispute will not result in liability for the Company. Managementestimates this liability and reconciles the estimates with actual results as disputes are resolved, or as the appropriate statute of limitationswith respect to a given dispute expires.As of December 31, 2010, open disputes totaled approximately $1.9 million. Based upon its experience with each vendor andsimilar disputes in the past, and based upon management review of the facts and contract terms applicable to each dispute, managementhas determined that the most likely outcome is that the Company will beF-13Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)liable for approximately $0.7 million in connection with these disputes, for which accrued liabilities are included on the accompanyingconsolidated balance sheet at December 31, 2010.Recent Accounting PronouncementsIn September 2009, the FASB ratified the consensus approach reached at the September 9-10 Emerging Issues Task Force (EITF)meeting on two EITF issues related to revenue recognition. The first, EITF Issue no. 08-01, Revenue Arrangements with MultipleDeliverables, which applies to multiple-deliverable revenue arrangements that are currently within the scope of FASB AccountingStandards Codification (ASC) Subtopic 605-25 and the second, EITF Issue no. 09-3, Certain Revenue Arrangements That IncludeSoftware Elements, which focuses on determining which arrangements are within the scope of the software revenue guidance in ASCTopic 985 and which are not. Both EITF issues are effective on a prospective basis for revenue arrangements entered into or materiallymodified in fiscal years beginning on or after June 15, 2010.Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would havea material effect on the Company’s consolidated financial statements or the Company’s future results of operations.NOTE 3 —ACQUISITIONOn December 16, 2009, GTT acquired privately-held WBS Connect. Based in Denver, Colorado, WBS Connect provides wide areanetwork and dedicated Internet access services to over 400 customers worldwide. The acquisition of WBS Connect expanded GTT’sportfolio of dedicated Internet access and Ethernet services. Additionally, GTT added WBS Connect’s network infrastructure assets withover 60 points of presence in major North American, Asian and European metro centers.The Company accounted for the Acquisition using the purchase method of accounting with GTT treated as the acquiring entity.Accordingly, consideration paid by the Company to complete the acquisition of WBS Connect has been allocated to WBS Connect’sassets and liabilities based upon their estimated fair values as of the date of completion of the Acquisition, December 16, 2009. TheCompany estimated the fair value of WBS Connect’s assets and liabilities based on discussions with WBS Connect’s management, duediligence and information presented in financial statements. Amounts in thousands Purchase Price: Cash consideration paid at closing $1,050 WBS debt extinguished by GTT at closing, including accrued interest and other fees 2,849 Total cash consideration 3,899 Fair value of liabilities assumed 13,054 Fair value of GTT common shares, to be issued over 18 months following the transaction 476 Fair value of earn out consideration 100 Fair value of promissory note issued to former WBS Connect owners 250 Total consideration rendered $17,779 F-14Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued) Amounts in thousands Purchase Price Allocation: Tangible net assets acquired Acquired Assets Current assets $4,613 Property and equipment 1,175 Intangible assets 4,800 Other assets 35 Total fair value of assets acquired 10,623 Goodwill 7,156 Total consideration $17,779 The Company settled with the WBS sellers on the number of shares to be delivered under the purchase agreement. Accordingly,there was a measurement period adjustment recorded for the year ended December 31, 2010.The following schedule presents unaudited consolidated pro forma results of operations as if the Acquisition had occurred onJanuary 1, 2009. This information does not purport to be indicative of the actual results that would have occurred if the Acquisition hadactually been completed January 1, 2009, nor is it necessarily indicative of the future operating results or the financial position of thecombined company. The unaudited pro forma results of operations do not reflect the cost of any integration activities or benefits thatmay result from synergies that may be derived from any integration activities. Year Ended December 31, 2009 Amounts in thousands, except per share data Revenue $90,917 Net income (loss) $(4,344) Net income (loss) per share: Basic $(0.28) Diluted $(0.28) NOTE 4 —GOODWILL AND INTANGIBLE ASSETSDuring the third quarter of 2010, the Company completed its annual goodwill impairment testing in accordance with ASC Topic350. As part of step one, the Company considered three methodologies to determine the fair-value of our entity: • A market capitalization approach, which measures market capitalization at the measurement date. • A discounted cash flow approach, which entails determining fair value using a discounted cash flow methodology. This methodrequires significant judgment to estimate the future cash flows and to determine the appropriate discount rates, growth rates, andother assumptions. • A guideline company approach, which entails analysis of comparable, publicly traded companies.Each of these methodologies the Company believes has merit in estimating the value of its goodwill. The Company accordinglyemployed each of these three methodologies in our analysis and concluded that no impairment existed.F-15Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)The following table summarizes the Company’s intangible assets as of December 31, 2010 and 2009 (amounts in thousands): December 31, 2010 Amortization Gross Asset Accumulated Net Book Period Cost Amortization Impairment Value Customer contracts 4-5 years $4,800 $1,186 $— $3,614 Carrier contracts 1 year 151 151 — — Noncompete agreements 4-5 years 4,800 3,165 1,269 366 Software 7 years 6,600 3,183 1,665 1,752 $16,351 $7,685 $2,934 $5,732 December 31, 2009 Amortization Gross Asset Accumulated Net Book Period Cost Amortization Impairment Value Customer contracts 4-5 years $4,800 $193 $— $4,607 Carrier contracts 1 year 151 151 — — Noncompete agreements 4-5 years 4,800 2,634 1,269 897 Software 7 years 6,600 2,826 1,665 2,109 $16,351 $5,804 $2,934 $7,613 Amortization expense was $1.9 million and $1.2 million for the years ended December 31, 2010 and 2009, respectively.During the year ended December 31, 2010, the Company adjusted its reported goodwill amount for the settlement with WBS sellerson the amount of shares delivered under the purchase agreement. This resulted in an approximately $0.1 million decrease to goodwill.Estimated amortization expense related to intangible assets subject to amortization at December 31, 2010 in each of the yearssubsequent to December 31, 2010 is as follows (amounts in thousands):Estimated Future Amortization of Intangibles2011 $1,758 2012 1,603 2013 1,471 2014 900 Total $5,732 The following table summarizes the Company’s goodwill activity during the years ended December 31, 2010 and 2009 (amounts inthousands):Balance December 31, 2008 $22,000 Goodwill acquired related to WBS Connect acquisition 7,156 Balance December 31, 2009 $29,156 Measurement period adjustment related to WBS Connect acquisition (110)Balance December 31, 2010 $29,046 F-16Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)NOTE 5 —PROPERTY AND EQUIPMENTThe following table summarizes the Company’s property and equipment at December 31, 2010 and 2009 (amounts in thousands): 2010 2009 Computer equipment $3,803 $3,550 Computer software 528 478 Leasehold improvements 527 539 Furniture and fixtures 248 242 Property and equipment, gross 5,106 4,809 Less accumulated depreciation and amortization (3,432) (2,574)Property and equipment, net $1,674 $2,235 Depreciation expense associated with property and equipment was $0.9 million and $0.5 million for the years ended December 31,2010 and 2009, respectively.NOTE 6 —ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESThe following table summarizes the Company’s accrued expenses and other current liabilities as of December 31, 2010 and 2009(amounts in thousands): 2010 2009 Accrued compensation and benefits $1,217 $1,880 Accrued interest payable 184 1,546 Accrued taxes 1,343 2,277 Accrued carrier costs 3,792 4,599 Accrued other 295 1,070 $6,831 $11,372 NOTE 7 —INCOME TAXESThe components of the provision for (benefit from) income taxes for the years ended December 31, 2010 and 2009 are as follows(amounts in thousands): 2010 2009 Current: Federal $70 $— State 26 — Foreign — 16 Subtotal 96 16 Deferred: Federal (452) (332)State (58) (58)Foreign 545 (206)Subtotal 35 (596)Change in Valuation Allowance 35 596 Provision for income taxes $96 $16 F-17Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)The provision for or benefit from income taxes differs from the amount computed by applying the U.S. federal statutory income taxrates for federal, state, and local to income before income taxes for the reasons set forth below for the years ended December 31, 2010 and2009: 2010 2009 US federal statutory income tax rate 35.00% 35.00%Permanent Items 0.00% 1.02%State Taxes (2.81)% (3.75)%Foreign tax rate differential (21.06)% (15.10)%Change in Valuation Allowance (12.12)% (23.03)%Other Items 7.57% 9.29%Effective Tax Rate 6.58% 3.43%As of December 31, 2010, the Company has net operating loss (“NOL”) carryforwards of approximately $20.2 million for taxpurposes which will be available to offset future income. These net operating loss carryforwards were generated in a number ofjurisdictions. If not used, these carryforwards will expire between 2020 and 2029. Approximately $1.4 million of the Company’sU.S. NOL carryforward may be significantly limited under Section 382 of the Internal Revenue Code (“IRC”). NOL carryforwards arelimited under Section 382 when there is a significant “ownership change” as defined in the IRC. During 2006, the Company experiencedsuch an ownership change.Deferred income taxes reflect the net effects of net operating loss carryforwards and the temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant componentsof the Company’s deferred tax assets and liabilities at December 31, 2010 and 2009 are as follows (amounts in thousands): 2010 2009 Deferred tax assets: Net operating loss carryforwards $5,201 $6,394 Allowance for Doubtful Accounts 260 12 Fixed Assets 338 390 Stock Compensation 1,325 1,136 Miscellaneous items 150 250 Total deferred tax assets before valuation allowance 7,274 8,182 Less: Valuation Allowance (6,739) (7,017)Total deferred tax assets 535 1,165 Deferred tax liabilities: Identified intangibles (345) (1,165)Other miscellaneous items (190) — Total deferred tax liabilities (535) (1,165)Net deferred tax liability $— $— ASC Topic 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. The Companybelieves that it is more likely than not that all of the deferred tax assets will be realized against future taxable income but does not haveobjective evidence to support this future assumption. Based uponF-18Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)the weight of available evidence, which includes the Company’s historical operating performance and the reported accumulated netlosses to date, the Company has provided a full valuation allowance against its deferred tax assets, except to the extent that those assetsare expected to be realized through continuing amortization of the Company’s deferred tax liabilities for intangible assets.The majority of the Company’s valuation allowance relates to deferred tax assets in the United Kingdom, the United States, Franceand Germany.NOTE 8 —SALES NOVATIONSOn August 31, 2010, the Company entered into sales novation agreements with RevNet International, LLC, a Florida limitedliability company (“RevNet”) and with Revelation Networks Incorporated, a Florida corporation (“RNI”). In the agreements, RevNet andRNI assigned and transferred to the Company certain service level agreements and all rights under those agreements, as well as certainsupply agreements and obligations there under.In exchange for the assignment and transfer, the Company paid to RevNet $2.1 million and RNI $0.9 million as upfront cash to beapplied as recoverable draws against future agent commission payments, which are included in prepaid expenses and other assets as ofDecember 31, 2010. In addition, the Company agreed to pay to RevNet agent commissions for the seven-year period ending August 31,2017 and agreed to pay RNI agent commissions for the five-year period ending August 31, 2015. Commencing in September 2011, theCompany has the option to reduce the agent commissions to RevNet and RNI by up to 50% until such time as the aggregate dollaramount of such monthly reductions by the Company is equal to the upfront cash payment amounts.NOTE 9 —EMPLOYEE SHARE-BASED COMPENSATION BENEFITSStock-Based Compensation PlanThe Company adopted its 2006 Employee, Director and Consultant Stock Plan (the “Plan”) in October 2006. In addition to stockoptions, the Company may also grant restricted stock or other stock-based awards under the Plan. The maximum number of sharesissuable over the term of the Plan is limited to 3,500,000 shares.The Plan permits the granting of stock options and restricted stock to employees (including employee directors and officers) andconsultants of the Company, and non-employee directors of the Company. Options granted under the Plan have an exercise price of atleast 100% of the fair market value of the underlying stock on the grant date and expire no later than ten years from the grant date. Theoptions generally vest over four years with 25% of the option shares becoming exercisable one year from the date of grant and theremaining 75% annually or quarterly over the following three years. The Compensation committee of the Board of Directors, asadministrator of the Plan, has the discretion to use a different vesting schedule.Stock OptionsDue to the Company’s limited history as a public company, the Company has estimated expected volatility based on the historicalvolatility of certain comparable companies as determined by management. The risk-free interest rate assumption is based upon observedinterest rates at the time of grant appropriate for the term of the Company’s employee stock options. The dividend yield assumption isbased on the Company’s intent not to issue a dividend under its dividend policy. The Company uses the simplified method under ASCTopic 718,F-19Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)Compensation — Stock Compensation, to estimate the options’ expected term. Assumptions used in the calculation of the stock optionexpense were as follows: 2010 2009Volatility 93.5% - 97.2% 92.2% - 98.5%Risk free rate 1.5% - 3.0% 1.9% - 3.7%Term 6.25 6.25 - 9.16Dividend yield 0.0% 0.0%Stock-based compensation expense recognized in the accompanying consolidated statement of operations for the year endedDecember 31, 2010 is based on awards ultimately expected to vest, reduced for estimated forfeitures. ASC Topic 718 requires forfeituresto be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.Forfeiture assumptions were based upon management’s estimate.The fair value of each stock option grant to employees is estimated on the date of grant. The fair value of each stock option grant tonon-employees is estimated on the applicable performance commitment date, performance completion date or interim financial reportingdate.During the years ended December 31, 2010 and 2009, the Company recognized compensation expense of $0.2 million and$0.2 million, respectively, related to stock options issued to employees and consultants, which is included in selling, general andadministrative expense on the accompanying consolidated statements of operations.During the year ended December 31, 2010, 338,000 options were granted pursuant to the Plan. The following table summarizesinformation concerning options outstanding as of December 31, 2010: Weighted Weighted Weighted Average Average Average Remaining Aggregate Exercise Fair Contractual Intrinsic Options Price Value Life (Years) Value Balance at December 31, 2009 689,500 $1.20 $0.82 8.32 $305,660 Granted 338,000 1.19 0.94 — 3,260 Exercised 4,000 3,196 Forfeited (151,344) 0.97 0.57 — 84,905 Balance at December 31, 2010 880,156 $1.20 $0.86 7.86 $281,330 Exercisable 208,448 $0.50 $0.37 7.06 $351,145 As of December 31, 2010, the unvested portion of share-based compensation expense attributable to stock options and the periodin which such expense is expected to vest and be recognized is as follows (amounts in thousands):2011 $129 2012 88 2013 69 2014 17 Total $303 The fair value of share based compensation for options that vested as of December 31, 2010 was $0.3 million.F-20Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)Restricted StockThe Company expenses restricted shares granted in accordance with the provisions of ASC Topic 718. The fair value of therestricted shares issued is amortized on a straight-line basis over the vesting periods. During the years ended December 31, 2010 and2009, the Company recognized compensation expense related to restricted stock of approximately $0.5 million and $0.4 million,respectively, which is included in selling, general and administrative expense on the accompanying consolidated statements ofoperations.The following table summarizes restricted stock activity during the years ended December 31, 2010 and 2009: 2010 2009 Weighted Weighted Average Average Fair Fair Shares Value Shares Value Nonvested Balance at January 1, 617,499 $0.72 566,752 $1.12 Granted 417,682 1.24 454,365 0.48 Forfeited — — (11,250) 0.52 Vested (367,682) 1.19 (392,368) 0.71 Nonvested Balance at December 31, 667,499 $0.91 617,499 $0.72 As of December 31, 2010, the unvested portion of share-based compensation expense attributable to restricted stock amounts to$0.3 million which is expected to vest and be recognized during a weighted-average period of 1.2 years.NOTE 10 —DEFINED CONTRIBUTION PLANThe Company has a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code that coverssubstantially all US based employees. Eligible employees may contribute amounts to the plan, via payroll withholding, subject tocertain limitations. During 2010, the Company matched 25% of employees’ contributions to the plan. The Company’s 401(k) expensewas $63,000 in 2010 and $42,000 in 2009.NOTE 11 —DEBTThe following summarizes the debt activity of the Company during 2010 (amounts in thousands): Convertible Total Term Line of Subordinated Promissory Note/ Notes Notes Debt Loan Credit Notes Capital Lease Payable Payable Debt obligation as of December 31, 2009 $12,707 $— $3,078 $— $833 $4,000 $4,796 Subordinated notes issuance 2,183 — — 2,183 — — — Net repayment on senior secured credit facility (740) — (740) — — — — WBS promissory note repayment (250) — — — (250) — — Principal payments on capital lease (339) — — — (339) — — Issuance of term loan 10,000 10,000 — — — — — Repayment of term loan (500) (500) — — — — — Retirement of notes payable (8,796) — — — — (4,000) (4,796)Debt obligation as of December 31, 2010 $14,265 $9,500 $2,338 $2,183 $244 $— $— F-21Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)Estimated annual commitments for debt maturities are as follows at December 31, 2010 (amounts in thousands): Total Debt 2011 $2,245 2012 5,679 2013 2,841 2014 2,000 2015 1,500 $14,265 Term Loan and Line of CreditIn December 2009, the Company and Silicon Valley Bank entered into a Second Amended and Restated Credit Facility (the“Restated Credit Facility”). Under the terms of the Restated Credit Facility, the Company’s revolving line of credit was increased to amaximum amount of $5.0 million, with the actual amount available being based on criteria related to the Company’s accountsreceivable in the United States (but not to exceed $3.4 million with respect to the United States receivables) and on criteria related to theCompany’s accounts receivable in Europe (but not to exceed $2.0 million with respect to the European receivables). The Restated CreditFacility had a 364-day term.On September 30, 2010, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon ValleyBank. The Loan Agreement provides for a term loan facility of $10 million (the “Term Loan”), and a revolving line of credit facility,which replaced the Second Amended and Restated Credit Facility, in the aggregate principal amount of up to $5 million (the “Line ofCredit”). The Loan Agreement contains customary representations and warranties of the Borrower and customary events of default. Theobligations of the Company under the Loan Agreement are secured by substantially all of the Company’s tangible and intangible assetspursuant to the Loan Agreement. The availability under the Line of Credit is calculated during any month as a percentage of eligibleaccounts receivable and is subject to certain conditions, including the continued accuracy of the Company’s representations, warrantiesand covenants. The Term Loan matures on September 30, 2015. The Company shall repay the Term Loan in sixty equal installments ofprincipal and interest, with interest accruing at a floating per annum rate equal to Silicon Valley Bank’s prime rate plus 3%, unless theCompany achieves certain performance criteria, in which case the interest rate shall be equal to Silicon Valley Bank’s prime rate plus2%. The Company had $9.5 million outstanding on the Term Loan as of December 31, 2010. The Line of Credit matures onSeptember 29, 2012. The principal amount outstanding under the Line of Credit shall accrue interest at a floating per annum rate equalto Silicon Valley Bank’s prime rate plus 2%, unless the Company achieves certain performance criteria, in which case the interest rateshall be equal to the Bank’s prime rate plus 1%. The Company had $2.3 million outstanding on the Line of Credit at December 31, 2010.On November 12, 2007, the holders of the $4.0 million of notes payable due on December 29, 2008 agreed to amend those notes toextend the maturity date to December 31, 2010, subject to increasing the interest rate to 10% per annum, beginning January 1, 2009.Under the terms of the notes, 50% of all interest accrued during 2008 and 2009 was payable on each of December 31, 2008 and 2009,respectively, and all principal and remaining accrued interest was payable on December 31, 2010.Subordinated NotesOn February 8, 2010, the Company completed a units offering (“February 2012 Units”) in which it sold 500 units consisting of debtand common stock at a purchase price of $10,000 per unit, resulting in $5.0 million of proceeds to the Company. Each unit consisted of2,970 shares of the Company’s common stock, and $7,000 in principal amount of the Company’s subordinated promissory notes dueFebruary 8, 2012. The subordinated promissory notes were issued at a discount to face value of $0.2 million and the discount is beingamortized, intoF-22Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)interest expense, over the life of the notes. Interest on the subordinated promissory notes accrues at 10% per annum. Accrued but unpaidinterest will be payable on February 8, 2011 and 2012.The proceeds from the February 2012 Units were to be applied by the Company to finance a portion of the purchase price under anasset purchase agreement with Global Capacity. On April 30, 2010 the asset purchase agreement with Global Capacity expired withoutconsummation of the acquisition. On May 13, 2010, investors representing $1.5 million in aggregated principal amount of theCompany’s subordinated promissory notes and $0.9 million of the Company’s common stock waived the right to receive their refundand elected to retain some or all of their subordinated promissory notes, which are recorded in long-term debt on the Company’scondensed consolidated balance sheet as of December 31, 2010On December 31, 2010, the Company completed a financing transaction in which it issued 212 Units, valued at $10,000 per unit(“December 2013 Units”). Each unit consisted of 5,000 shares of the Company’s common stock, and $5,000 in principal amount of theCompany’s subordinated promissory notes due December 31, 2013. The subordinated promissory notes were issued at a discount to facevalue of $0.2 million and the discount is being amortized, into interest expense, over the life of the notes. In total, the Company issued1,060,000 shares of the Company’s common stock and $1.1 million in principal amount of subordinated promissory notes.As of December 31, 2010, the subordinated notes payable had a balance of $2.2 million. The balance includes notes totaling$1.9 million due to a related party, Universal Telecommunications, Inc. H. Brian Thompson, the Company’s Executive Chairman of theBoard of Directors, is also the head of Universal Telecommunications, Inc., his own private equity investment and advisory firm. Also,included in the balance is $0.1 million of the notes held by officers and directors of the Company.Promissory Note and Capital LeaseAs part of the WBS Connect acquisition, the Company assumed in the acquisition approximately $0.6 million in capital leaseobligations payable in monthly installments through April 2011 and issued approximately $0.3 million in subordinated seller notes tothe sellers of WBS Connect, due in monthly installments and payable in full by October 2010. The Company paid the $0.3 million insubordinated seller notes in full and has approximately $0.3 million outstanding in capital lease obligations as of December 31, 2010.Notes Payable and Convertible Notes PayableThe holders of the convertible notes payable (“December 2010 Notes”) had the right to convert the principal due under theDecember 2010 Notes into shares of the Company’s common stock, at any time, at a price per share equal to $1.70. The Company hadthe right to require the holders of the December 2010 Notes to convert the principal amount due under the December 2010 Notes at anytime after the closing price of the Company’s common stock shall be equal to or greater than $2.64 for 15 consecutive business days. Theconversion provisions of the December 2010 Notes included protection against dilutive issuances of the Company’s common stock,subject to certain exceptions. The Company had agreed to register with the Securities and Exchange Commission the shares ofCompany’s common stock issued to the holders of the December 2010 Notes upon their conversion, subject to certain limitations.On September 30, 2010, proceeds from the Term Loan were used to repay the Company’s $4.0 million of notes payable and$3.1 million of the December 2010 Notes, both due December 31, 2010, as well as $1.5 million in interest accrued on the notes payableand convertible notes.The December 2013 Units were issued in exchange for the repayment obligation created by the maturity of the December 2010Notes. The amount of the repayment obligation was equal to the outstanding principal amount (valued at face value) of $1.6 million andaccrued but unpaid interest of $0.5 million. Since this was a cashless exchange, there were no cash proceeds to the Company. TheDecember 2010 Notes involved in the exchange were held by Universal Telecommunications, Inc., which is an affiliate of H. BrianThompson, Howard E. Janzen andF-23Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)Theodore B Smith, III. Messrs. Thompson, Janzen and Smith are members of the Company’s Board of Directors. Given theserelationships, the exchange and the terms of the December 2013 Units were reviewed and approved by an independent committee of ourBoard of Directors.NOTE 12 —CONCENTRATIONSFinancial instruments potentially subjecting the Company to a significant concentration of credit risk consist primarily of cash andcash equivalents and designated cash. At times during the periods presented, the Company had funds in excess of $250,000 insured bythe US Federal Deposit Insurance Corporation, or in excess of similar Deposit Insurance programs outside of the United States, on depositat various financial institutions. As of December 31, 2010, approximately $5.8 million of the Company’s deposits were held atinstitutions as balances in excess of the US Federal Deposit Insurance Corporation and international insured deposit limits for thoseinstitutions. However, management believes the Company is not exposed to significant credit risk due to the financial position of thedepository institutions in which those deposits are held.For the year ended December 31, 2010, no single customer exceeded 5% of total consolidated revenues. For the year endedDecember 31, 2009, no single customer exceeded 10% of total consolidated revenues.NOTE 13 —COMMITMENTS AND CONTINGENCIESCommitment — LeasesGTTA is required to provide its landlord with a letter of credit to provide protection from default under the lease for the Company’sheadquarters. GTTA has provided the landlord with a letter of credit in the amount of $100,000 supported by hypothecation of aCertificate of Deposit held by the underlying bank in the same amount.Office Space and Operating LeasesOffice facility leases may provide for escalations of rent or rent abatements and payment of pro rata portions of building operatingexpenses. The Company currently leases facilities located in McLean, Virginia (lease expires December, 2014), London (UnitedKingdom), (lease expires June, 2012), Düsseldorf (Germany), (lease expires July, 2011) and Denver, Colorado (three month lease thatautomatically renews unless a notice of non-renewal is delivered). The Company records rent expense using the straight-line methodover the term of the lease agreement. Office facility rent expense was $0.8 million and $0.9 million for the years ended December 31,2010 and 2009, respectively.The Company has also entered into certain non-cancelable operating lease agreements related to vehicles. Total expense undervehicle leases was $33,000 and $100,000 for the years ended December 31, 2010 and 2009, respectively.Estimated annual commitments under non-cancelable operating leases are as follows at December 31, 2010 (amounts in thousands): Office Space 2011 $679 2012 421 2013 327 2014 335 $1,762 F-24Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)Commitments-Supply agreementsAs of December 31, 2010, the Company had supplier agreement purchase obligations of $38.6 million associated with thetelecommunications services that the Company has contracted to purchase from its vendors. The Company’s contracts are generally suchthat the terms and conditions in the vendor and client customer contracts are substantially the same in terms of duration. Theback-to-back nature of the Company’s contracts means that the largest component of its contractual obligations is generally mirrored byits customer’s commitment to purchase the services associated with those obligations.Estimated annual commitments under supplier contractual agreements are as follows at December 31, 2010 (amounts in thousands): Supplier Agreements 2011 $12,630 2012 14,094 2013 9,316 2014 1,518 2015 1,070 $38,628 If a customer disconnects its service before the term ordered from the vendor expires, and if GTT were unable to find anothercustomer for the capacity, GTT may be subject to an early termination liability. Under standard telecommunications industry practice(commonly referred to in the industry as “portability”), this early termination liability may be waived by the vendor if GTT were to orderreplacement service with the vendor of equal or greater value to the service cancelled. Additionally, the Company maintains some fixednetwork costs and from time to time if it deems portions of the network are not economically beneficial, the Company may disconnectthose portions and potentially incur early termination liabilities. As of December 31, 2010, the Company has $0.2 million accrued forearly termination liabilities.“Take-or-Pay” Purchase CommitmentsSome of the Company’s supplier purchase agreements call for the Company to make monthly payments to suppliers whether or notthe Company is currently utilizing the underlying capacity in that particular month (commonly referred to in the industry as“take-or-pay” commitments). As of December 31, 2010 and 2009, the Company’s aggregate monthly obligations under such take-or-paycommitments over the remaining term of all of those contracts totaled $2.6 million and $4.7 million, respectively.Contingencies-Legal proceedingsThe Company is subject to legal proceedings arising in the ordinary course of business. In the opinion of management, the ultimatedisposition of those matters will not have a material adverse effect on the Company’s consolidated financial position, results ofoperations or liquidity. No material reserves have been established for any pending legal proceeding, either because a loss is notprobable or the amount of a loss, if any, cannot be reasonably estimated.F-25Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Global Telecom & Technology, Inc.Notes to Consolidated Financial Statements — (Continued)NOTE 14 —FOREIGN OPERATIONSOur operations are located primarily in the United States and Europe. Our financial data by geographic area is as follows: US UK Germany Total GTT2010 Revenues by geographic area $61,685 $11,857 $7,533 $81,075 Long-lived assets at December 31 39,571 509 8 40,088 2009 Revenues by geographic area $36,941 $18,917 $8,363 $64,221 Long-lived assets at December 31 38,873 561 (0) 39,433 NOTE 15 —SUBSEQUENT EVENTSOn February 16, 2011, the Company and the holders of the December 2013 Units amended the offering solely to increase theaggregate principal amount available for issuance from $1.1 million to $1.6 million. On February 16, 2011, the Company also completeda financing transaction in which it issued 40 Units, at a purchase price of $10,000 per Unit, for gross proceeds of $400,000. Each Unitwas comprised of 5,000 shares of the Company’s common stock, and $5,000 in principal amount of subordinated promissory notes. Thesubordinated promissory notes were issued at a discount to face value and the discount is being amortized over the life of the notes. Theaggregate proceeds of the financing transaction was applied towards working capital.F-26Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 21.1SUBSIDIARIES OF THE REGISTRANTGlobal Telecom & Technology Americas, Inc., a Virginia corporationGTT — EMEA Ltd., a United Kingdom corporationGTT Global Telecom Government Services, LLC, a Virginia limited liability companyGlobal Telecom & Technology SARL (formerly called European Telecommunications & TechnologySARL), a French corporationEuropean Telecommunications & Technology Inc., a Delaware corporationGlobal Telecom & Technology Deutschland GmbH (formerly called ETT European Telecommunications& Technology Deutschland GmbH), a German corporationETT (European Telecommunications & Technology) Private Limited, an Indian corporationEuropean Telecommunications & Technology (S) Pte Limited, a Singapore corporationETT Network Services Limited, a United Kingdom corporationWBS Connect LLC, a Colorado limited liability companyTEK Channel Consulting, LLC, a Colorado limited liability companyWBS Connect Europe, Ltd., a company formed under the laws of IrelandSource: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in Form S-8 (No. 333-139356) of Global Telecom & Technology, Inc. of our report dated March 11,2011 relating to the consolidated financial statements of Global Telecom & Technology, Inc. and Subsidiaries as of December 31, 2010 and 2009 and for theyears then ended included in this annual report on Form 10-K./s/ J.H. Cohn LLPJericho, New YorkMarch 11, 2011Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Richard D. Calder, Jr., certify that: 1. I have reviewed this annual report on Form 10-K of Global Telecom & Technology, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: March 11, 2011 /s/ Richard D. Calder, Jr. Richard D. Calder, Jr. President and Chief Executive Officer Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.2CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Eric A. Swank, certify that: 1. I have reviewed this annual report on Form 10-K of Global Telecom & Technology, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles; (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: March 11, 2011 /s/ Eric A. Swank Eric A. Swank Chief Financial Officer and Treasurer Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.1CERTIFICATION OFCHIEF EXECUTIVE OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Global Telecom & Technology, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard D. Calder, Jr., Chairman of the Board, Executive Chairmanand Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, that to my best knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 11, 2011 /s/ Richard D. Calder, Jr. Richard D. Calder, Jr. President and Chief Executive Officer Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.2CERTIFICATION OFCHIEF FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Global Telecom & Technology, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010 asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eric A. Swank, Chief Financial Officer and Treasurer of the Companycertify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my best knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 11, 2011 /s/ Eric A. Swank Eric A. Swank Chief Financial Officer and Treasurer Source: GTT Communications, Inc., 10-K, March 11, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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