1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1999
/ / Transition report pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ____________
Commission File No. 0-26817
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Global DataTel,Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0067813
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3333 Congress Ave.,Delray Beach,Fl. 33445
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(Address of principal executive offices)
(561)- 276- 8260
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(Issuer's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes No X
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 1999: 22,495,623
shares of common stock, par value $.001 per share.
Transitional Small Business Disclosure Format (check one):
Yes No X
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GLOBAL DATATEL,INC. AND SUBSIDIARIES
Index to Form 10-QSB/A for the Period Ended Sept.30, 1999
PART I . FINANCIAL INFORMATION
Item 1. Financial Statements:.......................................3
Consolidated Balance Sheets.........................................3
Consolidated Statements of Operations and Comprehensive Income......5
Consolidated Statements of Cash Flows...............................6
Notes to Consolidated Financial.....................................8
Item 2. Management's Discussion and Analysis or Plan of Operation...11
PART II. OTHER INFORMATION
Item 5. Other.......................................................17
Item 6. Exhibits and Reports on Form 8-K............................17
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PART I
ITEM 1. FINANCIAL STATEMENTS:
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
September 30, December 31,
1 9 9 9 1 9 9 8
---------- ----------
Current assets:
Cash $ 50,638 $ 133,676
Accounts receivable, net of allowance
for doubtful accounts of $404,595 and
$389,880, respectively 2,898,273 2,867,344
Due from stockholders -- 364,380
Inventories 1,012,152 1,127,611
Other current assets 1,984,496 447,214
---------- ----------
Total current assets 5,945,559 4,940,225
---------- ----------
Property, plant and equipment, net of
accumulated depreciation of $346,449 and
$309,332, respectively 549,279 522,585
---------- ----------
Other assets:
Goodwill, net of accumulated amortization of
$51,323 and $5,133, respectively 1,180,421 1,226,611
Other assets 30,691 531,345
---------- ----------
Total other assets 1,211,112 1,757,956
---------- ----------
Total assets $7,705,950 $7,220,766
========== ==========
See accompanying notes to consolidated financial statements.
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GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
September 30, December 31,
1 9 9 9 1 9 9 8
----------- -----------
Current liabilities:
Short term borrowings, banks $ 1,029,405 $ 998,477
Deferred revenues 44,759 409,081
Accounts payable 3,774,950 2,300,541
Accrued expenses 2,809,045 1,032,382
Notes payable to shareholders 661,667 1,056,667
----------- -----------
Total current liabilities 8,319,826 5,797,148
Mortgage payable - bank 72,921 97,159
----------- -----------
Total liabilities 8,392,747 5,894,307
----------- -----------
Commitments and contingencies
Stockholders' (deficiency) equity:
Preferred stock 25,000,000 shares
authorized, par value $.001, -- and 105,000
shares issued as of September 30, 1999 and
December 31, 1998, respectively -- 105
Common stock, 50,000,000 shares authorized
par value $.001, 22,280,124 and 9,180,123 shares
issued and outstanding as of September 30, 1999
and December 31, 1998, respectively 22,280 9,180
Paid in capital 9,006,495 8,719,489
Accumulated deficit (9,956,519) (7,363,963)
Foreign currency translation adjustment 240,947 (38,352)
----------- -----------
Total stockholders' (deficiency) equity (686,797) 1,326,459
----------- -----------
Total liabilities and stockholders' (deficiency) equity $ 7,705,950 $ 7,220,766
=========== ===========
See accompanying notes to consolidated financial statements.
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GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Nine Months Ended Three Months Ended
September 30, September 30,
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------------ ------------ ------------ ------------
Net sales $ 9,583,440 $ -- $ 2,279,982 $ --
Costs of goods sold 6,287,233 -- 1,400,770 --
------------ ------------ ------------ ------------
Gross profit 3,296,207 -- 879,212 --
------------ ------------ ------------ ------------
Selling, general, and administrative expenses 2,854,441 -- 642,242 --
Payroll and related expenses 2,531,876 -- 1,338,937 --
Interest expense 434,448 -- 137,482 --
Other (income), net (70,366) -- (19,953) --
------------ ------------ ------------ ------------
Total expenses and other (income), net 5,750,399 -- 2,098,708 --
------------ ------------ ------------ ------------
Loss before provisions for income taxes (2,454,192) -- (1,219,496) --
Provision for income taxes 138,364 -- 148,165 --
------------ ------------ ------------ ------------
Loss from continuing operations (2,592,556) -- (1,367,661) --
Discontinued operations:
Loss from operations from subsidiary sold -- (435,269) -- (145,090)
------------ ------------ ------------ ------------
Net loss (2,592,556) (435,269) (1,367,661) (145,090)
Other comprehensive income:
Foreign currency translation, net of tax 279,299 -- 260,249 --
------------ ------------ ------------ ------------
Comprehensive loss $ (2,313,257) $ (435,269) $ (1,107,412) $ (145,090)
============ ============ ============ ============
Loss per share - Basic and diluted
Loss per share from continuing operations $ (.12) $ -- $ (.07) $ (.02)
Loss per share from discontinued operations -- (.08) -- --
------------ ------------ ------------ ------------
Net loss per share - Basic and diluted $ (.12) $ (.08) $ (.07) $ (.02)
============ ============ ============ ============
Weighted average shares outstanding
Basic 22,267,256 5,191,030 20,280,124 6,156,431
Diluted 22,267,256 5,191,030 20,280,124 6,156,431
See accompanying notes to consolidated financial statements.
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GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1 9 9 9 1 9 9 8
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,592,556) $ (435,269)
Adjustment to reconcile net loss to net
cash (used) provided by operations
Depreciation and amortization 82,670 5,969
Provision for bad debt expense 14,715 --
Changes in operating assets and liabilities:
Accounts receivable (45,644) --
Inventories 115,459 --
Other assets (1,023,417) (11,202)
Accounts payable and accrued expenses 3,238,499 (28,883)
Deferred revenues (364,322) --
----------- -----------
Net cash used in operating activities (574,596) (469,385)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (63,811) --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings of notes payable (388,310) (104,533)
Net advances from stockholders 364,380 --
Proceeds from issuance of common stock 300,000 574,000
----------- -----------
Net cash flows provided by financing activities 276,070 469,467
----------- -----------
Foreign currency effect on cash 279,299 --
----------- -----------
Net change in cash (83,038) 82
Cash at beginning of year 133,676 --
----------- -----------
Cash at end of year $ 50,638 $ 82
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1 9 9 9 1 9 9 8
---------- ----------
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 434,448 $ --
========== ==========
Income taxes $ 138,364 $ --
========== ==========
Non-cash investing and financing transactions:
Preferred shares issued to purchase subsidiaries $ -- $ 105
Common shares issued for services -- 199,200
Common shares issued to purchase subsidiaries -- 1,088,455
---------- ----------
$ -- $1,287,760
========== ==========
See accompanying notes to consolidated financial statements.
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GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying consolidated financial statements
of Global DataTel, Inc., International Computer Resources ("ICR"), Mantenimiento
Electronico de Sistemas Limited ("MES"), DLR & CIA ("DLR"), Micro Star LTD>
("MICRO") and CASA Informatica ("CASA") contain all adjustments necessary to
present fairly the Company's financial position as of September 30, 1999 and
December 30, 1998 and the statements of income and comprehensive income and cash
flows for the nine and three months ended September 30, 1999 and September 30,
1998.
The consolidated results of operations for the nine and three months ended
September 30, 1999 and 1998 are not necessarily indicative of the results to be
expected for the full year.
Except as follows, the accounting policies followed by the Company are set forth
in Note 2 to the Company's financial statements included in its Annual Report on
Form 10-SB, for the year ended December 31, 1999.
Organization - Global DataTel, Inc. ("the Company") was originally incorporated
under the laws of the State of Utah on April 17, 1980 as La Plate Oil and
Mining, Inc. On October 1,1982 the company changed its name to Gold Coast
Resources, Inc. ("Gold Coast"). On September 30, 1998 Gold Coast purchased 100%
of the outstanding common stock of International Computer Resources ("ICR") (a
Florida corporation) and Mantenimiento Electronico de Sistemas Limited ("MES")
(a Colombian corporation). On December 2, 1998 the company changed its name to
Global DataTel, Inc.
On November 30, 1998, the Company purchased three unrelated companies in
Colombia, South America, DLR & CIA ("DLR"), Micro Star LTD. ("Micro"), and CASA
Informatica "("Casa"). The companies acquired are also in the business of
providing software and hardware solutions to companies in their markets. Prior
to the acquisition of ICR and MES, Gold Coast Resources was a development stage
company that, through a wholly-owned subsidiary The Travel Agents Hotel Guide,
Inc. ("Hotel"), was engaged in the business of developing a hotel guide selling
advertising space to the hotel and travel industry. Gold Coast sold Hotel on
December 14, 1998.
The Company currently engages primarily in the sale and distribution of medium
and high-end computer and software products, including Enterprise Resource
Planning (ERP) suites, as well as, providing information technology solutions
and support to medium and large business clients primarily in Central and South
America. The Company has distribution agreements with International Business
Machines ("IBM"), Lotus, Cisco Systems, and JBA.
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GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUBSEQUENT EVENTS
Proposed Debenture Offering - In February 1999, the Company signed a letter of
intent with Dirks & Company to act as the Managing Underwriter in connection
with a proposed offering of shares of Cumulative Convertible Debentures of the
Company. Dirks & Company intends to underwrite, on a firm commitment basis, such
number of Debentures which will result in gross proceeds of approximately $50
million. A firm commitment does not guarantee that the underwriter will fund the
proposed offering, since their commitment is not known until the twenty day
waiting period following the SEC approved registration has been filed. As of
this date no registration document relating to this proposed offering has been
filed and management has had no contact with the underwriter for several months.
Additional Stock Offering - On February 5, 1999 the Company completed an
offering under Rule 504 of Regulation D for 100,000 shares of its common stock
at $3.00 per share. The offering was subscribed to in full by a related party,
and the Form D was timely filed with the Securities and Exchange Commission.
Proposed Stock Purchase - In April 1999, the Company began negotiations to
acquire 100% of a computer solutions provider. The Company subsequently decided
not to complete the purchase.
Asset Purchase Agreement - In December 1999, the Company entered into an asset
purchase agreement with Surge Components, Inc. ("Surge") whereby Surge would
acquire the assets of the Company in exchange for stock to be treated as a
"tracking stock" covering the assets sold by the Company. Among other
conditions, the completion of the acquisition is conditioned on the approval of
both Companies' stockholders and successful completion of due diligence.
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GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUBSEQUENT EVENTS (Continued)
Convertible Promissory Note - In October 1999, the Company issued a subordinated
Convertible Promissory Note (the "Note") in the amount of $1,000,000 to Surge.
The Note is due on June 1, 2000 and accrues interest at the rate of 10% per
annum. Upon the successful completion of the asset purchase by Surge, the Note
is canceled and all interest accrued to date will be forgiven. If the asset
purchase with Surge is not completed by February 28, 2000 or is not approved by
the shareholders of both companies, Surge at its sole discretion may convert the
Note into common stock of the Company at a conversion price equal to 90% of the
average closing price of the Company's common stock for the twenty previous
trading days or Surge may demand repayment. In January 2000, the Note was
canceled and replaced with a new note totaling $4,100,000 (Note 2 - Subordinated
Convertible Promissory Note).
Stock Options - In April 1999, the Company entered into an option agreement with
a consultant, in partial payment for services rendered. The agreement grants
250,000 shares of the Company's common stock, at an exercise price of $5.75 per
share. The options are non-dilutive. To date, no options have been exercised.
Subordinated Convertible Promissory Note - In February 2000, the Company entered
into a Subordinated Convertible Promissory Note ("Convertible Note") with Surge
for $4,100,000. The Convertible Note accrues interest at the rate of 10% per
annum. Upon completion of the Company's acquisition by Surge, the Convertible
Note and all accrued interest will be forgiven. If the acquisition does not
occur by July 31, 2000, Surge, at its sole discretion, may convert this note
into the common stock of the Company on a dollar for dollar basis at a
conversion price equal to 90% of the average closing price of the Company's
Common Stock for the preceding 20 trading days or Surge may demand repayment.
The Convertible Note is secured by the pledge of certain shares of stock owned
by the President of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
Except for historical information, the materials contained in
this Management's Discussion and Analysis or Plan of Operation is
forward-looking (within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act) and involve a number of risks and
uncertainties. These include the Company's losses, lack of working capital,
general economic downturns, economic, social and political conditions in
Colombia and other parts of Central and South America, and other risks detailed
from time to time in the Company's filings with the Securities and Exchange
Commission. Although forward-looking statements in this Report reflect the good
faith judgment of the Company's management, such statements can only be based on
facts and factors currently known by the Company. Consequently, forward-looking
statements are inherently subject to risks and uncertainties, actual results and
outcomes may differ materially from the results and outcomes discussed in the
forward-looking statements. Readers are urged to carefully review and consider
the various disclosures made by the Company in this Report, as an attempt to
advise interested parties of the risks and factors that may affect the Company's
business, financial condition and results of operations and prospects.
Nine Months Ended September 30, 1999 as Compared to the Nine Months Ended
September 30, 1998
The following table summarizes, on a proforma basis the unaudited
results of operations for the acquired companies:
Nine Months Ended
September 30,
1999 1998
Net sales $ 9,583,440 $15,760,387
Cost of goods sold 6,287,233 9,952,169
Gross profit 3,296,207 5,808,218
Selling, general & administrative expenses 3,218,523 2,446,536
Payroll and related expenses 2,531,876 2,136,089
(Loss) profit from operations (2,454,192) 1,225,593
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The following table summarizes, on a proforma basis the unaudited results of
operations for the acquired companies:
Three Months Ended
September 30,
1999 1998
Net sales $ 2,279,982 $ 5,621,769
Cost of goods sold 1,400,770 3,541,715
Gross profit 879,212 2,080,054
Selling, general & administrative expenses 759,771 435,075
Payroll and related expenses 1,338,937 1,094,074
(Loss) profit from operations (1,219,496) 550,905
Net sales for the nine months ended September 30, 1999 ("Fiscal 1999") decreased
by $6,176,947, or 39%, to $9,583,440, as compared to $15,760,387 for the nine
months ended September 30, 1998 ("Fiscal 1998"). Net sales for the three months
ended September 30, 1999 decreased by $3,341,787, or 59%, to $2,279,982, as
compared to $5,621,769 for the three months ended September 30, 1998. This
decrease was attributable primarily to having the Company's main supplier, IBM,
sell directly to clients, with the Company receiving a commission on the sale.
In this way, the Company is limiting its credit risk.
The Company's gross profit for Fiscal 1999 decreased by $2,512,011, or 43%, to
$3,296,207, as compared to $5,808,218 for Fiscal 1998. The Company's gross
profit for the three months ended September 30, 1999 decreased by $1,200,842, or
58%, to $879,212, as compared to $2,080,054 for the three months ended September
30, 1998. The decrease in the gross profit resulted primarily from the decrease
in sales volume. The Company has reduced the amount of inventory it keeps on
hand and the related carrying costs as a result of the Company's main supplier
selling directly to the customer,
Selling, general and administrative expenses increased by $771,987, or 32% to
$3,218,523 in Fiscal 1999, as compared to $2,446,536 for Fiscal 1998. For the
three months ended September 30, 1999, selling, general and administrative
expenses increased by $324,696, or 75% to $759,771, as compared to $435,075 for
the three months ended September 30, 1998. The increase in these expenses
relates to the costs associated with the commencing of operations for ehola.
Payroll expenses increased by $395,787, or 19% to $2,531,876 in Fiscal 1999, as
compared to $2,136,089 in Fiscal 1998. Payroll expenses increased by $244,863,
or 22% to $1,338,937 for the three months ended September 30, 1999, as compared
to $1,094,074 for the three months ended September 30, 1998. The increase is due
to the hiring of additional staff such as marketing, design, and technical
personnel. These increases are primarily due to the Company's commitment towards
increasing sales and
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its related investment in internet e-commerce activities during the third
quarter of Fiscal 1999.
As a result of the above, the acquired companies on a proforma basis, had a loss
from operations totaling $2,454,192 in Fiscal 1999, as compared to income from
operations totaling $1,225,593 in Fiscal 1998. The Company had a loss from
operations totaling $1,219,496 for the three months ended September 30, 1999, as
compared to income from operations totaling $550,905 for the three months ended
September 30, 1998.
The Company anticipates that it will continue to incur significant expenditures
relating to its internet operations through at least the end of 2000. These
costs will consist primarily of payroll and payroll related costs as well as
significant marketing expenditures to assist in the development of name
recognition for ehola.
Liquidity and Capital Resources
The Company's Current Ratio changed to 0.71 at September 30, 1999, as compared
to 0.85 at December 31, 1998, as a result of an increase of other current
assets, accounts payable and accrued expenses. At December 31, 1998, the Company
has a working capital deficiency totaling $856,923. The deficiency primarily
relates to the funds expended or to be expended for the purchase of Micro, DLR
and Casa. During the nine months ended September 30, 1999, the working capital
deficiency increased to $2,374,269. The Company incurred losses totaling
$2,592,556 during the nine months ended September 30, 1999, which it financed
through increases in accounts payable and accrued expenses and proceeds totaling
$300,000 from the issuance of stock.
As substantially all of the Company's operations are currently conducted in
Colombia, the Company is subject to special consideration and significant risks
not typically associated with Companies operating in North America and Western
Europe. These include risks associated with, among others, the political,
economic and legal environments and foreign currency exchange. The Company's
results may be adversely affected by changes in the political and social
conditions in Colombia, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion,
remittance abroad, and rates and methods of taxation among other things. Since
its working capital has been limited, obligations and commitments have gone
unfulfilled. The Company's current financial situation, as well as the ongoing
funding to support the initial operations of ehola, will require the Company to
obtain additional financing in order to meet its obligations during the next
twelve months.
The Company has had losses generated from operations for several years. These
losses have generally been financed through stockholder loans, proceeds from
stock issuances or the issuance of shares to pay for services rendered to the
Company. During 1998, Gold Coast issued 1,198,500 shares of its common stock to
officers, directors, employees and others for services rendered. The shares were
valued at $.20 per share. During 1998, Gold Coast issued 2,870,000 shares of its
common stock for
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cash at $.20 per share pursuant to rule 504 of Regulation D. On February 5, 1999
the Company did an offering under Rule 504 of Regulation D for 100,000 shares of
its common stock at $3.00 per share. The offering was subscribed to in full by a
related party.
On December 14, 1998, the Company sold its interest in a subsidiary, The Travel
Agent's Hotel Guide, Inc., a Nevada corporation, to Ameriresource Technologies,
Inc. in consideration for a convertible debenture in the face amount of
$3,350,000, bearing interest at the rate of seven (7%) percent per annum and
convertible in three years into common stock of Ameriresource. Gold Coast
Resources had acquired a 20% interest in the Travel Agent's Hotel Guide, Inc.
company on August 17, 1998, by payment of 7,000,000 shares of Common Stock
shares to David Newren, a former officer and director of the Company. The
remaining 80% had previously been acquired by the issuance of 600,000 shares of
Gold Coast Resources common stock.
At one time, Gold Coast Resources pursued mergers with Biostasis, Inc., Shoulder
Shade Products, Inc., Secure Bind, Inc., and Fox Broadcasting Inc., but
rescinded these transactions in August 1998, canceling the shares of preferred
stock previously issued to each of these entities.
On September 30, 1998, the Company acquired all of the outstanding stock of ICR
in exchange for 105,000 shares of convertible preferred stock valued at $0.001
per share and 4,243,843 shares of common stock valued at $.20 per share. The net
assets acquired and liabilities assumed approximated $90,000 and $190,000,
respectively.
On September 30, 1998, the Company acquired MES for 357,143 common shares of the
Company's common stock, valued at the book value of MES. The net assets acquired
and liabilities assumed approximated $1,152,000 and $913,000, respectively.
On November 30, 1998, the Company acquired DLR for $300,000 ($100,000 due at
closing and five monthly installments of $40,000 thereafter, as defined) in
cash, and 60,000 shares of the Company's common stock, valued at $3.00 per
share. The net assets acquired and liabilities assumed approximated $3,527,000
and $1,786,000, respectively. The acquisition resulted in goodwill of
approximately $502,000.
On November 30, 1998, the Company acquired Micro for $150,000, payable in six
consecutive monthly payments from the date of closing, and 70,000 shares of the
Company's common stock, valued at $3.00 per share. The net assets acquired and
liabilities assumed approximated $890,000 and $748,000, respectively. The
purchase resulted in goodwill of approximately $218,000.
On November 30, 1998, the Company acquired Casa for $840,000, payable in 9
monthly payments of $93,333 commencing at the date of the closing and 392,000
shares of the Company's common stock, valued at $3 per share. The net assets
acquired and liabilities assumed approximated $3,300,000 and $1,800,000,
respectively. The purchase resulted in goodwill of approximately $512,000.
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At December 31, 1998 the Company has only one class of common stock outstanding
and a Series A Convertible Preferred Stock. The Series A Convertible Preferred
Stock has a liquidating value of no less than $35,000,000 and has preference
over all other stock in a liquidation. The conversion value is based on the
liquidating value and a maximum share price of 111 shares of common stock for
one share of preferred stock. There are no arrearages in preferred dividends. On
June 25, 1999, the shares were converted into 13,000,001 shares of the Company's
common stock.
On March 14, 1996, DLR obtained a mortgage from a bank for the purchase of their
office facility in Bogota, Colombia. The mortgage expires on March 2012 and had
an initial principal balance of $99,400. The mortgage agreement allows for an
increase in the outstanding principal balance due to monetary adjustments as
mandated by the Colombian Central Bank.
The Colombian subsidiaries obtain short-term financing from banks and financing
companies. Interest on such obligations range between 34% and 44% annually and
is determined by the financing source subsequent to the availability of funds.
Most of these obligations are personally guaranteed by officers of the companies
and the balance owed as of December 31, 1998 approximated $1,132,000.
ICR has available a $100,000 line of credit, at 10% interest, personally
guaranteed by the majority stockholder of the Company, for working capital
purposes. As of December 31, 1998, the balance owed on this line of credit was
approximately $43,000.
The Colombian subsidiaries have credit facilities from IBM for the purchase of
computer equipment which are guaranteed by certain shareholders and officers of
the Colombian subsidiaries. The credit facilities at December 31, 1998
approximated $1,200,000 for Casa, $600,000 for DLR, and $150,000 for Micro.
In December 1999, the Company entered into an asset purchase agreement with
Surge Components, Inc. ("Surge") whereby Surge would acquire the assets of the
Company in exchange for stock to be treated as a "tracking stock" covering the
assets sold by the Company. Among other conditions, the completion of the
acquisition is conditioned on the approval of both Companies' stockholders and
successful completion of due diligence.
In October 1999, the Company issued a subordinated Convertible Promissory Note
(the "Note") in the amount of $1,000,000. The Note is due on June 1, 2000 and
accrues interest at the rate of 10% per annum. Upon the successful completion of
the asset purchase by Surge, the Note is canceled and all interest accrued to
date will be forgiven. If the asset purchase with Surge is not completed by
February 28, 2000 or is not approved by the shareholders of both companies,
Surge at its sole discretion may convert the Note into the common stock of the
Company at a conversion price equal to 90% of the average closing price of the
Company's common stock for the twenty
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previous trading days or demand repayment. In January 2000, the Note was
cancelled and replaced with a new note totaling $4,100,000.
In February 2000, the Company replaced the previous Subordinated Convertible
Promissory Note ("Convertible Note") with Surge totaling up to $6,250,000. The
Convertible Note accrues interest at the rate of 10% per annum. Upon completion
of the Company's acquisition by Surge, the Convertible Note and all accrued
interest will be forgiven. If the acquisition does not occur by July 30, 2000,
Surge, at its own discretion, may convert this note into the common stock of the
Company on a dollar for dollar basis at a conversion price equal to 90% of the
average closing price of the Company's Common Stock for the preceding 20 trading
days or Surge may demand repayment. The Convertible Note is secured by the
pledging of certain shares of stock owned by the President of the Company.
In April 1999, the Company entered into an option agreement with a consultant,
in partial payment for services rendered. The agreement grants 250,000 shares of
the Company's common stock, at an exercise price of $5.75 per share. The options
are non-dilutive. To date, no options have been exercised.
INFLATION
The effects of inflation have lessened in recent years as indicated by
the average consumer price index, which has been below 3% in each of the past
two years. The Company has generally been able to offset the impact of rising
costs through purchase price reductions. As a result, inflation has not had, nor
is it expected to have, a significant impact on the Company's business. However,
inflation and changing interest rates have had a significant effect on the
economy in general and, therefore, could affect the Company's future operating
results.
17
PART II
Item 5. Other information
On September 29, 1999 , Mr.Gerald D'Ambrosio, the Company's Secretary resigned.
Mr. Antonio Serrato was appointed Company Secretary by the Board of Directors,
effective October 4,1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
- ----------- -----------
11. Statement re: Computation of per share earnings.
27. Statement re: Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
18
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GLOBAL DATATEL, INC.
By: /s/ Richard Baker
-------------------------------------
Richard Baker, President and CEO
Dated: May 11, 2000