GLOBAL DATATEL INC
FILING TYPE: 10QSB/A
DESCRIPTION: QUARTERLY REPORT
FILING DATE: JANUARY 23, 2001
PERIOD END: SEPT. 30, 2000
PRIMARY EXCHANGE: OVER THE COUNTER INCLUDES OTC AND OTCBB
TICKER: GDIS
TABLE OF CONTENTS
10QSB/A OTHERDOC
Balance Sheet Assets. . . . . . . . . . . . . . . . . . . . . . . . . 3
Balance Sheet Liabilities . . . . . . . . . . . . . . . . . . . . . . 4
Income Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . 6
NOTES TO . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
ITEM 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EX-11.2 OTHERDOC
Table5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
EX-27 OTHERDOC
EX-27 OTHERDOC. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
AMENDMENT NUMBER ONE
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended Sept. 30, 2000
/ / Transition report pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ____________
Commission file number 0 - 26817
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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court.
Yes ___ No ___
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 Sept 30, 2000:
23,772,924 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
for the Period Ended Sept 30, 2000
PART I . FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 3 - 4
Consolidated Statements of Operations and Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 8 - 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
2
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Sept 30, December 31,
2 0 0 0 1 9 9 9
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A S S E T S
Current assets:
Cash $ 164,829 $ 173,579
Accounts receivable, net of allowance
for doubtful accounts of $48,296 and
$363,718, respectively 1,292,281 3,030,984
Inventories 308,352 948,724
Prepaid expenses and other current assets 2,554,414 604,301
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Total current assets 4,319,875 4,757,588
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Property, plant and equipment, net of
accumulated depreciation of $480,494
and $384,272, respectively 455,751 500,681
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Other assets:
Goodwill, net of accumulated amortization
of $118,040 and $66,720, respectively 1,113,704 1,165,024
Other assets 0 174,931
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Total other assets 1,569,455 1,339,955
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Total assets $5,889,331 $ 6,598,224
========== =============
See accompanying notes to consolidated financial statements.
3
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Sept. 30, December 31,
2 0 0 0 1 9 9 9
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current liabilities:
Short term borrowings, banks $ 767,398 $ 707,029
Note payable - Surge Components, Inc. 4,101,740 1,000,000
Deferred revenues 53,982 40,441
Accounts payable 3,631,401 2,948,700
Accrued expenses 640,856 1,359,764
Notes payable to shareholders -- 661,667
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Total current liabilities 9,195,377 6,717,601
Mortgage payable - bank 65,046 72,921
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Total liabilities 9,260,423 6,790,522
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Commitments and contingencies
Stockholders' deficiency:
Preferred stock 25,000,000 shares
authorized, par value $.001, none issued -- --
Common stock, 50,000,000 shares authorized
par value $.001, 23,772,924 and 23,280,124
issued and outstanding respectively 23,773 23,280
Paid in capital 11,703,315 11,703,788
Accumulated deficit (15,054,551) (12,019,715)
Foreign currency translation adjustment (43,629) 100,349
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Total stockholders' deficiency (3,371,092) (192,298)
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Total liabilities and stockholders $ 5,889,331 $ 6,598,224
============= ==============
See accompanying notes to consolidated financial statements.
4
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Nine Months Ended Three Months Ended
Sept. 30, Sept. 30,
2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9
------------ ------------ ----------- ------------
Net sales $ 5,769,574 $ 9,583,440 $ 4,101,279 2,279,982
Costs of goods sold 2,973,246 6,287,233 779,955 1,400,770
------------ ------------ ----------- ------------
Gross profit 2,796,328 3,296,207 3,321,323 879,212
------------ ------------ ----------- ------------
Selling, general, and administrative
Expenses 2,830,130 2,854,441 616,715 642,242
Payroll and related expenses 2,582,003 2,531,876 1,247,891 1,339,037
Interest expense, net 419,033 364,082 212,424 117,429
------------ ------------ ----------- ------------
Total expenses 5,831,166 5,750,399 2,077,030 2,098,708
------------ ------------ ----------- ------------
Loss before provision for
income taxes (3,034,838) (2,454,192) 1,244,293 (1,219,496)
Provision for income taxes (benefit) 138,364 148,165
------------ ------------ ----------- ------------
Net Income (loss) (3,034,838) (2,592,556) 1,244,293 (1,367,661)
Other comprehensive (loss) income:
Foreign currency translation, net of tax (43,629) 279,299 122,312 260,249
------------ ------------ ----------- ------------
Comprehensive loss (3,078,467) $(2,313,257) $ 1,366,605 $(1,107,412)
============ ============ =========== ============
Loss per share
Basic (.13) (.10) $ .06 $ (.05)
Diluted (.13) $ (.10) .06 $ (.05)
Weighted average shares outstanding
Basic 23,536,053 22,260,680 23,772,924 22,280,124
Diluted 23,536,053 22,260,680 23,772,924 22,280,124
See accompanying notes to consolidated financial statements.
5
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
Sept 30,
2 0 0 0 1 9 9 9
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,078,467) $(2,592,556)
Adjustment to reconcile net loss to net
cash used in operations
Depreciation and amortization 147,542 82,670
Provision for bad debt expense 14,715
Changes in operating assets and liabilities:
Accounts receivable 1,738,703 ( 45,644)
Inventories 640,372 115,459
Other assets (1,775,182) (1,023,417)
Accounts payable and accrued expenses 16,287 3,238,499
Deferred revenues 13,541 (364,322)
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Net cash (used in) provided by operating activities (2,297,204) (574,596)
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets ( 51,292) ( 63,811)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings of notes payable 2,440,073 ( 23,930)
Proceeds from issuance of common stock -- 300,000
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Net cash flows provided by (used in) financing activities 2,440,073 276,070
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Foreign currency effect on cash (100,327) 279,299
------------ ------------
Net change in cash (8,750) (83,038)
Cash at beginning of period 173,579 133,676
Cash at end of period 164,829 50,638
See accompanying notes to consolidated financial statements.
6
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying consolidated financial statements
of Global DataTel, Inc. contain all adjustments necessary to present fairly the
Company's financial position as of Sept.30, 2000 and December 31, 1999 and the
statements of income and comprehensive income for the nine and three months
ended Sept.30, 2000 and 1999 and statement of cash flows for the nine months
ended Sept. 30, 2000 and 1999.
The consolidated results of operations for the nine and three months ended Sept.
30, 2000 and 1999 are not necessarily indicative of the results to be expected
for the full year.
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-KSB, for
the year ended December 31, 1999.
NOTE 2 - PLEDGE OF ASSETS
On June 2, 2000, the Board of Directors and a sufficient number of shareholders
consented to pledge all the Company's assets and certain of its liabilities to
Surge Components, Inc. ("Surge") in furtherance of satisfying a condition
precedent to closing the sale of such assets to Surge. As a result of the
execution of the pledge agreement, Surge took effective control of the Company's
assets and operations. The Company has reported its operations through the date
of the change in control.
7
ITEM 6. 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 Sept.30, 2000 as compared to the Nine months ended Sept.30,
1999.
Net sales for the nine months ended Sept.30, 2000 ("Fiscal 2000") decreased by
$3,813,916, or 40%, to $5,769,574, as compared to $9,583,440 for the nine months
ended Sept.30, 1999 ("Fiscal 1999"). This decrease was attributable primarily to
having the Company's main supplier sell a significant amount of goods directly
to customers, with the Company receiving a commission on the sale. The Company
is currently negotiating with its main supplier in order to attempt to obtain
more favorable credit terms.
The Company's gross profit for Fiscal 2000 decreased by $499,879 , or 15%, to $
2,796,328, as compared to $3,296,207 for Fiscal 1999. 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.
Additionally, a greater percentage of the sales during 2000 were from services
provided to customers. These sales have historically had a higher gross profit
than those of the sales of products. The receiving of commission on the sales
made by the Company's main supplier directly to the Company's customers and the
greater efficiency in inventory management resulting from the merger of the
Colombian subsidiaries have also resulted in an increased gross profit. As a
result, gross profit as a percentage of sales increased from 34% in Fiscal 1999
to 48% in Fiscal 2000.
Selling, general and administrative expenses decreased by $24,311 , or 1% to
$2,830,130 in Fiscal 2000, as compared to $2,854,441 for Fiscal 1999.
8
Payroll expenses increased by $50,127 , or 2% to $2,582,003 in Fiscal 2000, as
compared to $2,531,876 in Fiscal 1999. 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 its related investment in internet e-commerce activities since the later
part of 1999.
As a result of the above, the Company had a loss from operations totaling
$3,034,838 in Fiscal 2000, as compared to a loss from operations totaling
$2,592,556 in Fiscal 1999. Included in the net loss for Fiscal 2000, are losses
totaling approximately $1,249,000 from the operations of E-hola.
Liquidity and Capital Resources
The Company's Current Ratio changed to 0.47 at September 30, 2000, as compared
to 0.71 at December 31, 1999, as a result of an increase of other current
assets, notes and accounts payable and accrued expenses. At December 31, 1999,
the Company had a working capital deficiency totaling $1,960,013. During the
nine months ended September 30, 2000, the working capital deficiency increased
to $4,875,502.
As a percentage of quarterly revenues, accounts receivable have increased
dramatically over the last two years. This increase is primarily related to
tightening financial conditions in Colombia. As a result, the banking industry
has been less likely to lend money to the Company's customers. Customers that
previously financed the work performed by the Company, now must self-finance
this work, thereby lengthening the amount of time until payment is received from
many customers to approximately 135 days. Since the Company's customers are
mainly medium to large quality companies, bad debts have not been material, and
the Company periodically reviews its allowance for such bad debts and adjusts
the balance accordingly.
During the nine months ended September 30, 2000, the Company had net cash used
in operating activities of $2,297,204, as compared to $574,596 used by operating
activities in the nine months ended September 30, 1999. The increase in cash
used in operating activities resulted primarily from losses incurred during the
nine months ended September 30, 2000.
The Company had net cash provided by financing activities of $2,440,073 for
The nine months ended September 30, 2000, as compared to $276,070 provided in
financing activities for the nine months ended September 30, 1999. This
increase in the cash provided by financing activities was a result of proceeds
from a convertible note with Surge as described more fully below. As a result
of the foregoing, the Company had a net decrease in cash of $8,750 during the
nine months ended September 30, 2000, as compared to a decrease of $83,038 for
the nine months ended September 30, 1999.
As 95% 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 and continuing operations of Ehola, will require the Company to
obtain additional financing in order to meet its obligations during the next
twelve months. As a result, the Company has not been able to adequately fund the
marketing of Ehola. Ehola has therefore been unable to attract and retain more
than 350 paid subscribers for its internet service provider operations.
Consequently, revenues for Ehola totaled less than $140,000 for
9
the nine months ended September 30, 2000. The Company has obtained funds
through a convertible note with Surge that has been used in part to sustain the
operations of the Company. A significant amount of additional funding is
anticipated from the potential exercised of Surge warrants subsequent to the
completion of the proposed acquisition by Surge.
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. 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.
At September 30, 2000 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 currently range between 18% and 28%
annually and is determined by the financing source subsequent to the
availability of funds. Officers of the companies personally guarantee a portion
of these obligations and the balance owed as of Sept.30, 2000 approximated
$767,398.
ICR and Global have available lines of credit aggregating $148,750, at 10%
interest, personally guaranteed by the majority stockholder of the Company, for
working capital purposes. As of September 30, 2000, the balance owed on this
line of credit was approximately $130,896.
In December 1999, the Company entered into an asset purchase agreement with
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.
10
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 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 October 1, 2000,
as extended by oral consent, 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.
In December 1999, the Company granted options to purchase 550,000 shares of the
Company's Common Stock to an officer of the Company. The options are exercisable
over a three year period at an exercise of $.52 per share. In March 2000, the
options were exercised using the cashless method into 492,800 shares of the
Company's Common Stock.
SUBSECUENT EVENTS
In November 8, 2000 ,Global DataTel, Inc. announced that it intends on selling
select assets to Superus Holdings (Nasdaq:SPRS - news). Superus will not close
---- ----
on all assets as originally agreed, and approved in a proposed merger with
Global. The select assets Global intends on selling to Superus in exchange for
cancellation of Global's outstanding note payable to Superus in the amount of
$4,800,000, approximately plus interest, will result in a significant one time
gain to Global. The sale will improve Global's balance sheet significantly.
Global does not anticipate the sale affecting its gross revenue.
Management intends on applying for listing on the Over the Counter Bulletin
Board as soon as practical.
Superus's Board of Directors elected to terminate the previously agreed to
Assets Purchase Agreement with Global, wherein all of the assets and certain
liabilities of Global were to be acquired, due to the Company's inability to
fulfill various conditions precedent.
Global's inability to meet the various conditions was highlighted by a lawsuit
against it by two former directors, Messrs. David Newren and David Levy. While
Global believes that the lawsuit was, and is baseless, the Company was unable to
settle the matter in a timely fashion. In addition, Nasdaq refused future
listing of Superus if Superus closed on the assets purchase as originally
planned because of a pending Newark, New Jersey US attorney's investigation of a
beneficial holder of Global's shares. Global and its Officers and Directors
worked diligently to resolve all issues but were unable to do so in a timely
manner. The Company intends to continue its efforts to resolve these issues and
to conduct its business in the best interest of its shareholders.
Superus expressed its intent upon termination of the Assets Purchase Agreement,
in selectively acquiring certain assets in an amicable settlement of the loan
and pledge agreement entered into previously between Superus and Global. There
shall be no shares of Superus issued to Global or its shareholders as originally
intended under the Assets Purchase Agreement pursuant to its termination.
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.
11
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
- ----------- -----------
11.2 Statement re: Computation of per share earnings.
27. Statement re: Financial Data Schedule
(b)
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/ Antonio Serrato
------------------------------------
Antonio Serrato
President
By: /s/ German Ramirez
------------------------------------
German Ramirez
Chief Financial Officer
Dated:
12