<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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)
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Nevada 87-0067813
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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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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<PAGE> 2
GLOBAL DATATEL,INC. AND SUBSIDIARIES
Index to Form 10-QSB for the Period Ended Sept.30, 1999
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PART I . FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 3-4
Consolidated Statements of Income and Comprehensive Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 9
PART II. OTHER INFORMATION
Item 5. Other information 11
Item 6. Exhibits and Reports on Form 8-K 11
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GLOBAL DATATEL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
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<CAPTION>
September 30, December 31,
ASSETS 1999 1998
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Current Assets:
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Cash and Cash Equivalents $ 158,892 $ 101,743
Trade Accounts Receivable 2,898,273 2,720,363
Inventories, Net 1,012,152 1,152,746
Prepaid Expenses and Other Current Assets 1,876,242 689,332
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Total Current Assets 5,945,559 4,664,184
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Property and Equipment, Net 549,279 479,970
Goodwill 10,918,780 10,918,780
Investment in Unconsolidated Subsidiary 3,350,000 3,350,000
Deferred Charges & Other Assets 30,691 923,082
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Total Assets $ 20,794,309 $ 20,336,016
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short Term Borrowings, Banks $ 1,029,405 $ 1,175,146
Accounts Payable 4,436,617 2,597,599
Accrued Expenses & Other Current Liabilities 2,079,807 1,772,693
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Total Current Liabilities 7,545,829 5,545,438
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Long Term Liabilities
Financial Obligations $ 72,921 $ 97,159
Deferred Revenues 44,759 409,081
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Total Liabilities 7,663,509 6,051,678
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Stockholders' Equity
Common Stock 22,496 9,180
Preferred Stock - 105
Additional Paid in Capital 17,781,557 17,781,557
Retained Earnings (4,822,168) (3,835,090)
Accumulated Translation Adjustment 148,915 328,586
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Total Stockholders' Equity 13,130,800 14,284,338
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Total Liabilities and Stockholders' Equity $ 20,794,309 $ 20,336,016
============ ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE> 4
GLOBAL DATATEL AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(unaudited)
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<CAPTION>
For the three months ended For the Nine months ended
September-99 September-99
1999 1998 1999 1998
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Revenues $ 2,279,982 $ 5,621,769 9,583,440 15,760,387
Cost of Sales:
Cost of goods sold 1,103,723 2,170,885 5,339,017 8,558,865
Other Costs of Sales 118,374 76,890 948,216 1,393,304
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1,222,097 2,247,775 6,287,233 9,952,169
Gross Profit 1,057,885 3,373,994 3,296,207 5,808,218
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Operating Expenses:
Personnel 753,558 1,494,074 2,531,876 2,136,089
Marketing & Promotion, Travel &
Entertainment, Communications 145,740 80,101 1,086,688 165,085
Occupancy 56,996 56,185 273,439 405,747
Professional Fees 87,469 94,813 258,260 205,272
Provision for Doubtful Accounts (1,136) - 14,716 10,445
Depreciation & Amortization (3,274) 20,756 29,511 76,659
Other Expenses 594,262 959,914 730,782 1,336,307
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Total Operating Expenses 1,633,615 2,705,843 4,925,272 4,335,604
------------ ----------- -----------------------------
Other Income /(Expense):
Interest Income 9,877 6,777 117,662 182,834
Interest Expense (137,482) (160,977) (434,448) (337,034)
Other 10,076 (22,402) (47,296) (92,821)
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Total Other Income/Expenses (117,529) (117,246) (364,082) (247,021)
------------ ----------- -----------------------------
Income Before Income Taxes (693,259) 550,905 (1,993,147) 1,225,593
Provision for Income Taxes 148,165 (280) 138,364 11,420
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Income Before Effects of Discontinued Operations (841,424) 551,185 (2,131,511) 1,214,173
Discontinued Operations
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Net Income (Loss) (841,424) 551,185 (2,131,511) 1,214,173
Other comprehensive income:
Foreign currency translation, net of taxes 129,865 42,987 148,915 41,269
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Comprehensive Income (Loss) $ (711,559) $ 594,172 (1,982,596) 1,255,442
=========== =========== ------------------------------
Per Share earnings (Loss) ($0.03) 0.06 ($0.08) 0.13
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE> 5
GLOBAL DATATEL AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1.999
AND THE TWELVE MONTHS OF 1.998
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<CAPTION>
September Full year
30, 1.999 1,998.00
Cash Flow from Operating Activities
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Net Income (loss) (2,131,511.00) (314,084.00)
Adjustments to reconcile net Income (Loss)
Loss on impaired assets and sales of assets 13,547.00
Loss from operations on subsidiary sold 629,473.00
Gain on sale of division (1,999,813.00)
Depreciation and amortization 29,511.00 287,023.00
Provision for Bad Debts 14,716.00 389,880.00
Deferred barter credits (123,900.00)
Changes in assets and liabilities
Increase in Trade Accounts Receivable (177,910.00) (3,682,283.00)
Increase in Inventories 140,594.00 (1,152,746.00)
Increase in Prepaid Expenses and Other Current Assets (1,186,910.00) 1,521,770.00
Increase in Deferred Charges & Other Assets 892,391.00
}increase in Accounts Payable 1,839,018.00 2,570,498.00
}increase in Accrued Expenses & Other Current Liabilities 307,114.00 742,034.00
Increase in Defferred Revenues (364,322.00) 409,081.00
Increase in Notes Payable to Shareholders 1,021,667.00
Net cash provided (used) by operating activities (637,309.00) 312,147.00
Cash used in Investing Activities
Additions to Property, Plant and Equipment 69,309.00 (301,102.00)
Net cash used by Investing Activities 69,309.00 (301,102.00)
Cash provided (used) by Financial Activities
Increase in Short Term Borrowings, Banks (145,741.00)
(Increase) decrease in mortgages payable (24,238.00) (7,374.00)
Proceds from sale of subsidiary 1,370,340.00
Convertible deventure received for sale of subsidiary (3,350,000.00)
Notes payable assumed in connection with adquisitions 1,175,146.00
Decrease in Retained Earnings 815,847.00
Proceeds from issuance of common stock 13,211.00 574,000.00
Net Cash provided (used) by Financial Activities 804,820.00 (237,888.00)
Increase (decrease) in cash prior to effect of
exchange rate on cash 236,820.00 (226,843.00)
Effect of exchange rate on cash (179,671.00) 328,586.00
Net Increase (Decrease) in Cash 57,149.00 101,743.00
Prior year Cash 101,743.00
Cash at the end of the period 158,892.00 101,743.00
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
<PAGE> 6
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated financial statements which include the accounts of
Global Datatel, Inc. and its subsidiaries (the "Company") have been prepared in
accordance with the instructions to Form 10Q-SB and do not include all
information and footnotes necessary to comply with generally accepted accounting
principles. In the opinion of management, all normal recurring adjustments
considered necessary for a fair presentation have been included. The
consolidated statements of operations for the three months ended Sept.30, 1999
and the nine months ended Sept 30,1999 are not necessarily indicative of the
results to be expected for a full year or for any other period. The December 31,
1998 balance sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles. It
is suggested that these financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
audited financial statements for the year ended December 31, 1998.
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) in a
transaction accounted for as a purchase. ICR and MES were both wholly owned
and majority-owned, respectively, by the majority shareholder of the
Company. On December 2, 1998 the company changed its name to Global
DataTel, Inc. The Company 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. The
Company has distribution agreements with International Business Machines
("IBM"), Lotus, Cisco Systems, and JBA.
On November 30, 1998, the Company purchased three unrelated companies in
Colombia, South America, DLR & CIA ("DLR"), Micro Star Ltda. ("Micro"), and
CASA Informatica ("Casa"). The companies acquired are also in the business
of providing software and hardware solutions to companies in their markets.
Previous to the acquisition by 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 that was to sell advertising space to the hotel
and travel industry. Gold Coast sold Hotel on December 14, 1998.
The following is summary of the significant policies followed in the
preparation of the consolidated financial statements.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Cash - For purposes of cash flows the company considers investments of
three months or less as cash equivalents. Revenues from services are
recognized as the services are performed. Revenues from the sales and
installation of a hardware package are recognized when the installation is
substantially completed and operational.
Inventories - Inventories are principally composed of finished goods and
are stated at the lower of cost or market.
Accounts Receivable - The Company periodically reviews the adequacy of the
allowance for doubtful accounts and maintains the allowance for doubtful
accounts at a level which management believes is sufficient to cover
potential credit losses.
Property, Plant and Equipment - Property, plant, and equipment is carried
at cost, less accumulated depreciation. Gains or losses from sales or
retirements are included in current operations. Maintenance, repairs and
renewals
<PAGE> 7
of a routine nature are charged to operations. Depreciation is provided
over the estimated useful lives of the related assets using the
straight-line method which range from five to ten years.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to concentration of credit risk consists primarily of
accounts receivable and debt securities. Concentration of credit with
respect to accounts receivable as of December 31, 1998 was limited to an
amount due from an agency of the Colombian Government, which represented
approximately 22% of the net accounts receivable. The Company provides for
estimated credit losses at time of sale based upon factors surrounding the
credit risk of specific customers, historical trends and other information.
The investment in debt securities represents 100% of the total category.
This investment consists of a convertible debenture in Ameriresources
Technologies, Inc, a publicly traded entity. The debenture is personally
guaranteed by the majority stockholder of Lexington Sales, Inc.
Fair Value of Financial Instruments - The carrying amount of cash and
short-term borrowings, banks are carried at costs, which based on
management's estimates approximates their fair values as of Sept. 30, 1999.
Income Taxes - The Company and its U.S. subsidiary file a consolidated
income tax return. Foreign subsidiaries are not consolidated. The Company
has adopted SFAS 109 and this pronouncement caused no material changes on
the financial statements. The provision for income taxes is primarily
related to the reconciliation of the taxes paid and owed by the foreign
subsidiaries in accordance with the taxing rules and regulation promulgated
by the Colombian government as of December 31, 1998.
Translation of Foreign Currency - The Company's Colombian subsidiaries are
translated in accordance with Statement of Financial Accounting Standards
No. 52 (SFA No. 52), which requires that foreign currency assets and
liabilities be translated using the exchange rates in effect at the balance
sheet date. Results of operations are translated using the average exchange
rates prevailing during the period. For purposes of SFAS No 52, the Company
considers the Colombian peso to be the functional currency. The effects of
unrealized exchange fluctuations on translating foreign currency assets and
liabilities into U.S. dollars are accumulated as the cumulative translation
adjustment in shareholders' equity. Realized gains and losses from foreign
currency transactions are included in the results of operation for the
period. Fluctuations arising from intercompany transactions are of long
term in nature and are accumulated as cumulative translation adjustments.
NOTE 2: OPERATING GROUPS
The Company has two operating segments: the Information Systems Group ("ISG")
and the Online Services Group ("OSG"). Products distributed by ISG includes
mid-range and mainframe servers that run on UNIX, OS/400,S390, and NT operating
systems, peripheral equipment (including wireless networking equipment, storage
products, printers and terminals),operating software, internet consulting, ERP
applications, and e-commerce applications. Through OSG, the Company offers its
consumer customers internet access in 16 countries, as well as multi-lingual
content available via the world wide web at its domain www.ehola.com. The
commercial division provides for e-commerce design,support, and consultation
services throughout Latin America. The division also resells internet appliances
such as Web Top Boxes and Personal Computers.The accounting policies of the
segments are the same. Although management measures the profitability of its
business through the results of these two segments, the Company's segments have
similar economic characteristics and, as such, the results of operations have
been aggregated and separate disclosure is not presented.. During the three
months ended Sept.30, 1999 and 1998, as well as the nine months ended June 30,
1998 and 1998, approximately 60% of the Company's net sales were generated from
the sale of IBM products. No one customer accounted for more than 6% and 7% the
Company's net sales in the three months ended Sept. 30, 1999 and 1998,
respectively, and no other single customer accounted for more than 5% of the
Company's net sales for the nine months ended Sept. 30,1999 and 1998.
NOTE 3 - BUSINESS ACQUISITIONS
<PAGE> 8
All acquisitions have been accounted for under the purchase method. The
results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition. In all of
the acquisitions, 100% of the acquired companies were purchased.
On September 30, 1998 the Company purchased, in a stock transaction, ICR
and MES. On November 30, 1998 the company purchased three Colombian
companies, DLR, Casa, and Micro.
The Company acquired all of the stock of ICR for 105,000 shares of
convertible preferred stock valued at $0.001 per share and 4,243,843 shares
of common stock valued at $2.00 per share. The net assets acquired and
liabilities assumed approximated $90,000 and $190,000, respectively. The
purchase resulted in goodwill of approximately $8,600,000. The subsidiary
of ICR, eHOLA.com, an Internet service provider, is expected to generate
the future realizable income necessary to justify the resulting goodwill in
this transaction. The acquisition was recorded using a discounted price per
share due to the low volume of trading of the Company's common stock during
the period of the acquisition.
The Company acquired MES for 357,143 common stock shares of the Company,
valued at $2.00 per share. The net assets acquired and liabilities assumed
approximated $1,181,000 and $913,000, respectively. The purchase resulted
in goodwill of approximately $475,000.
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 $1,536,000 and
$1,732,000, respectively. The acquisition resulted in goodwill of
approximately $502,000.
The Company acquired Casa for $840,000 ($93,333 at closing and eight
monthly installments of $93,333 thereafter, as defined) in cash, and
392,000 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 $808,000.
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 $926,000 and $748,000, respectively. The
purchase resulted in goodwill of $537,000.
The Company issued non-interest-bearing promissory notes to the
shareholders of DLR, Casa and Micro for the unpaid cash portion of the
consideration for the acquisitions. The terms of the notes for the
individual companies acquired are as presented in the preceding paragraphs
and the amount due is reflected as notes payable to stockholders in the
accompanying consolidated balance sheet as of December 31, 1998. As
discussed in Note 15, the Company is currently attempting to raise capital
in connection with a proposed public offering. The realization of a major
portion of the assets in the accompanying balance sheet as of December 31,
1998 is dependent upon continued operations of the Company, and their
ability to raise additional capital. Management believes that actions
presently taken to revise the Company's operating and financial
requirements will provide the opportunity for the Company to continue as a
going concern.
NOTE 4 - GOODWILL
Goodwill, which represents the excess of acquisition costs over the net
assets acquired in the business combinations, is amortized on the
straight-line method over 20 years (See Note 2). The carrying amount of
goodwill is reviewed annually using estimated un-discounted cash flows for
the businesses acquired over the remaining amortization periods.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company is a member of a group of affiliated entities and, has
extensive transactions and relationships with members of the group. Because
of these relationships, it is possible that the terms of these transactions
are not the same as those that would result from transactions among wholly
unrelated parties.
NOTE 6 - SUBSEQUENT EVENTS
<PAGE> 9
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 cannot determine at this time the
eventual outcome of this proposed offering. On August 18,1999, Dirks &
Company agreed to revise their offering into a 144A offering. This new
offering will supercede the previously announced public offering. This
offering has not yet commenced.
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, and the Form D was
timely filed with the Securities and Exchange Commission.
In April 1999, the Company began negotiations to acquire 100% of the shares
of stock of a computer solutions provider. As of this date, management has
decided not to acquire these entities.
On October 8, 1999, the Company signed a Merger Agreement and Plan of
Reorganization with Surge Components, Inc. ("SCI"). Upon completion of the
proposed merger the Company will operate as a wholly-owned subsidiary of GDI.
Pursuant to the agreement, shareholders of (SCI) will receive approximately
2,430,000 shares of GDI in exchange for all of Surge's outstanding stock on a
one for two basis. Surge's publicly held warrants will be exchanged on a one for
one basis for GDI warrants with the same exercise price and expiration date. The
acquisition is subject to shareholder approval,due diligence and the
satisfaction of conditions precedent
In October 1999, Surge loaned $1,000,000 to GDI. The loan, which is due June 1,
2000, incurs interest at the rate of ten percent (10%) per annum and is
collateralized by 300,000 shares of GDI stock. On the completion of the Merger
with Surge, the outstanding principal balance and accrued interest of the loan
will be forgiven.
NOTE 7 - STOCK OPTION AGREEMENT
In April 1999, the Company entered into an option agreement with a
consultant, in partial payment of 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.
NOTE 8 - OPERATING RISKS
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 and remittance abroad, and rates and methods of taxation among
other things.
NOTE 9 - IMPACT OF YEAR 2000 - UNAUDITED
The Company is in the process of evaluating the effect of the year 2000 on
its computer systems. The Company believes that the cost of upgrading its
systems will not materially affect the operations but will constitute the
normal periodic ongoing cost of maintaining and improving its computer
system.
The Company has initiated communications with all of its significant
suppliers to determine the extent to which the Company's operations are
vulnerable to those third parties failure to remediate their own year 2000
issues. There can be no guarantee that the system of such companies or
payors will be timely converted and would not have an adverse impact on the
Company. Additionally, general problems such as electric power, water and
sewer etc., are beyond the ability of the Company to determine, and would
affect most other companies in the geographic area of Colombia.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
<PAGE> 10
Except for historical information, the materials contained in this Management's
Discussion and Analysis or Plan of Operation are 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 short operating history, need to manage its growth, general economic
downturns, intense price cutting in the computer industry, seasonality of
quarterly results, and other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission (the"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,and 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 and the Company's
Report on Form 10-SB for the year ended December 31, 1998, both of which have
been filed with the Commission. These reports 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. RESULTS OF
OPERATIONS: Net sales for Global DataTel, Inc. and Subsidiaries (the "Company")
for the nine months ended Sept 30, 1999 decreased by $6,176,947, or 60%, to
$9,583,440 as compared to net sales of $15,760,387 for the nine months ended
Sept 30, 1998. The Company's net sales for the three months ended Sept. 30, 1999
decreased by $3,341,787, or 60%, to $2,279,982 as compared to net sales of
$5,621,769 for the three months ended August 31, 1998. This decrease was
attributable primarily to having our main supplier sell direct to our clients on
a commission basis in response to credit risk avoidance in the country of
Colombia, management will make on a case by case basis a credit evaluation on
each potential client, as its normal course of business. The eHOLA.com
subsidiary posted revenues of $18,842, this marks the first revenues for the
Online Services Division. There can be no assurance, however, that these
improving conditions will continue in the latter part of 1999. The Company will
continue to attempt to increase sales by introducing new products, hiring more
salespeople and sales representatives, also with the initial shipments of our
Flagship Internet Access Service pre-loaded on IBM Aptivas's destined for Latin
America commenced on Oct. 1, 1999. The Online Services Group, has also initiated
retail sales of Internet appliances direct to consumers in various test markets
in Latin America. The Company's gross profit for the nine months ended Sept. 30,
1999 decreased by $2,512,011, or 43%, as compared to the nine months ended Sept.
30, 1998. The Company's gross profit for the three months ended Sept. 30, 1999
decreased by $2,316,109, or 68%, as compared to the three months ended Sept.
30,1998. The lower margins were primarily a result of the Company choosing to
have our supplier sell direct, and the company receives lower margins as a
consequence of shifting the credit risk. General and administrative expenses for
the nine months ended Sept. 30, 1999 increased by 24%, as a percentage of sales
compared to the nine months ended Sept. 30, 1998. For the three months ended
Sept. 30, 1999, general and administrative expenses increased by 23%, as
compared to the three months ended Sept. 30, 1998. These increases are primarily
due to costs associated with the Online Services Group. 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
during the third quarter 1999. The Online Services Groups, losses decreased at
the rate of $63,000 per quarter or 27% second to third quarter. The Company is
committed to increasing sales through, an Internet initiative to market portal
and e-commerce products and services to midsize and enterprise class customers.
Interest expense for the nine months ended Sept. 30, 1999 increased by $117,061
or 47%, as compared to the nine months ended Sept. 30, 1998. Interest expense
for the three months ended Sept. 30, 1999 increased by $283, or 0%,as compared
to the three months ended Sept. 30, 1998. These increases are primarily due to
the Company's increased purchasing through lines of credit. The Company intends
to continue utilizing lines of credit on an as needed basis based on its cash
needs. As a result of the foregoing, the Company had net loss of $1,982,596 for
the nine months ended Sept. 30, 1999 as compared to a net profit of $1,255,442
for the nine months ended Sept. 30, 1998. The Company had net loss of $711.559
for the three months ended Sept. 30, 1999, as compared to a net income of
$594,172, for the three months ended Sept. 30, 1998. The Company's Current Ratio
changed to 0.77 at Sept. 30, 1999, as compared to 0.84 at Dec. 31, 1998, as a
result of increased accounts payable. The average number of days to collect
receivables remained about the same at 61 days. Management believes that working
capital levels are adequate to meet the current operating requirements of the
Company. In August 1999, the Company renewed the letters of credit agreements
with its banks through July 31, 1999 allowing the Company to obtain up to
$1,000,000 in in direct borrowings with a maximum borrowing limit of $1,500,000.
The direct borrowings incur interest at the bank's market rate. Borrowings are
collateralized by the assets of the Company.. The Company intends to expand its
facilities over the next several years in order to achieve and maintain the
growth expected primarily through the increased penetration of the internet
e-business market, the introduction of new products and the upgrade of existing
product lines.
On October 8, 1999, the Company signed a Merger Agreement and Plan of
Reorganization with Surge Components, Inc. ("SCI"). Upon completion of the
proposed merger Surge (SCI), will operate as a wholly owned subsidiary of GDI.
Pursuant to the agreement, shareholders of Surge will receive approximately
2,430,000 shares in Global DataTel in exchange for all of Surge's outstanding
stock on a two for one basis. Surge's publicly held warrants will be exchanged
on a one for one basis for Global DataTel warrants with the same exercise price
and expiration date. The acquisition is subject to Surge's shareholder
approval, due diligence and the satisfaction of conditions precedent. In
October 1999, Surge Components loaned $1,000,000 to Global Datatel. The loan,
which is due June 1,
<PAGE> 11
2000, incurs interest at the rate of ten percent (10%) per annum and is
collateralized by 300,000 shares of Global DataTel stock pledged by Richard
Baker, President. On the completion of the Merger with Surge, the outstanding
principal balance and accrued interest of the loan will be forgiven. During the
nine months ended Sept. 30, 1999, the Company had net cash used in operating
activities of $614.813, as compared to $312,147 provided by operating
activities in the twelve months of 1998. The increase in cash used by operating
activities resulted mainly from an increase in accounts payable. The Company
had net cash used in investing activities of $69,309 for the nine months ended
Sept. 30 1999, as compared to $301,102 provided by investing activities for the
twelve months ended Dec.31, 1998. The Company had net cash provided by
financing activities of $804,820 for nine months ended Sept. 30, 1999, as
compared to $237.888 used in the twelve months ended Dec. 31, 1998. As a result
of the foregoing, the Company had a net increase in cash of $57,149 during the
nine months ended Sept. 30, 1999, as compared to a net increase of $101.743 for
the twelve months ended Dec.. 31, 1998. The Company expects that its cash flow
from operations, current investment program and the Company's line of credit
agreement will be sufficient to meets its current financial requirements over
at least the next twelve months.
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
- - ----------- -----------
11.1 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.
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/ German Ramirez
-------------------------------
German Ramirez
Principal Financial Officer
Dated:November 8,1999
<PAGE> 1
GLOBAL DATATEL, INC. AND SUBSIDIARIES
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Basic earnings:
Net income $ (711,559) $ 594,172 $ (1,982,596) $ 1,255,442
Shares:
Weighted common shares outstanding 22,495,623 9,180,000 22,495,623 9,180,000
Employees stock options -- -- -- --
------------ ------------ ------------ ------------
Total weighted shares outstanding 22,495,623 9,180,000 22,495,623 9,180,000
------------ ------------ ------------ ------------
Basic earnings per common share $ (0.03) $ 0.06 $ (0.8) $ 0.13
============ ============ ============ ============
Diluted earnings:
Net income $ (711,559) $ 594,172 $ (1,982,596) $ 1,255,442
Shares:
Weighted common shares outstanding 22,495,623 9,180,000 22,495,623 9,180,000
Employees & other stock options -- -- -- --
------------ ------------ ------------ ------------
Total weighted shares outstanding 22,495,623 9,180,000 22,495,623 9,180,000
------------ ------------ ------------ ------------
Diluted earnings per common share $ (0.03) $ 0.06 $ (0.08) $ 0.13
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Statements of Income filed as part of the report
on Form 10-QSB and is qaulified in its entirety by reference to such report on
Form 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 158,892
<SECURITIES> 0
<RECEIVABLES> 2,898,273
<ALLOWANCES> 0
<INVENTORY> 1,012,152
<CURRENT-ASSETS> 5,945,559
<PP&E> 812,406
<DEPRECIATION> 263,127
<TOTAL-ASSETS> 20,794,309
<CURRENT-LIABILITIES> 7,568,325
<BONDS> 0
0
0
<COMMON> 22,495,623
<OTHER-SE> 1,105,000
<TOTAL-LIABILITY-AND-EQUITY> 20,794,309
<SALES> 9,583,440
<TOTAL-REVENUES> 9,583,440
<CGS> 5,339,017
<TOTAL-COSTS> 6,287,233
<OTHER-EXPENSES> 4,925,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 434,448
<INCOME-PRETAX> (1,993,147)
<INCOME-TAX> 138,364
<INCOME-CONTINUING> (2,131,511)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 148,915
<NET-INCOME> (1,982,596)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
