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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-SB/A
Amendment No. 5
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange
Act of 1934
GLOBAL DATATEL, INC.
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(Exact name of Registrant in its charter)
NEVADA 87-0067813
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(State of organization) (I.R.S. Employer
Identification No.)
3333 CONGRESS AVENUE, SUITE 404, DELRAY BEACH, FLORIDA 33445
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(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code: (561) 276-8260
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock
You should not rely on forward-looking statements in this registration
statement. This registration statement contains forward-looking statements that
involve risks and uncertainties. We use words such as "anticipates," "believes,"
"plans," "expects," "future," "intends" and similar expressions to identify
these forward-looking statements. This registration statement also contains
forward-looking statements attributed to certain third parties relating to their
estimates regarding the growth of the Internet, Internet advertising and online
commerce markets and spending. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this registration
statement. Our actual results could differ materially from those anticipated in
these forward-looking statements for many reasons.
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PART I
Item 1. Business.
(a) DEVELOPMENT OF BUSINESS.
Global DataTel, Inc., was originally incorporated in the State of Utah in 1980,
as LaPlate Oil and Mining, Inc., and changed its name to Gold Coast Resources,
Inc. in 1982. The Company's state of incorporation was changed in December, 1996
to the State of Nevada. In December, 1998, the Company's name was changed to
Global DataTel, Inc., in connection with a change in control of the Company. The
change resulted from the series of events described below which occurred earlier
in 1998 and refocused the direction of the Company. In December 1998, the
largest shareholder of the Company, surrendered a portion of his shares, and the
Company reissued shares to, among others, new shareholders who invested along
with the new business of the Company. Shortly thereafter, the existing officers
and directors of the Company, David Newren and David Levy, resigned, and Richard
Baker, Antonio Serrato, and Jerry Daye were appointed to the Board of Directors
and Richard Baker was appointed President, Gerald D'Ambroseo appointed Secretary
and Michael DeMarie appointed Treasurer. Mr. Baker resigned from all positions
with the Company in June 2000. All share and per share data in this Report
give retroactive effect to the Company's December 1999 one-for-two reverse
stock split.
In 1998, a number of significant transactions took place. The Company, in
September 1998, acquired International Computer Resources, Inc. ("ICR"), a
Florida corporation, which does business as an IBM computer reseller, and
Mantenimiento Electronico de Systemas, Ltd. ("MES"), a Colombian corporation,
which does business as a computer integrator and service provider.
In November, 1998, Global acquired three additional Colombian corporations, Casa
Informatica, S.A., ("CASA"), DLR & CIA, Ltda., ("DLR") and Microstar, Ltda.
("MICRO"). CASA, an IBM computer reseller, was acquired for $840,000.00 in cash
and a promissory note (since paid) and 392,000 restricted shares of the
Company's common stock (the "Common Stock") valued at $1,176,000. DLR, an IBM
computer reseller and system integrator, was acquired for a total consideration
of $600,000, which was paid $300,000 in cash and a promissory note (since
partially paid) and 60,000 restricted shares of the Company's common stock
valued at $300,000. The remaining payments under the promissory note to DLR
($120,000) were placed in escrow while the parties negotiate a settlement. The
remaining balance on, MICRO, also a IBM computer reseller and system integrator,
was acquired for a total consideration of $500,000, which was paid $150,000 in
cash and a promissory note (since paid) and 70,000 restricted shares of the
Company's common stock valued at $350,000.
Global now has three wholly owned or controlled operating subsidiaries:
Global DataTel de Colombia, S.A. (GDC), a Colombian
corporation which is subsidiary, consisting of four acquired
companies in Colombia, MES, CASA, DLR and MICRO. These
companies are involved in the computer system integration
business. Global owns 94.0% of the capital stock of GDC, with
100% of the voting rights. Under Colombian law, a foreign
entity cannot own more than 94.0% of a Colombian corporation.
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On Line Latin America, S.A. (OLA), now known as eHola.com
S.A., a Colombian corporation, is in the Internet service
business. Global owns 94.0% of the capital stock of OLA, with
100% of the voting rights.
eHOLA.com, Inc, (eHOLA), a Nevada corporation (formerly
Electronic Latin America On-Line, Inc.), a wholly owned
subsidiary, is in the Internet service business.
Global DataTel de Colombia was incorporated under the laws of Colombia on May
10, 1999, in Bogota, Colombia. The company was the combination of the 4
Colombian acquired companies, DLR, CASA, Microstar, and MES. OLA was
incorporated under the laws of Colombia on January 3, 1999, in Barranquilla,
Colombia, and subsequently changed its name to ehola.com S.A. The corporation
was a newly formed company. Ehola.com,Inc., formerly known as On Line Latin
America,Inc. was incorporated on December 31,1998, in Nevada. The corporation is
a newly formed company.
The operations of International Computer Resources, Inc. ("ICR") are now
conducted under Global DataTel, Inc., and form the North American component of
the Information Systems Division.
Gold Coast Resources prior to September 1998 was involved in the marketing of
the "Travel Agent's Hotel Guide", a publication that provided travel agents
exposure to Hotels and hotels around the world. Prior to that, Gold Coast
Resources was involved in oil, gas, mining and mineral investments.
On December 14, 1998, the Company sold its interest in a subsidiary, The Travel
Agent's Hotel Guide, Inc., a Nevada corporation, to Ameriresources 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 Ameriresources. Gold Coast
Resources had acquired a 20% interest in the Travel Agent's Hotel Guide, Inc. on
August 17, 1998, by payment of 3,500,000 shares of Common Stock to David Newren,
a former officer and director of the Company. The Company had previously
acquired an 80% interest.
In April, 1999, we negotiated a letter of intent to acquire Malibu Shopping
Networks, Inc., doing business as "Latin Pak," which company provides marketing
and distribution services to the Latin American community. No agreement was ever
entered into and the Company elected not to pursue this acquisition.
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 1,000,000 shares of
preferred stock previously issued to each of these entities.
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(b) NARRATIVE DESCRIPTION OF BUSINESS.
Global DataTel de Colombia, (GDC) is the largest operating subsidiary of Global,
with over 95% of its revenues and profits. This subsidiary is the South American
component of our Information Systems Division. The North American component of
our Information Systems Division presently accounts for approximately 5% of the
Company's revenues and profits. GDC is a midrange to large system integration
computer solution provider. In Colombia, GDC is authorized by various leading
high tech companies as a reseller. An authorized reseller is a company that
has met the minimum requirements established by a manufacturer in order to be
able to resell that manufacturer's product. GDC represents such firms as IBM
Corp., Compaq Computer, Microsoft, and Lotus. The GDC subsidiary has been
authorized by IBM de Colombia to resell midrange and personal computer systems
and IBM's operating system software and utilities in Colombia. We deal directly
with IBM de Colombia for order fulfillment. We are also authorized to resell
Compaq Corp. systems in Colombia. We can purchase directly or through their
distributors as best suits our needs. The Microsoft Corp. has authorized GDC to
be a Microsoft Solution provider. In that capacity, GDC integrates Microsoft
products with other applications, i.e., installing and setting up Microsoft
programs in the hardware and network elements being purchased by our customers
as part of an integrated system. The Lotus Corp., an IBM company, has authorized
us to resell their products. These products are primarily purchased through
their authorized distributors in Colombia. Global is also an authorized reseller
in Colombia of Global One telecommunications products and services. Global One
is a corporation owned jointly by Sprint, French Telecom, and Deutsche Telecom.
They operate Global One outside their primary markets. Because of changes in
control of Global One no agreement is in effect and Global has not generated any
revenues from Global One.
We are authorized distributors for IBM, and Lotus, and we have a written
distribution agreement with JBA International, Inc. ("JBA") There are no
exclusive sales territories for IBM, Compaq, Microsoft, JBA, Cisco Systems or
Lotus. We do have an "installed base" with IBM, whereby any contact to buy IBM
hardware by applicable customers is made through GDC.
The primary focus is to provide presale consulting to Colombia's largest
national, government, and international companies, to determine the best
solution to their particular information system requirements. Based upon this
analysis, GDC can provide clients with a fully integrated solution which may
include hardware, software and services from various sources. The products may
include an AS/400 mini-computer, which becomes the host system in a centric
computing architecture operating under IBM's proprietary OS/400 operating
system. The applications suite that reside on these hosts may include an ERP
application such as JBA's System 21 product localized and customized for each
account. The Information Systems Division's main business is to provide system
consulting, resale of new micro, mini, or mainframe hardware, as well as
software and complementary contract services as needed. These services may
include help desk, contract programming, training, and hardware/software
maintenance contracts. Sale of new hardware typically may include wintel based
micro computers such as IBM desktops, IBM AS/400-RS/6000 mini computers, and
IBMS/390 mainframes. A typical sales cycle begins with either a sales lead from
one of our suppliers such as IBM, or a direct outbound sales call from one of
our salespersons. We market primarily in Colombia, with 4 offices in the major
cities. Our staff includes 162
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employees, all of them full-time employees. Customer support is determined by
the product or service that has been supplied to the account. In the case of new
hardware, the supplier handles the warranty directly and subsequently may sell
an ongoing service agreement. Software products may include Microsoft, Lotus,
JBA, and several other complimentary application software programs as may be
deemed necessary in order to provide satisfactory results. Services include
various supplemental after sale products such as executive training, employee
implementation, and long term contractual maintenance agreements.
Our largest order to date is from La Cachareria La Catorce a large supermarket
chain headquartered in Cali, Colombia. This order is primarily for IBM point of
sale hardware and software. While the parties negotiated a contract they
chose instead to enter into a three-year plan beginning in 1999. Each year upon
Global's submission of a budget and schedule of store by store implementation,
GDC obtains a work order. Invoicing and payment is made when each store
installation is completed. As of February 1, 2000, we had fulfilled
approximately $850,000 of the plan rollout. There was a 12 month delay from the
original schedule due to technical problems with IBM's network. The year 2000
should constitute $500,000 with the balance of a $5 million budget subject to
review.
GDC formerly had a service agreement with the Colombian National Police to
maintain and service their IBM Information System. This agreement ended in
December, 1999, due to the fact that the National Police added 20 additional
RS/6000 servers which they wanted the Company to maintain at no additional
compensation. It was not profitable for the Company to do so. Our current
service agreement covers power, original cabling, networking elements,
connectors, switching and frames. In connection with our system integration
services we provide the National Police with hardware from Cisco and Hewlett
Packard, as well as cabling services needed for the installation, configuration
and testing of their information system. We also receive installation
assignments on an as-needed basis.
The customer support for software and services, may reside with Global, with
certain levels of support accorded our company from the supplier. New product
developments include e-commerce solutions as well localization of some software
programs for our suppliers such as JBA. At the moment we have no intellectual
property rights, or patents, and licenses.
The division operates across a broad horizontal marketplace and is not
limited to any single vertical market. We compete in a very competitive
marketplace against not only other integrators, but also manufacturers such as
Sun Microsystems, as well as IBM themselves in certain instances. Management
believes that Global is well positioned in the marketplace and has a good
reputation in fulfilling the client contracts. Our competitors however, may have
greater resources or superior products, than our offerings. The competitive
nature of system integration requires a talented workforce to compete
effectively. The competition may have expertise in certain areas that would give
that company an edge in winning a contract and vice versa.
GDC has been selling integrated systems and providing enterprise resource
planning (ERP) services in the manufacturing and distribution sectors, and
competes, management believes, on the
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basis of price, quality and speed. ERP integrates all departments and functions
across a company into a single computer system to serve, in an efficient and
integrated fashion, the needs of the different departments. By including all of
the hardware, software and services to implement a project from our broad
portfolio of products and services, which includes electronic business to
business applications, we maintain a competitive advantage. A growing percentage
of sales is directly related to the business to business area, which is a
natural complement to our integrated systems offerings.
Because of our concentration of business in Colombia, we are dependent on the
laws of that country to offer our products and services. At present there is
substantially no known detrimental regulations concerning the products we sell,
such as IBM, Compaq and other computer manufacturers, as well the services we
provide as part of standard set of offering to the commercial sector in
Colombia. The Internet division has to date not been adversely effected by any
governmental rules or regulatory laws. It is possible legislation may be enacted
that could effect both divisions ability to conduct business in Colombia.
On Line Latin America, S.A. (now eHOLA.com S.A.), and eHOLA.com operate under
our On Line Services Division. This division's main business is two-fold: to
provide dial-up Internet access ("Internet Access") principally to do business
in the United States, Central America, and South America, (which is marketed
under the eHOLA name) and to provide both simple and sophisticated e-commerce
business solutions ("Technology Solutions").
Our Internet access operations commenced on April 22, 1999. We presently offer
Internet access in the following countries: Argentina, Bolivia, Brazil, Chile,
Colombia, El Salvador, Equador, Guatemala, Mexico, Paraguay, Peru, United States
and Venezuela. We are in a testing phase, and are actively seeking subscribers.
eHOLA offers, for one basic yearly subscription price per country, in the
countries listed above, unlimited Internet access including the World Wide Web
multilingual portal www.eHOLA.com. The service also includes free e-mail and
Microsoft Internet Explorer browser. As of June 30, 2000, we had 343 Internet
access subscribers, approximately 4,400 registered users, and revenues of
$66,920.
The Internet in Latin America is still in its infancy as compared to the United
States or Europe as looked at from a population penetration percentage. Although
the market place is relatively new, competition is growing more robust. Though
eHOLA endeavors to engage in predominately business-to-business e-commerce in
Latin America where there is presently limited competition due to the high
distribution channel barriers to entry, there is no guarantee that competition
in this realm will remain comparatively tepid.
America OnLine's ("AOL") entrance into Latin America (AOL LA) has dedicated
its effort to build dialup service and consumer oriented content. AOL LA has
launched service in Brazil, and we expect that it will expand to other countries
in Latin America, following the consumer oriented market. While it may take time
to build brand name recognition in Latin America, with AOL's resources and
expertise, it is expected that AOL LA will be a market leader. Nevertheless, we
believe that the market is so large that we will be able to maintain our
presence in the market place.
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eHOLA is moving towards being a business to business oriented company. As
Internet use in Latin America grows, more businesses will need to develop
internet strategies. While AOL LA will affect the ISP portion of our business,
our e-commerce, Web integration, hosting, connectivity and application service
provider portions are not considered to be, at least today, affected by AOL LA.
As AOL LA's marketing efforts bring more consumers to the Internet, more
business oriented opportunities shall appear for eHOLA.
In February 2000, we opened an e-business center in Bogota, Colombia,
including Global Plaza and Global Merchant. Global Plaza is an Internet site
where our clients can build a virtual store where, for a monthly fee, they can
link, promote, catalog and sell their products over the Internet and share our
search capabilities without the need to acquire, operate and maintain their own
hardware and software. Global Merchant is an e-commerce application that allows
small, and medium size companies to create multiple virtual stores to exhibit,
promote, and commercialize their products and services over the Internet by
taking real-time sales orders from existing or perspective customers 24 hours a
day, seven days a week. Global Merchant provides the ability to generate
advertising spaces for each store, track performance and sales and derive
consumer profiles to obtain demographic information. The Bogota center currently
has three users, and is still in the process of launching. Presently, it is our
goal for this center to provide services for all of Colombia. Once established,
we will seek to open centers in Cali, Medillen and Baranquilla, Colombia.
The Technology Solutions operations are in their development stage. eHOLA
endeavors to provide both simple and sophisticated e-commerce business solutions
to Latin American companies with which eHOLA/com comes in contact by virtue of
GDC's (and its progeny's) Web and system integration engagements, its Internet
Access clientele, business visitors to its Internet business center, and through
its own direct solicitations. eHOLA's Technology Solutions operations have
attracted relationships with top-tier American technology providers (e.g.,
BroadVision) seeking to capitalize upon GDC's and eHOLA's Latin American
synergies.
Global is not dependent upon any major customer at the present time. From time
to time Global has had large government contracts. Such large government
contracts or clients are, in the opinion of Management, an exception. As we
purchase products only in connection with our sales, we do not experience
backlogs.
The South American component of our Information Systems Division, GDC, accounts
for approximately 95% of the Company's revenues. The North American component
presently accounts for approximately 5%.
Global has no research and development costs to date.
Possible Future Acquisitions. Management believes that an important element of
Global's strategy to be a lending provider of e-business and infrastructure
solutions is and will continue to be organic growth and growth through
acquisitions. The web and systems integration, Internet access and related
businesses in Latin America are still relatively fragmented in comparison to
similar
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companies in the United States. This fragmented market creates opportunities for
companies like Global who are positioned to acquire small, independent companies
throughout Latin America and then aggregate these companies within one business
enterprise that can enjoy economics of scale and other synergies.
Global presently has no definitive agreements to consummate any such
transactions, but has entered into discussions with a number of web and systems
integration companies and Internet service providers in Latin America with
respect to either entering into a letter of intent or acquiring an option to
purchase such businesses. Management expects that any such transactions would be
consummated, if at all, following the recapitalization and consummation of the
GDIS Acquisition. Management also expects that the majority of the consideration
paid to acquire such companies would be in the form of shares of Class B Common
Stock of Surge Components, Inc. However, there can be no assurance that any such
transactions will be consummated, or, if they are, as to the terms of the
definitive purchase agreements.
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.
Results of Operations
Three months ended March 31, 2000 as compared to the three months ended March
31, 1999.
Net sales for the quarter ended March 31, 2000 ("First Quarter 2000") decreased
by $3,971,627, or 61%, to $2,530,385, as compared to $6,502,012 for the quarter
ended March 31, 1999 ("First Quarter 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. In this way, the Company is limiting its credit risk. Approximately 85% of
the sales in First Quarter 1999, or $5,572,097 were from the sales of computer
equipment as compared to $1,716,534, or 68% of sales in First Quarter 2000.
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The Company's gross profit for First Quarter 2000 decreased by $710,115, or 43%,
to $948,650, as compared to $1,658,765 for First Quarter 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 also results in an increased gross profit. As a result, gross profit
as a percentage of sales increased from 26% in Fiscal 1999 to 37% in Fiscal
2000.
Selling, general and administrative expenses increased by $887,282, or 208%, to
$1,312,286 in First Quarter 2000, as compared to $425,004 for First Quarter
1999. The increase in these expenses relates primarily to the costs associated
with the operations of eHOLA, which commenced during the second quarter 1999.
Payroll expenses increased by $617,918, or 210%, to $911,918 in First Quarter
2000, as compared to $294,000 in First Quarter 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
$1,387,920 in First Quarter 2000, as compared to income from operations totaling
$853,676 in First Quarter 1999. Included in the net loss for First Quarter 2000,
are losses totaling approximately $590,000 from the operations of eHOLA.
Year Ended December 30, 1999 as Compared to the Year Ended December 30, 1998
During 1998, the Company changed its focus, disposing of the operations
previously carried on by the Company (primarily related to the publication of
the Travel Agents Hotel Guide) and acquiring five companies operating in the
computer and electronics industry and a developing company in the Internet
service business. As a result, comparison of the Company's operations would not
be meaningful. The following table summarizes the results of operations for the
acquired companies:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
---- ----
<S> <C> <C>
Net sales $13,836,785 $21,457,159
Cost of goods sold 8,411,701 15,620,783
Gross profit 5,425,084 5,836,376
Selling, general & administrative expenses 4,345,900 2,768,733
Payroll and related expenses 3,541,784 2,626,204
(Loss) profit from operations (2,462,600) 441,439
</TABLE>
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Net sales for the year ended December 31, 1999 ("Calendar 1999") decreased by
$7,620,374, or 36%, to $13,836,785, as compared to $21,457,159 for the year
ended December 31, 1998 ("Calendar 1998"). This decrease was attributable
primarily to having the Company's main supplier sell directly to clients, with
the Company receiving a commission on the sale. In this way, the Company limited
its credit risk. Beginning during the first quarter of 2000, the Company
reinstituted the policy of purchasing equipment from this supplier.
The Company's gross profit for Calendar 1999 decreased by $411,292, or 7%, to
$5,425,084, as compared to $5,836,376 for Calendar 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. Additionally, a greater percentage of the sales during 1999 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
also results in an increased gross profit. As a result, gross profit as a
percentage of sales increased from 27% in Calendar 1998 to 39% in Calendar 1999.
Selling, general and administrative expenses increased by $1,577,167, or 57%, to
$4,345,900 in Calendar 1999, as compared to $2,768,733 for Calendar 1998. The
increase in these expenses relates to the costs associated with the commencing
of operations for eHOLA.
Payroll expenses increased by $915,580, or 35%, to $3,541,784 in Calendar 1999,
as compared to $2,626,204 in Calendar 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 its related investment in Internet e-commerce activities during the third
quarter of Calendar 1999.
As a result of the above, the acquired companies on a pro forma basis, had a
loss from operations totaling $2,462,600 in Calendar 1999, as compared to income
from operations totaling $441,439 in Calendar 1998.
Liquidity and Capital Resources
As of March 31, 2000
The Company's Current Ratio dropped from 0.85 at December 31, 1998 to 0.71 at
December 31, 1999, to 0.64 at March 31, 2000, as a result of an increase of
other current assets, accounts payable and accrued expenses. At March 31, 2000,
and December 31, 1999, the Company has a working capital deficiency totaling
$3,351,536 and $1,960,013, respectively. The deficiency primarily relates to the
funds expended for the purchase of Micro, DLR and Casa in 1998 and start up
costs relating to eHOLA. The Company incurred losses totaling $1,387,920 during
the First Quarter 2000 and $3,218,822 during Calendar 1999, which it financed
through increases in accounts payable, accrued expenses, note payable from Surge
Components, Inc and proceeds totaling $300,000 from the issuance of stock. The
Company's accounts receivable at March 31, 2000 exceeded revenues for
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the first quarter 2000. This resulted from approximately 44% of the sales for
the quarter occurring in the month of March. In addition, according to Colombian
law, the Company is required to include in all invoices a 15% tax on sales.
During the three months ended March 31, 2000, Global had net cash used in
operating activities of $1,332,205, as compared to $1,066,664 used in operating
activities in the three months ended March 31, 1999. The increase in cash used
in operating activities resulted primarily from losses incurred during the three
months ended March 31, 2000.
Global had net cash used in investing activities of $60,000 for the three months
ended March 31, 2000. These costs relate to the acquisition of the assets of
Global by Surge, as more fully described below.
Global had net cash provided by financing activities of $1,320,350 for three
months ended March 31, 2000, as compared to $1,083,790 for the three months
ended March 31, 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, Global had a net decrease in cash of
$136,199 during the three months ended March 31, 2000, as compared to a net
increase of $55,478 for the three months ended March 31, 1999.
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.
At March 31, 2000 Global had 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 arrearage in preferred dividends. On June 25,
1999, the shares were converted into 13,000,001 shares of Global's common stock.
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.
Offices of the companies personally guarantee most of these obligations and the
balance owed as of March 31, 2000 approximated $746,380.
ICR and Global have available lines of credit aggregating $148,750, at 10%
interest, personally guaranteed by the majority stockholder of Global, for
working capital purposes. As of March 31, 2000, the balance owed on this line of
credit was approximately $135,612.
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The Company currently has no material commitments for capital
expenditures as of March 31, 2000 or December 31, 1999.
In December 1999, Global granted options to purchase 550,000 shares of
Global's Common Stock to an officer of Global. The options were exercisable over
a three year period at an exercise price of $.52 per share. In March 2000, the
options were exercised using the cashless method into 492,800 shares of Global's
Common Stock.
As of December 31, 1999 as Compared to December 31, 1998
Global's Current Ratio changed to 0.71 at December 31, 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, 1999, Global has a
working capital deficiency totaling $1,960,013. The deficiency primarily relates
to the funds expended for the purchase of Micro, DLR and Casa in 1998 and start
up costs relating to eHOLA. Global incurred losses totaling $3,218,822 during
Fiscal 1999, which it financed through increases in accounts payable, accrued
expenses, note payable from Surge Components, Inc. ("Surge") and proceeds
totaling $300,000 from the issuance of stock. 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 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 stockholder.
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 and 4,243,843
shares of common stock. The net assets acquired and liabilities assumed
approximated $90,000 and $190,000, respectively. The purchase has been reported
and accounted for as a reverse acquisition.
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 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
12
<PAGE>
Stock, valued at $3.00 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.
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. The Company did not make the payments as required and is
in default on the remaining obligation. In March 2000, the remaining payments
under the agreement totaling $120,000 were placed in escrow while the parties
negotiate a settlement.
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 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 20% interest in the Travel Agent's Hotel Guide, Inc.
company on August 17, 1998, by payment of 3,500,000 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 300,000 shares of
Gold Coast Resources common stock.
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, 1999 approximated $450,000.
13
<PAGE>
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, 1999, the balance owed on this line of credit was
approximately $95,000.
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 available credit facilities at December 31, 1999
approximated $1,200,000 for Casa, $600,000 for DLR, and $150,000 for Micro. The
outstanding balances at December 31, 1999 totaled $2,119,915.
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 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. In January 2000,
the Note was cancelled to Surge and replaced with a new note totaling
$4,100,000.
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. The Company issued 1,000,000 shares of the
Company's Common Stock for investment banking services in connection with this
transaction.
In February 2000, the Company replaced the previous Subordinated Convertible
Promissory Note ("Convertible Note") with Surge totaling up to $6,250,000.
Through February 29, 2000, $2,165,876 has been loaned to Global, and the
remaining $4,084,124 may be loaned to Global, upon satisfaction of certain
conditions. 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.
14
<PAGE>
Impact of Recently Issued Accounting Standards
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 summarizes the interpretations of certain revenue recognition
issues by the staff of the Securities and Exchange Commission. The guidance
provided by SAB 101 has been adopted effective January 1, 2000. The Company does
not expect there to be a material impact of this standard in its financial
statements.
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.
Item 3. Properties.
The Company presently maintains the following facilities:
Information Systems Division - North America
An office suite totaling approximately 2,000 sq. ft. in Delray Beach,
Florida, which is leased through the year 2001, at a yearly rental of $37,709.
The building is a commercial technical center with approximately 5 individual
companies located directly adjacent. In June 2000, Global relinquished
approximately 2,500 square feet of warehouse space which was underutilized and
rented a 1,000 square foot warehouse at $151.86 per month.
Information Systems Division - South America
Bogota, Colombia- One sales office totaling 6,000 sq. ft., which is leased
through May, 2000. The annual rent is $69,600.00.
One service office totaling 4,000 sq. ft., which is leased through April, 2001.
The annual rent is $19,200.00; and
One administration building totaling 5,000 sq. ft., which is a standalone
structure that is 75% utilized and has enough room for expected growth. This
building is owned by the Company without major encumbrances other than a first
mortgage.
Cali, Colombia- One sales/technical office totaling 1200 sq. ft., which
leased through January, 2000. The annual rent is $10,200.00.
15
<PAGE>
Medillen, Colombia- One sales/technical office totaling 95 sq. meters, which is
leased through December, 1999. The annual rent is $6,600.00.
Barranquilla, Colombia- One sales/technical office totaling 2,500 sq.
ft., which is leased through August, 2000. The annual rent is $19,200.00.
We are considering relocating to a central facility in Bogota, Colombia
in early 2000, which would replace the two rental offices there.
On Line Services Division - North America
The On Line Services Division shares the Information Systems Division offices.
On Line Services Division - South America
One administrative/sales/technical office of 5,000 sq. ft. in
Barranquilla, Colombia, which is leased through January, 2001. The annual rent
is $43,200.00.
Our present annual lease obligations for 1999 totals approximately
$205,000.00. Renewable leases provide for rental increases of 5%-10%.
All corporate facilities are covered by general business insurance
policies. Present utilization of our facilities is at approximately 75%.
We also utilize our suppliers' in-country backbone facilities to allow
access to our network, thereby eliminating any need for additional offices in
separate countries.
Item 4. Security Ownership of Certain Beneficial Owners And Management
The following table sets forth information known to Global regarding the
beneficial ownership, as defined in applicable regulations, of our common stock
as of May 3, 2000 by the following individuals or groups: each person or entity
who is known by Global to own beneficially more than 5% of our outstanding
stock; each of the Executive Officers identified in the Summary Compensation
Table; each director of Global; and, all directors and executive officers as a
group. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table below have sole voting and
investment power with respect to all shares of common stock held by them.
Applicable percentage ownership in the following table is based on 23,891,954
shares of common stock outstanding as of May 3, 2000 (1). All share amounts give
retroactive effect to a one-for-two reverse stock split effected by Global in
late 1998. Common stock is the only outstanding class of voting security of
Global.
16
<PAGE>
<TABLE>
<CAPTION>
Name/Address No. of Shares (2) Percentage
Owner Class Beneficially Owned of Class
------------- ----- ------------------ ---------
<S> <C> <C> <C>
Mario Habib(3)(6) Common 997,800 4.0%
Antonio Serrato(3)(7) Common 388,000 1.6%
Richard Baker(3)(4) Common 4,250,144 17.5%
Rafael Delgado(3)(5) Common 144,816 less than 1%
AVG Family Trust(12) Common 3,592,929 15.0%
Lynn Tanner(8)(9) Common 3,792,928 15.9%
Robert P. DePalo(10) Common 1,700,000 7.1%
Old Oak Fund, Inc.(11) Common 1,794,000 7.5%
Jerre Daye(13) Common -- less than 1%
Officers and Directors as a
Group (4 persons) Common 5,705,760 22.9%
</TABLE>
-------------------
(1) Does not include 1,000,000 shares held by International Technology
Marketing, Inc. as to which a stop order has been imposed at the
request of the Company and which the Company is seeking to have
cancelled.
(2) Assumes the exercise of all options (identified below) held by
management exercisable within 60 days, which would increase the
outstanding common stock by 1,000,000.
(3) Address, c/o Global DataTel, Inc.
(4) Includes options held, but not exercised, to acquire an additional
350,000 shares at $7.12 per share.
(5) Includes options held, but not exercised, to acquire an additional
100,000 shares $7.12 per share.
(6) Includes options held, but not exercised, to acquire an additional
350,000 shares $7.12 per share.
17
<PAGE>
(7) Includes options held, but not exercised, to acquire an additional
200,000 shares $7.12 per share.
(8) Address, c/o David Kagel, Esq. 1801 Century Park East, Suite 2500, Los
Angeles CA 90067.
(9) Includes 459,595 shares held by Dolphin Waves, Inc.; 1,111,111 shares
held by Surrey Management Ltd.; 1,111,111 shares held by Walcon
Industries, Inc.; and 1,111,111 held by Willside International, Inc.
(10) Address, 488 Madison Avenue, 8th Fl., New York NY 10022.
(11) Address, 488 Madison Avenue, 8th Fl., New York NY 10022.
(12) The Company does not know the ultimate beneficial owner of the AVG
Family Trust. The address for the AVG Family Trust is c/o Stuart
Rosenblum, Esq., 488 Madison Avenue, 11th Floor, New York, New York
10020.
(13) Jerrey Daye is currently a director of Global.
Item 5. Directors And Executive Officers.
The following table sets forth certain information with respect to our executive
officers and directors as of December 31, 1999.
Name Age Position Held
---- ---- -------------
Richard Baker 41 President, CEO, Chairman of the
Board
Antonio Serrato 65 Vice-President, COO, Director
German Ramirez 55 CFO
Jerre Daye 50 Director
GLOBAL DATATEL DE COLOMBIA
Rafael Delgado 50 President
ON LINE LATIN AMERICA, S.A
AND eHOLA.com, INC.
Mario Habib 42 President
RICHARD BAKER, PRESIDENT, CEO, CHAIRMAN OF THE BOARD OF DIRECTORS. Mr. Baker was
President, CEO and Chairman of the Board of Directors of Global since December,
1998 to June 28, 2000, at which time he resigned each of these positions. Mr.
Baker founded International Computer Resources, Inc. ("ICR") in April of 1992.
ICR is a U.S. IBM
18
<PAGE>
Business Partner specializing in the IBM AS/400 and RS/6000 mid-range platforms,
and now a wholly owned subsidiary of Global. Mr. Baker was also an owner of
Mantenimiento Electronic de Systemas, Ltd. ("MES"), a company incorporated in
1986, and involved in the maintenance of IBM midrange and mainframe computer
systems throughout the country of Colombia, now also a subsidiary of Global. Mr.
Baker has approximately 10 years experience in Latin America business
operations. Mr. Baker attended Palm Beach Community College from 1985 to 1987.
ANTONIO SERRATO, VICE-PRESIDENT, COO and SECRETARY. Mr. Serrato has been
Vice-President and COO of Global since December 14, 1998 and Secretary since
December, 1999. Mr. Serrato became President of the Company upon Mr. Baker's
resignation on June 28, 2000. Prior to that time, and since 1993, Mr. Serrato
was General Manager of MES, now a wholly owned subsidiary of Global. Prior to
his employment with MES, Mr. Serrato was an IBM World Trade vice president, with
responsibility over an extensive sales force. Mr. Serrato has extensive
experience in Latin America computer sales and management. Mr. Serrato received
an engineering degree from the National University, Bogota, Columbia in 1959.
GERMAN RAMIREZ, CFO - Mr. Ramirez has been CFO since August 1999. Mr.
Ramirez was formerly director of finance for IBM de Colombia, having been
employed by IBM de Colombia from 1970 to 1995, when he retired. Mr. Ramirez
received a B.A. from Universidad de LaGrande, Colombia.
JERRE DAYE, DIRECTOR - Mr. Daye has been Director of Global since December,
1998. Mr. Daye is the President, since 1992, of Bayou Terrabone Real Estate, a
licensed auction and real estate company in Louisiana.
SUBSIDIARIES: OFFICERS
GLOBAL DATATEL DE COLOMBIA
RAFAEL DELGADO, PRESIDENT - Mr. Delgado has been President of Global DataTel De
Colombia, S.A., ("GDC"), a subsidiary of Global, since December, 1998. Prior to
that, Mr. Delgado was the founder, in 1993, of Casa Informatica, an IBM Business
partner in Colombia, which was acquired by Global. Casas' principal business was
system integration projects for midsize to large clients in Colombia. Mr.
Delgado has extensive experience in computer sales and management.
ON LINE LATIN AMERICA, S.A. AND EHOLA.COM, INC.
MARIO HABIB, PRESIDENT - Mr. Habib has been President of On Line Latin America,
S.A. ("OLA") and eHOLA.com, Inc. ("eHOLA"), wholly owned subsidiaries of Global,
since December, 1998. From 1979 to 1998 Mr. Habib was the General Manager of
Yidi Industries, a manufacturing concern. Mr. Habib received a bachelor's degree
in mechanical engineering from Purdue University in 1979.
19
<PAGE>
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE
The table below summarizes the compensation awarded to, earned by or paid to the
named executive officer for services rendered to Global in all capacities for
the fiscal years ended December 31, 1997 and December 31, 1998, by each person
serving as Global's Executive Officers in the fiscal years ended December 31,
1998 and December 31, 1999.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Awards
Compensation Securities
------------ Underlying
Options/SARs
Name Year Salary($) Bonus($) (#)
---- ---- --------- --------- -------------
<S> <C> <C> <C> <C>
Richard Baker 99 $200,000 0 0
President & CEO 98 $ 75,000 0 0
97 $ 75,000 0 0
96 $ 75,000 0 0
Antonio Serrato 99 $150,000 0 0.
Vice-President 98 $ 75,000 0 0
COO 97 $ 80,000 0 0
96 $ 75,000 0 0
Rafael Delgado 99 $105,000 0 0
President of 98 $105,000 0 0
GDC 97 $ 90,000 0 0
96 $ 60,000 0 0
Mario Habib 99 $180,000
President of 98 $135,000 0 0
OLA 97 0 0 0
and eHOLA 96 0 0 0
German Ramirez 99 $78,000 0 0
</TABLE>
The above table reflects annual salaries for positions held in 1996, 1997 and
1998 with what are now our subsidiaries.
20
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The table below includes the number of stock options granted to the named
executive officers in the Summary Compensation Table during Fiscal 1999 and
exercise information.
<TABLE>
<CAPTION>
Individual Grants
Number of Securities Percent of Total Options
Underlying Options Granted to Employees in Exercise Expiration
Name Granted(#) Fiscal Year Price ($/sh) Date
---- -------------------- ------------------------- ------------ -----------
<S> <C> <C> <C> <C>
Richard Baker 350,000 17.86 7.12 6/1/04
Antonio Serrato 200,000 10.20 7.12 6/1/04
Rafael Delgado 100,000 5.10 7.12 6/1/04
Mario Habib 350,000 17.86 7.12 6/1/04
200,000 10.20 2.00 12/8/02
550,000 28.06 .52 12/29/09
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The table below includes information regarding the value realized on option
exercises and the market value of unexercised options held by the named
executive officers, in the Summary Compensation Table during Fiscal 1999. The
numbers below are based on a market price of $2 per Common Share at the close of
business on December 31, 1999.
<TABLE>
<CAPTION>
Number of Value of
Shares Unexercised Unexercised
Acquired Options at FY-End (#) In-The-Money
on Value Exercisable/ Options at FY-End($)
Name Exercise (#) Realized ($) Unexercisable Exercisable/Unexercisable
---- ------------ ------------ ------------- -------------------------
<S> <C> <C> <C> <C>
Richard Baker 0 0 350,000/0 0/0
Antonio Serrato 0 0 200,000/00/0 0/0
Rafael Delgado 0 0 100,000/0 0/0
Mario Habib 0 0 1,100,000/0 814,000
</TABLE>
21
<PAGE>
As of June 1, 1999, we have entered into employment agreements with the
following executive officers and key personnel:
RICHARD BAKER: Mr. Baker formerly had a 3 year employment agreement as the
President and CEO of Global DataTel, Inc. with a base salary of $200,000 per
year, discretionary bonuses and reimbursement of business expenses, and life
insurance with a death benefit of $1,000,000.
ANTONIO SERRATO: A 3 year employment agreement as Vice President and COO of
Global DataTel, Inc. with a base salary of $150,000 per year, discretionary
bonuses and reimbursement of business expenses, and life insurance with a death
benefit of $100,000.
RAFAEL DELGADO: A 3 year employment agreement as the President of Global DataTel
de Colombia, with a base salary of $80,000 per year, discretionary bonuses and
reimbursement of business expenses, and life insurance with a death benefit of
$100,000.
MARIO HABIB: A 3 year employment agreement as the President of eHOLA.com and On
Line Latin America, S.A., with a base salary of $180,000 per year, discretionary
bonuses and reimbursement of business expenses, and life insurance with a death
benefit of $100,000.
The employment agreements discussed above contained grants of the following
options to purchase common stock, which options are immediately exercisable:
RICHARD BAKER 350,000 options @ $ 7.12 each
ANTONIO SERRATO 200,000 options @ $ 7.12 each
RAFAEL DELGADO 100,000 options @ $ 7.12 each
MARIO HABIB 350,000 options @ $ 7.12 each
None of these options have been exercised.
On December 29, 1999, Mario Habib was granted option to purchase 550,000 shares
of the Company's common stock at $.52 per share pursuant to the Company's 1999
Incentive and Non- Qualified Stock Option Plan. These options were exercised in
February, 2000 under the cashless exercise provisions of the Plan, resulting in
the issuance of 492,800 shares to Mr. Habib.
The Company also has employment agreements with the following individuals:
ANTONIO HABIB: A 3 year employment agreement as the Regional Sales Manager of
Global DataTel de Colombia, at an annual salary of $60,000 per year,
discretionary bonuses and reimbursement of business expenses, and life insurance
with a death benefit of $100,000.
CARLOS MEJIA: A 3 year employment agreement as the General Manager of Global
DataTel de Colombia, at an salary of $65,000 per year, discretionary bonuses and
reimbursement of business expenses, and life insurance with a death benefit of
$100,000.
22
<PAGE>
The employment agreements for these individuals also grant the following
options:
CARLOS MEJIA 25,000 options @ $7.12 each
ANTONIO HABIB 15,000 options @ $7.12 each
Each of the above have also executed confidentiality, non-solicitation and
non-competition agreements, which restrict the individual's activities for one
year after they cease working for us.
The Company's directors currently serve without compensation.
Item 7. Certain Relationships And Related Transactions.
On September 30, 1998, the Company purchased 100% of the shares of International
Computer Resources, Inc. ("ICR") and Mantenimiento Electronico de Systemas, Ltd.
("MES"). ICR was formerly owned 33.3% by Richard Baker, Global's former
President, CEO and Chairman of the Board, 33.3% by Dolphin Waves, Inc. and 33.3%
by AVG Family Trust. The consideration paid by Global to the former ICR
shareholders, consisted of 4,243,843 restricted shares of Global Common Stock,
and 105,000 shares of Global Convertible Preferred Stock. MES was formerly owned
51% by Mr. Baker and 49% by Antonio Serrato, Global's Vice President, COO and
Secretary. The consideration paid by Global to the former MES shareholders
consisted of 357,153 restricted shares of Global Common Stock. (See
"Consolidated Financial Statements" and Notes thereto) eHOLA.com, Inc.,
previously owned solely by Mr. Baker, was also acquired by Global for $1.00. In
addition to the shares of the company's common stock and preferred stock
received by Mr. Baker, he was given the right to vote all of the other issued
shares of the Company's Series A Convertible Preferred Stock.
During 1998 and prior to change of control to present management in December
1998, the Company issued 1,198,500 shares of the Company's common stock to
certain former officers, directors and shareholders. Included in this issuance
were 125,000 and 50,000 shares issued to David Newren and Lauren Olson,
respectively, the sole directors of the Company for fair consideration.
On August 19, 1998 , the Company issued 3,500,000 shares of the Company's Common
Stock to a former officer, director and principal shareholder of the Company,
David Newren, for his 20% interest in Travel Agent's Hotel Guide, Inc., a former
subsidiary of the Company, and the return of 1 million shares of preferred stock
of the Company. The remaining 80% had been previously acquired by the Company
through the issuance of 300,000 shares of the Company's common stock. (See
"Consolidated Financial Statements" and Notes thereto).
On February 5, 1999, Global sold 100,000 restricted shares of its Common Stock
to AJL Investments, Inc., for $3.00, per share. AJL Investments was at that time
a 5% shareholder of the Company.
During December 1996, Gold Coast acquired 135,751 shares of Synfuels Technology,
Inc. by issuing 1,585,040 shares of its restricted common stock. An additional
30,125 shares were acquired by issuing 500,000 shares of its common stock. These
shares were exchanged for 17.2 acres of land in Henderson,
23
<PAGE>
Nevada, in December, 1996. This land was subsequently lost through repossession.
Gold Coast's former President was also an officer of Synfuels Technology, Inc.
Item 8. Description of Registrant's Securities.
Our Certificate of Incorporation authorizes 50,000,000 shares of $0.001 par
value common stock. As of June 30, 1999, there were issued and outstanding
22,495,623 shares of common stock, after giving effect to the conversion in
June, 1999 of all issued Class A Preferred Stock into 13,000,000 shares of
common stock. There is no longer any preferred shares issued or outstanding.
The holders of common stock are entitled to one vote for each share held of
record on all matters to be voted on by the shareholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50 percent of the shares have the ability to elect the
directors. The holders of common stock are entitled to receive dividends when,
as, and if declared by the Board of Directors out of funds legally available
therefor. The Company has not, however, previously paid any cash dividends and
does not anticipate paying any cash dividends in the foreseeable future. In the
event of liquidation, dissolution or winding up of the Company the holders of
common stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the common stock.
Holders of shares of common stock, as such, have no conversion, preemptive or
other subscription rights, and there are no redemption provisions applicable to
the common stock. All of the outstanding shares of common stock are, when
issued, fully paid and nonassessable.
The Company's Transfer Agent is Signature Stock Transfer, Inc., 14675 Midway
Road, Suite 221, Dallas, TX 75244.
24
<PAGE>
PART II
Item 1. Market Price of And Dividends on The Registrant's Common Equity And
Related Stockholder Matters.
Our common stock has had a limited market in the Over-The-Counter Bulletin Board
(OTCBB), under the Symbols "GCRI", GCRID, "GDIS", "GDISD" and "GDISE". The stock
was removed from trading on the OTCBB on December 2, 1999. The following is a
summary of the high ask and low bid for each quarter (with the volume traded in
that quarter) since commencement of trading in February, 1997, as provided by
NASDAQ Trading & Market Services and the National Quotation Bureau:
HIGH/ASK LOW/BID
1997
Q2 18.0000 1.2500
Q3 6.5000 0.7500
Q4 6.0000 0.5000
1998
Q1 5.0000 2.0000
Q2 2.8750 1.1250
Q3 10.0000 0.0625
Q4 20.0000 1.0000
1999
Q1 13.1250 5.8125
Q2 17.3750 5.6875
Q3 11.0000 5.0000
Q4 7.0000 .004
The Company had approximately 519 shareholders of record as of April 17, 2000.
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark- down or commissions and may not represent actual transactions.
The Company has never declared or paid any dividends on its common stock and
does not anticipate paying any dividends on its common stock in the foreseeable
future.
25
<PAGE>
Item 2. Legal Proceedings.
The Company has been named by Seven Oaks Holdings as a third-party defendant in
litigation in connection with the reissuance of a stock certificate for
approximately 400,000 shares, with restrictive legend. A shareholder of the
Company had pledged the shares to Seven Oaks Holdings in connection with a loan
transaction. The Company believes that it has meritorious defenses to such
action. The action, initially commenced in May, 1999, is pending in the
Circuit Court of the 15th Judicial Circuit in and for Palm Beach County,
Florida, Case No. CL 99-4900 AI, and is entitled "Joseph Charles & Associates,
Plaintiff, and Classic Inns, Inc., Plaintiff Intervenor, vs. Seven Oaks
Holdings, Limited, Defendant/Third Party Plaintiff, vs. Global DataTel, Inc. and
Signature Stock Transfer, Inc., Third Party Defendants."
On October 5, 1999, the United States Securities and Exchange Commission ("SEC")
issued a Formal Order Directing Private Investigation pursuant to Section 20(a)
of the Securities Act and Section 21(a) of the Exchange Act in the Matter of
Global DataTel, Inc., to determine if any acts or practices were in violation of
Sections 17(a) and 17(b) of the Securities Act and Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder. The Company believes that the SEC's
investigation is focused on the accuracy of information published by the
Company. The Company has responded to all requests for documentary information
sought by the SEC in its investigation. The Staff has taken testimony in this
matter.
Item 3. Changes in And Disagreements With Accountants on Accounting And
Financial Disclosures.
In December, 1998, the Company retained as auditors, Infante, Lago & Company, as
that firm was familiar with dealing with Latin American companies. Prior
thereto, the Company's auditors were Schvaneveldt & Company. The change was not
due to any disagreement in accounting principles or practices followed by the
Company. On December 2, 1999, the Registrant was informed by Jesus Lago, CPA,
the engagement partner responsible for Global DataTel, Inc.'s audit, that he had
resigned from the firm of Infante, Lago & Company and that the Registrant must
retain (i) Roger Infante, CPA, (ii) Mr. Lago's new firm, the DeCarlo group or
(iii) a new accounting firm. On December 16, 1999, the registrant retained the
firm of Seligson & Giannattasio as its new auditors. A Form 8-K was filed with
regard to this change on January 10, 2000.
Item 4. Recent Sales of Unregistered Securities
The issuance of shares by the Company in connection with the hereinafter
described acquisitions of ICR, MES, DLR and MicroStar, as well as the terminated
acquisitions described below, were each transactions exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 (the "Securities Act"),
as a transaction by an issuer not involving any public offering. No unregistered
distribution of the Company's securities was made in any of the transactions
without an appropriate exemption from the registration requirements. The
issuance of shares pursuant to the exemption from registration pursuant to
Regulation D under the Securities Act is also noted where appropriate.
26
<PAGE>
Unless otherwise indicated below, no underwriters or placement agents were
involved in any transactions.
In 1997, the Company engaged in negotiations for various entities wherein
preferred stock was issued. These investors were exempt from registration under
Section 4(2) of the Securities Act. The Company issued approximately 4,500,000
shares of preferred stock in connection with Biostasis, Inc., Shoulder Shade
Products, Inc., Secure Bind, Inc., Fox Broadcasting Inc. and the acquisition of
Travel Agents Hotel Guide, Inc. All of the proposed acquisitions were cancelled.
These preferred stock transactions were reversed in August, 1998. (See
"Consolidated Financial Statements" and Notes thereto).
During December 1996, Gold Coast acquired 135,751 shares of Synfuels Technology,
Inc. by issuing 1,585,040 shares of its restricted common stock. An additional
30,125 shares were acquired by issuing 500,000 shares of its common stock
pursuant to an exemption under Regulation D. These shares were exchanged for
17.2 acres of land in Henderson, Nevada in December 1996. This land was
subsequently lost through repossession. Gold Coast's president at the time of
the transaction was also an officer of Synfuels Technology, Inc.
During 1998, and prior to change of control to present management in December
1998, the Company issued 1,198,500 shares of the Company's common stock to
certain former officers, directors and shareholders. Included in this issuance
were 125,000 and 50,000 shares issued to David Newren and Lauren Olson,
respectively, the sole directors of the Company for fair consideration.
On August 19, 1998 , the Company issued 3,500,000 shares of the Company's Common
Stock to a former officer, director and principal shareholder of the Company,
David Newren, for his 20% interest in Travel Agent's Hotel Guide, Inc., a former
subsidiary of the Company, and the return of 1 million shares of preferred stock
of the Company. The remaining 80% had been previously acquired by the Company
through the issuance of 600,000 shares of the Company's common stock. (See
"Consolidated Financial Statements" and Notes thereto.
On September 30, 1998, the Company acquired all of the outstanding stock of ICR
in exchange for 105,000 shares of convertible preferred stock and 4,243,843
shares of common stock. The net assets acquired and liabilities assumed
approximated $90,000 and $190,000, respectively. The purchase has been reported
as a reverse acquisition. (See "Item 7. Certain Relationships and Related
Transactions," above).
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. (See
"Item 7. Certain Relationships and Related Transactions," above).
On November 30, 1998, the Company acquired DLR from Daniel Lopez Rios, $300,000
($100,000 due at closing and five monthly installments of $40,000 thereafter),
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. As a
27
<PAGE>
result of, and subsequent to the acquisition, Mr. Rios was appointed as Sales
Manager of Global DataTel de Colombia. Mr. Rios was not an affiliate of Global
prior to such time.
On November 30, 1998, the Company acquired MICRO from Mario Habib, Antonio
Habib, and Zuleima Yidi 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, which was allocated among the three former
shareholders of MICRO. As a result of, and subsequent to the acquisition of
MICRO, Mr. Mario Habib was subsequently appointed as the President of eHOLA.com
and On Line Latin America, S.A., and Antonio Habib was appointed as Regional
Sales Manager of GDC. Neither Mr. Mario Habib, nor Mr. Antonio Habib, were
affiliates of the Company prior to such time.
On November 30, 1998, the Company acquired CASA from Rafael Delgado and 17 other
shareholders of CASA for $840,000, payable in 9 monthly payments of $93,333
commencing at the date of the closing and 152,101 shares of the Company's common
stock, valued at $3.00 per share, which was allotted among Rafael Delgado
(17,389 shares), Carlos Mejia (23,985 shares) and 16 other former shareholders
of CASA. As a result of, and subsequent to the acquisition, Mr. Delgado was
appointed as President of GDC. Mr. Delgado was not an affiliate of the Company
prior to such time.
In August, 1998, the Company, then known as Gold Coast Resources, Inc., issued
2,870,000 shares of common stock for cash at $0.10 per share pursuant to Rule
504 of Regulation D.
On February 5, 1999, the Company sold 100,000 restricted shares of its Common
Stock to AJL Investments, Inc., for $3.00, per share, pursuant to Rule 504 of
Regulation D. This placement did not involve public solicitation or
advertisement.
In March, 1999, the Company entered into a subscription agreement with Langsdale
Enterprise Ltd. for the sale of 43,750 restricted shares at $8.00 per share for
the total consideration of $350,000. This placement was exempt from registration
under Section 4(2) of the Securities Act and did not involve public solicitation
or advertisement.
Pursuant to Rule 504, the aggregate offering proceeds of the shares did not
exceed $1,000,000 over a twelve-month period.
Each purchaser of the securities described above has represented that he/she/it
understands that the securities acquired may not be sold or otherwise
transferred absent registration under the Securities Act or the availability of
an exemption from the registration requirements of the Securities Act, and each
certificate evidencing the securities owned by each purchaser bears or will bear
upon issuance a legend to that effect.
28
<PAGE>
Item 5. Indemnification of Officers And Directors.
The Company's Bylaws do not contain a provision entitling any director or
executive officer to indemnification against liability under the Securities Act
of 1933 (the "33 Act"). Sections 78.751 et seq. of the Nevada Revised Statutes
allow a company to indemnify its officers, directors, employees, and agents from
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, except under certain
circumstances. Indemnification may only occur if a determination has been made
that the officer, director, employee, or agent acted in good faith and in a
manner which such person believed to be in the best interests of the company. A
determination may be made by the shareholders; by a majority of the directors
who were not parties to the action, suit or proceeding confirmed by opinion of
independent legal counsel; or by opinion of independent legal counsel in the
event a quorum of directors who were not a party to such action, suit or
proceeding does not exist. Provided the terms and conditions of these provisions
under Nevada law are met, officers, directors, employees and agents of the
Company may be indemnified against any cost, loss, or expense arising out of any
liability under the '33 Act. Insofar as indemnification for liabilities arising
under the '33 Act may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification for violations of the
'33 Act is against public policy and is, therefore, unenforceable.
PART F/S
FINANCIAL STATEMENTS
Consolidated Financial Statements of Global DataTel, Inc. and its Subsidiaries:
Accountant's report of Seligson & Giannattasio LLP dated April 16, 2000.
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998
Consolidated Statements of Operations and Comprehensive Income for the years
ended December 31, 1999 and December 31, 1998.
Consolidated Statements of Shareholder's Deficiency
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and
December 31, 1998
Notes to Financial Statements
29
<PAGE>
THE FOLLOWING FINANCIAL STATEMENTS ARE INCORPORATED FROM THE REGISTRANT'S FORM
10K-SB/A FILED MAY 25, 2000:
Financial Statements of Casa Informatica, S.A:
Accountant's report of Seligson & Giannattasio LLP dated April 14, 2000.
Balance Sheets as of November 30, 1998 and December 31, 1997
Statements of Operations and Comprehensive Income for the eleven months ended
November 30, 1998 and year ended December 31, 1997
Statements of Shareholder's Equity
Statements of Cash Flows for the eleven months ended November 30, 1998 and year
ended December 31, 1997
Notes to Financial Statements
Financial Statements of Daniel Lopez R & Compania Ltda.:
Accountant's report of Seligson & Giannattasio LLP dated April 14, 2000.
Balance Sheets as of November 30, 1998 and December 31, 1997
Statements of Operations and Comprehensive Income for the eleven months ended
November 30, 1998 and year ended December 31, 1997
Statements of Shareholder's Deficiency
Statements of Cash Flows for the eleven months ended November 30, 1998 and year
ended December 31, 1997
Notes to Financial Statements
Financial Statements of Micro Star Ltda.:
Accountant's report of Seligson & Giannattasio LLP dated April 14, 2000.
Balance Sheets as of November 30, 1998 and December 31, 1997
30
<PAGE>
Statements of Operations and Comprehensive Income for the eleven months ended
November 30, 1998 and year ended December 31, 1997
Statements of Shareholder's Equity
Statements of Cash Flows for the eleven months ended November 30, 1998 and year
ended December 31, 1997
Notes to Financial Statements
Financial Statements of Mantenimiento Electronico De Sistemas Ltda.:
Accountant's report of Seligson & Giannattasio LLP dated April 14, 2000.
Balance Sheets as of September 30, 1998 and December 31, 1997
Statements of Operations and Comprehensive Income for the ten months ended
September 30, 1998 and year ended December 31, 1997
Statements of Shareholder's Equity
Statements of Cash Flows for the eleven months ended September 30, 1998 and year
ended December 31, 1997
Notes to Financial Statements
Pro Forma Financial Statements of Global DataTel, Inc. and Subsidiaries
(UNAUDITED)
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
TO THE BOARD OF DIRECTORS
GLOBAL DATATEL, INC. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheet of Global
DataTel, Inc. and Subsidiaries (the "Company") as of December 31, 1999, and
the related consolidated statements of operations and comprehensive income,
cash flows and changes in shareholders' deficiency for the two years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Global
DataTel, Inc. and Subsidiaries as of December 31, 1999, and the results of
their operations and their cash flows for the two years ended December 31,
1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 16 to the
financial statements, the Company's working capital deficiency raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Our report dated February 14, 2000 on the financial statements for the year
ended December 31, 1998 included a qualification as to the Company's opening
inventory. Subsequent to the issuance of the report, we obtained information
enabling us to complete our audit procedures and remove the qualification.
Seligson & Giannattasio, LLP
N. White Plains, NY
April 16, 2000
F-32
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-----------
<TABLE>
<CAPTION>
March 31, December 31,
2 0 0 0 1 9 9 9
------- -------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 37,380 $ 173,579
Accounts receivable, net of allowance
for doubtful accounts of $141,216 and
$363,718, respectively 3,380,345 3,030,984
Inventories 712,380 948,724
Prepaid expenses and taxes 1,710,672 604,301
---------- ----------
Total current assets 5,840,777 4,757,588
---------- ----------
Property, plant and equipment, net of
accumulated depreciation of $396,904
and $384,272, respectively 488,049 500,681
---------- ----------
Other assets:
Goodwill, net of accumulated amortization
of $82,116 and $66,720, respectively 1,149,628 1,165,024
Other assets 83,041 174,931
---------- ----------
Total other assets 1,232,669 1,339,955
---------- ----------
Total assets $7,561,495 $6,598,224
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2 0 0 0 1 9 9 9
------- -------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current liabilities:
Short term borrowings, banks $ 881,992 $ 707,029
Note payable - Surge Components, Inc. 2,806,251 1,000,000
Deferred revenues 169,210 40,441
Accounts payable 3,905,548 2,948,700
Accrued expenses 1,429,332 1,359,764
Notes payable to shareholders -- 661,667
------------ ------------
Total current liabilities 9,192,333 6,717,601
Mortgage payable - bank 73,724 72,921
------------ ------------
Total liabilities 9,266,057 6,790,522
------------ ------------
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 11,703,295 11,703,788
Accumulated deficit (13,467,635) (12,019,715)
Accumulated other comprehensive income 36,005 100,349
------------ ------------
Total stockholders' deficiency (1,704,562) (192,298)
------------- -------------
Total liabilities and stockholders' deficiency $ 7,561,495 $ 6,598,224
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
2 0 0 0 1 9 9 9 1 9 9 9 1 9 9 8
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 2,530,385 $ 6,502,012 $13,836,785 $ 1,862,339
Costs of goods sold 1,581,735 4,843,247 8,411,701 728,140
----------- ----------- ----------- -----------
Gross profit 948,650 1,658,765 5,425,084 1,134,199
----------- ----------- ----------- -----------
Selling, general, and administrative expenses 1,372,286 425,004 5,659,896 757,429
Payroll and related expenses 911,918 294,000 3,541,784 1,383,821
Interest expense, net 112,366 86,085 686,004 18,663
----------- ----------- ----------- -----------
Total expenses 2,396,570 805,089 9,887,684 2,159,913
----------- ----------- ----------- -----------
(Loss) income before provisions for income taxes (1,447,920) 853,676 (4,462,600) (1,025,714)
Provision for income taxes -- 240,000 193,152 134,839
----------- ----------- ----------- -----------
(Loss) income from continuing operations (1,447,920) 613,676 (4,655,752) (1,160,553)
----------- ---------- ----------- -----------
Discontinued operations:
Loss from operations from subsidiary sold -- -- -- (625,473)
Loss on sale of subsidiary -- -- -- (1,910,431)
----------- ----------- ----------- -----------
Loss from discontinued operations -- -- -- (2,535,904)
----------- ----------- ----------- -----------
Net (loss) income (1,447,920) 613,676 (4,655,752) (3,696,457)
Other comprehensive income (loss):
Foreign currency translation, net of tax (64,344) 8,039 138,701 (38,352)
------------ ----------- ----------- -----------
Comprehensive (loss) income $(1,512,264) $ 621,715 $(4,517,051) $(3,734,809)
============ =========== =========== ===========
(Loss) income per share - Basic and diluted
(Loss) income per share from
continuing operations $ (.06) $ .03$ (.21) $ (.17)
Loss per share from discontinued operations -- -- -- (.37)
----------- ----------- ------------- -----------
Net (loss) income per share - Basic and diluted $ (.06) $ .03$ (.21) $ (.54)
=========== =========== ============= ===========
Weighted average shares outstanding
Basic 23,296,551 22,240,798 22,352,926 6,836,755
Diluted 23,296,551 22,240,798 22,352,926 6,836,755
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Shares Amount Share Amount
------ ------ ----- ------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 4,500,000 $ 4,500 7,162 $ 7
Rescinded preferred (4,500,000) (4,500) -- --
Shares issued for services -- -- 1,198,500 1,199
Shares issued for cash -- -- 2,870,000 2,870
Shares tendered by stockholders -- -- (3,518,525) (3,519)
Shares issued to purchase subsidiaries 105,000 105 8,622,986 8,623
Foreign currency translation -- -- -- --
Net loss for the period -- -- -- --
---------- ------- ----------- -------
Balance at December 31, 1998 105,000 $ 105 9,180,123 $ 9,180
Conversion of preferred shares (105,000) (105) 13,000,001 13,000
Shares issued for cash -- -- 100,000 100
Shares issued for investment banking fees -- -- 1,000,000 1,000
Foreign currency translation -- -- -- --
Net loss for the period -- -- -- --
---------- ------- ----------- -------
Balance at December 31, 1999 -- -- 23,280,124 23,280
Exercise of stock options -- -- 492,800 493
Foreign currency translation -- -- -- --
Net loss for the period -- -- -- --
---------- ------- ----------- -------
Balance at March 31, 2000 -- $ -- 23,772,924 $23,773
========== ======= =========== =======
</TABLE>
<PAGE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Foreign
Additional Currency
Paid-in Accumulated Translation
Capital Deficit Adjustments Total
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $ 5,821,448 $ (3,667,506) $ -- $ 2,158,449
Rescinded preferred (271,895) -- -- (276,395)
Shares issued for services 198,001 -- -- 199,200
Shares issued for cash 571,130 -- -- 574,000
Shares tendered by stockholders 3,519 -- -- --
Shares issued to purchase subsidiaries 3,095,580 -- -- 3,104,308
Foreign currency translation -- -- (38,352) (38,352)
Net loss for the period -- (3,696,457) -- (3,696,457)
------------ ------------ -------- -----------
Balance at December 31, 1998 $ 9,417,783 $ (7,363,963) $(38,352) $ 2,024,753
Conversion of preferred shares (12,895) -- -- --
Shares issued for cash 299,900 -- -- 300,000
Shares issued for investment banking fees 1,999,000 -- -- 2,000,000
Foreign currency translation -- -- 138,701 138,701
Net loss for the period -- (4,655,752) -- (4,655,752)
------------ ------------ -------- -----------
Balance at December 31, 1999 11,703,788 (12,019,715) 100,349 (192,298)
Exercise of stock options (493) -- -- --
Foreign currency translation -- -- (64,344) (64,344)
Net loss for the period -- (1,447,920) -- (1,447,920)
----------- ------------ -------- -----------
Balance at March 31, 2000 $11,703,295 $(13,467,635) $ 36,005 $(1,704,562)
=========== ============ ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
2 0 0 0 1 9 9 9 1 9 9 9 1 9 9 8
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(1,447,920) $ 613,676 $(4,655,752) $(3,696,457)
Adjustment to reconcile net (loss) income to net
cash (used) provided by operations
Other losses, net -- -- -- 276,395
Loss on sale of division -- -- -- 1,910,431
Depreciation and amortization 28,028 27,927 136,527 37,425
Investment banking fees -- -- 2,000,000 --
Provision for bad debt expense (222,502) -- 26,162 (249,295)
Changes in operating assets and liabilities:
Accounts receivable (126,859) (2,080,011) (137,478) 378,098
Inventories 236,344 (247,744) 178,887 (70,981)
Other assets (1,014,481) (1,015,947) 350,297 124,446
Accounts payable and accrued expenses 1,026,416 1,543,210 975,541 725,880
Deferred revenues 128,769 92,225 (368,640) 171,722
----------- ----------- ----------- -----------
Net cash used in operating activities (1,392,205) (1,066,664) (1,494,456) (392,336)
------------ ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets -- -- (53,036) (2,601)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings of notes payable 1,982,017 783,790 684,314 (395,044)
Net advances from stockholders (661,667) -- 464,380 388,009
Proceeds from issuance of common stock -- 300,000 300,000 574,000
----------- ----------- ----------- -----------
Net cash flows provided by financing activities 1,320,350 1,083,790 1,448,694 566,965
----------- ----------- ----------- -----------
Foreign currency effect on cash (64,344) 38,352 138,701 (38,352)
------------ ----------- ----------- -----------
Net change in cash (136,199) 55,478 39,903 133,676
Cash at beginning of year 173,579 133,676 133,676 --
----------- ------------ ----------- -----------
Cash at end of year $ 37,380 $ 189,154 $ 173,579 $ 133,676
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-37
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
2 0 0 0 1 9 9 9 1 9 9 9 1 9 9 8
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 112,366 $ 86,085 $ 661,004 $ 18,663
============== ============ =========== ===========
Income taxes $ -- $ -- $ 193,152 $ 134,839
============== ============ =========== ===========
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 -- -- -- 2,654,455
--------------- ------------- ----------- -----------
$ -- $ -- $ -- $ 2,853,760
============== ============ =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
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.
During 1999, MES, DLR and Micro were merged into Casa. The combined entity then
changed its name to Global Datatel de Colombia, Inc. ("GDC"). In addition, the
Company commenced internet operations as an Internet service/content provider
through its wholly-owned subsidiaries of ehola.com SA and ehola.com, Inc.
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 wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
During 1998, the financial statements include the operations of ICR and MES for
the period beginning September 30, 1998 and CASA, DLR and Micro for the period
beginning November 30, 1998.
F-39
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------
Cash - For purposes of cash flows the company considers investments of three
months or less as cash equivalents.
Revenue Recognition - Revenues from services are recognized as the services are
performed. Revenues from the sales and installation of hardware packages 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 (first-in, first-out method) 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 recorded at
cost. Depreciation is generally on a straight-line basis over the estimated
useful lives of the related assets as follows:
Building and improvements 20 years
Furniture and office equipment 5 - 10 years
Computer and EDP equipment 5 years
Transportation equipment 5 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. Subsequent to year-end this balance was paid. As of
December 31, 1999, no one customer accounted for more than five percent of
outstanding accounts receivable. The Company provides for estimated credit
losses at the time of sale based upon factors surrounding the credit risk of
specific customers, historical trends and other information.
F-40
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------
Fair Value - The Company has a number of financial instruments, none of which is
held for trading purposes. The Company estimates that the fair value of all
financial instruments at December 31, 1999 and 1998, does not differ materially
from the aggregate carrying values of these financial instruments recorded in
the accompanying balance sheets. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value, and,
accordingly, the estimates are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
Investments - The Company utilizes Statement of Financial Accounting Standards
("SFAS") Number 115, "Accounting for Certain Investments in Debt and Equity
Securities" to account for its investments. The Company's investments consist
primarily of a convertible debenture from a publicly traded company and are
being reported as held to maturity securities. Held to maturity securities are
carried at amortized cost. Held to maturity securities declines in fair value
below amortized cost that are other than temporary, are included in earnings.
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. The carrying amount of goodwill is reviewed
annually using estimated undiscounted cash flows for the businesses acquired
over the remaining amortization periods.
Loss Per Share - Loss per share for all periods was computed by dividing net
income by the weighted average number of common and common equivalent shares
outstanding and also is adjusted for the assumed conversion of shares issuable
upon exercise of options and other convertible securities. The Company had
losses in each of the years presented and for the three months ended March 31,
2000 and 1999 and, accordingly, common stock equivalents are excluded as the
effect would be anti-dilutive.
F-41
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------
Income Taxes - The Company and its U.S. subsidiaries 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, 1999. The Company has approximately $1,900,000 of
net operating loss carryforwards, which are subject to certain restrictions and
limitations based on the Company's ownership changes during 1998. The Company
also has approximately $1,300,000 in net operating losses subsequent to the
change in ownership, which may be used to offset income through 2019. A
valuation allowance has been provided against the benefits available from these
net operating losses due to the uncertainty regarding its realization.
Translation of Foreign Currency - The Company's Colombian subsidiaries are
translated in accordance with Statement of Financial Accounting Standards No. 52
(SFAS 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 long term in nature and
are accumulated as cumulative translation adjustments.
Year 2000 Computer Readiness - Unaudited - The Company is in the process of
evaluating the effect of the year 2000 ("Y2K") 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 Y2K 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. The Company experienced virtually no Y2K problems
in January 2000 and does not expect to incur any material costs.
F-42
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------
Prior Period Adjustment - During 1999, certain errors were detected in the
previously reported goodwill resulting from the 1998 acquisitions of ICR and
MES. An adjustment of approximately $948,000 was made to reduce goodwill at the
beginning of the year. A corresponding adjustment was made to reduce the
previously reported amortization expense in 1998 by approximately $11,000. As
the result of current and previous losses, there is no resulting change in the
income tax provision for 1998.
Subsequent to the issuance of the 1999 financial statements, it was determined
that costs associated with the treatment of costs related to the purchase of the
Company's assets should have been expensed as incurred. As a result net loss and
net loss per share are greater than the previously issued financial statements
by $2,000,000 and $.09, respectively.
Interim Reporting - Information pertaining to the three months ended March 31,
2000 and 1999 has not been audited. In the opinion of management, the unaudited
interim financial information reflects all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation. Results for
interim periods are not necessarily indicative of results for a full year.
Reclassifications - Certain prior year information has been reclassified to
conform to the current year's presentations.
NOTE 2 - BUSINESS ACQUISITIONS
------------------------------
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.
ICR - 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. The transaction has been recorded as a reverse
acquisition.
F-43
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - BUSINESS ACQUISITIONS (Continued)
-----------------------------------------
MES - 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.
DLR - 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 $502,000.
The Company did not make the payments as required by the purchase agreement and
is in default on the remaining obligation. In March 2000, the remaining payments
under the agreement were placed in escrow while the parties negotiate a
settlement.
MICRO - 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 $218,000. In March 2000, the
remaining payments under the agreement were made.
CASA - 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. In
March 2000, the remaining payments under the agreement were made.
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 sheets as
of December 31, 1999 and 1998. The realization of a major portion of the assets
in the accompanying balance sheet as of December 31, 1999 and 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.
F-44
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - BUSINESS ACQUISITIONS (Continued)
------------------------------------------
The following unaudited pro forma consolidated results of operations are
presented as if ICR, DLR, Casa, and Micro Star acquisitions had been made as of
January 1, 1998. The unaudited consolidated pro forma information is not
necessarily indicative of the combined results that would have occurred had the
acquisitions occurred on those dates, nor is it indicative of the results that
may occur in the future.
Year ended
December 31,
1998
----
(Unaudited)
Net sales $21,457,159
Net loss from continuing operations $ (314,056)
Net loss per share $ (.01)
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant, and equipment consist of the following:
March 31, December 31,
2 0 0 0 1999
------- ------------
(Unaudited)
Land $ 73,807 $ 73,807
Buildings 184,653 184,653
Office equipment 185,597 185,597
EDP equipment 440,896 440,896
---------- ----------
Total property, plant, and equipment 884,953 884,953
Less: accumulated depreciation 396,904 384,272
--------- ----------
Property, plant and equipment, net $488,049 $500,681
======== ========
Depreciation expense for the year ended December 31, 1999 and 1998 was $74,940
and $84,469, respectively. For the year ended December 31, 1998, depreciation is
included for the period from dates of acquisition to the end of the year (see
Note 2 acquisitions).
F-45
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - CONVERTIBLE DEBENTURE
------------------------------
On December 14, 1998, the Company sold Hotel to Ameriresource Technologies, Inc.
in exchange for a convertible debenture totaling $3,350,000. The debenture
accrues interest at the rate of 7% per annum and is due December 15, 2001. The
Company accounts for the debenture pursuant to SFAS Number 115, "Accounting for
Certain Investments in Debt and Equity Securities". The Company has deemed these
securities to be "held-to-maturity" securities as defined by the standard and
account for the debenture at amortized cost. Although the debenture is
guaranteed by a third party, there are sufficient collectability and enforcement
concerns to cause a permanent reduction in its market value. This security has
therefore been totally reserved and charged against the gain associated with the
sale of Hotel.
NOTE 5 - SHORT TERM BORROWINGS, BANKS
-------------------------------------
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, 1999 approximated $450,000.
ICR has 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, 1999, the balance owed on this line of credit was approximately
$94,711.
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, 1999
approximated $1,200,000 for Casa, $600,000 for DLR, and $150,000 for Micro.
NOTE 6 - DEFERRED REVENUES
---------------------------
Deferred revenues are comprised mainly of customer deposits on orders. The
nature of the Colombian operations requires a delay between the time that an
order is placed and the completion of the contract. Consequently, the Company
requests deposits on such arrangements.
F-46
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - MORTGAGE PAYABLE - BANK
--------------------------------
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. Therefor, management of the Company can
not reasonably determine minimum future payments. Although payments are due
currently, the entire balance has been classified as long-term because
management cannot determine, at this time, the amount that is due and payable in
the current year.
NOTE 8 - 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. In January
2000, the Note was canceled and replaced with a new note totaling $4,100,000
(Note 9).
NOTE 9 - 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 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 pledge of
certain shares of stock owned by the President of the Company. In February 2000,
the Note was canceled and replaced with a new note totaling up to $6,250,000.
F-47
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - COMMITMENTS AND CONTINGENCIES
---------------------------------------
On January 1, 1997, a subsidiary of the Company entered into a two-year lease
with an indefinite renewal option for office facilities in Bogota, Colombia. The
lease calls for an approximate negotiable increase of 18% at renewal. The lease
can be canceled by either party without prior notification.
On December 9, 1996, a subsidiary of the Company entered into a one-year lease
for office facilities in Medellin, Colombia. The lease is personally guaranteed
by one of the officers of the Company and a bond for approximately 50% of the
annual lease was submitted to the lessor. The lease can be terminated by either
party without prior notification and calls for negotiated annual increases.
On August 16, 1997, a subsidiary of the Company entered into a one-year lease
with an indefinite renewal option for office space in Cali, Colombia. The lease
is personally guaranteed by an officer of the Company. The lease calls for
negotiated annual increases and can be canceled by non-fulfillment of the lease
terms.
On May 4, 1998, a subsidiary of the Company entered into a six-month agreement
to rent office space in Medellin, Colombia. The lease calls for an indefinite
renewal with annual increases to be tied to the legal inflation rate. The lease
may be canceled upon non-fulfillment of the lease terms with three months prior
notification.
On March 1, 1993, a subsidiary of the Company entered into a lease agreement
expiring in April 2000 to rent office space in Bogota, Colombia. The lease calls
for an indefinite renewable option.
On January 1, 1999, a subsidiary of the Company entered into a three-year lease
for office and warehouse space in Delray Beach, Florida. The lease is renewable
for an additional three years with annual increases of 5%.
As of December 31, 1999, the minimum lease obligation for leases that management
can determine to have a minimum obligation is as follows:
Year
2000 $ 48,396
2001 44,796
---------
Total $ 93,192
========
F-48
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - CAPITAL STRUCTURE
---------------------------
Additional 1998 Common Stock Issuances - 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 cash at $.20
per share pursuant to Rule 504 of Regulation D. During 1998, Gold Coast issued
3,500,000 shares of its common stock to an officer/director/major shareholder
for his minority interest in the Travel Agent's Hotel Guide, Inc. The shares
were valued at $0.10.
Gold Coast issued 1,000,000 Class F Preferred shares for 80% of the outstanding
shares of Hotel. The Class F shares are redeemable for common stock based on the
performance guidelines established by the exchange agreement dated October 7,
1997. The Agreement specifies that for each $15,000 of earnings by Hotel, it may
redeem one share of class F preferred for 10 shares of common stock subject to
the rules and regulations of Rule 144. In the event that no earnings are
produced within a five-year period the preferred shares shall become
non-convertible.
On August 14, 1998, Gold Coast rescinded the mergers with the above subsidiaries
and canceled the preferred shares previously issued to each of these entities.
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.
Additional 1999 Common Stock Issuances - 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
stockholder, and the Form D was timely filed with the Securities and Exchange
Commission.
In December 1999, the Company issued 1,000,000 shares for investment banking
services provided in connection with the Company's acquisition by Surge
Components, Inc.
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.
F-49
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - CAPITAL STRUCTURE (Continued)
---------------------------------------
1999 Incentive and Non-Qualified Stock Options Plan
---------------------------------------------------
In 1999, the Company adopted the 1999 Incentive and Non-Qualified Stock Option
Plan ("Option Plan"). The plan provides for the grant of options to employees of
the Company and its subsidiaries to purchase an aggregate of 2,650,000 common
shares.
Option Plan activity is summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------ ----------------
<S> <C> <C>
Options outstanding - January 1, 1999 -- --
Granted 1,000,000 $ 7.12
Exercised -- --
----------
Options outstanding - December 31, 1999 1,000,000 $ 7.12
==========
Options exercisable - December 31, 1999 1,000,000 $ 7.12
==========
</TABLE>
In March 2000, 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
for a three year period at an exercise price of $.52 per share. The options were
exercised in March 2000 using the cashless method into 492,800 shares of the
Company's common stock.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". The Company currently accounts for its stock-based compensation
plans using the accounting prescribed by Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees". Since the Company is not required
to adopt the fair value based recognition provisions prescribed under SFAS No.
123, it has elected only to comply with the disclosure requirements set forth in
the statement which includes disclosing pro forma net income and earnings per
share as if the fair value based method of accounting had been applied. The pro
forma net income and earnings per share for the year ended December 31, 1999
would have been $(7,683,907) and $(.37) had the new method been applied.
Compensation to non-employees is accounted for based on the fair value of the
consideration received or the fair market value of the equity instruments
issued, whichever is more reliably measurable.
F-50
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - CAPITAL STRUCTURE (Continued)
--------------------------------------
The fair value of each option grant was estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions: expected volatility of 94.34% for awards granted in 1999; risk free
interest rate of 6.75%; and expected lives of 3 years.
The effects of applying SFAS 123 in the above pro forma disclosures are not
indicative of future amounts as they do not include the effects of awards
granted prior to 1997. Additionally, future amounts are likely to be affected by
the number of grants awarded since additional awards are generally expected to
be made at varying amounts.
NOTE 12 - INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREAS
--------------------------------------------------------------
The Company operates predominantly in one industry segment, computer systems
design and hardware sales. The Company has two geographic groups, the U.S.
subsidiary and the Colombian subsidiaries. The geographic distributions of the
Company's identifiable assets, operating income and revenues are summarized in
the following table.
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998
---- ----
<S> <C> <C>
Revenues from unrelated entities:
United States $ 577,630 $ 594,126
Colombia 13,259,155 1,268,213
----------- ----------
Total revenues $13,836,785 $ 1,862,339
=========== ===========
Operating loss:
United States $ (869,396) $ (527,102)
Colombia (1,593,204) (498,612)
------------- ------------
Total operating loss $ (2,462,600) $(1,025,714)
============= ============
Assets:
United States $ 3,676,877 $ 4,902,609
Colombia 5,777,347 7,989,580
------------ -----------
Total identifiable assets 9,454,224 12,892,189
Less: Corporate eliminations 2,856,000 4,284,608
------------ ------------
Total assets $ 6,598,224 $ 8,607,581
============ ===========
</TABLE>
F-51
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREAS (Continued)
--------------------------------------------------------------------------
The Company has only one significant supplier, IBM de Colombia, which accounted
for approximately 60% of the total purchases made during 1999 and 1998.
NOTE 13 - SALE OF SUBSIDIARY
----------------------------
The Travel Agents Hotel Guide was a publication being developed by Gold Coast
and the former management of the Company for use by travel agents in order to
advertise and sell hotel rooms primarily throughout the United States. Gold
Coast acquired the publication rights, logo, client lists and business concept
from the former president of Hotel by issuing 4,600,000 shares of common stock
of Gold Coast. A portion of these shares represent shares issued in exchange for
the canceled preferred stock previously issued.
On December 14, 1998, the Company sold Hotel for $3,350,000 in the form of a
convertible debenture issued by Ameriresources Technologies, Inc., a publicly
traded company, and guaranteed by Lexington Sales, Inc. (Note 4). The
accompanying statement of operations for the year ended December 31, 1998
reflect discontinued operations, the loss from operations of approximately
$629,000 and the gain on sale of the subsidiary of approximately $2,000,000,
less amount reserved of $3,350,000.
NOTE 14 - INCOME TAXES
----------------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes using the enacted tax
rates in effect in the years in which the differences are expected to reverse.
Deferred income tax assets are comprised as follows:
December 31,
1 9 9 9 1 9 9 8
------- -------
Deferred tax asset:
Net operating losses $533,000 $ --
Less: valuation allowance 533,000 --
-------- -----------
$ -- $ --
======== ===========
F-52
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - INCOME TAXES (continued)
---------------------------------
The Company's income tax expense consists of the following:
Year Ended December 31,
1 9 9 9 1 9 9 8
------- -------
Current:
Federal $ -- $ --
State -- --
Foreign 193,152 134,839
-------- --------
193,152 134,839
-------- --------
Deferred:
Federal $ -- $ --
State -- --
Foreign -- --
-------- --------
-- --
-------- --------
Provision for income taxes $193,152 $134,839
======== ========
A reconciliation of the difference between the expected income tax rate using
the statutory Federal tax rate and the Company's effective rate is as follows:
Year Ended December 31,
1 9 9 9 1 9 9 8
------- -------
U.S. Federal income tax statutory rate (34)% (34)%
State income tax, net of Federal income
tax benefit (7) (7)
Foreign income taxes 4 13
Net operating loss - valuation allowance 41 41
---- ----
Effective tax rate 4% 13%
===== ====
F-53
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 15 - 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. To date, transactions among the group have been limited to loans, sales
of equipment and sharing of office space. Since the merging of the Colombian
subsidiaries into GDC, sale of equipment have been minimal.
NOTE 16 - 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,
remittance abroad, and rates and methods of taxation among other things. Since
its working capital has been limited, obligations and commitments have gone
unfulfilled. In order to fund the operations of GDC and support the development
and marketing of Ehola, the Company entered into a subordinated convertible
promissory note with Surge (Note 9). This note was made in conjunction with the
proposed sale of the Company's operations to Surge.
NOTE 17 - 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.
F-54
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 17 - SUBSEQUENT EVENTS (continued)
---------------------------------------
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.
F-55
<PAGE>
PART III
EXHIBITS:
3.1 Articles of Incorporation of Gold Coast Resources, Inc. a Nevada
corporation*
3.2 Amendment to Articles of Incorporation*
3.3 Amendment to Articles of Incorporation*
3.4 By-Laws*
4.1 1999 Incentive and Non-Qualified Stock Option Plan*
6.1 Lease for 3333 South Congress Ave., Suite 404 and 2875 South
Congress Ave., Suite D, Delray Beach, Florida.*
6.2 Lease for Calle 39, No. 18-A-11, Bogota, Colombia.*
6.3 Lease for Carera 18, No. 90-11 and Calle 90, No. 18-16, Bogota,
Colombia.*
6.4 Lease for Calle 90, No. 18-59, Bogota, Colombia.*
6.5 Lease for Calle 3, No. 41-65 of 803, Medellin, Colombia.
6.6 Lease for Calle 4, No. 1-04/10, dated February 1, 1997,
Cali, Colombia.
6.7 Lease Commencing February 1, 2000 in Centio Financieso,
Barranquillie, Colombia.
10.1 Employment Agreement with Richard Baker*
10.2 Employment Agreement with Antonio Serrato*
10.3 Employment Agreement with Rafael Delgado*
10.4 Employment Agreement with Mario Habib*
10.5 Employment Agreement with Antonio Habib*
10.6 Employment Agreement with Carlos Mejia*
10.7 JBA International, Inc. Distribution Agreement.
56
<PAGE>
10.8 National Police - Social Welfare contract with Full Formalities
No. 11/2.000 between the National Police and Global DataTel de
Colombia S.A.
10.9 National Police - Sanity Direction - Sales Contract No. 136 of 1999,
entered between the Nation-National Police- Sanity Direction and
Global DataTel de Colombia, S.A., executed on December 21, 1999.
10.10 National Police - Contract for the Rendering of Services No. 179 of
1998, entered between the National Police and the Firm Mantenimento
Electronico de Limitada, executed December 18, 1998.
10.11 Contact for the rendering of Professional Services between Global
DataTel de Colombia S.A., and Distribudora Dinamica S.A., dated
June 18, 1999.
10.12 Agreement for purchase of equipment, between Instituto Geografico
Augustin Codazzi and Global DataTel de Colombia, S.A. dated
December 6, 1999.
11. Computation of Earnings per Common Share
16.1 Letter of Schvaneveldt and Company re Change in Certifying Accountant*
27. Financial Data Schedule.
99.1 Correspondence (3) with Policia Nacional de Colombia.*
99.2 Purchase Order and correspondence (7) concerning contract with LA
14 S.A.*
99.3 Correspondence from Lotus, business partner status of the Company.*
99.4 Confirmation of the Company's authorizations to be a reseller of
Hewlett-Packard product.*
99.5 Certification from Compaq Computer de Columbia S.A. of authorized
reseller status of the Company.*
99.6 Microsoft Solution Provider Certification, dated July 26, 2000.
99.7 Correspondence from IBM de Colombia relating to designation of Global
DataTel de Colombia, S.A. as an IBM Colombia Business Partner and
"Solution Provider - Advanced Business Partners With Added Value.
--------------
*Previously filed
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Registrant: GLOBAL DATATEL, INC.
Date: August 10, 2000
By: /s/ Antonio Serrato
----------------------------
Antonio Serrato, President
58
