<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 2, 2000
SURGE COMPONENTS, INC.
--------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
New York 0-14188 11-2602030
-------- ------- ----------
<S> <C> <C>
(State or Other Jurisdiction of (Commission File Number) IRS Employer Identification
Incorporation) Number)
</TABLE>
1016 Grand Boulevard, Deer Park, New York 11729
--------------------------------------------------------
(Address of principal executive offices)(Zip Code)
(631) 595-1818
--------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
Effective as of June 2, 2000, Surge Components, Inc., doing business as
Superus Holdings, (the "Registrant" or "Superus") entered into a Pledge
Agreement (the "Pledge Agreement") between the Registrant and Global DataTel,
Inc., a Nevada corporation ("Global") wherein all of the assets and certain
liabilities of Global were transferred under a pledge to Superus in accordance
with the provisions of the Nevada general corporation law. The Pledge Agreement
transfers to Superus, all of the assets of Global (the "Global Assets") that
were to be sold outright (the "GDIS Acquisition") under the Asset Purchase
Agreement, dated as of December 8, 2000, by and among Superus, Global and GDIS
Acquisition Corp., a wholly-owned subsidiary of Superus ("Acquisition Sub"),
which agreement is incorporated by reference herein. The transfer under pledge
transferred full control of Global's operations and assets, pending shareholder
approval, to Superus.
In connection with the pledge, on June 5, 2000, Global executed a Bill
of Sale, Assignment and Assumption (the "Bill of Sale") transferring the Global
Assets outright to the Acquisition Sub. The Bill of Sale provides that at the
Effective Date of the pending GDIS Acquisition and the issuance of Class B
Common Stock of the Registrant, all the Global Assets will be released from the
pledge and transferred outright to Acquisition Sub. The Registrant's
shareholders, as well as Global's shareholders, will be asked to approve the
Acquisition in upcoming special meetings of shareholders called for such
purpose. A copy of the Pledge Agreement, the Bill of Sale, and an amendment to
the Asset Purchase Agreement are each included as an exhibit to this Report.
Global is a leader in Latin America in medium to large system
integration projects. Global is a First Tier IBM Business Partner, Microsoft
Solution provider, Lotus Premier Team Provider and a distributor for JBA
International E.R.P. Company. Global also distributes hardware for Compaq, Dell,
Hewlett-Packard and Cisco Systems. eHOLA.com, Inc. is a wholly owned subsidiary
of Global. eHOLA offers e-business solutions customized to the needs of Latin
American companies including: ISP Services, hosting/ASP solutions, product
development and solutions, business solutions centers and training/customer
service.
Terms of the Acquisition
In full consideration for the sale, transfer, conveyance, assignment
and delivery of the Assets by Global to Surge and in reliance upon the
representations and warranties made by Global and for other consideration, the
Registrant has paid to Global 239,000 shares of Non-Voting Redeemable
Convertible Series A Preferred Stock, $.001 par value, issuable on a 100 for 1
basis to the Global stockholders. The Registrant's Preferred Stock is being held
in escrow pending shareholder approvals. Following approval of Superus's and
Global's stockholders, each share of Non-Voting Redeemable Convertible Series A
Preferred Stock will automatically convert into and shall vote on a converted
basis of 100 shares of Superus' Class B Common Stock. Simultaneously therewith,
all of the Global Assets will be released from the pledge and transferred
outright to the Acquisition Sub, which will be a wholly owned subsidiary of
Superus. Superus is also proposing a recapitalization wherein it will be
reorganized into a Delaware corporation which will be a holding company for the
Acquisition Sub, a second subsidiary which will conduct the electronic
components business and operation of Surge Components, Inc. and a third
subisdiary which will conduct the business and operation of MailEncrypt.com,
Inc., a previously announced pending merger.
<PAGE>
Superus' existing Common Stock, which trades under the Nasdaq symbol of
SPRS, $.001 par value, shall be redesignated as "Class A Common Stock". The
Class A Common Stock shall have the same rights and preferences and otherwise be
the same as the existing Common Stock, except that the holders of each two (2)
shares of Class A Common Stock issued and outstanding at the Effective Date (as
defined in the Asset Purchase Agreement) of Shareholder approval and Nasdaq
listing of the Class B Common Stock, shall have the right to receive and become
exchangeable for one (1) share of Class B Common Stock during the six-month
period following the Effective Date.
Surge's existing Class A Common Stock Warrants, which trade under the
symbol of SPRSW, shall, upon shareholder approval and Nasdaq listing of the
Class B Common Stock, be redesignated as "Class B Common Stock Warrants". Upon
Shareholder approval and Nasdaq listing of the Class B Common Stock, each
existing Warrant shall have the right to purchase one (1) share of Class B
Common Stock at an exercise price of $5.00 per share, callable when the Class B
Common Stock trades at or above $7.50 per share and expiring on July 31, 2003.
The Convertible Promissory Note (the "Note") issued to the Registrant
reflecting a $1,000,000 loan (the "Loan") made as of October 8, 1999 to Global
has been replaced with a $6,250,000 note which remains outstanding and, is
convertible into shares of Global Common Stock at the rate of $1.00 per share,
is secured by a pledge of 1,000,000 shares of Global Common Stock owned by an
officer of Global, along with the pledge of the Global Assets, and has also been
secured by the Registrant under a Security Agreement, dated December 1, 1999,
which secures said Note with all of the assets of Global.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Independent Auditors' Report F - 1
Consolidated Balance Sheets F - 2 - 3
Consolidated Statements of Operations and Comprehensive income F - 4
Consolidated Statements of Shareholders' Deficiency F - 5
Consolidated Statements of Cash Flows F - 6 - 7
Notes to Financial Statements F - 8 - 22
Computation of Earnings per Common Share F - 23
Financial Data Schedule F - 24 -25
(b) PRO FORMA FINANCIAL INFORMATION.
The Pro forma financial information required herein will be filed by
amendment.
<PAGE>
(c) Exhibits:
Exhibit
Number Description
1 Pledge Agreement, dated June 2, 2000, by and among Global Datatel,
Inc., Global Datatel Acquisition Corporation and Surge Components,
Inc.
2 Asset Purchase Agreement, dated December 8, 1999, by and among Surge
Components, Inc., GDIS Acquisition Corp., as Buyer and Global DataTel,
Inc. (Incorporated by reference from Exhibit 3.1 to Registrant's
Current Report on Form 8-K, Date of Event, December 8, 2000).
3 Bill of Sale, dated as of June 5, 2000, by and among Global DataTel,
Inc., Surge Components, Inc., and GDIS Acquisition Corp.
4 Subordinated Convertible Promissory Note in the Principal Amount of
$6,250,000.00 issued by Global Datatel, Inc.
5 Security Agreement, dated December 1, 1999, by and among Surge
Components, Inc., GDIS Acquisition Corp., as Buyer and Global Datatel,
Inc. (Incorporated by reference from Exhibit 99.3 to Registrant's
Current Report on Form 8-K, Date of Event, December 8, 1999).
<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 15 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.
Seligson & Giannattasio, LLP
N. White Plains, NY
April 16, 2000
<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)
Current assets:
<S> <C> <C>
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
Deferred acquisition costs 2,060,000 2,000,000
Other assets 83,041 174,931
----------- ----------
Total other assets 3,292,669 3,339,955
----------- ----------
Total assets $9,621,495 $8,598,224
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2 0 0 0 1 9 9 9
------------ ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
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' equity:
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 (11,407,635) (10,019,715)
Accumulated other comprehensive income 36,005 100,349
------------ ------------
Total stockholders' equity 355,438 1,807,702
------------ ------------
Total liabilities and stockholders' equity $ 9,621,495 $ 8,598,224
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<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 1,312,286 425,004 3,659,896 757,429
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 2,336,570 805,089 7,887,684 2,159,913
------------ ------------ ------------ ------------
(Loss) income before provisions for income taxes (1,387,920) 853,676 (2,462,600) (1,025,714)
Provision for income taxes -- 240,000 193,152 134,839
------------ ------------ ------------ ------------
(Loss) income from continuing operations (1,387,920) 613,676 (2,655,752) (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 (1,387,920) 613,676 (2,655,752) (3,696,457)
Other comprehensive income (loss):
Foreign currency translation, net of tax (64,344) 8,039 138,701 (38,352)
------------ ------------ ------------ ------------
Comprehensive (loss) income $ (1,452,264) $ 621,715 $ (2,517,051) $ (3,734,809)
============ ============ ============ ============
(Loss) income per share - Basic and diluted
(Loss) income per share from
continuing operations $ (.06) $ .03 $ (.12) $ (.17)
Loss per share from discontinued operations -- -- -- (.37)
------------ ------------ ------------ ------------
Net (loss) income per share - Basic and diluted $ (.06) $ .03 $ (.12) $ (.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.
<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>
Additional
Preferred Stock Common Stock Paid-in
Shares Amount Share Amount Capital
--------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 4,500,000 $ 4,500 7,162 $ 7 $ 5,821,448
Rescinded preferred (4,500,000) (4,500) -- -- (271,895)
Shares issued for services -- -- 1,198,500 1,199 198,001
Shares issued for cash -- -- 2,870,000 2,870 571,130
Shares tendered by stockholders -- -- (3,518,525) (3,519) 3,519
Shares issued to purchase subsidiaries 105,000 105 8,622,986 8,623 3,095,580
Foreign currency translation -- -- -- -- --
Net loss for the period -- -- -- -- --
--------- ------------ ---------- ------------ ------------
Balance at December 31, 1998 105,000 $ 105 9,180,123 $ 9,180 $ 9,417,783
Conversion of preferred shares (105,000) (105) 13,000,001 13,000 (12,895)
Shares issued for cash -- -- 100,000 100 299,900
Shares issued for investment banking fees -- -- 1,000,000 1,000 1,999,000
Foreign currency translation -- -- -- -- --
Net loss for the period -- -- -- -- --
--------- ------------ ---------- ------------ ------------
Balance at December 31, 1999 -- -- 23,280,124 23,280 11,703,788
Exercise of stock options -- -- 492,800 493 (493)
Foreign currency translation -- -- -- -- --
Net loss for the period -- -- -- -- --
--------- ------------ ---------- ------------ ------------
Balance at March 31, 2000 -- $ -- 23,772,924 $ 23,773 $ 11,703,295
========= ============ ========== ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Foreign
Currency
Accumulated Translation
Deficit Adjustments Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1998 $ (3,667,506) $ -- $ 2,158,449
Rescinded preferred -- -- (276,395)
Shares issued for services -- -- 199,200
Shares issued for cash -- -- 574,000
Shares tendered by stockholders -- -- --
Shares issued to purchase subsidiaries -- -- 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 $ (7,363,963) $ (38,352) $ 2,024,753
Conversion of preferred shares -- -- --
Shares issued for cash -- -- 300,000
Shares issued for investment banking fees -- -- 2,000,000
Foreign currency translation -- 138,701 138,701
Net loss for the period (2,655,752) -- (2,655,752)
------------ ------------ ------------
Balance at December 31, 1999 (10,019,715) 100,349 1,807,702
Exercise of stock options -- -- --
Foreign currency translation -- (64,344) (64,344)
Net loss for the period (1,387,920) -- (1,387,920)
------------ ------------ ------------
Balance at March 31, 2000 $(11,407,635) $ 36,005 $ 355,438
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<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)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net (loss) income $(1,387,920) $ 613,676 $(2,655,752) $(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
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 (1,332,205) (1,066,664) (1,494,456) (392,336)
------------ ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets -- -- (53,036) (2,601)
Deferred acquisition costs (60,000) -- -- --
------------ ----------- ------------ ------------
Net cash used in investing activities (60,000) -- (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.
<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
============ ============ ========== ==========
Common shares issued for investment banking fees $ -- $ -- $2,000,000 $ --
============ ============ ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<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.
Cash - For purposes of cash flows the company considers investments of three
months or less as cash equivalents.
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
-------------------------------------------------------------------------------
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.
<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, accordingly, common stock equivalents are excluded as the effect would
be anti-dilutive.
<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.
<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.
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.
<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.
<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,
2000 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).
<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.
<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.
<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
========
<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
related party, 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.
<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:
Weighted Average
Shares Exercise Price
---------- ----------------
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
==========
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.
<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.
Year Ended December 31, 1999 1998
---- ----
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
============ ===========
<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 3,500,000 shares of common stock
of Gold Coast.
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 - RELATED PARTY TRANSACTIONS
The Company is a member of a group of affiliated entities and, has extensive
transactions and relationships with members of the group. Because of these
relationships, it is possible that the terms of these transactions are not the
same as those that would result from transactions among wholly unrelated
parties.
NOTE 15 - 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.
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 16 - 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.
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.
<PAGE>
GLOBAL DATATEL, INC. AND SUBSIDIARIES
EXHIBIT II
COMPUTATION OF EARNINGS PER COMMON SHARE
<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
------- ------- ------- -------
Basic earnings:
<S> <C> <C> <C> <C>
Net loss $(1,387,920) $ 613,676 $( 2,655,752) $(3,696,457)
----------- ------------ ------------ -----------
Shares:
Weighted common shares outstanding 23,296,551 22,240,798 22,352,926 6,836,755
----------- ------------ ------------ -----------
Net loss per share $ (.06) $ .03 $ (.12) $ (.54)
=========== ============ ============ ===========
Diluted earnings:
Net loss $(1,387,920) $ 613,676 $(2,655,752) $(3,696,457)
----------- ------------ ------------ -----------
Shares:
Weighted common shares outstanding 23,296,551 22,240,798 22,352,926 6,836,755
Employee stock options -- -- -- --
Other stock options -- -- -- --
Convertible note -- -- -- --
----------- ------------ ------------ -----------
Total weighted shares outstanding 23,296,551 22,240,798 22,352,926 6,836,755
----------- ------------ ------------ -----------
Diluted net loss per common share $ (.06) $ .03 $ (.12) $ (.54)
=========== ============ ============ ===========
</TABLE>
<PAGE>
EXHIBIT 27
[ARTICLE] 5
[LEGEND]
This schedule contains summary financial information extracted from the
consolidated balance sheet and statements of income filed as part of the report
on form 10 for the year ended December 31, 1999 and is qualified in its entirety
by reference to such report on form 10.
[/LEGEND]
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1999
[CASH] 173,579
[SECURITIES] 0
[RECEIVABLES] 3,394,702
[ALLOWANCES] 363,718
[INVENTORY] 948,724
[CURRENT-ASSETS] 4,757,588
[PP&E] 884,953
[DEPRECIATION] 384,272
[TOTAL-ASSETS] 8,598,224
[CURRENT-LIABILITIES] 6,717,601
[BONDS] 72,921
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 23,280
[OTHER-SE] 1,784,422
[TOTAL-LIABILITY-AND-EQUITY] 8,598,224
[SALES] 13,836,785
[TOTAL-REVENUES] 13,836,785
[CGS] 8,411,701
[TOTAL-COSTS] 7,201,680
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 686,004
[INCOME-PRETAX] (2,462,600)
[INCOME-TAX] 193,152
[INCOME-CONTINUING] (2,655,752)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (2,655,752)
[EPS-BASIC] (.12)
[EPS-DILUTED] (.12)
</TABLE>
<PAGE>
Exhibit 2
This schedule contains summary financial information extracted from the Balance
Sheet and Statements of Income filed as part of the report on Form 10-QSB and is
qualified in its entirety by reference to such report on Form 10-QSB.
PRIOD-TYPE 3-MOS
FISCAL-YEAR-END DEC-31-2000
PERIOD-END MAR-31-2000
CASH 37,380
SECURITIES 0
RECEIVABLES 3,521,561
ALLOWANCES 141,216
INVENTORY 712,380
CURRENT-ASSETS 5,840,777
PP&E 884,953
DEPRECIATION 396,904
TOTAL-ASSETS 9,621,495
CURRENT-LIABILITIES 9,192,313
BONDS 73,724
PREFERRED-MANDATORY 0
PREFERRED 0
COMMON 23,773
OTHER-SE 331,685
TOTAL-LIABILITY-AND-EQUITY 9,621,495
SALES 2,530,385
TOTAL-REVENUES 2,530,385
CGS 1,581,735
TOTAL-COSTS 2,224,204
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 112,366
INCOME-PRETAX (1,387,920)
INCOME-TAX 0
INCOME-CONTINUING (1,387,920)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (1,387,920)
EPS-BASIC (.06)
EPS-DILUTED (.06)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SURGE COMPONENTS, INC.
Registrant
Dated: June 16, 2000 By: /s/ IRA LEVY
---------------------------
Ira Levy, President
