U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


[X]      QUARTERLY  REPORT UNDER SECTION 12 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001.

[ ]      TRANSITION  REPORT UNDER  SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934 FOR THE  TRANSITION PERIOD FROM ______ TO _______.

                          Commission file number 21143

                        CONVERGENCE COMMUNICATIONS, INC.

        (Exact name of small business issuer as specified in its charter)


                  Nevada                                87-0545056
     (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)               Identification No.)

      102 West 500 South, Suite 320
           Salt Lake City, Utah                           84101
 (Address of Principal Executive Offices)               (Zip Code)

                                 (801) 328-5618
                           (Issuer's telephone number)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                         if changed since last report)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

As of October 31, 2001,  58,884,543  shares of  registrant's  Common Stock,  par
value $.001 per share were outstanding.


<PAGE>

PART I:  FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB

         The  accompanying   unaudited   consolidated  financial  statements  of
Convergence   Communications,   Inc.  have  been  prepared  in  accordance  with
accounting  principles  generally  accepted for interim financial  reporting and
pursuant to the rules and regulations of the Securities and Exchange Commission.
They do not include all of the information and footnotes  required by accounting
principles generally accepted for complete financial statements. These financial
statements should be read in conjunction with Note 1 herein and the consolidated
financial  statements  and notes  thereto  included in our annual report on Form
10-KSB for the year ended December 31, 2000,  which are  incorporated  herein by
reference.  The accompanying  financial statements have not been examined by our
independent   accountants  in  accordance  with  auditing  standards   generally
accepted,  but in the opinion of  management,  all  adjustments  (consisting  of
normal recurring  entries) necessary for the fair presentation of our results of
operations,  financial  position and changes  therein for the periods  presented
have been included.  The results of operations for the six months ended June 30,
2001 may not be  indicative  of the results  that may be  expected  for the year
ending December 31, 2001.




                      [THIS SPACE INTENTIONALLY LEFT BLANK]



<PAGE>
<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, 2001 AND DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------------------

                                                                                 June 30,          December 31,
                                                                                   2001                2000
                                                                              ----------------    ----------------
<S>                                                                               <C>                 <C>

ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                                     $ 2,492,411         $ 4,193,170
    Accounts receivable - net                                                       7,303,282           5,244,893
    Inventory - net                                                                    35,483             910,204
    Value added tax receivable                                                      1,128,739           4,048,900
    Note receivable (due from related party)                                          500,000
    Prepaid expenses and other                                                      2,529,629           2,129,438
                                                                              ----------------    ----------------
                 Total current assets                                              13,989,544          16,526,605

PROPERTY AND EQUIPMENT - net                                                       51,937,888          56,652,546

INTANGIBLE ASSETS - net                                                            32,758,543          46,513,030

OTHER ASSETS
    Debt issue costs                                                                5,481,307           5,550,687
    Note receivable (due from related party)                                        2,250,000
    Other                                                                           1,300,545           1,475,034
                                                                              ----------------    ----------------
                 Total other assets                                                 9,031,852           7,025,721
                                                                              ----------------    ----------------
TOTAL ASSETS                                                                    $ 107,717,827       $ 126,717,902
                                                                              ================    ================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Short-term debt (payable to related party)                                                        $ 3,000,000
    Notes payable - current portion                                              $ 17,456,806          22,298,447
    Current portion of long-term debt (payable to related party)                      206,500           1,436,519
    Accounts payable and accrued liabilities                                       23,282,791          21,944,835
                                                                              ----------------    ----------------
                 Total current liabilities                                         40,946,097          48,679,801

LONG-TERM LIABILITIES:
    Notes payable - long-term portion                                               8,577,322          12,274,717
    Long-term debt (payable to related parties)                                     8,293,500           4,769,497
    Other long-term liabilities                                                     1,048,988             392,239
                                                                              ----------------    ----------------
                 Total long-term liabilities                                       17,919,810          17,436,453
MINORITY INTEREST IN SUBSIDIARIES                                                           -           2,012,603
                                                                              ----------------    ----------------
                 Total liabilities                                                 58,865,907          68,128,857

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
    Series "D" Preferred stock; $0.001 par value; 10,000,000 shares authorized:
       2,643,636 shares issued and outstanding in 2001                                  2,644
    Series "C" Preferred stock; $0.001 par value; 14,250,000 shares authorized:
       13,620,472 shares issued and outstanding in 2001 and 2000, respectively         13,620              13,620
    Common stock; $0.001 par value; 100,000,000 shares authorized:
       11,921,094 shares issued in 2001 and 2002                                       11,921              11,921
    Additional paid-in capital                                                    150,896,075         127,897,441
    Accumulated deficit                                                          (101,661,511)        (69,089,076)
    Accumulated other comprehensive income (loss)                                     907,240            (244,861)
    Treasury stock, 572,468 common shares in 2001 at cost                          (1,318,069)                  -
                                                                              ----------------    ----------------
                 Total stockholders' equity                                        48,851,920          58,589,045
                                                                              ----------------    ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $ 107,717,827       $ 126,717,902
                                                                              ================    ================
</TABLE>


See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000
------------------------------------------------------------------------------------------------------------

                                                                        Three Months         Three Months
                                                                            Ended               Ended
                                                                           June 30             June 30
                                                                            2001                 2000
                                                                      ------------------   -----------------
<S>                                                                        <C>                  <C>

NET REVENUES FROM SERVICES                                                 $ 10,577,717         $ 8,635,510
                                                                      ------------------   -----------------
COSTS AND EXPENSES:
     Variable cost of services                                                7,427,046           4,897,700
     Salaries, wages and benefits                                             5,373,051           3,638,927
     Selling, general and administrative                                      2,966,741           3,844,845
     Depreciation and amortization                                            3,774,854           3,977,136
     Stock option compensation expense                                           21,802             246,144
     Business restructuring charges and asset impairments                    16,607,281                   -
                                                                      ------------------   -----------------
                   Total costs and expenses                                  36,170,775          16,604,752
                                                                      ------------------   -----------------
OPERATING LOSS                                                              (25,593,058)         (7,969,242)
OTHER INCOME (EXPENSE):
     Interest income                                                             71,903             152,487
     Interest expense                                                        (1,004,352)           (944,217)
     Gain on asset sale                                                       8,001,337                   -
     Other                                                                         (360)             (3,891)
     Net gain (loss) on foreign exchange                                       (181,639)             55,330
                                                                      ------------------   -----------------
                   Total other income (expense)                               6,886,889            (740,291)
                                                                      ------------------   -----------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST                              (18,706,169)         (8,709,533)

BENEFIT (PROVISION) FOR INCOME TAXES                                              6,168             (40,388)
                                                                      ------------------   -----------------
LOSS BEFORE MINORITY INTEREST                                               (18,700,001)         (8,749,921)

MINORITY INTEREST IN (GAIN) LOSS OF SUBSIDIARIES                             (4,637,353)            869,714
                                                                      ------------------   -----------------
NET LOSS                                                                  $ (23,337,354)       $ (7,880,207)
                                                                      ==================   =================
Net loss per basic and diluted common share                                     $ (0.83)            $ (0.37)
                                                                      ==================   =================
Weighted-average number of common shares:
     Basic and diluted                                                       28,128,584          21,541,324
                                                                      ==================   =================
</TABLE>

See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
------------------------------------------------------------------------------------------------------------

                                                                         Six Months           Six Months
                                                                            Ended               Ended
                                                                           June 30             June 30
                                                                            2001                 2000
                                                                      ------------------   -----------------
<S>                                                                        <C>                 <C>

NET REVENUES FROM SERVICES                                                 $ 21,087,045        $ 15,851,933
                                                                      ------------------   -----------------
COSTS AND EXPENSES:
     Variable cost of services                                               14,377,246           8,997,860
     Salaries, wages and benefits                                            11,464,806           6,793,648
     Selling, general and administrative                                      5,823,050           7,525,053
     Depreciation and amortization                                            7,681,359           6,885,851
     Stock option compensation expense                                           54,505             510,367
     Business restructuring charges and asset impairments                    16,607,281                   -
                                                                      ------------------   -----------------
                   Total costs and expenses                                  56,008,247          30,712,779
                                                                      ------------------   -----------------
OPERATING LOSS                                                              (34,921,202)        (14,860,846)

OTHER INCOME (EXPENSE):
     Interest income                                                            211,610             425,028
     Interest expense                                                        (2,235,755)         (1,661,697)
     Gain on asset sale                                                       8,001,337                   -
     Other                                                                       70,612               4,007
     Net gain (loss) on foreign exchange                                       (137,474)             85,713
                                                                      ------------------   -----------------
                   Total other income (expense)                               5,910,330          (1,146,949)
                                                                      ------------------   -----------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST                              (29,010,872)        (16,007,795)

PROVISION FOR INCOME TAXES                                                      (25,259)            (94,147)
                                                                      ------------------   -----------------
LOSS BEFORE MINORITY INTEREST                                               (29,036,131)        (16,101,942)

MINORITY INTEREST IN (GAIN) LOSS OF SUBSIDIARIES                             (3,536,304)          1,527,455
                                                                      ------------------   -----------------
NET LOSS                                                                  $ (32,572,435)      $ (14,574,487)
                                                                      ==================   =================
Net loss per basic and diluted common share                                     $ (1.18)            $ (0.68)
                                                                      ==================   =================
Weighted-average number of common shares:
     Basic and diluted                                                       27,601,719          21,480,240
                                                                      ==================   =================
</TABLE>
See notes to consolidated financial statements.

<PAGE>


<TABLE>
<CAPTION>


CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND YEAR ENDED DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

                                                                          Preferred Stock
                                                       ----------------------------------------------------------
                                                       ----------------------------------------------------------
                                                           Series "B"         Series "C"          Series "D"         Common Stock
                                                       -------------------------------------- -------------------------------------
                                                       -----------------------------------------------------------------------------
                                           Total       Shares     Amount   Shares     Amount   Shares    Amount    Shares     Amount
                                         -----------   --------  -------  ---------  -------- ---------  ------  ----------  -------
<S>                                      <C>           <C>          <C>  <C>          <C>    <C>         <C>     <C>         <C>

BALANCE, JANUARY  1, 2000               $59,375,280    101,374   $  101   9,728,909  $ 9,729         -   $    -  11,585,489 $ 1,585
Comprehensive loss:
   Net loss for year ended December 31,
     2000                               (32,973,060)
   Other comprehensive loss consisting
     or foreign currency translation
      adjustment                           (214,849)
                                         -----------   --------  -------  ---------  -------- ---------  ------  ---------- --------

     Total comprehensive loss           (33,187,909)        -         -           -        -         -        -          -         -
Acquisition of Metrotelecom stock for
   CCI common shares                      1,000,000                                                                 121,212      121
Acquisition and retirement of stock
   from former officer                            -    (71,853)     (72)                                           (328,510)   (328)
Conversion of Series B to common shares           -    (29,521)     (29)                                            125,237      125
Non-cash remeasurement of options                 -
Exercise of shareholder stock options    27,374,162                       3,891,563    3,891
Exercise of employee stock options              241                                                                  11,000       11
Issuance of common shares for minority    3,765,727                                                                 406,666      407
  interest
Issuance of warrants on debt                 13,251
Issuance of options for common shares
   below fair value                         248,293
                                         -----------   --------  -------  --------- -------- ---------  -------   ---------  -------
BALANCE, DECEMBER 31, 2000               58,589,045          -        -  13,620,472   13,620         -        -  11,921,094   11,921
Comprehensive loss:
   Net loss for six months ended
    June 30, 2001                       (32,572,435)
   Other comprehensive income
     consisting of foreign currency
      translation adjustment              1,152,101
                                         -----------   --------  -------  --------- -------- ---------  -------   ---------  -------

     Total comprehensive loss           (31,420,334)         -        -           -        -         -         -          -        -
Issuance of Series D shares              22,937,349                                          2,643,636  $ 2,644
Acquisition of treasury stock           $(1,318,069)
Issuance of options on debt                  12,929
Stock-based compensation expense             51,000
                                         -----------   --------  -------  --------- -------- ---------  -------   ---------  -------

BALANCE, JUNE 30, 2001                 $ 48,851,920          -        -  13,620,472 $ 13,620 2,643,636  $ 2,644  11,921,094  $11,921
                                         ===========   ========  =======  ========= ======== =========  =======  ==========  =======

                                                               (CONTINUED ON NEXT PAGE)
</TABLE>



See notes to consolidated financial statements.
<PAGE>


<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND YEAR ENDED DECEMBER 31, 2000
(CONTINUED FROM PREVIOUS PAGE)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------


                                                                            Accumulated
                                                Additional                    Other
                                                 Paid-in       Accumulated  Comprehensive   Treasury
                                                 Capital         Deficit     Income (Loss)    Stock
                                               ----------      -----------   ------------   -----------
<S>                                           <C>             <C>             <C>           <C>

BALANCE, JANUARY 1, 2000                    $  95,147,893   $ (35,764,016)     $ (30,012)  $         -
Comprehensive loss:
   Net loss for year ended December 31,
     2000                                                     (32,973,060)
   Other comprehensive loss consisting
     or foreign currency translation
      adjustment                                                             (214,849)
                                               ----------      -----------   ------------   -----------

     Total comprehensive loss                           -     (32,973,060)      (214,849)            -
Acquisition of Metrotelecom stock for
   CCI common shares                              999,879
Acquisition and retirement of stock
from former officer                                   400
Conversion of Series B to common shares               (96)
Non-cash remeasurement of options                 352,000        (352,000)
Exercise of shareholder stock options          27,370,271
Exercise of employee stock options                    230
Issuance of common shares for minority
  interest                                      3,765,320
Issuance of warrants on debt                       13,251
Issuance of options for common shares
   below fair value                               248,293
                                               ----------      -----------   ------------   -----------

BALANCE, DECEMBER 31, 2000                    127,897,441     (69,089,076)      (244,861)            -
Comprehensive loss:
   Net loss for six months ended
    June 30, 2001                                             (32,572,435)
   Other comprehensive income
     consisting of foreign currency
      translation adjustment                                                   1,152,101
                                               ----------      -----------   ------------   -----------
     Total comprehensive loss                         -       (32,572,435)     1,152,101             -
Issuance of Series D shares                    22,934,705
Acquisition of treasury stock                                                              $(1,318,069)
Issuance of options on debt                        12,929
Stock-based compensation expense                   51,000
                                               ----------      -----------   ------------   ----------

BALANCE, JUNE 30, 2001                      $ 150,896,075   $(101,661,511)     $ 907,240   $(1,318,069)
                                             ============   ==============   ============ =============

</TABLE>
See notes to consolidated financial statements.



<PAGE>
<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
----------------------------------------------------------------------------------------------------------

                                                                          Six Months         Six Months
                                                                             Ended             Ended
                                                                            June 30           June 30
                                                                             2001               2000
                                                                        ----------------   ---------------
<S>                                                                        <C>               <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                              $(32,572,435)     $(14,574,487)
     Adjustments to reconcile net loss to net cash used in
        operating activities:
           Depreciation and amortization                                      7,681,359         6,885,851
           Asset impairment                                                  13,184,220                 -
           Gain on asset sale                                                (8,001,337)                -
           Provision for bad debts                                              668,313           439,057
           Minority interest in gain (loss) of subsidiaries                   3,536,304        (1,527,455)
           Stock-based compensation expense                                      51,000           528,445
           Amortization of discount on notes payable                            607,303         1,091,473
           Issuance of options on Alcatel debt                                   12,929                 -
           Change in assets and liabilities:
              Accounts receivable                                            (2,983,473)       (2,316,193)
              Inventory                                                         (42,115)         (222,385)
              Other current assets                                              417,350        (2,415,284)
              Other assets                                                   (1,002,373)       (1,656,593)
              Accounts payable and accrued liabilities                          904,368         3,362,037
              Due to affiliates                                                       -          (102,699)
              Other long-term liabilities                                       939,610            43,541
                                                                        ----------------   ---------------
                   Net cash used in operating activities                    (16,598,977)      (10,464,692)
                                                                        ----------------   ---------------

CASH FLOWs FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                                    (17,803,813)       (5,879,732)
     Cash paid in Metrotelecom acquisition, net                                       -        (3,417,851)
     Proceeds from asset  sale                                               19,750,000                 -
                                                                        ----------------   ---------------
                   Net cash provided by (used in) investing activities        1,946,187        (9,297,583)
                                                                        ----------------   ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from exercise of employee stock options                             -               241
     Net proceeds from issuance of Series "D" Preferred Stock                22,937,349                 -
     Proceeds from related party borrowings                                   4,230,000                 -
     Payments on related party borrowings                                    (4,999,497)         (126,000)
     Payments on notes payable                                               (9,178,970)         (322,917)
                                                                        ----------------   ---------------
                   Net cash provided by (used in) financing activities       12,988,882          (448,676)
                                                                        ----------------   ---------------

EFFECT OF EXCHANGE RATES ON CASH                                                (36,851)            4,965
                                                                        ----------------   ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                    (1,700,759)      (20,205,986)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                4,193,170        26,303,296
                                                                        ----------------   ---------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER                                 $ 2,492,411       $ 6,097,310
                                                                        ================   ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for interest                               $ 1,026,343         $ 218,325
                                                                        ================   ===============
     Cash paid during the period for income taxes (including prepaid)          $ 26,466          $ 69,366
                                                                        ================   ===============

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
     Acquisition of treasury stock in exchange for minority interest
      in subsidiary                                                         $ 1,318,069               $ -
                                                                        ================   ===============
     Issuance of notes receivable in asset sale                             $ 2,000,000               $ -
                                                                        ================   ===============

See notes to consolidated financial statements.

</TABLE>
<PAGE>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2001
(Unaudited)


1.       Basis of Presentation

         Convergence Communications, Inc. and subsidiaries (the "Company"), is a
Latin  American  facilities-based  telecommunications  company  which  owns  and
operates IP-based,  broadband  metropolitan area networks.  The Company offers a
menu  of  broadband  connectivity,  IP-telephony,  high-speed  Internet  access,
web-site  hosting,  virtual  private  networks,  e-commerce  and pay  television
services to businesses and consumers in Latin America, primarily in Mexico.

         From  its   inception,   the   Company   has   focused   on   providing
telecommunications  services using high-speed  transmission  networks within and
across  national  borders.  The  Company  intends to  capitalize  on the rapidly
growing  demand for  telecommunications  services  in  countries  emerging  from
developing   and   state-controlled   economies   and  where  there  is  growing
liberalization  of  regulations  governing the  provision of  telecommunications
services.

         The Company's consolidated financial statements have been prepared on a
going  concern  basis,   which   contemplates  the  realization  of  assets  and
satisfaction of liabilities in the normal course of business.  The  consolidated
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability and  classifications of recorded amounts of assets or the amounts
and classifications of liabilities that might be necessary should the Company be
unable to continue as a going  concern.  The Company's  continuation  as a going
concern  depends upon its ability to generate  sufficient cash flows to meet its
obligations on a timely basis and to obtain additional  financing or refinancing
as may be required.

         At June 30, 2001, the Company's  current  liabilities  exceeded current
assets by $26,956,553. Since its inception, the Company has sustained net losses
and negative cash flow,  due  primarily to  amortization  of  intangible  assets
relating to  acquisitions,  interest  expense on debt relating to  acquisitions,
start-up costs,  legal and professional  expenses,  and charges for depreciation
and other costs relating to acquisition and the development of its business. The
Company  expects to continue to  experience  net losses and  negative  cash flow
through 2002, and may continue to do so thereafter while it develops and expands
its business,  even if individual markets of the Company become  profitable.  As
described  in more  detail  below,  in  September  2001,  the  Company  received
approximately $18.15 million from the private placement of its securities.



<PAGE>


         As  described  in more detail in Note 2 below,  the Company  recorded a
pre-tax charge of $16,607,281  for the quarter ended June 30, 2001 in connection
with a restructuring plan.

         As of June 30, 2001, the Company continues to be out of compliance with
the operating  covenants of the Alcatel equipment financing facility and had not
received  a waiver of such  noncompliance  from the  lender.  As a  result,  the
Company is unable to draw upon its facility until it meets those covenants,  and
Alcatel has the right to accelerate  the maturity of the  outstanding  debt. The
outstanding balance under the Alcatel facility of $1,591,555 has been classified
as a current liability in the accompanying consolidated balance sheets.

         The Company  intends to meet its  operational  and capital  expenditure
requirements during 2001 from a combination of:

     o    The sale of its  equity  securities  and of  selected  operations  and
          assets.  In September 2001, the Company closed a private  placement of
          its equity  securities and in June 2001, the Company sold a portion of
          its El Salvador operations

     o    Extending or modifying repayment terms on seller notes

     o    Reductions in capital expenditures

     o    Control of operating expense growth

2.       Business Restructuring Charges and Related Asset Impairments

         In connection with a restructuring  plan to exit certain  non-strategic
market  regions and to streamline  the Company's  cost structure in both foreign
and corporate  operations,  the Company recorded a pre-tax charge of $16,607,281
in the current  second fiscal  quarter,  which includes  restructuring  costs of
$3,423,061 and asset write-downs of $13,184,220.

         Restructuring   costs   primarily   relate  to   involuntary   employee
separations of $2,280,162 for approximately 150 employees and facility reduction
costs  of  $1,142,898.  The  employee  separation  costs  primarily  impact  the
Company's  corporate  operations and  Venezuela,  but also impact all geographic
locations of the Company,  with the majority pertaining to management employees.
As of  October  31,  2001,  almost  all of the  150  employee  separations  were
completed.

         Asset  write-downs   reflect  the  write-down  of  certain   long-lived
intangible  assets,  VAT tax  receivable  and tangible  fixed assets that became
impaired  as a result  of  management's  decision  to limit  or  reduce  certain
operations in  non-strategic  market regions and reduce  operations in Venezuela
(see Note 9). Impairment losses were determined based on the write-down of fixed
assets,  goodwill and other acquired  intangibles to their fair value, which was
estimated  by  the  expected   future  cash  flows.   The  Company   expects  to
substantially complete the restructuring plan by December 31, 2001.



<PAGE>
<TABLE>
<CAPTION>


         The following table displays the status of the restructuring reserve at
June 30, 2001:

   -------------------------------------- ----------------- --------------- ---------------- ----------------
               Type of Cost                Initial Charge    Cash charges      Non-cash      6-30-01 Reserve
                                                                                charges
   -------------------------------------- ----------------- --------------- ---------------- ----------------
   <S>                                          <C>               <C>            <C>              <C>

   Restructuring costs:
   Employee separations                         $2,280,162        $654,426                        $1,839,699
   Facility reductions                           1,142,898          12,000                           916,935
   -------------------------------------- ----------------- --------------- ---------------- ----------------
   Total                                         3,423,060         666,426                         2,756,634

   Asset write-downs:
   Goodwill,    and    other    acquired         2,530,223                       $2,530,223
   intangibles
   Fixed assets                                  9,054,556                        9,054,556
   VAT tax receivable                            1,599,442                        1,599,442
   -------------------------------------- ----------------- --------------- ---------------- ----------------
   Total                                       $16,607,281        $666,426      $13,184,221       $2,756,634
   -------------------------------------- ----------------- --------------- ---------------- ----------------
</TABLE>


3.       Chispa Transactions

            Effective  June 1,  2001,  the  Company,  through  its  consolidated
subsidiary  Chispa  Dos,  Inc.  ("Chispa"),  completed  the  sale  of its  cable
television and residential data assets of Chispa to an unrelated third party for
$19.75 million in cash and $2 million in a note  receivable.  As a result of the
sale of assets,  the  Company  recognized  a pre-tax  gain of  approximately  $8
million ($3 million after minority  interest)  during the quarter ended June 30,
2001.

            On June 21,  2001,  the Company  closed an exchange  agreement  with
FondElec  Essential  Services  Growth Fund,  L.P., a shareholder  of the Company
("FondElec"),  pursuant to which FondElec acquired the Company's approximate 33%
interest in Chispa in exchange for 572,468 shares of the Company's  common stock
owned by FondElec.  The sale was accounted for as a nonmonetary  transaction and
resulted in no  significant  gain or loss to the Company.  The Company's  shares
reacquired  in the exchange  resulted in treasury  stock of  approximately  $1.3
million being recorded in the quarter ended June 30, 2001.

            In   connection   with  the   exchange,   Chispa  paid  the  Company
approximately  $8.5 million of the  approximate  $11.25 million that the Company
had  loaned  Chispa  through  intercompany  loans,  and the  Company  agreed  to
refinance  the  remaining  $2.75  million  in  inter-company  loans to two notes
receivable  with  interest  at 10% and  maturing  on June  11,  2006.  The notes
receivable are  collateralized  by  FondElec's  pledge of 591,398  shares of the
Company's  common stock owned by Fondelec  and  Chispa's  pledge of a $2 million
note receivable.  The Company paid approximately $6 million of the $8 million in
proceeds from the payment of the  intercompany  loans toward  certain  long-term
debt  amounts owed under a vendor  financing  arrangement.  For a more  detailed
description of these  transactions,  see our report on Form 8-K filed on July 3,
2001.



<PAGE>


         As a result of the sale of the Chispa assets and minority interest, the
Company ceased to consolidate the related net assets and operations of Chispa as
of the  dates of sale and  exchange.  Consolidated  revenues  and net  income of
Chispa  for the six  months  ended  June 30,  2001  were $3.4  million  and $1.7
million,  respectively,  and  consolidated  revenues  and net losses for the six
months ended June 30, 2000 were $4.2 million and $.7 million, respectively.

4.       Principles of Consolidation

         The  consolidated   financial   statements   include  the  accounts  of
Convergence  Communications,  Inc., all wholly and  majority-owned  subsidiaries
including  its 33%  interest in Chispa  through June 21, 2001 (see Note 3 above)
and its 49% voting interest in  International  Van, S. A. de C.V.  ("Intervan").
All significant  intercompany  accounts and transactions have been eliminated in
consolidation.

5.       Net Loss per Common Share and Common Share Equivalent

         Net loss per  common  share and common  share  equivalent  amounts  are
computed by both the basic  method,  which uses the weighted  average  number of
common shares and the common stock  equivalents on a voting basis for the Series
B (which  was  converted  to  common  stock in August  2000) and  Series C and D
preferred stock outstanding, and the diluted method, which includes the dilutive
common shares from stock options and warrants,  as calculated using the treasury
stock  method.  At June  30,  2001 and  2000,  all  options  and  warrants  were
anti-dilutive due to the losses of the Company.

6.       Use of Estimates in Preparing Financial Statements

         The  preparation of financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect 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 reporting  period.  Actual  results could differ from those
estimates.

7.       Operating Segment Information

         The Company makes key financial  decisions  based on certain  operating
results of its subsidiaries and revenue types. The Company's  operating  segment
information is as follows for the six months ended June 30, 2001 and 2000:
<TABLE>
<CAPTION>


                                                                         Central
2001                         Mexico          Venezuela           America          Corporate           Totals
---------------------     -------------    --------------     --------------     --------------    ---------------
<S>                   <C>               <C>                <C>               <C>               <C>

Revenue:
-        Data         $      7,441,178  $        624,014   $      4,479,218  $              -  $      12,544,410
-        CATV                        -                 -          3,063,064                 -          3,063,064
-        Other               2,540,407            36,798          2,902,366                 -          5,479,571
Operating loss              (7,760,624)      (13,532,234)        (7,375,801)       (6,252,543)       (34,921,202)

                                                                         Central
2000                         Mexico          Venezuela           America          Corporate           Totals
---------------------     -------------    --------------      --------------    --------------    ---------------
Revenue:
-        Data         $      5,458,848  $        570,102   $      2,934,502  $              -  $       8,963,452
-        CATV                        -                 -          3,526,865                 -          3,526,865
-        Other               2,145,258            30,371          1,185,987                 -          3,361,616
Operating loss              (3,997,897)         (857,364)        (4,412,351)       (5,593,234)       (14,860,846)

</TABLE>

8.       Recently Issued Financial Accounting Standards

         In June 2001, the Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting  Standard No. 141, Business  Combinations and
SFAS No. 142,  Goodwill and Other  Intangible  Assets.  SFAS No. 141 establishes
accounting and reporting  standards for business  combinations.  SFAS No. 141 is
effective for business combinations  initiated after June 30, 2001. SFAS No. 142
establishes  accounting  and  reporting  standards  for goodwill and  intangible
assets, requiring impairment testing for goodwill and intangible assets, and the
elimination of periodic  amortization of goodwill and certain  intangibles.  The
Company  intends to adopt the  provisions of SFAS No. 142  effective  January 1,
2002.  Management is currently  evaluating the impact of these pronouncements on
the financial statements.

         In June  2001,  the FASB  issued  SFAS No.  143,  Accounting  for Asset
Retirement  Obligations,  which  requires  asset  retirement  obligations  to be
recognized  when they are incurred and  displayed  as  liabilities.  SFAS 143 is
effective  for the year  ending  December  31,  2003.  Management  is  currently
evaluating the impact of this pronouncement on the financial statements.

         In August  2001,  the FASB  issued  SFAS No.  144,  Accounting  for the
Impairment or Disposal of Long-Lived Assets.  SFAS No. 144 addresses  accounting
and reporting for the impairment or disposal of long-lived assets, including the
disposal of a segment of business. SFAS No. 144 is effective for the year ending
December  31,  2002.  Management  is  currently  evaluating  the  impact of this
pronouncement on the financial statements.

9.       Subsequent Events

         On July 30, 2001,  the Company  borrowed  $1.75 million on an unsecured
basis from a shareholder.  The loan was due on August 15, 2001 and  subsequently
converted  into  preferred  stock (see below) on  September  11,  2001.  See the
Company's  report  on Form 8-K  filed on  October  9,  2001 for a more  detailed
description of the transactions.

         On  September  11,  2001,  the  Company  closed a $20  million  private
placement  with two  shareholders  in the Company.  At the closing,  the Company
issued those investors  3,529,410  shares of our common stock for $18.15 million
in cash and converted approximately $1.85 million due under a promissory note to
one of the shareholders in July 2001. See the Company's report on Form 8-K dated
September 11, 2001 for a more detailed  description  of the  transactions.  As a
condition of the private placement, all of the outstanding and issuable warrants
of the  Company  held by the  investors  in the Series C and Series D  preferred
stock equity rounds were  immediately  vested and exercised at $0.01 per warrant
into their respective common or preferred stock.  Additionally,  all outstanding
preferred stock was then  immediately  converted to common stock on a 1:1 basis.
As a result of the induced  conversion of preferred  stock, the Company recorded
approximately  $5.4 million as a dividend  charge to net  earnings  available to
common stockholders for preferred stock warrants and approximately $600,000 as a
charge against retained earnings for common stock warrants.

         In July 2001,  the management and the board of directors of the Company
committed to a plan to dispose of its Venezuelan  operations.  As a result,  the
Company  will  record  additional  exit  and  disposal  costs  related  to  such
operations.  Consolidated  revenues and net losses of the Venezuelan  operations
for the six  months  ended June 30,  2001 were $.7  million  and $16.4  million,
respectively,  and for the six months  ended June 30,  2000 were $.6 million and
$.8 million, respectively.



<PAGE>


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS

         The  following   discussion  and  analysis  relates  to  our  financial
condition  and results of  operations  for the six month  periods ended June 30,
2001  and  2000.  This  information  should  be read  in  conjunction  with  our
consolidated  financial  statements  and the  notes  related  thereto  appearing
elsewhere in this report.

A.       OVERVIEW

         We provide high quality,  low-cost integrated  communications  services
using our own  metropolitan  area networks and local networks of incumbent local
exchange providers. We operate primarily in recently deregulated and high-growth
markets,   principally  in  Mexico  and  Central  America.  We  offer  customers
broadband, high-speed data connections,  high-speed and dial-up Internet access,
voice and video services in a number of our markets using an IP-based technology
platform and networks that employ  fiber-optic  fixed wireless  technologies and
hybrid fiber coaxial cable.

         From our inception in 1995 until 1998, our main activities consisted of
acquiring licenses and authorizations in our various market countries, acquiring
building access rights,  hiring  management and other key personnel,  developing
operating  systems and activities  directly  associated with the acquisition and
deployment of our various networks.  During fiscal 1998, we acquired the ability
to provide, or introduced,  significant bundled  telecommunications  services in
our markets.

         Since our  inception,  we have  sustained  significant  net  losses and
negative  cash flow.  We expect the losses and  negative  cash flow to  continue
until we develop a customer base that will generate  sufficient revenues to fund
our  operating  expenses.  We expect that our 2001  operating and net losses and
negative  operating  cash flow will be greater than in 2000. We also  anticipate
that the execution of our business plan will result in a rapid  expansion of our
operations,  which may place a significant  strain on our management,  financial
and other  resources.  Our ability to manage the  problems  associated  with our
expansion  will  depend,  among  other  things,  on our  capability  to  monitor
operations,  control costs, maintain effective quality control, secure necessary
interconnect and regulatory  approvals,  expand internal management,  technical,
information and accounting systems and attract,  assimilate and retain qualified
management and professional  personnel.  Our inability or failure to effectively
manage these issues could result in significant subscriber turnover, stagnant or
decreasing subscriber growth, our inability to meet our contractual  obligations
for continued funding under our various vendor financing  relationships  such as
with Alcatel,  managerial  inefficiencies,  missed corporate  opportunities  and
continuing or increased losses.

         The  difficulties  in managing  these various  business  issues will be
compounded by a number of the unique  attributes of our business  operations and
our strategy for becoming a premier facilities-based telecommunications provider
in our various markets.  For example,  we use, as part of our operating network,
wireless technology.  This technology has been used by other  telecommunications
providers  for  a  significant  period  of  time,  but  our  point-to-multipoint
technology has only been  commercially used on a limited basis. We selected this
technology  because we believe  it  complements  the  wireline  technologies  we
otherwise  employ in our networks,  but if that  technology  does not perform as
expected or provide  the  advantages  that we expect,  our  business,  financial
condition  and the results of our  operations  may be  materially  and adversely
affected.  Further,  we employ an IP-based  technology platform that uses packet
switching to transmit voice,  video and data elements over the same network.  We
believe that  IP-based  packet-switched  networks have less overhead and greater
capacity than  traditionally  used technology  platforms but, in the past, there
have been issues  regarding the quality of service  provided by those platforms.
We believe that the quality of services  provided by other transport systems has
been  incorporated  into the newer  generations  of IP  switches  and  bandwidth
managers, but if our technology platform does not perform as expected or provide
the advantages we expect, our business,  financial  condition and the results of
our operations could also be materially and adversely affected. Also, as part of
our operations in some of our markets, we rely on network capacity that we lease
from third parties,  some of which may be our  competitors in the market.  Those
parties  may not have the same  incentive  as  other,  non-competitive,  network
owners to maintain those existing  relationships  with us on terms which promote
our competitive advantage.

B.       MATERIAL CHANGES IN RESULTS OF OPERATIONS

Six months ended June 30, 2001 compared to the six months ended June 30, 2000:

         Revenues.  Our  revenues for the six months ended June 30, 2001 totaled
$21.1  million,  compared  to  $15.9  million  for  the  same  period  in  2000,
representing a $5.2 million  increase in revenues (or 33%). The following  table
shows our revenues (in thousands) by region for the first six months of 2001 and
2000:

                TOTAL REVENUES
                (in thousands)                    2001             2000
                                                ----------       ----------
                Mexico (Intervan)            $      9,981     $      7,604
                Venezuela                             661              600
                Central America                    10,445            7,648
                                                ----------       ----------
                     Consolidated total      $     21,087     $     15,852
                                                ==========       ==========


         The increase in our 2001 revenues was primarily  attributable to growth
of our  operations  in  Mexico  (Intervan),  combined  with the  acquisition  of
Metrotelecom  (Central  America) in April 2000,  but was offset by the sale of a
portion  of our  El  Salvadoran  operations  (Chispa)  in  June  2001.  Intervan
contributed  almost  $2.4  million of the  revenue  increase,  consisting  of an
increase  of  $2.2  million  in high  speed  data  revenue  with  the  remainder
consisting of other revenue.

         Variable Cost of Services. Variable cost of services consists primarily
of high-speed data bandwidth,  telephony and cable programming charges. The cost
of these services  totaled $14.4 million for the six months ended June 30, 2001,
an  increase  of $5.4  million  over the same  period in 2000.  The  significant
increase  in variable  cost of  services is a result of growth in our  revenues,
including completing the acquisition of Metrotelecom in April 2000.

         Salaries,  Wages and Benefits. Our salaries, wages and benefits totaled
$11.5  million  for the six months  ended June 30,  2001,  an  increase  of $4.7
million  over the same  period  in  2000,  due  primarily  to  employee  hirings
subsequent  to June 2000.  We  maintained a total of about 475 employees at June
30, 2001 reflecting a significant  reduction of 320 employees from our headcount
total of 795 at March 31, 2001.  This  reduction of 320  employees  reflects the
reduction  of 200  employees  resulting  from the sale of Chispa  in June  2001,
combined with about 120  employees  who we  terminated  in  connection  with our
business restructuring discussed below.

         Selling, General and Administrative Expenses. We incurred SG&A expenses
of $5.8  million  during the six months  ended June 30, 2001, a decrease of $1.7
million  compared to the same  period in 2000.  The  decrease  in SG&A  expenses
reflects the impact of management's cost reduction program.

         Depreciation  and  Amortization.   Our  depreciation  and  amortization
expense  totaled  $7.7  million  during  the six  months  ended  June 30,  2001,
representing  an increase  of $0.8  million  over the same  period in 2000.  The
increase  reflects the  depreciation  expense  from  network  assets we obtained
through acquisitions and our foreign subsidiary network asset purchases.

         Business Restructuring Charges and Asset Impairments. During the second
quarter of 2001, our management  approved a restructuring plan which resulted in
a restructuring charge of $16,607,281. (See Note 2)

         Interest Income and Interest  Expense.  Our interest  income  decreased
$0.2  million for a total of $0.2  million  during the six months ended June 30,
2001 due to a lower average cash investment balance during the period.  Interest
expense  over the same  period  increased  $0.6  million  due  primarily  to the
acquisition debt we incurred in April 2000.  Additionally,  the average interest
rate recorded on our indebtedness  during the six months ended June 30, 2001 was
approximately 12.5%, compared to approximately 10.75% as of June 30, 2000.

         Gain on Asset Sale. On June 1, 2001, we completed the sale of our cable
television and residential  data assets located in El Salvador and recognized an
$8 million pre-tax gain, before minority interest of $5 million.

         Net Loss. We incurred a net loss attributable to common shareholders of
$32.6  million  in the six months  ended June 30,  2001,  an  increase  of $18.1
million  compared  to the same  period in 2000.  The  principal  reasons for the
increase were:

     o    $4.7  million  increase in salary and  benefits  expense  attributable
          primarily to the significant  growth in employee  headcount to support
          our planned operations.

     o    $0.8 million increase in depreciation on fixed assets and amortization
          expense  on  intangible  assets  as a result of the  build-out  of our
          networks and our acquisition of certain operations in Guatemala.

     o    $16.6  million  increase in business  restructuring  charges and asset
          impairments.

     o    $0.6  million  increase  in  interest  expense  due to  the  increased
          acquisition debt balance.

     o    $5 million  increase  in minority  interest  gain from the sale of our
          interest in Chispa.

     o    The above  increases  were  offset by the $8 million  pre-tax  gain on
          asset  sale,  a $1.7  million  decrease  in SG&A  expenses  due to the
          concerted  effort by  management  to reduce such  expenses  and a $0.5
          million decrease in non-cash stock compensation expense.

Liquidity and Capital Resources

         Since  inception,  we have funded our cash  requirements  at the parent
company  level  through debt and equity  transactions.  The proceeds  from these
transactions  were primarily used to fund our investments  in, and  acquisitions
of, start-up network  operations,  to provide working  capital,  and for general
corporate purposes, including the expenses we incurred in seeking and evaluating
new business opportunities.  Our foreign subsidiary interests have been financed
by a combination of equity investments and shareholder loans.

         We will continue to make significant  capital  expenditures in the next
several years in connection with building our networks,  the further development
of our operations in Mexico and Central America,  and new customer accounts (for
which we install  our  equipment  on customer  premises).  We intend to meet our
capital requirements during 2001 from a combination of the following:

     o    The sale of its  equity  securities  and of  selected  operations  and
          assets.  In September 2001, the Company closed a private  placement of
          its equity  securities and in June 2001, the Company sold a portion of
          its El Salvador operations

     o    Extending or modifying repayment terms on seller notes

     o    Reductions in capital expenditures

     o    Control of operating expense growth

         In June,  2001, we completed the sale of a portion of our operations in
El  Salvador  and,  in  September  2001,  we  completed  a $20  million  private
placement.  See Note 9, Subsequent Events, above, for more information regarding
the private placement.

         We anticipate  that we will require a minimum of $3 million  during the
remainder  of 2001 for  capital  expenditures  related to the  expansion  of our
existing  telecommunications  business,  and  that we will  require  significant
amounts thereafter.

         The  telecommunications  market dropped dramatically beginning in 2000,
which has significantly affected the market value of companies in that industry.
The values of telecommunications  companies have also been adversely affected by
the credit experience of the established  telecommunications vendors, which have
recently had increasing problems in collecting payments for their equipment.  As
a result of these  factors,  investors  and  lenders  are  carefully  evaluating
prospective   investment   opportunities  in,  and  the  investment  values  of,
telecommunications  companies that are seeking investments.  If we are unable to
obtain  additional equity capital as a result of the factors noted above in this
paragraph,  or  otherwise,  our  ability to comply with the terms of the Alcatel
financing   facility  and  make  draw  downs  on  the   facility   (and  receive
reimbursement of certain amounts we have paid or will pay thereunder) also could
be adversely affected.

         During the six months ended June 30,  2001,  our  operating  activities
used $16.6 million,  compared with $10.5 million during the same period in 2000.
Our investing  activities provided $1.9 million in the six months ended June 30,
2001,  compared  with using $9.3 million  during the same period in 2000.  These
changes were  primarily  attributable  to the sale of our cable  television  and
residential  data assets in El  Salvador,  and the  increase in working  capital
requirements  and  purchases  of property and  equipment  related to our rapidly
expanding operations. Financing activities, principally the issuance of Series D
Preferred  Stock in  February  2001  offset by the  payments  on notes  payable,
provided $13 million in net cash flow during the six months ended June 30, 2001.

         As of June 30, 2001, we had current assets of $14 million,  compared to
$16.5  million as of December  31,  2000,  for a decrease of $2.5  million.  The
decrease  in  current  assets  was  primarily  due to cash used to fund  foreign
operations.

         The  cash  flow  generated  by  our  foreign  operations  will  not  be
sufficient to cover our planned  operational growth in the next fiscal year. Our
ability to execute our business  plan will be dependent on our efforts to obtain
additional sources of funds to finance our business plan.

         We have the ability to  moderate  our  capital  spending  and losses by
varying  the  number  and  extent of our  market  build out  activities  and the
services  we offer in our  various  markets.  If we elect to slow the speed,  or
narrow the focus,  of our business  plan,  we will be able to reduce our capital
requirements  and losses.  The actual  costs of building out and  launching  our
markets would depend on a number of factors,  however,  including our ability to
negotiate  favorable  prices for purchases of network  equipment,  the number of
customers and the services for which they  subscribe,  the nature and success of
the services that we may offer, regulatory changes and changes in technology. In
addition,  actual  costs and  revenues  could vary from the amounts we expect or
budget,  possibly materially,  and such variations are likely to affect how much
additional financing we will need for our operations.  Accordingly, there can be
no assurance  that our actual  financial  needs will not exceed the  anticipated
amounts available to us, including from new, third parties, described above.

         To the extent we acquire the  amounts  necessary  to fund our  business
plan through the issuance of equity securities,  our shareholders may experience
dilution in the value per share of their equity  securities.  The acquisition of
funding  through the issuance of debt could result in a  substantial  portion of
our cash flow from  operations  being  dedicated to the payment of principal and
interest  on  that  indebtedness,   and  could  render  us  more  vulnerable  to
competitive  pressures and economic  downturns.  Our  subsidiaries or affiliates
could also obtain  financing from third  parties,  but there can be no assurance
our subsidiaries or affiliates will be able to obtain the financing  required to
make planned  capital  expenditures,  provide working capital or meet other cash
needs on terms that are economically acceptable to us.

Recently Issued Financial Accounting Standards

         In June 2001, the Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting  Standard No. 141, Business  Combinations and
SFAS No. 142,  Goodwill and Other  Intangible  Assets.  SFAS No. 141 establishes
accounting and reporting  standards for business  combinations.  SFAS No. 141 is
effective for business combinations  initiated after June 30, 2001. SFAS No. 142
establishes  accounting  and  reporting  standards  for goodwill and  intangible
assets, requiring impairment testing for goodwill and intangible assets, and the
elimination of periodic  amortization of goodwill and certain  intangibles.  The
Company  intends to adopt the  provisions of SFAS No. 142  effective  January 1,
2002.  Management is currently  evaluating the impact of these pronouncements on
the financial statements.

         In June  2001,  the FASB  issued  SFAS No.  143,  Accounting  for Asset
Retirement  Obligations,  which  requires  asset  retirement  obligations  to be
recognized  when they are incurred and  displayed  as  liabilities.  SFAS 143 is
effective  for the year  ending  December  31,  2003.  Management  is  currently
evaluating the impact of this pronouncement on the financial statements.

         In August  2001,  the FASB  issued  SFAS No.  144,  Accounting  for the
Impairment or Disposal of Long-Lived Assets.  SFAS No. 144 addresses  accounting
and reporting for the impairment or disposal of long-lived assets, including the
disposal of a segment of business. SFAS No. 144 is effective for the year ending
December  31,  2002.  Management  is  currently  evaluating  the  impact of this
pronouncement on the financial statements.

D.       SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

         Certain statements contained in "Management's  Discussion and Analysis"
constitute  forward-looking  statements  concerning  our  operations,   economic
performance and financial condition.  Because those statements involve risks and
uncertainties,  actual  results may differ  materially  from those  expressed or
implied by those forward-looking statements.

         In addition,  any statements that express or involve  discussions as to
expectations,  beliefs,  plans,  objectives,  assumptions  or  future  events or
performance  are  not  historical   facts  and  may  be   forward-looking   and,
accordingly,  those statements involve estimates,  assumptions and uncertainties
which could cause actual results to differ  materially  from those  expressed in
the  forward-looking  statements.  Accordingly,  those types of  statements  are
qualified in their entirety by reference to, and are accompanied by, the factors
discussed  throughout  this  report.  Among the key  factors  that have a direct
bearing  on our  results  of  operations  are the  potential  risk of  delay  in
implementing our business plan; the political, economic and legal aspects of the
markets  in  which  we  operate;   competition;  and  our  need  for  additional
substantial financing. We have no control over some of these factors.

         The factors  described in this report could cause our actual  operating
results  to  differ  materially  from  those  expressed  in any  forward-looking
statements made by or on behalf of us. Persons reviewing this report, therefore,
should not place undue reliance on those forward-looking statements. Further, to
the extent this report contains forward-looking  statements,  they speak only as
of the date of this  report,  and we  undertake  no  obligation  to  update  any
forward-looking   statement  or   statements   to  reflect  the   occurrence  of
unanticipated  events.  New factors may emerge from time to time,  and it is not
possible for  management  to predict all of such  factors.  Further,  management
cannot  assess the impact of each such  factor on our  business or the extent to
which any factor, or combination of factors,  may cause actual results to differ
materially from those contained in any forward-looking statements.

PART II: OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS


         See also the section entitled "Legal Proceedings" in our report on Form
10-KSB for the year ended  December  31,  2000 and our report on Form 10-QSB for
the quarter ended March 31, 2001.

           In March 2000,  we were named as a defendant in an action  brought in
the federal court in California.  In the action,  the plaintiff  alleged that we
had defrauded  them when, in 1997,  we engaged in a corporate  transaction  that
reduced  their  ownership,  and that we had  failed  to offer  them the right to
acquire our equity  securities  under the terms of a contractual  right in their
favor. See our report on Form 10-KSB for the period ending December 31, 2000 for
more  information  regarding this action.  In October 2001, the court granted us
summary judgment in the case and, on October 29, 2001, entered a judgment in the
matter.

ITEM 2.       CHANGES IN SECURITIES


         On June 8, 2001, we entered into an Exchange  Agreement  through one of
our wholly owned  subsidiaries with FondElec,  pursuant to which FondElec agreed
to acquire our interest in Chispa.  The transaction was closed on June 21, 2001.
Chispa was the holding  company  for a majority  of our El Salvador  operations.
Under the terms of the transaction,  FondElec acquired our interest in Chispa in
exchange for 572,468 shares of our common stock that FondElec owned. The 572,468
shares have been classified as treasury stock on our financial statements. For a
more detailed  description of the transaction,  see our report on Form 8-K filed
on July 3, 2001.

         On September 11, 2001, we closed a $20 million  private  placement with
two accredited  investors.  At the closing, we issued those investors 23,529,410
shares of our common  stock for $18.15  million  in cash and the  conversion  of
approximately  $1.85 million due under the  promissory  note we issued to one of
the investors in July 2001.  Under the terms of that  transaction,  we converted
all of our  outstanding  preferred  stock  (consisting  of Series C  Convertible
Preferred Stock and Series D Convertible Preferred Stock) into common shares. As
a result of the conversions, we now have only common stock outstanding.  See our
report on Form 8-K filed on October 9, 2001 for a more detailed  description  of
the private placement and the ancillary transactions effected in connection with
it.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES


         See the section entitled "Item 5 - Other  Information" in our report on
Form 10-QSB for the quarter ended March 31, 2001.

ITEM 4.       MATTERS SUBMITTED TO A VOTE OF THE COMPANY'S SHAREHOLDERS


         During  June 2001,  we  submitted a consent  resolution  relating to an
amendment of our Amended and Restated  Articles of Incorporation to increase our
authorized capital from 125,000,000 shares to 175,000,000  shares,  comprised of
75,000,000  shares of  preferred  stock and  100,000,000  shares of common stock
through  the  use  of  written   consents,   which  is   authorized   under  our
organizational documents and Nevada corporate law. The amendment was effected in
July 2001.  The  approval  procedures,  number of shares of our stock  voting in
favor  of  each  of  those  actions  pursuant  to  the  written  consents  and a
description of each of the transactions so approved are described in more detail
in our information statement on Schedule 14c dated July 3, 2001.

         In conjunction  with the September 2001 equity  financing  described in
Item 2 above,  we  submitted a consent  resolution  in October 2001 to amend our
Amended and Restated Articles of Incorporation to vote for certain amendments to
our Articles of  Incorporation,  including an amendment  that will  increase the
maximum  number of members of our board of directors  from ten members to twelve
members,  and an amendment that will require the approval of at least 75% of our
board of certain types of equity offerings through December 31, 2007 through the
use of written consents,  which is authorized under our organizational documents
and Nevada corporate law. The approval procedures, number of shares of our stock
voting in favor of each of those actions  pursuant to the written consents and a
description of each of the transactions so approved are described in more detail
in our information statement on Schedule 14c dated November 1, 2001.

ITEM 5.       OTHER INFORMATION


                                      None.

ITEM 6.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

         A.       EXHIBITS.

                                      None.


         B.       REPORTS ON FORM 8-K

         On July 3, 2001, we filed a report on Form 8-K which  described (i) the
closing of an exchange of our interest in Chispa,  the holding  company for most
our El Salvador operations,  with one of our shareholders for some of its common
stock in the company (see "Item 2 - Changes in  Securities"  above) and (ii) the
appointment of two new directors to our board.

         On August 7, 2001, we filed a report on Form 8-K which  described (i) a
$1.75  million  unsecured  loan we  obtained  from a  shareholder  and  (ii) our
conversion of a promissory note due on August 1, 2001 into a ten-year term note.

         On October 9, 2001, we filed a report on Form 8-K which described a $20
million  private  placement  of common  stock,  including  the  conversion  of a
promissory note and exercise of certain warrants.



<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.

                                        CONVERGENCE COMMUNICATIONS, INC.


Date:  November 7, 2001                 BY       /s/ GARY BARLOW
                                                 -------------------------------
                                                 Gary Barlow
                                                 Chief Accounting Officer