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 SEPTEMBER 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 November 9, 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 in the United  States of America 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 in the United States of America,  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 nine months ended September 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)
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
------------------------------------------------------------------------------------------------------------------
                                                                                 September 30,     December 31,
                                                                                   2001                2000
                                                                              ----------------    ----------------
<S>                                                                              <C>                  <C>
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents                                                    $ 12,229,937         $ 4,193,170
    Accounts receivable - net                                                       6,576,235           5,244,893
    Inventory - net                                                                    39,981             910,204
    Value added tax receivable                                                      1,024,891           4,048,900
    Note receivable (due from related party)                                          500,000
    Prepaid expenses and other                                                      2,959,822           2,129,438
                                                                              ----------------    ----------------
                 Total current assets                                              23,330,866          16,526,605

PROPERTY AND EQUIPMENT - net                                                       51,835,754          56,652,546

INTANGIBLE ASSETS - net                                                            31,494,475          46,513,030

OTHER ASSETS
    Debt issue costs                                                                5,305,709           5,550,687
    Note receivable (due from related party)                                        2,250,000
    Other                                                                           1,506,119           1,475,034
                                                                              ----------------    ----------------
                 Total other assets                                                 9,061,828           7,025,721
                                                                              ----------------    ----------------
TOTAL ASSETS                                                                    $ 115,722,923       $ 126,717,902
                                                                              ================    ================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Short-term debt (payable to related party)                                                        $ 3,000,000
    Notes payable - current portion                                              $ 16,133,499          22,298,447
    Current portion of long-term debt (payable to related party)                      206,400           1,436,519
    Accounts payable and accrued liabilities                                       19,517,947          21,944,835
                                                                              ----------------    ----------------
                 Total current liabilities                                         35,857,846          48,679,801

LONG-TERM LIABILITIES:
    Notes payable - long-term portion                                               8,705,555          12,274,717
    Long-term debt (payable to related parties)                                     9,576,236           4,769,497
    Other long-term liabilities                                                     3,084,911             392,239
                                                                              ----------------    ----------------
                 Total long-term liabilities                                       21,366,702          17,436,453

MINORITY INTEREST IN SUBSIDIARIES                                                           -           2,012,603
                                                                              ----------------    ----------------
                 Total liabilities                                                 57,224,548          68,128,857

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Series "D" Preferred stock; $0.001 par value; 10,000,000 shares authorized:
       none issued                                                                          -                   -
    Series "C" Preferred stock; $0.001 par value; 14,250,000 shares authorized:
       13,620,472 shares issued and outstanding in 2000                                     -              13,620
    Common stock; $0.001 par value; 100,000,000 shares authorized:
       58,884,543 and 11,921,094 shares issued in 2001 and 2000, respectively          58,885              11,921
    Additional paid-in capital                                                    176,959,814         127,897,441
    Accumulated deficit                                                          (116,977,718)        (69,089,076)
    Accumulated other comprehensive loss                                             (224,537)           (244,861)
    Treasury stock, 572,468 common shares in 2001 at cost                          (1,318,069)                  -
                                                                              ----------------    ----------------
                 Total stockholders' equity                                        58,498,375          58,589,045
                                                                              ----------------    ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $ 115,722,923       $ 126,717,902
                                                                              ================    ================


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

<TABLE>
<CAPTION>


CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

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

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

NET REVENUES FROM SERVICES                                                  $ 9,291,905          $ 9,126,110
                                                                       -----------------    -----------------
COSTS AND EXPENSES:
     Variable cost of services                                                6,649,065            5,582,604
     Salaries, wages and benefits                                             3,926,399            4,826,527
     Selling, general and administrative                                      1,710,729            3,190,291
     Depreciation and amortization                                            3,022,785            3,804,771
     Stock option compensation expense                                                -               63,141
     Business restructuring charges and asset impairments                     1,514,989                    -
                                                                       -----------------    -----------------
                   Total costs and expenses                                  16,823,967           17,467,334
                                                                       -----------------    -----------------
OPERATING LOSS                                                               (7,532,062)          (8,341,224)

OTHER INCOME (EXPENSE):
     Interest income                                                             93,620              273,039
     Interest expense                                                        (1,275,719)          (1,001,221)
     Other                                                                       (2,190)              93,123
     Net gain (loss) on foreign exchange                                       (570,698)               7,410
                                                                       -----------------    -----------------
                   Total other expense                                       (1,754,987)            (627,649)
                                                                       -----------------    -----------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST                               (9,287,049)          (8,968,873)

PROVISION FOR INCOME TAXES                                                       (6,416)             (51,860)
                                                                       -----------------    -----------------
LOSS BEFORE MINORITY INTEREST                                                (9,293,465)          (9,020,733)

MINORITY INTEREST IN LOSS OF SUBSIDIARIES                                             -              925,641
                                                                       -----------------    -----------------
NET LOSS                                                                     (9,293,465)          (8,095,092)

NON-CASH REMEASUREMENT OF OPTIONS AND WARRANTS                               (5,396,396)            (352,000)
                                                                       -----------------    -----------------
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS                              $ (14,689,861)        $ (8,447,092)
                                                                       =================    =================
Net loss per basic and diluted common share                                     $ (0.45)             $ (0.35)
                                                                       =================    =================
Weighted-average number of common shares:
     Basic and diluted                                                       32,951,750           24,087,956
                                                                       =================    =================


See notes to consolidated financial statements.

</TABLE>
<PAGE>

<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

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

                                                                          Nine Months          Nine Months
                                                                             Ended                Ended
                                                                         September 30         September 30
                                                                             2001                 2000
                                                                       ------------------   ------------------
<S>                                                                         <C>                  <C>

NET REVENUES FROM SERVICES                                                  $ 30,378,950         $ 24,978,043
                                                                       ------------------   ------------------
COSTS AND EXPENSES:
     Variable cost of services                                                21,026,311           14,580,464
     Salaries, wages and benefits                                             15,391,205           11,620,175
     Selling, general and administrative                                       7,533,779           10,715,344
     Depreciation and amortization                                            10,704,144           10,690,622
     Stock option compensation expense                                            54,505              573,508
     Business restructuring charges and asset impairments                     18,122,270                    -
                                                                       ------------------   ------------------
                   Total costs and expenses                                   72,832,214           48,180,113
                                                                       ------------------   ------------------
OPERATING LOSS                                                               (42,453,264)         (23,202,070)

OTHER INCOME (EXPENSE):
     Interest income                                                             305,230              767,566
     Interest expense                                                         (3,511,474)          (2,662,918)
     Gain on asset sale                                                        8,001,337                    -
     Other                                                                        68,422               97,130
     Net gain (loss) on foreign exchange                                        (708,172)              23,624
                                                                       ------------------   ------------------
                   Total other income (expense)                                4,155,343           (1,774,598)
                                                                       ------------------   ------------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST                               (38,297,921)         (24,976,668)

PROVISION FOR INCOME TAXES                                                       (31,675)            (146,007)
                                                                       ------------------   ------------------
LOSS BEFORE MINORITY INTEREST                                                (38,329,596)         (25,122,675)

MINORITY INTEREST IN LOSS (GAIN) OF SUBSIDIARIES                              (3,536,304)           2,453,096
                                                                       ------------------   ------------------
NET LOSS                                                                     (41,865,900)         (22,669,579)

NON-CASH REMEASUREMENT OF OPTIONS AND WARRANTS                                (5,396,396)            (352,000)
                                                                       ------------------   ------------------
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS                               $ (47,262,296)       $ (23,021,579)
                                                                       ==================   ==================
Net loss per basic and diluted common share                                      $ (1.61)             $ (1.03)
                                                                       ==================   ==================
Weighted-average number of common shares:
     Basic and diluted                                                        29,404,660           22,355,824
                                                                       ==================   ==================
</TABLE>


See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>


CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 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 $ 11,585
Comprehensive loss:
   Net loss for year ended December 31
     2000                                 (32,973,060)
   Other comprehensive loss consisting of
     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
   interest                                 3,765,727                                                              406,666      407
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 nine months ended
     September 31, 2001                   (41,865,900)
   Other comprehensive income consisting of
     foreign currency translation
        adjustment                             20,324
                                          ----------   -------  -------  ---------  -------  --------- --------   --------  -------
     Total comprehensive loss             (41,845,576)       -       -           -        -          -        -          -        -
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               54,505
Non-cash remeasurement of preferred stock
   warrants
Exercise of warrants to preferred stock        64,243                    3,973,758    3,974  2,450,523    2,450
Modification of common stock warrants               -
Exercise of warrants to common stock            7,457                                                              745,650      746
Conversion of Series C stock into
   common stock                                     0                  (17,594,230) (17,594)                    17,594,230   17,594
Conversion of Series D stock into common
   stock                                            0                                       (5,094,159)  (5,094) 5,094,159    5,094
Conversion of prommisory note to common
   stock                                    1,818,082                                                            2,138,920    2,139
Issuance of common stock                   18,178,410                                                           21,390,490   21,391
                                          ----------   -------  -------  ---------  -------  ---------   --------  --------  -------

BALANCE, SEPTEMBER 30, 2001              $ 58,498,375        -       -           -  $     -          -   $    - 58,884,543 $ 58,885
                                          ==========   =======  =======  =========  =======  =========   ========  ========  =======

                             CONTINUED ON NEXT PAGE

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

<TABLE>
<CAPTION>

CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND YEAR ENDED DECEMBER 31, 2000
                          CONTINUED FROM PREVIOUS PAGE
--------------------------------------------------------------------------------------
                                                                     Accumulated
                                         Additional                    Other
                                          Paid-in     Accumulated    ComprehensiveTreasury
                                          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 of 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 nine months ended
      September 30, 2001                                 (41,865,900)
   Other comprehensive income
      consisting of foreign currency
      translation adjustment                                              20,324
                                           ----------  --------------- ----------- ----------
     Total comprehensive loss                      -     (41,865,900)     20,324           -
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              54,505
Non-cash remeasurement of preferred
   stock warrants                           5,396,396     (5,396,396)
Exercise of warrants to preferred
   stock                                      57,819
Modification of common stock warrants        626,346        (626,346)
Exercise of warrants to common stock           6,711
Conversion of Series C stock into
   common stock
Conversion of Series D stock into
   common stock
Conversion of prommisory note to
   common stock                            1,815,943
Issuance of common stock                  18,157,019
                                          -----------  --------------- ----------- ----------

BALANCE, SEPTEMBER 30, 2001             $ 176,959,81  $ (116,977,718)  $(224,537)$(1,318,069)
                                          ===========  =============== ===========  ==========

</TABLE>

See notes to consolidated financial statements.

<TABLE>
<CAPTION>
CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
--------------------------------------------------------------------------------------------------
                                                                      Nine Months    Nine Months
                                                                        Ended           Ended
                                                                      September 30  September 30
                                                                         2001           2000
                                                                     -------------  --------------
<S>                                                                  <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                         $(41,865,900)   $(22,669,579)
    Adjustments to reconcile net loss to net cash used in
       operating activities:
         Depreciation and amortization                                 10,704,144      10,690,622
         Asset impairment                                              13,584,371               -
         Gain on asset sale                                            (8,001,337)              -
         Provision for bad debts                                          959,855         795,088
         Minority interest in gain (loss) of subsidiaries               3,536,304      (2,453,096)
         Stock-based compensation expense                                  54,505         590,400
         Amortization of discount on notes payable                        776,402       1,661,862
         Issuance of options on debt                                       12,929          13,251
         Change in assets and liabilities:
            Accounts receivable                                        (2,547,969)     (2,295,839)
            Inventory                                                     (46,613)       (656,217)
            Other current assets                                         (309,143)     (2,877,908)
            Other assets                                               (1,043,318)     (4,934,028)
            Accounts payable and accrued liabilities                   (3,933,446)      6,445,939
            Due to affiliates                                                   -        (122,356)
            Other long-term liabilities                                 2,975,535          96,807
                                                                     -------------  --------------
                Net cash used in operating activities                 (25,143,681)    (15,715,054)
                                                                     -------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property and equipment                               (19,449,426)    (18,120,577)
    Cash paid in Metrotelecom acquisition, net                                  -      (3,417,851)
    Proceeds from asset sale                                           19,750,000               -
                                                                     -------------  --------------
                Net cash provided by (used in) investing activities       300,574     (21,538,428)
                                                                     -------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from exercise of employee stock options                        -             241
    Net proceeds from issuance of Series "C" Preferred Stock                    -      29,186,722
    Net proceeds from issuance of Series "D" Preferred Stock           22,937,349               -
    Net proceeds from exercise of shareholder warrants                     71,700               -
    Net proceeds from issuance of common stock                         18,178,410               -
    Proceeds from related party borrowings                              5,980,000               -
    Payments on related party borrowings                               (4,999,497)       (539,893)
    Proceeds from notes payable                                                 -       6,418,025
    Payments on notes payable                                          (9,178,970)       (454,167)
                                                                     -------------  --------------
                Net cash provided by financing activities              32,988,992      34,610,928
                                                                     -------------  --------------

EFFECT OF EXCHANGE RATES ON CASH                                         (109,118)        (13,109)
                                                                     -------------  --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    8,036,767      (2,655,663)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          4,193,170      26,303,296
                                                                     -------------  --------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER                          $ 12,229,937    $ 23,647,633
                                                                     =============  ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the period for interest                          $ 1,313,235       $ 347,963
                                                                     =============  ==============
    Cash paid during the period for income taxes (including prepaid)     $ 37,491       $ 183,522
                                                                     =============  ==============

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
    Acquisition of treasury stock in exchange for minority interest in$s1,318,069             $ -
                                                                     =============  ==============
    Issuance of notes receivable in asset sale                        $ 2,000,000             $ -
                                                                     =============  ==============
    Conversion of prommisory note to common stock                     $ 1,818,082             $ -
                                                                     =============  ==============
See notes to consolidated financial statements.
</TABLE>


CONVERGENCE COMMUNICATIONS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 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 September  30, 2001,  the  Company's  current  liabilities  exceeded
current assets by  $12,526,980.  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  $18.18  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  $18,122,270  for the  quarter  ended  September  30, 2001 in
connection with a restructuring plan.

         As of September 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 $7,591,555 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 $18,122,270
for the nine months ended September 30, 2001, which includes restructuring costs
of  $4,523,914  and  asset  write-downs  of  $13,598,356.  These  costs  include
$1,514,989 of  restructuring  costs recorded in the three months ended September
30, 2001 to reflect the Company's approval to cease operations in Venezuela.

         For the nine months  ended  September  30,  2001,  restructuring  costs
primarily  relate  to  involuntary   employee   separations  of  $2,863,825  for
approximately  200 employees and facility  reduction  costs of  $1,660,089.  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.  For  the  three  months  ended
September 30, 2001, the severance and facility reduction costs were $583,663 and
$517,191,  respectively.  As of November 9, 2001, almost all of the 200 employee
separations were completed.

         For the nine months ended September 30, 2001, 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.  As a result of the decision to cease  operations  in
Venezuela,  additional  other  assets of $414,135  became  impaired in the three
months ended September 30, 2001.  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.
<TABLE>

<CAPTION>

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

   -------------------------------------- ----------------- --------------- ---------------- ----------------
               Type of Cost                Initial Charge    Cash charges      Non-cash      9-30-01 Reserve
                                                                                charges
   -------------------------------------- ----------------- --------------- ---------------- ----------------
   <S>                                          <C>             <C>              <C>             <C>        <C>

   Restructuring costs:
   Employee separations                         $2,863,825      $1,416,330                        $1,447,495
   Facility reductions                           1,660,089          24,500                         1,635,589
   -------------------------------------- ----------------- --------------- ---------------- ----------------
   Total                                         4,523,914       1,440,830                         3,083,084

   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
   Other assets                                    414,135                          414,135
   -------------------------------------- ----------------- --------------- ---------------- ----------------
   Total                                       $18,122,270      $1,440,830      $13,598,356       $3,083,084
   -------------------------------------- ----------------- --------------- ---------------- ----------------
</TABLE>


         Consolidated  revenues and net losses of the Venezuelan  operations for
the nine months ended  September  30, 2001 were $0.9 million and $18.4  million,
respectively, and for the nine months ended September 30, 2000 were $0.9 million
and $1.5 million, respectively.

3.       Equity and Debt Financings

         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 July 31,  2001,  the Company  converted a loan due on August 1, 2001
totaling  $1,407,635.89  (which includes accrued interest through July 31, 2001)
into a  ten-year  obligation  under  the  terms of a loan  commitment  agreement
between the Company and Transworld  Telecommunications,  Inc. ("TTI"), a related
party. The commitment  agreement is described in greater detail in the Company's
filing on Form 10-SB (EDGAR  notation  10-12 G/A) dated  December 31, 1996. As a
result of the  conversion,  the Company will be obligated to pay TTI  $17,078.51
per month,  beginning  September 1, 2001 and through  August 30,  2011.  See the
Company's  report  on  Form  8-K  filed  August  7,  2001  for a  more  detailed
description of the transactions.

         On  September  11,  2001,  the  Company  closed a $20  million  private
placement  with two  shareholders  of the Company.  At the closing,  the Company
issued those investors  3,529,410  shares of our common stock for $18.18 million
in cash and converted approximately $1.82 million due under a promissory note to
one of the shareholders in July 2001. See the Company's report on Form 8-K filed
October  9,  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
$5,396,396 for the quarter ended September 30, 2001 as a non-cash  remeasurement
charge to net earnings  available to common  stockholders  for  preferred  stock
warrants  and  $626,346  as  a  disproportionate   distribution  charge  against
accumulated deficit related to the modification of the common stock warrants.

4.       Principles of Consolidation

         The  consolidated   financial   statements   include  the  accounts  of
Convergence  Communications,  Inc., all wholly-owned and controlled subsidiaries
including  its 33%  interest in Chispa  through June 21, 2001 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  (which was converted to common stock in September
2001),  and the diluted  method,  which includes the dilutive common shares from
stock options and warrants,  as calculated  using the treasury stock method.  At
September  30,  2001  and  2000,  all  outstanding  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 our subsidiaries and revenue types. The Company's  operating  segment
information is as follows for the nine months ended September 30, 2001 and 2000:

<TABLE>
<CAPTION>

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

Revenue:
-        Data       $       11,572,663  $        865,925   $      6,598,867  $              -  $      19,037,455
-        CATV                        -                 -          3,264,737                 -          3,264,737
-        Other               4,000,486            36,798          4,039,474                 -          8,076,758
Operating loss             (11,520,095)      (16,769,895)        (6,733,437)       (7,429,837)       (42,453,264)

                                                                 Central
2000                       Mexico            Venezuela           America          Corporate           Totals
-------------------    ----------------    --------------     --------------    --------------    ---------------
Revenue:
-        Data       $        8,640,232  $        827,037   $      4,696,214  $              -  $      14,163,483
-        CATV                        -                 -          5,412,612                 -          5,412,612
-        Other               3,226,440            49,941          2,125,567                 -          5,401,948
Operating loss              (6,209,952)       (1,520,542)        (6,353,454)       (9,118,122)       (23,202,070)

</TABLE>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS

         The  following   discussion  and  analysis  relates  to  our  financial
condition and results of operations for the nine-month  periods ended  September
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
situation  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

Nine months ended September 30, 2001 compared to the nine months ended September
30, 2000:

         Revenues.  Our revenues for the nine months  ended  September  30, 2001
totaled  $30.4  million,  compared  to $25  million for the same period in 2000,
representing a $5.4 million  increase in revenues (or 22%). The following  table
shows our  revenues (in  thousands)  by region for the first nine months of 2001
and 2000:

                TOTAL REVENUES
                (in thousands)                     2001             2000
                                                 ----------       ----------
                Mexico (Intervan)                $  15,573     $     11,867
                Venezuela                              903              877
                Central America                     13,903           12,234
                                                 ----------       ----------
                     Consolidated total       $     30,379     $     24,978
                                                 ==========       ==========


         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 $3.7 million of the revenue  increase,  consisting of an increase of
$2.9 million in high speed data revenue with the  remainder  consisting of other
revenue, including telephony.

         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 $21 million for the nine months ended  September 30,
2001, an increase of $6.4 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
$15.4 million for the nine months ended  September 30, 2001, an increase of $3.8
million  over the same  period  in  2000,  due  primarily  to  employee  hirings
subsequent  to June  2000.  We  maintained  a total of about  440  employees  at
September 30, 2001 reflecting a significant  reduction of 310 employees from our
headcount  total  of 750 at  September  30,  2000.  This  net  reduction  of 310
employees  includes the  reduction of 200 employees  resulting  from the sale of
Chispa in June 2001,  combined  with about 155  employees  who we  terminated in
connection with our business restructuring discussed below.

         Selling, General and Administrative Expenses. We incurred SG&A expenses
of $7.5 million  during the nine months ended  September 30, 2001, a decrease of
$3.2 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 $10.7 million  during the nine months ended  September 30, 2001
and 2000.  The lack of an  increase  reflects  the  sales of fixed  assets in El
Salvador and asset  impairment  reserves  recorded on Venezuela  intangibles and
fixed assets as of June 30, 2001.

         Business Restructuring Charges and Asset Impairments. During the second
and third quarters of 2001, our management  approved a restructuring plan, which
resulted in a restructuring charge of $18,122,270. (See Note 2)


         Interest Income and Interest  Expense.  Our interest  income  decreased
$0.5 million for a total of $0.3 million during the nine months ended  September
30,  2001 due to a lower  average  cash  investment  balance  during the period.
Interest  expense over the same period  increased  $0.8 million due primarily to
the  acquisition  debt we  incurred  in April  2000.  Additionally,  the average
interest  rate  recorded  on our  indebtedness  during  the  nine  months  ended
September 30, 2001 was approximately 12.5%,  compared to approximately 10.75% as
of September 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
$47.3 million in the nine months ended  September 30, 2001, an increase of $24.2
million  compared  to the same  period in 2000.  The  principal  reasons for the
increase were:

     o    $5 million in non-cash remeasurement of options and warrants charge as
          a result of the induced conversion of preferred stock on September 11,
          2001.

     o    $6.4  million  increase in salary and  benefits  expense  attributable
          primarily  to the  significant  growth  subsequent  to  June  2000  in
          employee headcount to support then planned operations. Since March 31,
          2001,  salary  and  benefit  costs  have  significantly  decreased  in
          connection with the restructuring plan implemented during 2001.

     o    $18.1  million  increase in business  restructuring  charges and asset
          impairments.

     o    $0.8  million  increase  in  interest  expense  due to  the  increased
          acquisition debt balance.

     o    $6 million  increase  in  minority  interest  gain of which $5 million
          directly relates to the sale of our interest in Chispa.

     o    The above  increases  were  offset by the $8 million  pre-tax  gain on
          asset  sale,  a $3.2  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.



<PAGE>


         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 (see Note 3) 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

         We anticipate that we will require a minimum of $1.2 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  nine  months  ended  September  30,  2001,  our  operating
activities  used $25.2  million,  compared  with $15.7  million  during the same
period in 2000.  Our  investing  activities  provided  $0.3  million in the nine
months ended  September 30, 2001,  compared with using $21.5 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 and issuance of common
stock in September 2001 offset by the payments on notes payable,  provided $33.1
million in net cash flow during the nine months ended September 30, 2001.

         As of  September  30,  2001,  we had current  assets of $23.3  million,
compared  to $16.5  million as of  December  31,  2000,  for an increase of $6.8
million.  The increase in current assets was primarily due to cash received from
the equity funding in September 2001.

         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.

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 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 June 30, 2001.

ITEM 2.       CHANGES IN SECURITIES


         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 $18.18  million  in cash and the  conversion  of
approximately  $1.82 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 13, 2001                BY       /s/ GARY BARLOW
                                                 -------------------------------
                                                 Gary Barlow
                                                 Chief Accounting Officer