<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
CONVERGE GLOBAL, INC.
---------------------
(Name of Small Business Issuer in its charter)
Utah 87-0426858
- --------------------------------- ---------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
233 Wilshire Boulevard, Suite 930, Santa Monica, California 90401
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(Address of principal executive offices) (Zip Code)
(310) 434-1974
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
None None
----------- ----------
----------- ----------
Securities to be registered pursuant to section 12(g) of the Act:
Common Stock, par value $.001
-----------------------------
(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. BUSINESS DEVELOPMENT
1. FORM AND YEAR OF ORGANIZATION
The corporation was incorporated under the laws of the State of Utah,
on October 4, 1985, under the name of Mormon Mint, Inc. The corporation was
originally organized to manufacture and market commemorative medallions as
related to the Church of Jesus Christ of Latter Day Saints, the "Mormons."
The company was inactive for ten years. In 1998, the Company changed its
name to Capital Placement Specialists, Inc. as it began to seek new business
opportunities.
Pursuant to an Acquisition Agreement, dated January 5, 1999, Bekam
Investments, Ltd. ("Bekam") acquired one hundred percent (100%) of the common
shares of the company at that time; or 2,430,000 shares. Bekam subsequently
spun off the company by contributing the shares to the treasury of the
Company. The Company then changed its name to Converge Global, Inc. Converge
Global, Inc. ("Converge" or the "Company") currently trades on the OTC
Bulletin Board under the trading symbol: CVRG.
B. BUSINESS OF ISSUER
The Company's business is focused in the globally emerging electronic
commerce ("e-commerce") industry. The Company is in the process of building
specialty portals catering to niche market segments, as well as building a
market that provides complete e-commerce solutions to other businesses. The
Company plans to provide these e-commerce solutions with specific emphasis on
audio and video delivery over the Internet. The Company's Internet address is:
www.convergecom.com.
1. PRINCIPAL PRODUCTS AND THE MARKET.
THE MARKET
THE INTERNET
International Data Corporation estimates that the number of users
accessing the Web will grow from 28 million in 1996 to 175 million in 2001
and that the amount of commerce conducted over the Web will increase from
approximately $2.6 billion in 1996 to $220 billion in 2001. Growth in
Internet usage has been fueled by a number of factors, including the large
and growing base of personal computers installed in the workplace and home,
advances in the performance and speed of personal computers and modems,
improvements in network infrastructure, easier and cheaper access to the
Internet and increased awareness of the Internet among consumer and trade
customers.
The emergence of the Internet as a significant communications medium
is driving the development and adoption of Web content and commerce
applications that offer both convenience and value to consumers, as well as
unique marketing opportunities and reduced operating costs to business. A
growing number of consumer and trade customers have begun to conduct business
on the Internet including paying bills, booking airline tickets, trading
securities and purchasing consumer goods (e.g., personal computers, consumer
electronics, compact disks, books, groceries and vehicles). Moreover, online
transactions can be faster, less expensive, more accurate and more convenient
than transactions conducted through a human intermediary.
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THE PRODUCTS
The following is a summary of the Company's products and services which
evidence the Company's recent shift in creation and development of Internet
niche portals, with an emphasis on special Internet web sites. The Company
is in the process of developing audio and video delivery over the Internet.
By leveraging its well-established marketing and technical expertise, along
with constantly updated content and technology supplied or procured by its
proven team of experts, the Company will design and implement each portal to
meet the tastes, interests and demands of its target audiences. By
positioning its portals as leading-edge, comprehensive communities, and by
extending the Company's status through a portfolio of credible and relevant
consumer-based content, features, products and services, the Company believes
it will establish its portals as mandatory destinations for targeted
consumers. Leading to ever-increasing base of sales and earnings. As a
result, Converge believes it will achieve a significant market valuation
through subsequent offerings of its equity securities, or by selling the
Company to a major force on the Internet, communications, entertainment or
consumer products industries. The Internet Technology ("IT") industry is
witnessing the onset of an e-commerce explosion. Price Waterhouse in it's
"Annual Technology Forecast" predicts that by 2002, e-commerce is anticipated
to generate $94 billion in revenues. Further industry projections anticipate
a significant influx of e-merchants will flock to the Internet in 2000. In
fact, by 2003 over 400,000 US based e-merchants will have a presence on the
World Wide Web. That is a 20 fold increase from current figures reporting
17,500 on line e-merchants. The majority of these e-merchants realize the
advantages of portals, such as they once realized the need to be in
commercial districts and shopping centers. The key to survival for merchants
was Location, Location, Location. As we reach the dawn of a new millennium,
the trend is quickly becoming Portals, Portals, Portals.
E-MERCHANTS
One of the Company's services is providing E-Merchant services.
E-Merchants are increasingly realizing the ease of conducting business on the
World Wide Web. Becoming an e-merchant is no longer a choice, but rather a
critical component of survival in the business world. Had this necessity
been realized, small bookstores, brokerage firms and travel agencies would
not have suffered drastic losses in revenues to their Internet savvy
competitors such as Amazon.com, E-trade and Travelocity.com. According to a
report published by Keenan Vision, there are approximately 17,500 e-merchants
on line and over 5 million offline merchants in the US alone, who currently
use credit cards to process payments. The growth opportunity is spectacular,
with millions of potential e-merchants across the globe increasing everyday.
The promise of reaching more customers, increasing productivity and
ultimately resulting in increased profits will attract even the smallest
business owners to portal infrastructures.
Similar to searching and investigating for a good location and storefront,
E-Merchants will be searching for the right portal most suitable to reach their
specific market. We are witnessing the gap narrow between the real world and
the virtual world. Converge has packaged together technology and services that
can assist any entrepreneur into an e-merchant with little effort. Converge
develops portal site for specific niche market where the Internet user quickly
reach his destination of choice or have more options available to him in the
same niche areas.
PORTAL SERVICES
Portals are defined as Internet infrastructures serving as entry points and
destinations for on line users. Currently, existing portals can be overwhelming
for the end user. The unavoidable portals control the sales and marketing
channels that reach on line consumers. Converge develops high quality,
attractive, easy to navigate specialty portals with user friendly interface
programmed with the most amateur Internet user in mind.
Often many E-Merchants risk drowning in vast search engines. What happens
to the speciality web site offering unique products and services? What happens
to the e-merchants catering exclusively to a particular demographical group?
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"Internet Portals will lead the E-Merchant stampede in 1999. Portals
are better positioned than other infrastructure players to take advantage of
the e-merchant market," states the Keenan Vision newsletter. The report
predicts the revenue opportunities resulting from the e-merchant stampede to
portals with the same enthusiasm as the cries of 'Gold!' during the
California Gold Rush of 150 years ago!
Electronic commerce is a proven opportunity. Ensuring success and avoiding
failure in this opportunity can be as simple as choosing the wrong portal.
Thus, Converge is an inevitable phenomenon drastically changing the face of
commerce.
Converge is strategically positioned for this demand by developing and
implementing niche portals.
2. DISTRIBUTION
As discussed above, the Company's products and services are all distributed
via the Internet. The Company's intention is to increase awareness and
distribution of its products and site through both mainstream marketing
(billboards, radio, television, etc.) and Internet marketing (listing in various
search engines, banner ads on various sites, etc.)
3. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE.
The Company feels that with the increase in bandwidth through channels
such as Cable Modems and DSL, the Internet is going to allow for more efficient
distribution of multimedia such as video and audio. It is the Company's
intention to produce and broadcast audio/video productions over the Internet
through its Webfomercials.
4. COMPETITION.
The online commerce industry, particularly on the Internet, is new, rapidly
evolving and intensely competitive, which the Company expects to intensify in
the future. Barriers to entry are minimal, allowing current and new competitors
to launch new Web sites at a relatively low cost. The company currently or
potentially competes with other companies which have e-commerce websites. These
competitors include Broadcast.Com, Amazon.com and Yahoo!
5. SOURCES AND AVAILABILITY OF INFORMATION AND PRINCIPAL SUPPLIERS.
The majority of the content and development of products is done internally.
The sites are hosted through various Internet Service Providers.
6. DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS.
Not applicable.
7. PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY
AGREEMENTS AND/OR LABOR CONTRACTS.
The Company filed its trademark application for the trademark
"Webfomercials" with the Patent and Trademark Office and is awaiting
registration of the mark. It has also applied to trademark its slogans
"solutions for the e-conomy" as well as "man's final destination."
8. GOVERNMENT APPROVAL.
No government approval is required for any of the Company's current
products or services.
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9. EFFECT OF ANY EXISTING OR PROPOSED GOVERNMENT REGULATIONS.
None.
10. RESEARCH AND DEVELOPMENT COSTS
Development costs are being absorbed since most of the research and
development is done internally by Converge's team. Any additional work
incapable of being completed by the Company will be sent to independent
contractors.
11. COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND
REGULATIONS
The Company is not involved in a business which involves the use of
materials in a manufacturing stage where such materials are likely to result in
the violation of any existing environmental rules and/or regulations. Further,
the Company does not own any real property which would lead to liability as a
land owner. Therefore, the Company does not anticipate that there will be any
costs associated with the compliance of environmental laws and regulations.
12. EMPLOYEES
As of the date hereof, the Company employs 8 full-time employees and 1
part-time employee. The Company hires independent contractors on an "as needed"
basis only. The Company has no collective bargaining agreements with its
employees. The Company believes that its employee relationships are
satisfactory. Long term, the Company will attempt to hire additional employees
as needed based on its growth rate.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
These financial projections contain figures relating to plans,
expectations, future results, performance, events or other matters that are
"forward-looking statements" . When used in the Plan of Operations, words such
as "estimate", "project", "intend", "expect", "anticipate" and similar
expressions are intended to identify forward-looking statements. Such forward
looking statements involve numerous risks and uncertainties, pertaining to
technology, development of the Company's products, and markets for such
products, timing and level of customer orders, competitive products and pricing,
changes in economic conditions and markets for the Company's products and other
risks and uncertainties. Actual results, performance and events are likely to
differ and may differ materially and adversely. Investors are cautioned not to
place undue reliance on these forward-looking statements which speak only as to
the date of the Plan of Operations.
These projections have not been prepared with a view toward complying with
published guidelines of the American Institute of Certified Public Accountants.
In addition, the Company's independent auditors have not examined, reviewed,
compiled, or applied upon procedures to the projections, and no other
independent expert has reviewed the projections.
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RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, selected financial
information for the Company:
<TABLE>
<CAPTION>
=================================================================================================
SIX MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31
(UNAUDITED) (AUDITED)
=================================================================================================
1999 1998 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 5,870 --- --- ---
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Cost of revenue -0- --- --- ---
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Gross profit 5,870 --- --- ---
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General, administrative, and selling expenses $ 332,920 --- --- $ 26,110
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Income (loss) from operations (327,050) --- --- (26,110)
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Interest expense -0- --- --- ---
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Other expense --- --- --- ---
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Income (loss) before taxes (327,050) --- --- (26,110)
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Taxes on income 800 --- --- ---
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Net income (loss) $(327,850) --- --- $(26,110)
=================================================================================================
</TABLE>
FISCAL YEAR ENDED DECEMBER 31, 1998 (AUDITED) AS COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1997 (AUDITED)
REVENUES. The Company has not generated revenues since inception.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company had no general, administrative and/or selling expenses for the
year ended December 31, 1998 as compared to $26,110 in selling, general and
administrative expenses generated for the same period in 1997 which were for
services rendered by an individual consultant to the Company.
INTEREST EXPENSE.
None.
OTHER EXPENSE.
None.
INCOME (LOSS) BEFORE TAXES.
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The Company has no income loss before taxes for the year ended December 31,
1998 since the Company had no revenues or expenses. The Company had a $26,110
loss before income taxes for the same period in 1997.
TAXES ON INCOME.
None.
NET INCOME/LOSS.
The Company experienced no net loss as of December 31, 1998 as compared
to a net loss of $26,110 for the same period in 1997.
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) AS COMPARED TO SIX MONTHS ENDED
JUNE 30, 1998 (UNAUDITED)
REVENUES. The Company generated $5,870 in revenues for the six months
ended June 30, 1999, from Web site service contracts as compared to no revenues
for the same period last year since the Company was not in operation at that
time.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company had $332,920 in general, administrative and/or selling expenses
for the six months ended June 30, 1999, as compared to no such expenses for the
same period in 1998. Such expenses were incurred by salaries, rent, general
office expenses.
INTEREST EXPENSE.
None.
OTHER EXPENSE.
None.
INCOME (LOSS) BEFORE TAXES.
The Company experienced a $327,850 income loss after taxes for the six
months ended June 30, 1999 due to an increase in expenses during the startup
period and no income loss after taxes for the same period in 1998 since the
Company was not in operation at that time.
TAXES ON INCOME.
The Company experienced $800 in income tax for the six months ended June
30, 1999, and no such tax for the same period in 1998.
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NET INCOME/LOSS.
The Company experienced a net loss of $327,050 as of six months ended June
30, 1999 as compared neither a net loss or gain for the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has received no venture capital investment. The Company
concluded an offering under Rule 504 of Regulation D. Under this offering the
Company raised $25,000 and issued 2,000,000 options to purchase shares of its
common stock at an exercise price of $0.10 each. These options were exercised
on March 30, 1999, May 7, 1997 and June 1999, raising $200,000.
Throughout its history the Company had employed a variety of methods for
diversifying its operations and pursuing its strategic and business objectives
without pulling badly needed capital from its on-going operations, or
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incurring onerous overhead and financing obligations. These have included
licenses, joint-ventures, and even counter-trade (technologies for
technologies) mechanisms as part of this diversification methodology.
As of June 30, 1998, the Company had no appreciable short or long-term debt
and had been reorganized to prepare for future business.
The Company does not believe that inflation has had a significant impact on
its operations since inception of the Company.
SUBSIDIARIES
On February 5, 1999, the Articles of Incorporation for Gearz.com, Inc.
("Gearz.com") were filed with the California secretary of State. The directors
of the company are Imran Husain and Samar Khan.
Gearz.com is a wholly owned subsidiary of Converge whereby Converge holds
1,000,000 shares of common stock of this Company. Gearz.com is a portal site
geared towards mens' interest. The target group ranges from ages 18-45 with
interests in finance, travel, entertainment, fashion and electronics. Gearz.com
considers itself as a "iVillage.com" or "woman.com" portal site for men.
On April 30, 1999, Converge became a 50% shareholder of Liquidationbid.com,
Inc. ("Liquidationbid") whereby Converge holds 1,000,000 shares of common stock
of Liquidation.bid. Mr. Imran Husain serves as the President and Director of
Liquidation.bid.
Liquidation bid is in the business of global business-to-business
auctioning and bartering exchange. It assists corporate clients in auctioning
or bartering excess inventory or, in case of liquidation, selling of assets,
inventories to highest bidder in an efficient and cost-effective manner.
YEAR 2000
The Company has developed and acquired its computer systems with an
objective to be Year 2000 compliant. The Company has engaged the services of
qualified technicians to determine the extent to which it may be vulnerable to
third party Year 2000 issues. As a relatively new corporation, all computer
equipment purchased, in August 1997 and August 1998, is Year 2000 compliant.
The internal software written by the Company's programmers is written with the
long-date format included and consequently is Year 2000 compliant. The Company
uses Microsoft software and has installed all the available "patches" to up-date
this software. Further, Microsoft "patches" will be installed as they become
available from Microsoft in 1999, but this affects less than 20% of the
Company's software and does not impact on the on-going operation of the Company.
The Company has expended approximately $15,000 on hardware and software to
become Year 2000 compliant.
The Company has assessed and continues to asses whether its information and
non-information technology systems will be effected by the Year 2000 issues. The
Company has investigated its third party communications suppliers such as the
telephone company and its Internet service provider and found that all are in
the process of becoming Year 2000 compliant in 1999. Based upon current
information, management believes that the necessary modifications have been made
internally to effectively continue The Company into the Year 2000, however,
management is continuing to monitor internal systems, and to assess the
readiness of its systems, to ensure Year 2000 compliance. As a contingency,
The Company has identified other communication suppliers who could provide the
necessary service at a minimal cost to the Company, and a minimal effect on the
operations of the Company. In the event no other communication suppliers can be
found, there could be a material adverse effect on the Company and its
operations. Based upon current information, The Company does not believe that
the costs associated with Year 2000 compliance is material for the Company.
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ITEM 3. DESCRIPTION OF PROPERTY
The main administrative offices of the Company are located at 233 Wilshire
Boulevard, Suite 930, Santa Monica, California 90401.
The Company has sub-leased these premises from Manhattan West, Inc., for a
period of three (3) years. The sublease payments are due on the first day of
each month at approximately $4,400.00 per month. All utilities and staff
expenses are borne by the Company.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of the date hereof and as adjusted
to reflect the sale of the Shares offered hereby by (i) each stockholder known
by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each director of the Company, (iii) each officer
of the Company, and (iv) all directors and officers as a group.
<TABLE>
<CAPTION>
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Title of Names and Amount and Percent of Outstanding
Class Address of Nature of Common Stock Beneficially Owned
Beneficial Beneficial -------------------------------
Owner Ownership
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<S> <C> <C> <C>
Common Imran Husain 1,000,000(1) 6.32%
Shares 10560 Wilshire Boulevard Director/
Unit No. 704 Officer
Los Angeles, CA 90024
Common Samar Khan 1,000,000(2) 6.32%
Shares 1233 San Vicente Boulevard Secretary/
Santa Monica, CA 90401 Treasurer
Common Reza Rahman 25,000 .0044%
Shares 6917 Valley View Lane, 254 Director
Irving, TX 75039
Common Montague Securities 3,400,000 17.58%
Shares International, Ltd.
Saffrey Square
Bay Street and Bank Lane
P.O. Box N-8303
Nassau, N.P., The Bahamas
</TABLE>
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All officers and directors as a group (3 persons) 2,025,000 32%
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
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(1) On January 6, 1999, the Company issued 1,000,000 options to
purchase Common Stock of the Company at an exercise price of $0.001 for a
term of five years to Mr. Husain under the Company's 1999 Incentive and
Nonstatutory Stock Option Plan. The options were exercised in February 1999.
(2) On January 6, 1999, the Company issued 1,000,000 options to purchase
Common Stock of the Company at an exercise price of $0.001 for a term of five
years to Mrs. Khan under the Company's 1999 Incentive and Nonstatutory Stock
Option Plan. The options were exercised in February 1999.
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The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Imran Husain 32 President, Chief Executive Officer and
Director
Samar Khan 27 Secretary, Treasurer
Reza Rahman 32 Director
- -----------------------------------------------------------------------------------
</TABLE>
IMRAN HUSAIN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr. Imran Husain
is President, Chief Executive Officer and Director of Converge Global, Inc. Mr.
Husain holds a B.S. in Science Florida International University.
SAMAR KHAN, SECRETARY AND TREASURER. Ms. Samar Khan has been involved with
corporate consulting since May, 1997. Ms. Khan has worked with GTI Partners,
a corporate consulting firm for one year. Ms. Khan was employed as an office
manager at Tansa Group, a public relations firm in Anaheim Hills, California
from 1993-1996. She attended California State University at Pomona from
1989-1991, taking courses in business and accounting.
REZA RAHMAN, DIRECTOR. Reza Rahman has been employed by Nokia Mobile Phones,
Inc. since 1995, a leader in the mobile phone manufacturing industry based in
Irving, Texas. As a customer satisfaction manager, his responsibilities include
measuring and analyzing key customer dissatisfaction issues, managing resolution
efforts and communicating lessons learned to other business units. He is also
responsible for developing and implementing strategies to improve market share
and has improved the Customer Satisfaction Index by a factor of 75 percent in
nine months. Mr. Rahman holds a B.S. in Industrial Engineering from the
University of Texas at Arlington.
ITEM 6. EXECUTIVE COMPENSATION
The following table and attached notes sets forth the compensation
of the Company's executive officers and directors during each of the fiscal
years since inception of the Company. The remuneration described in the
table does not include the cost to the Company of benefits furnished to the
named executive officers, including premiums for health insurance,
reimbursement of expense, and other benefits provided to such individual that
are extended in connection with the ordinary conduct of the Company's
business. The value of such benefits cannot be precisely determined, but the
executive officers named below did not receive other compensation in excess
of the lesser of $25,000 or 10% of such officer's cash compensation.
The following table sets forth all compensation scheduled to be
received for services rendered to the Company in all capacities during the
1998-99 fiscal year by those persons who are the Company's officers and
directors.
<TABLE>
<CAPTION>
Name and Annual Compensation Long Term Compensation
Principal Position Stock Options
Bonuses / Other
- -------------------------------------------------------------------------------------
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<S> <C> <C> <C>
Imran Husain $ 60,000 Stock Options 1,000,000(1)
President, CEO and Director
Samar Khan $ 60,000 Stock Options 1,000,000(2)
Secretary/Treasurer
Reza Rahman $ -0- Stock Options -0-
Director -------------
$ 120,000
</TABLE>
See audited and unaudited financial statements for fiscal year
detail of executive compensation.
The Company carries no officers and directors liability insurance, nor
disability and life insurance benefits. The Company has historically reimbursed
Messrs. Husain, Rahman and Mrs. Khan for quarterly private health insurance
premiums and for expenses. All executive officers are currently covered by
employment agreements. The Company does not maintain any pension plan, profit
sharing plan or similar retirement or employee benefit plans.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an Acquisition Agreement dated January 5, 1999, Bekam
Investments, Ltd. ("Bekam") acquired 100% of the common shares of the Company at
the time or 2,430,100 shares. Bekam subsequently spun off the Company by
contributing the shares to the treasury of the Company. The Company then
changed its name to Converge Global, Inc.
On January 6, 1999, the Board of Directors approved the 1999 Incentive
Stock Option Plan to certain employees and officers exercised within five (5)
years from February 1, 1999, at a par value common stock price of $0.001 per
share.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of common stock, $.001 par value per share, of which
approximately 5,977,800 shares were outstanding as of August 8, 1999.
Holders of shares of common stock are entitled to one vote for each share
on all matters to be voted on by the stockholders. Holders of common stock have
no cumulative voting rights. Accordingly, the holders of in excess of 50% of
the aggregate number of shares of Common Stock outstanding will be able to elect
all of the directors of the Company and to approve or disapprove any other
matter submitted to a vote of all shareholders. See "Principal Shareholders."
Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time, by the Board of
Directors in its discretion, from funds legally available therefor. The Company
does not currently anticipate paying any dividends on its Common Stock. In the
event of a liquidation, dissolution or winding up of the Company, the holders of
shares of common stock are entitled to share pro rata all assets remaining after
- ---------------------------
(1) On January 6,, 1999, the Company issued 1,000,000 options to
purchase Common Stock of the Company at an exercise price of $0.001 for a
term of five years to Mr. Husain under the Company's 1999 Incentive and
Nonstatutory Stock Option Plan. The options were exercised in February 1999.
(2) On January 6, 1999, the Company issued 1,000,000 options to
purchase Common Stock of the Company at an exercise price of $0.001 for a
term of five years to Mrs. Khan under the Company's 1999 Incentive and
Nonstatutory Stock Option Plan. The options were exercised in February 1999.
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payment in full of all liabilities. Holders of common stock have no preemptive
rights to purchase the Company's common stock. There are no conversion rights
or redemption or sinking fund provisions with respect to the common stock. All
of the outstanding shares of common stock are fully paid and non-assessable.
Shares of Common Stock are registered at the office of the Company and are
transferable at such office by the registered holder (or duly authorized
attorney) upon surrender of the Common Stock certificate, properly endorsed. No
transfer shall be registered unless the Company is satisfied that such transfer
will not result in a violation of any applicable federal or state securities
laws. The Company's transfer agent is Holladay Stock Transfer, Inc., 4350 East
Camelback Road, Suite 100F, Phoenix, Arizona 85018.
PREFERRED STOCK
The Company has a single common class of stock and there is no preferred
class of stock at this time.
DISTRIBUTION OF ACQUISITION SHARES
Pursuant to the Acquisition Agreement dated January 5, 1999, Bekam retired
all the acquired shares, 2,430,000 shares, to the treasury of the Company.
WARRANTS AND OPTIONS
WARRANTS
The Company has no warrants issued and outstanding at this time.
OPTIONS
As of January 6, 1999 the Company implemented its 1999 Incentive and
Non-Statutory Stock Option Plan which authorized 7,000,000 shares exercisable
upon grant to beneficiary over a period of five (5) years, and no less than
twenty percent (20%) shall be exercised annually. As of the date of this
filing, there have been 2,000,000 options issued to two (2) employees.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY AND
OTHER STOCKHOLDERS MATTERS
A. MARKET INFORMATION
MARKET FOR THE ISSUER'S COMMON STOCK
AND RELATED MATTERS
Converge has a total authorized capitalization of 50,000,000 shares of a
single class of common stock, par value $.001. As of the date hereof, the
Company has approximately 5,977,800 total issued and outstanding shares.
Management and insider holdings comprise approximately 32% of the total issued
and outstanding; while the remainder is distributed amongst approximately 11
registered shareholders and 120 streetholders. The current actual public float
is approximately 3,000,000 shares. The Company's common stock is presently held
in client accounts and/or in "street name" by over 9 U.S. securities firms.
The Company's common stock had been traded in the over-the-counter market
since the January 5, 1999 acquisition with Converge and is quoted on the OTC
Bulletin Board under the symbol CVRG.
14
<PAGE>
The following table sets forth the high and low bid prices for the
Company's common stock as reported on the OTC Bulletin Board.
The prices below also reflect inter-dealer quotations, without retail
mark-up, mark-down or commissions and may not represent actual transactions:
<TABLE>
<CAPTION>
Low High
Month/Year Bid Bid
-----------------------------------------------------
<S> <C> <C>
February 1999 5.25 5.25
March 1999 5.5 5.5
April 1999 4.75 4.75
May 1999 4.875 4.875
June 1999 2.875 2.875
July 1999 2.125 2.125
</TABLE>
As of August 10, 1999 the bid price of the Company's common shares was
$3.25 per share. As of August 9, 1999 there were approximately 11 registered
and 120 street holders of record of the Company's common stock.
MARKET MAKERS
Management understands that the following firms currently make a market for
the Company's securities on the OTC Bulletin Board: Hill Thompson, Paragon,
Sharpe and National.
TRADING SYMBOL: CVRG
B. HOLDERS
As of August 9, 1999, there were approximately 11 holders of Company Common
Stock, and 120 street holders of the Company stock, as reported by the Company's
transfer agent.
SHAREHOLDER ACCOUNTS
Although to date a small market cap and unregistered issue, the Company's
stock is widely distributed. Converge stock is currently held in individual and
institutional client names at 9 U.S. registered broker dealer firms. The
Company understands that the following firms currently hold its common stock in
registered client names, unregistered "street name" and/or client accounts.
Bear Stearns & Co., Inc.
Merrill Lynch
The Depository Trust
National Financial Services
RBC Dominion Securities
Solomon Smith Barney
U.S. Clearing
Yorktown Securities I
Chase Manhattan Bank
15
<PAGE>
The Company's transfer is Holladay Stock Transfer, Inc., 4350 East
Camelback Road, Suite 100F, Phoenix, Arizona 85018.
C. DIVIDENDS
The Company has not paid any dividends on its Common Stock. The Company
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying cash dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
To the best knowledge of management, there are no legal proceedings pending
or threatened against the Company.
ITEM 3. ACCOUNTANTS
The Company has engaged Stonefield Josephson, Inc., 1620 26th Street, Suite
400-South, Santa Monica, California 90401 as its principal accountants as of
April 30, 1999. The decision to engage Stonefield Josephson, Inc. was approved
by the Board of Directors.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company conducted an offering under Rule 504 of Regulation D of the
Securities Act of 1933 in February 1999. Under this offering, the Company
raised $25,000 from an investment group and issued 2,000,000 options to purchase
shares of the Company's common stock at an exercise price of $0.10 per share.
These options were exercised on March 30, 1999, May 7, 1997 and June 1999,
raising $200,000 for the Company.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Utah Corporation Law and the Company's Certificate of Incorporation and
Bylaws authorize indemnification of a director, officer, employee or agent of
the Company against expenses incurred by him or her in connection with any
action, suit, or proceeding to which such person is named a party by reason of
having acted or served in such capacity, except for liabilities arising from
such person's own misconduct or negligence in performance of duty. In addition,
even a director, officer, employee or agent of the Company who was found liable
for misconduct or negligence in the performance of duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
PART F/S
FINANCIAL STATEMENTS
The following financial statements are included herein:
Audited Consolidated Financial Statements for Fiscal Year ended 1998
Unaudited Consolidated Financial Statements for the Six Months Ended June 30,
1999 and June 30, 1998
16
<PAGE>
PART III
ITEM 1 AND
ITEM 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
Exhibit No. Document Description
- ----------- --------------------
No Additions to Exhibits
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONVERGE GLOBAL, INC.
By: /s/ Imran Husain
----------------------------------------------
Imran Husain
Its: President, Chief Executive Officer, Director
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Imran Husain President, Chief Executive Officer
Imran Husain and Director September 23, 1999
/s/ Samar Khan Secretary and Treasurer
Samar Khan and Director September 23, 1999
/s/ Reza Rahman Director September 23, 1999
Reza Rahman
</TABLE>
17
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
(FORMERLY KNOWN AS
CAPITAL PLACEMENT SPECIALISTS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
CONTENTS
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Deficit F-4
Consolidated Statements of Cash Flows F-5 - F-6
Notes to Consolidated Financial Statements F-7 - F-12
</TABLE>
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Converge Global, Inc. and Subsidiaries
Santa Monica, California
We have audited the accompanying consolidated balance sheet of Converge Global,
Inc. and Subsidiaries (a development stage enterprise) as of December 31, 1998,
and the related consolidated statements of operations, stockholders' deficit and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements as of December 31, 1997 and for the year then ended, were audited by
other auditors whose report dated July 9, 1999, included an explanatory
paragraph which expressed substantial doubt about the Company's ability to
continue as a going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Converge Global,
Inc. and Subsidiaries as of December 31, 1998, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the financial
statements, the Company has incurred net losses from operations, has negative
cash flows from operations, and has a net capital deficiency. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
STONEFIELD JOSEPHSON, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
June 16, 1999
F-1
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, June 30, December 31,
1999 1998 1998
----------- ----------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 18,932 $ - $ -
Due from related party 3,280 - -
Prepaid expenses 9,500 - -
------------- ----------- -------------
Total current assets 31,712 - -
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 11,458 - -
INVESTMENT IN MEDCOM NETWORK, INC. 30,000 - -
------------- ----------- -------------
$ 73,170 $ - $ -
============= =========== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accrued expenses $ 113,140 $ - $ -
Loan payable, related party 17,000 - -
------------- ----------- -------------
Total current liabilities 130,140 - -
------------- ----------- -------------
NOTE PAYABLE 35,000 - -
------------- ----------- -------------
STOCKHOLDERS' DEFICIT:
Common stock; $0.001 par value, 50,000,000 shares
authorized, 8,918,100 and 2,340,100 shares issued
and outstanding at June 30, 1999 and December 31,
1998, respectively 8,918 2,340 2,340
Common stock subscriptions receivable (2,000) - -
Additional paid-in capital 343,132 111,830 111,830
Deficit accumulated during development stage (442,020) (114,170) (114,170)
------------- ----------- -------------
Total stockholders' deficit (91,970) - -
------------- ----------- -------------
$ 73,170 $ - $ -
============= =========== =============
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-2
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
inception of
Six months Six months Year ended Year ended operations on
ended ended December 31, December 31, October 4, 1985 to
June 30, 1999 June 30, 1998 1998 1997 June 30, 1999*
------------- ------------- -------------- ------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 5,870 $ - $ - $ - $ 5,870
COST OF REVENUES - - - - -
-------------- -------------- --------------- ------------- --------------
GROSS PROFIT 5,870 - - - 5,870
SELLING, GENERAL AND ADMINISTRATIVE 332,920 - - 26,110 447,090
-------------- -------------- --------------- ------------- --------------
LOSS BEFORE INCOME TAXES (327,050) - - (26,110) (441,220)
INCOME TAXES 800 - - - 800
-------------- -------------- --------------- ------------- --------------
NET LOSS $ (327,850) $ - $ - $ (26,110) $ (442,020)
============== ============== =============== ============= ==============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 6,843,404 6,843,404 6,843,404 6,843,404 6,843,404
============== ============== =============== ============= ==============
NET LOSS PER SHARE:
Basic $ (.05) $ - $ - $ - $ (.06)
============== ============== =============== ============= ==============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Diluted 7,537,327 7,537,327 7,537,327 7,537,327 7,537,327
============== ============== =============== ============= ==============
NET LOSS PER SHARE:
Diluted $ (.04) $ - $ - $ - $ (.06)
============== ============== =============== ============= ==============
</TABLE>
* The period from inception of operations on October 4, 1985 to December 31,
1998 (audited) and for the six months ended June 30, 1999 (unaudited).
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-3
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Deficit
accumulated
Common stock Additional during Total
Common stock subscriptions paid-in development stockholders'
Shares Amount Receivable Capital Stage Deficit
---------- ----------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 20,790,000 $ 20,790 $ $ 67,270 $ (88,060) $
Issuance of common stock in
exchange for services received 2,611,000 2,611 23,499 26,110
1 to 10 reverse stock split (21,060,900) (21,061) 21,061
Net loss for the year
ended December 31, 1997 (26,110) (26,110)
----------- ----------- ------------ ------------- -------------- -----------
Balance at December 31, 1997 2,340,100 2,340 111,830 (114,170)
Net loss for the year ended
December 31, 1998
----------- ----------- ------------ ------------- -------------- -----------
Balance at December 31, 1998 2,340,100 2,340 111,830 (114,170)
Issuance of common stock
during private placement 2,500,000 2,500 22,500 25,000
Exercise of common stock
options 2,000,000 2,000 198,000 200,000
Exercise of employee stock options 2,000,000 2,000 (2,000)
Capital contribution 10,100 10,100
Issuance of common stock in
exchange for services received 78,000 78 702 780
Net loss for the six months
ended June 30, 1999
(unaudited) (327,850) (327,850)
----------- ----------- ------------ ------------- -------------- -----------
Balance at June 30, 1999
(unaudited) 8,918,100 $ 8,918 $ (2,000) $ 343,132 $ (442,020) $ (91,970)
=========== =========== ============ ============= ============== ===========
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-4
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Period from
inception of
Six months Six months Year ended Year ended operations on
ended ended December 31, December 31, October 4, 1985
June 30, 1999 June 30, 1998 1998 1997 to June 30, 1999
--------------- --------------- ------------ ------------ ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (327,850) $ - $ - $ (26,110) $ (353,960)
-------------- -------------- ------------- ----------- ---------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 1,042 - - - 1,042
Services in exchange for common stock 780 - - 26,110 26,890
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN ASSETS:
Increase in due from related party (3,280) - - - (3,280)
Increase in prepaid expenses (9,500) - - - (9,500)
INCREASE IN LIABILITIES-
increase in accrued expenses 113,140 - - - 113,140
-------------- -------------- ------------- ----------- ---------------
Total adjustments 102,182 - - 26,110 128,292
-------------- -------------- ------------- ----------- ---------------
Net cash used for operating activities (225,668) - - - (225,668)
-------------- -------------- ------------- ----------- ---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments to acquire property and equipment (12,500) - - - (12,500)
Investment in Medcom Network, Inc. (30,000) - - - (30,000)
-------------- -------------- ------------- ----------- ---------------
Net cash used for investing activities (42,500) - - - (42,500)
-------------- -------------- ------------- ----------- ---------------
</TABLE>
(Continued)
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-5
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Period from
inception of
Six months Six months Year ended Year ended operations on
ended ended December 31, December 31, October 4, 1985
June 30, 1999 June 30, 1998 1998 1997 to June 30, 1999
--------------- ------------- ------------- ------------ ----------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from loan payable, related party 17,000 - - - 17,000
Proceeds from note payable, net 35,000 - - - 35,000
Proceeds from issuance of common stock and
paid in capital 235,100 - - - 235,100
--------------- ------------- ------------- ------------ -------------
Net cash provided by financing activities 287,100 - - - 287,100
--------------- ------------- ------------- ------------ -------------
NET INCREASE IN CASH 18,932 - - - 18,932
CASH, beginning of period/year - - - - -
--------------- ------------- ------------- ------------ -------------
CASH, end of period/year $ 18,932 $ - $ - $ - $ 18,932
=============== ============= ============= ============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
income taxes paid $ 800 $ - $ - $ - $ 800
=============== ============= ============= ============ =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES -
services rendered in exchange for
common stock $ 780 $ - $ - $ 26,110 $ 26,890
=============== ============= ============= ============ =============
</TABLE>
* The period from inception of operations on October 4, 1985 to December 31,
1998 (audited) and for the six months ended June 30, 1999 (unaudited).
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-6
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
The Company was organized October 4, 1985, under the laws of the
State of Utah, as Mormon Mint, Inc.
On October 15, 1997, the Company reverse split its common stock
1:10, thus decreasing the number of outstanding common stock
shares from 23,401,000 shares to 2,340,100 shares.
On December 4, 1997, the Company changed its name from Mormon
Mint, Inc. to Capital Placement Specialists, Inc.
On January 5, 1999, all of the outstanding shares were purchased
for $200,000 and accordingly, there was a change in control of
the Company. Immediately following this transaction, the new
stockholders changed its name from Capital Placement Specialists,
Inc. to Converge Global, Inc.
PRINCIPLES OF CONSOLIDATION:
The accompanying financial statements include the accounts of
Converge Global, Inc. (the "Parent"), and its subsidiaries,
Gearz.com, Inc., a wholly owned subsidiary, and
Liquidationbid.com, Inc., a 50% owned subsidiary, collectively
"the Company." All significant intercompany accounts and
transactions have been eliminated in consolidation.
GOING CONCERN:
The Company's consolidated financial statements are prepared
using the generally accepted accounting principles applicable to
a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company has no current source of revenue. Without realization of
additional capital, it would be unlikely for the Company to
continue as a going concern. This factor raises substantial doubt
about the Company's ability to continue as a going concern.
BUSINESS ACTIVITY:
The Company plans to provide in-depth and unique e-commerce
solutions with specific emphasis on audio and video delivery over
the Internet. The Company also plans to design and develop
websites in exchange for fees from its customers.
See accompanying independent auditors' report.
F-7
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
CASH:
EQUIVALENTS
For purposes of the statement of cash flows, cash equivalents
include all highly liquid debt instruments with original
maturities of three months or less which are not securing any
corporate obligations.
CONCENTRATION
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles 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.
PROPERTY AND EQUIPMENT:
Property and equipment are valued at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred;
additions, renewals and betterments are capitalized. When
property and equipment are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the
respective accounts, and any gain or loss is included in
operations. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.
INCOME TAXES:
The Company uses the liability method of accounting for income
taxes pursuant to SFAS No. 109, "Accounting for Income Taxes."
Deferred income tax assets result from temporary differences when
certain amounts are deducted for financial statement purposes and
when they are deducted for income tax purposes.
The principal temporary difference is the net operating loss
carryforward, which was immaterial at December 31, 1998 and 1997,
respectively. A deferred tax asset has been provided and is
completely offset by a valuation allowance because its
utilization does not appear to be reasonably assured.
See accompanying independent auditors' report.
F-8
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES, CONTINUED:
On January 5, 1999, there was a 100% change in the control and
ownership of the Company. As a result of this change in control,
there are significant limitations on the utilization of the net
operating loss carryforwards through December 31, 1998. Federal
net operating loss carryforward starts to expire on December 31,
2018 and California state net operating loss carryforward starts
to expire on December 31, 2003.
NET LOSS PER SHARE:
The Company has adopted Statement of Financial Accounting
Standard No. 128, Earnings per Share ("SFAS No. 128"), which is
effective for annual and interim financial statements issued for
periods ending after December 15, 1997. SFAS No. 128 was issued
to simplify the standards for calculating earnings per share
("EPS") previously in APB No. 15, Earnings Per Share. SFAS No.
128 replaces the presentation of primary EPS with a presentation
of basic EPS. The new rules also require dual presentation of
basic and diluted EPS on the face of the statement of operations.
For the six months ended June 30, 1999 and the years ended
December 31, 1998 and December 31, 1997 and the period from
inception of operations to June 30, 1999, the per share data is
based on the weighted average number of common and common
equivalent shares outstanding, and are calculated in accordance
with Staff Accounting Bulletin of the Securities and Exchange
Commission (SAB) No. 98 whereby common stock, options or warrants
to purchase common stock or other potentially dilutive
instruments issued for nominal consideration must be reflected in
basic and diluted per share calculations for all periods in a
manner similar to a stock split, even if anti-dilutive.
Accordingly, in computing basic earnings per share, nominal
issuances of common stock are reflected in a manner similar to a
stock split or dividend. In computing diluted earnings per share,
nominal issuances of common stock and potential common stock are
reflected in a manner similar to a stock split or dividend.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The accompanying unaudited condensed consolidated financial
statements for the interim periods ended June 30, 1999 and 1998
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-QSB and Regulation S-B. Accordingly,
they do not include all of the information and footnotes required
by generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1999.
See accompanying independent auditors' report.
F-9
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(2) PROPERTY AND EQUIPMENT:
A summary at June 30, 1999 is as follows:
<TABLE>
<S> <C>
Computer equipment $ 12,500
Less accumulated depreciation 1,042
--------------
$ 11,458
==============
</TABLE>
Depreciation expense for the six months ended June 30, 1999 amounted to
$1,042. There were no property and equipment as of December 31, 1998 and
1997, and accordingly, there was no deprecation expense for the years
ended December 31, 1998 and 1997.
(3) INVESTMENT IN MEDCOM NETWORK, INC. (UNAUDITED):
On June 15, 1999, the Company purchased 20% of the outstanding shares of
an unrelated company, Medcom Network, Inc. for $30,000. The purchase
included a six-month anti-dilution provision and an agreement not to
sell the shares for a period of one year or until the shares are
registered with the United States Securities and Exchange Commission.
(4) ACCRUED EXPENSES:
A summary at June 30, 1999 is as follows:
<TABLE>
<S> <C>
Accrued payroll and related taxes $ 74,250
Other overhead expenses 27,091
Accrued legal 7,500
Accrued rent 4,299
--------------
$ 113,140
==============
</TABLE>
There were no accrued expenses for the years ended December 31, 1998
and 1997.
(5) NOTE PAYABLE (UNAUDITED):
The note is due to a foreign trust (related through an officer) and is
unsecured. It is due on April 15, 2002 and accrues interest at 7.5% per
annum. The note may be extended in one-year increments, subject to the
note holder's approval.
See accompanying independent auditors' report.
F-10
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(6) STOCKHOLDERS' DEFICIT:
PRIVATE PLACEMENT OFFERING
The Company commenced a private placement offering under Regulation D,
rule 504 of the Securities Act of 1933, up to the limit of $1,000,000.
During January 1999, the Company raised $25,000 from the issuance of
2,500,000 shares of common stock to an investment group. The Company
also granted 2,000,000 stock options to this investment group to
purchase additional shares of common stock at an exercise price of $0.10
per share. During the six months ended June 30, 1999, 2,000,000 options
were exercised for $200,000.
EMPLOYEE STOCK OPTION PLAN
Effective January 6, 1999, the Company adopted a Stock Option Plan (the
"Plan") for its directors, employees and consultants under which a
maximum number of 7,000,000 options maybe granted to purchase common
stock of the Company. The Compensation Committee of the Board of
Directors administers the Plan, selects recipients to whom options are
granted and determines the number of shares to be awarded. Options
granted under the Plan are exercisable at a price determined by the
Compensation Committee at the time of grant, but in no event less than
fair market value.
The number and weighted average exercise price of options granted under
the Employee Stock Option Plan, for the six months ended June 30, 1999
are as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding at beginning of period - $ .001
Outstanding at end of period - -
Exercisable at end of period - -
Granted during period 2,000,000 .001
Exercised during period 2,000,000 .001
</TABLE>
The holders of these stock options have executed agreements to exercise
these options; however, no cash was received to date. Accordingly, the
$2,000 due for the 2,000,000 shares has been presented on the
accompanying balance sheet as common stock receivable at June 30, 1999.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No.
123, "Accounting for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the fair market value of the underlying
stock on the date of grant, no compensation expense is recognized.
Proforma information regarding net income and earnings per share under
the fair value method has not been presented as the amounts are
immaterial.
See accompanying independent auditors' report.
F-11
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
(7) RELATED PARTY TRANSACTION:
Prior to January 5, 1999, the Company neither owned nor leased any real
or personal property. Office services were provided without charge by a
director. Such costs were immaterial to the financial statements and,
accordingly, have not been reflected therein.
Effective January 5, 1999, the Company rents office space and certain
office equipment on a monthly basis from a party related through common
ownership. Rent expense for the six months ended June 30, 1999 amounted
to approximately $28,000.
Effective February 1, 1999, the Company entered into a one-year
employment agreement with two of its officers. Pursuant to this
agreement, the Company will compensate each officer $5,000 per month.
Adjustments for compensation and renewal of employment terms are subject
to the Board of Directors' approval.
See accompanying independent auditors' report.
F-12
