<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1999
( ) For the transition period from __________ to __________
Commission file number: 0-27039
CONVERGE GLOBAL, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0426858
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
233 WILSHIRE BOULEVARD, SUITE 930, SANTA MONICA, CALIFORNIA 90401
(Address of principal executive offices) (Zip Code)
(310) 434-1974 (310) 656-3055
(Issuer's telephone/facsimile numbers, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
The issuer had 6,916,900 shares of its $.001 par value Common Stock
issued and outstanding as of November 19, 1999.
Transitional Small Business Disclosure Format (check one)
Yes No X
--- ---
<PAGE>
CONVERGE GLOBAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PAGE NO.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1998 3
Comparative Unaudited Consolidated Statements of
Operations for the Three Months Ended September
30, 1999 and 1998 4
Comparative Unaudited Consolidated Statements of
Cash Flow for the Three Months Ended September 30,
1999 and 1998 5
Notes to the Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
<CAPTION>
PART II. OTHER INFORMATION
<S> <C>
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 18
(b) Reports on Form 8-K 18
</TABLE>
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,000 $ -
Due from related party 4,189 -
----------- -------------
Total current assets 5,189 -
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 18,891 -
INVESTMENT IN MEDCOM NETWORK, INC. 23,000 -
----------- -------------
$ 47,080 $ -
----------- -------------
----------- -------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accrued expenses $ 139,647
Loan payable, related party 17,000
-----------
Total current liabilities 156,647
-----------
NOTE PAYABLE 250,000
-----------
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 September 30, 1999 and December 31,
1998, respectively 8,918 2,340
Common stock subscriptions receivable (2,000) -
Additional paid-in capital 343,132 111,830
Deficit accumulated during development stage (709,617) (114,170)
----------- -------------
Total stockholders' deficit (359,567) -
----------- -------------
$ 47,080 $ -
----------- -------------
----------- -------------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
3
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
inception of
Nine months Nine months Year ended Year ended operations on
ended ended December 31, December 31, October 4, 1985 to
September 30, 1999 September 30, 1998 1998 1997 September 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 600,517 - - 26,110 714,687
----------- ----------- ----------- ----------- ----------
LOSS BEFORE INCOME TAXES (594,647) - - (26,110) (708,817)
INCOME TAXES 800 - - - 800
----------- ----------- ----------- ----------- ----------
NET LOSS $ (595,447) $ - $ - $ (26,110) $ (709,617)
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic and diluted 8,002,642 8,002,642 8,002,642 8,002,642 8,002,642
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
NET LOSS PER SHARE:
Basic and diluted $ (.07) $ - $ - $ - $ (.09)
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
</TABLE>
* The period from inception of operations on October 4, 1985 to December
31, 1998 (audited) and for the nine months ended September 30, 1999
(unaudited).
See accompanying independent auditors' report and notes to consolidated
financial statements.
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
Nine months Nine months Year ended Year ended operations on
ended ended December 31, December 31, October 4, 1985 to
September 30, 1999 September 30, 1998 1998 1997 September 30, 1999*
------------------ ------------------ ---- ---- ------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $(595,447) $ - $ - $ (26,110) $(709,617)
--------- --------------- ------------ --------- ---------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 2,242 - - - 2,242
Services in exchange for common stock 780 - - 26,110 114,950
Loss on investment 7,000 - - - 7,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN ASSETS -
increase in due from related party (4,189) - - - (4,189)
INCREASE IN LIABILITIES-
increase in accrued expenses 139,647 - - - 139,647
--------- --------------- ------------ --------- ---------
Total adjustments 145,480 - - 26,110 259,650
--------- --------------- ------------ --------- ---------
Net cash used for operating activities (449,967) - - - (449,967)
--------- --------------- ------------ --------- ---------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments to acquire property and equipment (21,133) - - - (21,133)
Investment in Medcom Network, Inc. (30,000) - - - (30,000)
--------- --------------- ------------ --------- ---------
Net cash used for investing activities (51,133) - - - (51,133)
--------- --------------- ------------ --------- ---------
</TABLE>
(Continued)
See accompanying independent auditors' report and notes to consolidated
financial statements.
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
Nine months Nine months Year ended Year ended operations on
ended ended December 31, December 31, October 4, 1985 to
September 30, 1999 September 30, 1998 1998 1997 September 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 250,000 - - - 250,000
Proceeds from issuance of common stock and
paid in capital 235,100 - - - 235,100
-------- ------------ ------------- -------- --------
Net cash provided by financing activities 502,100 - - - 502,100
-------- ------------ ------------- -------- --------
NET INCREASE IN CASH 1,000 - - - 1,000
CASH, beginning of period/year - - - - -
-------- ------------ ------------- -------- --------
CASH, end of period/year $ 1,000 $ - $ - $ - $ 1,000
-------- ------------ ------------- -------- --------
-------- ------------ ------------- -------- --------
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 $114,950
-------- ------------ ------------- -------- --------
-------- ------------ ------------- -------- --------
</TABLE>
* The period from inception of operations on October 4, 1985 to December
31, 1998 (audited) and for the nine months ended September 30, 1999
(unaudited).
See accompanying independent auditors' report and notes to consolidated
financial statements.
6
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
NINE MONTHS ENDED SEPTEMBER 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. The Company was inactive for
approximately 10 years.
On December 4, 1997, the Company changed its name from Mormon
Mint, Inc. to Capital Placement Specialists, Inc.
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 for redistribution to
selected investors of Bekam. The Company then changed its name to
Converge Global, Inc.
PRINCIPLES OF CONSOLIDATION (UNAUDITED):
The accompanying financial statements include the accounts of
Converge Global, Inc. (the "Parent"), and its subsidiaries,
Gearz.com, Inc. and LiquidationBid.com, Inc. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
<TABLE>
<CAPTION>
Percent of
Subsidiary Ownership Description
---------- --------- -----------
<S> <C> <C>
Gearz.com, Inc. 100% Gearz.com, Inc. was formed on February 5, 1999
in the State of California. There were no
material operations during the nine months
ended September 30, 1999.
LiquidationBid.com, Inc. 50% LiquidationBid.com, Inc. (a development stage
company) was incorporated on April 8, 1999 in
the State of Nevada by Converge Global, Inc.
Immediately after its formation, the Company
relinquished 50% of its interest to
Inetvisionz, Inc., a company related through
common ownership, in exchange for rights for
services. Two of the three board members of
LiquidationBid.com, Inc. are officers and
stockholders of the Company, thereby
demonstrating control over LiquidationBid.com,
Inc. There were no material operations during
the nine months ended September 30, 1999.
</TABLE>
See accompanying independent auditors' report.
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
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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.
Management recognizes that the Company must generate additional
resources to enable it to continue operations. The Company
intends to begin recognizing significant revenue during the
fourth quarter of 1999 or early 2000. Management's plans also
include the sale of additional equity securities. However, no
assurance can be given that the Company will be successful in
raising additional capital. Further, there can be no assurance,
assuming the Company successfully raises additional equity, that
the Company will achieve profitability or positive cash flow.
BUSINESS ACTIVITY:
The Company, a development stage 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.
REVENUE RECOGNITION:
The Company recognizes website design and development revenue as
services are performed over the life of the contract.
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.
See accompanying independent auditors' report.
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
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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.
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.
COMMON STOCK:
On October 15, 1997, the Company effected a 10:1 reverse split of
its common stock, thus decreasing the number of outstanding
common stock shares from 23,401,000 shares to 2,340,100 shares.
All share and per share data in the financial statements reflect
the reverse split for all periods presented.
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.
See accompanying independent auditors' report.
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
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
NET LOSS PER SHARE, CONTINUED:
For the nine months ended September 30, 1999 and the years ended
December 31, 1998 and December 31, 1997 and the period from
inception of operations to September 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 September 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 nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1999.
(2) PROPERTY AND EQUIPMENT (UNAUDITED):
A summary at September 30, 1999 is as follows:
<TABLE>
<S> <C>
Computer and office equipment $ 21,133
Less accumulated depreciation 2,242
--------------
$ 18,891
--------------
--------------
</TABLE>
Depreciation expense for the nine months ended September 30, 1999
amounted to $2,242. There was 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.
See accompanying independent auditors' report.
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
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(3) INVESTMENT IN MEDCOM NETWORK, INC. (UNAUDITED):
Medcom Network, Inc. was incorporated on June 11, 1999 and does not
expect to recognize revenue until December 1999. There were no
significant operations as of September 30, 1999. On June 15, 1999, the
Company purchased 20% of the outstanding shares of an unrelated startup
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. This investment is
being accounted for using the equity method. The Company's share of the
investee's net loss of approximatley $7,000 is reflected in the
accompanying financial statements.
(4) ACCRUED EXPENSES (UNAUDITED):
A summary at September 30, 1999 is as follows:
<TABLE>
<S> <C>
Accrued payroll and related taxes $ 99,000
Accrued professional fees 22,956
Other overhead expenses 15,811
Accrued legal 1,880
--------------
$ 139,647
--------------
--------------
</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.
(6) STOCKHOLDERS' DEFICIT (UNAUDITED):
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 nine months ended September 30, 1999, 2,000,000
options were exercised for $200,000.
See accompanying independent auditors' report.
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
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(6) STOCKHOLDERS' DEFICIT (UNAUDITED), CONTINUED:
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 nine months ended September 30,
1999 are as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding at beginning of period - $ -
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 September 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.
Pro forma information regarding the effect on operations is required by
SFAS 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that
statement. Pro forma information using the Black-Scholes method at the
date of grant based on the following assumptions:
Expected life 1 month
Risk-free interest rate 6.00%
Dividend yield -
Volatility 100%
See accompanying independent auditors' report.
12
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(6) STOCKHOLDERS' DEFICIT (UNAUDITED), CONTINUED:
This option valuation model requires input of highly subjective
assumptions. Because the Company's employee stock options have
characteristics significantly different from those of traded options,
and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing
model does not necessarily provide a reliable single measure of fair
value of its employee stock options.
For purposes of proforma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The
Company's proforma information is as follows:
<TABLE>
<CAPTION>
September 30,
1999
----
<S> <C>
Net loss, as reported $ (595,447)
Proforma net loss $ (617,447)
Basic and diluted historical loss per share $ (.07)
Proforma basic and diluted loss per share $ (.08)
</TABLE>
(7) RELATED PARTY TRANSACTION:
The loan payable, related party, represents short-term borrowings from
an officer of the Company. It is non-interest bearing and due on demand
(unaudited).
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 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 (unaudited).
See accompanying independent auditors' report.
13
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
(8) LEASE COMMITMENTS (UNAUDITED):
The Company has a three-year agreement to lease its office space from
Manhattan West, Inc., a related party through common ownership. The
Company is responsible for all overhead expenses including utilities,
telephone and insurance expense. The Company also rents certain office
equipment on a monthly basis from the same related party.
The following is a schedule by years of future minimum rental payments
required under operating leases that have noncancellable lease terms in
excess of one year as of September 30, 1999:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1999 $ 13,200
2000 52,800
2001 52,800
2002 13,200
--------------
$ 132,000
--------------
--------------
</TABLE>
Rent expense for the nine months ended September 30, 1999 amounted to
approximately $40,000.
See accompanying independent auditors' report.
14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 Pink Sheets under the
trading symbol: CVRG.
The Company filed its Form 10-SB with the Securities and Exchange
Commission to become a reporting company on August 13, 1999. The Company is
currently undergoing the comment stage of the process, but became a reporting
company on October 13, 1999. Upon the approval of the SEC, the Company will
apply to be traded on the OTC bulletin board under the same symbol, CVRG.
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.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 as compared to the Three Months Ended
September 30, 1998.
NET REVENUES
Net revenues were zero for the third quarter which ended September 30, 1999 as
compared to zero for the same period in 1998. There was no increase or decrease
from the same quarter for the previous year.
GROSS PROFIT AND COST OF REVENUES
The gross profit was zero in the quarter ending September 30, 1999 in comparison
with zero for the same quarter the previous year. Cost of revenues for the
quarter ending September 30, 1999 was zero as there was no cost of revenues for
the period ending September 30, 1998.
15
<PAGE>
OPERATING EXPENSES
Operating expenses were $267,597 during the quarter ending September 30, 1999.
This compares with zero for the quarter ending September 30, 1998.
Operating expenses for the quarter ending September 30, 1999 increased $267,597
or 100% compared to the same time period in 1998. The increase was primarily due
to an increase in expenses such as the Medcom investment, as well as
compensation, payroll, travel expenses incurred in the day to day operation of
the Company.
INTEREST
Net interest expenses paid were zero of the net sales during the quarter ending
September 30, 1999. This compares with zero for the same time last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures and
operating expenses, including labor costs and compensation as well as funding of
accounts receivable. The Company's primary sources of cash have been from a note
payable. For the fiscal year 1999, the increase in expense and decrease in cash
was attributable to an increase in payable driven by business growth with
decrease in cash resulting from greater capital expenditures, for acquisitions
and operating expenses.
There were no accounts receivable this quarter ending September 30, 1999, as
compared with the same amount for quarter ending September 30, 1998.
The Company's current plans require additional capital expenditures for the
remainder of the year of approximately $40,000 per month. Year to date, the
Company has expended approximately $500,000. The Company believes conducting
private placements will generate sufficient capital to finance its operations
and anticipated capital expenditures through fiscal 2000.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the best knowledge of management and the Company's counsel, there is
no material litigation pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
(27) Financial Data Schedule
(b) REPORTS ON FORM 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONVERGE GLOBAL, INC.
(Registrant)
Date: November 24, 1999 /s/ Imran Husain
----------------------------------
IMRAN HUSAIN
President, Chief Financial Officer
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1998 JAN-01-1997
<PERIOD-END> SEP-30-1999 SEP-30-1998 DEC-31-1998 DEC-31-1997
<CASH> 1,000 0 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 4,189 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 5,189 0 0 0
<PP&E> 21,133 0 0 0
<DEPRECIATION> (2,242) 0 0 0
<TOTAL-ASSETS> 47,080 0 0 0
<CURRENT-LIABILITIES> 156,647 0 0 0
<BONDS> 250,000 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 8,918 0 2,340 0
<OTHER-SE> (368,485) 0 (2,340) 0
<TOTAL-LIABILITY-AND-EQUITY> 47,080 0 0 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> 5,870 0 0 0
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 600,517 0 0 26,110
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> (594,647) 0 0 (26,110)
<INCOME-TAX> 800 0 0 0
<INCOME-CONTINUING> (595,447) 0 0 (26,110)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (595,447) 0 0 (26,110)
<EPS-BASIC> (0.07) 0 0 0
<EPS-DILUTED> (0.07) 0 0 0
</TABLE>
