<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
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.
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(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
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(310) 434-1974
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
<S> <C>
None None
------ ------
------ ------
</TABLE>
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 Pink Sheets 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. Portals
are defined as Internet infrastructures serving as entry points and destinations
for on line users. The Company's Internet address is: www.convergecom.com.
1. PRINCIPAL PRODUCTS AND THE MARKET.
THE MARKET
THE INTERNET
In the Company's perspective 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.
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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. The
Company will design and implement each portal to meet the tastes, interests and
demands of its target audiences.
The Company has developed the content and design of DIGITALMEN.COM.
DIGITALMEN.COM is a Web site that is targeted at men between the ages of 18 and
45. The Web site will feature products and services in the areas of cars, bars,
men's fashion, restaurants, finance, dating, greeting cards, community chat and
message boards. DIGITALMEN.COM is the only service that the Company has offered
as of the date of this response.
The Company also has as work in progress Liquidationbid.com. The
Company will develop a business-to-business "e -marketplace" for liquidating
businesses inventories. The portal will match buyers and sellers of excess goods
and services in a virtual marketplace. Initially, liquidationbid.com will
develop an integrated marketing strategy that will leverage relationships with
selling partners in South Asia. There is no launch date set.
The Company also has Desitv.com as a work in progress. DesiTV.com
will be created as the first digital entertainment network targeted towards
South Asians (Pakistan, India, Bangledesh, Sri Lanka, Nepal). DesiTV is
striving to become the first South Asian channel to broadcast rich media
content over the Internet. The focus will be to become the leading e-commerce
distributor of digital audio and video. It is still a concept with no launch
date set.
Another work in progress of the Company is Machmail.com: Converge's
concept under the name Machmail.com is to develop a communication portal which
integrates a number of different functionalities in an easy to use graphical
user interface (GUI) . The functionalities that it will integrate are the
following:
1) the ability to translate emails into French, German, Spanish, and
Chinese, initially, enroute to its destination; and
2) The ability to have a homepage which can display data from multiple
user accounts that the user might have all displayed with the inputting of one
password as oppose to going to different locations and obtaining passwords.
Finally, the Company technical division, Essential Tech, assists the Company
in techincal design of Websites and applications.
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.
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.)
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3. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR
SERVICE.
The Company launched its Website for Digitalmen.com on
November 1, 1999. Digitalmen.com, previously known as Gearz.com, continues to
include the same concepts geared towards identifying interests of men between
the ages of 18-45.
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. Currently, the Company is aware of theman.com, Inc.,
a privately held company based in Santa Clara, California founded in January
1999. theman.com launched its Web site on November 22, 1999 targeting men
between the ages of 18-45. The Web site features articles and issues that men
find interesting and provides them with information on such topics as food,
health and sports.
theman.com may be better financed than Converge. The composition and
identity of Converge's competitors are constantly changing based upon
marketplace conditions and changes.
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. The
development of the of the products include the building of digitalmen.com which
consists of technical work consisting of HTML programming, designing database,
programming are all completed in house by the Company's computer programmers.
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.
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.
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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.
The accountants have stated in their audit report that the there is a
going concern as to the availability of the company and its resources to
continue.
RESULTS OF OPERATIONS
The Company has generated minimal revenues and does not
anticipate generating any material revenues until at least the first
quarter of the Year 2000. Currently, the Company's only cash
requirements are for rent and salaries. The Company does not anticipate
breaking even in its financial operations until at least January, 2001.
The Company's sole source of capital during 1999 shall be investment
capital provided by third parties. As a result, the Company's director
has provided an unsecured loan in the amount of $250,000 to be payable
by January 1, 2003 to cover expenses which arise. For the most part,
the Company doesn't anticipate any changes in the number of employees
or equipment changes. The Company doesn't have any research and
development costs and finds in the event such needs are apparent, the
Company's own technical staff is capable of conducting the research and
development. The Company anticipates that it will require additional
capital contributions to fund its operations during the Year 2000. The
Company intends to find investors or go to the original group of
investors for additional capital for continued operations. In addition,
the Company is actively seeking institutional type investors as a
source of funding and growing the business. If the Company is
unsuccessful in securing additional capital then it will be required to
materially curtail or cease operations altogether. Further, in the
event the Company does attract such capital, but is unable to generate
revenues sufficient to support its expenses, then the Company would be
required to eventually curtail or even cease operations. The Company's
substantial financial losses since its inception have raised a
substantial doubt with
5
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the Company's auditors as to the Company's ability to continue as a
going concern.
The following table sets forth, for the years indicated, selected financial
information for the Company:
<TABLE>
<CAPTION>
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NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
(UNAUDITED) (AUDITED)
- --------------------------------------------------------------------------------------------------------------------
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<S> <C> <C> <C> <C>
1999 1998 1998 1997
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Total revenue ---5,870 --- --- ---
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Cost of revenue --- --- --- ---
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Gross profit --- --- --- ---
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General, administrative, and selling expenses $ 598,517 --- --- $ 26,110
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Income (loss) from operations --- --- --- (26,110)
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Interest expense 5,000 --- --- ---
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Other expense --- --- --- ---
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Income (loss) before taxes (327,850) --- --- (26,110)
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Taxes on income 800 --- --- ---
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Net income (loss) $(328,650) --- --- $ (26,110)
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</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AS COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1998 (UNAUDITED)
REVENUES. The Company generated $5,870 in revenues for the nine months
ended September 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.
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GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company had $598,517 in general, administrative and/or selling expenses for
the nine months ended September 30, 1999, as compared to no such expenses for
the same period in 1998. Such expenses were incurred by salaries, rent, general
office expenses as well as compensation for services of Jeff Cohn of Cohn
Partners whom provided assistance in developing a marketing strategy for
DIGITALMEN.COM by providing market research and business development strategies
such as choosing right affiliate partners, content, functionality and user
friendliness of the Web site. Peter Marshall of MITD assisted in providing our
team with the knowledge to develop some of the applications for Digitalmen.Com.
In addition, he provided technical consultation on the development of the
applications such as data base management, e-mail system, user registration and
content synchronization with the content provider.
<TABLE>
<CAPTION>
General and administrative expenses:
<S> <C>
Advertising and marketing $ 82,589
Depreciation 2,242
Dues and subscriptions 383
Independent contractors 58,610
Insurance 2,764
Meals and entertainment 12,768
Office expense 6,592
Payroll expense 209,278
Payroll tax expense 15,717
Postage and delivery 3,897
Printing and reproduction 5,136
Professional fees 36,481
Rent 40,030
Repairs and maintenance 1,800
Telephone 28,545
Travel 42,133
Website development and related expense 49,552
Total $598,517
</TABLE>
INTEREST EXPENSE.
The Company realized a $5,000 interest expense for the period ending
September 30, 1999 on a $250,000 Note with a 7.5% interest per annum, as opposed
to none for the same period last year.
OTHER EXPENSE.
None.
INCOME/LOSS BEFORE TAXES.
The Company experienced a $599,647 income loss before taxes for the
nine months ended September 30, 1999 due to an increase in expenses during the
startup period and no income loss before 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 nine months ended
September 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 $600,447 as of nine months ended
September 30, 1999 as compared to a net loss or gain for the same period in
1998.
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.
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 for the period December 31, 1998
after taxes as compared to a net loss 26,110 for the same period in 1997.
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, 1999 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
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. The Company has
identified a number of alternative capital sources, however, if it is unable to
attract additional capital its operations will be severely adversely effected.
The Company has not engaged in any counter-trade mechanisms trading technology
for technology as of the date of this filing.
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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. The Articles were subsequently
amended on December 7, 1999, to change the name of Gearz to Digitalmen.com, Inc.
Such action was approved and ratified by unanimous board of directors and
majority of shareholders.
Digitalmen.com is a wholly owned subsidiary of Converge whereby
Converge holds 1,000,000 shares of common stock of this Company. Digitalmen.com
is a portal site geared towards men's interest. The target group ranges from
ages 18-45 with interests in finance, travel, entertainment, fashion and
electronics.
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 Liquidationbid. 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.
The Company is a 20% shareholder of MedCom Network, Inc. a California
corporation which is developing an on-line data base of disease codes which are
codes found in the medical industry dictionaries. The Company invested in MedCom
by contributing $30,000 for shares of restricted common stock of the company.
This was an investment made by the Company and the Company's officers or
directors have no management involvement in MedCom.
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 was purchased in August 1997 and 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. The three year term of the sublease began on
February 1, 1999 and will terminate on February 1, 2002.
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 Montaque 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
- -------------------------------------------------------------------------------------------------------
All officers and directors as a group (3 persons) 2,025,000 32%
</TABLE>
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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.
(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.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
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: Converge Global,
Inc., a publicly traded company, nominated Mr. Husain as its President and CEO
since it inceptions in January 1999. Mr. Husain graduated from Florida
International University with a Bachelor of Science degree in Biology. Mr.
Husain is also President of American Business Investments, a private investment
company. Before becoming President of Converge Global, Mr. Husain was primarily
acting as manager for family investments in the U.S. equity markets for the last
seven years.
SAMAR KHAN, SECRETARY AND TREASURER. From June of 1998 to July of 1999, Ms. Khan
worked as a partner with GTI Partners, a corporate consulting firm for one year,
where she handled all the administrative responsibilities for the firm. 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 as a Product Development Manager. Responsibilities in his
position 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. Prior to 1995, Mr. Rahman
worked as an engineer for Golden Eagle Systems for two years.
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 which is January 1999. 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.
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<TABLE>
<CAPTION>
Name and Annual Compensation Long Term Compensation
Principal Position Stock Options
Bonuses / Other
- ----------------------------------------------------------------------------
<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
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$ 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.
The Company obtained a loan from Verifica International, Inc.
("Verifica") on May 5, 1999 in the amount of $250,000. The beneficial owner of
Verifica is the father of the Company's CEO, Mr. Husain.
The Company entered into a sublease agreement with Manhattan West,
Inc., a related party through common ownership on February 1, 1999. The term of
the sublease is three years and the Company is responsible for all overhead and
related expenses including utilities and insurance. The Company rents office
equipment from Manhattan West Inc. on a monthly basis.
- ---------------------
(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.
(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.
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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 September 30, 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
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 all of which have
been exercised.
13
<PAGE>
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 November 17, 1999, the
Company has approximately 6,916,900 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 has been trading on the over-the-counter
market since the January 5, 1999 the same date as the acquisition Converge. The
stock is now quoted on the Pink Sheets under the symbol CVRG.
The following table sets forth the high and low bid prices for the
Company's common stock as previously 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
August 1999 2.25 3.625
September 1999 2.06 3.75
October 1999 2.00 3.50
</TABLE>
As of September 30, 1999 the high bid price of the Company's common
shares was $3.75 per share. As of September 30, 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
14
<PAGE>
B. HOLDERS
As of August 9, 1999, there were approximately 15 holders of Company
Common Stock, and 120 street holders of the Company stock, as reported by the
Company's transfer agent. There are 6,916,900 restricted shares outstanding as
of November 17, 1999. There have been no "piggy back" or "demand" registration
rights granted to any shareholders.
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.
15
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The following financial statements are included herein:
Unaudited Consolidated Financial Statements for the Nine Months Ended
September 30, 1999 and September 30, 1998
PART III
ITEM 1 AND
ITEM 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Document Description
- ----------- --------------------
<S> <C>
*3.1 Certificate of Incorporation of Mormon Mint, Inc., a Utah corporation,
dated October 4, 1985
*3.2 Amendment to Articles of Incorporation with the name change to Capital
Placement Specialists, Inc., dated December 4, 1997
*3.3 Amendment to Articles of Incorporation with name change to Converge
Global, Inc., dated January 28, 1999
*3.4 Bylaws of Converge Global, Inc., dated January 19, 1999
3.5 Amendment to Articles of Incorporation of Gearz.com with the name
change to Digitalmen.com filed on December 7, 1999
*10.1 Sub-Lease Agreement, dated February 1, 1999 (to be filed by amendment)
*10.2 Acquisition Agreement, dated January 5, 1999
*10.3 Employment Agreement for Imran Husain dated February 1, 1999
*10.4 Employment Agreement for Samar Khan dated February 1, 1999
*10.5 1999 Incentive & Nonstatutory Stock Option Plan dated January 6, 1999
16 Opinion Letter from Barry L. Friedman, Certified Public Accountant
21 List of Subsidiaries of Small Business Issuer
27 Financial Data Schedule
</TABLE>
"*" Previously filed
16
<PAGE>
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
- ------------------------------- and Director December 27, 1999
Imran Husain
/s/ Samar Khan Secretary and Treasurer
- ------------------------------- and Director December 27, 1999
Samar Khan
/s/ Reza Rahman Director December 27, 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
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Deficit 5-6
Consolidated Statements of Cash Flows 7-8
Notes to Consolidated Financial Statements 9-16
</TABLE>
<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, 1998, 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.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
June 16, 1999
2
<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 $ 144,647
Loan payable, related party 17,000
---------
Total current liabilities 161,647
---------
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 (714,617) (114,170)
--------- ----------
Total stockholders' deficit (364,567) -
--------- ----------
$ 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 598,517 - - 26,110 714,687
----------- ----------- ---------- ----------- ------------
LOSS BEFORE INCOME TAXES AND EQUITY
IN LOSSES OF MEDCOM NETWORK, INC (592,647) - - (26,110) (708,817)
INCOME TAXES 800 - - - 800
EQUITY IN LOSSES OF MEDCOM
NETWORK, INC (7,000) - - - -
----------- ----------- ---------- ----------- ------------
NET LOSS $ (600,447) $ - $ - $ (26,110) $ (709,617)
----------- ----------- ---------- ----------- ------------
----------- ----------- ---------- ----------- ------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic and diluted 8,918,100 8,918,100 8,918,100 8,918,100 8,918,100
----------- ----------- ---------- ----------- ------------
----------- ----------- ---------- ----------- ------------
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 STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Deficit
accumulated
Common stock Additional during Total
Common stock subscriptions paid-in Treasury development stockholders'
Shares Amount receivable capital stock stage deficit
----------- -------- ------------- ----------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock in
exchange for services received
since inception on October 4, 1985
to December 31, 1996 2,079,000 $ 2,079 $ - $ 85,981 $- $ (88,060) $ -
Issuance of common stock in
exchange for services received 261,100 261 - 25,849 - - 26,110
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) -
--------- --------- ----- --------- ----- --------- --------
</TABLE>
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 STOCKHOLDERS' DEFICIT (CONTINUED)
<TABLE>
<CAPTION>
Deficit
accumulated
Common stock Additional during Total
Common stock subscriptions paid-in Treasury development stockholders'
Shares Amount receivable capital stock stage deficit
----------- -------- ------------- ----------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions of shares to
treasury stock (Note 1) (2,340,100) - - - (2,340) - -
Distribution of shares from
treasury (Note 1) 2,340,100 - - - 2,340 - -
Issuance of common stock in
exchange for services received 78,000 78 - 702 - - 780
Exercise of employee stock options 2,000,000 2,000 (2,000) - - - -
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
Capital contribution - - - 10,100 - - 10,100
Net loss for the nine months ended
September 30, 1999 (unaudited) - - - - - (600,447) (600,447)
--------- -------- --------- --------- ------- ---------- ----------
Balance at September 30, 1999
(unaudited) 8,918,100 $ 8,918 $ (2,000) $ 343,132 $ - $ (714,617) $ (364,567)
--------- -------- --------- --------- ------- ---------- ----------
--------- -------- --------- --------- ------- ---------- ----------
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
6
<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 $(600,447) $- $- $ (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 144,647 - - - 139,647
--------- ----- ----- --------- ----------
Total adjustments 150,480 - - 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.
7
<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.
8
<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. The Company was
awarded 1,000,000 of the 2,000,000
outstanding shares of
LiquidationBid.com, Inc. in exchange
for assets and 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.
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):
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. If management is unable to raise
additional capital and expected significant revenues do not
result in positive cash flow, the Company will not be able to
meet its obligations and will have to cease operations.
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
in accordance with SOP 97-2 "Software Revenue Recognition."
This standard requires revenue recognition as services are
performed over the life of a long-term contract and upon
delivery of the product under a short-term 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.
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)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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.
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.
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)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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 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) DUE FROM RELATED PARTY (UNAUDITED):
Due from related party represents short-term loans to the officers of
the Company. The amounts are non-interest bearing, unsecured and due on
demand.
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)
(3) 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.
(4) INVESTMENT IN MEDCOM NETWORK, INC. (UNAUDITED):
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. Medcom
Network, Inc. was incorporated on June 11, 1999 and does not expect to
recognize revenue until December 1999. As of September 30, 1999, Medcom
Network, Inc. had no sales, cost of sales or gross profit, resulting in
a loss from continuing operations and net loss of $31,216. The
Company's share of the investee's net loss of approximately $7,000 is
reflected in the accompanying financial statements.
(5) 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 interest 5,000
Accrued legal 1,880
---------
$ 144,647
---------
---------
</TABLE>
There were no accrued expenses for the years ended December 31, 1998
and 1997.
(6) 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. Interest expense amounted to $5,000, and is
included in accrued expenses.
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)
(7) 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 at $0.01 per share, 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.
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.
See accompanying independent auditors' report.
14
<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)
(7) STOCKHOLDERS' DEFICIT (UNAUDITED), CONTINUED:
EMPLOYEE STOCK OPTION PLAN, CONTINUED
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:
<TABLE>
<S> <C>
Expected life 1 month
Risk-free interest rate 6.00%
Dividend yield -
Volatility 100%
</TABLE>
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>
SHARES ISSUED IN EXCHANGE FOR SERVICES
Shares issued in exchange for services were valued at the cost of the
services rendered, which was the most readily determinable at that
time.
See accompanying independent auditors' report.
15
<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) 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).
(9) 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.
16
<PAGE>
Exhibit 3.5
Amendment to Articles of Incorporation for Gearz.com
--------
A0535658
--------
---------------------
ENDORSED-FILED
in the office of the
CERTIFICATE OF AMENDMENT Secretary of State of
OF California
ARTICLES OF INCORPORATION DEC - 7 1999
BILL JONES,
Secretary of State
---------------------
The undersigned certify that:
1. They are the president and secretary of GEARZ.COM, INC., a
California corporation.
2. Article I of the Articles of Incorporation of this corporation is
amended to read as follows:
I.
The name of the corporation is DIGITALMEN.COM, INC.
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the board of directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902,
California Corporations Code. The total number of outstanding shares of the
corporation is 1,000,000. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was more
than 50%.
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of my own knowledge.
DATE: November 3, 1999
/s/
----------------------------
Imran Husain , President
/s/
----------------------------
Samar Khan, Secretary
[SEAL]
<PAGE>
Exhibit 16
Opinion Letter
July 9, 1998
Board of Directors
Capital Placement Specialists, Inc.
Las Vegas, NV
INDEPENDENT AUDITORS' REPORT
I have audited the accompanying Balance Sheets of Capital Placement
Specialists, Inc., (Formerly Mormon Mint, Inc.,), (A Development Stage
Company), as of June 30, 1998, December 31, 1997, and December 31, 1996, and
the related statements of operations, stockholders equity and cash flows for
period January 1, 1998 to June 30, 1998, and the two years ended December 31,
1997, and December 31, 1996. These financial statement are the responsibility
of the Company's management. My responsibility is to express an opinion on
these financial statements based on my audit.
I conducted my 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 statement 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. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Capital Placement
Specialists, Inc., (Formerly Mormon Mint, Inc.), (A Development Stage
Company), as of June 30, 1998, December 31, 1997, and December 31, 1996, and
the results of its operations and cash flows for the period January 1, 1998
to June 30, 1998, and for the two years ended December 31, 1997, and December
31, 1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note 3.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Barry L. Friedman
Certified Public Accountant
<PAGE>
Exhibit 21
List of Subsidiaries of Small Business Issuer
1. Liquidationbid.com 50% Shareholder
2. Digitalmen.com 100% Shareholder
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS YEAR YEAR
<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> 161,647 0 0 0
<BONDS> 250,000 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 8,918 2,340 2,340 0
<OTHER-SE> (373,485) (2,340) (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> 605,517 0 0 26,110
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 5,000 0 0 0
<INCOME-PRETAX> (599,647) 0 0 (26,110)
<INCOME-TAX> 800 0 0 0
<INCOME-CONTINUING> (600,447) 0 0 (26,110)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (600,447) 0 0 (26,100)
<EPS-BASIC> (0.07) 0 0 0
<EPS-DILUTED> (0.07) 0 0 0
</TABLE>
