<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
COMMISSION FILE NUMBER 000-27039
CONVERGE GLOBAL, INC.
---------------------
(Exact name of small business issuer as specified in its charter)
UTAH 87-0426858
------------ ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
233 Wilshire Boulevard, Suite 930, Santa Monica, CA 90401
---------------------------------------------------------
(Address of principal executive offices)
(310) 434-1974
--------------
(Issuer's telephone number)
N/A
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of May 1, 2000, the number of shares of Common Stock issued and outstanding
was 8,928,170.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2000 1
Condensed Consolidated Statement of Operations - For the three months ended
March 31, 2000 and 1999 2
Condensed Consolidated Statement of Cash Flows - For the three months ended
March 31, 2000 and 1999 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET - MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS -
cash $ 343,268
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 62,213
WEBSITE DEVELOPMENT 270,000
---------
$ 675,481
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accrued expenses $ 233,965
Loans payable, officer stockholders 326,090
---------
Total current liabilities 560,055
---------
NOTE PAYABLE, RELATED PARTY 250,000
---------
MINORITY INTEREST 436,243
---------
STOCKHOLDERS' DEFICIT:
Common stock; $0.001 par value, 50,000,000 shares
authorized, 8,918,100 shares issued and outstanding 8,918
Common stock subscriptions receivable (2,000)
Additional paid in capital 361,132
Deficit accumulated during development stage (938,867)
---------
Total stockholders' deficit (570,817)
---------
$ 675,481
=========
</TABLE>
1
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
THREE MONTHS ENDED OF OPERATIONS ON
MARCH 31, OCTOBER 4, 1985 TO
2000 1999 MARCH 31, 2000
----------- ----------- --------------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ 5,870
COST OF REVENUES -- -- --
----------- ----------- -----------
GROSS PROFIT -- -- 5,870
----------- ----------- -----------
SELLING, GENERAL AND ADMINISTRATIVE 173,881 172,721 902,519
----------- ----------- -----------
LOSS FROM OPERATIONS (173,881) (172,721) (896,649)
INTEREST EXPENSE 4,687 -- 14,375
----------- ----------- -----------
LOSS BEFORE INCOME TAXES, EQUITY IN LOSSES OF
MEDCOM NETWORK, INC. AND MINORITY INTEREST (178,568) (172,721) (911,024)
----------- ----------- -----------
INCOME TAXES 800 800 1,600
EQUITY IN LOSSES OF MEDCOM NETWORK, INC -- -- 30,000
MINORITY LOSS ALLOCATION (3,757) -- (3,757)
----------- ----------- -----------
NET LOSS $ (175,611) $ (173,521) $ (938,867)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
basic and diluted 8,918,100 6,052,322 8,918,100
=========== =========== ===========
NET LOSS PER SHARE -
basic and diluted $ (0.02) $ (0.03) $ (0.11)
=========== =========== ===========
</TABLE>
2
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
THREE MONTHS ENDED THREE MONTHS ENDED OF OPERATIONS ON
MARCH 31 MARCH 31 OCTOBER 4, 1985 TO
2000 1999 MARCH 31, 2000
----------- ----------- --------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (175,611) $ (173,521) $ (938,867)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 1,345 417 4,693
Services in exchange for common stock -- 780 114,950
Loss on investment -- -- 30,000
Issuance of options under stock option plan -- 18,000 18,000
Minority interest (3,757) (3,757)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
increase in assets -
increase in accrued expenses - - -
INCREASE IN LIABILITIES -
increase in accrued expenses 8,512 65,675 233,965
----------- ----------- -----------
Total adjustments 6,100 84,872 397,851
----------- ----------- -----------
Net cash used for operating activities (169,511) (88,649) (541,016)
----------- ----------- -----------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments to acquire property and equipment (44,773) (12,500) (66,906)
Investment in Website Development (70,000) (270,000)
Investment in Medcom, Inc. -- -- (30,000)
----------- ----------- -----------
Net cash used for investing activities (114,773) (12,500) (366,906)
----------- ----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from loan payable, related parties 185,090 10,000 326,090
Proceeds from note payable, net -- -- 250,000
Proceeds from sale of securities of subsidiaries 440,000 440,000
Proceeds from issuance of common stock
and paid in capital -- 95,100 235,100
----------- ----------- -----------
Net cash provided by financing activities 625,090 105,100 1,251,190
----------- ----------- -----------
NET INCREASE IN CASH 340,806 3,951 343,268
CASH, beginning of period 2,462 -- --
----------- ----------- -----------
CASH, end of period $ 343,268 $ 3,951 $ 343,268
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Income taxes paid $ 800 $ 800 $ 800
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING
AND FINANCING ACTIVITIES:
Services rendered in exchange for common stock $ -- $ 780 $ 114,950
=========== =========== ===========
Issuance of options under stock option plan $ -- $ 18,000 $ 18,000
=========== =========== ===========
</TABLE>
3
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(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 2,340,100 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:
The accompanying financial statements include the accounts of Converge
Global, Inc. (the "Parent"), and its subsidiaries, Digitalmen.com,
Inc., Essential Tec, 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>
Digitalmen.com, Inc. 91% Digitalmen.com, Inc. (formerly
Gearz.com, Inc.) was formed on February
5, 1999 in the State of California.
During the quarter ended March 31, 2000,
Digitalmen.com, Inc. commenced three
Private Placement Offerings, which are
exempt from registration under
Regulation D of The Securities Act of
1933. Total proceeds raised during the
quarter amounted to $315,000 and is
ongoing. The offering terms are as
follows:
a. 1,000,000 shares of
Digitalmen.com, Inc.'s
restricted common stock at
$0.50 per share. The Company
sold 300,000 shares for
$150,000.
</TABLE>
4
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
PRINCIPLES OF CONSOLIDATION, CONTINUED:
<TABLE>
<CAPTION>
Percent of
Subsidiary Ownership Description
---------- --------- -----------
<S> <C> <C>
b. 1,000,000 warrants of
Digitalmen.com at $0.30 per
warrant which maybe exercised
at $2.50 per share to acquire
one share of common stock for
each warrant. The Company sold
sold 416,666 warrants for
$125,000.
c. 1,000,000 shares of
Digitalmen.com, Inc.'s
restricted common stock at
$3.50 per share. The Company sold
11,429 shares for $40,000.
Essential Tec, Inc. 92% Essential Tec, Inc. was formed in the
State of California during 1999. During
the Quarter ended March 31, 2000,
Essential Tec, Inc. commenced three
Private Placement Offerings, which are
exempt from registration under
Regulation D of The Securities Act of
1933. Total proceeds from amounted to
$125,000 as of March 31, 2000 and is
ongoing. The offering terms are as
follows:
a. 1,000,000 shares of Essential
Tec, Inc.'s restricted common
stock at $0.50 per share. The
Company sold 250,000 shares for
$125,000.
b. 1,000,000 warrants of
Essential Tec, Inc. at $0.30
per warrant which maybe
exercised at $1.00 per share
to acquire one share of common
stock for each warrant.
c. 1,000,000 shares of Essential
Tec, Inc.'s restricted common
stock at $1.50 per share.
</TABLE>
5
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
PRINCIPLES OF CONSOLIDATION, CONTINUED:
<TABLE>
<CAPTION>
Percent of
Subsidiary Ownership Description
---------- --------- -----------
<S> <C> <C>
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
the rights to services. No value has
been assigned to these future rights,
and therefore, there is no cost basis in
this investment. 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
quarter ended March 31, 2000.
</TABLE>
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 year 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.
6
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
BASIS OF PREPARATION:
The accompanying unaudited condensed consolidated interim financial
statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission for the
presentation of interim financial information, but do not include all
the information and footnotes required by generally accepted
accounting principles for complete financial statements. The audited
consolidated financial statements for the two years ended December 31,
1999 was filed on April 14, 2000 with the Securities and Exchange
Commission and is hereby referenced. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31,
2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion and financial statements contained herein are for the
quarters ended March 31, 2000 and 1999. The following discussion regarding the
financial statements of the Company should be read in conjunction with the
financial statements of the Company included herewith.
OVERVIEW
The Company's business is focused in the globally emerging electronic
commerce ("e-commerce") industry.
(A) PLAN OF OPERATIONS
The Company's cash requirements for the next twelve months are
approximately $40,000 per month. With a $250,000 line of credit recently
granted by a director (see "Certain Relationships and Related Transactions"),
the Company has been able to continue its operations for approximately six
months. The Company has also been able to secure $200,000 in convertible debt
financing to continue its operations (see "Results of Operations").
Digitalmen.com, a subsidiary of the company, commenced three private
placement offerings in the quarter ended March 31, 2000, under Regulation D
of the Securities Act 1933. Total proceeds raised during the quarter amounted
to $315,000. Essential Tec, Inc., raised under Regulation D, $125,000 during
the quarter ended March 31, 2000. While there is no assurance the Company
will be successful in raising additional capital, the Company is actively
seeking both institutional debt and private equity financing to assure that
it will be capable of financing the continuation of the business. Any
additional capital raised above and beyond what the Company needs as its
monthly expenditure would be used in increasing marketing and sales efforts
of the Company's Web sites. Should the Company fail to raise additional
funding, it will be forced to curtail its growth, cut back by reducing the
number of employees or even cease operations altogether.
The Company does not anticipate any new research and development to
be conducted in the near future. In the event there is a need for research
and development, the Company believes that its current work force is capable
and equipped to conduct such research and development internally. The Company
does not anticipate any purchase or sale of plant and/or equipment nor does
the management anticipate any increase in the number of employees.
The Company recently launched its first Web site, Digitalmen.com.
The Company's future development plans for DigitalMen are tied to raising
additional capital. The additional capital would be allocated to hiring
additional Web content staff as well as promotion and marketing personnel.
Should the Company be unsuccessful in raising the capital needed, it will
continue to update the site with its existing staff but will not be able to
promote or market the site. During the next nine months, the Company plans to
complete LiquidationBid.com, Machmail.com and Desitv.com. The estimated cost
to develop these products will be minimal as the current staff of developers
and engineers of the Company are working to develop and launch these
products. LiquidationBid, Machmail, and Desitv can all be built within the
monthly budget listed.
(B) RESULTS OF OPERATIONS
The Company has generated minimal revenues and does not anticipate
generating any material revenues in the near future. Currently, the Company's
only cash requirements are for rent, general overhead and salaries. The
8
<PAGE>
Company's sole source of capital during the quarter ended March 31, 2000, was
investment capital provided by third parties. As a result, to cover expenses
that arise, on November 1, 1999 the Company's director provided an unsecured
line of credit to the Company to draw upon, interest free, in the amount of
$250,000 to be payable by January 1, 2003. The Company has drawn on the line
of credit in January 2000 ($60,000), December 1999, ($39,000) and November
1999 ($50,000). On May 5, 1999, the Company executed a promissory note with
holder, Verifica International, Ltd., in the amount of $250,000. The note
pays interest at an annual rate of 7.5% on the outstanding balance and is due
on April 15, 2002. In addition, on January 19, 2000, the Company executed a
convertible preferred promissory note in the amount of $200,000 with
Knightrider Investments Ltd. The note is payable within one year with an 8%
annual interest. Should the Company fail to pay the principal and interest,
the outstanding balance will be converted into restricted shares at a 30%
discount based on the market price as traded on the previous day's close.
According to the Company's plan, this additional infusion of capital will
allow the Company to operate at its current cost rate of $40,000 per month
well into September 2000. For the most part, the Company doesn't anticipate
any changes in the number of employees or equipment. The Company does not
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 seek 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. In the event the Company does not attract
such capital, and 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 the Company's auditors as to
the Company's ability to continue as a going concern.
The following table sets forth, for the periods indicated, selected financial
information for the Company:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
QUARTER ENDED
MARCH 31
- -----------------------------------------------------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Total revenue $ -- $ --
- -----------------------------------------------------------------------------------------
Cost of revenue -- --
- -----------------------------------------------------------------------------------------
Gross profit -- --
- -----------------------------------------------------------------------------------------
General, administrative, and selling expenses 173,881 172,721
- -----------------------------------------------------------------------------------------
Income (loss) from operations (173,881) (172,721)
- -----------------------------------------------------------------------------------------
Interest expense 4,687 --
- -----------------------------------------------------------------------------------------
Income (loss) before taxes (178,568) (172,721)
- -----------------------------------------------------------------------------------------
Income Taxes (800) (800)
- -----------------------------------------------------------------------------------------
Minority Loss allocation 3,757 --
- -----------------------------------------------------------------------------------------
Net income (loss) $(175,611) $(173,521)
- -----------------------------------------------------------------------------------------
</TABLE>
QUARTER ENDED MARCH 31, 2000 AS COMPARED TO QUARTER ENDED MARCH 31, 1999
REVENUES.
The Company had no revenue for either the quarter ended March 31, 2000
or the quarter ended
9
<PAGE>
March 31, 1999.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company had general, administrative and/or selling expenses of
$173,881 for the quarter ended March 31, 2000 as compared to $172,721 for the
same period in 1999.
INTEREST EXPENSE.
The Company had $4,687 of interest expenses for the quarter ended
March 31, 2000 as compared to no interest expense for the quarter ended March
31,1999.
OTHER EXPENSE.
None.
INCOME (LOSS) BEFORE TAXES.
The Company has a loss before taxes of $178,568 for the quarter
ended March 31, 2000 as compared to $172,721 for the Quarter ended March 31,
1999.
TAXES ON INCOME.
Income taxes for the quarter ended March 31,2000 and 1999 amounted
to $800.
NET INCOME/LOSS
The Company had a net loss of $175,611 for the quarter ended March
31,2000 compared to a net loss of $173,521 the quarter ended March 31,1999.
LIQUIDITY AND CAPITAL RESOURCES
In January 1999, the Company concluded an offering under Rule 504 of
Regulation D. Under this offering, the Company raised $25,000 and
additionally 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 an additional $200,000.
Digitalmen.com, a subsidiary of the company, commenced three private
placement offerings in the quarter ended March 31, 2000, under Regulation D
of the Securities Act 1933. Total proceeds raised during the quarter amounted
to $315,000. Essential Tec, Inc., under Regulation D, also raised $125,000,
during the quarter ended March 31, 2000.
The Company foresees 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 options include licenses,
joint-ventures, and even counter-trade (technologies for technologies)
mechanisms as part of this diversification methodology. The Company has not
yet engaged in any counter-trade mechanisms trading technology for
technology, licenses nor joint ventures as of the date of this filing. In
addition, there are no assurances that the Company could find adequate
partners for each of these alternatives. In the event the Company is unable
to implement such alternative methods of funding and find other sources of
capital, the operation of the business would be
10
<PAGE>
severely and adversely affected.
On May 5, 1999, the Company executed a promissory note with the
holder Verifica International, Ltd. in the amount of $250,000. The note pays
an annual interest rate of 7.5% on the outstanding balance and is due on
April 15, 2002. On November 1, 1999, the Company's director provided an
unsecured line of credit to the Company to draw upon, interest free, in the
amount of $250,000 to be payable by January 1, 2003. On January 19, 2000, the
Company executed a convertible preferred promissory note in the amount of
$200,000 with Knightrider Investments, Ltd. The note is payable back within
one year with 8% annual interest. Should the Company fail to pay the amount,
it will be converted into equity at a 30% discount to where the market was
trading on the previous days close. If the Company is unable to pay the
$200,000 debt owed under this note by the due date of April 15, 2001, then
the note holder would have the right to convert the note into 142,857 shares
(utilizing a 30% discount from the $2.00 market price); this would constitute
approximately 1.6% of the Company's present outstanding stock. The greater
the stock price at the time of conversion, the less would be the number of
shares into which the promissory note would be convertible. Conversely, the
less the stock price at the time of conversion, the greater would be the
number of shares into which the promissory note would be convertible. In the
event the stock price at the time of conversion was substantially less than
$2.00, the existing shareholders of the Company could incur substantial
dilution upon conversion of the promissory note.
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 Gearz.com, Inc. are Imran Husain and Samar Khan. The Articles
were subsequently amended on December 7, 1999, to change the name of
Gearz.com to Digitalmen.com, Inc. Such action was approved and ratified by
unanimous board of directors and shareholders.
Digitalmen.com is a 91% owned subsidiary of the Company whereby
the Company holds 3,000,000 shares of common stock of Digitalmen.com.
Digitalmen.com is a portal site geared towards men's interests. The target
group ranges from ages 18 to 45 with interests in finance, travel,
entertainment, fashion and electronics.
On April 30, 1999, the Company became a 50% shareholder of
LiquidationBid.com, Inc. ("LiquidationBid") whereby the Company holds
1,000,000 shares of common stock of LiquidationBid. Mr. Imran Husain serves
as the President and Director of LiquidationBid.
LiquidationBid 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.
11
<PAGE>
The Company is a 20% shareholder of MedCom Network, Inc. ("Medcom"),
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 in cash 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.
As of March 31, 2000 Medcom had no sales and cost of sales resulting in a
loss from continuing operations and net loss. The investment in Medcom is
recorded at no value in the financial statements as of March 31, 2000, as
required by the equity method of accounting.
Essential Tec, Inc. ("Essential Tec"), an 92% owned subsidiary of
the Company, has been formed as an information technology services Company
with an extensive technical labor force in Pakistan. Essential Tec's software
engineers are capable of providing high quality, cost-effective services to
clients in a resource-constrained environment. Essential Tec services include
e-Commerce Solutions, e-Procurement applications, auctioning engines, and
several other web based solutions. Essential Tec sells and markets its
services and products from its offices based in Santa Monica, California.
Essential Tec had no material transactions during the quarter ended March 31,
2000.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the best knowledge of management, there is no material
litigation pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended March 31, 2000, the Company's
subsidiary, Digitalmen.com, Inc. sold 416,666 warrants to purchase
shares of common stock and 311,429 shares of common stock to five
accredited investors for a total of $315,000. This transaction was
exempt from registration pursuant to Rule 506 of Regulation D of the
Securities Act of 1933.
During the quarter ended March 31, 2000, the Company's
subsidiary, Essential Tec, Inc. sold 250,000 shares of common stock to
three accredited investors for a total of $125,000. This transaction
was exempt from registration pursuant to Rule 506 of Regulation D of
the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
1. The following Exhibits are filed herein: 27.1 Financial
Data Schedule
2. Reports on Form 8-K filed: None
13
<PAGE>
SIGNATURES
In accordance with the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, duly authorized.
CONVERGE GLOBAL, INC.
DATED: May 16, 2000 By: /s/ Imran Husain
---------------------------------
Imran Husain, President and Chief
Executive Officer
By: /s/ Hamid Kabani
---------------------------------
Hamid Kabani, Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001078799
<NAME> CONVERGE GLOBAL, INC
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 343,268 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 343,268 0
<PP&E> 66,906 0
<DEPRECIATION> (4,693) 0
<TOTAL-ASSETS> 675,481 0
<CURRENT-LIABILITIES> 560,055 0
<BONDS> 250,000 0
0 0
0 0
<COMMON> 8,918 0
<OTHER-SE> (579,735) 0
<TOTAL-LIABILITY-AND-EQUITY> 675,481 0
<SALES> 0 5,870
<TOTAL-REVENUES> 0 5,870
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 173,881 172,721
<LOSS-PROVISION> (173,881) (172,721)
<INTEREST-EXPENSE> 4,687 0
<INCOME-PRETAX> (178,568) (172,721)
<INCOME-TAX> 800 800
<INCOME-CONTINUING> (175,611) (173,521)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (175,611) (173,521)
<EPS-BASIC> 0.02 0.03
<EPS-DILUTED> 0.02 0.03
</TABLE>
