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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A2
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1999
( ) For the transition period from __________ to __________
Commission file number: 0-27039
CONVERGE GLOBAL, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0426858
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
233 WILSHIRE BOULEVARD, SUITE 930, SANTA MONICA, CALIFORNIA 90401
(Address of principal executive offices) (Zip Code)
(310) 434-1974 (310) 656-3055
(Issuer's telephone/facsimile numbers, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
------ ------
The issuer had 6,916,900 shares of its $.001 par value Common Stock
issued and outstanding as of November 19, 1999.
Transitional Small Business Disclosure Format (check one)
Yes No X
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CONVERGE GLOBAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
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PAGE NO.
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Item 1. Financial Statements
Consolidated Balance Sheet as of September 30, 1998 3
Comparative Unaudited Consolidated Statements of
Operations for the Three Months Ended September
30, 1999 and 1998 4
Comparative Unaudited Consolidated Statements of
Cash Flow for the Three Months Ended September 30,
1999 and 1998 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 11
(b) Reports on Form 8-K 11
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CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET - SEPTEMBER 30, 1999
(UNAUDITED)
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<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,000
Due from related party 4,189
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Total current assets
5,189
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PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 18,891
INVESTMENT IN MEDCOM NETWORK, INC. 23,000
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$ 47,080
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----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accrued expenses $ 144,647
Loan payable, related party 17,000
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Total current liabilities 161,647
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NOTE PAYABLE 250,000
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STOCKHOLDERS' DEFICIT:
Common stock; $0.001 par value, 50,000,000 shares
authorized, 8,918,100 shares issued and outstanding 8,918
Common stock subscriptions receivable (2,000)
Additional paid in capital 361,132
Deficit accumulated during development stage (732,617)
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Total stockholders' deficit (364,567)
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$ 47,080
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CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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PERIOD FROM INCEPTION
NINE MONTHS ENDED THREE MONTHS ENDED OF OPERATIONS ON
SEPTEMBER 30 SEPTEMBER 30 OCTOBER 4, 1985 TO
1999 1998 1999 1998 SEPTEMBER 30, 1999
---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 5,870 $ - $ - $ - $ 5,870
COST OF REVENUES - - - - -
----------- ----------- ----------- ----------- -----------
GROSS PROFIT 5,870 - - - 5,870
----------- ----------- ----------- ----------- -----------
SELLING, GENERAL AND ADMINISTRATIVE 611,517 - 260,597 - 725,687
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (605,647) - (260,597) - (719,817)
----------- ----------- ----------- ----------- -----------
INTEREST EXPENSE 5,000 - 5,000 - 5,000
----------- ----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES AND EQUITY IN
LOSSES OF MEDCOM NETWORK, INC (610,647) - (265,597) - (724,817)
----------- ----------- ----------- ----------- -----------
INCOME TAXES 800 - - - 800
----------- ----------- ----------- ----------- -----------
EQUITY IN LOSSES OF MEDCOM NETWORK, INC 7,000 - 7,000 - 7,000
----------- ----------- ----------- ----------- -----------
NET LOSS $ (618,447) $ - $ (272,597) $ - $ (732,617)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic and diluted 7,600,374 2,340,100 7,600,374 2,340,100 7,600,374
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET LOSS PER SHARE:
Basic and diluted $ (0.08) $ - $ (0.04) $ - $ (0.10)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
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CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
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PERIOD FROM INCEPTION
NINE MONTHS ENDED NINE MONTHS ENDED OF OPERATIONS ON
SEPTEMBER 30 SEPTEMBER 30 OCTOBER 4, 1985 TO
1999 1998 SEPTEMBER 30, 1999
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<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (618,447) $ - $ (732,617)
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 - 114,950
Loss on investment 7,000 - 7,000
Issuance of options under stock option plan 18,000 - 18,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN ASSETS -
increase in due to related party (4,189) - (4,189)
INCREASE IN LIABILITIES -
increase in accrued expenses 144,647 - 144,647
--------------- ---------- ---------------
Total adjustments 168,480 - 282,650
--------------- ---------- ---------------
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, Inc. (30,000) - (30,000)
--------------- ---------- ---------------
Net cash used for investing activities (51,133) - (51,133)
--------------- ---------- ---------------
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 - - -
--------------- ---------- ---------------
CASH, end of period 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 $ - $ 114,950
--------------- ---------- ---------------
--------------- ---------- ---------------
Issuance of options under stock option plan $ 18,000 $ - $ 18,000
--------------- ---------- ---------------
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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 ability of the
company and its resources to continue.
PLAN OF OPERATIONS
The Company's cash requirements for the next twelve months are
approximately at $40,000 per month. With the line of credit from the director,
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 (please see Results of Operation). 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 twelve 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.
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 was investment capital provided by third parties. As a result, to
cover expenses that
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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. Funding is to take place on April 15, 2000.
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 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 years indicated, selected financial
information for the Company:
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.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company had $611,517 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 for salaries, rent,
general office expenses as well as compensation for services of Jeff Cohn of
Cohn Partners who 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. Also included in general and
administrative expenses for the period ended September 30, 1999 is $18,000 of
compensation expense recognized in relation to stock options granted under the
Employee Stock Option Plan.
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<TABLE>
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General Administrative and Selling 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 227,278
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 44,552
Total $611,517
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INTEREST EXPENSE.
The Company recorded $5,000 in interest expense for the period ending
September 30, 1999 on a $250,000 Note with a 7.5% interest per annum as opposed
to no expense for the same period last year.
OTHER EXPENSE.
Since the date of acquisition in June, 1999 through September 30, 1999
Medcom Network, Inc. had no sales, costs of sales, gross profit, resulting in a
loss from continuing operations and a net loss of $31,216. the Company's share
of the investee's net loss of approximately $7,000 for this period is reflected
in the financial statements. For the period ended September 30, 1998, there was
no investment in Medcom Network, Inc. (see footnote #4 to the financial
statements).
INCOME (LOSS) BEFORE TAXES.
The Company experienced a $617,647 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) after taxes for the same period in 1998
since the Company was not in operation at that time.
TAXES ON INCOME.
The Company experienced $800 in income tax for the nine months ended
September 30, 1999, and no such tax for the same period in 1998.
NET INCOME/LOSS.
The Company experienced a net loss of $618,447 for the nine months
ended September 30, 1999 as compared to neither a net loss or gain for the same
period in 1998.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures and
operating expenses, including labor costs and compensation as well as funding
of accounts receivable. The Company's primary sources of cash have been from a
note payable. For the fiscal year 1999, the increase in expense and decrease in
cash was attributable to an increase in payable driven by business growth with
decrease in cash resulting from greater capital expenditures, for acquisitions
and operating expenses.
There were no accounts receivable this quarter ending September 30, 1999, as
compared with the same amount for quarter ending September 30, 1998.
The Company's current plans require additional capital expenditures for the
remainder of the year of approximately $40,000 per month. Year to date, the
Company has expended approximately $500,000. The Company believes conducting
private placements will generate sufficient capital to finance its operations
and anticipated capital expenditures through fiscal 2000.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the best knowledge of management and the Company's counsel, there
is no material litigation pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
(27) Financial Data Schedule
(b) REPORTS ON FORM 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONVERGE GLOBAL, INC.
(Registrant)
Date: February 16, 2000 /s/ Imran Husain
-------------------------------------
IMRAN HUSAIN
President, Chief Financial Officer
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<ARTICLE> 5
<CIK> 0001078799
<NAME> CONVERGE GLOBAL, INC.
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998 SEP-30-1999 SEP-30-1998
<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 0 0 0
<OTHER-SE> (373,485) 0 0 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> 611,517 0 (260,597) 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 5,000 0 5,000 0
<INCOME-PRETAX> (617,647) 0 (272,597) 0
<INCOME-TAX> 800 0 0 0
<INCOME-CONTINUING> (618,447) 0 (272,597) 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (618,447) 0 (272,597) 0
<EPS-BASIC> (0.08) 0 (0.04) 0
<EPS-DILUTED> (0.08) 0 (0.04) 0
</TABLE>
