<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 6
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
CONVERGE GLOBAL, INC.
---------------------
(Name of Small Business Issuer in its charter)
Utah 87-0426858
- -------------------------- --------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
233 Wilshire Boulevard, Suite 930, Santa Monica, California 90401
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(310) 434-1974
------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
<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)
1
<PAGE>
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 2,340,100 shares. Bekam subsequently
spun off the company by contributing the shares to the treasury of the
Company for redistribution to select investors of Bekam. The Company then
changed its name to 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.
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.
2
<PAGE>
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. For information on products and services that the site will be offering,
please visit out web site and click on liquidationbid.com.
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 will
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. To
obtain information on products and services that the site will be offering,
please visit out web site and click on Desitv.com.
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 inputting different passwords.
We have mentioned Essential Tec, as a division which is briefly described
under the "company" section.
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.)
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, 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.
3
<PAGE>
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.
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.
4
<PAGE>
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 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
5
<PAGE>
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:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
(UNAUDITED) (AUDITED)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue 5,870 --- --- ---
- --------------------------------------------------------------------------------------------------------------------
Cost of revenue --- --- --- ---
- --------------------------------------------------------------------------------------------------------------------
Gross profit 5,870 --- --- ---
- --------------------------------------------------------------------------------------------------------------------
General, administrative, and selling expenses 611,517 --- --- $26,110
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (605,647) --- --- (26,110)
- --------------------------------------------------------------------------------------------------------------------
Interest expense 5,000 --- --- ---
- --------------------------------------------------------------------------------------------------------------------
Equity in Losses of Medcom Network, Inc. 7,000 --- --- ---
- --------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes (617,647) --- --- (26,110)
- --------------------------------------------------------------------------------------------------------------------
Taxes on income 800 --- --- ---
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $618,447 --- --- $(26,110)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</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.
6
<PAGE>
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.
General Administrative and Selling Expenses:
<TABLE>
<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
</TABLE>
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.
7
<PAGE>
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.
FISCAL YEAR ENDED DECEMBER 31, 1998 (AUDITED) AS COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1997 (AUDITED)
REVENUES.
None.
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 or 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 had neither a net loss or net income for year ended
December 31, 1998, as compared to net loss of $26,110 for year ended December
31, 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.
8
<PAGE>
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 severely and adversely
affected.
As of September 30, 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. Funding to take place on April
15, 2000. 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.
As of February 10, 2000 the price of the stock was $2.00 bid. 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 the company 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 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 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.
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.
9
<PAGE>
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.
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.
10
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Title of Names and Amount and Percent of Outstanding
Class Address of Nature of Common Stock Beneficially Owned
Beneficial Beneficial -------------------------------
Owner Ownership
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Common Imran Husain 1,000,000(1) 11%
Shares 10560 Wilshire Boulevard Director/
Unit No. 704 Officer
Los Angeles, CA 90024
Common Samar Khan 1,000,000(2) 11%
Shares 1233 San Vicente Boulevard Secretary/
Santa Monica, CA 90401 Treasurer
Common Reza Rahman 25,000 .002%
Shares 6917 Valley View Lane, 254 Director
Irving, TX 75039
Common Montaque Securities 4,000,000 45%
Shares International, Ltd.
Mr. Owen Bethal
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 22%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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>
- ---------------
(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.
11
<PAGE>
IMRAN HUSAIN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR: Converge
Global, Inc., a publicly traded company, nominated Mr. Husain as its
President and CEO since 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. Ms. Khan was unemployed during the years 1996-1998.
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. 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 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
1999 fiscal year by those persons who are the Company's officers and
directors.
<TABLE>
<CAPTION>
Name and Annual Compensation Long Term Compensation
Principal Position Stock Options
Bonuses / Other
---------------------------------------------------------------------------------------------
<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
- ----------
</TABLE>
(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.
12
<PAGE>
<TABLE>
<S> <C> <C> <C>
Reza Rahman $ -0- Stock Options -0-
Director
------
$ 120,000
</TABLE>
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
On November 1, 1999, a member of the Board of Directors of the Company,
Imran Husain, provided the Company with a line of credit in the amount of
$250,000. The line of credit is interest free, unsecured and the Company can
draw against it at any time. The entire balance is due on January 1, 2003.
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 2,340,100 shares. Bekam subsequently spun off the Company by
contributing the shares to the treasury of the Company for redistribution to
select investors of Bekam. 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 exercisable within five
(5) years from February 1, 1999, at an exercise price of $0.001 per share.
All 2,000,000 options granted to the current officers and directors have been
exercised.
The Company entered into a loan agreement with Verifica International,
Inc. ("Verifica") on May 5, 1999 in the amount of $250,000. The loan is due
on April 15, 2002 and has an annual interest rate of 7.5% on the outstanding
principal. The beneficial owner of Verifica is the father of the Company's
CEO, Mr. Hussain.
The Company entered into a sublease agreement with Manhattan West, Inc.,
a related party through common ownership on February 1, 1999. The beneficial
owner of Manhattan West Inc is Tariq Khan the husband of Ms. Samar Khan, and
officer, director and shareholder of the Company. 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. The Company believes
the terms of the sublease were at fair market value and the transaction was
at arms length.
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 8,918,100 shares were outstanding as of January 18, 2000.
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."
13
<PAGE>
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, 2,340,100 shares, to the treasury of the
Company for distribution to investors.
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.
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 January 18, 2000, the
Company has approximately 8,918,100 issued and outstanding shares. Management
and insider holdings comprise approximately 22% 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.
14
<PAGE>
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
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.
15
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
To the best knowledge of management, there are no legal proceedings
pending or threatened against the Company.
ITEM 3. ACCOUNTANTS
(1) DISMISSAL OF PRINCIPAL ACCOUNTANTS
The Company dismissed its former accountants, Barry L. Friedman, CPA
("Former Accountants") on April 30, 1999 as its principal accountants. The
principal accountant's report on the financial statements for either of the
past two years ending December 31, 1997 and December 31, 1996 contained no
adverse opinion or a disclaimer of opinion. The decision to change principal
accountants of the Company was approved by the Board of Directors of the
Company.
During the Company's year ended December 31, 1997, December 31,
1996, June 30, 1998 and through the dismissal of the Former Accountants on
April 30, 1999, there were no disagreements with the Former Accountants on
any matter of accounting principals or practices, financial statement
disclosures, or auditing scope or procedure. There is nothing to report under
Item 304 (a) (1) (iv) (B) through (E).
(2) ENGAGEMENT OF NEW PRINCIPAL 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. Stonefield replaced Former Accountants and
conducted the Audit for the fiscal year 1998. Neither the Company nor anyone
on is behalf has consulted Stonefield during the two most recent fiscal years
regarding any matter for which reporting is required under Regulation S-B,
Item 304 (a)(2)(I) or (ii) and the related instructions. The decision to
engage Stonefield 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 January 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.
On January 19, 2000, the Company executed a convertible preferred
promissory note in the amount of $200,000 with Knightrider Investments, Ltd.
Funding to take place on April 15, 2000. 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. As of February 10, 2000 the price of the stock was
$2.00 bid. 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.
16
<PAGE>
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.
17
<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
- --------------------------------
<C> <S>
*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
*10.6 Promissory Note between Converge Global, Inc. and Knightrider Investments
Ltd., dated January 19, 2000
*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
18
<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 February 17, 2000
Imran Husain
/s/ Samar Khan Secretary and Treasurer
- ------------------------ and Director February 17, 2000
Samar Khan
/s/ Reza Rahman Director February 17, 2000
- ------------------------
Reza Rahman
</TABLE>
19
<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>
2
<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
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors July 9,1998
Capital Placement Specialists, Inc.
Las Vegas, Nevada
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 statements 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 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. 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 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
Las Vegas, Nevada
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 361,132 111,830
Deficit accumulated during development stage (732,617) (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 611,517 - - 26,110 725,687
-------------- -------------- --------------- ------------- --------------
LOSS FROM OPERATIONS (605,647) - - 26,110 (719,817)
INTEREST EXPENSE 5,000 - - - 5,000
-------------- -------------- --------------- ------------- --------------
-------------- --------------- -------------
LOSS BEFORE INCOME TAXES AND EQUITY
IN LOSSES OF MEDCOM NETWORK, INC. (610,647) - - (26,110) (724,817)
INCOME TAXES 800 - - - 800
EQUITY IN LOSSES OF MEDCOM
NETWORK, INC. (7,000) - - - (7,000)
-------------- -------------- --------------- ------------- --------------
-------------- --------------- -------------
NET LOSS $ (618,447) $ - $ - (26,110) $ (732,617)
-------------- -------------- --------------- ------------- --------------
-------------- -------------- --------------- ------------- --------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic and diluted 7,600,374 2,340,100 2,340,100 2,340,100 7,600,374
-------------- -------------- --------------- ------------- --------------
-------------- -------------- --------------- ------------- --------------
NET LOSS PER SHARE:
Basic and diluted $ (0.08) $ - $ - (0.01) $ (0.10)
-------------- -------------- --------------- ------------- --------------
-------------- -------------- --------------- ------------- --------------
</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
Issuance of options under stock
option plan - - - 18,000 - - 18,000
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) - - - - - (618,447) (618,447)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at September 30, 1999
(unaudited) 8,918,100 $ 8,918 $ (2,000) $ 361,132 $ - $ (732,617) $ (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>
Nine months Nine months Year ended
ended ended December 31,
September 30, 1999 September 30, 1998 1998
------------------ ------------------ ----
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (618,447) $ - $ -
--------------- --------------- ---------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 2,242 - -
Services in exchange for common stock 780 - -
Loss on investment 7,000 - -
Issuance of options under stock option plan 18,000 - -
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN ASSETS -
increase in due from related party (4,189) - -
INCREASE IN LIABILITIES -
increase in accrued expenses 144,647 - -
--------------- --------------- ---------------
Total adjustments 168,480 - -
--------------- --------------- ---------------
Net cash used for operating activities (449,967) - -
--------------- --------------- ---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments to acquire property and equipment (21,133) - -
Investment in Medcom Network, Inc. (30,000) - -
--------------- --------------- ---------------
Net cash used for investing activities (51,133) - -
--------------- --------------- ---------------
<CAPTION>
Period from
inception of
Year ended operations on
December 31, October 4, 1985 to
1997 September 30, 1999*
---- ------------------
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (26,110) $ (732,617)
------------- -------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization - 2,242
Services in exchange for common stock 26,110 114,950
Loss on investment - 7,000
Issuance of options under stock option plan - 18,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN ASSETS -
increase in due from related party - (4,189)
INCREASE IN LIABILITIES -
increase in accrued expenses - 144,647
------------- -------------
Total adjustments 26,110 282,650
------------- -------------
Net cash used for operating activities - (449,967)
------------- -------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments to acquire property and equipment - (21,133)
Investment in Medcom Network, Inc. - (30,000)
------------- -------------
Net cash used for investing activities - (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
--------------- -------------- ------------- ------------- -------------
--------------- -------------- ------------- ------------- -------------
Issuance of options under stock
option plan $ 18,000 $ - $ - $ - $ 18,000
--------------- -------------- ------------- ------------- -------------
--------------- -------------- ------------- ------------- -------------
</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
2,340,100 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 (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
inter-company accounts and transactions have been eliminated in
consolidation.
<TABLE>
<CAPTION>
Percent of
Subsidiary Ownership Description
---------- --------- -----------
<C> <C> <S>
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 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 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
upon delivery of the product.
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 computes net loss per share following SFAS No. 128,
"Earnings Per Share". Under the provisions of SFAS No. 128, basic
net income (loss) per share is computed by dividing the net
income (loss) available to common shareholders for the period by
the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share is computed by
dividing the net income (loss) for the period by the weighted
average number of common and common equivalent shares outstanding
during the period. Common equivalent shares are not included in
the computation of diluted loss per share for the periods
presented because the effect would be anti-dilutive.
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.
(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.
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)
(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. Accordingly, $18,000 has been recognized as compensation
expense relating to the options granted during the nine months ended
September 30, 1999.
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 $ (618,447)
Proforma net loss $ (622,447)
Basic and diluted historical loss per share $ (.08)
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
<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-31-1999 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 0 2,340 0
<OTHER-SE> (373,485) 0 (2,340) 0
<TOTAL-LIABILITY-AND-EQUITY> 47,080 0 0 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> 5,870 0 0 0
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 611,517 0 0 26,110
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 5,000 0 0 0
<INCOME-PRETAX> (617,647) 0 0 (26,110)
<INCOME-TAX> 800 0 0 0
<INCOME-CONTINUING> (618,447) 0 0 (26,110)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (618,447) 0 0 (26,110)
<EPS-BASIC> (0.08) 0 0 (0.01)
<EPS-DILUTED> (0.08) 0 0 (0.01)
</TABLE>
