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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 000-27039
CONVERGE GLOBAL, INC.
(Name of small business issuer as specified in its charter)
UTAH 87-0426858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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 REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.001 per share
Check whether Registrant (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
the Form 10-KSB. [ X ]
Registrant's revenues for its fiscal year ended December 31, 1999, were $5,870.
As of March 16, 2000, Registrant had 8,916,900 shares of its $.001 par value
Common Stock issued and outstanding with an aggregate market value of the common
stock held by non-affiliates of $10,052,000. This calculation is based upon the
closing sales price of $4.00 per share on March 9, 2000.
Transitional Small Business Disclosure Format (check one). Yes [ ] No [X]
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TABLE OF CONTENTS
<TABLE>
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PART I PAGE
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Item 1 Business 1
Item 2 Properties 5
Item 3 Legal Proceedings 5
Item 4 Submission of Matters to a Vote of Security Holders 5
PART II
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Item 5 Market for Common Equity and Related Stockholder 5
Matters
Item 6 Management's Discussion and Analysis 6
Item 7 Financial Statements 10
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 10
PART III
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Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 11
Item 10 Executive Compensation 12
Item 11 Security Ownership of Certain Beneficial Owners and
Management 13
Item 12 Certain Relationships and Related Transactions 14
PART IV
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Item 13 Exhibits and Reports on Form 8-K 15
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PART I
ITEM 1 - 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 distributing the shares to select investors of Bekam. The
Company then changed its name to Converge Global, Inc. ("Converge" or the
"Company"). The Company's common stock is currently quoted on the
over-the-counter "Bulletin Board" under the symbol: CVRG.
2. ANY BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDING
Not Applicable.
3. ANY MATERIAL RECLASSIFICATION, MERGER, CONSOLIDATION, OR
PURCHASE OR SALE OF A SIGNIFICANT AMOUNT OF ASSETS NOT IN THE ORDINARY
COURSE OF BUSINESS
See discussion in Item I, Business, A. Business Development, 1.
Form and Year of Organization above.
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 SERVICES AND THEIR MARKET
a. THE MARKET
THE INTERNET
IDC estimates that the number of users accessing the Worldwide Web will
grow from 28 million in 1996 to 175 million in 2001 and that the amount of
commerce conducted over the web will increase from approximately $2.6 billion in
1996 to $220 billion in 2001. Growth in Internet usage has been fueled by a
number of factors, including the large and growing base of personal computers
installed in the workplace and home, advances in the performance and speed of
personal computers and modems, improvements in network infrastructure, easier
and cheaper access to the Internet and increased awareness of the Internet among
consumer and trade customers.
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The emergence of the Internet as a significant communications medium is
driving the development and adoption of web content and commerce applications
that offer both convenience and value to consumers, as well as unique marketing
opportunities and reduced operating costs to business. A growing number of
consumer and trade customers have begun to conduct business on the Internet
including paying bills, booking airline tickets, trading securities and
purchasing consumer goods (e.g., personal computers, consumer electronics,
compact disks, books, groceries and vehicles). Moreover, online transactions can
be faster, less expensive and more convenient than transactions conducted
through a human intermediary.
b. PRINCIPAL PRODUCTS AND SERVICES
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.
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.
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 report.
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 our 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 our 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 opposed to going to
different locations and inputting different passwords.
Essential Tec, Inc. ("Essential Tec"), a wholly-owned subsidiary of the
Company, has been formed as an information technology services Company with an
extensive technical labor force in Pakistan. Essential Tec utilizes an extensive
offshore infrastructure to provide managed software solutions with a specific
focus on Web Related Technologies and Solutions. Essential Tec's software
engineers are capable of providing high quality, cost-effective services to
clients in a resource-constrained environment. Essential Tec's services include
e-Commerce Solutions, e-Procurement applications, auctioning engines, and
several other web based solutions. Essential Tec sells and markets its services
and products from its offices based in Santa Monica, California.
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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 and 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. Barriers to entry are minimal, allowing current and new
competitors to launch new web sites at a relatively low cost. 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 and 45. The Web site features
articles and issues that men find interesting and provides them with information
on such topics as food, health and sports. theman.com may be better financed
than Converge. The composition and identity of Converge's competitors are
constantly changing based upon marketplace conditions and changes.
The Company believes that the principal competitive factors in its
market are brand name recognition, wide selection, personalized service, ease of
use, customer service, convenience, reliability, quality of search engine tools,
and quality of editorial and other site content. Many of the Company's current
and potential competitors have longer operating histories, larger customer
bases, greater brand name recognition and significantly greater financial,
marketing and other resources than the Company. In addition, other Web sites may
be acquired by, receive investments from or enter into other commercial
relationships with larger, well-established and well-financed companies as use
of the Internet and other online services increases. Certain of the Company's
competitors may be able to devote greater resources to marketing and promotional
campaigns, and devote substantially more resources to Web site and systems
development than the Company. Increased competition may result in reduced
operating margins, loss of market share and a diminished franchise value. There
can be no assurance that the Company will be able to compete successfully
against current and future competitors, and competitive pressures faced by the
Company may have a material adverse effect on the Company's business, prospects,
financial condition and results of operations. Further as a strategic response
to changes in the competitive environment, the Company may, from time to time,
make certain service or marketing decisions or acquisitions that could have a
material adverse effect on its business, prospects, financial condition and
results of operations. New technologies and the expansion of existing
technologies may increase the competitive pressures on the Company. In addition,
companies that control access to transactions through network access or web
browsers could promote the Company's competitors or charge the Company a
substantial fee for inclusion.
The Company will consider conducting acquisitions of its competitors
and/or complementary businesses in the future, but is not contemplating any
acquisitions as of the date of this document.
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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 products includes the building of digitalmen.com which
consists of technical work consisting of HTML programming, designing database,
and programming are all completed in house by the Company's computer
programmers.
6. DEPENDENCE ON A SINGLE OR FEW CUSTOMERS
Not Applicable.
7. INTELLECTUAL PROPERTY
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.
The Company is not currently subject to direct regulation by any
domestic or foreign governmental agency, other than regulations applicable to
businesses generally, and laws or regulations directly applicable to access to
online commerce. However, due to the increasing popularity and use of the
Internet and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online services
covering issues such as user privacy, pricing, content, copyrights, distribution
and characteristics and quality of products and services. The adoption of any
additional laws or regulations may decrease the growth of the Internet or other
online services, which could, in turn, decrease the demand for the Company's
products and services and increase the Company's cost of doing business, or
otherwise have a material adverse effect on the Company's business, prospects,
financial condition and results of operations. Moreover, the applicability to
the Internet and other online services of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, libel and
personal privacy is uncertain and may take years to resolve. Any such new
legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to the Company's business, or
the application of existing laws and regulations to the Internet and other
online services could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
Permits or licenses may be required from federal, state or local
government authorities to operate on the Internet. No assurances can be made
that such permits or licenses will be obtainable. The Company may be required to
comply with future national and/or international legislation and statutes
regarding conducting commerce on the Internet in all or specific countries
throughout the world.
9. EFFECT OF ANY EXISTING OR PROPOSED GOVERNMENT REGULATIONS
See discussion in Paragraph 8, Government Approval above.
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
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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
landowner. Therefore, the Company does not anticipate that there will be any
costs associated with the compliance of environmental laws and regulations.
12. EMPLOYEES
As of the date hereof, the Company employs 8 full-time employees and 1
part-time employee. The Company hires independent contractors on an "as needed"
basis only. The Company has no collective bargaining agreements with its
employees. The Company believes that its employee relationships are
satisfactory. Long term, the Company will attempt to hire additional employees
as needed based on its growth rate.
ITEM 2 - PROPERTIES
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 3 - LEGAL PROCEEDINGS
To the best knowledge of management, there are no legal proceedings
pending or threatened against the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION
Converge has a total authorized capitalization of 50,000,000 shares of
a single class of common stock, par value $.001. As of March 16, 2000, the
Company has approximately 8,916,900 issued and outstanding shares. Management
and insider holdings comprise approximately 22% of the total issued and
outstanding shares; while the remainder is distributed amongst approximately 7
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 approximately 9 U.S. securities
firms.
The Company's Common Stock began being quoted on the over-the-counter
bulletin board system ("OTC Bulletin Board") on January 5, 1999 under the symbol
"CVRG." However, on January 13, 2000, as the Company's Form 10-SB had not yet
cleared all SEC comments, the Company's common stock was no longer eligible for
quotation on the OTC Bulletin Board, but started being quoted on the "Pink
Sheets." The Company's Form 10-SB cleared SEC comments on February 22, 2000 and
the Company's stock is now quoted on the Bulletin Board again.
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The following table sets forth the high ask and low bid prices for the
Company's common stock as 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>
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Period Reported High Ask Low Bid
<S> <C> <C>
Quarter ended March 31, 1999 $6.75 $5.00
Quarter ended June 30, 1999 5.50 2.875
Quarter ended September 30, 1999 4.00 0.5625
Quarter ended December 31, 1999 3.50 1.50
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(b) STOCKHOLDERS
As of March 16, 2000 there were approximately 9 registered and 120
street holders of record of the Company's common stock.
The Company's transfer agent is Holladay Stock Transfer, Inc., 4350
East Camelback Road, Suite 100F, Phoenix, Arizona 85018.
(c) DIVIDENDS
The Company has not paid cash dividends on its Common Stock in the past
and does not anticipate doing so in the foreseeable future. The Company
currently intends to retain future earnings, if any, to fund the development and
growth of its business.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The discussion and financial statements contained herein are for the
fiscal years ended December 31, 1998 and 1999. The following discussion
regarding the financial statements of the Company should be read in conjunction
with the financial statements of the Company included herewith.
OVERVIEW
The Company's business is focused in the globally emerging electronic
commerce ("e-commerce") industry.
(a) PLAN OF OPERATIONS
The Company's cash requirements for the next twelve months are
approximately $40,000 per month. With a $250,000 line of credit recently granted
by a director (see "Certain Relationships and Related Transactions"), the
Company has been able to continue its operations for approximately six months.
The Company has also been able to secure $200,000 in convertible debt financing
to continue its operations (see "Results of Operations"). 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.
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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.com 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.
(b) RESULTS OF OPERATIONS
The Company has generated minimal revenues and does not anticipate
generating any material revenues in the near future. Currently, the Company's
only cash requirements are for rent and salaries. 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 borrowed $141,000 against this line as of December 31, 1999 and an
additional $45,000 during January 2000. 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. The Company borrowed $140,000 against this line during January
and February 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 not
attract such capital, and is unable to generate revenues sufficient to
support its expenses, then the Company would be required to eventually
curtail or even cease operations. The Company's substantial financial losses
since its inception have raised a substantial doubt with the Company's
auditors as to the Company's ability to continue as a going concern.
The following table sets forth, for the years indicated, selected financial
information for the Company:
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YEAR ENDED
DECEMBER 31
(AUDITED)
1999 1998
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Total revenue $5870 ---
Cost of revenue --------- ---
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Gross profit $5870 ---
General, administrative, and selling expenses $614,468 ---
Income (loss) from operations ($608,598) ---
Interest expense $9688 ---
Equity in Losses of Medcom Network, Inc. $30,000 ---
Income (loss) before taxes $(648,286) ---
Taxes on income $800 ---
Net income (loss) $(649,086) ---
</TABLE>
FISCAL YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1998
REVENUES.
The Company had revenues of $5,870 for the year ended December 31, 1999
as compared to no revenues in fiscal year ended December 31, 1998.
GENERAL, ADMINISTRATIVE, AND SELLING EXPENSES.
The Company had general, administrative and/or selling expenses of
$614,468 for the year ended December 31, 1999 as compared to no selling, general
and administrative expenses generated for the same period in 1998.
INTEREST EXPENSE.
The Company had $9,688 of interest expenses for the year ended December
31, 1999 as compared to no interest expense for the year ended December 31,
1998.
OTHER EXPENSE.
None.
INCOME (LOSS) BEFORE TAXES.
The Company has a loss before taxes of $649,086 for the year ended
December 31, 1999. The Company had no income or loss before taxes for the year
ended December 31, 1998 since the Company had no revenues or expenses.
TAXES ON INCOME.
Income taxes for the year ended December 31, 1999 amounted to $800 as
compared to no taxes in 1998
NET INCOME/LOSS
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The Company had a loss of $649,086 for year ended December 31, 1999
compared to neither a net loss or net income for the year ended December 31,
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has received no venture capital investment. In January
1999, the Company concluded an offering under Rule 504 of Regulation D. Under
this offering, the Company raised $25,000 and additionally issued 2,000,000
options to purchase shares of its common stock at an exercise price of $0.10
each. These options were exercised on March 30, 1999, May 7, 1999, and June
1999, raising an additional $200,000.
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.
On May 5, 1999, the Company executed a promissory note with the holder
Verifica International, Ltd. in the amount of $250,000. The note pays an annual
interest rate of 7.5% on the outstanding balance and is due on April 15, 2002.
On November 1, 1999, the Company's director provided an unsecured line of credit
to the Company to draw upon, interest free, in the amount of $250,000 to be
payable by January 1, 2003. On January 19, 2000, the Company executed a
convertible preferred promissory note in the amount of $200,000 with Knightrider
Investments, Ltd. The Company borrowed $140,000 against this line during
January and February 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 to 45 with interests in finance, travel, entertainment, fashion and
electronics.
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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. As of December
31, 1999 Medcom had no sales and cost of sales resulting in a loss from
continuing operations and net loss. The investment in Medcom is recorded at no
value in the financial statements as of December 31, 1999, as required by the
equity method of accounting.
Essential Tec, Inc. ("Essential Tec"), a wholly-owned subsidiary of the
Company, has been formed as an information technology services Company with an
extensive technical labor force in Pakistan. Essential Tec's software engineers
are capable of providing high quality, cost-effective services to clients in a
resource-constrained environment. Essential Tec services include e-Commerce
Solutions, e-Procurement applications, auctioning engines, and several other web
based solutions. Essential Tec sells and markets its services and products from
its offices based in Santa Monica, California. Essential Tec had no material
transactions during the year ended December 31, 1999.
PART II - OTHER INFORMATION
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements that constitute Item 7 are included at the end
of this report beginning on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(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
10
<PAGE>
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 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal offices and
positions with the Company held by each person and the date such person became a
director or executive officer of the Company. The executive officers of the
Company are elected annually by the Board of Directors. Each year the
stockholders elect the board of directors. The executive officers serve terms of
one year or until their death, resignation or removal by the Board of Directors.
There was no arrangement or understanding between any executive officer and any
other person pursuant to which any person was elected as an executive officer.
The directors and executive 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
Hamid Kabani 39 Chief Financial Officer
Reza Rahman 32 Director
- -----------------------------------------------------------------------------------------
</TABLE>
IMRAN HUSAIN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR: Converge
directors elected 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, Mr. Husain was primarily acting as manager for family investments in
the U.S. equity markets for the last seven years.
SAMAR KHAN, SECRETARY. From June 1998 to July 1999, Ms. Khan worked as a partner
with GTI Partners, a corporate consulting firm 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 through 1996. She attended California State University at Pomona from
1989 to 1991, taking courses in business and accounting. Ms. Khan was unemployed
during the years 1996 through 1998.
HAMID KABANI, CHIEF FINANCIAL OFFICER. Mr. Kabani joined the Company on March 1,
2000 as its Chief Financial Officer. Mr. Kabani is a Certified Public
Accountant, as well as a Chartered Accountant. From July 1998 and continuing
through the present, Mr. Kabani is the President of Kabani and Company. From
June 1997 to June 1998, Mr. Kabani was at Deloitte and Touche. From 1995 through
1997 Mr. Kabani was at McGladrey and Pullen, an accounting firm, where he served
as the Quality Control Specialist. He graduated from University of Karachi,
Pakistan, with a degree in accounting. He is a member of the Qualification
Committee of the Board of Accountancy for the State
11
<PAGE>
of California. Mr. Kabani is also a member of a sub-committee of Irvine Chamber
of Commerce and is active with Costa Mesa Chamber of Commerce.
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.
(b) COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than ten percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during its 1999 fiscal year, all such filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were complied with.
ITEM 10-EXECUTIVE COMPENSATION
(a) SUMMARY 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.
<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
President, CEO and Director
Samar Khan $ 60,000 Stock Options 1,000,000
Secretary/Treasurer
Reza Rahman $ -0- Stock Options -
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. The Company does not maintain any pension plan,
profit sharing plan or similar retirement or employee benefit plans.
12
<PAGE>
(b) EMPLOYMENT AGREEMENTS
On February 1, 1999, the Company entered into an Employment Agreement
with Imran Husain as its President. This Employment Agreement has a term of one
year and continues on an at-will basis after one year. Compensation of $5,000
per month and standard benefits are granted to Mr. Husain under the Agreement.
There are no severance provisions in this Employment Agreement.
On February 1, 1999, the Company entered into an Employment Agreement
with Samar Khan as its Secretary and Treasurer. This Employment Agreement has a
term of one year and continues on an at-will basis after one year. Compensation
of $5,000 per month and standard benefits are granted to Ms. Khan under the
Agreement. There are no severance provisions in this Employment Agreement.
(c) COMPENSATION OF DIRECTORS
Directors of the Company do not receive any cash compensation, but are
entitled to reimbursement of their reasonable expenses incurred in attending
directors' meetings.
ITEM 11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the date of this Report 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
and (iii) all directors and officers as a group.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Title of Names and Amount and Percent of Outstanding
Class Address of Nature of Common Stock Beneficially Owned
Beneficial Beneficial -------------------------------
Owner Ownership(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Imran Husain 1,000,000 11%
Shares 10560 Wilshire Boulevard Director/
Unit No. 704 Officer
Los Angeles, CA 90024
Common Samar Khan 1,000,000 11%
Shares 1233 San Vicente Boulevard Secretary/
Santa Monica, CA 90401
Common Hamid Kabani -0- -0-
233 Wilshire Blvd., Suite 930 Chief Financial Officer
Santa Monica, CA 90401
</TABLE>
- --------
(1) Except as otherwise indicated, the Company believes that the
beneficial owners of Common Stock listed above, based on information furnished
by such owners, have sole investment and voting power with respect to such
shares, subject to community property laws where applicable. Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Shares of Common
Stock subject to options or warrants currently exercisable, or exercisable
within 60 days, are deemed outstanding for purposes of computing the percentage
of the person holding such options or warrants, but are not deemed outstanding
for purposes of computing the percentage of any other person.
13
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Reza Rahman 25,000 *
Shares 6917 Valley View Lane, 254 Director
Irving, TX 75039
All officers and directors as
a group (4 persons) 2,025,000 22%
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
- -------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%
ITEM 12-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
distributing the shares of the Company 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.
14
<PAGE>
PART IV
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
<S> <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
*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
*21 List of Subsidiaries of Small Business Issuer
27 Financial Data Schedule
</TABLE>
- ---------------------------
*Incorporated by reference from Registration Statement on Form 10-SB filed by
the Company on February 17, 2000.
(b) REPORTS ON FORM 8-K
None.
15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") the Registrant caused this report 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
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<S> <C> <C>
/S/ IMRAN HUSAIN
- -------------------------------- President, Chief Executive Officer
Imran Husain and Director April 12, 2000
/S/ SAMAR KHAN
- -------------------------------- Secretary and Treasurer
Samar Khan and Director April 12, 2000
/S/ REZA RAHMAN
- -------------------------------- Director April 12, 2000
Reza Rahman
</TABLE>
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
(FORMERLY KNOWN AS
CAPITAL PLACEMENT SPECIALISTS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Deficit 4-5
Consolidated Statements of Cash Flows 6-7
Notes to Consolidated Financial Statements 8-15
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Converge Global, Inc. and Subsidiaries
Santa Monica, California
We have audited the accompanying consolidated balance sheet of Converge Global,
Inc. and Subsidiaries (a development stage enterprise) as of December 31, 1999,
and the related consolidated statements of operations, stockholders' deficit and
cash flows for the two years 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.
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, 1999, and the results of its operations
and its cash flows for the two years 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
March 30, 2000
1
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS -
cash $ 2,462
WEBSITE DEVELOPMENT 200,000
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 18,785
-------------
$ 221,247
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES -
accrued expenses $ 225,453
LOANS PAYABLE, OFFICER-STOCKHOLDERS 141,000
NOTE PAYABLE, RELATED PARTY 250,000
STOCKHOLDERS' DEFICIT:
Common stock; $0.001 par value, 50,000,000 shares
authorized, 8,918,100 shares issued and outstanding at
December 31, 1999, respectively 8,918
Common stock subscriptions receivable (2,000)
Additional paid-in capital 361,132
Deficit accumulated during development stage (763,256)
------------
Total stockholders' deficit (395,206)
-------------
$ 221,247
=============
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
2
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
inception of
Year ended Year ended operations on
December 31, December 31, October 4, 1985 to
1999 1998 December 31, 1999
---- ---- -----------------
<S> <C> <C> <C>
REVENUES $ 5,870 $ - $ 5,870
COST OF REVENUES - - -
--------------- --------------- --------------
GROSS PROFIT 5,870 - 5,870
SELLING, GENERAL AND ADMINISTRATIVE 614,468 - 728,638
--------------- --------------- --------------
LOSS FROM OPERATIONS (608,598) - (722,768)
INTEREST EXPENSE 9,688 - 9,688
--------------- --------------- --------------
LOSS BEFORE INCOME TAXES AND EQUITY
IN LOSSES OF MEDCOM NETWORK, INC. (618,286) - (732,456)
INCOME TAXES (800) - 800
EQUITY IN LOSSES OF MEDCOM
NETWORK, INC. (30,000) - (30,000)
--------------- --------------- --------------
NET LOSS $ (649,086) $ - $ (763,256)
=============== =============== ==============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
basic and diluted 7,889,278 7,889,278 7,889,278
=============== =============== ==============
NET LOSS PER SHARE -
basic and diluted $ (0.08) $ - $ (0.09)
=============== =============== =================
</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 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.
4
<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) - (2,340)
Distribution of shares from
treasury (Note 1) 2,340,100 - - - 2,340 - 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 year ended
December 31, 1999 - - - - - (649,086) (649,086)
---------- ---------- ---------- ---------- ---------- ---------- --------
Balance at December 31, 1999 8,918,100 $ 8,918 $ (2,000) $ 361,132 $ - $ (763,256) $(395,206)
========== ========== ========== ========== ========== ========== ==========
</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 CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Period from
inception of
Year ended Year ended operations on
December 31, December 31, October 4, 1985 to
1999 1998 December 31, 1999
---- ---- -----------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (649,086) $ - $ (763,256)
--------------- ------------ --------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 3,348 - 3,348
Services in exchange for common stock 780 - 114,950
Loss on investment 30,000 - 30,000
Issuance of options under stock option plan 18,000 - 18,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN ASSETS -
INCREASE IN LIABILITIES -
increase in accrued expenses 225,453 - 225,453
--------------- ------------ -------------
Total adjustments 277,581 - 391,751
--------------- ------------ -------------
Net cash used for operating activities (371,505) - (371,505)
--------------- ------------ -------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Payments to acquire property and equipment (22,133) - (22,133)
Investment in Medcom Network, Inc. (30,000) - (30,000)
Investment in Website development (200,000) - (200,000)
--------------- ------------ -------------
Net cash used for investing activities (252,133) - (252,133)
--------------- ------------ -------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from loan payable, officer-stockholders 141,000 - 141,000
Proceeds from note payable 250,000 - 250,000
Proceeds from issuance of common stock and
paid in capital 235,100 - 235,100
--------------- ------------ -------------
Net cash provided by financing activities 626,100 - 626,100
--------------- ------------ -------------
NET INCREASE IN CASH 2,462 - 2,462
CASH, beginning of period/year - - -
--------------- ------------ -------------
CASH, end of period/year $ 2,462 $ - $ 2,462
=============== ============ =============
</TABLE>
(Continued)
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 (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Period from
inception of
Year ended Year ended operations on
December 31, December 31, October 4, 1985 to
1999 1998 December 31, 1999
---- ---- -----------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ - $ - $ 800
=============== =============== ===============
Interest paid $ - $ - $ -
=============== =============== ===============
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
=============== =============== ===============
Exercise of options under stock option plan $ 2,000 $ - $ 2,000
=============== =============== ===============
</TABLE>
See accompanying independent auditors' report and notes to consolidated
financial statements.
7
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
The Company was organized October 4, 1985, under the laws of the
State of Utah, as Mormon Mint, Inc. The Company was inactive for
approximately 10 years.
On December 4, 1997, the Company changed its name from Mormon
Mint, Inc. to Capital Placement Specialists, Inc.
Pursuant to an acquisition agreement, dated January 5, 1999,
Bekam Investments, Ltd. ("Bekam") acquired one hundred percent
(100%) of the common shares of the Company at that time; or
2,340,100 shares. Bekam subsequently spun off the Company by
contributing the shares to the treasury of the Company for
redistribution to selected investors of Bekam. The Company then
changed its name to Converge Global, Inc.
PRINCIPLES OF CONSOLIDATION:
The accompanying financial statements include the accounts of
Converge Global, Inc. (the "Parent"), and its subsidiaries,
Digitalmen.com, Inc., Essential Tec, Inc. and LiquidationBid.com,
Inc. All significant intercompany accounts and transactions have
been eliminated in consolidation.
<TABLE>
<CAPTION>
Percent of
Subsidiary Ownership Description
---------- ----------- -------------
<S> <C> <C>
Digitalmen.com, Inc. 100% Digitalmen.com, Inc. (formerly Gearz.com, Inc.)
was formed on February 5, 1999 in the State of
California. There were no material operations
during the year ended December 31, 1999.
Subsequent to December 31, 1999, Digitalmen.com,
Inc. commenced three Private Placement Offerings,
which are exempt from registration under Regulation
D of The Securities Act of 1933. The offerings are
as follows:
a. 1,000,000 shares of Digitalmen.com, Inc.'s
restricted common stock at $0.50 per share.
b. 1,000,000 warrants of Digitalmen.com
at $0.30 per warrant which maybe exercised
at $2.50 per share to acquire one share
of common stock for each warrant.
c. 1,000,000 shares of Digitalmen.com, Inc.'s
restricted common stock at $3.50 per share.
</TABLE>
See accompanying independent auditors' report.
8
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PRINCIPLES OF CONSOLIDATION, CONTINUED:
<TABLE>
<CAPTION>
Percent of
Subsidiary Ownership Description
---------- ----------- -------------
<S> <C> <C>
Essential Tec, Inc. 100% Essential Tec, Inc. was formed in the State of
California during 1999. There were no material
operations during the year ended December 31,
1999.
Subsequent to December 31, 1999, Essential Tec,
Inc. commenced three Private Placement
Offerings, which are exempt from registration
under Regulation D of The Securities Act of
1933. The offerings are as follows:
a. 1,000,000 shares of Essential Tec, Inc.'s
restricted common stock at $0.50 per share.
b. 1,000,000 warrants of Essential Tec, Inc.
at $0.30 per warrant which maybe exercised
at $1.00 per share to acquire one share
of common stock for each warrant.
c. 1,000,000 shares of Essential Tec, Inc.'s
restricted common stock at $1.50 per share.
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 year ended
December 31, 1999.
</TABLE>
GOING CONCERN:
The Company's consolidated financial statements are prepared
using the generally accepted accounting principles applicable to
a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company has no current source of revenue. Without realization of
additional capital, it would be unlikely for the Company to
continue as a going concern. This factor raises substantial doubt
about the Company's ability to continue as a going concern.
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, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
GOING CONCERN, CONTINUED:
Management recognizes that the Company must generate additional
resources to enable it to continue operations. The Company
intends to begin recognizing significant revenue during the year
2000. Management's plans also include the sale of additional
equity securities. However, no assurance can be given that the
Company will be successful in raising additional capital.
Further, there can be no assurance, assuming the Company
successfully raises additional equity, that the Company will
achieve profitability or positive cash flow. If management is
unable to raise additional capital and expected significant
revenues do not result in positive cash flow, the Company will
not be able to meet its obligations and will have to cease
operations.
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.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
See accompanying independent auditors' report.
10
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
WEBSITE TECHNOLOGY:
Website technology is stated at cost. Expenditures for
maintenance and repairs are expensed when incurred; additions,
renewals and betterments are capitalized. Amortization is
computed using the straight-line method over the estimated useful
life of the asset (3 years). The Company is accounting for
Website Technology costs under the capitalization criteria of
Statement of Position 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." There was no
amortization for the year ended December 31, 1999.
PROPERTY AND EQUIPMENT:
Property and equipment are stated 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 amounted to approximately $630,000 and immaterial at
December 31, 1999 and 1998, 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.
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.
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, 1999 AND 1998
(2) PROPERTY AND EQUIPMENT:
A summary at December 31, 1999 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Computer and office equipment $ 22,133
Less accumulated depreciation 3,348
--------------
$ 18,785
==============
</TABLE>
Depreciation expense for the year ended December 31, 1999 amounted to
$3,348. There was no property and equipment as of December 31, 1998, and
accordingly, there was no depreciation expense for the year ended
December 31, 1998.
(3) INVESTMENT IN MEDCOM NETWORK, INC.:
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 year 2000. As of December 31, 1999, Medcom
Network, Inc. had no sales, cost of sales or gross profit, resulting in
a loss from continuing operations and net loss. The Company's share of
the investee's net loss is reflected in the accompanying financial
statements and accordingly, this investment is recorded at no value as
required by the equity method of accounting.
(4) ACCRUED EXPENSES:
A summary at December 31, 1999 is as follows:
<TABLE>
<S> <C>
Accrued payroll and related taxes $ 127,900
Accrued professional fees 53,996
Checkbook overdraft 17,446
Other overhead expenses 16,423
Accrued interest 9,688
--------------
$ 225,453
==============
</TABLE>
There were no accrued expenses for the year ended December 31, 1998.
(5) LOANS PAYABLE, OFFICER-STOCKHOLDERS:
Loans payable, officer-stockholders are unsecured, non-interest bearing
and due on January 1, 2003. Pursuant to this agreement, the Company can
borrow up to $250,000 at anytime before its due date. As of December 31,
1999, the Company had borrowed $141,000. In addition, the Company
borrowed $45,000 during January 2000.
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, 1999 AND 1998
(6) NOTE PAYABLE, RELATED PARTY:
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 $9,688, and is
included in accrued expenses.
(7) STOCKHOLDERS' DEFICIT:
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 year ended December 31,
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 year ended December 31, 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 December 31,
1999.
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, 1999 AND 1998
(7) STOCKHOLDERS' DEFICIT, CONTINUED:
EMPLOYEE STOCK OPTION PLAN, CONTINUED
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 year ended December
31, 1999.
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>
December 31,
1999
----
<S> <C>
Net loss, as reported $ (649,086)
Proforma net loss $ (653,086)
Basic and diluted historical net loss per share $ (0.08)
Proforma basic and diluted net loss per share $ (0.08)
</TABLE>
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.
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.
14
<PAGE>
CONVERGE GLOBAL, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(8) RELATED PARTY TRANSACTION:
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.
(9) LEASE COMMITMENTS:
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 December 31, 1999:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
2000 $ 79,211
2001 55,201
2002 4,400
--------------
$ 138,812
==============
</TABLE>
Rent expense for the year ended December 31, 1999 amounted to
approximately $48,000.
(10) SUBSEQUENT EVENT (UNAUDITED):
During January 2000, the Company executed a convertible preferred
promissory note in the amount of $200,000 with Knightrider Investments
Ltd. This note is due on January 19, 2001 and bears interest at 8% per
annum. Pursuant to the terms of this agreement, in the event of default
on payment by the Company, the unpaid principal and interest will be
converted into restricted shares of common stock at a discounted price
of 30% off of the traded fair market value of the previous day's close.
During January and February 2000, the Company borrowed $140,000.
See accompanying independent auditors' report.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001078799
<NAME> CONVERGE GLOBAL, INC.
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 2,462 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,462 0
<PP&E> 22,133 0
<DEPRECIATION> (3,348) 0
<TOTAL-ASSETS> 221,247 0
<CURRENT-LIABILITIES> 225,453 0
<BONDS> 391,000 0
0 0
0 0
<COMMON> 8,918 2,340
<OTHER-SE> (404,124) (2,340)
<TOTAL-LIABILITY-AND-EQUITY> 221,247 0
<SALES> 0 0
<TOTAL-REVENUES> 5,870 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 644,468 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,688 0
<INCOME-PRETAX> (648,286) 0
<INCOME-TAX> 800 0
<INCOME-CONTINUING> (649,286) 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (649,086) 0
<EPS-BASIC> (0.08) 0
<EPS-DILUTED> (0.08) 0
</TABLE>
