The much-hyped profitability of ZSUNE appears to be in jeopardy. From the most recent version of the 10SB (No. 6 for those that are counting):
"In accordance with the terms of the acquisition agreement for OIA the former
shareholders of OIA are to receive 1 share of the Company's common stock for
each $0.50 of earnings before interest, income taxes, depreciation, and
amortization for the year from April 1, 1999 through March 31, 2000. OIA's
earnings as defined above were $10,910,076. Accordingly, the Company would owe
21,820,152 shares of its common stock at March 31, 2000. The value of the shares
at March 31, 2000 was approximately $250,000,000. This value would be added to
the goodwill on the balance sheet of the Company. The Company is attempting to
renegotiate the terms of the transaction to issue less shares for additional
cash consideration. However, no agreement has been reached at the date of this
audit report".
ZSUNE currently amortizes goodwill over 10 years (Note 2s). If the deal goes through as initially structured and assuming that ZSUNE will amortize the OIA goodwill over 10 years, the annual charge is $25,000,000. That's right 25 million! To put this figure into perspective, ZSUNE reported total revenues of $27,220,240 and net income of $5,979,675 for 1999. |
