#*#*#*#*#* ZSUN D.D for the ENLIGTHENED INVESTOR #*#*#*#*#*
ZSUN is a POS OTCBB stock formed a little over a year ago through a reverse merger with a busted out failed beverage business.
That should be all the DD needed for an investor to run the other way, but if you're a little slow on the uptake then please take the time to go over the following, it's from "Frisky", on the Raging Bull board, a poster that claims to be a professional accountant.
ragingbull.com
EGB2 The cash flow statement has puzzled you and many other readers. I have just finally figured out most of the discrepancies. I hope that you will fully understand and enjoy my analysis. This may partially explain why ZSUN decided to take the figures out of its web site. I am surprised that Jones and Jensen offered an UNQUALIFIED OPINION on two set of statements for the same company in the same time period, one in the web site, one in the 10sb. Either one has full of errors. They should be in some other profession.
A cashflow statement should be prepared by computing the difference between two consecutive balance sheets and then adjusting some non-cash revenues and expenses in the current year income statement. ZSUN only showed one arm: the balance sheet as of 12/31/98. It did not show the other arm: the balance sheet as of 12/31/97. It is next to impossible to fully guess the real figures behind. I think that because that balance sheet of Bestway as of 12/31/97 was a joke. They did not want to show. Besides, if they had shown the balance sheet as of 12/31/97, they would have not been able to massage the numbers on the cashflow statement easily. Any good accountants (not Jones & Jensen ) could easily identify the irregularities.
Well, we know Momentum Internet was an empty paper company, Bestway USA was virtually bankrupt and had no meaningful assets. Therefore, the balance sheet as of 12/31/97 should be very close to Momentum Asia's. If you look at page 107 in the 10sb, you will find the Momentum Asia's balance sheet as of 12/31/97. (That statement was audited by Jones & Jensen too). Bingo, THE BEGINNING CASH BALANCE WAS $22,011 in Momentum Asia. The figure is the same as the begging balance of ZSUN's cash flow statement. Meaning, Momentum Internet, Bestway USA or ZSUN before the reverse-merger has NO CASH period. All the cash was from Momentum Asia. Therefore, I took ZSUN's balance sheet as of 12/31/98 and Momentum Asia's balance sheet as of 12/31/97 and tried to tie the figures in ZSUN's cashflow statement and I can't. I wish I could post the spreadsheet in the message board. But the format is not in a layman readable form so I will try just to highlight the difference. To fully understand what I am going to say, please have page 55 through 59, page 63,page 107, page 108, page 114 of the 10sb with you.. Focus the figures on page 59 and trace back those figures to the relevant pages that I am going to point out.
Following are the problems in the cashflow statement listed in page 59 of the 10sb:
(1) Foreign Currency translation adjustment (listed as other comprehensive income in 12/31/98) decreased by $2,967 in 1998. It should be deducted from the net income. However, Jones & Jensen's idiotic accountant added to the net income. Although this is a minor careless error, I am just very surprised that they were able to derive the ending cash balance correctly, unless somebody massaged the discrepancy somewhere in the cashflow statement.
(2) I adjusted all the adjustments, depreciation, allowance for bad debts, unrealized gain on securities, loss on sale of assets as done by ZSUN.
(3) The sum of the unrealized gain $712,438 and the increase of marketable securities $30,205 is $742,643. (In 1997 the marketable securities were included in the other assets, I reclassified to current asset for comparison) Bingo, ZSUN was PERFECT in 10sb. The web site's figure without parentheses is incorrect. Also, the web site should not list the decrease of marketable securities of $742,643, because this will count $712,438 twice.
(4) If ZSUN added back bad debt allowance to the net income, it had to increase the difference of the beginning and ending balance of accounts receivable too. The difference of beginning and ending balance of accounts receivable plus $36,320 is $907,368. ZSUN reported $330,757 in the 10sb and $771,907 in the web site. I don't know which one I should use. If we took the lower figure, it would imply that Bestway had $567,611 accounts receivable. Highly unlikely, because it had no sales. I am inclined for the higher figure. However if I do so, I must plug the increase to a garbage collector account: other assets.
(5) Inventory was increased by $46,245 not decreased by $48,783 reported by ZSUN. I believe that Jones & Jensen was confused then massaged the sign incorrectly. If you check somewhere in 10sb, it says that the remaining asset for Bestway was valued at $50,000 inventory. This figure was perfectly reported in ZSUN's 12/31/99 balance sheet.
(6) The other asset was increased by $1,498,985 (adjusted for the common stock held for sales reclassification). ZSUN said $1,359,449 was contribution of capital by shareholders as non-cash financing activities, the net increase is $137,536. However, in ZSUN's cash flow statement, it says that the net increase of other asset is $88,586. There is a discrepancy of $48,950 probably was listed as an other asset item in Bestway's balance sheet.
(7) Current liabilities were increased by $489,784 not $377,080. The discrepancy was probably from the liabilities in Bestway's balance sheet, 12/31/97.
(8) Purchased of equipment should be $420,454 instead of $186,374. The discrepany was probably from the assets listed in Bestway's balance sheet, 12/31/97.
(9) Common Stock and additional paid in capital has a discrepancy of $847,899 after I removed the non-cash financing activity of $1,359,449 from the contributed capital and common stock held to maturity as well as related parties receivable. Yes, I know this figure is exact the same as recpaitalization of ZSUN at the time of the reverse-merger. However, it vanished in the cash flow statement in conjunction with the discrepancies that I listed above.
(7) My best guess on ZSUN's balance sheet as of 12/31/97, excluding Momentum Asia follows:
Cash $0
Accounts receivable 0 (I put $576,611 in Other assets)
Inventory 50,000 (move 45,028 to other assets)
Equipment 234,080
Other Assets 676,523(48,950+2967*2+576,611+45028)
Total Assets $960,603
Current liabilities $112,704
Common Stock 9,512
Additional Paid-in
Capital 838,387
Total L & OE $960,603
Remember, at the time of the reverse-merger. Only $50,000 inventory was left. All the other accounts vanished except the common stock and additional paid-in capital. ZSUN did not explain how they vanished.
ZSUN needs to hire a first-class CPA firm like Arthur Andersen, KPMG, Ernst & Young instead of the one who was confused between positive and negative number. The accurate financial figures will offer the credibility of the company. I hope that you will have a clear picture now.
To the ZSUN touts: Financial statements are very important means of communication between a publicly held company and the public. ZSUN needs to take the job seriously. Without offering a reliable statement, nobody will believe any of your business plans.
Now if a company that hires accountants that don't know plus from minus sounds like a good investment to you, then you've found a winner.
Tick Tock, tick tock, tick tock.
CMB |
