techstocks.com
To: The Ditchdigger (4687 )
From: Ellen G.
Sunday, Oct 12 1997 3:55PM EST
Reply #4705 of 18578
"On September 21, 1995, the Company entered into an agreement with Horizon Marketing Ltd. to acquire 100% of the outstanding stock of Olympus Mills USA, Inc., a textile manufacturing business located in Florida. The consideration for the acquisition was 1,750,000 shares of common stock and $250,000 in cash to be paid by January 1, 1996 or upon the sale of certain inventory. At the date of the acquisition it appears that the Company also recorded $400,000 of assumed secured debt. The assumption of this debt does not appear to be provided for in the acquisition agreement.
As discussed above, the books and records of the Company are not available for the period prior to December 31, 1995. However, it appears from the September 30, 1995 quarterly financial statements that the shares issued were valued at $2,625,000 and debts were recorded of $ 400,000 and $250,000.
On a consolidated basis it appears that the total acquisition cost of $3,275,000 was recorded as property, plant and equipment. Current management does not believe that the $400,000 of secured debt was properly recorded as an element of this transaction. Additionally, there have been no claims by any secured lender with respect to this alleged debt. Furthermore, current management has identified approximately $351,000 of assets that appear to have been acquired as part of the acquisition. These assets were sold for cash of approximately $351,000 during the year ended June 30, 1996. Current management has been unable to determine whether the acquisition was made at "arms length", and therefore, whether amounts recorded in the financial statements properly reflect the fair values of the assets acquired. In fact, current management has been unable to identify any assets, with the exception of the $351,000 discussed above, received in connection with this acquisition. Management believes that given the nature and condition of the business there was no bonafide purpose for the issuance of the number of shares issued in connection with this transaction. Based upon the foregoing, management has determined to retroactively adjust the accounting for this acquisition.
The revised accounting for this transaction results in assets held for sale of $350,859, goodwill of $2,459,745, and the recognition of debt at $250,000 and common stock and additional paid-in capital of $2,672,282. Given the circumstances described above management believes that goodwill recognized in the above transaction is significantly impaired and has charged the total amount to operations as of June 30, 1996.
During March 1996, the $250,000 in debt discussed above was exchanged for 250,000 shares of common stock." |
