By: frisky
Reply To: None Sunday, 9 Apr 2000 at 12:51 PM EDT
Post # of 18876
I think that I have figured out why ZSUN exchanged its own shares with the related parties when it was formed. What was the motive behind it? This is a long message. Please be very patient and read carefully.
I have questioned the account of common stock held to maturity account which was buried in other assets of financial statements since last July. You could find the account in Note 3 of Notes to Financial Statements. ZSUN, changed the name of Common Stock Held to Maturity in 10sb version 1, 2, 3 to Investment in Restricted Common Stock in 10sb version 4.
In Note 6 of Notes to Financial Statements of 1998 ( 10sb version 1, 2, 3), ZSUN said that "During 1998, officers of the company contributed other assets recorded at cost of $1,359,449 to additional capital. The other assets included marketable equity securities, memberships in country clubs, a mortgage note receivable and common stock held to maturity. If you remember, I have pointed out that the sum of membership of country club, $142,857 and common stock held to maturity, $857,143 is exact $1,000,000. The membership of a country club is exact 1/7 of a million. Statistically speaking, this is impossible. More likely somebody worked out the number.
In Note 3 of Notes to Financial Statements of 1999 (10sb version 4), ZSUN disclosed that the ending balance of investment in restricted common stock was $166,413 (Laraca restricted shares.) In footnote 10, ZSUN disclosed that the beginning balance (12/31/98) of restricted common stock in the account of marketable securities including Laraca, Titan was $324,870. The beginning balance of unrestricted common stock in the account of marketable securities was $786,588. In Note 11, ZSUN disclosed an equity investment of Bevex for $469,000. I added $324,870 and $469,000 up and obtained the total of $823,870. This figure is not the same as the balance of $857,143 reported in 10sb version 1, 2, 3 described in the last paragraph. Moreover, the total of unrestricted common stock in marketable securities of $786,588 is different from the figure of $775,903 reported on 10sb version 1, 2, 3. IMO, it appears that somebody was trying to massage the numbers but could not straight them up. Surprisingly, ZSUN's accountant, Jones & Jensen offered unqualified opinion for financial statements of 1998 and 1999. In 1999, ZSUN raked $1,435,237 proceeds from selling shares of those related parties, claimed $470,185 realized gain and $114,795 unrealized gain. ZSUN also said that it acquired additional $445,446 marketable securities in 1999. (Those figures are in the cash flow statement and note 10 of 10sb version 4.) On December 12/31/99, ZSUN disclosed that it has unrestricted shares of Chequemate for $135,712, other unrestricted shares (acquired in 1999) for $404,522. Restricted shares of Larcara for $166,413, inoperative or bankrupt of Bevex shares for $254,195. They are recorded at the market price as of 12/31/1999 and could be found in Note 10, 10sb version 4.
IMO, when the reverse merger took place in September 1998, the related parties threw in stocks like Titan, Chequemate, Laraca, Bevex, possible Dynatec and maybe some other worthless restricted stocks in exchange for ZSUN's shares. Once the stocks of related parties were pumped up. ZSUN sold their related party shares for profits. Once ZSUN's stock was pumped up. ZSUN's related parties sold ZSUN's shares. Since ZSUN did not own more than 5% of the stocks of its related parties and the related parties did not own more than 5% of ZSUN's stocks, nobody has to file Sc13 G to SEC. The beauty is that ZSUN did not have to sell its own shares directly to the public but can still raise the capital from the public. Had ZSUN sold its own shares, it would have had to classify the proceeds as common stock and additional paid in capital in shareholders' equity section. It would not be a revenue item in the income statement. In other words, it would have no impact to EPS. ZSUN might not be able to portray itself as a "profitable Internet" company before acquiring. When ZSUN sold the shares of its related parties, it picked up the realized gains. When ZSUN held those shares, it picked up the unrealized gains. Both realized gains and unrealized gains will be in EPS. ZSUN then said itself as a "profitable Internet" company. They are really brilliant. This is why they need IR companies to promote their stocks. A good example is that ZSUN had sold portion of Laraca shares for $625,000 and reported $502,303 realzied gain. Laraca sold portion of its ZSUN holding and recorded a huge realized gain of $2,781,685 (from Laraca's 10k). However, both Larcra and ZSUN's net businesses are all losing money.
When the inventory of the related shares dwindled, ZSUN acquired OIA. OIA former shareholders demanded $400,000 up front, 6,000,000 restricted shares for one year and two shares of each dollar profit above $2.5 million for one year, OIA made money from high-priced investment seminars. ZSUN is a profitable "Internet Holding" company again.
BTW, ZSUN's insiders have reported their holdings on 11/19/1999. You can find the info in Yahoo or Edgar. You will notice that Allen Hardman just owns 12,500 shares as of 11/15/99. If you read the cash flow statement and Note 8 of Notes to Financial Statements in10sb version 4, you will see that he exercised his option of 25,000 shares in 1999 but he sold 12,500 shares. The plausible reason is that he sold half to pay state, federal and medicare tax. I believe that former OIA shareholders will do the same when they obtain their reward that is two shares for every $1 profit above $2.5 million.
IMO, it is so obvious that ZSUN is making money from handling BB shares of its related parties and making money from OIA's investment seminars. The dot com businesses are nothing but to attract the capital from uniformed or naive investors. Don't take my words, do your own analysis. You should be the judge yourself. All the information are from ZSUN's 10sb version 1, 2, 3 and 4. You could verify yourself.
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