APOLOGIES FOR MASSIVE LOSSES FOR THE YEARS TO COME? CANT WAIT TO SEE YOUR WRITE UP THIS TIME. THE SEC FILLINGS JUST PROVED EVERYTHING WE SAID WAS RIGHT. I THINK ITS HIGH TIME THAT YOU APOLOGIES TO US FOR YOUR BAD FORECASTS ON ZSUN WHICH WERE WAY WAY OFF THE MARK.
By: frisky
Reply To: None Friday, 12 May 2000 at 8:49 PM EDT
Post # of 20604
Why did SEC approve the last 10sb filings? The reasons are:
(1)ZSUN disclosed all the shares that will be issued to former OIA shareholders, 5,000,000 shares in escrow plus additional 21,820,152 contingent shares. 12,000,000 out of 21,820,152 shares were settled for $6,000,000.
(2)ZSUN disclosed all the other marketable securities in Note 10.
(3)ZSUN disclosed all the goodwill. When ZSUN paid its own share, it valued each share at $2.5 per share. Therefore, the goodwill includes (a) $375,000 from finders'commission of OIA merger: ZSUN paid Global Marketing Direct 150,000 shares for finding OIA, (b) $265,000 from Momentum Internet merger: ZSUN paid $15,000 plus 100,000 shares to Anthony Tobin's Vulcan Consultants. At the time of acquisition, Momentum Internet has no assets, it was just a shell corp., (c)$2,751,417 from the acquisition of OIA: ZSUN paid Scott Elder et al 1,000,000 shares of ZSUN plus $400,000. At the time of the merger, OIA had a net assets of $148,583. Therefore, the difference between $2,900,000 and $148,583 is $2,751,417. ZSUN said that it would record $111,704,230 goodwill for the additional shares that would be issued to former OIA shareholders. ZSUN said it will amortize goodwill for 10 years. This means that $11.5 million of goodwill amortization will be absorbed by the other operating income each year.
Approving 10sb means that a company meets the minimum reporting standards. SEC is not judging the merit of that company. SEC simply ensures that the reporting standards are followed. It is up to the investors to determine the value of that company.
Does this change the fundamentals of ZSUN? Not at all! ZSUN is still just a profitable investment education company (OIA counts 85% to 90% of ZSUN's revenues.) . In 1999 ZSUN reported a profit of $5,964,239. If you exclude the one time-gain of $4,778,596 and assume the tax rate is 36%, ZSUN's operating profit will be about $2.9 million. If we add three more months profit for OIA and assume ZSUN enjoy 20% of earnings growth. ZSUN's earnings in 2000 will be about $4.8 million. This is not sufficient to cover the expecting $11 million of goodwill amortization. In other words, ZSUN will report a net loss of $6.2 million. Besides, ZSUN will have 37 million shares issued and outstanding in 2000. Therefore, if ZSUN wants to report a profit, it must have a 300% earnings growth. If ZSUN can achieve 300% earnings growth in one year, it would set a world record.
Yes, I understand that ZSUN will report a profit in the first quarter of 2000 because ZSUN did not count the goodwill until 4/1/200. However, this may be the last time that you see ZSUN reports a profit for a very long time.
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