Why does ZSUN not have any fundamentals? Why is ZSUN worth less than one dollar?
By: frisky $$$
Reply To: None Wednesday, 26 Jul 2000 at 8:18 PM EDT
Post # of 24386
Why does ZSUN not have any fundamentals? Why is ZSUN worth less than one dollar?
(1) ZSUN changed its name from a bankrupt beverage refilling company, Bestway USA in September 1998.
(2) ZSUN's auditor, Jones & Jensen, has been charged by SEC for not following Generally Accepted Auditing Standards in an unrelated audit.
(3) ZSUN reversely merged with a money-losing printing and tele-marketing company, New Age Publication in Philippines in October 1998. The company had a net asset of $807,956 including an accumulated deficit of $20,670 as of December 31, 1997. It later changed its name to Momentum Asia. ZSUN issued 4,000,000 shares for Momentum Asia. The deal was handled by a counsel who was found guilty in participating the pump-and-dump scheme of Electro-Optical Systems by a U S court.
(4) ZSUN acquired Momentum Internet from Anthony Tobin's Vulcan Consultants in October 1998. At the time of acquisition, Momentum Internet has no assets. In fact, Mr. Tobin borrowed $70,000 from New Age Publication. Mr. Tobin later paid back with 130,000 shares of ZSUN (split-adjusted) in December 1998. In other words, Mr. Tobin received $70,000 and 1,000,000 shares (split-adjusted) from ZSUN.
(5) At time of the formation, ZSUN exchanged its own shares with related parties: TMOT, DDD and LCAI. If the shares were not restricted, ZSUN classified them as marketable securities. If they were restricted, ZSUN classified them as common stock held to maturity. If ZSUN had sold their own shares, ZSUN could only have classified the excess of par as additional paid-in capital. In other words, ZSUN shifted the capital raising activities into investing activities. The cost of owning TMOT, DDD, LCAI was negligible. Therefore, ZSUN could generate a huge amount of realized and unrealized gain on marketable securities in 1998 and 1999.
(6) ZSUN lost good deal of money in Momentum Asia and Momentum Internet in 1998. However, it booked $535,802 of realized gain on marketable securities and $712,438 of unrealized gain on marketable securities to hide the loss from Internet businesses. ZSUN then issued several press releases on 2/8/99, 3/13/99, 5/27/99 and claimed that it had $.47 basic EPS and $.11 diluted EPS. ZSUN even posted its "audited" financial statements on its web site. Jones & Jensen issued an unqualified opinion on the financial statements. Suckers flocked in, especially the uninformed foreigners, bought the stock based on the false and misleading financial figures. ZSUN stock was pumped up to as high as $17. We later discovered that sales were overstated from $760,520 to $2,289,158. The loss on BVEX of $165,449 was not reported. The diluted EPS was only $.04. If one excludes the realized and unrealized gain from TMOT, DDD and LCAI, one will discover that ZSUN incurred a loss per share of $.03 in 1998. ZSUN filed seven versions of 10sb, one version of financial statements posted in its web site. Surprisingly, Jones & Jensen issued unqualified opinion for all different versions of financial statements for 1998 and 1999. IMHO, ZSUN and Jones & Jensen have violated Section 17 (a) of Securities Act of 1933, Section 9, Section 10 and Section 10a of Securities Act of 1934.
(7)ZSUN acquired Asia4sale.com from Brian Hodgson. ZSUN paid him $15,000 and 100,000 shares. It was a great deal for Mr. Hodgson because Asia4sale virtually had no assets.
(8) ZSUN knew that it could not show too much profit from selling DDD, LCAI and TMOT. On March 31, 1999, it acquired Online Investors Advantage, a day trading seminar firm from Scott Elder, Ross Jardine et al. ZSUN paid them $400,000 cash, 1,000,000 free shares, 5,000,000 escrow shares plus two shares for every dollar of EBITDA from OIA. According to 10sb version 7 issued on May 11, 2000, ZSUN paid them additional $6,000,000 and 9,820,152 shares. In summary, Scott Elder et al received $6,400,000 and 10,820,152 ZSUN shares for the whole deal. At the time of acquisition, OIA had net assets of $ 148,543. They have taken back more than the net profits they contributed to ZSUN in 1999. ZSUN booked the excessive payment as good (garbage)-will and additional paid-in capital to dress-up its balance sheet. Too bad, the suckers could not understand. Moreover, ZSUN paid 150,000 shares to Gloabl Direct Marketing in December 1998 as a compensation for finding OIA.
(9)ZSUN issued multiple press releases about their record earnings of every quarter in 1999 as well as the first quarter of 2000. According to 10sb version 7, ZSUN reported net income of $5.9 million in 1999 and diluted EPS of $.23. The denominator in EPS calculation did not include the additional 9 million shares issued to Scott Elder et al in May 2000. It only used 25,796,000 shares. The actual outstanding shares is over 32 million shares now. The net income of 1999 was mainly from the short-term capital gain of selling Asia4sale of $5 million, OIA's operating income of $6 million, realized gain on marketable securities of $470,185, unrealized gain on marketable securities of $111,749. ZSUN has never disclosed the loss from Internet businesses in its press releases. The suckers can never understand.
(10) ZSUN sold 70% of ownership in Asia4sale.com Ltd. to a group of Taiwanese suckers for $5,000,000. A subsidiary virtually has no assets but some cheap computer equipment. ZSUN needs the money to pay Scott Elder and Ross Jardine et al. Asia4sale.com Ltd. then reversely merged with Asia4sale.com Inc. ZSUN received 2.7 million garbage shares from AFSI. The Taiwanese suckers received 6.3 million garbage shares. God knows who kept the last one million shares of AFSI. ZSUN later paid 800,000 shares of AFSI to its shareholders. Therefore, it could adopt the cost method instead of equity method of accounting. The loss of AFSI will be out of the picture. ZSUN can then use the artificially high market price to value their investment in ANSI. It will create unrealized gain on marketable securities. AFSI had a sale of $70,024 and a loss of $5,006,986 in 1999, a sale of $60,446 and a loss of $138,702 for the first quarter of 2000. However, it had a ludicrous market cap of $120 million. Because AFSI had no cash, it issued 800,000 additional shares to unknown investors at a wholesale price of $2.50 per share. The suckers then paid $8 to $11 at retail price in the open market. AFSI is extremely thinly traded. So far in July, 2000 it only traded for two days with the volume of 2,200 shares. In June 2000, it traded for 13 days with the volume of 46,300 shares. In May 2000, it traded for two days with the volume of 9,500 shares. In April 2000, it had no trades.
(11) ZSUN targeted its customers to Chinese but all its web sites are in English. Only the elite group like Frank Ching can read. MSN, YHOO, China.com and thousands of Chinese and Taiwanese e-commerce all programmed their web sites in Chinese. ZSUN cannot compete at all.
(12) ZSUN kept portraying itself as a profitable Internet holding company. However, 85% to 90% of its revenues and 100% of earnings are from high-priced day trading seminar subsidiary, OIA. All the Internet subsidiaries are losing money. ZSUN made money from OIA day trading seminars and selling and holding of TMOT, DDD, LCAI, HRCT, XNET class of yo-yo stocks.
(13) The price of TMOT, DDD and LCAI are continuously falling. The bubbles have bursted.
(14) In 1999 ZSUN invested a basket of listed stocks by using the profits from selling TMOT, DDD, LCAI. 1999 was a very good year but ZSUN's performance was very miserable. If ZSUN had invested in a money market mutual fund, if would have doubled its return. If the teachers are so lousy, how much can a student learn from them? Besides, the day trading seminar will cost one at least $2,995 a piece.
(15) Tigertooth.com has been under construction for good.
(16) ZSUN newly acquired subsidiaries, Asia Prepress and Asia Internet Services, add no value to ZSUN but cost ZSUN $300,000, 250,000 shares, $159,229 debt. Because they are also located in Subic Bay and Clark, Philippines, the same location that Momentum Asia situated, I wonder whether these two companies are simply piggybacking on Momentum Asia.
(17) ZSUN or ZSUN's related parties hired professional touts to masquerade as unbiased analysts. On November 19, 1999, Ray Dirks' Security Capital Trading issued a strong-buy recommendation with a near-term price target over $15 per share with long-term $30 price target. On December 10, 1999, Access 1 Financial issued a buy recommendation with $36 12-month price target. On April 20, 2000, Stockreporter.com issued a strong buy recommendation with 2000 target price of $28.50. On June 14, 2000, Dirks & Company issued a strong buy recommendation with 6-9 months price target of $30 per share and 12-18 months price target of $60 per share. However, the insiders rushed to the exit door when ZSUN stock started to set 52-week low. David McCoy tried to sell 25,000 shares on April 20, 2000. Serge Rudiger tried to sell 30,000 shares on May 8, 2000. Mark Lindholm tried to unload 30,000 on May 10, 2000. Anthony Tobin tried to liquidate 100,000 shares on June 8, 2000. Pedro Azeudo Rua is trying to sell 1,000 shares on July 31, 2000. If ZSUN stock is going to be $60 per share, why would the insiders try to sell the stock at or near 52-week low price? I understand that the paid touts are protected under First Amendment. However, they must disclose the amount of compensation according to Securities Law. I have not been able to find a paragraph in ZSUN's official press releases that indicated the compensation. IMO, ZSUN and its paid touts might have violated Section 17 (b) of Securities Act of 1933. After their recommendations, the price of ZSUN plummeted. It is now trading around $4.
(18)OIA's revenues in the second quarter of 2000 declined from the first quarter of 2000. There is no more sequential growth. In addition, the goodwill amortization from the acquisition of OIA will reduce EPS further. I believe that ZSUN alleviates the problem with the the unrealized gain from AFSI.
All the information are from ZSUN's SEC filings and ZSUN's official press releases.
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