OLYMPUS VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1996
NOTE 1 - ORGANIZATION AND ACQUISITIONS:
Olympus Ventures, Inc. (the "Company") was incorporated on October 24, 1988 in the State of Washington and for the period from inception to December 31, 1994 was in its development stage. Acquisitions by the Company were as follows:
(a) C.E.A. LINES, INC.
On November 7, 1994, the Company entered into an agreement, which was amended on January 1, 1995, with Central European Subholding Inc. to purchase 50.1% of the common stock in C.E.A. Lines, Inc. ("CEA"). In connection with this transaction 3,000,000 shares of common stock (prior to the 1 for 10 reverse split - see Note 6) were issued. CEA became a majority owned subsidiary of the Company. CEA's principal asset was an ocean shipping vessel and its main activity was providing freight services. CEA was organized under the laws of the Turks & Caicos Islands, British West Indies.
On September 20, 1995, the Company entered into another agreement with Central European Subholding, Inc. for the purchase of the remaining 49.9% of the stock of CEA. Under the terms of this agreement the Company received 100% of the stock of CEA Traders, a wholly owned subsidiary of CEA. In connection with this transaction 400,000 shares of common stock were issued.
The shares were valued by the Company at $2,000,000. The purchase price was allocated to property, plant and equipment ($1,454,269) and minority interest ($545,731).
The CEA acquisition was a related party transaction. 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.
On January 8, 1996 the Company's chief executive officer resigned. Since his resignation the Company has had several chief executive officer's. Current management joined the Company on July 15, 1996.
Current management has had communications with the officer that resigned to compel him to return the following to the Company: (1) the assets of CEA (including the ocean shipping vessel), (ii) the books and records of CEA, and (iii) the books and records of the Company from inception through December 31, 1995. To date, current management has been unable to reach an agreement with the former chief executive for the return of the above. Management is currently investigating its legal options, but believes that it may not be practicable or economically reasonable to further pursue this matter.
Pending the conclusion of its investigation, management has instructed the Company's transfer agent to stop the transfer of the 400,000 common shares issued in the second CEA transaction. Additionally, since the Company is unable to secure the assets of CEA, management has determined that the Company's investment in CEA which amounted to $3,354,068 should be and was written off as of June 30, 1996.
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OLYMPUS VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1996
NOTE 1 - ORGANIZATION AND ACQUISITIONS (CONTINUED):
(b) CARIBBEAN CHARTERS LTD.
On August 21, 1995, the Company acquired 100% of the sellers interest in Caribbean Charters Ltd. This acquisition was evidenced by a convertible promissory note in the amount of $750,000 convertible into the Company's common shares at a price of $2.50 per share.
Since the assets of Caribbean Charters Ltd. consisted of three boats, the purchase price was attributed entirely to property, plant and equipment.
This acquisition was also with a related party. 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.
During March 1996, the Company exchanged 750,000 common shares for the $750,000 convertible note.
In December 1995, one of the boats was sold for $35,000 resulting in a loss of $140,000. In October 1995, a second boat was sold for $60,000 resulting in a loss of $165,000. In May 1996, the third boat was repossessed by a secured lender resulting in a loss of $210,000. Accordingly, as of June 30, 1996, all of the assets of Caribbean Charter Ltd had been disposed of.
(C) OLYMPUS MILLS USA, INC.
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.
F - 9
OLYMPUS VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1996
NOTE 1 - ORGANIZATION AND ACQUISITIONS (CONTINUED):
(c) OLYMPUS MILLS USA, INC. (CONTINUED):
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.
(d) EKRHEN CORPORATION
On September 21, 1995 the Company acquired certain assets of Ekrhen Corporation. The consideration paid for this acquisition consisted of 100,000 shares of common stock and the assumption of $200,000 of debt.
As discussed above, the books and records of the Company were not available prior to December 31, 1995. It appears from the September 30, 1995 and December 31, 1995 quarterly financial statements that the shares issued were valued at $600,000 and debt was recorded at $200,000. On a consolidated basis it appears that the total acquisition cost of $800,000 was recorded as property, plant and equipment.
However, since the contract called for 100,000 shares to be issued at $6.50 per share and the debt assumed aggregated $200,000, the acquisition should have been recorded at $850,000, and has been so adjusted. Current management questioned whether the share value was properly computed and therefore in January 1997 engaged an independent appraiser to determine whether amounts recorded in the financial statements properly reflect the fair values of the assets acquired.
F - 10
OLYMPUS VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1996
NOTE 1 - ORGANIZATION AND ACQUISITIONS (CONTINUED):
(d) EKRHEN CORPORATION (CONTINUED):
In as much as there were detailed listings of the equipment acquired, the appraiser through study and inspection, was able to provide a value for the equipment at or about the time of the acquisition. The appraised value aggregated $333,590. The equipment acquired has been retroactively adjusted to this amount with an equivalent adjustment to additional paid-in capital.
(e) K.O.K.O WEAR INC. D/B/A "HOT BODY"
As of October 16, 1995 the Company, through a subsidiary, acquired all of the shares of K.O.K.O. Wear Inc. in exchange for 40,000 common shares. As part of the agreement, the Company warrantied that the issued shares (which are restricted under Rule 144) will have a value of $200,000 at the end of the holding period. If the value is less than $200,000, the Company at its option, may pay the difference in cash or additional shares. The principal asset of K.O.K.O. Wear Inc. was a license agreement.
In October, 1996 subsequent to the balance sheet date, the Company terminated the services of a former principal of K.O.K.O. Wear Inc.
In management's opinion the acquired license was significantly impaired as of June 30, 1996 and therefore has been written-off.
(f) NELSON INTERNATIONAL CORP. AND BARON'S INTERNACIONAL, S.A.
As of November 2, 1995 the Company, through a subsidiary, acquired all of the outstanding shares of Nelson International Corp. (Hialeah, Florida) and Baron's Internacional, S.A., a textile manufacturing business located in Managua, Nicaragua. The consideration for the acquisition was 300,000 shares, valued at $1,500,000. As part of the acquisition, the Company assumed part, but not all of the acquired companies' liabilities which aggregated approximately $253,000. The total purchase price of $1,753,000 was reflected as property, plant and equipment. As part of the agreement, the Company warranted that the issued shares (which are restricted under Rule 144) will have a value of $1,500,000 at the end of the holding period. If the value is less than $1,500,000, the Company, at its option, may pay the difference in cash or additional shares. The sellers warranted that the equipment in the two factories will appraise at a value of no less than $1,000,000 or the purchase price and warranty will be adjusted accordingly.
Current management questioned whether the share value was properly computed and therefore in January 1997 engaged an independent appraiser to determine whether amounts recorded in the financial statements properly reflected the fair value of the assets acquired.
In as much as there were detailed listings of the equipment acquired, the appraiser through study and inspection was able to provide a value for the equipment at about the time of the acquisition. The appraised value aggregated $741,085. The equipment acquired has been retroactively adjusted to that amount with an equivalent adjustment to goodwill.
F - 11
OLYMPUS VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1996
NOTE 1 - ORGANIZATION AND ACQUISITIONS (CONTINUED):
(f) NELSON INTERNATIONAL CORP. AND BARON'S INTERNACIONAL, S.A
(CONTINUED):
As of June 30, 1996, management determined that the goodwill described above was significantly impaired and accordingly was charged to operations.
(g) H & D FASHIONS S. A.
As of November 30, 1995 the Company acquired all of the outstanding shares of H & D Fashions S.A., a textile manufacturing business located in San Cristobal, Dominican Republic. The purchase price was 50,000 shares of the Company's common stock and $183,200 in cash, $15,200 payable in January 1996, with the remaining balance paid in monthly installments. Final payment was due December 1996. As part of the agreement, the Company warranted that the issued shares (which are restricted under Rule 144) will have a value of $250,000 at the end of the holding period. If the value is less than $250,000, the Company at its option may pay the difference in cash or additional shares.
Current management questioned whether the share value was properly computed and therefore in January 1997 engaged an independent appraiser to determine whether amounts recorded in the financial statements properly reflected the fair value of the assets acquired.
In as much as there were detailed listings of the equipment acquired, the appraiser through study and inspection was able to provide a value for the equipment at or about the time of the acquisition. The appraised value aggregated $330,815. The equipment acquired has been retroactively adjusted to the amount with an equivalent adjusted to goodwill.
As of June 30, 1996, management determined that the goodwill described above was significantly impaired and accordingly reflected a charge to operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Olympus Ventures, Inc., (the "Company") and its wholly-owned subsidiaries, CEA Lines, Inc. ("CEA"), Olympus Mills USA, Inc. ("Olympus"), K.O.K.O. Wear, Inc. ("KOKO"), Nelson International Corp. ("Nelson"), Baron's Internacional, S.A. ("Barons"), and H&D Fashions, S.A. ("H&D"). All material intercompany balances and transactions have been eliminated. |
