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Microcap & Penny Stocks : DCI Telecommunications - DCTC Today -- Ignore unavailable to you. Want to Upgrade?

To: Steve W. who wrote (16236)	5/8/1999 12:21:00 PM
From: Colin Cody	Read Replies (1) \| Respond to of 19331

Part II - This is an example of Pooling vrs Purchase based on a DECEMBER 1st merger: Billy sells newspapers at "Billy's" on a corner in New York City. He nets $100,000. Bob sells newspapers at "Bob's" on the corner opposite Billy. He nets $100,000. They decide to work together - merge. They each figure that each corner is worth 10x earnings, or $1,000,000. ---------------------------------------- Pooling: BEFORE Billy's Balance Sheet -zero- (he has no inventory) Billy's Income Statement $100,000 earnings Bob's Balance Sheet -zero- (he has no inventory either) Bob's Income Statement $100,000 earnings AFTER POOLING Billy Bob's Balance Sheet -zero (they still have no inventory) Billy Bob's Income Statement $200,000 earnings Billy Bob's EBITDA $200,000 earnings --------------------------------- Now for purchase accounting: (THIS IS WHERE IT IS DIFFERENT FROM EXAMPLE #1) BEFORE Billy's Balance Sheet -zero- (he has no inventory) Billy's Income Statement $100,000 earnings Bob's Balance Sheet -zero- (he has no inventory either) Bob's Income Statement $100,000 earnings AFTER PURCHASE Billy Bob's Balance Sheet "Goodwill" $1,000,000 & "Stockholder's Equity" - $1,000,000 Billy Bob's Income Statement $108,333 earnings minus $4,167 goodwill amortization = $104,166 Billy Bob's EBITDA $108,333 earnings (this will remain the same as with pooling AFTER year #1) AFTER YEAR #1 Billy Bob's Income Statement $200,000 earnings minus $50,000 goodwill amortization = $150,000 Billy Bob's EBITDA $200,000 earnings