RBB ONE
REPORT TO HYDROMER BOARD FROM HYDROMER'S INDEPENDANT ACCOUNTANTS
Rosenberg Rich
Baker Berman
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& C O M P A N Y
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A PROFESSIONAL ASSOCIATION OF
CERTIFIED PUBLIC ACCOUNTANTS
380 Foothill Road o PO. Box 6483 o Bridgewater, NJ 08807-0483
908-231-1000 o FAX: 908-231-6894 o E-Mail: rrbb@net-lynx.com
Kalman A. Parson, CPA*~#
Kenneth A. Berman, CPA*
Leonard M. Friedman, CPA#o
Barry D. Kopp, CPA*
Frank S. LaForgia, CPA
Alvin P. Levine, CPA+
Aaron A. Rich, CPA.
David N. Roth, CPA
Carl S.Schwartz, CPA*
Nicholas L. Truglio, CPA~
Steven J. Truppo, CPA
- -----------------
Daniel M. Brooks, CPA
Dorvin M. Rosenberg, CPA
Hydromer
Project Comet
* NJ and NY
+ NJ and FL
. NJ, NY and PA
o Accredited in Business Valuation
~Certified Fraud Examiner
#Certified Valuation Analyst
Other Offices:
195 Maplewood Avenue
Maplewood, NJ 07040
973-763-6363
973-763-4430 Fax
rgauerstrasse 54 CH-8050
ich, Switzerland
011-41-1-308-2969
011~1-1-308-2968 Fax
P.O. Box 61
Grand Cayman, Cayman Islands
345-949 4244
345-949-8635 Fax
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS o SEC PRACTICE SECTION o
PRIVATE COMPANIES PRACTICE SECTION o NATIONAL ASSOCIATED CPA FlRMS o INDEPENDENT
ACCOUNTANTS INTERNATIONAL
Rosenberg Rich
Baker Berman
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& C 0 M P A N Y
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A PROFESSIONAL ASSOCIATION OF
CERTIFIED PUBLIC ACCOUNTANTS
Hydromer
Project Comet
Balance Sheet
Purchase Method-Net Assets of Company Acquired
Exceeds Cost of Acquisition ........................................ A
Balance Sheet
Purchase Method-Cost of Acquisition Exceeds Net Assets
of Company Acquired................................................. B
Balance Sheet
Pooling Method...................................................... C
BALANCE SHEET (PURCHASE METHOD-NET ASSETS OF COMPANY ACQUIRED EXCEEDS COST OF ACQUISITION)
ASSETS BIOSEARCH HYDROMER ELIMINATIONS CONSOLIDATED
CASH AND CASH EQUIVALENTS 14,486 716,045 730,531
TRADE RECEIVABLES 351,964 431,150 783,114
INVENTORIES 372,012 148,753 520,765
PREPAID EXPENSES 77,567 77,567
DEFERRED TAX ASSET 100,000 100,000
OTHER ASSETS 18,762 18,762
---------------------------------------------------------------------
TOTAL CURRENT ASSETS 757,224 1,473,515 0 2,230,739
---------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 1,351,882 271,743 (340,146) 1,283,479 (1)
DEFERRED TAX ASSET 262,856 262,856
OTHER ASSETS 8,123 11,968 20,091
INVESTMENT IN BIOSEARCH 600,000 (600,000) 0 (1)
---------------------------------------------------------------------
TOTAL ASSETS 2,117,229 2,620,082 (940,146) 3,797,165
=====================================================================
CURRENT LIABILITIES
CURRENT MATURITIES OF L/T DEBT 691,041 691,041
ACCOUNTS PAYABLE 353,712 29,213 382,925
ACCRUED LIABILITIES 132,330 167,678 300,008
INCOME TAX PAYABLE 40,223 40,223
---------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,177,083 237,114 1,414,197
---------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES 0
---------------------------------------------------------------------
TOTAL LIABILITIES 1,177,083 237,114 1,414,197
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
SECURITIES ISSUED FOR BIOSEARCH ACQUISITION 600,000 600,000 (1)
COMMON STOCK 11,129,954 2,922,708 (11,129,954) 2,922,708 (1)
CONTRIBUTED CAPITAL 577,750 577,750
ACCUMULATED DEFICT (10,158,569) (1,711,350) 10,158,569 (1,711,350) (1)
TREASURY STOCK, AT COST; 7,940 SHARES (31,239) (6,140) 31,239 (6,140) (1)
---------------------------------------------------------------------
TOTAL SHAREHOLDERS EQUITY 940,146 2,382,968 (940,146) 2,382,968
COMMITMENTS AND CONTINGENCIES
---------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,117,229 2,620,082 (940,146) 3,797,165
=====================================================================
(1) INVESTMENT IN BIOSEARCH (B) INVOLVES HYDROMER (H)ISSUING 400,000 COMMON
SHARES
AT $1.50 PER SHARE RESULTING IN A TOTAL INVESTMENT ON H'S BOOKS
OF $600,000. THE ENTRY IS RECORDED AS FOLLOWS:
DR INVESTMENT.. 600,000
CR CS (600,000)
IN CONSOLIDATION, THE INVESTMENT (ON H'S BOOKS) IS ELIMINATED AGAINST THE EQUITY
(BV) OF BIOSEARCH (AMOUNTING TO $940,146) IN A SEPARATE CONSOLIDATION COLUMN -
IN THIS CASE, THE DIFFERENCE BETWEEN THE COST AND BV RESULTS IN "NEGATIVE"
GOODWILL WHICH IS E1QUALLY OFFSET AGAINST THE NON-CURRENT ASSETS (IN THIS CASE
'FIXED ASSETS'). THUS, FIXED ASSETS IS REDUCED IN CONSOLIDATION BY THE
DIFFERENCE ($340,146=$940,146 - $600,000)
ELIMINATION ADJUSTMENT:
DR PAID-IN-CAPITAL 11,129,954
CR ACCUMULATED DEFICIT 10,158,569
CR TREASURY STOCK 31,239
CR FIXED ASSETS 340,146
CR INVESTMENT IN BIOSEARCH 600,000
BALANCE SHEET (PURCHASE METHOD-COST OF ACQUISITION EXCEEDS NET ASSETS OF COMPANY ACQUIRED)
ASSETS BIOSEARCH HYDROMER ELIMINATIONS CONSOLIDATED
CASH AND CASH EQUIVALENTS 14,486 716,045 730,531
TRADE RECEIVABLES 351,964 431,150 783,114
INVENTORIES 372,012 148,753 520,765
PREPAID EXPENSES 77,567 77,567
DEFERRED TAX ASSET 100,000 100,000
OTHER ASSETS 18,762 18,762
---------------------------------------------------------------------
TOTAL CURRENT ASSETS 757,224 1,473,515 0 2,230,739
---------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 1,351,882 271,743 50,000 1,673,625 (1)
DEFERRED TAX ASSET 262,856 262,856
OTHER ASSETS 8,123 11,968 20,091
GOODWILL 59,854 59,854
INVESTMENT IN BIOSEARCH 1,050,000 (1,050,000) 0 (1)
---------------------------------------------------------------------
TOTAL ASSETS 2,117,229 3,070,082 (940,146) 4,247,165
=====================================================================
CURRENT LIABILITIES
CURRENT MATURITIES OF L/T DEBT 691,041 691,041
ACCOUNTS PAYABLE 353,712 29,213 382,925
ACCRUED LIABILITIES 132,330 167,678 300,008
INCOME TAX PAYABLE 40,223 40,223
---------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,177,083 237,114 1,414,197
---------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES 0
---------------------------------------------------------------------
TOTAL LIABILITIES 1,177,083 237,114 1,414,197
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
SECURITIES ISSUED FOR BIOSEARCH ACQUISITION 1,050,000 1,050,000 (1)
COMMON STOCK 11,129,954 2,922,708 (11,129,954) 2,922,708 (1)
CONTRIBUTED CAPITAL 577,750 577,750
ACCUMULATED DEFICIT (10,158,569) (1,711,350) 10,158,569 (1,711,350) (1)
TREASURY STOCK, AT COST; 7,940 SHARES (31,239) (6,140) 31,239 (6,140) (1)
---------------------------------------------------------------------
TOTAL SHAREHOLDERS EQUITY 940,146 2,832,968 (940,146) 2,832,968
COMMITMENTS AND CONTINGENCIES
---------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,117,229 3,070,082 (940,146) 4,247,165
=====================================================================
(1) INVESTMENT IN BIOSEARCH (B) INVOLVES HYDROMER (H) ISSUING 700,000 COMMON
SHARES AT $1.50 PER SHARE RESULTING IN A TOTAL INVESTMENT ON H'S BOOKS OF
$600,000. THE ENTRY IS RECORDED AS FOLLOWS:
DR INVESTMENT.. 1,050,000
CR CS (1,050,000)
IN CONSOLIDATION, THE INVESTMENT (ON H'S BOOKS) IS ELIMINATED AGAINST THE EQUITY
(BV) OF BIOSEARCH (AMOUNTING TO $940,146) IN A SEPARATE CONSOLIDATION COLUMN -
IN THIS CASE, THE DIFFERENCE BETWEEN THE COST AND BV RESULTS IN AN EXCESS WHICH
IS FIRST ATTRIBUED TO THE FAIR VALUE OF THE ASSETS OF BIOSEARCH. IF AFTER THE
ASSETS ARE WRITTEN UP THERE IS STILL A DIFFERENCE, THAT DIFFERENCE IS RECORDED
AS GOODWILL AND AMORTIZED OVER A LIFE NOT TO EXCEED 40 YEARS. IN THE EXAMPLE
ABOVE, IT IS ASSUMED THAT $50,000 IS ATTRIBUTABLE TO A FIXED ASSET INCREASE AND
THE REMAINDER IS RECORDED AS GOODWILL.
ELIMINATION ADJUSTMENTS:
A)
DR GOODWILL 59,854
DR FIXED ASSETS 50,000
DR PAID-IN CAPITAL 11,129,954
CR ACCUMULATED DEFICIT 10,158,569
CR TREASURY STOCK 31,239
CR INVESTMENT IN BIOSEARCH 1,050,000
TO ELIMINATE INVESTMENT AND RECORD GOODWILL
B)
DR DEPRECIATION EXPENSE 10,000
CR FIXED ASSETS 10,000
TO RECORD DEPR. EXP ON FIXED ASSET WRITE-UP - ASSUMING 5 YEAR LIFE STRAIGHT LINE
C)
DR AMORTIZATION 1,500
CR GOODWILL 1,500
TO RECORD AMORTIZATION OF GOODWILL ASSUMING 40 YEAR LIFE
BALANCE SHEET-POOLING METHOD
ASSETS BIOSEARCH HYDROMER ELIMINATIONS CONSOLIDATED
CASH AND CASH EQUIVALENTS 14,486 716,045 730,531
TRADE RECEIVABLES 351,964 431,150 783,114
INVENTORIES 372,012 148,753 520,765
PREPAID EXPENSES 77,567 77,567
DEFERRED TAX ASSET 100,000 100,000
OTHER ASSETS 18,762 18,762
---------------------------------------------------------------------
TOTAL CURRENT ASSETS 757,224 1,473,515 0 2,230,739
---------------------------------------------------------------------
NET PROPERTY,PLANT AND EQUIPMENT 1,351,882 271,743 1,623,625
DEFERRED TAX ASSET 262,856 262,856
OTHER ASSETS 8,123 11,968 20,091
GOODWILL 0
INVESTMENT IN BIOSEARCH 940,146 (940,146) 0 (1)
---------------------------------------------------------------------
TOTAL ASSETS 2,117,229 2,960,228 (940,146) 4,137,311
=====================================================================
CURRENT LIABILITIES
CURRENT MATURITIES OF L/T DEBT 691,041 691,041
ACCOUNTS PAYABLE 353,712 29,213 382,925
ACCRUED LIABILITIES 132,330 167,678 300,008
INCOME TAX PYABLE 40,223 40,223
---------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,177,083 237,114 1,414,197
---------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES 0
---------------------------------------------------------------------
TOTAL LIABILITIES 1,177,083 237,114 1,414,197
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
SECURITIES ISSUED FOR BIOSEARCH ACQUISITION 0 (1)
COMMON STOCK 11,129,954 14,021,423 (11,129,954) 14,021,423 (1)
CONTRIBUTED CAPITAL 577,750 577,750
ACCUMULATED DEFICIT (10,158,569) (11,869,919) 10,158,569 (11,869,919) (1)
TREASURY STOCK, AT COST; 7,940 SHARES (31,239) (6,140) 31,239 (6,140) (1)
---------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 940,146 2,723,114 (940,146) 2,723,114
---------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
---------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,117,229 2,960,228 (940,146) 4,137,311
=====================================================================
(1) INVESTMENT IN BIOSEARCH (B) INVOLVES HYDROMER (H) ISSUING 400,000 COMMON
SHARES AT $1.50 PER SHARE FOR ALL THE O/S SHARES OF B. THE INVESTMENT ON
H'S BOOKS IS THE NET VALUE OF B AT THE TIME THE DEAL IS CONSUMMATED
DR INVESTMENT.. 940,146
DR DEFICIT 10,158,569
CR CS (11,098,715)
IN CONSOLIDATION, THE INVESTMENT(ON H'S BOOKS) IS ELIMINATED AGAINST THE
EQUITY (BV) OF BIOSEARCH (AMOUNTING TO $940,146) IN A SEPARATE
CONSOLIDATION COLUMN - NO GOODWILL IS RECORDED OR ASSETS WRITTEN UP OR DOWN
EVERYTHING IS RECORDED AND "POOLED" AT BOOK VALUE.
NOTE: A POOLING MUST BE DONE IF ALL 12 OF THE CRITERIA (SEE ATTACHED) ARE MET.
IF NOT, THE PURCHASE METHOD IS USED.
ELIMINATION ADJUSTMENTS:
DR PAID-IN CAPITAL 11,129,954
CR ACCUMULATED DEFICIT 10,158,569
CR TREASURY STOCK 31,239
CR INVESTMENT IN BIOSEARCH 940,146
TO ELIMINATE INVESTMENT