DNA Brands Inc (DNAX)

[stockdarockk]

Company files Form 15-12g, to "go dark"from investors. CEO states they are in financial TROUBLE.

I hope many realize that the 15-12g filing is when it really set in that these guys were in a bit more trouble than was led to believe, by the rescinded letter two months ago. The stock was getting crushed, and then when it seemed to be coming undone, we, like many, reached out to find out if this was going to be a bottom bounce, or continue to get crushed. Knowing they were going release news, and at least shielding that it was to be rougher news, the bounce call was easy to make. And oh boy did the bounce happen. It happened to bounce over and over. So it wasnt hard to feel better that this upcoming news was quiet, in order to not have a repeat issue, like the news based on a "pre-mature" distribution deal with Coke. With two months and not updating, but giving the appearance it was making sure to finish this deal, we stayed in touch with the company. Contrary to somes belief, we were hoping to get back to its multi-penny days.

Things stayed almost even keel, until lately. Then the 15-12g filing hit to de-register its securities from the SEC. So even though this did well, it would or could now trap anyone piling in. Assuming it was going to fully recover that last run. The day of the filing, it still had a chance, as I put it then, depending on managements next move. Then there wasnt one. So it was clear they were in trouble, as also shared.

I was positive like many, and enjoyed the bounce it had. But in pinks these change quickly. And thats the purpose of "stickies". The volume would show some peoplee new to this stock, and chart its most recent "wow" run. And as its not showing on Ihub anymore(Form 15 filing), the sticky had to let people know they filed to de-register, and weigh that in, before you pile in now. No one likes negativity in any stocks held. But there were signs, that even if planning to hold, be careful planning to load, as it could be at a huge loss.

It is what it is, but my post hopefully had some at least factor everything in. Todays investor update confirmed what we thought might be hat was about to happen. The letter today will be part of this post, ill sticky. But DNAX may have a bright future. But its going to have a new start up company type growing pains again. As they will need to find financing, and cant revamp productions, until they do. That will probably include some sort of toxic financing, and periods of relentless dilution.

In playing bounce plays, one needs to always be on the look out for any spin that could bring it back down. Good luck if you hold and choose to ride it out. But there is a negativity to the sort to mid term troubles with this company.


*******Investor Update, August 18th 2014*********
http://www.dnaenergydrink.com/DNAenergy/index.php?option=com_content&view=article&id=484:shareholder-letter&catid=57:news&Itemid=116

Dear Shareholder,

It is with a heavy heart that I am writing this letter. I am sure that each and every one of you know the obstacles and disappointments we have faced since the summer of 2012 when our then investment banker, Charles Morgan Securities closed its doors virtually a few days before we were to receive a sizable infusion of money to be utilized for our planned expansion. At that time DNA was on pace of approximately $2 million in revenue. Based upon the anticipated receipt of this funding which we were led to believe was sitting in escrow, we had made commitments for increased inventory, distribution, sales and marketing efforts that we could no longer afford when the closing of the funding was cancelled.

2013 was a very difficult year for DNA. While we were trying to get back to our previous revenue numbers and beyond, senior management and key personnel made some serious financial contributions and sacrifices. Not only did senior management continue to go without salaries for the third consecutive year, we continued to personally fund operations by making personal contributions of an aggregate of $1.8 million. Initially structured as loans, the obligation to repay the entire loan balance was subsequently eliminated and the company released from this obligation, along with accrued salary of $944,000 at the end of the year. Other key employees also agreed to significant pay cuts to (i) reaffirm their belief that we were once again on the right track and, (ii) free up money to bring on a new Vice President of Sales and Marketing, Eric Fowler. Mr. Fowler came to us as a seasoned beverage industry professional with a strong resume and heavy experience in all aspects of the industry with emphasis on the energy drink sector.

Mr. Fowler formulated and implemented a detailed plan to secure major retailers and distribution avenues. This plan included the total rebranding of our award winning energy drink line and the introduction of a new energy coffee line. DNA’s decision to rebrand was the direct result of his meeting and conversations with a top level executive at one of the largest international beverage producer and distributor where he was told that they would not entertain doing business with DNA with its current edgy graphic design. Mr. Fowler stated that once the graphics were changed per their recommendation, it would then be an item acceptable to them for distribution. Mr. Fowler also urged us to create an energy coffee line which the Company did after he assured us that due to his pre-production sales efforts he had pre-sold virtually the entire first run.

Based upon his strong distributor relationships, personal friendship, pre-rebranding sales efforts and verbal commitments, Mr. Fowler went as far as projecting opening size orders, and ongoing purchases and revenue projections. Although sales did not measure up to projections we remained optimistic based upon his reported sales efforts and reports of how close we were to some very major successes. We were optimistic enough to promote Mr. Fowler to President and CEO effective April 1, 2014.

Never in our wildest imagination did we think that there was more behind slower than anticipated progress, than normal delays incurred when introducing new products. That is until Mr. Fowler put out a bogus press release shortly after assuming his new role. A retraction was issued immediately by the Board of Directors and Mr. Fowler was demoted to his previous position while an internal investigation was commenced. What we have discovered is staggering. Aside from some early successes, virtually everything submitted by Mr. Fowler was a lie or fabrication. Emails were falsified, conversations never took place or if they did, results were altered or not reported at all. We also learned that while serving as our Vice-President, President and CEO, Mr. Fowler was also in the employ/and or a consultant for 3 other companies, two of them beverage, selling competing products to “our” current and prospective distributors. Mr. Fowler went so far as to provide the exact same plan and projections to our competition. While we were paying him a healthy salary, expenses and benefits, Mr. Fowler was collecting fees, expenses and benefits from others as well. We also believe one or more of these companies knew of Mr. Fowler’s relationship with DNA and may have been part of the conspiracy.

The extent of damage incurred by DNA as a result of Mr. Fowler’s actions is very significant. We are continuing our investigation into these events. However, based upon what Mr. Fowler told us was imminent additional business opportunities, including contracting with a major retailer encompassing thousands of retail stores that would have caused our company to reach a new, higher level of business, we entered into certain short term financing transactions that we now find ourselves hard pressed to service and/or repay. All of these alleged new business opportunities described by Mr. Fowler have proven to be imaginary.

We have retained litigation counsel to pursue Mr. Fowler and his son Chris Fowler, a former employee of ours, and those companies that may have conspired with him on both a civil and criminal basis. Unfortunately, this is expected to be a long and expensive process. In the meantime, we have taken the following steps to reduce costs in an attempt to keep DNA viable:

To eliminate costs the Company has filed a Form 15 with the SEC, voluntarily choosing to become non-reporting. This means that we will be able to save in excess of approximately $150,000 in annual auditing and legal expense. We can apply within 6 months to become reporting again if we should choose; Our common stock continues to trade on the OTC “pink sheets” and we intend to continue to file reports with the OTC Markets;
Senior management and key employees have converted all of their unpaid and accrued salaries to a preferred stock with super voting rights, but no equity. We are not increasing our ownership, only gaining voting shares. In order to service the debt on the books, the Company is increasing its authorized shares amount as allowed by Colorado law.
We have engaged two beverage brokers to immediately move out inventory and secure new distribution channels; and
Senior management is, once again, loaning the Company unsecured funds to continue operations.

While we have made mistakes in the past, none of our actions were done in bad faith. In reality, I do not believe anyone has suffered more financially and emotionally than us. Yet, we remain committed to our plan and our products.

We are open to any other ideas which you may have that will allow us to move forward. Please do not hesitate to contact us if you think you have any positive suggestions. We continue to use whatever resources at our disposal to implement our business plan. We are also engaged in discussions with various financing sources, but as of the date of this letter no definitive agreement with any financing source has been reached.

Sincerely,
Melvin Leiner
President