DNA Brands Inc (DNAX)

[Ed the Trader]

"Do you think a reverse split is possible in your opinion?"

DNAX is basically sitting at $0.0001 so of course a reverse split is possible.

However, in betting against a reverse split, one must consider why reverse splits become necessary.

Simply put, a reverse split becomes necessary if the market action (or inaction) prohibits corporate management from deriving further funding from the stock.

So far, it appears that it has been possible for financiers to sell large blocks of stock at periodic intervals even at 0.0001. There have been a small number of zero volume days but they have not been strung together into long, multi-day periods of inactivity.

Judging from the comments posted here on iHub, the majority of people who buy DNAX seem to understand that unlike almost all OTC Pinks, and last year DNAX was still trading as an OTCQB stock, DNA is a real company with superior products. It's downfalls are that last year it's former CEO really screwed up the company in what appears to be intentional sabotage, and DNA has a bad habit of obtaining excellent distribution deals without backing it up with sufficient advertising and marketing. If DNA management can overcome those shortcomings, it can rebound and make shareholders very wealthy. I think most shareholders understand that and expect a huge climb in PPS in time. So, they are comfortable holding DNAX long term.

If we are to believe reports from other iHub posters, the CEO himself has something like $400,000 of his own cash tied up in DNAX. If that is true, the CEO is not going to be very interested in a reverse split either as he will hurt him worse than almost anyone.

One disturbing fact is the lack of visibility of the share structure due to a gagged transfer agent. So, we don't know how close the O/S is to the A/S. The current A/S is six billion shares. No one knows how the market will respond if the A/S is raised although I've seen other tickers with MUCH less actual business behind them successfully sell shares out to about 20 billion shares.

As long as the market continues to be willing to buy and hold more shares, DNA management can continue to sell new shares into the market as they deem necessary. From appearances, they have been relatively as austere in their use of new shares as a source of funding. However, there are always limits to what level of dilution the market will accept.

I wish that someone here with 5 figures to put into the company would talk to Mel to determine what would be required financially to launch the new planned product. Then, if that person got a group of folks to offer DNA management a sufficiently large block of cash (presumably for stock at favorable terms), then DNA could launch the new product with enough juice behind it to do advertising and marketing well.

There is also a strong possibility that DNA management is sorta marking time at the moment to get their current debts cleared (note those four massive spikes in volume since last November). Once the financiers of old debt are clear of that debt, maybe one or more of those financiers (or some other source of funding) will be willing to provide DNA with new debt to fund the launch of the new product (and maybe a jump start of getting the existing products moving better). It is very possible that DNA management has been told that no one will fund the new product until the existing debt is first cleared.

I just provided much analysis, and much speculation, but not much in the way of a concrete answer to your question.

The short answer is that from what I see right now, I think that DNA management will do everything they can to avoid a reverse split, and I don't think that market forces are currently such that DNA management will be forced into a reverse split.

That could change at any time, and if it does, I don't think it will matter for shareholders if they tried to get out in time or not. I don't think most shareholders with any sizable holdings even at 0.0001 can get out even now. This is very much a buy and hold and hope scenario, not a buy and watch and quickly get out if things get worse scenario. I believe the market makers are holding hundreds of millions of shares from last week's spike in volume and they are likely to insure that their shares move before much of anyone else's shares move.