DNA Brands Inc (DNAX)

[Ed the Trader]

"...they also don't make such a bold statement unless they are willing to follow thru on the plan. Mel stated over the next 6 months. How many months has it been? By my calculations we should be nearing the end of the 6 month cycle very soon. If he has not even started on the trials then I ask again, what have they been doing for the past, 5 months?"

Nope... you need to read the December 18th shareholder letter again. What it clearly states is that they are working on eliminating their existing debt and that the debt MAY be eliminated in the first quarter of 2015.

"Convertible debt which we were forced to accept has also been greatly reduced and could be eliminated early in the first quarter of 2015."

The shareholder letter also clearly states that DNA management would LIKE TO move forward on a new beverage, and that IF they are able to secure funding, they will have the product ready for market in 6-8 months. [Note that the January PR modified this slightly to indicate 6-9 months.] It is very clear that without funding, the work on the new beverage will NOT begin.

"On a more optimistic note, we would like to move forward with the development of a new and fully proprietary functional beverage which is not yet in the marketplace. We have received the support from a prominent member of the medical community to do a clinical study at little or no expense to the Company. If we are able to secure adequate funding, which is not a certainty, we can have this product ready for market in 6-8 months."

Mel laid out the situation very clearly but people read what they want to see, so they think that DNA has been working on the development of the new product since December even though it clearly states that new funding is a prerequisite of any such work beginning.

(Reference: Shareholder Letter, December 18, 2014, http://www.dnaenergydrink.com/DNAenergy/index.php?option=com_content&view=article&id=485:shareholder-letter&catid=57:news&Itemid=116)

(Reference: DNA Brands 2015 Outlook, January 08, 2015 08:30 ET, http://www.marketwired.com/press-release/dna-brands-2015-outlook-pinksheets-dnax-1981370.htm)

If we are to believe the post that razzle34dazzle posted on 4/10/2015, in which he claims that he just received a message from Mel stating that DNA is still seeking (but has not yet obtained) funding for the new beverage, then DNA has not yet begun work on this new product:

"Dear Mr. XXXXX,
What I can share with you is that we are in the process of selling off our remaining inventory and are seeking additional capital that may allow us to continue moving forward. Upon the advice of counsel that is all I am able to put forth at this time.

Sincerely,
Mel Leiner"

(Reference: DNAX IHub post #20402 by razzle34dazzle, Friday, 04/10/15 11:59:36 AM, http://investorshub.advfn.com/boards/read_msg.aspx?message_id=112611048)

I have no way to know for sure that DNA is unable to obtain additional funding, which would be used to fund development of their new product, until they have cleared out their existing debt first, but that does make sense.

You asked, "If they seriously are only doing what you have laid out here, which is to allow investors to dig them out of their debt hole with absolutely no game plan after that then how can any new investor seriously think they have a chance of an adequate ROI?"

Like it or not, from what I have seen so far, it is EXACTLY the game plan that DNA management is waiting for enough dilutive shares to be purchased to pay off the existing debt so that they will then have some opportunity to obtain new debt to fund the development of the new product.

Further, it is unlikely that we will see the new product until 6 to 9 months have passed AFTER the new funding is finally obtained. Therefore, the EARLIEST that we should be expecting to see the new product is November... and maybe several months after that.

DNAX now trades at the bottom ($0.0001). If the plan which DNA management wishes to execute pans out, I think it is reasonable to figure that the PPS will go to at least $0.01. In fact, if I recall correctly, the PPS rose into the double zero range last year just on the announcement that management was expecting the debt to be zeroed out. A rise of PPS from $0.0001 to $0.01 represents a 10,000% profit. That means that $100 becomes $10,000.

Is the risk and the wait worth the chance at a 10,000% profit?

I can't answer that for you, or anyone else. Personally, I am holding a small amount of DNAX, and if it appears that the stock continues to trade (ie: no stagnated, long-term no-bid condition which would suggest an impending reverse split), I plan to purchase and hold more. I think that the total risk of some cash is worth a chance of the potential profit. Each person has to evaluate his or her tolerance for the potential of the total loss of investment.

I will suggest a small glimmer of hope, which is that Mel was very specific about not being able to say any more per advice of his legal counsel. This suggests to me that a funding deal may be in the works, but the lawyers told Mel to stay quiet about it until it is finalized. After all, under the previous CEO, DNA got into enough trouble issuing statements that were not correct.

Of course, Mel could just be blowing smoke just to stir up some hope in investors, but to be blunt, one of the reasons that I am sticking with DNAX is that up to now, Mel has appeared to be very sincere, and not one to blow smoke, or play with mirrors. He only issues statements when he has something definite to communicate, and you know exactly what is happening when you read one of his communications.

November 2015 is 6 months from now.
February 2016 is 9 months from now.

News of funding alone will almost certainly make this stock skyrocket. The first quarter of 2015 is over... and maybe so is the process of eliminating the existing debt.