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Re: foxi post# 181196

Tuesday, 07/11/2023 9:38:01 AM

Tuesday, July 11, 2023 9:38:01 AM

Post# of 192019
Here's my cut at it from a couple of weeks ago along with some issues that I hope they clarify for us:

In the tax world, as well as the M&A and asset disposal world, structure is everything, so I suspect the characterization of the transaction as a sale of 2 subs has a purpose, although it's not evident so far. There have not been enough details released to determine what exactly is intended. Further, we don't know exactly what each of those subs currently own, because it could have changed since the original disclosures about the 2020 merger. We also don’t know yet what will remain with ENZC. Thankfully CC says he’s going to make additional comments about how this deal will affect ENZC shareholders. We do need some clarification.

The first PR said it was a sale. The 2nd PR, 10 days later, said it was a business combination and the 3rd PR mentioned both and it sounded like some cash may be involved. The language used in the PR’s has caused some confusion and uncertainty about what is actually going to happen…(1) essentially a step toward a reverse merger with a movement to NASDAQ in exchange for major funding or (2) an outright cash sale of the 2 major subs that hold the bulk of ENZC’s technology.

The PR's are from ENZC and they do seem to suggest that the transaction with SAGA will provide benefits to ENZC beyond the closing of the transaction, so I tend to believe (and this is JMHO) the 2nd PR revealed the ultimate intent while the language in the 1st PR created some questions about (1) what will remain in ENZC and (2) the value of ENZC’s technology.

Personally, I find it hard to believe that ENZC believes that the sum of their technology is only worth $250 million, now renegotiated to $450 million with a Make Whole clause. Consequently, as I’ve said all along, the key term in the 1st PR that I suspect has been misunderstood is $250 million in value, which implies to me that the "value" will be SAGA stock or maybe stock and a little bit of cash. SAGA needs the cash they raise from stock sales for funding VIRO and BGEN research, operations, etc. and ENZC needs the SAGA stock in order for ENZC shareholders to continue to benefit from VIRO and BGEN operations and growth.

So, here’s one scenario of how the deal may be structured. Since this deal was negotiated with SAGA while basically a blank check company with no other investments, it MAY be based on the typical SPAC $10/SAGA share value versus market value at closing. If based on market value at closing, adjust accordingly. So, maybe ENZC will receive 25 million (up to 45 million now) SAGA shares for about 80% to 85% of SAGA’s current stock structure, which will be reduced to around 60% as the PIPE funds are raised from subsequent SAGA stock sales. Alternatively, the deal might reserve around 20% for future sales and ENZC would start out and keep its share of SAGA at around 60%. If ENZC dividends the SAGA shares out to ENZC shareholders, we become SAGA shareholders as well as ENZC shareholders. If they dividend out less than 100% of the SAGA shares, ENZC’s assets will increase as should its stock price, both of which will fluctuate with SAGA’s stock price.

So, what will remain in ENZC other than the lawsuits and maybe some cash from the SAGA deal? That’s the unknown that we’re wrestling with now. There’s BioClonetics and RobustoMed, 50% of IMPL (but SAGA is going to take the Bulgarian side of that deal, so will ENZC still get its revenues?) and 50% of the Bulgarian entity related to Valentin Dimitrov (unless that was retraded in some way), maybe the patent application for MS and possibly some other patent applications not specifically mentioned as a part of the SAGA deal and/or maybe carved out royalties from each of the patents going to SAGA and maybe licensing fees for any patents not going to SAGA (Clone 3 status is unclear).

Most of those assets can produce passive income for ENZC, which could then be paid out as dividends, possibly for a long time. It’s also possible that no one wanted to taint SAGA with ENZC’s ongoing lawsuits (the possible reasoning for the structure strategy as a sale of the subs) and that a full merger with SAGA is planned (or possible) once all the lawsuits are resolved, meaning more compensation to ENZC shareholders if that were to occur.

What are the 900 million of authorized ENZC shares for? Possibilities: (1) Dividends to shareholders instead of SAGA shares, (2) intended for a future major shareholder, (3) intended to buy something to add assets to ENZC, (4) preferred stock conversions, (5) payoff to contractors or insiders, (6) just extra room in case something comes along.

If this deal shapes up like I think under this scenario, we get the benefit of substantial funding, listing on the NASDAQ under a new name and an additional management team separated from scientific research responsibilities and dedicated to management of the company and its assets in the investment environment. The ENZC scientists can focus on the science and CC can focus more on legal issues such as resolving the lawsuits, preparing, managing and protecting the IP and whatever else he has planned for ENZC.
All of the above is JMHO.