Shareholders Meeting Questions (Draft) - Version 0.2
Company
How do you justify the wide margin between revenues ($709,638), administrative costs (i.e. payroll is approximately $3,857,925) and net loss ($7,789,905)?
Dr. Frudakis recently stated that the company plans to move from its current 7,000 square foot building to a new 20,000 square foot building at a cost of approximately $1,000,000. DNAP has 12 full-time employees as per the last 10K and not much equipment. Can you explain why the additional space if needed and in what timescale?
Does the company intend to relocate to the new research facility being constructed at the USF, as indicated by having signed a letter of intent to do so? If not, has the company selected alternative premises? What is the timescale to finalize this decision and move to the new location? Will the existing offices at Cocoanut Avenue be retained?
Can you confirm the current number of employees, their function, and whether they are full time or part time or employed on a contract basis? Do all employees work at the company offices? What are the current plans for expanding the workforce in terms of numbers and functions of prospective employees?
In the January 2003 letter to shareholders, Dr. Frudakis intimated that shareholders would be able to participate in a warrants plan that the company intended at that time to implement. Was the vote for the increase in authorized shares on the basis that such a warrants plan would be provided? Why did the company not ultimately proceed with the warrants plan as initially envisaged?
In the January letter to shareholders, Dr. Frudakis stated that the common shareholders would be given the right to vote on any further issuance of shares. Since that letter was released, DNAP has issued over 200,000,000 shares. Why have shareholders not received proxies from the company in relation to these issuances?
What is the current status of the agreement with Genomedics Inc (GMED)? Is the agreement still in force and what are the implications (if any) of this for DNAP?
Early in the companies history there was much discussion of the Orchid option agreement. It was described as a six month window of opportunity in which Orchid could obtain the exclusive rights to the first completed product. Mention was made in newsletters that the terms of the option created some hesitation on the part of potential partners/customers as they did not wish to lose their negotiated rights should Orchid chose to exercise their option. Since then we have heard that the rights to the option have transferred to Beckman and there has been very little said in regards to it lately. Does the option still exist? If not, what completed product was used to trigger the six month window and in what time frame did it occur? If it still exists, what are the ramifications in terms of any approaching project completions? Since Ancestry and DNAWitness were developed under different circumstances we are under the impression that the option agreement does not apply to them, is that a correct assumption?
Much has been made of the technology and innovation of the company and the potential value that can result from exploiting them, but in terms of material value, what are the tangible assets of the company? We are aware that the building is leased and that the actual ownership of the major piece of equipment (Orchid UHT) is questionable. Aside from the office and lab equipment, is there any other capital equipment that is the property of the company? The products themselves (Ancestry and DNAWitness) can be considered assets, but as they are 'service based' there is very little inventory associated with them. (swabs, plastic bags, printed material etc.). The major asset of the company is presumably the 'platform' from which the various products are derived, what exact form does the platform take? Is it a program/database and associated documentation resident on a computer? Is it a documented and archived set of CD-ROMS? Is it a collection of various parts that coalesces into a functional entity under the careful management of a trained individual? Is it therefore a tangible object that can be described, backed-up or duplicated at will, or is it an intangible collection of expertise and knowledge that requires the involved participation of a single, or set of, individuals? The patent applications are a growing repository of potential value that will perhaps provide a tangible asset if they are ever granted, until they are however, they must be considered intangible. What Safeguards are in place to protect the assets of the company?
Presumably the platform is protected from competitive duplication by patent application. We can see where this would prevent a competitor from reading the patent application and duplicating the platform and going into business with a competing service. How would it prevent a major pharmaceutical company, for instance, from duplicating the platform and using it in the privacy of their own lab to develop new drugs. Drugs that would come out of the drug pipeline just like countless others before them. The drugs themselves would not be in competition with DNAP so what would be the path for litigating the patent rights? How would anyone know, by what mechanism would the use of a duplicate platform be revealed?
Given that the assets of the company, while potentially valuable, are knowledge based and therefore somewhat intangible, are there any particular safeguards in place to protect shareholder value in the event of unforeseen business failure? Are the assets documented and archived such that they can be reconstituted by knowledgeable individuals? Are they listed on an asset sheet so that they can be tracked by auditors? Are there by-laws in place that would require a shareholder vote before such key assets could be transferred or licensed?
What is the legal status of the Orchid device if the company entered bankruptcy?
Can the company confirm the status of the NIH and the NIJ grant applications?
Can the company confirm the status of the company's application for forensic laboratory accreditation?
What happened to the proposed private placement?
Can the company provide an update on the civil case in the Florida circuit court involving a former employee?
Are there are other current or pending legal actions involving the company?
Has the company been, is it currently, or will it potentially be involved with DNA Phenomics in Malaysia? If not, has the company identified another partner(s) for product distribution in the Asia Pacific market?
Are there any initiatives underway or planned in relation to partner(s) for product distribution in Europe?
If the company share price reaches .025 will funding under the La Jolla Cove agreement be discontinued, be suspended until the share price recovers, or will funding continue?
Can the company provide an update in relation to its previous indications about becoming a drug company?
The company previously indicated that it would at some future stage make license fee payments to Genetic Technologies. Can you explain the context, and anticipated magnitude and timescale of these payments?
Management
Can you explain and justify the level of management compensation and how this will change upon expiration of the existing one year employment agreements for the management team?
Can you explain why it is necessary to have a Chief Financial Officer/Chief Operating Officer role at the present time? Would it have been possible to outsource these functions, possibly as an interim measure?
The securing of which co-commercialization and or co-development partner for the Company's first genomics - based patient classification test triggered the “performance condition” in the Performance Stock Agreement between the company and Tony Frudakis, that resulted in the vesting of 30,000,000 shares as per the terms of that agreement?
What is Dr. Frudakis's involvement with the Biometrics Council (renamed to Biological Threats Council)? Are there any implications for the company as a result of his involvement with this initiative?
Scientific Advisory Board
Can you confirm the current composition of the SAB? Some individuals were previously listed in SEC returns and on the company website as being SAB members, e.g. Ramin Mirhashemi, Ferenado Arena and DC Rao, but these individuals no longer appear to be SAB members. For any people who are no longer SAB members can you provide an explanation as to why they are not?
Can you explain the role of the SAB and the services that are typically performed by SAB members?
Can you explain how the remuneration level of 50,000 shares of common stock per annum was arrived at? In the Company's opinion is this sufficient to attract and retain the type of individual that the company would want as SAB members?
As per the last 10K the company has initiated plans to expand the SAB to include "other scientists who will actively contribute to our effort in increasing the number of BGA sub-categories from our current four, to as many as 20." Can you provide an update on how these efforts are progressing? Are there any current plans to expand the SAB to include scientists in disciplines other than biogeographical ancestry?
Can you explain the difference between the SAB and the Board of Consultants, which was also mentioned in the last 10K?
Investor Relations
Does the company have any plans to enhance their access to customers or shareholders questions and suggestions?
Does the company intend to provide newsletters on a regular basis in the future?
Website
Why are the “DNAP in the Press” and the “Conferences/Trade Shows/Presentations” sections of the company website not updated on a regular basis?
Why is the January 2003 letter to shareholders the only publicly released document from the company not available on the website?
Science
[Could have some technical questions about AIMS and ADMIXMAP here. I know Doug has a potential question...]
Services/Products
The two major products in the market today are AncestryByDNA (ABD) and DNAWitness. We have heard positive things about both. Since the two products have been on the market for a number of months now can you share any market analysis that you have obtained. We have heard some fairly large estimates for the size of the market for DNA testing as it relates to the forensic space, but those estimates include such unrelated to DNAWitness categories as CODIS testing of convicted felons and backlogged rape kits. Do you have any market analysis that focuses on the specific number of applications available for the DNAWitness product? What is your projection for the growth curve for ABD, is it still growing, at what rate? Is the curve showing signs of exponential growth, linear growth or is it flattening out?
Can you confirm the current status of the development of ABD 3.0?
Can you give any details about the parental populations used in the development of the AIMs? Specifically, what is the parental population for the Indo-European category? From what ethnic groups/part of Europe were these people from?
Is it possible that some of the admixture estimates that are derived are overestimated due to their being compared to a small (narrow) parental population?
What will the 20 categories be in ABD 3.0? Who is this product being developed in conjunction with and what are their aims for the project(s)? Is there an agreed taxonomy of racial categories and what correlation is there between any such taxonomy and the categories that the company intends to use?
Can the company provide any details of the scope and progress of the project to “date” admixture? How would such work result in new products or impact current products?
What is the company’s current anticipation of the likely adoption of DNA Witness for routine use by US and foreign Police Departments and/or Governmental agencies?
Can the company provide any details on the development of additional classifiers for traits such as hair color and facial features that would be components of DNA Witness?
Why has genotyping not been provided as a service to other companies to date? What are the current plans for offering this as a service? Why did the $1,000 genome scan appear not to generate market interest?
Will the company be providing so-called “validation genotyping” services for (GMED)?
Has any interest been expressed in the paternity testing service that was recently introduced by the company?
What is the status of Retinome? This was ostensibly 75% finished over two years ago. We then heard that the data was inconsistent due to ‘self reporting’ errors introduced by the participants, but a more sophisticated data set was obtained using digital equipment. We heard in a magazine article last summer Retinome would be introduced by the end of 2003. It is now mid 2004 and we have heard nothing lately. Could you clarify? What is the anticipated timetable for completion of this product and its launch in the market?
What is the status of Statinome? What is the anticipated timetable for completion of this product and its launch in the market? There has been some indication that competitors are working on similar projects, can you give us any indication of DNAP’s advantages or disadvantages in regards to these competing approaches?
What is the status of Ovanome? What is the anticipated timetable for completion of this product and its launch in the market?
Are there any other products currently in development or planned by the company?
Patent Applications
What is the current status of the various patent applications? What issues (if any) have been encountered in practice during the patent application review process? What is the company's expectation that any or all of these patents will be granted in due course?
Have all the inventions and patent applications been assigned to DNAP as the sole owner and assignee of those assets? If not, then who owns the inventions and patent applications?
Do all the employees of DNAP, including officers and staff members, and outside contract researchers have a written obligation to assign all of their inventions to the company as a condition of their employment or contract? If not, then how is ownership determined?
N.B. As utilized here, the term “inventions” comprise only those pertinent to the science, technology and business objectives of DNAP.
Collaborative Research
Can the company confirm the current status of the collaborative relationship with the University of Miami? Are Drs. Mirhashemi and Arena still employed by the University and are they participating in research with the company?
Is there any update on the FAMRI sponsored project on genetic susceptibility to cervical cancer in second hand smokers in conjunction with the University of Miami that was the subject of the press release in February 2003?
Can the company provide any update about the work that has been underway with New York University aimed at developing a transplant classifier?
Can the company explain what happened with the proposed collaboration with GeneLink which is apparently now not going forward?
Can the company provide more details about the relationship with H. Lee Moffitt (Moffitt) over and above what is contained in the 10K?
What is the nature of the relationship with Moffitt? Equal partners, both sharing in the costs of resources and materials of the various projects and then sharing equally in the resulting assets? Is DNAP acting as a service provider to Moffitt, being paid for their services and their expertise, but then Moffitt is the owner of any assets developed from the project. Is DNAP providing the project management or is it acting as a subcontractor taking direction from Moffit? Is there some other form for the relationship? How does the company see the process of co-development and co-commercialization working in practice with Moffitt?
Can the company provide any detail on the due diligence work that was undertaken by Moffitt before collaborating with DNAP and confirm when the projects actually started?
Can the company confirm that the following projects are currently underway in conjunction with Moffitt: Colon Cancer, Multiple Myeloma, Cyclophosphamide, Taxanes? Is is possible to provide any additional detail on the scope and anticipated timetable for these projects? Are there any other projects currently in progress or planned to be undertaken with Moffitt?
Can the company explain why they terminated the license agreement with the Penn State Research Foundation? Does this have any affect on the company’s intellectual property or on other work underway, or future work planned, in conjunction with Dr. Shriver?
Is there any update on the National Institutes of Justice Funded Project that was the subject of the press release in August 2003?
Can the company confirm the scope and status of any projects underway in conjunction with Senecio Inc?
Listing
Can the company confirm that it has applied to be delisted from the Berlin Exchange and also confirm the status of the listing on the Frankfurt Exchange? Does the company have plans to list on other foreign exchanges?
Has the company considered possible courses of action to address potential naked short-selling of its stock? These could include delisting from exchanges, removing its stock from the DTCC system and issuing physical certificates, and recalling all of its stock and re-issuing it to shareholders of record.
Does the company intend ultimately to list on NASDAQ or AMEX (or some other exchange)? Is there any timetable for such a listing?
Miscellaneous
Does the company intend to implement a reverse split of its stock in the foreseeable future? If not, how does the company think that the existing level of authorized shares will be perceived by the market? Is so, what would the ballpark split ratio be?
How does DNAP Utah impact/affect its wholly-owned operating subsidiary, DNAP Florida? What's the role/structure of the Utah parent company? Do they interact with DNAP Florida? If so, in what capacity? Is there overhead to DNAP Florida for this entity? Is Utah involved in the day-to-day operations of Florida? Do they handle employment contracts, etc? How many shares does Utah hold? Based on the above, what's the float?
Comments or additions welcome.
