Now that is a masterpiece of misleading information.
So if I read the 8-K and the PR correctly,....
You obviously don't. (Or is this your eventual disclaimer?)
Dutchess is taking 2,000,000 warrants in exchange for the $2,000,000 in "incentive debentures" attached to the DNAPrint Notes Payable.
No they aren't. $2,000,000 is an imaginary upper limit.
From the filing:
If the balance on the Incentive Debentures at the time of the spinoff is less than $2,000,000, the Registrant shall be deemed to have made a principle payment on the Notes in the amount of the shortfall.
Not even close:
Dutchess, whose Notes payable included a lien on all of DNAPrint's assets agreed as part of this deal to release their claim on the assets.
Dutchess is releasing 'certain' assets. Not all (as the spin suggests).
As part of the Letter Agreement, Dutchess consented to the transfer of certain assets to Pharmaceuticals and released its security interest in such assets and in the Pharmaceuticals’ common stock.
And last but certainly not least;
Dutchess agreed to take "up to" 2,000,000 shares of DNAPrint Pharma (shares that don't exist yet in a company that doesn't exist yet) to discharge the other $4,000,000 in debt. That means if DNAPrint didn't pay them another nickel, Dutchess is willing to value (the non-existent) shares at $2.00/share and accept them as payment on DNAPrint's debt? I mean, that's what I see folks, unless someone can show me differently.
This is different.
On July 24, 2007 the Registrant entered into a Letter Agreement with Dutchess whereby the Registrant will be permitted to repay a portion of the Notes and Incentive Debentures owed to Dutchess through the issuance of stock and warrants in a planned future spinoff of the Registrant’s wholly-owned subsidiary, DNAPrint Pharmaceuticals, Inc.
Note the significant difference from 'all' the current debt vs. a 'portion' of the Notes.
Under the terms of the Letter Agreement, Pharmaceuticals would issue up to 2,000,000 shares of its common stock to Dutchess after the spinoff as a payment on the Notes due by the Registrant to Dutchess.
Notice the significance of the word 'payment'.
So we have in summary, a fraction of the Dutchess debt (as opposed to the totality reported in the spin) being exchanged for a huge share of the new entity that includes not only a major ownership share but a guaranteed share of any income.
The sole justification of a spin-off is to free the new entity from the overhead costs and debt of the parent company so that they can exploit their assets without having to be weighted down with that burden. This 'virtual' spin-off has already been loaded down and constrained before it has even been gotten off the ground.
On the other hand this was a very nice attempt at spin from a past master of the art and we should appreciate the effort, even if the message itself is flawed.
regards,
frog
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