I was wondering about dutchess too, but it appears that dutchess is actually working with the company. From their last 10Q, it looks to me like they want to spin off the pharmaceutical division and when that happens, and warrants are issued to dutchess, the debentures go away. Would like to hear others' thoughts on this.
On July 20, 2007, we entered into a letter agreement with Dutchess whereby Dutchess agreed to the transfer of certain assets in our Pharmaceutical division to DNAPrint Pharmaceuticals, Inc. (“Pharmaceuticals”) and released their security interest in such assets and in the common stock of Pharmaceuticals. For this, within 45 days after the end of each calendar quarter, we shall pay to Dutchess a payment on the Dutchess notes equal to the sum of i) 80% of the royalty income paid to us by Pharmaceuticals during the preceding calendar quarter and ii) 4% of all other cash received by us from sales of goods or services during the preceding calendar quarter. Also, on the date on which the common stock of Pharmaceuticals either (i) becomes subject to the reporting requirements of Section 12 of the Securities Exchange Act of 1934, or (ii) becomes listed or eligible for trading on any exchange or other trading system (the “Pharmaceuticals Issuance Date"), we shall cause Pharmaceuticals to issue to Dutchess warrants to purchase two million shares of Pharmaceuticals common stock, at an exercise price of $0.01 per share, expiring July 31, 2012. Such warrants shall be issued in full payment of the Incentive Debentures, and immediately upon the issuance of such warrants, any and all Dutchess Incentive Debentures shall be discharged in full, and Dutchess shall surrender to us the original executed Dutchess Incentive Debentures. If the balance on the Dutchess Incentives Debentures as of the Pharmaceuticals Issuance Date is less than $2 million (such difference being referred to as the "Shortfall"), then on such date, we shall be deemed to have made a principal payment on the Dutchess Notes in the amount of the Shortfall.
On the Pharmaceuticals Issuance Date, we shall cause Pharmaceuticals to issue to Dutchess up to two million shares of Pharmaceuticals common stock as payment of amounts due under the Dutchess Notes; provided, however, in no event shall we be required to issue to Dutchess shares having a value in excess of the amounts then due under the Dutchess Notes. For purposes of determining the amount of such payment, the Pharmaceuticals common stock shall have a deemed value equal to the gross sales proceeds realized by Dutchess upon its disposition of such stock.
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