Kayaker,

I think you've made some great points. There are a lot of lingering questions about the actual valuation of Zenith Epigenetics Ltd. and whether current holders of Zenith are getting the short end of the stick here. I still don't understand this well enough to form an opinion.

So if those 34.4 million shares of Zenith Epigenetics Ltd. being sold to Zenith Capital Corp. are valued at $34.4 million, and the original valuation of Zenith was closer to $100 million, the question is what is the remaining $66 million valuation attributed to? How much are the royalty preferred shares that are staying with Zenith Capital Corp. worth? How much more beyond $34.4 million is Zenith Epigentics Ltd. worth?

Fouremm offered the following:

"I imagine the dollar per share value of Zenith would now currently be ascribed to be roughly 34 cents per share derived from Zenith's ownership in Newco and 66 cents per share derived from ownership of RVX preferreds. Personally I would have thought the IP being assigned to Newco would have been valued higher and the RVX preferreds valued lower (as they currently are non performing) but I would speculate that there is already a funding arrangement basically in place for Newco and that the 34.4 million at a dollar will just be balancing the ownership of Newco once it is diluted post funding. Again just my guess."

Perhaps the seemingly low valuation of the IP being assigned to Newco (Zenith Epigenetics Ltd.) is to "create" value for an IPO. For example, if Zenith Epigenetics Ltd. is valued at $50 million, this may mean that the future Zenith Epigenetics Ltd. IPO would be for ~$15 million to make up that residual valuation. And assuming $1 per share, this would be an additional ~15 million shares on top of the 34.4 million held by Zenith Capital Corp.

With this new proposed arrangement, Zenith Capital Corp will own those 34.4 million shares of Zenith Epigenetics Ltd. Assuming that a Zenith Epigenetics Ltd. IPO is down the road, will those 34.4 million shares remain with Zenith Capital Corp, which will remain private, and thus be illiquid to owners of Zenith Capital Corp shares? Or will current owners of Zenith receive a portion of these 34.4 million shares of Zenith Epigenetics Ltd. to provide some liquidity?

Kayaker you stated in your earlier post, “perhaps we are getting 1 share of Newco for every 3 shares of Zenith we currently hold? That would mean 2/3 of the current value of Zenith would be left in Zenith Capital Corp (RVX royalties).” And in your most recent post stated "And I don't buy that 2/3 of the value of Zenith is the POTENTIAL royalties from RVX. Zenith's current and future pipeline is only worth 1/3?"

Another way of asking this is how much of the remaining 2/3 value of current Zenith (~$103 million minus $34.4 million) is attributable to the RVX royalties vs. value of Zenith Epigenetics Ltd. that will be the basis of the IPO? Personally, I think that the actual value of Zenith Epigenetics Ltd. is significantly more than $34.4 million and more in the $50 million ballpark. If true, this means that some of this "2/3" value is yet unrealized and won't be until the IPO.

In addition to KayakerBC and Fouremm’s recent input here on the Zenith Agoracom board, G1945V stated it well on the Stockhouse board:

“Assuming Newco is the ( the present Zenith Epigenetics Corp) to be renamed Zenith Capital Corp..it will sell all of it's assets that being IP's, less Royalty Preferred Shares, will retain certain receivables and assume trade payable and other liabilities of approx $4.6MM, to Zenith Epigenetics Ltd, for a price tag of $34.4MM."

Zenith Epigenetics Ltd's debt repayment of $34.4MM to Zenith Capital Corp (Newco) will be satisfied by issuing 34.4M Class A shares of Zenith Epigenetics Ltd to Newco valued at $1. An IPO will be spun out of Zenith Epigenetics Ltd which presumably will add value to Newco down the road.

In essence, Newco shareholders will get to keep the royalty stream from RVX and will benefit from the 34.4M shares held on Zenith Epigenetics Ltd and what comes from the IPO. This is a balancing act in some ways in order to separate the Royalty Preferred Shares from all of the assets of Zenith Epigenetics Corp, soon to be renamed Zenith Capital Corp, getting it ready for an IPO. It may appear to be a hair cut but let's face it, the existing Zenith shares as we know it today, no one seems to really know what they are worth. This is what's needed to change that going forward.”

Great discussion. Let's keep it up.

BearDownAZ