Koo, just a couple clarifications. Newco is Zenith Epigenetics Ltd. It is Zenith Epigenetics Corp (aka the Corporation) that will be renamed Zenith Capital Corp. and own the 34.4 million shares of Zenith Epigenetic Ltd.

I'd also like to continue this discussion of the 34.4 million shares at $1/share, whether this represents a 1:3 reverse split and what the true valuation of Zenith Epigenetics is right now vs. the future.

Koo wrote "The PPS of the 34.4M shares of Zenith Epigenetics ltd owned by Newco post reorganization will be set once Zenith Epigenetics Ltd launch the IPO."

This is a good point. The "apparent" value of those 34.4M shares right now is $1 per share based upon the $34.4M USD "Purchaes Price" for the "Transferred Assets" detailed in the Asset Purchase agreement. However, if you believe that the value of the "Transferred Assets" of Zenith Epigenetics Ltd. is much more than $34.4M, which I do, then at the time of the IPO the PPS of those shares could be significantly higher. If this is the case, then why would this arrangement put such a low-ball valuation to the "Transferred Assets?"

KBC wrote "Bear, unfortunately I wouldn't call it a reverse split. There are currently have about 103 million valued at about $1.00 US. A reverse split (1:3) would take us to about 34 million shares at $3.00. Unfortuntately, it looks like 34 million shares at $1.00."

This is also a good point. If the original 103M Zenith Epigenetics Corp shares, which included both the RPS and the technology "Transferred Assets", were valued at $1/share, then a true 1:3 reverse split would lead to 34M shares at $3 per share. Instead the number of shares is shrinking from ~103M to 34.4M AND the value is apparently staying constant at $1/share based upon the "Purchase Price" for the "Transferred Assets." The inference of this, as KBC and others have noted, is that the apparent value of the RSPs is 2/3 of $103M (~$69M) and the apparent value of the "Technology Assets" is 1/3 of $103M ($34.4M).

Furthermore, the Asset Purchase Agreement states "In accordance with the Asset Purchase Agreement, the Purchase Price is subject to adjustment based on any changes to working capital of the Corporation and the Assumed Liabilities between the date of the Asset Purchase Agreement and the effective date of the Transaction, which is currently anticipated to be February 1, 2016. In particular, the Corporation is frequently in discussions with third parties regarding potential licensing and/or royalty arrangements which may require adjustments to the Purchase Price if any such transaction is completed prior to the effective date of the Transaction."

So perhaps what we are seeing is a VERY conservative valuation of $34.4M for the Technology Assets of Zenith right now. Keep in mind that Zenith has been very hush hush on things. They are still pre-IND. Yes they have various patents on a big library of 2nd generation BET bromodomain inhibitors comprised of various scaffolds. But everything is pre-clinical right now. We have the Zenith AGM happening January 7, 2016. Zenith is presenting during JP Morgan week in San Francisco Jan 11-14th. Zenith still lists on their website they plan to file an IND in second half of 2015. As described above this "Purchase Price" is subject to change between now and the effective date of the transaction (anticipated to be Feb 1, 2016). So perhaps the valuation of the "Transferred Assets" is expected to increase significantly with some of these events, including the filing of the IND, disclosing of clinical trial plans, or portential licensing and/or royalty arrangments. However, they also state that this adjustment to the Purchase Price would only occur "if any such transaction is completed prior to the effective date of the Transaction." Hmmmmmm. Just something to think about.

BearDownAZ