I recently spoke to David Franklyn by phone. I wanted to hear...

I recently spoke to David Franklyn by phone. I wanted to hear for myself why the CZD board think this deal is good, in contrast to most on this forum. I am not an apologist for this deal, but would like to put the board perspective as I understand it, to stimulate further discussion.

I'll start by noting that I left a message for Mr Franklin to call me back, and received a call within half an hour, which is very good compared to the board members of some companies in which I have shares.

The following is what I think Mr Franklin was telling me. However, please do not take it as gospel, as I am paraphrasing what he said via my own understanding and may inadvertently misrepresent some aspect of what he said.

The board feel that their shareholders are somewhat divided on the value of the AOD9604, with some putting a lot of store in the rumours about production in China, body builder useage on the black market, and the potential for a new delivery system that will solve the original efficacy problem, whilst others think it has been a black hole for shareholder funds and that the board should concentrate on developing their other assets.

The board also feel it would be difficult (due to not having a single focus) and dilutionary to raise the necessary capital to progress AOD9604 via the CZD vehicle and that the shareholders who have had enough of that compound would not like it.

Therefore they want a new vehicle devoted specifically to developing AOD9602, so that people who like the idea can participate and those who don't like it are not hit for any further costs after the $500k.

ATOS will be fully controlled by CZD and moved into the CZD offices. The board of ATOS and spa business will be GONE. It will become a single mission entity devoted to the comercialisation of AOD9602 and run by the current CZD board. In effect, the $500,000 is not being given away, it is being used to further development of AOD9602 via a fully controlled, if not fully owned, dedicated entity.

Existing shareholders of Calzada who are not enamoured with AOD9602 will now see their exposure to further expenditure on the drug capped. Further expenditure on the project will come from capital raisings via ATOS, from people who see a future in the drug. Existing shareholders of CZD will however retain exposure to some of the upside via the CZD holding in ATOS. Note that CZD also get 30 million options under the deal terms. These can be converted if things go well, or allowed to lapse if development of the drug disappoints again.

Yes, shareholders in ATOS have been dealt into the action, but they had to get something for having their company treated as a shell and used for a new purpose. Yes, the deal notionally values ATOS shares at 0.185 cents a share. The CZD board expect to get around $2m from the sale of ATOS assets including the spa business. If this doesn't happen the deal can be aborted. As I understand it from the conversation, there are various due diligence hurdles to be cleared before CZD proceed with the deal.

Another factor mentioned by Mr Franklyn is that the patent on AOD9602 is not as long term as they would like, and there is some urgency in getting things moving if they want to try and do anything with it.

Are ATOS shares worth 0.185c? (This is me thinking aloud) Well, it depends how you value what is being treated as essentially a listed shell with existing assets you expect to sell for about $2m.

If CZD do end up with half of a listed, dedicated entity with about $2.5m in the bank, ready to set about raising money to progress the development of AOD9602, or do further deals with POH or whatever, it's possible the 0.185c a share valuation will not seem extreme. From memory that was roughly the level ATOS were trading at before they were suspended.

Anyway, I'm keeping an open mind for the time being on the value of this deal to CZD shareholders. I don't think it is necessarily as negative as first impressions might indicate. There have been some premature objections based on a misunderstanding of the facts, such as the question as to what ATOS management can bring to the party (they'll be gone), how the spa business fits in with the new direction (also gone), how much the ATOS assets are worth, etc. I might still end up opposing the deal, one must always remain skeptical when investing, but there are some aspects of it that are currently making sense to me. It's not as if CZD were looking like making great progress in the development of AOD9602 using the current structure.

I hope this adds a bit of clarity on some aspects of the deal and doesn't further muddy the waters. If you feel it just raises more questions I would urge you to contact the company and ask questions, don't just rely on this forum for information. You need to get perspectives from as many sources as possible.