I have completed my review of the proposed give-away of...

I have completed my review of the proposed give-away of Metabolic Pharmaceuticals and the AOD9604 intellectual property to failed spa operator ATOS. Quite to the contrary of Calzada's expresed intention to "Unlock shareholder value" in the assets of PolyNovo and Metabolic Pharmaceuticals, this proposed deal will savage shareholder value for Cazada shareholders.

I use the term give-away advisedly because in my opinion it describes the proposed transaction far more accurately than the word vend.

First, lets look at what assets go each way:

Calzada gives ATOS Metabolic Pharmaceuticals and all their intellectual property plus $500,000 in cash.

ATOS gives Calzada 160,000,000 shares of nearly worthless shares, arbitrarily valued by Calzada at 1.85 cents per share. In my view, a more realistic valuation based on a cash value of undiluted ATOS shares of only about 1 cent per share, making the value of the diluted new shares only about a half cent per share. In fact, due to the utter lack of confidence in ATOS by the market, I think it is likely that the market would value undiluted shares of ATOS at about 0.3 cents per share. This would make the value of the newly issued, diluted shares about .015 cents per share, and the value of the entire issue of 160,000,000 shares of ATOS stock to be tendered to Calzada a more realistic $240,000, NOT $3,000,000 as touted by Calzada.

Even if the shares were valued at 0.3 cents per share, the full value of the share issue would be no more than $480,000.

In short, in my opinion, the 160,000,000 new shares of ATOS to be issued to Calzada are fully paid for by the cash payment of $500,000. The vending of Metabolic Pharmaceuticals and their intellectual property is thus simply handed over to ATOS gratis.

I want to drive this point home: IN MY OPINION, CALZADA IS FULLY PAYING FOR THE 160,000,000 SHARES OF ATOS WITH THE CASH PAYMENT OF $500,000. The rest is nothing more than a gift.

I am sure that Calzada management would dispute my valuation of the ATOS shares, but that's just the point. There IS NO VALUE for these shares that has been established by the market. What they are actually worth is a complete unknown.

Before ANY deal based on a share exchange should be given consideration, the value of the shares tendered must be established in the market. Anything else is irresponsible, rash, and a violation of the fiduciary responsibility to shareholders.

Now, lets have a look at what ATOS brings to the party in terms of managing the Metabolic assets into the future: NOTHING.

ATOS has ZERO experience managing the development of pharmaceuticals. They have never managed a clinical trial., taken a drug to market, or negotiated a strategic partnership for the development of a pharmaceutical.

ATOS appears to have about $1,000,000 or a bit less in liquid assets, which is wholly inadequate to fund the development of AOD9604.

Looking at all this, one is left wondering just what in the world is going on here.

Finally, lets have a critical look at the CZD announcement for some guidance.

"The Executive Chairman of Calzada, Mr David Franklyn, added: Metabolics drug development assets have significant upside potential, with this transaction placing those assets in a focused vehicle with capital dedicated to proving up the commercial potential of the drug. Going forward, Calzada will have a significant shareholding in ATOS thereby retaining upside exposure for its shareholders. This restructuring also provides shareholders with an opportunity to invest further in a more targeted direct exposure to Metabolics development projects."

Here Mr. Franklyn seems to be saying that ATOS has the capital to prove up the commercial potential of the drug. However, that does not appear to be the case, since ATOS is capital starved, even to continue its core business operating new age spas.

The announcement goes on to note three additional value drivers:

"Metabolic has previously announced a Collaborative Research and Option Agreement with the ASX listed Phosphagenics Ltd aimed at developing a transdermally delivered AOD9604 for the treatment of cellulite and sub cutaneous fat.

"Metabolic is in ongoing discussions with a large Asian group regarding the direct funding of the development of alternative delivery forms of AOD9604 and possibly new human clinical trials.

"Encouraging animal results to date indicate that AOD9604 has potential application to both the prevention and treatment of osteoporosis and as a biologic aimed at improving bone quality in medical device procedures."

None of these value drivers depends on the conclusion of the ATOS deal, and in fact could be jeopardized by the deal, or would likely result in even more dilution of value for Calzada shareholders.

I am concerned that Phosphagenics will have serious reservations about the viability of the deal that was struck last year with Metabolic for development of a cellulite cream if the implementation of the agreement is spun off to a marginally viable spa operator.

Then, if there is an Asian group interested in funding further development of AOD9604, surely this could be accomplished within the present structure with less dilution of value to existing Calzada shareholders.

Finally, if animal studies are indeed encouraging with respect to osteoporosis and bone development, then by all means giving the asset away makes even less sense.

In summary, and despite the fact that this post is far from a comprehensive review of all the shortcomings and negatives with respect to this deal, we can already form the conclusion that this deal is terrible for Calzada shareholders, as it virtually gives away a major asset of the company.

It will drive the value of Calzada shares down with immediate effect.

It fails to demonstrate effective corporate governance.

It appears to indicate a failure of managements fiduciary responsibility to its shareholders.

The deal must not go forward if Calzada shareholders are to retain value in their investment.

I encourage every Calzada shareholder to write directly to Calzada management as make your position known. I encourage posting here on HotCopper as well.

Phone calls to David Franklyn are not out of order. His phone number is at the end of the Corporate announcement.