Drugking
TO: Dr Vanda Pauwels
FROM: A. Charity Chappell
DATE: May 28, 2015
SUBJECT: Evaluating DrugKing's Series A and B transfers.
Series A & B preferred Stock
Drug King has two financial assets, an investment in Series A and Series B preferred stock of TIp-Top that it will transfer to InsureAll. Series A stock is traded publically and has a call option written by InsureAll which allows the repurchase of the stock two years after the transfer date with a fixed exercise date. The Series B preferrd stock, which is not publically traded, will be transferred to InsureAll with a call option attached to the stock allowing DrugKing to repurchase the stock from whomever owns it as long as the purchase is completed within two years of the transfer date and like the Series A preferred stock it has a fixed exercise price. An outside source has also concluded that both "transfers isolate the transferred asset…beyond the reach of DrugKing and it creditors, even in bankruptcy or other receivership."
Investment in a Debt Security
DrugKing tranferred an investment in a debt security which is publically traded to InsureAll, a substantive thrid party with a conditional call that will permit them (DrugKing to repurchase the asset if LIBOR is below 4 percent. This option has a fixed exercise price and LIBOR is currently at 6.5 percent. An outside source has also concluded that the "transfer isolate the transferred asset…beyond the reach of DrugKing and it creditors, even in bankruptcy or other receivership."
Trade Receivables and Credit Card Receivables
DrugKing transfers two financial assets a trade receivable and a credit card receivable to INsureAll, a substantive third party. The trade receivable has a fair value to $100 a book value of $99 and were transferred at $103, (a price which includes the put option price of $3). InsureAll has a put option it can exercise up to one year after the transfer date for $102.50. The credit card receivables have a fair value of $100, book value of
FROM: A. Charity Chappell
DATE: May 28, 2015
SUBJECT: Evaluating DrugKing's Series A and B transfers.
Series A & B preferred Stock
Drug King has two financial assets, an investment in Series A and Series B preferred stock of TIp-Top that it will transfer to InsureAll. Series A stock is traded publically and has a call option written by InsureAll which allows the repurchase of the stock two years after the transfer date with a fixed exercise date. The Series B preferrd stock, which is not publically traded, will be transferred to InsureAll with a call option attached to the stock allowing DrugKing to repurchase the stock from whomever owns it as long as the purchase is completed within two years of the transfer date and like the Series A preferred stock it has a fixed exercise price. An outside source has also concluded that both "transfers isolate the transferred asset…beyond the reach of DrugKing and it creditors, even in bankruptcy or other receivership."
Investment in a Debt Security
DrugKing tranferred an investment in a debt security which is publically traded to InsureAll, a substantive thrid party with a conditional call that will permit them (DrugKing to repurchase the asset if LIBOR is below 4 percent. This option has a fixed exercise price and LIBOR is currently at 6.5 percent. An outside source has also concluded that the "transfer isolate the transferred asset…beyond the reach of DrugKing and it creditors, even in bankruptcy or other receivership."
Trade Receivables and Credit Card Receivables
DrugKing transfers two financial assets a trade receivable and a credit card receivable to INsureAll, a substantive third party. The trade receivable has a fair value to $100 a book value of $99 and were transferred at $103, (a price which includes the put option price of $3). InsureAll has a put option it can exercise up to one year after the transfer date for $102.50. The credit card receivables have a fair value of $100, book value of