RE:R&D Spin-off AnswerHonestAbe wrote: Consider their following situation back in late-2008 ... Photon had -$55,000 (yes, negative) cash balance and working capital of under $500,000. The stock was trading for mere pennies (between 1 cent and 8 cents) and their ability to continue operating as a going concern was in question.
Review this link to outline management's reason for the R&D restructuring:
https://www.newswire.ca/en/story/539117/photon-reports-audited-2008-financial-results-and-achieves-second-consecutive-break-even-quarter
Specifically, here is an excerpt outlining their reasons:
"
Effective October 1, 2008 employees previously working in Photon's research and development department severed employment with Photon and commenced employment with Photon Control R&D Ltd. Photon Control R&D Ltd is a newly formed and related Canadian Controlled Private Corporation. Photon has secured an agreement with Photon Control R&D Ltd to ensure ongoing support for its present and future products. The restructuring decision was based upon the following factors: - Photon's research and development cost base should become financially stable. - It is believed that raising additional funds through public offering would be costly and unadvisable. - It is believed that a layoff of the research and development department would entail considerable severance payments. - It is believed that Photon would improve the funding of its research and development by using this new model. - It is believed that this new arrangement should allow Photon to better finance its future operations. - It is intended that all current Intellectual Property ("IP") and any add-on IP developed by Photon Control R&D Ltd, derived from the existing IP, remain or become the exclusive property of Photon. - This new arrangement should provide a higher level of cost certainty and improved ability to scale expenditures to specific projects and revenue streams, build a stronger sense of responsibility and improve accountability. - This new arrangement should improve and increases the focus on our manufacturing efficiency. - This new arrangement should give Photon a stronger focus on sales and its marketing programs and help Photon to leverage the revenue potential of products and to diversify products and offerings into the global market. - An independent third party evaluation is being conducted by Evans and Evans, Inc. to substantiate these beliefs."
I see they were trading at one cent. Amazing indeed!
The above description is useful, thanks. But what was the basic fact of who funded the R&D, and what was in it for that person? Presumably management - or related parties - funded the outside R&D, at least for the first few years? And those parties received what in return?