It means there were undisclosed liabilities to the company when the merger took place. It means that the company is looking at all options to rectify this and address it head on. It also means that the squankers on the other board that kept claiming there were open liabilities were somewhat right.

The question is, what will the board do about it? All we know is the conditions of the merger are no longer valid. What was presented as a debt free company (due to all that dilution) is no longer the case. Since the debt can't follow the CEO, it looks like the company is on the hook if it is proven valid and not yet paid for.

So, can the company cancel the merger? I don't think so. I think we are way past that option.

Can the company legally claim that the debts are on Peter, not DSUS? probably not. Debt does not follow the CEO, it follows the assets.

Can the company negotiate this debt down? Maybe, but, the leverage isn't very clear. This should have been taken care of at time of merger as a condition of proceeding. They would have had leverage by saying that if they want to be paid, they can have 10% of their claim and walk away or else let the company go into bankruptcy and get nothing. Now, I don't see the leverage unless they can prove that the debt really should have been assigned to Peter and not the company. That will take some fancy lawyering to pull off.

My prayers are with them on this Veterans day.

DSUS -