Ann: GENERAL: GEN: Genesis Research Provides Upda

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GEN
13/11/2012 12:02
GENERAL

REL: 1202 HRS Genesis Research and Development Corporation Limited

GENERAL: GEN: Genesis Research Provides Update on Business Status

Auckland, New Zealand, 13 November 2012 - Genesis Research and Development
Corporation Ltd (NZSX/ASX: GEN) provides the following update on its status.
Background
During 2008 and 2009 Genesis sought funding support for its research and
development activities from the Foundation for Research Science and
Technology (FRST), a Government agency that has now been merged into the
Science and Innovation Group of the Ministry of Business Innovation and
Employment. However FRST discounted positive reports from 2 of its reviewers
and declined funding on the opinion of a third negative reviewer, and
subsequently on the basis of unstated reasons in a secret report that it has
refused to disclose despite requests from Genesis and the Ombudsmen.
Despite the lack of Government support, Genesis raised funds from its
shareholders in 2009 and 2010, and in 2009 from a Japanese investor in the
subsidiary Solirna Biosciences Ltd for its ssRNAi development. However this
was insufficient to support activities beyond May 2010, when Genesis
announced the cessation of active operations due to lack of funding.
Later in 2010 Genesis made a placement to UBNZ Funds Management Ltd (UBNZ)
and then subsequently raised further funds by the issue to UBNZ of a
Convertible Note. This Note has not been converted to shares as it would
require an expensive appraisal report and special meeting of shareholders,
because it would result in UBNZ holding more than 20% of Genesis and thus
would invoke various provisions in the Takeovers Code.
Since then the Board has sought to maintain Genesis as a non-operating
investment entity so that it might realise funds from its investment interest
in Real Time Genomics Inc. (RTG), a leading bioinformatics software company
with the fastest and most accurate algorithms and analysis pipelines for the
challenges of Next Generation sequence analysis.
RTG has significantly developed its products and market presence but there
has not yet been any opportunity for Genesis to realise its investment.
During the last 2 years the Board has reviewed a number of proposals for
Genesis, most of which involved selling an existing business to Genesis,
effectively as a 'back door listing'. In January 2012 Genesis announced a
proposed merger with Mariposa Health Ltd, which would have allowed Genesis to
survive and continue in the field of biotechnology and drug development.
However UBNZ failed to waive its rights under its security agreement to
enable the merger proposal to proceed.
UBNZ has suggested other proposals but has not provided sufficient detail for
the Board to submit a proposal to shareholders, and has not provided funds
for the significant transaction costs.
Accordingly Genesis has insufficient funds to continue, even as a
non-operating investment entity.
The Board believes that it has become necessary for the company to be placed
in voluntary liquidation by the shareholders and for any remaining assets to
be realised and/or distributed pro rata to shareholders (after dealing with
any creditor's claims), but the Board does not have any power to appoint a
liquidator as it requires a special resolution of shareholders or an order by
the Court.
UBNZ could appoint a receiver, as a secured creditor under the Convertible
Note. However UBNZ has not provided any indication of its intended actions.
Director Resignations
In view of the lack of funds to pay for any further legal costs, shareholder
meetings, or operating costs, and the ongoing lack of communication from
major shareholders UBNZ and Delight Grace Ltd, the Board is unable to
continue managing the Company so directors A von Roy, S Gillis, A Gearing and
D Mahnert-Lueg have resigned from the Board.
C Yan remains as the sole director of the Company.
Future Action
The remaining director will have to consider the future direction of the
business including:
o Appointment of further directors
o Maintaining solvency
o Compliance with Listing Requirements on NZSX and ASX or seeking shareholder
approval for delisting
***

Commentary on Genesis History since 1994
Genesis was established in 1994 by Dr Jim Watson, who had worked in the US
biotechnology industry and could see the potential benefits to New Zealand of
locating innovative biotechnology research in New Zealand, including both
human health and agricultural projects.
Genesis developed collaborations with many international and NZ groups,
including
o a forestry project with Fletcher Challenge Forests that eventually lead to
the establishment of ArborGen LLC in USA, producing revenue to Genesis of
more than $30 million;
o A collaboration with Corixa USA that developed PVAC, a product for
psoriasis that proceeded into Phase II clinical trials and earned licensing
revenue of more than $50 million.
In 2000 Genesis listed on NZSX and ASX with a market capitalisation exceeding
$160 million. Subsequently the two products in clinical development were not
successful, so Genesis focused on development of drugs using the emerging
technology of RNAi, as Genesis had worked in this field since the mechanism
was discovered in plants.
Since 1994, over 400 highly qualified scientists have worked at Genesis. Many
have gone on to establish startups in NZ such as Lanzatech, Pictor,
Androgenix or become senior managers and Chief Executives in other NZ
organisations.
Genesis supported various educational programmes including an annual science
forum for selected high school students from 1996 to 2005.
Key Statistics
Share capital subscribed $78 million 37%
Revenue from Licensing and Collaborations $123 million 58%
Government grants for agricultural research $7 million 3%
Government grants for human health research $4 million 2%
Total Cash Inflow $212 million 100%
Net foreign exchange earnings $82 million
Tax losses that are unable to be offset or utilised $55 million

***

Authorised by A von Roy
Contact 021 556659
End CA:00229656 For:GEN    Type:GENERAL    Time:2012-11-13 12:02:02