U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ý |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR |
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o |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended June 30, 2004 Commission file number 0- |
GENETIC TECHNOLOGIES LIMITED
(Exact Name of Registrant as Specified in its Charter)
Australia
(Jurisdiction of Incorporation or Organization) |
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N/A (Translation of Registrant's name into English) |
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60-66 Hanover Street, Fitzroy, Victoria, Australia, 3065 telephone: 011-61-3-9415-1135; facsimile: 011-61-3-9417-2987 (Address of principal executive offices) (Zip code) |
Securities
registered or to be registered pursuant to Section 12(b) of the Act
None
Securities registered pursuant to Section 12(g) of the Act:
Title
of each class
American Depositary Shares each representing
30 Ordinary Shares and evidenced by
American Depositary Receipts
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
The total number of issued shares of each class of stock of Genetic Technologies Limited as of June 30, 2005 was:
362,369,899 Ordinary Shares
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý
Indicate by check mark which financial statement item the Registrant has elected to follow Item 17 o Item 18 ý .
Please send copies of notices and communications from the Securities and Exchange Commission to:
Ross Kaufman
Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
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ITEM 8.B |
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LITIGATION AND OTHER LEGAL PROCEEDINGS |
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75 |
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ITEM 8.C |
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DIVIDENDS |
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75 |
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ITEM 8.D |
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SIGNIFICANT CHANGES |
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75 |
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ITEM 9. |
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THE OFFER AND LISTING |
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75 |
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ITEM 9.A |
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OFFER AND LISTING DETAILS |
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75 |
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ITEM 9.B |
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PLAN OF DISTRIBUTION |
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77 |
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ITEM 9.C |
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MARKETS |
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77 |
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ITEM 9.D |
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SELLING SHAREHOLDERS |
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77 |
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ITEM 9.E |
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DILUTION |
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77 |
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ITEM 9.F |
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EXPENSES OF THE ISSUE |
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78 |
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ITEM 10. |
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ADDITIONAL INFORMATION |
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78 |
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ITEM 10.A |
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SHARE CAPITAL |
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78 |
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ITEM 10.B |
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OUR CONSTITUTION |
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79 |
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ITEM 10.C |
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MATERIAL CONTRACTS |
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84 |
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ITEM 10.D |
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EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS |
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84 |
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ITEM 10.E |
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TAXATION |
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85 |
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ITEM 10.F |
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DIVIDENDS AND PAYING AGENTS |
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91 |
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ITEM 10.G |
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STATEMENT BY EXPERTS |
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92 |
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ITEM 10.H |
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DOCUMENTS ON DISPLAY |
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92 |
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ITEM 10.I |
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SUBSIDIARY INFORMATION |
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92 |
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ITEM 11. |
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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92 |
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ITEM 12. |
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DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
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93 |
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ITEM 12.A |
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DEBT SECURITIES |
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93 |
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ITEM 12.B |
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WARRANTS AND RIGHTS |
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93 |
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ITEM 12.C |
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OTHER SECURITIES |
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93 |
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ITEM 12.D |
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AMERICAN DEPOSITARY SHARES |
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93 |
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ITEM 13. |
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DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
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101 |
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ITEM 14. |
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
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101 |
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ITEM 15. |
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CONTROLS AND PROCEDURES |
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101 |
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ITEM 16A. |
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AUDIT COMMITTEE FINANCIAL EXPERT |
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101 |
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ITEM 16B. |
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CODE OF ETHICS |
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101 |
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ii
iii
In this Registration Statement, the "Company," "Genetic Technologies," "we," "us" and "our" refer to Genetic Technologies Limited and its consolidated subsidiaries.
References to the "ADSs" are to our ADSs described in Item 12.D, "American Depositary Shares," and references to the "Ordinary Shares" are to our Ordinary Shares described in Item 10.A, "Share Capital."
Except as otherwise stated, all monetary amounts in this Registration Statement are presented in U.S. dollars. Unless otherwise indicated, amounts in Australian dollars have been translated into U.S. dollars. These translations are provided for convenience only, and they are not representations that the Australian dollar could be converted into U.S. dollars at the rate indicated. Historic data has been converted at the applicable rate at the date indicated. In this Registration Statement, references to "A$" are to Australian dollars and references to "$" and "U.S. dollars" are to United States dollars. The noon buying rate for cable transfers in Australian dollars on June 30, 2004 was A$1.00 = $0.6952, on December 31, 2004 was A$1.00 = $0.7805 and on June 30, 2005 was A$1.00 = $0.7618.
Our fiscal year ends on June 30, and references in this Registration Statement to any specific fiscal year are to the twelve month period ended June 30 of such year.
This Registration Statement contains forward-looking statements that involve risks and uncertainties. We use words such an "anticipates," "believes," "plans," "expects," "future," "intends" and similar expressions to identify such forward-looking statements. This Registration Statement also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the growth of genetic technologies and related service markets and spending. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Registration Statement. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described below under the caption "Risk Factors" and elsewhere in this Registration Statement.
Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time, we can give no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations are contained in cautionary statements in this Registration Statement, including, without limitation, in conjunction with the forward-looking statements included in this Registration Statement and specifically under Item 3.D, "Risk Factors."
All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements.
ENFORCEMENT OF LIABILITIES AND SERVICE OF PROCESS
We are incorporated under the laws of Western Australia, Commonwealth of Australia. All of our directors and executive officers, and the experts named in this Registration Statement, reside outside the U.S. Substantially all of our assets, our directors' and officers' assets and such experts' assets are located outside the U.S. As a result, it may not be possible for investors to effect service of process within the U.S. upon us or our directors, executive officers or such experts, or to enforce against them or us in U.S. courts, judgments obtained in U.S. courts based upon the civil liability provisions of the federal securities laws of the U.S. In addition, we have been advised by our Australian solicitors, Clayton Utz, that there is doubt that the courts of Australia will enforce against us, our officers, directors and experts named herein, judgments obtained in the U.S. based upon the civil liability provisions of the federal securities laws of the U.S. or will enter judgments in original actions brought in Australian courts based upon the federal securities laws of the U.S.
Item 1. Identity of Directors, Senior Management and Advisers
Item 1.A Directors and Senior Management
The Directors of the Company are as follows:
Name
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Position/Function
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Business Address
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Dr. Mervyn Jacobson | Executive Chairman |
60-66 Hanover Street, Fitzroy
Victoria 3065 Australia |
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Fred Bart |
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Deputy Chairman |
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Suite 2, Level 12, 75 Elizabeth Street, Sydney NSW 2000 Australia |
Henry Bosch AO |
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Non-Executive Director |
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60-66 Hanover Street, Fitzroy Victoria 3065 Australia |
John S. Dawkins AO |
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Non-Executive Director |
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60-66 Hanover Street, Fitzroy Victoria 3065 Australia |
Professor Deon J. Venter |
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Non-Executive Director |
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60-66 Hanover Street, Fitzroy Victoria 3065 Australia |
Robert J. Edge |
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Non-Executive Director |
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60-66 Hanover Street, Fitzroy Victoria 3065 Australia |
The Senior Managers of the Company are as follows:
Name
|
Position/Function
|
Business Address
|
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---|---|---|---|---|
Dr. Mervyn Jacobson | Executive Chairman |
60-66 Hanover Street, Fitzroy
Victoria 3065 Australia |
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Thomas G. Howitt |
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Chief Financial Officer Company Secretary |
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60-66 Hanover Street, Fitzroy Victoria 3065 Australia |
Ian W. Smith |
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General Manager Service Testing |
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60-66 Hanover Street, Fitzroy Victoria 3065 Australia |
Geoff E. Newing |
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General Manager Business Development |
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60-66 Hanover Street, Fitzroy Victoria 3065 Australia |
2
Our principal bankers, accountants and legal advisers are as follows:
Name of Adviser
|
Function
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Business Address
|
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---|---|---|---|---|
Ernst & Young, Chartered Accountants | Auditors |
680 George Street
Sydney NSW 2000 Australia |
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St George Bank Limited |
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Bankers |
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333 Collins Street Melbourne, Victoria 3000 Australia |
KeyBank National Association |
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Bankers |
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1130 Haxton Drive Fort Collins, CO 80525 |
Clayton Utz |
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Solicitors |
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333 Collins Street Melbourne, Victoria 3000 Australia |
Faegre & Benson LLP |
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Licensing and Patent Attorneys |
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3200 Wells Fargo Center 1700 Lincoln Street Denver, CO 80203 |
Greenberg Traurig, LLP |
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U.S. Listing Counsel |
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200 Park Avenue New York, NY 10166 |
Auditors
The auditors of the Company's US GAAP accounts for the years ended June 30, 2001, June 30, 2002, June 30, 2003 and June 30, 2004 were Ernst & Young, whose address is 680 George Street, Sydney, NSW 2000, Australia, members of the Australian Institute of Chartered Accountants. The Company's financial statements for the year ended June 30, 2000 are unaudited, as more fully described in item 3.5 of this Registration Statement, as are the financial statements for the six months ended December 31, 2004 and 2003, respectively. Ernst & Young are the Company's current auditors, an appointment ratified at the Annual General Meeting held on November 28, 2003.
Item 2. Offer Statistics And Expected Timetable
Not applicable.
Item 3.A Selected Financial Data
The following selected financial data for the four years ended June 30, 2004 are derived from the audited consolidated financial statements of Genetic Technologies Limited, prepared in accordance with United States generally accepted accounting principles ("US GAAP"). The selected financial data for the year ended June 30, 2000 is derived from unaudited financial statements prepared in accordance with US GAAP. The financial data for the six month periods ended December 31, 2004 and 2003 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Genetic Technologies Limited considers necessary for a fair presentation of the financial position and the results of operations for these periods.
3
Operating results for the six month period ended December 31, 2004 are not necessarily indicative of the results to be expected for the entire year ended June 30, 2005, or any future period. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.
The acquisition of GeneType AG by the Company in 2000 was accounted for under US GAAP as a reverse acquisition for financial reporting purposes. Accordingly, the summary financial data set forth below is that of GeneType (the legal acquiree), with the results of operations of Genetic Technologies (the legal acquiror) included from the effective date of its acquisition (September 30, 2000).
CONSOLIDATED PROFIT AND LOSS STATEMENT
All amounts are in U.S. dollars as of December 31 or June 30 as noted (except for per share data).
Refer page 5.
4
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED PROFIT AND LOSS STATEMENTS
US GAAP FOR 2000, 2001, 2002, 2003 AND 2004
CONVERTED TO U.S. DOLLARS
|
Six months
Ended 31 Dec. 2004 |
Six months
Ended 31 Dec. 2003 |
Year Ended
30 June 2004 |
Year Ended
30 June 2003 |
Year Ended
30 June 2002 |
Year Ended
30 June 2001 |
Year Ended
30 June 2000 |
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U.S. Dollars
(a) |
U.S. Dollars
(b) |
U.S. Dollars
(c) |
U.S. Dollars
(d) |
U.S. Dollars
(e) |
U.S. Dollars
(f) |
U.S. Dollars
(g) |
|||||||||
REVENUES | ||||||||||||||||
Licensing Revenue | 4,148,983 | 241,567 | 507,910 | 2,615,544 | 778,131 | 0 | 0 | |||||||||
Service Testing Revenue | 1,219,555 | 1,060,207 | 1,969,963 | 1,727,617 | 838,969 | 500,110 | 623,001 | |||||||||
Grant Income | 108,875 | 96,844 | 154,702 | 50,244 | 91,610 | 197,289 | 581,116 | |||||||||
Other Revenue | | 967 | 12,427 | 10,722 | 17,343 | 24,274 | 3,595 | |||||||||
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TOTAL REVENUES | 5,477,413 | 1,399,585 | 2,645,002 | 4,404,127 | 1,726,053 | 721,673 | 1,207,712 | |||||||||
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OPERATING EXPENSES | ||||||||||||||||
Research and Development | 617,754 | 388,589 | 1,659,914 | 512,345 | 497,207 | 357,345 | 350,859 | |||||||||
Patent Fees | 1,053,566 | 347,142 | 763,739 | 428,335 | 267,408 | 70,484 | 902,015 | |||||||||
Service Testing Expenses | 1,916,201 | 1,133,859 | 2,229,307 | 1,820,490 | 934,732 | 502,376 | 409,947 | |||||||||
Sales and Marketing | 365,221 | 293,266 | 960,619 | 661,211 | 397,772 | 241,435 | 298,314 | |||||||||
General and Administrative | 1,816,126 | 1,433,288 | 2,383,879 | 1,182,856 | 1,140,919 | 1,815,176 | 375,956 | |||||||||
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TOTAL OPERATING EXPENSES | 5,768,868 | 3,596,144 | 7,997,458 | 4,605,237 | 3,238,038 | 2,986,816 | 2,337,091 | |||||||||
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PROFIT (LOSS) FROM OPERATIONS | (291,455 | ) | (2,196,559 | ) | (5,352,456 | ) | (201,110 | ) | (1,511,985 | ) | (2,265,143 | ) | (1,129,329 | ) | ||
OTHER INCOME (EXPENSE) |
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Interest Income | 174,933 | 143,508 | 352,605 | 68,387 | 57,907 | 59,920 | 3,249 | |||||||||
Interest Expense | 0 | 0 | 0 | (5,979 | ) | (5,490 | ) | (6,823 | ) | (164,958 | ) | |||||
Net Profit (Loss) on Sale of Mining Operations | 0 | 0 | 0 | 0 | 43,063 | 71,008 | 0 | |||||||||
Net Profit (Loss) on Securities |
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0 |
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224,749 |
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406,224 |
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(100,191 |
) |
(1,153,309 |
) |
(1,242,645 |
) |
0 |
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|
Net Foreign Exchange Losses | (160,353 | ) | (268,248 | ) | (171,960 | ) | (558,292 | ) | (579,605 | ) | (248,051 | ) | (90,059 | ) | ||
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TOTAL OTHER INCOME (EXPENSES) | 14,580 | 100,009 | 586,869 | (596,075 | ) | (1,637,434 | ) | (1,366,591 | ) | (251,768 | ) | |||||
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NET LOSS BEFORE INCOME TAXES | (276,875 | ) | (2,096,550 | ) | (4,765,587 | ) | (797,185 | ) | (3,149,419 | ) | (3,631,734 | ) | (1,381,147 | ) | ||
INCOME TAXES |
|
(139,912 |
) |
(6,872 |
) |
(27,579 |
) |
(167,412 |
) |
(83,000 |
) |
0 |
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0 |
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NET LOSS BEFORE MINORITY INTEREST | (416,787 | ) | (2,103,422 | ) | (4,793,166 | ) | (964,597 | ) | (3,232,419 | ) | (3,631,734 | ) | (1,381,147 | ) | ||
MINORITY INTEREST |
|
3,597 |
|
(13,725 |
) |
(23,560 |
) |
4,202 |
|
10,240 |
|
46,324 |
|
0 |
|
|
|
|
|
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NET LOSS | (413,190 | ) | (2,117,147 | ) | (4,816,726 | ) | (960,395 | ) | (3,222,179 | ) | (3,585,410 | ) | (1,381,147 | ) | ||
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NET LOSS PER ORDINARY SHARE (CENTS PER SHARE) | (0 | ) | (1 | ) | (2 | ) | (0 | ) | (1 | ) | (2 | ) | (1 | ) | ||
WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC AND DILUTED) |
|
297,663,917 |
|
274,207,046 |
|
277,806,689 |
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261,541,405 |
|
259,757,871 |
|
221,535,566 |
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93,691,466 |
|
5
GENETIC TECHNOLOGIES LIMITED
SELECTED CONSOLIDATED BALANCE SHEET DATA
US GAAP FOR 2000, 2001, 2002, 2003 AND 2004
CONVERTED TO U.S. DOLLARS
|
As at
31 Dec. 2004 |
As at
31 Dec. 2003 |
As at
30 June 2004 |
As at
30 June 2003 |
As at
30 June 2002 |
As at
30 June 2001 |
As at
30 June 2000 |
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|
U.S. Dollars
(a) |
U.S. Dollars
(b) |
U.S. Dollars
(c) |
U.S. Dollars
(d) |
U.S. Dollars
(e) |
U.S. Dollars
(f) |
U.S. Dollars
(g) |
|||||||||
ASSETS | ||||||||||||||||
CURRENT | 9,308,233 | 9,063,848 | 9,063,848 | 4,274,514 | 4,631,408 | 1,718,182 | 301,283 | |||||||||
NON CURRENT | 7,709,459 | 6,589,525 | 6,589,525 | 1,807,634 | 660,338 | 4,872,819 | 510,419 | |||||||||
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|
|
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TOTAL ASSETS | 17,017,692 | 15,653,373 | 15,653,373 | 6,082,148 | 5,291,746 | 6,591,000 | 811,702 | |||||||||
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LIABILITIES | ||||||||||||||||
CURRENT | 3,128,155 | 3,233,207 | 3,233,207 | 1,349,310 | 736,881 | 413,123 | 1,937,860 | |||||||||
NON CURRENT | 546,350 | 486,640 | 486,640 | 469,490 | 392,980 | 355,670 | 417,970 | |||||||||
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|
|
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TOTAL LIABILITIES | 3,674,505 | 3,719,847 | 3,719,847 | 1,818,800 | 1,129,861 | 768,793 | 2,365,830 | |||||||||
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|
|
|
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NET ASSETS | 13,343,187 | 11,933,526 | 11,851,330 | 4,204,310 | 4,120,945 | 5,822,208 | (1,544,128 | ) | ||||||||
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DIVIDENDS DECLARED PER SHARE | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
6
The following table sets forth, for the periods and dates indicated, certain information concerning the noon buying rate in New York City for Australian dollars expressed in U.S. dollars per A$1.00 as certified for customs purposes by the Federal Reserve Bank of New York.
Period ended
|
At period end
|
Average rate(a)
|
High
|
Low
|
||||
---|---|---|---|---|---|---|---|---|
June 2000 | 0.5971 | 0.6282 | 0.6718 | 0.5645 | ||||
June 2001 | 0.5100 | 0.5372 | 0.6030 | 0.4773 | ||||
June 2002 | 0.5628 | 0.5236 | 0.6256 | 0.4819 | ||||
June 2003 | 0.6713 | 0.5847 | 0.6735 | 0.5226 | ||||
June 2004 | 0.6952 | 0.7132 | 0.8005 | 0.6345 | ||||
January 2005 | 0.7759 | 0.7790 | 0.7578 | |||||
February 2005 | 0.7940 | 0.7940 | 0.7669 | |||||
March 2005 | 0.7729 | 0.7974 | 0.7685 | |||||
April 2005 | 0.7834 | 0.7834 | 0.7664 | |||||
May 2005 | 0.7591 | 0.7810 | 0.7550 | |||||
June 2005 | 0.7618 | 0.7792 | 0.7498 |
Item 3.B Capitalization and Indebtedness
The following table sets forth our unaudited indebtedness and capitalization as of March 31, 2005:
|
March 31, 2005
|
|||
---|---|---|---|---|
Indebtedness | $ | 1,167,925 | ||
Stockholders' Equity |
|
|
|
|
Ordinary shares, no par value, 349,477,809 shares authorized, issued and outstanding | $ | 25,695,370 | ||
Accumulated deficit | $ | (10,067,925 | ) | |
Accumulated other comprehensive income (loss) | $ | 2,830,069 | ||
|
||||
Total Stockholders' equity and capitalization | $ | 18,457,514 | ||
|
Item 3.C Reasons for the Offer and Use of Proceeds
Not applicable.
Before you purchase our ADSs, you should be aware that there are risks, including those described below. You should consider carefully these risk factors together with all of the other information contained elsewhere in this Registration Statement before you decide to purchase our ADSs.
Risks Related to Us
Our stock price is volatile and can fluctuate significantly based on events not in our control and general industry conditions. As a result the value of your investment may decline significantly.
The biotechnology sector seems particularly vulnerable to abrupt changes in investor sentiment. Stock prices of companies in the biotechnology industry, including ours, can swing dramatically, with
7
little relationship to operating performance. Our stock price may be affected by a number of factors including, but not limited to:
Since June 30, 2002, the price of our Ordinary Shares has ranged from a low of A$0.18 to a high of A$0.87 per share. Further fluctuations are likely to occur due to events not within our control and general market conditions affecting the biotechnology sector or the stock market generally. The most significant such event of which we have knowledge took place in August 2003 after a television report in Australia on our company was broadcast. That week the price of our shares increased from A$0.58 to A$0.87 on a volume of 26,000,000 shares traded, which was exceptionally high for us. The share price subsequently retreated.
In addition, low trading volume may increase the volatility of the price of our ADSs. Trading volume in our Ordinary Shares on other markets has not been historically high, and trading volume of our ADSs on the NASDAQ SmallCap Market may also be low. Further, because each of our ADSs represents 30 of our Ordinary Shares, trading volume in our ADSs may be lower than that for our Ordinary Shares. A thin trading market could cause the price of our ADSs to fluctuate significantly more than the stock market as a whole. For example, trades involving a relatively small number of our ADSs may have a greater impact on the trading price for our ADSs than would be the case if their trading volume were higher.
The following chart graphically illustrates the fluctuation in the price of our shares over the last four years:
8
The fact that we do not expect to pay cash dividends may lead to decreased prices for our stock.
We have never paid a cash dividend on our Ordinary Shares and we do not anticipate paying any cash dividend in the foreseeable future. We intend to retain future cash earnings, if any, for reinvestment in the development and expansion of our business. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent on our financial condition, results of operations, capital requirements and any other factors our board of directors decides is relevant. As a result, an investor will only recognize an economic gain on an investment in our stock from an appreciation in the price of our stock.
You may have difficulty in effecting service of legal process and enforcing judgments against us and our management.
We are a public company limited by shares, registered and operating under the Australian Corporations Act 2001. All of our directors and officers named in this Registration Statement reside outside the U.S. Substantially all or a substantial portion of the assets of those persons are located outside the U.S. As a result, it may not be possible to effect service on such persons in the U.S. or to enforce, in foreign courts, judgments against such persons obtained in U.S. courts and predicated on the civil liability provisions of the federal securities laws of the U.S. Furthermore, substantially all of our directly owned assets are outside the U.S., and, as such, any judgment obtained in the U.S. against us may not be collectible within the U.S. There is doubt as to the enforceability in the Commonwealth of Australia, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon federal or state securities laws of the U.S., especially in the case of enforcement of judgments of U.S. courts where the defendant has not been properly served in Australia.
Because we are not required to provide you with the same information as an issuer of securities based in the United States, you may not be afforded the same protections or information you would have if you invested in a United States public corporation.
We are exempt from certain provisions of the Securities Exchange Act of 1934, as amended, commonly referred to as the Exchange Act, that are applicable to U.S. public companies, including (i) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time. The exempt provisions would be available to you if you invested in a U.S. corporation.
However, in line with the Australian Stock Exchange regulations, we will disclose our semi annual results, which are required to have a limited review semi-annually and be fully audited annually. The information, which may have an effect on the stock price on the Australian Stock Exchange, will also be disclosed immediately in the public media and to the Australian Stock Exchange. Other relevant information pertaining to our company or us will also be disclosed in line with the Australian Stock Exchange regulations and information dissemination requirements for listed companies. We will provide our semi-annual results and other material information that we make public in Australia in the U.S. under the cover of SEC Form 6-K. Nevertheless, you may not be afforded the same protections or information, which would be made available to you, were you investing in a United States public corporation because the Form 10-Q and Form 8-K requirements are not applicable to us.
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If a public market does not develop for our ADSs, your ability to resell your ADSs could be negatively affected. This would be so because there would be limited buyers for your interests.
There has been no public market for the ADSs and there has been virtually no trading in our ADSs through the pink sheets after establishment of our Level I ADR Program. We expect to list the ADSs on the NASDAQ SmallCap Market after this Registration Statement becomes effective. An active trading market for the ADSs, however, may not develop or be maintained after listing. If an active trading market is not developed and maintained, the liquidity and trading prices of the ADSs could be negatively affected.
Holders of ADSs may have limited rights relative to holders of our Ordinary Shares in certain circumstances.
The rights of holders of ADSs with respect to voting of Ordinary Shares and the right to receive certain distributions may be limited in certain respects by the deposit agreement entered into by us and The Bank of New York. For example, although ADS holders are entitled under the deposit agreement, subject to any applicable provisions of Australian law and of our constitution, to instruct the depositary as to the exercise of the voting rights pertaining to the Ordinary Shares represented by the American Depositary Shares, and the depositary has agreed that it will try, as far as practical, to vote the Ordinary Shares so represented in accordance with such instructions, ADS holders may not receive notices sent by depositary in time to ensure that the depositary will vote the Ordinary Shares. This means that holders of ADSs may not be able to exercise their right to vote. In addition, under the deposit agreement, the depositary has the right to restrict distributions to holders of the ADSs in the event that it is unlawful or impractical to make such distributions. We have no obligation to take any action to permit distributions to holders of our American Depositary Receipts, or ADRs. As a result, holders of ADRs may not receive distributions made by us. For further information about the rights and limitations on rights applicable to holders of our ADRs, please see Item 12D of this Registration Statement entitled "American Depositary Shares".
Our company has a history of losses and we expect to continue to incur losses.
Genetic Technologies Limited was founded in 1987. We have incurred operating losses in every year of our existence. We incurred net losses of $3,222,179 for the year ended June 30, 2002, net loss of $960,395 for the year ended June 30, 2003 and net losses of $4,816,726 for the year ended June 30, 2004, and a net loss of $413,190 for six months ended December 31, 2004, which losses are continuing. As of December 31, 2004, we have accumulated losses of $7,652,354. We have not achieved profitability and expect to continue to incur net losses. The extent of future losses and the time required to achieve profitability is highly uncertain.
Risks Related to our Industry
The sales cycle for our testing products and license generation is lengthy. As a result, we may expend substantial funds and management effort with no assurance of successfully selling our products or services or granting new licenses.
Our ability to obtain customers for our genetic testing products and services depends in significant part upon the perception that our products and services can help accelerate efforts in genomics. The sales cycle is typically lengthy. Our sales effort requires the effective demonstration of the benefits of our products and services to and significant training of many different departments within a potential customer. In addition, we sometimes are required to negotiate agreements containing terms unique to each customer. With respect to license generation, it is common for negotiations with licensees to take many months before a license is eventually granted. Our business could be adversely affected if we expend money without any return.
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If our competitors develop more effective products, our results of operations and financial condition could be affected.
We are subject to limited competition from biotechnology and diagnostic companies, academic and research institutions and government or other publicly-funded agencies that are pursuing products and services that are substantially similar to our proposed testing products and services, or which otherwise address the needs of our customers and potential customers. Our competitors in the testing market include private and public sector enterprises in Australia and elsewhere. Many of the organizations competing with us have significantly greater experience in financial, research and development, manufacturing, marketing, sales, distribution, technical and regulatory matters than we do. In addition, many current and potential competitors have greater name recognition and more extensive collaborative relationships. Because of our patents, we have virtually no competition in the licensing area.
Our competitive position in the testing area is based upon our ability to:
If we are not successful in meeting these goals, our business could be hurt. Similarly, our competitors may succeed in developing technologies, products or procedures that are more effective than any that we are developing or that would render our technology and products obsolete, noncompetitive or uneconomical.
For a full discussion of competition see Item 4.B, "Competition".
We rely heavily upon our patents and proprietary technology and any future claims that our patents are invalid could seriously affect our licensing business, and adversely affect our revenues and our financial condition.
We rely upon our portfolio of patent rights, patent applications and exclusive licenses to patents and patent applications relating to genetic technologies. We expect to aggressively patent and protect our proprietary technologies. However, we cannot be sure that any additional patents will be issued to us as a result of our domestic or foreign patent applications or that any of our patents will withstand challenges by others. Patents issued to or licensed by us may be infringed or third parties may independently develop either the same or similar technology. Similarly, our patents may not provide us with meaningful protection from competitors, including those who may pursue patents which may prevent, limit or interfere with our products or will require licensing and the payment of significant fees or royalties by us to such third parties in order to enable us to conduct our business. We may sue or be sued by third parties regarding patents and other intellectual property rights. These suits are costly and would divert funds and management and technical resources from our operations.
We have relationships with a number of academic consultants who are not employed by us. Accordingly, we have limited control over their activities and can expect only limited amounts of their time to be dedicated to our activities. These persons may have consulting, employment or advisory arrangements with other entities that may conflict with or compete with their obligations to us. Our consultants typically sign agreements that provide for confidentiality of our proprietary information and results of studies. However, in connection with every relationship, we may not be able to maintain the confidentiality of our technology, the dissemination of which could hurt our competitive position and
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results of operations. To the extent that our scientific consultants develop inventions or processes independently that may be applicable to our proposed products, disputes may arise as to the ownership of the proprietary rights to such information, and we may not win those disputes.
If we are unable to protect our proprietary methods and technologies, we may not be able to commercialize products or services.
Our commercial success will depend, in large part, on our ability to obtain patent protection on many aspects of our business, including the products, methods and services we develop. Patents issued to us may not provide us with substantial protection or be commercially beneficial to us. The issuance of a patent is not conclusive as to its validity or its enforceability.
In addition, our patent applications or those we have licensed, may not result in issued patents. If our patent applications do not result in issued patents, our competitors may obtain rights to commercialize our discoveries which would harm our competitive position.
We also may apply for patent protection on novel genetic variations in known genes and their uses, as well as novel uses for previously identified genetic variations discovered by third parties. In the latter cases, we may need a license from the holder of the patent with respect to such genetic variations in order to make, use or sell any related products. We may not be able to acquire such licenses on terms acceptable to us, if at all.
Certain parties are attempting to rapidly identify and characterize genes and genetic variations through the use of sequencing and other technologies. To the extent any patents are issued to other parties on such partial or full-length genes or genetic variations or uses for such genes or genetic variations, the risk increases that the sale of products or services developed by us or our collaborators may give rise to claims of patent infringement against us. Others may have filed and, in the future, are likely to file patent applications covering many genetic variations and their uses. Any such patent application may have priority over our patent applications and could further require us to obtain rights to previously issued patents covering genetic variations. Any license that we may require under any such patent may not be made available to us on commercially acceptable terms, if at all.
We may be sued for infringing on the intellectual property rights of others. We could also become involved in interference proceedings in the United States Patent and Trademark Office to determine the relative priority of our patents or patent applications and those of the other parties involved in the interference proceeding. Intellectual property proceedings are costly, and could affect our results of operations. These proceedings can also divert the attention of managerial and technical personnel. If we do not prevail in any intellectual property proceeding, in addition to any damages we might have to pay, we could be required to stop the infringing activity, or obtain a license to or design around the intellectual property in question. In interference proceedings, our patent rights could be invalidated and the scope of our patents could be limited. If we are unable to obtain licenses to intellectual property rights that we need to conduct our business, or are unable to design around any third party patent, we may be unable to sell some of our products, which will result in reduced revenue.
We have in the past and may in the future become a party to litigation involving patents and intellectual property rights. We currently have pending litigation involving Applera Corporation, the outcome of which remains uncertain. We may in the future receive claims of infringement of intellectual property rights from other parties. If we do not prevail in any future legal proceedings, we may be required to pay significant monetary damages. In addition, we could also be enjoined from use of certain processes or prevented from selling certain configurations of our products or services that were found to be within the scope of the patent claims. In the event we did not prevail in any future proceeding, we would either have to obtain licenses from the other party, avoid certain product configurations or modify some of our products, services and processes to design around the patents. Licenses could be costly or unavailable on commercially reasonable terms. Designing around patents or
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focusing efforts on different configurations could be time consuming, and we would have to remove some of our products or services from the market while we were completing redesigns. Accordingly, if we are unable to settle future intellectual property disputes through licensing or similar arrangements, or if any such future disputes are determined adversely to us, our ability to market and sell our products and services could be seriously harmed. This would in turn reduce demands for our products and harm our financial condition and results of operations.
In addition, in order to protect or enforce our patent rights or to protect our ability to operate our business, we may need to initiate other patent litigation against third parties. These lawsuits could be expensive, take significant time, and could divert management's attention from other business concerns. These lawsuits could result in the invalidation or limitation in the scope of our patents or forfeiture of the rights associated with our patents. We may not prevail in any such proceedings and a court may find damages or award other remedies in favor of our opposing party in any of these suits. During the course of any future proceedings, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. Securities analysts or investors may perceive these announcements to be negative, which could cause the market price of our stock to decline.
We may be subject to professional liability suits; our insurance may not be sufficient to cover damages. If this occurs, our business and financial condition may be negatively affected.
Our business exposes us to potential liability risks that are inherent in the testing, manufacturing, marketing and sale of genetic tests. The use of our products and product candidates, whether for clinical trials or commercial sale, may expose us to professional liability claims or product recall and possible adverse publicity. We may be subject to claims resulting from incorrect results of analysis of genetic variations or other screening tests performed using our products. Litigation of these claims can be costly. We could expend significant funds during any litigation proceeding brought against us. Further, if a court were to require us to pay damages to a plaintiff, the amount of such damages could significantly harm our financial condition. Although we have public and products liability insurance coverage under broadform liability and professional indemnity policies, for an aggregate amount of A$60,000,000, the level or breadth of our coverage may not be adequate to fully cover potential liability claims. To date we have not been subject to claims, or ultimately liability, in excess of the amount of our coverage. In addition, we may not be able to obtain additional professional liability coverage in the future at an acceptable cost. A successful claim or series of claims brought against us in excess of our insurance coverage and the effect of professional liability litigation upon the reputation and marketability of our technology and products, together with the diversion of the attention of key personnel, could negatively affect our business.
We use potentially hazardous materials, chemicals and patient samples in our business and any disputes relating to improper handling, storage or disposal of these materials could be time consuming and costly.
Our research and development, production and service activities involve the controlled use of hazardous laboratory materials and chemicals, including small quantities of acid and alcohol, and patient tissue and blood samples. We do not knowingly deal with infectious samples. We, our collaborators and service providers are subject to stringent Australian federal, state and local laws and regulations governing occupational health and safety standards, including those governing the use, storage, handling and disposal of these materials and certain waste products. However, we could be liable for accidental contamination or discharge or any resultant injury from hazardous materials, and conveyance, processing, and storage of and data on patient samples. If we, our collaborators or service providers fail to comply with applicable laws or regulations, we could be required to pay penalties or be held liable for any damages that result and this liability could exceed our financial resources. Further,
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future changes to environmental health and safety laws could cause us to incur additional expense or restrict our operations. We have never had a reportable injury through the date of this Registration Statement.
In addition, our collaborators and service providers may be working with these types of hazardous materials, including hazardous chemicals, in connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury caused to persons or property by exposure to, or release of, these patient samples that may contain viruses and hazardous materials. The cost of this liability could exceed our resources. While we maintain broadform liability insurance coverage for these risks, in the amount of up to A$40,000,000, the level or breadth of our coverage may not be adequate to fully cover potential liability claims. To date we have not been subject to claims, or ultimately liability, in excess of the amount of our coverage. Our broadform insurance coverage also covers us against losses arising from an interruption of our business activities as a result of the mishandling of such materials. We also maintain workers' compensation insurance, which is mandatory in Australia, covering all of our workers in the event of injury.
We depend on the collaborative efforts of our academic and corporate partners for research, development and commercialization of some of our products. A breach by our partners of their obligations, or the termination of the relationship, could deprive us of valuable resources and require additional investment of time and money.
Our strategy for research, development and commercialization of some of our products involves entering into various arrangements with academic and corporate partners and others. As a result, our strategy depends, in part, upon the success of these outside parties in performing their responsibilities. Our collaborators may also be our competitors. We cannot control the amount and timing of resources that our collaborators devote to performing their contractual obligations and we have no certainty that these parties will perform their obligations as expected or that any revenue will be derived from these arrangements.
If our collaborators breach or terminate their agreement with us or otherwise fail to conduct their collaborative activities in a timely manner, the development or commercialization of the product candidate or research program under such collaborative arrangement may be delayed. If that is the case, we may be required to undertake unforeseen additional responsibilities or to devote unforeseen additional funds or other resources to such development or commercialization, or such development or commercialization could be terminated. The termination or cancellation of collaborative arrangements could adversely affect our financial condition, intellectual property position and operations. In addition, disagreements between collaborators and us could lead to delays in the collaborative research, development, or commercialization of certain products or could require or result in formal legal process or arbitration for resolution. These consequences could be time-consuming and expensive and could have material adverse effects on us.
Other than our contractual rights under our license agreements, we may be limited in our ability to convince our licensees to fulfill their obligations. If our licensees fail to act promptly and effectively, or if a dispute arises, it could have a material adverse effect on our results of operations and the price of our Ordinary Shares and ADSs.
We rely upon scientific, technical and clinical data supplied by academic and corporate collaborators, licensors, licensees, independent contractors and others in the evaluation and development of potential therapeutic methods. There may be errors or omissions in this data that would materially adversely affect the development of these compounds.
We may seek additional collaborative arrangements to develop and commercialize our products in the future. We may not be able to negotiate acceptable collaborative arrangements in the future, and if negotiated we have no certainty that they will be on favorable terms or will be successful. In addition,
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our collaborative partners may pursue alternative technologies or develop alternative compounds independently or in collaboration with others as a means of developing treatments for the diseases targeted by their collaborative programs with us. If any of these events occurs, the progress of our company could be adversely affected and our results of operations and financial condition could suffer.
Problems associated with international business operations could affect our ability to license our technology and our results of operations.
We seek to license our intellectual property on a global scale, including eventually in countries such as China that are considered to provide significantly less protection to intellectual property than the United States and Australia. In addition, a number of other risks are inherent in international transactions and commerce, including political and economic instability, foreign currency exchange fluctuations and changes in tax laws. For example, in fiscal year 2003 we sustained foreign exchange losses of over $500,000 primarily due to the appreciation in the value of the Australian Dollar compared to the U.S. Dollar and the impact on our cash deposits denominated in U.S. Dollars.
Government regulation of genetic research or testing may adversely affect the demand for our products and impair our business and operations.
Apart from accreditation, we are generally not subject to regulation. Federal, state and local governments, however, may adopt regulations relating to the conduct of genetic research and genetic testing. These regulations could limit or restrict genetic research activities as well as genetic testing for research or clinical purposes. In addition, if state and local regulations are adopted, these regulations may be inconsistent with, or in conflict with, regulations adopted by other state or local governments. Regulations relating to genetic research activities could adversely affect our ability to conduct our research and development activities. Regulations restricting genetic testing could adversely affect our ability to market and sell our products and services. Accordingly, any regulations of this nature could increase the costs of our operations or restrict our ability to conduct our testing business and might adversely affect our operations and financial condition.
In Australia, there is no law that prohibits the performing a paternity test by using just a sample from a father and child. In March 2003, the Australian Law Reform Commission (ALRC) released its report into Human Genetic Testing in Australia. In relation to paternity testing, it made various recommendations, the most significant of which was that the testing of a child without the knowledge or consent of both parents should be made illegal. Even though this report was released over two years ago, it is expected that the Government will eventually accept and pass legislation to enforce the ALRC recommendations. When passed, this will have a negative impact on our revenue, as father/child testing is a substantial and growing market. However, another of the ALRC recommendations was that Human DNA parentage testing only be performed in an accredited laboratory. If this recommendation is accepted, then the three non-accredited providers will either have to comply or cease trading.
Ethical and other concerns surrounding the use of genetic information may reduce the demand for our products and services.
Public opinion regarding ethical issues related to the confidentiality and appropriate use of genetic testing results may influence governmental authorities to call for limits on, or regulation of the use of, genetic testing. In addition, such authorities could prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Furthermore, adverse publicity or public opinion relating to genetic research and testing, even in the absence of any governmental regulation, could reduce the potential markets for our products, which could materially and adversely affect our revenues.
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Although we are a leader in the field of genetics in Australia, we do not undertake any activities in the contentious areas of cloning, stem cell research or other gene-altering areas. As such, many of the ethical issues that may be relevant to other participants in the genetics industry are not applicable to us.
Licensing
The patenting of genes and issues surrounding access to genetic knowledge are subjects of extensive and ongoing public debate in many countries. In recent times for example, the Australian Law Reform Commission has conducted two inquiries into the social uses of genetic information. Although we do not own any patents over genes, the patents we hold over uses of non-coding DNA have a broad scope and these have also been the subject of debate and some criticism in the media. A risk we may face is that individuals or organisations in any of the countries in which these patents have issued could potentially take legal action to seek their amendment, revocation or invalidation.
Furthermore, any time that we initiate legal action against parties that infringe our patents we face a risk that the infringer will defend itself through a counter-claim of patent invalidity. Subsequent legal action could potentially overturn, invalidate or limit the scope of our patents.
Under the relevant Patent Act in most, if not all, the countries in which our non-coding patents have issued, the relevant judicial system has rights to impose compulsory licensing. The relevant governments typically hold "march-in" rights by which they may unilaterally choose to exploit the technology. To the extent that the Company's non-coding DNA technology is used in the conduct of genetic research, we also face risks, uncertainty and controversy over the licensing of our technology to those conducting research. Whether or not researchers should be exempted from obligations to take licenses to relevant patents is currently the subject of another government inquiry being conducted by the Australian Council for Intellectual Property. We cannot predict the outcome of this enquiry and there is a risk that we may be prevented in the future from asserting the patents to people performing research.
Genetic testing
There is a risk that a moratorium on genetic testing by the Australian Institute of Sport may impact on the commercialization of our sports performance genetic test for the elite competitor market in Australia. However, this moratorium should not impact our ability to distribute this test throughout the rest of the world. There is also a view held by some elements of the medical and academic communities that the marketing of some of our cancer diagnostic tests is done solely with a commercial objective in mind. In essence, some parties have indicated that, in their view, the risk of inheriting certain types of cancer is too low to warrant an expensive genetic test. Guidelines laid down by the Australian National Health Medical Research Council also prevent us from promoting our testing in a manner which may 'cause any unnecessary alarm'.
Health care cost containment initiatives could limit the adoption of genetic testing as a clinical tool, which would harm our revenues and prospects.
In recent years, health care payors as well as federal and state governments have focused on containing or reducing health care costs. We cannot predict the effect that any of these initiatives may have on our business. In particular, gene-based therapeutics, if successfully developed and commercialized, are likely to be costly compared to currently available drug therapies. Health care cost containment initiatives focused either on gene-based therapeutics or on genetic testing could cause the growth in the clinical market for genetic testing to be curtailed or slowed. In addition, health care cost containment initiatives could also cause pharmaceutical companies to reduce research and development spending. In either case, our business and our operating results would be adversely affected. In addition, genetic testing in clinical settings is often billed to third-party payors, including private
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insurers and governmental organizations. If our current and future clinical products and services are not considered cost-effective by these payors, reimbursement may not be available to users of our products and services. In this event, potential customers would be much less likely to use our products and services, and our business and operating results would be seriously harmed.
ITEM 4. INFORMATION ON THE COMPANY
Item 4.A History and Development of the Company
We were incorporated under the laws of Western Australia on January 5, 1987 as Concord Mining N.L. On August 13, 1991 we changed our name to Consolidated Victorian Gold Mines N.L. On December 2, 1991 we changed our name to Consolidated Victorian Mines N.L. On March 15, 1995 we changed our name to Duketon Goldfields N.L.
On October 15, 1999 the type of company was changed from a No Liability Company to a company limited by shares. On August 29, 2000 we changed our name to Genetic Technologies Limited, which is our current name. We were originally incorporated as a mining company and gradually phased out our mining activities and became a biotechnology company with the acquisition of GeneType AG in August 2000. Our Australian company number is ACN 009 212 328. We operate pursuant to our constitution, the Australian Corporations Act, the Australian Stock Exchange Listing Rules and, where applicable, local legislation.
Our registered office, headquarters, laboratory and main business activities are all located at 60-66 Hanover Street, Fitzroy, Victoria 3065 Australia and our telephone number is 613-9415-1135. We also have a corporate office located at Level 12, Suite 2, 75 Elizabeth Street, Sydney, NSW 2000, Australia and our telephone number at that location is 612-9233-5015. Our website address is www.gtg.com.au. Information on our website and websites linked to it does not constitute part of this Registration Statement.
GeneType AG was incorporated in Zug, Switzerland in 1989, and was acquired by us on August 29, 2000. GeneType AG had been formed by Dr. Mervyn Jacobson (a medical doctor) and Dr. Malcolm Simons (an immunogeneticist) after they met in Melbourne, Australia, in early 1989, and resolved to test the hypothesis developed by Dr. Simons that the non-coding or "junk" DNA regions in the human, (and in particular, the non-coding DNA of the human HLA gene complex on chromosome 6) was in reality not "junk", but a valuable and highly ordered reservoir of useful genetic information, overlooked by the scientific community up until that time.
GeneType AG indeed researched and proved that certain motifs or sequence variations (known as "polymorphisms") within the non-coding DNA of these HLA genes could be identified which were clearly not "junk"and GeneType AG also showed that these polymorphisms were actually linked to particular DNA variations in the coding region (known as "alleles"). Alternatively, some of these non-coding polymorphisms could be linked to groupings of alleles in the coding region (or "haplotypes") of these HLA genes. This was a significant breakthrough and resulted in a first patent filing concerning use of non-coding polymorphisms linked to coding alleles or haplotypes in HLA for analysis purposes. GeneType AG then filed additional patents in relation to use of non-coding polymorphisms for analysis purposes outside of the HLA genes. Later, GeneType AG also filed patents on the use of such non-coding polymorphisms for mapping purposes. These patents were filed in many countries. Subsequently, such patent applications have resulted in issued patents being awarded to GeneType AG in many jurisdictions, creating a potentially valuable business opportunity for GeneType AG. The commercial mission then evolved for GeneType AG to assert its ownership over such patents, by way of out-licensing these inventions and these strategies to others, to allow them to also access this useful and informative genetic informationwhich GeneType AG had been the first to prove indeed exists within the non-coding DNA of all genes in all multi-cellular speciesand so, to then exploit such inventions globally for profit.
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On August 29, 2000, we acquired 100% of GeneType AG, including all its valuable patents, and we shifted our focus exclusively to the area of biotechnology. We also changed our name to Genetic Technologies Limited. In September 2000 our listing was duly transferred from the mining board of the ASX to the industrial board and our shares were thereafter classified under the industry group "Health and Biotechnology", completing our transformation from a mining and resources company into a biotechnology company. During 2001, we also acquired 10% of the issued and outstanding shares in Cytomation Inc., Fort Collins, Colorado. At that time, Cytomation was a leader in the manufacture and sales of flow cytometers and cell sorters. Also, in December 2001, we acquired an initial shareholding of less than 1% in the issued capital of XY Inc., a company based in Fort Collins, Colorado. In July 2001 we acquired the business of DNA-ID Labs in Perth, Western Australia, as part of our strategy of expanding our paternity testing business in Australia. In March 2002, we formed AgGenomics Pty Ltd, based in Melbourne, in order to expand our genetic service testing into the field of plant genetics. In May 2003, we acquired the fixed assets of the business Genetic Science Services in Melbourne, in order to expand into the field of the genetic testing of animals.
Since the acquisition of GeneType AG, with the exception of certain minor passive interests, the directors have disposed of all remaining mining interests so that our activities now focus solely on emerging opportunities in the field of biotechnology.
Our current activities in biotechnology primarily concentrate on three clearly defined areas of activity:
In August 2001, our subsidiary Gtech International Resources Limited sold its remaining interest in the Aurex Project in the Yukon Territory, Canada, to Expatriate Resources Limited in exchange for 600,000 common shares in Expatriate Resources Limited. Gtech International Resources Limited retains a 1.5% net smelter return royalty. In September 2001 we sold all of our shares in Golden Mount NL for A$1.00, with full release of all our performance bonds. In November 2001 we sold our entire shareholding in Cytomation Inc. for $4,816,044 (A$9.2 million), which resulted in a profit to our company of approximately $273,475 (A$500,000). On June 4, 2002 we sold all the shares in Mt Alexander Goldfields NL, the company which owned the other Victorian mining assets, for $157,045 (A$300,000) cash, and we were also granted a full release of all our performance bonds.
In early calendar year 2002, we commenced the process of out-licensing our non-coding patentsand we announced several early successes. The first license to our non-coding patents was granted to Genetic Solutions Pty Limited of Australia, and soon after, to Nanogen Inc., Sequenom Inc., Perlegen Sciences Inc. and Myriad Genetics Inc. all of the U.S. In the first half of 2003, we granted licenses to Pyrosequencing AB of Sweden, to ARUP and the University of Utah. In the year ended 2004, we granted licenses to the University of Sydney, in Australia, Quest Diagnostics Inc. of USA, King's College London, Vialactia Biosciences (NZ) Limited of New Zealand, University of Technology, Sydney, Australia, TM Bioscience Corporation of Canada, Laboratory Corporation of America Holdings, Colorado State University of USA, C.Y. O'Connor ERADE Village Foundation of Perth, Western Australia, and Ovita Limited of New Zealand. Since June 30, 2004, we have granted licenses to Genzyme Corporation of USA, MetaMorphix Inc. of USA, Bionomics Limited of Adelaide, South Australia and the Australian Genome Research Facility of Brisbane, Queensland. Additional licenses have followed. These licenses are more fully described below under Item 4.B "Business Overview".
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It is a priority for the company and its advisers to continue to identify additional parties who would benefit from taking a license to the GTG non-coding patents. We are now pursuing negotiations with companies and organizations in the U.S., Europe, Australia, New Zealand, Canada, Japan and South America that would all benefit from taking a license to our non-coding patents or from collaborations with our service testing business, and we are now devoting increasingly significant resources to this steadily growing activity.
We are a biotechnology company, now pursuing commercial opportunities in three main areas of activity:
Industry Background
The Human Genome Project (HGP) announced (in 2001) the completion of the first draft of the entire sequence of the human genome. The biotechnology industry is now working to build upon the vast amount of knowledge generated by that programin order to develop a better understanding of the genetic basis of human health and disease. Increasingly, genetics is being shown to play a key role in the diagnosis and treatment of many diseases in humans, as well as diseases in animals and plants. Our growing understanding of genetics is now providing new information for understanding such predisposing or causative factors in many of these diseases.
More recently, the successful mapping of the Mouse Genome was published in December, 2002, and this permitted for the first time, a detailed comparison of human genes and mouse genes. One of the key findings that has arisen from this work is the significant role that non-coding regulatory DNA plays in controlling gene function in both human genes and mouse genes. For some scientists, but not for our company, these findingsof the great significance of non-coding regulatory DNA to gene functionwere new, significant and totally unexpected.
A major focus in science is now the identification and analysis of genetic variations and disease-associated genes within the genome. These genetic variations, or polymorphisms, in the DNA sequences vary between individuals. The most common genetic variations are Single Nucleotide Polymorphisms, or SNPs, which are merely a difference in a single nucleotide. The first draft of the human genome identified over 1.4 million SNPs that can be useful as positional signposts for disease-associated DNA sequences in a gene or as markers to map genes along a chromosome. A significant number of these SNPs (perhaps more than 97%) are now known to be non-coding.
Genomics
A genome is an organism's complete set of DNA and the study of that DNA is called genomics. Genomes vary in size with bacteria displaying the smallest known genome at 600,000 DNA base pairs, while human and mouse genomes have over 3 billion. The DNA of the human genome is organized into 24 distinct chromosomes that contain from 50 million to 250 million base pairs on each chromosome. The DNA on each chromosome contains genes that are specific sequences that encode proteins that actually perform the work within a cell and also make up the cell itself. Surprisingly, only about 2-5% of the human genome is organized into coding DNA, with the remainder being considered to be non-coding DNA. Our patent portfolio is centered on proprietary methods for utilizing the valuable information contained within these non-coding regions.
19
Genetic Variability
Almost 99.9% of an individual's genome is identical to that of every other individual's genome. However, even slight variations in sequence can drastically change how a gene functions. Variations can lead to harmless changes, such as blue eyes instead of brown, or to major diseases such as cancer, cystic fibrosis, or cardiovascular disease. Genetic variations can also be responsible for many of the differences in the ways individuals respond to drug therapies. As a result of this knowledge, routine analysis of SNPs and other genetic variations are expected to play an increasingly important role in the discovery and development of new drugs, as well as in a variety of diagnostic therapeutic and other medical and life science applications. Industry sources estimate there are millions of genetic variations in the human genome, creating demand for products and technologies that can quickly and accurately detect and analyze these variations. It is thought that medicine of the future will be dispensed to a patient based on his or her own specific DNA variations. This type of personalized medicine will require sophisticated genetic tests to determine the genetic make-up of an individual, and it is now recognized that such genetic make-up depends not only on the form of the coding DNA, but also the form of the associated non-coding DNA.
Genetic Tests
Most genes come in many different forms, called alleles. One or more alleles may be associated with a particular disease state. Genetic testing involves the direct examination of an individual's DNA for a DNA marker associated with the allele of interest. Determination of the particular alleles an individual has within his or her DNA is called genotyping.
The most commonly tested marker of a particular allele is a SNP. As much as 98% of the human genome is considered to be non-coding DNA, the majority of the identified 1.4 million SNPs are also in non-coding regions of DNA. We believe that a license to our proprietary methods of analyzing non-coding regions of DNA will be absolutely necessary for many of the genetic tests of the future. Similarly, tests for genetic abnormalities or mutations may involve not just individual SNPs, but also groups of SNPs or even larger sequences of DNA, and such abnormal sequenceslarge or smallmay be located either in the coding region alone, or in the non-coding region alone, or in both the coding and non-coding regions of the gene (or genes) under examination. Clearly, the variations within genes that may be responsible for a disease are now known to be much more complicated than was previously understood, and the role of non-coding DNA is now being found to be highly relevant in more and more, diseases. This similarly applies to genetic disorders in animals and in plants. Accordingly, more and more genetic testing will in future look not only at coding variations, but also at the non-coding variations within a particular gene.
Our Patent Portfolio
The acquisition of GeneType AG gave our company ownership rights to a potentially significant portfolio of issued patents. The major families of patents in the portfolio include:
(a) Intron
sequence analysis;
(b) Genomic mapping;
(c) Fetal cell recovery;
(d) Electrophoresis standards;
(e) Sports performance;
(f) Parasitology;
(g) Ancestral haplotypes for tissue typing;
(h) Markers for disease; and
(i) Modulation of the immune system.
(a) The Intron Sequence Analysis patents allow for the detection of specific motifs within the genetic material in the non-coding regions of DNA which have been shown, may be linked to certain
20
alleles or haplotypes within the coding region of the gene. In other words, whereas most geneticists previously looked at the genetic information located within the coding region alone, our inventions have provided a means of also looking at additional useful information which is located within the non-coding part of the gene, and which is now known to also be important in influencing gene functionand in particular, protein production. The method is useful for example, in the determination of tissue typing for transplantation in order to test for possible likely acceptance or rejection of bone marrow or tissue grafts. The method is also useful in the detection of genetic changes or mutations in the non-coding region of certain genes associated with a higher incidence of certain genetic diseases, such as cystic fibrosis, susceptibility to breast cancer, multiple sclerosis, Alzheimer's Disease, etc. It is also now known that more than 100 human diseases are associated with genetic changes in the non-coding part of a particular gene and which are linked to the function of the coding part that gene. Similar applications also exist in animals and plants. Several important markers in livestock, for example, have been shown to be located in the non-coding part of the DNA and also linked to particular coding functionfor example, marbling or tenderness. It has also been shown that variations in the non-coding DNA of plants can influence function in plants, including the color of flowers and the timing of plant germination and growth.
(b) The Genomic Mapping patents describe methods for analyzing genetic material collected from various selected populations to identify and locate genes and markers of interest, by identifying highly polymorphic sites throughout the genome and particular haplotypes associated with such sites, all based on a reading of sequence information in both the coding and the non-coding portions of the genome.
(c) The Fetal Cell Recovery patents describe a novel and safe method for the isolation and collection of fetal cells from the peripheral blood of a pregnant woman, utilizing various HLA or other markers plus flow cytometryall without any invasive procedure that might endanger the mother or the child.
(d) The Electrophoresis Standards patents describe a method for identifying band positions in an electrophoretic separation by also including a control, which serves as an internal standard.
(e) The Sports Performance patents describe a method that enables aspects of athletic performance to be predicted based on detection of various forms of the alpha actinin 3 (ACTN3) gene.
(f) The Parasitology patents describe the identification and use of genetic variations within the typically waterborne parasite "Cryptosporidium parvum". This enables more accurate typing of Cryptosporidium organisms which may be important in the management of disease outbreaks.
(g) The Ancestral Haplotypes for Tissue Typing patents describe a method for determining ancestral haplotypes using haplospecific geometric elements within the major histocompatibility complex multi gene cluster and methods of genetic analysis involving the amplification of complimentary duplicons. These patents were acquired from the C.Y. O'Connor ERADE Village Foundation.
(h) The Markers for Disease patents describe a group of patents relating to uses of a group of genetic variations called "variable number tandem repeats" (VNTRs). Particular uses have been found for VNTR's in predicting predisposition to addiction.
(i) The Modulation of the Immune System patents describe various methods aimed at improving the efficacy of cancer therapy and treatment of HIV-AIDS.
In total, we own 8 issued patents and 12 pending patents in the United States. Reflecting our international business strategy, we have also sought and been granted foreign patents by many major industrialized nations, corresponding to each of the major patents already issued in the United States.
The many issued, allowed and pending patents claimed by GeneType AG, and which are now owned by our company, distinguish us from competitors by giving us the legal right to claim ownership or proprietary methods and compositions for analysis of DNA using information contained within non-coding regions and for isolation of fetal cells from a maternal blood sample. The methods and
21
compositions for analysis of DNA may be used to identify a particular form of a gene or to map the location of a disease-associated gene along a chromosome.
Generally, United States patents have a term of 17 years from the date of issuance for patents filed with the United States Patent Office prior to June 8, 1995, and 20 years from the application filing date or earlier claimed priority date in the case of patents issued from applications filed on or after June 8, 1995. For applications filed after May 29, 2000, the term is 20 years from the date of filing. A minimum term of 17 years is assured, provided the applicant causes no delays during prosecution. Patents in most other countries have a term of 20 years from the date of filing the patent application. Our issued United States patents will expire between 2009 and 2019. We intend to continue to file patent applications as we develop new products, technologies and patentable enhancements. Prosecution practices have been implemented to avoid any applicant delays that could compromise the 17-year minimum term. There can be no guarantee that such procedures will prevent the loss of a potential patent term. This is particularly true in the short-term as the patent rules implementing the most recent patent term changes are largely new and untested.
Complex legal and factual determinations and evolving law make patent protection uncertain. As a result, we cannot be certain that patents will be issued from any of our pending patent applications or from applications licensed to us or that any issued patents will have sufficient breadth to offer meaningful protection. In addition, our issued patents may be successfully challenged, invalidated, circumvented or rendered unenforceable so that our patent rights would not create an effective competitive barrier. Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the United States patent laws.
In addition to patent protection, we rely on trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Our employees and consultants are required to sign agreements to assign to us their interests in discoveries, inventions, patents, trademarks and copyrights arising from their work for us. They also are required to maintain the confidentiality of our intellectual property, and refrain from unfair competition with us during their employment and for a certain amount of time after their employment with us, which includes solicitation of our employees and customers. We cannot be certain these agreements will not be breached or invalidated. In addition, third parties may independently discover or invent competing technologies or reverse engineer our trade secrets or other technologies.
In the future, we may become involved in lawsuits in which third parties file claims asserting that our technologies or products infringe on their intellectual property. We cannot predict whether third parties will assert such claims against us or against the licensors of technologies licensed to us, or our licensees, or whether those claims will hurt our business. We may be forced to defend against such claims, whether they are with or without merit or whether they are resolved in favor of or against our licensors, or us and may face costly litigation and diversion of management's attention and resources. As a result of such disputes, we may have to develop costly non-infringing technologies or enter into licensing agreements. These agreements may oblige us to accept costly terms, which could seriously limit the ability to conduct our operations and affect adversely our financial condition.
In addition, we may become involved in lawsuits in which third parties file claims asserting that one or more of our patents are invalid. We cannot predict whether third parties will assert such claims against us or against the licensees of such patents, or whether those claims will hurt our business. We may be forced to defend against such claims, whether they are with or without merit or whether they are resolved in favor of or against our licensees, or us and may face costly litigation and diversion of management's attention and resources. During the period from February 2001 through March 31, 2002 we had in place a patent insurance policy, placed with GE Reinsurance Corporation through Dexta Corporation Limited, their managing general agents in Australia. Although the policy was not renewed on its expiry, since we had advised Dexta of 13 companies prior to March 31, 2002 as potential infringers, the majority of our expenses of prosecution of our claims incurred to date have been covered by the policy. Of those 13 so identified, we have secured licenses with six, relinquished our claims against four and commenced proceedings against Applera, Covance and Nuvello, the costs of which were covered. The suits against Covance and Nuvello have since been settled.
22
Our Patents
Our current patent portfolio is described below:
Non-coding DNA
Title
|
Earliest priority
|
Country
|
Appl./Patent No.
|
Status
|
||||
---|---|---|---|---|---|---|---|---|
Intron sequence analysis |
25 August 1989
25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 25 August 1989 |
Australia
Australia Austria Belgium Canada Denmark Europe France Germany Germany Greece Hong Kong Israel Italy Japan Japan Liechtenstein Luxemburg Netherlands New Zealand Singapore South Africa Spain Sweden Switzerland United Kingdom United States United States United States United States United States |
654111
672519 E144797 BE0414469 CA2023888 DK0414469 EP0414469 FR0414469 DE69029018 DE299319 GR0414469 HK1008053 IL95467 IT0414469 JP3206812 JP20010092923 LI0414469 LU0414469 NL0414469 235051 47747 906675 ES2095859 SE0414469 CH0414469 GB0414469 5192659 5612179 5789568 09/935998 10/005626 |
Granted
Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Pending Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Pending Pending |
||||
23
Genomic mapping |
|
11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 11 July 1990 |
|
Australia Austria Belgium Canada Denmark Europe France Germany Ireland Israel Italy Japan Liechtenstein Luxemburg Netherlands New Zealand South Africa Sweden Switzerland United Kingdom United States |
|
647806 AT185377 BE0570371 CA2087042 DK0570371 EP0570371 FR0570371 DE691316910 IE0570371 IL98793 IT0570371 3409796 LI0570371 LU0570371 NL0570371 238926 915422 SE0570371 CH0570371 GB0570371 5851762 |
|
Granted Granted Granted Pending Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted |
Compositions and methods of use of Variable Number of Tandem Repeats (VNTRS) |
|
1 October 2003 |
|
United States |
|
60/508,364 |
|
Pending |
Markers of Predisposition to Addictive States |
|
8 November 2004 8 November 2004 |
|
Australia United States |
|
2004906419 60/625888 |
|
Provisional Provisional |
24
RareCellect® project
Title
|
Earliest priority
|
Country
|
Appl./Patent No.
|
Status
|
||||
---|---|---|---|---|---|---|---|---|
Fetal cell recovery |
27 March 1990
27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 27 March 1990 |
Australia
Austria Belgium Canada Denmark Europe France Germany Greece Ireland Israel Italy Japan Liechtenstein Luxemburg Netherlands New Zealand Singapore South Africa Spain Sweden Switzerland United Kingdom United States United States |
649027
AT194166 BE0521909 CA2059554 DK521909 EP0521909 FR0521909 DE69132269 GR3034487 IE910996 IL97677 IT0521909 JP2965699 LI0521909 LU0521909 NL0521909 237589 96077821 912317 ES2149760 SE0521909 CH0521909 GB0521909 5447842 5153117 |
Granted
Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Pending Granted Granted Granted Granted Granted Granted Granted |
||||
Identification of fetal DNA and cell markers |
|
5 March 2003 |
|
Australia |
|
PCT/AU2004/000287 |
|
Pending |
Maternal antibodies as fetal cell markers to identify and enrich fetal cells from maternal blood |
|
31 May 2002 |
|
Australia Canada Europe Japan New Zealand United States Singapore |
|
PCT/AU/03/00676 2003229297 03722092-8 2004509429 537328 385170 200406994-4 |
|
Pending Pending Pending Pending Pending Pending Pending |
Non-invasive fetal cell recovery |
|
12 May 2005 |
|
United States |
|
TBA |
|
Pending |
Methods of enriching fetal cells |
|
9 June 2005 |
|
United States |
|
TBA |
|
Pending |
25
C.Y. O'Connor ERADE Village Foundation
Title
|
Earliest priority
|
Country
|
Appl./Patent No.
|
Status
|
||||
---|---|---|---|---|---|---|---|---|
Genetic analysis |
1 November 1991
1 November 1991 1 November 1991 1 November 1991 1 November 1991 |
Europe
France Germany United Kingdom United States |
EP0660877
FR0660877 DE69232726.6 GB0660877 US6383747 |
Granted
Granted Granted Granted Granted |
||||
Methods of genetic analysis involving the amplification of complementary duplicons | 16 February 2005 | Australia | 2005900728 | Pending |
ImmunAid project
Title
|
Earliest priority
|
Country
|
Appl./Patent No.
|
Status
|
||||
---|---|---|---|---|---|---|---|---|
A retroviral immunotherapy |
18 August 2002
18 August 2000 18 August 2000 18 August 2000 18 August 2000 18 August 2000 18 August 2000 18 August 2000 18 August 2000 |
Australia
Canada Europe Japan New Zealand China Singapore South Africa United States |
2003200583
CA2431954TBA 01962453.5 2002-518971 524280 01817380.2 200301401-6 2003/1694 10/369,256 |
Pending
Pending Pending Pending Pending Pending Pending Granted Pending |
||||
Strategy for retroviral immunotherapy |
|
20 February 2002 20 February 2002 20 February 2002 20 February 2002 20 February 2002 20 February 2002 20 February 2002 20 February 2002 20 February 2002 |
|
Australia Brazil Canada China Europe Japan New Zealand Singapore South Africa |
|
2003246604 P10307868-0 2476956 03808873.8 3742468.6 2003-569225 534590 20040403-3 2004/7143 |
|
Pending Pending Pending Pending Pending Pending Pending Pending Pending |
Cancer therapy |
|
14 February 2002 14 February 2002 14 February 2002 14 February 2002 14 February 2002 14 February 2002 14 February 2002 14 February 2002 14 February 2002 14 February 2002 |
|
Australia Brazil Canada China Europe Japan New Zealand Singapore South Africa United States |
|
2003203051 0307661-0 2476366 3808204.7 3701355.4 2003-567437 534570 200404602-5 2004/7142 TBA |
|
Pending Pending Pending Pending Pending Pending Pending Pending Pending Pending |
26
Pathogen genetics and genomics
Title
|
Earliest priority
|
Country
|
Appl./Patent No.
|
Status
|
||||
---|---|---|---|---|---|---|---|---|
High resolution analysis of genetic variation within cryptosporidium parvum |
22 August 2002
22 August 2002 22 August 2002 22 August 2002 22 August 2002 22 August 2002 22 August 2002 22 August 2002 22 August 2002 |
Australia
Brazil Canada China Europe Japan Mexico New Zealand United States |
2003250619
2002950977 TBA 03822035.0 TBA 2004-529588 2005/00002027 538418 TBA |
Pending
Pending Pending Pending Pending Pending Pending Pending Pending |
Athletic performance
Title
|
Earliest priority
|
Country
|
Appl./Patent No.
|
Status
|
||||
---|---|---|---|---|---|---|---|---|
ACTN3 genotype screen for athletic performance |
16 September 2002
16 September 2002 16 September 2002 16 September 2002 16 September 2002 16 September 2002 16 September 2002 16 September 2002 16 September 2002 16 September 2002 |
Australia
Canada Russia South Korea China Europe India Japan New Zealand United States |
2003258390
TBA TBA 10-2005-7004536 TBA 03794708.2 TBA 2004-534867 538890 TBA |
Pending Pending Pending Pending Pending Pending Pending Pending Pending Pending |
Electrophoresis standard
Title
|
Earliest priority
|
Country
|
Appl./Patent No.
|
Status
|
||||
---|---|---|---|---|---|---|---|---|
Electrophoresis standard | 11 July 1990 |
Germany
Europe France Sweden United Kingdom United States |
DE69127999
EP0466479 FR0466479 913062634 GB0466479 5096557 |
Granted
Granted Granted Granted Granted Granted |
Out-licensing Our Non-coding Patents Globally
The Company is currently commercializing and licensing its non-coding patents in the US and elsewhere.
This strategy was initiated in late 2000, soon after GeneType AG and its patents were acquired by the Company. The first step was to secure patent insurance, which we achieved in early 2001. This meant that if we were forced to take legal action against infringers, under that policy the cost would be largely covered by our underwriter. This policy has since expired.
Thereafter, we progressively made contact with many companies in the USA and elsewhere, bringing the patents to their attention and indicating how they might benefit from a license to the GTG
27
non-coding patents. In late 2002, we hired Ian Christensen to manage the Australian end of the licensing effort and to build our central database of all prospective licensees, globally.
The plan initially was to grant a limited number of licenses focusing primarily on the up-front fee component, and then to progressively build recurring annuity or royalty component of subsequent licenses.
When we found some companies that seemed to be clearly infringing our patents while also indicating they would not take a license, we then put them on formal notice under our patent insurance policy. Overall, the strategy has unfolded as planned.
Our Licenses and Commercial Collaborations
The following section describes our existing commercial and research licenses, our collaborations and our collaborators. We announced our first license to the non-coding patents to the Australian livestock testing firm Genetic Solutions Pty. Limited, in February 2002. Since then, we have formed several collaborations and granted a further 23 licenses.
Commercial Licenses and Collaborations:
Agriculture Victoria Services Pty. Limited: On February 28, 2002 our subsidiary GeneType Pty. Limited entered into a joint venture agreement with Agriculture Victoria Services Pty. Limited for the formation of the joint venture company AgGenomics Pty. Limited, to operate a joint venture business in commercial plant genotyping and genomics services. Under the terms of the joint venture agreement we hold 50.1% of the shares of the joint venture company. We have certain obligations under the joint venture agreement to loan money to the joint venture company, which is not expected to exceed A$500,000 at any given time. Agriculture Victoria Services Pty. Limited is not required to provide further funding to the joint venture company. The agreement is terminable by a party in the event of a breach by the other party that is not timely cured or upon the occurrence of an "adverse event" to the company or to either shareholder. Adverse events are insolvency type events or discontinuation of business. In the event of termination the non-defaulting party can require liquidation of the company or purchase the other party's interest, as it chooses.
Nanogen License: In April 2002, we granted a license to Nanogen, Inc, of San Diego, USA, who specializes in the development of biochip applications in genetics diagnostics. Nanogen paid us a non-refundable $250,000 and unlisted warrants for a license limited to genetic research and human diagnostics. Specifically, Nanogen receives no rights to the mapping patent nor any applications in animals or plants. Since the date of the initial license, the warrants became "in the money" and we exercised them, acquired Nanogen shares which we disposed of in market transactions for a further $275,000 of other income. The license can be terminated by either party upon any material breach of any term or condition of the agreement not timely cured. We also can terminate the agreement in the event the licensee becomes involved in insolvency proceedings or if it discontinues its business for any reason.
Sequenom License: Also in April, 2002, we granted a license to bioinstrument maker Sequenom, Inc., who paid us a non-refundable $500,000 (in cash and shares) for a license to our non-coding analysis and mapping patents. The license can be terminated by either party upon any material breach of any term or condition by the other party which has not been timely cured after notice. We may also terminate the agreement in the event of the bankruptcy of the licensee or discontinuation of their business.
Perlegen License: In August 2002, we granted a license to US genome researcher, Perlegen Sciences, Inc., which paid a non-refundable combination of cash and securities worth approximately $598,120 for an exclusive license limited to a specialized field known as "high resolution whole genome
28
analysis". Either party can terminate the license agreement upon any material breach of any term or condition by the other party that is not timely cured after notice. We have the right to terminate the agreement, as well, in the event of insolvency of the licensee or if it discontinues it business for any reason.
Myriad Licenses: In October, 2002, we announced a licensing agreement with Myriad Genetics, Inc, under which we granted Myriad broad rights to utilize our non-coding patents, in return for which Myriad agreed to pay us a non-refundable $1,000,000 cash, plus future fees on an annual basis in lieu of royalties, plus the rights to bring Myriad's predictive medicine products to Australia and New Zealand. These products include genetic susceptibility tests for breast cancer, ovarian cancer, bowel cancer, melanoma and cardiac risk. These tests, which are now being offered by GTG in Australia, have resulted in the expansion of our existing genetic testing facilities in Melbourne. The license can be terminated by either party upon material breach by the other party that is not cured within 30 days of notice. We also may terminate if the licensee fails to make any payment required by the agreement. Under the second of two agreements we are granted a license to use Myriad's diagnostic services in Australia and New Zealand in exchange for an annual fee. We are obligated to use reasonable efforts to commercialize the licensed diagnostic services in Australia and New Zealand. Under the terms of this agreement we have been granted an option in exchange for upfront payments and a continuing royalty, to expand the license in respect of full sequence testing, which has not been exercised. The term of this agreement extends until 2012. Either party can terminate the agreement upon a material breach not timely cured after notice. In addition, Myriad can terminate if we fail to make any payment required under the agreement.
Pyrosequencing Licenses: In March, 2003, we announced a cross-licensing agreement with Pyrosequencing AB, of Sweden (now known as Biotage AB). Pyrosequencing receives a broad non-exclusive license to our non-coding DNA analysis and mapping patents but only when used in combination with Pyrosequencing's "sequencing by synthesis" reagents. In return, we received a non-refundable cash up front payment, plus royalties for the life of the GTG patents, plus three state-of-the-art analytical instruments (Pyrosequencing systems), plus other IP rights and assays from Pyrosequencing. Either party can terminate the agreement upon material breach that is not timely cured by the other party after notice. In addition, either party can terminate the agreement if the other party becomes involved in insolvency proceedings, or if the other party discontinues its business for any reason.
ARUP License: In April, 2003, we announced a license to Associated Regional & University Pathologists (ARUP) of Salt Lake City, Utah. ARUP is a sophisticated laboratory system owned by the University of Utah, and the first service provider actually performing human genetic testing to take a license from GTG. The license was granted in return for a one-time non-refundable license issue fee. The license is terminable by a party upon material breach by the other party that is not timely cured after notice. In addition, we have the right to terminate if the licensee becomes involved in an insolvency or discontinues its business for any reason.
In May, 2003, we had also granted the University of Utah a separate research license to show our support for their leading genetic research program into the non-coding regions of many genomes. This license is terminable upon material breach by the licensee not timely cured after notice.
Quest License: In August 2003, we granted a license to our non-coding analysis patents to Quest Diagnostics Inc., based in New Jersey, USA. The terms include a non-refundable signing fee plus ongoing annual payments in lieu of royalties from Quest for services provided by it in genetic laboratory testing in the United States, Canada and Mexico. The license is unilaterally revocable by us if upon notice we have a reasonable belief that the license is being used to assist an unlicensed party to avoid obtaining its own license under the licensed patents. In addition, the license is terminable by one party in the event of a material breach by the other party not cured after notice. Either party also may
29
terminate the license in the event of an insolvency event affecting the other party or the discontinuation of business by the other party.
ViaLactia License: In September 2003, we reached agreement with ViaLactia Biosciences (NZ) Limited of Auckland, New Zealand regarding the terms of a research and commercial license to the GTG non-coding patents. ViaLactia is a biotechnology company operating as a wholly owned subsidiary of Fonterra, New Zealand's largest dairy cooperative. The license was formally concluded in December 2003. The purpose of the license is to permit ViaLactia to conduct internal research activities and development of applications of our technology in the dairy industry, including new applications concerning dairy cattle, pasture grasses, mice as models for dairy cattle and yeast and bacteria as applied to the dairy industry. The license is terminable by either party upon material default of the other party that is not timely cured, without other penalty.
C.Y. O'Connor ERADE Village Foundation: In October 2003 we announced that we had signed heads of agreement to establish a broad strategic alliance with the C.Y. O'Connor ERADE Village Foundation, a leader in biotechnology innovation in Perth, Western Australia. Definitive documentation was concluded in June 2004. Under the terms of the agreement, we acquired all of the Foundation's patents and other intellectual property in the fields of genetics and genomics, including the Foundation's issued U.S. patent 6383747-B1 and foreign equivalents. We expect this extensive package of intellectual property will create additional opportunities for us in support of licensing and service testing. The Foundation acquired a license to our non-coding patents for a fee, so that the net purchase price for us was settled by the issuance of a total of 16,666,667 of our Ordinary Shares to the Foundation based on a market value of A$0.39 per share. The transaction closed in June 2004. Under the arrangement we support the ongoing genetics and genomics programs of the Foundation. Initially, five projects have been selected for priority attention and we will provide A$4.5 million to the Foundation, spread over five years, to help fund such research and development of new intellectual property. The first and second installments of A$450,000 each have already been paid, and we have also supplied a letter of credit for A$450,000 for the term of the agreement. In return, we are the primary commercialization vehicle for all new inventions, patents, intellectual property and business opportunities arising at the Foundation in the field of genetics or genomics. We are also obligated to pay royalties to the Foundation on gross revenue derived from the Foundation IP. We may terminate the license following any breach of the license by the licensee, either party can terminate following a material breach that is not timely cured or following an insolvency event of the other party.
GENDIA Network: In November 2003, we announced that we had joined the GENDIA diagnostic genetic testing network as the sole GENDIA affiliated laboratory in Australia and New Zealand. GENDIA is a network of some 20 leading laboratories worldwide who work together and share with each other access to very sophisticated genetic testing procedures. We are the sole GENDIA-affiliated laboratory in Australia and New Zealand.
TM Bioscience License: In December 2003, we granted a license to our non coding analysis and mapping patents to TM Bioscience Corporation of Toronto, Canada. The terms provide for a signing fee plus ongoing annual payments as a non-refundable license fee and an annual royalty on licensed products. This was our first commercial license granted to a Canadian company. TM Bioscience is a leading provider of diagnostic kits for human genetic testing, exported globally. The agreement is terminable by a party upon material breach by the other party that is not timely cured, and may be terminated by us in the event of dissolution or sale of the business of the licensee.
LabCorp License: In February 2004, we granted a license to our non-coding patents to Laboratory Corporation of America Holdings (known as "LabCorp"), a leading provider of human diagnostic services in the U.S. and Canada. It also performs testing in Europe for other companies, including pharmaceutical companies, for regulatory compliance purposes. The license covers both non-coding analysis patents and non-coding mapping patents, in exchange for a non-refundable signing fee plus
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annual license annuity payments for the life of the patents, through 2015. LabCorp also withdrew a declaratory action in respect of our patents that had been commenced in New Jersey. The license is terminable by either party upon material breach by the other party that is not timely cured. In addition, we are entitled to terminate the agreement in the event that the licensee intentionally and knowingly promotes licensee's reference testing to third party clinical laboratories for the purpose of circumventing the need for such laboratories to license our patents. The licensee is entitled to terminate the agreement at any time upon 30 days' prior written notice (without prejudice to its accrued obligations thereunder) and we can terminate in the event of an insolvency event involving the licensee or discontinuation of its business.
Ovita License: In June 2004, we entered into a license agreement with Ovita Limited of New Zealand, granting them a license to our non-coding patents to the extent required in order to commercialize genetic marker tests and pedigree tests and to conduct research and development activities for new applications of our technology in connection with testing of sheep and cattle. The agreement contemplates compensation to us of an initial non-refundable research license fee, an initial non-refundable commercial license fee and a royalty on licensed products made using our patents, payable calculated on gross sales. The license is terminable by a party for material breach that is not cured by the other party, by licensee upon 30 days' written notice to us and by either party in the event of discontinuation of its business, an insolvency event or failure to pay amounts due and owing to the other.
Genzyme License: Effective as of September 17, 2004 we granted a license to our non-coding patents to Genzyme Corporation, based in Cambridge, Massachusetts, in order for the licensee to perform preclinical and human research and human genetic testing. The grant of the license is in exchange for a non-refundable license issue fee consisting of a cash component and an in-kind component. The in-kind component consists of a license agreement in respect of patents owned by Johns Hopkins University and licensed by the licensee. In addition, the licensee is obligated to pay to us license annuity fees in lieu of a royalty for each year of the term. Either party can terminate the agreement upon material breach not timely cured, in the event of insolvency of the licensee, or by the licensee at any time upon 30 days' written notice to us.
MetaMorphix Agreements: On September 17, 2004 we executed two agreements with MetaMorphix, Inc., based in Maryland and specializing in the genetics and genomics of certain animal species, particularly cattle and dogs. Under the first such agreement we granted a license to use our non-coding patents in order to commercialize applications of DNA/RNA-based diagnostic assays for use in the livestock, aquaculture and companion animal industries. The licensee is obligated to pay us annually increasing license annuity fees in lieu of a royalty, as well as a non-refundable license issue fee. Either party can terminate the agreement upon a material breach not timely cured, or by us upon the licensee's discontinuation of its business for any reason. Under the second license, to which MMI Genomics, Inc. also is a party, we were granted a license to the licensor's patents and associated know-how in order to perform internal DNA-based diagnostic assays for use in our cattle and canine identity and parentage verification services. We are obligated to pay the licensor a non-refundable license fee. The licensor's obligations include ongoing support for the license and know-how. The agreement is terminable by either party upon material default by the other party that is not timely cured, or by the licensor in the event we discontinue our cattle and canine identity and parentage verification genotyping services business for any reason.
Australian Genome Research Facility License: Effective December 31, 2004 we entered into a license agreement with Australian Genome Research Facility Ltd. to our non-coding patents pursuant to which AGRF can use the patents on a non-exclusive basis for the purpose of performing genotyping services. The license requires an advance non-refundable license fee and an annual non-refundable annuity for the term of the license in lieu of a royalty, which continues until sooner terminated or the
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licensee no longer utilizes the patent. The agreement is terminable by mutual agreement, or by us in the event of a breach of a term or condition by the licensee or if it is subject to an insolvency event.
Bionomics Limited License: Effective November 5, 2004 we entered into two agreements with Bionomics Limited, a public company based in Adelaide, South Australia. Under the first such agreement we granted a non-exclusive, royalty free license to Bionomics to use our non-coding patents in order to (i) perform research and development activities relating to and arising from the identification of genetic factors that may influence epilepsy and (ii) commercialize the results of those research and development activities including, without limitation, epilepsy diagnostic assays. Bionomics paid us a non-refundable license fee on signing. Either party can terminate the agreement upon a material breach not timely cured. Under the second agreement with Bionomics we were granted a license to use certain intellectual property rights, including patent rights and associated know-how, relating to epilepsy gene discoveries and epilepsy diagnostic assays subject to minimum annual royalties. We paid Bionomics a non-refundable license fee. The agreement is terminable by either party upon material default by the other party that is not timely cured.
Research Licenses and Collaborations:
University of Melbourne: On January 22, 2003 we entered into a collaborative research agreement with the University of Melbourne, Australia, concerning the so-called "ARC Linkage Project": toward novel approaches for the control of parasitic nematodes via genomics/phenomics. This sets forth the terms of the collaboration between GeneType Pty. Limited and the university for research under an Australian government Research Council Linkage-Project. Under the terms of this agreement GeneType Pty. Limited is obligated to use its best efforts to provide additional funds for the project to make up the projected shortfall as contemplated by the original proposal, over a term of three years.
Horticulture Australia Limited: On June 18, 2003, AgGenomics Pty. Limited, a subsidiary of the Company, entered into a three-year Collaborative Research Agreement with Horticulture Australia Limited (HAL) to try and identify a genetic trait for day/night neutrality in strawberries which, if found, could lead to an extension of the cultivation season and consequently higher production. The research program, costing approximately AUD2.1 million ($1.5 million), is funded by HAL as to 45% and AgGenomics as to 55%. Any and all intellectual property generated from the project will be owned in the same proportions.
University of Sydney License: In July 2003, we granted a research license to the University of Sydney, in Australia. We subsequently entered into a further agreement (dated September 4, 2003) with the University of Sydney pursuant to which we have the exclusive right to commercialize a new and potentially significant genetic invention made by a professor in the Neurogenetics Research Unit and the University's Faculty of Medicine. This Australian invention is intended to permit an improved understanding of the genetic factors underlying superior athletic and sports performance, based on the presence or absence of a particular gene. Under the terms of this agreement we have agreed to make an upfront payment, to pay a royalty on net sales of the invention by us, a fee on first grant of a patent for the invention or any patent rights in any country and a further payment of part of any consideration of whatever kind received by us under a license of the assigned intellectual property.
King's College License: In December 2003 we granted a license to our non-coding patents to King's College, London, in the United Kingdom. Under the terms of the license, King's College will be able to apply the GTG non-coding patents to its internal research programs. King's College is considered a leader in the field of researching the genetic basis of various psychiatric and psychological disorders, including schizophrenia, anxiety/depression and certain attention deficit disorders. Future commercial applications arising from research at King's College would require an additional commercial license from us. In March 2004 we initiated a joint research project in the United Kingdom to explore the functionality of certain non-coding DNA elements, initially with special focus on the
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genetics of breast cancer susceptibility and the genetics of certain neuro-psychiatric conditions, such as schizophrenia. The project was funded by us for a further period of six months, in an amount of GBP53,000 that was paid in two installments. In May 2005, we extended the project for the period from June 1, 2005 to December 31, 2005 and agreed to fund the costs incurred by King's College during that period up to a maximum amount of GBP51,360. The license is terminable by either party upon any material breach not timely cured, without penalty.
University of Technology, Sydney: Effective December 23, 2003 we entered into a non-commercial research license with the University of Technology, Sydney, to permit the University to conduct internal research activities to research, identify, map and develop tests for genetic markers and genes of interest. Either party has the right to terminate the agreement upon the occurrence of a material breach that is not timely cured, without other penalty.
Colorado State University: Effective May 14, 2004 we entered into a non-commercial research license with the Colorado State University. This is a royalty-free license to permit the University to conduct research in exchange for a nominal licensing fee.
In addition to the above agreements, we continue to negotiate licensing terms to grant licenses to our non-coding patents to many companieslarge and small, and also to many government and private institutes, in many countries.
To facilitate these negotiations, we are also building a database of all prospective licensees, who we believe would benefit from a license to our non-coding patents. As at August 2004, we had identified more than 2,100 parties that warranted closer scrutiny. Of these, we have so far found evidence of probable infringement in relation to almost 500 of these. Negotiations have now commenced with more than 70 of these parties.
We continue to believe that a large number of biotechnology companies, service providers, IT companies and researchers will need to take a license to our proprietary methods in order to commercialize their own technologies. As our resources permit, we plan to allocate progressively more effort towards these licensing activities. However, apart from the many parties now negotiating with us in good faith, we have also found a few who seemed determined to use our patents without our approval. After suitable notices and warnings, we decided the time had come to initiate appropriate action against such infringers.
On March 26, 2003, we initiated legal action in the USA against three publicly-traded US companies for patent infringement. Two of these cases, against Nuvello and Covance, have been settled. The legal costs arising from the legal action taken against these three infringing companies have to date largely been covered by our patent insurance policy. See Item 8.A, "Litigation and Other Proceedings."
(ii) Building the Genetic Testing Business
Background and History of the Paternity Testing Business
In the early 1990's, GeneType AG established a small service-testing laboratory in Melbourne, Australia, initially to show-case its non-coding inventions, and also to generate some revenue to help support and fund its ambitious research program in those early days. Following the acquisition of several other small DNA testing laboratories in Australia, GeneType AG consolidated the business into becoming the largest provider of disputed paternity DNA testing services in Australia.
In December 1997, GeneType AG formed a partnership with Curtin University, based in Perth, Australia, to offer DNA paternity tests in Western Australia. This partnership continues today, with the University helping us collect specimens and sending them to Melbourne, where the actual testing is performed in the genetic testing laboratory at our Fitzroy headquarters.
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Then in August 2000, we acquired 100% of GeneType AG, including control over all its patents and its disputed paternity DNA service testing business.
Later, in July 2001, we acquired the paternity testing business of DNA-ID Labs, another small testing laboratory based in Perth. Overall, we acquired several small businessessome in Sydney, plus two based in Perth and one based in Melbourne, eventually making our service testing laboratory based in Melbourne the leading provider of disputed paternity testing services in Australia.
We now have extensive experience in providing DNA-based individuality testing for the resolution of disputed paternity, the determination of familial relationships for immigration purposes and for forensic stain analysis.
The most common type of DNA testing is paternity testingwhere we determine the father of a given child. In order to perform this test we take a sample from the mother, alleged father and child. The test can also be performed without the mother's sample but this makes the analysis somewhat more complex and the price increases accordingly.
Other types of tests we can offer include:
We issue reports for the Family Court in Australia and provide similar services internationally for the Department of Immigration and Multicultural and Indigenous Affairs (DIMIA). We are one of only two DNA testing laboratories in Australia recognized by DIMIA to provide DNA tests for immigration purposes.
We are one of only three laboratories worldwide used by Kenyon Corporation, believed to be the world's largest disaster management company. We perform the full range of DNA tests required by Kenyon for purposes of crash victim identification, and provide cover for the region controlled by Kenyon Australia. The boundaries of this region are determined by the north and south pole, to the west by India, and to the east by Fiji. Since the relationship was established with Kenyon over two years ago, no airline serviced by Kenyon has had one of its planes crash in our region.
Over time, we have gained a reputation as a leading genetic testing laboratory, and progressively, we have started to receive specimens for testing from other countries, mostly from countries in the Asia-Pacific region, but also from as far away as USA and UK. In addition, we received requests to perform tests outside of human paternity, and this has caused us to consider and now plan a significant expansion of our testing services.
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Expansion of DNA Testing Services Beyond Paternity Testing
(1) Plant Testing in March 2002, we formed a joint venture with the Victorian (Australia) State Government's Department of Primary Industry, for the purpose of providing a high throughput genotyping service for plant testingin order to help plant breeders identify the genes responsible for the detection of commercially relevant traits, such as resistance to disease, accelerated growth and the improvement of crop yields. A new company, AgGenomics Pty Ltd, was formedwith Genetic Technologies Limited ("GTG") as the majority stockholder and the State agency as the minority partner. AgGenomics is located at the Plant Biotechnology Centre at La Trobe University, in Melbourne. In June, 2003, AgGenomics announced it had entered into a 2 year A$2.1 million program with Horticulture Australia to identify genetic markers in strawberries. AgGenomics will also receive 55% of any intellectual property developed during the life of this project after contributing A$1,165,757 to acquire the IP.
(2) Animal Testing in May 2003, we acquired the assets of Genetic Science Services to expand the range of tests we can offer to include relevant genetic testing in animalsfor example, progeny testing in horses, dogs, deer, sexing in birds, and animal disease identification and susceptibility testing for a range of animals, including exotic and zoo animals. This acquisition will also allow GTG to support research projects involving, for example, the Australian fur seal, and possibly the platypus and various frogs and reptiles.
(3) Cancer Susceptibility Testing the strategic alliance with Myriad delivered to GTG exclusive rights for Australia and New Zealand to perform DNA susceptibility testing for a range of cancers, initially for breast cancer and ovarian cancer, and later, for bowel cancer, melanoma and cardiac risk. Professor Deon Venter joined the Board of Directors of GTG in April 2003, with special responsibility to oversee the establishment and operation of the new cancer susceptibility testing facility at GTG. In June, 2003, this facility was granted provisional accreditation. In addition, Dr. Frank Firgaira joined GTG as Head of Molecular DiagnosticsCancer Susceptibility Testing. This area of testing continues to build momentum, with new equipment arriving, new employees joining the company and new technology becoming available exclusively to us, such that the Australian community now has access to some of the latest technologies available for genetic testing. First testing has now begun, with referrals having already been received from both medical specialists and hospitals.
(4) Forensic Testing it may be surprising to many people that there has historically been no independent (as contrasted with State Government Police or Health laboratories) forensic testing laboratory in Australia. GTG has now obtained formal forensics accreditation from NATA, the National Association of Testing Authorities in Australia, and is currently the only independent forensics laboratory in the country.
(5) Athletic Performance Testing the Company acquired the commercial rights from the University of Sydney for a genetic test capable of determining whether or not athletes possess a predisposition for speed or endurance events. We now offer this test on a commercial basis.
(iii) Our Support for Five Significant Research Projects
We strongly support research and development. Indeed, Genetic Technologies had its foundation as a research company when it was established some 16 years ago. Since then, the Company has consistently pursued research and, following its Australian listing in 2000, when additional working capital became available, its research activities were significantly expanded.
We currently support five major research programs, details of which have been provided below. Some projects have arisen from new inventions made by the Company while some have been made by others who have approached the Company seeking collaboration and support for their activities.
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By its very nature, research is unpredictable and involves a considerable element of risk. Such risks may relate to scientific concepts, the implementation of the science, the protection of any inventions made and the success or otherwise in persuading others to respect the intellectual property acquired or created by the Company.
Specifically, patents filed may not issue or may later be challenged by others. Even if patents issue, the methods described may, with time, be superceded by other alternative methods which may prove to be commercially more attractive. Even if patents issue and the methods developed are successfully reduced to practice and can be shown to be commercially relevant, there is still no assurance that other parties will respect the patents or will take licenses to use the intellectual property. In such circumstances, it is possible that legal action will be necessary to enforce the Company's rights. Such action, in turn, raises a new series of risks including potentially significant legal costs and uncertain outcomes.
To the extent that delays are encountered in concluding the research projects, additional costs are likely to be incurred. Further, the projected revenues from the projects will also be deferred, potentially impacting on the Company's liquidity. In such cases, the Company may seek to partner with outside parties, who will contribute to the costs of research in return for an interest in the project, or the Company may seek to raise additional working capital from the Market.
In a worst case scenario, if the Company's research projects do not achieve their scientific objectives, the projects may well be closed down with no valuable intellectual property having been created.
(a) RareCellect®
Our subsidiary GeneType AG holds issued patents on a method for the recovery of fetal cells circulating in the peripheral blood of a pregnant woman. These patents, with an earliest priority date of March 27, 1990, have been granted or allowed in most countries where filed, including the US, United Kingdom, France, Germany, Australia, and Japan. In March 2001, RareCellect Limited was incorporated by us in Australia for the purpose of performing additional research and development of the method and overseeing its eventual commercialization.
Approximately 0.65% of live births are affected by major chromosomal abnormalities, including trisomy 21 (Down's Syndrome, 0.12%). Prenatal screening for such disorders is now widely available in developed countries, but is neither standardized nor universal. Even the best prenatal screening regimens fail to detect 5% of Down's cases, and suffers from false positive rates of about 5%. When screening based on past obstetric history or advanced maternal age indicates an increased risk of fetal genetic defects, the pregnant woman is generally subjected to a further, invasive procedureamniocentesis, chorionic villus sampling (CVS), or fetal blood samplingin order to obtain fetal cells for definitive prenatal diagnosis. Such procedures are not without risk, resulting in miscarriage rates from 0.5 to 2.0% above the expected background rate, and can lead to congenital abnormalities when performed too early in gestation.
It has long been generally recognized that a simple, universally applicable, non-invasive means of obtaining fetal cells for prenatal diagnosis would represent a major advance over existing practice and would be widely adopted throughout the developed world. RareCellect seeks to develop such a method.
It is well-known that fetal cells, including trophoblasts, lymphocytes, and erythroblasts, circulate in the peripheral blood of pregnant women, in some cases as early as five weeks' gestation. Although these cells are rare, only 1 per 10 6 to 10 7 maternal nucleated cells, it is possible to isolate them from venous blood samples. To date, no group has been able to achieve this with the reliability necessary for a routine clinical test. Reasons for this failure have included the lack of markers capable of adequately
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discriminating fetal from adult cells and limitations on the speed at which the required number of cells can be processed.
The GTG patents for fetal cell recovery describe a method that, in principle, should have the requisite power to reliably discriminate fetal from maternal cells. The method makes use of the HLA system of cell-surface molecules. The genes that encode these molecules show great variability (i.e., are highly polymorphic) in all human populations and are co-dominantly expressed. Provided that enough different types of HLA molecules can be interrogated, the probability that maternal and fetal cells share exactly the same complement of HLA molecules can be made very small. Recent advances in flow cytometry (cell sorter) instrumentation have now made feasible examination of enough peripheral blood cells in a sample to identify the very rare fetal cells.
In addition to the patent filed by us in relation to HLA markers, we have also filed a subsequent patent based on other non-HLA markers.
In 2001, GTG began recruiting a team of scientists dedicated to this project. A high-speed cell sorter, "MoFlo", manufactured by Cytomation Inc., (Colorado, USA) was initially installed in refurbished laboratories in Melbourne, Australia. Extensive testing of commercially-available anti-HLA antibody reagents was then conducted.
In early 2003, Dr. Ralph Bohmer arrived in Australia from the US to lead this project. Dr. Bohmer has also brought additional new concepts that could support this project, and provisional patents on these new inventions have recently been filed.
In 2004, Dr Richard Allman was recruited from the UK to assist with project leadership, in particular, with flow cytometry. Significant advances have been made as summarised below:
The proposed project outcome is a new, non-invasive pre-natal genetic test. Revenues from the project will be generated from a mixture of licence fees, royalties and direct, fee-for-service genetic testing.
Using GTG's patented HLA method, fetal cells can now be reproducibly and routinely isolated from maternal blood. A new and novel, direct cell labelling and sorting procedure has been developed and a patent application is in preparation. It is anticipated that the combination of the HLA method and the new, novel method will allow optimisation of the isolation procedure to increase the number and speed of fetal cell retrieval and validate a gender-independent cell labelling protocol.
Incremental advances in these areas are expected over the next 24 months at a burn rate of approximately $450,000 per annum.
Partnering to access clinical specimens and enable side-by-side clinical comparison of the new technique with existing methods will be required. It is anticipated that the clinical analysis and test validation would take around 24 months at a cost of approximately $150,000 per annum for a local partner. Suitable partners include a Melbourne-based hospital network and, potentially, large US genetics companies. Such clinical work is expected to commence within 12 months.
The key risk for this project is the time required in optimisation to enhance sample throughput to a commercially viable rate. Obviously, delays to achieving such optimisation would result in a longer lead time to commercial revenues and extended cash burn on research.
Provided there are no major technical problems, we estimate that the first material revenues will be received in 2007/2008.
Markets and competition: there are some four million pregnancies per year in the U.S. alone. It is already the case that some form of antenatal screening is provided for most pregnancies in developed countries. The trend towards increasing numbers of women becoming pregnant later in life is resulting in an increasing risk of chromosomal aberrations in these pregnancies. Given the expense,
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inconvenience, and inaccuracy of current screening strategies, and the risks associated with subsequent invasive diagnostic procedures, it seems probable that a reliable, accurate, non-invasive, and relatively inexpensive diagnostic test would be rapidly adopted.
This conclusion has, of course, been reached by a number of other parties. There are currently several competing groups actively pursuing different methods for the isolation of fetal cells from maternal blood, including academic centers in many countriesU.S., United Kingdom, Japan, China, Italy, Singapore, Finland, Germany, Netherlands, Franceand commercial organizations, e.g. IQ Corporation, Vysis, Roche Diagnostics, Paragon Genetics and Niagen Genetics. In 1995, the U.S. National Institutes of Health began funding of the large, collaborative National Institute of Child Health and Fetal Cell Isolation Study (NIFTY) trial, still on-going. Despite numerous optimistic claims made in the past, it does not appear that a fully satisfactory solution has been found or commercialized yet.
The method being developed by us has attracted widespread interest in relation to collaborative research and development, clinical trials and future commercialization. At least two major diagnostic companies have expressed interest in the project. During the coming year, the Company is likely to pursue discussions with these parties regarding the sharing of development costs and future licensing rights.
Government regulation: clinical testing in most developed countries is subject to extensive regulatory scrutiny, the nature of which varies from one country (and sometimes state) to another. In Australia, accreditation of laboratories offering pathology services is granted by the Health Insurance Commission, based on a report of assessment by the National Association of Testing Authorities (NATA). In addition, in the State of Victoria, where the Company has its headquarters, accreditation may also be obtained from the Pathology Services Accreditation Board, again subject to favorable assessment by NATA. In the U.S., laboratories are currently certified by the College of American Pathologists and the Health Care Financing Administration, under the authority of the Clinical Laboratory Improvement Amendments of 1988. However, there are currently moves to introduce an additional level of regulation for entities offering genetic testing, probably under the auspices of the FDA. Both the Clinical Laboratory Improvement Advisory Committee and the Secretaries Advisory Committee on Genetic Testing have recently held hearings and/or issued reports. In Australia, the Australian Law Reform Commission and the Australian Health Ethics Committee of the National Health and Medical Research Council have recently issued a major issues paper, "Protection of Human Genetic Information". It is anticipated that the field of genetic testing will be progressively subject to increasing levels of governmental regulation in most countries.
(b) ImmunAid
ImmunAid Pty Ltd (currently 65% owned by GTG) was formed in March 2001 in Victoria, Australia, with GTG owning 60% and the scientists working on the project owning 40%. We acquired a further 5% interest in the company, following the conversion of loans made to it by GTG into shares. The objective of ImmunAid was to test a novel concept for treating HIV/AIDS, with the initial work being performed at University of Western Australia. The concept was initially tested in a mouse model with mice that had been infected with the murine AIDS (MAIDS) virus. This is an effective model to investigate mechanisms of retrovirus-induced immunodeficiency because the MAIDS virus causes pathology with a number of features similar to human AIDS. The early results in mice were subsequently described by the scientist in charge as being "remarkable".
The method has been protected by the filing of an Australian provisional patent application. In August 2001 this was converted to a full PCT patent application. A preliminary search by the Australian Patent Office has failed to reveal any prior art.
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We then funded a further one-year program of laboratory research at the University of Western Australia in the amount of approximately $250,000 with the work commencing in May 2001. The work built on the earlier research (performed in the same laboratory) and sought a more detailed understanding of the treatment mechanism and also to extend it to cancer. The results achieved in the mouse model were both remarkable and compelling. Based upon the results, in February 2002, two additional provisional patent applications were filed to further refine the invention and extend its use to the treatment of cancer. In October 2003 ImmunAid filed a further provisional patent to cover the novel concept that the immune system cycles as part of its response to viral infection or cancerous cell growth. The original provisional applications are progressively being converted to definitive patent filings which are progressing through the PCT examination process.
The principal research activity for ImmunAid is being conducted at the University of Western Australia, Department of Microbiology. The latest project commenced in January 2005 and will conclude July 2005 at a cost of approximately $40,000. In general terms, ImmunAid's proprietary theory seeks to define the critical time to treat HIV/cancer with antimitotic drugs. If successful, the final commercial outcome is expected to be a diagnostic kit for use by clinicians to time therapeutic treatment for maximum effect.
The project will be reviewed in the second half of calendar 2005 to determine if the current human monitoring program may proceed to human intervention trials. Cost and duration of the project will depend upon the size of the study and availability for recruitment of suitable patients. ImmunAid has already established a network of cooperative cancer and HIV clinicians that would be suitable to participate in such an evaluation. Estimated budget and timetable for the initial trials: $120,000 over 12 months. We note that other parties have expressed interest to participate in the ImmunAid project.
(c) Pathogen Genomics and Genetics Program (PGGP)
In March 2001 we entered into a Collaborative Research Agreement (CRA) with the University of Melbourne (Department of Veterinary Science) to conduct applied research on methods for the diagnosis and control of infectious diseases in animals and humans. Two scientists were employed via the university and work commenced in mid-2001 under the direction of Associate Professor Robin Gasser. Prof. Gasser is the author of more than 120 papers in international peer-reviewed journals, mainly in classical and molecular parasitology.
A substantial portion of the costs associated with this project are paid for by interested third parties, including relevant industry bodies.
A summary of the project's development costs, outcomes and further plans is summarized below:
PGGP 1 (undertaken between April 2001 and March 2003) Cryptosporidium
Total estimated costs paid by the Company: $400,000
Gasser et al developed a new, DNA-based test to identify and sub-type Cryptosporidium species and sub-species. Independent validation of sensitivity and specificity was conducted by Robin Gasser and Rachel Chalmers (PHLS Cryptosporidium Reference Unit, Swansea UK) post our funding. Collectively, the Company and Gasser have transferred the Crypto test from gels to capillary instruments. Accordingly, we are now able to offer the test directly. Marketing of this test is in progress. First revenues from the deployment of the test are expected to be received during the year ending June 30, 2006.
PGGP 2 (now being undertaken between January 2003 and March 2006) Trichostrongylus vitrinus
Total estimated costs to be paid by the Company: $450,000
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The planned outcome is characterisation and isolation of gene/protein targets within the parasite that, when disrupted, are lethal. Historically, vaccines directed towards disrupting parasite proteins have not been effective. The most likely product to arise from this research therefore is a compound, anthelmintic. The market for such compounds is vast, for example, Merck's Ivermectin and analogues. The continued reduction in efficacy of existing anthelmintics, due to parasite resistance, provides a growing market opportunity for the introduction of alternative, improved compounds. Subject to successful completion of the project, first revenues are likely to arise, from either licensing of the resulting technology or the sale of the project, during the 2006 calendar year.
Proposed PGGP 3
To capitalise upon our investment to date, the Company will continue to support the project to achieve identification, characterisation and isolation of additional compound targets.
It is estimated that the project will require a minimum of between $150,000 and $200,000 per annum for 3 years to support new target identification by the University of Melbourne and around $80,000 per target to conduct assay development and high through-put screening (HTS) of a compound library.
(d) C.Y. O' Connor ERADE Village Foundation
In June 2004, we entered into a series of agreements with the C.Y. O'Connor ERADE Village Foundation, incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology (the "Foundation") under which (i) we acquired the entire patent estate of the Foundation in the field of genetics and genomics in return for shares in the Company, (ii) we granted a license to the Foundation to utilize our non-coding patents, and (iii) we agreed to provide research funding to the Foundation for a period of five years to develop novel, high-value genetic tests for commercialization by us.
The research program was formed upon the acquisition by the Company of all the genetics and genomics intellectual property generated by the Foundation, which showed great promise in a number of important areas, including improved tissue typing and transplantation techniques in human bone marrow transplantation, plus an extensive range of new opportunities in the field of human genetics and animal genetics, including cattle, horses, dogs and fish.
GTG will also own any and all intellectual property generated by the Foundation as part of the agreement between the parties.
A summary of the research focus is as follows:
July 2004-June 2009 at approximately $700,000 per annum.
A series of projects that aim to develop new genetic tests for animals and humans using patented, haplotype block technology. These projects include (i) complement regulation in humans, which might explain the genetic basis of recurrent spontaneous abortion, (ii) canine hip dysplasia in dogs, which in turn has led to an improved way of performing DNA typing in dogs, (iii) a new DNA method for identifying the precise species of origin of ancient or recent DNA, (iv) several projects which have started to research the genetic basis of certain animal issues, including polling in cattle and sheep, black wool in merino sheep, meat tenderness and innate immunity, (v) performance in race horses and fecundity in several species, (vi) computational genomics, to develop a new user interface to process vast amounts of data in super-rapid time and the application of the GMT invention in new areas, such as atherosclerosis and Alzheimer's disease, and (vii) new methods for aquaculture brood-stock selection to overcome certain emerging problems in commercial acquaculture.
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Success of this research to date has already resulted in new methods that could save lives in human bone marrow transplantation and have already resulted in a new genetic test which can determine susceptibility to recurrent spontaneous abortion in humans and also in certain livestock species. Other projects, while still at an early stage of development, have already demonstrated exciting new findings which readily justify this innovative program. As additional research projects commence, sources of required biological materials will be identified and sample libraries assembled.
Representatives from the Company and the Foundation have recently met with external parties to identify potential commercial partners to advance these projects and discussions are continuing. Subject to these negotiations, first commercial outputs may be received during the second half of the 2005 calendar year.
Additional products are likely to be developed and offered to the market progressively during the life of the program. Some of these inventions could have significant valueboth in terms of saving lives and in generating new sources of revenue for the Company.
(e) King's College, London
The purpose of this work is to establish the importance of the type of DNA sequence known as VNTRs (Variable Number Tandem Repeat polymorphisms) in human and animal diseases and to secure appropriate IP relating to these repeats. VNTRs show different sequence properties from person to person, and are thought to be involved in predisposing some individuals to a range of diseases, such as cancer and dementia. Therefore, the ability to identify the VNTRs associated with diseases, and thus use them as a diagnostic test, and, possibly a target for disease treatment or prevention, is a logically desirable goal for us. This project (currently being carried out at King's College, London, under the auspices of Dr. Gerome Breen), has developed new ways of identifying novel VNTRs in humans, as well as methods for highlighting which of these may be involved in disease states. Work is ongoing, and is now focused on the identification of polymorphisms of potential diagnostic use, some of which may be or indicate "drugable" targets. This data will be used to progress our intellectual property position on VNTRs for clinical diagnostics and treatment.
The research is in Discovery phase, that is, continuing the development of research-based investigations into broadening the utility of the project across the scope of human and animal diseases. Estimated timing of the project is between 1 and 2 years at a cost of between $60,000 and $120,000 per year. The project is due to conclude in December 2006.
We consider that there are minimal risks of not completing development to a point where an informed decision can be made whether to implement all or parts of the projects as a range of genetic tests.
Material net cash inflows from significant projects are expected to commence post 2006.
Competition
Licensing
Our licensing business principally covers two families of "non-coding" patents. As we are the sole owners of these patents there is, by definition, no direct competition in this activity. However, to some degree, there are alternate technologies in the market place which can be used to perform genetic analysis and genomic mapping and so in this regard we do face indirect competition and a potential risk of technological obsolescence. A more serious risk of obsolescence comes from the inevitable expiry of our patents in 2016, at which time our ability to generate license revenues from these particular patents will cease. It is anticipated that over time, however, licensing of additional patents filed by the Company in other areas of genetics will replace revenues currently generated from the licensing of the non-coding patents.
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Genetic testingpaternity
The size of the Australian DNA paternity testing market can only be estimated. The tests are outside the Medicare regime and hence no central records are kept. Our best estimate is that the total size of the market is about 6,000 tests per year which, if correct, would give the Company approximately a 50 percent total market share. There are presently 9 other organisations that offer these tests in Australia. All are NATA accredited, except the last three, Gene-E, DNA Solutions and DNA Bioscience. A brief outline on each is listed below.
DNAlabs
This is our largest competitor and is a wholly-owned subsidiary of Sydney IVF. It obtains paternity testing referrals exclusively from Mayne Limited which has the largest share of the Australian pathology market.
Sonic Health Care
A division of Sonic, the second largest pathology provider in Australia. The laboratory is Sydney-based and was established by the ex-head of DNAlabs. Once accreditation was granted in July 2003 the referrals which the Company had previously received from Sonic ceased.
Gribbles
The third largest pathology provider in Australia, which entered the paternity testing market in late 2003, and is aggressively pricing their service in order to increase market share.
Victorian Institute of Forensic Medicine
This is the Coroner's laboratory in Victoria. We know from their annual report that for the last 5 years their workload has been relatively static at 150 cases per annum.
John Tonge Centre
This is the Coroner's laboratory in Queensland. They are NATA accredited but do not offer the test commercially.
Medvet Science Pty. Ltd.
This laboratory is based in South Australia and its major shareholder is the State Government. Prior to the entry of Gribbles, it had a monopoly in S.A. and also controls the market in the Northern Territory and Tasmania.
Gene-E
This Victorian based company was established in early 2001. The company does not have a laboratory in Australia and all of its samples are sent to the US for processing. People obtain information from Gene-E by calling a 1300 number and listening to a recorded message. The company specialises in mail order testing. The parties can order a sample collection kit, but only after they listen to and pay for the recorded message.
DNA Solutions
This company was established about 5 years ago and sells its services over the internet. DNA Solutions is the only non accredited provider which has its own laboratory. Their business is generated
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via the web and they have sites in various countries. Based on recent press reports, they perform 800 cases per annum but a substantial number of these are received from offshore.
DNA-Bioscience
An internet based company which plans to commence trading in May 2005.
Sonic and Mayne are the two largest pathology companies in Australia. Throughout Australia, Mayne refers exclusively to DNALabs. In Victoria, NSW and WA, Sonic refer exclusively to their own laboratories. The Australian market for paternity testing is now saturated and, since the entry of two of the three major pathology companies in the later part of 2003, our ability to generate growing revenues from this market has reduced. As of April 2005, our market share appears to have stabilized.
Genetic testingdiagnostics
As the sole licensee in Australia for the test for the predisposition for familial breast cancer, we don't have any commercial competitors in this area. However, the test is provided by the pathology departments of certain public hospitals. They are not true competitors in that the numbers of such tests that can be performed is restricted due to limited Government funding. Further, the hospitals use strict patient selection criteria such that only the top 10% of highest risk patients are tested.
Genetic testingforensics
Forensic DNA testing is defined to include DNA tests, the results of which can be relied upon as evidence in a court of law. To meet the strict standards of court evidence, forensic testing can only be conducted through NATA accredited laboratories that have been approved for forensics work. We are the only non-government owned, NATA accredited forensics laboratory in Australia. At the moment, virtually all forensic testing is conducted through state government owned laboratories. These laboratories have substantial backlogs and for this reason do not generally undertake private DNA forensic tests. As such, we are the only accredited laboratory currently providing forensic testing to the public. To resolve the backlog problem, one state (Queensland) has already suggested that it plans to outsource the testing of 10,000 samples to the private sector. As GTG is the only non-government laboratory in Australia, we expect to be considered favorably when tenders are called for this and other government-referred work.
Genetic testinganimals
We offer a DNA testing service across a number of animal species, particularly with respect to establishing an animal's pedigree and parentage. This test is common across animal species and is not proprietary. Accordingly, any laboratory that can provide a DNA parentage/pedigree test is able to enter this market. Other than ourselves, there are currently five other laboratories offering material levels of DNA service testing for animals.
Queensland University currently offers testing across animal species but particularly horses, where it is currently the preferred laboratory for stud book recording. Queensland University also provides a DNA service testing for dogs and cattle.
Genetic Solutions currently offering a range of genetic tests for the cattle industry. Genetic Solutions is a smaller laboratory which has indicated that it may extend its testing services to sheep.
AgResearch research laboratory in New Zealand used by Ovita, a company specializing in providing sheep herd management systems that includes a genetic breeding scoring system. Ovita has indicated that it would like to expand its services into the cattle industry.
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Commonwealth Scientific and Industrial Research Organization (CSIRO)
A government instrumentality that is primarily a research institute.
Maxxam Analytics Inc.
A company based in Canada that is the sole provider to the Australian Harness Racing Council.
Some of major pathology companies in Australia already have vet pathology businesses and almost all have expertise in human DNA profiling. We expect that they will enter the animal testing market in the medium term.
Genetic testingplants
There are no material levels of commercial DNA service tests conducted in Australia for plants, other than commissioned research conducted by public authorities (such as universities and CSIRO) or by commercial organisations that internally conduct DNA tests as part of the ordinary course of their operations. In recognition of this, we established AgGenomics Pty Ltd, a joint venture between ourselves and the Victorian State Government. The joint venture is controlled by GTG (owning 50.1%). The commercial goal of AgGenomics is to offer the following services to plant breeders and researchers:
AgGenomics has focused on the commercial species of greatest value to the Australian economy and also species where the most substantial funding has been invested, including wheat, barley, canola, cotton, vegetable brassicas (e.g. cabbage, cauliflower, brussel sprouts and broccoli) and wine grapes. To date, AgGenomics has completed a number of commercial projects for some of these sectors.
In Australia we have two major competitors. The first is Southern Cross University, which specialises in tropical fruits and rice but, as they are highly specialized and do not match AgGenomics testing capacity, they are not seen as a major threat. The second, South Australian Research & Development Institute (SARDI), is seen as our major threat as in the next few years there is a reasonable expectation that they will have the capacity to match AgGenomics. In addition to this, their expertise in plants is similar to ours.
Whilst we have few domestic competitors, our major commercial threat comes from offshore laboratories based in the US, England and Korea. These laboratories have a significantly higher throughput than AgGenomics and by and large enjoy greater economies of scale, thereby reducing their production costs. To date, a few large Australian plant sequencing contracts have been lost offshore in cases where the client simply requires the return of the genetic data and does not require our expertise in its interpretation.
Genetic testingsports performance
GTG owns the worldwide marketing rights to the ACTN3 sports gene test. This unique genetic test, which focuses on the ACTN3 gene, is the subject of granted patents and cannot be offered by any other party within the patent territories. As such, GTG has no competitors for this genetic test. As the ACTN3 sports gene test provides an indication of an individual's predisposition to sports/power sport performance as opposed to endurance sport performance, there are a range of other tests, genetic and non genetic that may also indicate a predisposition to particular sporting performance. None of these
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however specifically relate to a genetic test on the ACTN3 gene which, scientifically, has shown a very high correlation to sports performance.
Research
The only area of research currently being carried out by the Company that is highly competitive relates to the RareCellect project. The examination of fetal cells for early detection of fetal diseases and genetic abnormalities is undertaken in approximately one out of every thirty pregnant women. Currently, fetal cells are obtained by invasive procedures such as amniocentesis and chorionic villous biopsy. The current procedures present a significant risk of harm to the fetus, particularly after the first trimester of pregnancy. There is, therefore, both a health and economic requirement to provide an efficient and non-invasive method for pre-natal diagnosis of genetic abnormalities.
We hold worldwide patents concerning a method for the recovery of fetal cells from maternal blood. These fetal cells can then be used to analyze the genetic health of the fetus, without the need to perform the current invasive tests. We are currently conducting pre-clinical research to optimize the fetal cell isolation techniques prior to commercialization. Patent applications have been filed to cover recent inventions in this field.
Local competition in Australia comes from Monash Medical Centre and Gribbles Pathology . Both of these groups are working on the isolation of placental derived cells (trophoblasts) from cervical mucous samples. Gribbles released a press statement about their technology on March 12, 2005 suggesting imminent commercialization. Similar claims have also appeared in the press over the past year from both Monash University and Gribbles. From a scientific standpoint, trophoblasts are much easier to isolate than fetal cells, however, they are inherently genetically unstable and their reliability for providing prenatal genetic diagnosis remains unproven.
The development of non-invasive fetal diagnostics is a highly competitive field. Worldwide groups actively pursuing non-invasive fetal cell diagnostics include:
(this list is not exhaustive and many other academic and commercial research departments are active in this field).
Concerted public health funding schemes have been operating in both the USA and Europe attempting to contribute to this field over recent years (National Institute of Child Health Fetal Cell Study, USA known by the acronym NIFTY, and a similar concerted action in Europe under the name COPERNICUS funded by the EEC). The majority of competitors now appear to be concentrating their
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efforts towards using free fetal DNA in maternal blood as a source of material for pre-natal diagnostics. The bulk of the competition and innovation in the pre-natal genetic screening market appears to be coming at the testing end of the service, rather than the sample collection and preparation stage, which is the focus of RareCellect. This means that samples of fetal cells prepared using RareCellect technology will be suitable for use by the current and emerging tests for fetal genetic health. Importantly, in the fetal cell isolation area, there are no known competitors who have demonstrated that they have a reproducible and commercially viable process for collecting fetal cells from maternal blood.
Environmental Regulations
The Company's operations are subject to environmental regulations under Australian State legislation.
In particular, the Company is subject to the requirements of the Environment Protection Act SA 1993. A license has been obtained under this Act to produce listed waste.
We have a minority interest of 18.62% in a mining joint venture in Western Australia known as the Duketon Belt Joint Venture which has been fully written off in the Company's accounts. This Joint Venture is on a care and maintenance basis and has only been subject to exploration drilling. We have provided performance bonds of US$26,873 (A$38,655) as at June 30, 2004 and A$87,504 as at the date of registration to the Mines Department in respect of restoration and environmental matters.
The directors of the Company are not aware of any potential environmental issues in respect of this mining exploration project.
Item 4.C Organizational Structure
The following table shows the organizational structure of Genetic Technologies and its subsidiaries as at the date of this Registration Statement:
Genetic Technologies Limited is the holding company of the group, and currently, Genetic Technologies Limited is listed on the Australian Stock Exchange, under the code GTG.
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Item 4.D Property, Plant and Equipment
GeneType Pty Limited, a wholly-owned subsidiary of the Company, rents the Melbourne laboratory premises located at 60-66 Hanover Street, Fitzroy from Bankberg Pty Limited, a company affiliated with Dr. Mervyn Jacobson. The lease is for 10 years, with an option for renewal for another 10 years, at an annual cost of A$378,212.
The premises in Sydney are located at Suite 2, Level 12, 75 Elizabeth Street, Sydney. We have entered into a three year lease for such premises. The first year rental is A$64,100, the second year rental is A$66,976 and the third year rental is A$69,655.
Item 5. Operating and Financial Review and Prospects
You should read the following discussion and analysis in conjunction with Item 3 "Selected Financial Data" and our financial statements, the notes to the financial statements and other financial information appearing elsewhere in this Registration Statement. In addition to historical information, the following discussion and other parts of this Registration Statement contain forward-looking statements that reflect our plans, estimates, intentions, expectations and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See the "Risk Factors" section of Item 3 and other forward-looking statements in this Registration Statement for a discussion of some, but not all factors that could cause or contribute to such differences.
Overview
Our Formation
GeneType AG was incorporated in Zug, Switzerland on September 25, 1989 to exploit the commercialization of the hypothesis that the non-coding region of the human HLA gene complex of chromosome 6 is a valuable and highly ordered reservoir of useful genetic information, largely overlooked by the rest of the world.
Genetic Technologies Limited was incorporated on January 5, 1987 as Concord Mining NL in Western Australia. On August 13, 1991 we changed our name to Consolidated Victorian Gold Mines NL to better reflect the operations of the company at the time. On December 2, 1991 we again changed our name to Consolidated Victorian Mines NL. On March 5, 1995 we again changed our name to Duketon Goldfields NL. On October 15 we changed our status from a "No Liability" company to a company limited by shares and the name became Duketon Goldfields Limited. On August 29, 2000 we changed our name to Genetic Technologies Limited, which is the current name of the Company.
On August 29, 2000 Duketon Goldfields Limited received shareholder approval to change its activities from a mining company to a biotechnology and genetics company on the acquisition of all the issued capital of GeneType AG of Switzerland. Following the acquisition of GeneType AG the new combination has been engaged in the researching, developing and commercialization of genetic concepts primarily related to our intron sequence patents and genomic mapping patents. We are also the largest accredited paternity testing laboratory in Australia which GeneType has been operating since 1990. Our Company has recently granted licenses to its patents and expects to derive revenue from further licensing of its patents. Prior to the merger with GeneType AG the mining exploration activities had ceased and were being progressively disposed of by August 2000. The company was basically an investment shell and following the completion of the merger the old shareholders of GeneType AG were in control of the company which formed the basis for treating the acquisition of GeneType AG as a reverse acquisition.
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Development Stage Enterprise
Until 2002 we were a development stage enterprise. We have been developing our technology that has resulted in the granting of seven families of patents in the USA which we have now actively started to commercialize and enforce. Since inception up to December 31, 2004, we have incurred $7,652,354 in operating losses and a further $3,244,126 in other comprehensive gains. Our losses have resulted principally from costs incurred in research and development, investment activity and from general and administrative costs associated with our operations. Other comprehensive losses relate primarily to foreign exchange translation adjustments recorded on conversion of our accounts from Australian to US dollars. See note 2 to our financial statements for a further discussion of foreign exchange currency losses.
The research and development costs incurred prior to August 2000 of approximately $6 million were funded by shareholders of GeneType AG, primarily Dr Mervyn Jacobson. On completion of the merger of Duketon Goldfields Limited and GeneType AG in August 2000, to form Genetic Technologies Limited, existing funds of approximately $5 million within Genetic Technologies Limited were applied towards research and development and general and administrative expenses associated with our operations. The Company also sold its investment in Cytomation Inc of Fort Collins in November 2001 for approximately $5 million. The funds realized from this sale of investments were applied towards research and development and general and administrative expenses associated with our operations. The Company has completed several small placements of shares including one in August 2003, and there have been other amounts raised from the exercise of unlisted options by shareholders. We have primarily depended on these sources of funds to meet our financing needs. However, we now license our non-coding/intron sequence technology and provide a series of genetic tests, both of which generate revenue to fund our expenses.
The extent to which we continue to incur losses will depend on the quantum of license fees received from the licensing of our patents and royalties and the number of genetic tests we conduct. We may not be able to license our technology successfully or ever achieve or sustain profitability.
Where We Derive our Revenues
Our major source of revenues up to June 30, 2002 were grants received from the Australian Government under the START Program licensing, fees from licensing the non-coding patents, DNA paternity testing services income in Australia and interest income from our cash held on deposit and cash equivalents.
Since June 30, 2002, the Company has been successful in securing licenses for its technology from Genetic Solutions Pty Limited, Nanogen Inc., Sequenom Inc., Perlegen Sciences Inc., Myriad Genetics Inc, ARUP, Quest Diagnostics Inc. of USA, King's College London, Vialactia Biosciences (NZ) Limited of New Zealand, University of Technology, Sydney, Australia, TM Biocience Corporation of Canada, Laboratory of Colorado State University of USA, C.Y. O'Connor ERADE Village Foundation of Perth, Western Australia, Ovita Limited of New Zealand, Genzyme Corporation of USA, MetaMorphix Inc. of USA, Bionomics Limited of Adelaide, South Australia and University of Utah, among others. We expect that licensing revenue in the form of up front payments and royalties and subscription agreements may provide the majority of our income in the future. We anticipate licensing other companies in the drug discovery, research, genomics, genetics, IT, service provider, pharmaceutical and biotechnology industries on a world wide basis. Our service testing revenue has increased annually since 2001.
We also received proceeds from the disposal of some of our remaining non-core mining assets which were held for resale in Australia and Canada during the year ended June 30, 2003. This is non-recurring income.
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Fiscal Year
As an Australian company, our normal fiscal year ends at the end of June each year. We produce audited consolidated accounts at the end of June each year and provide audit reviewed six month accounts at the end of December each year.
Recent Accounting Pronouncements
United States Pronouncements
In January 2003, the FASB issued Interpretation No. 46: Consolidation of Variable Interest Entities ("FIN 46"), which addresses the consolidation of business enterprises (variable interest entities) to which the usual condition of consolidation, a controlling financial interest, does not apply. FIN 46 requires an entity to assess its business relationships to determine if they are variable interest entities. As defined in FIN 46, variable interests are contractual, ownership or other interests in an entity that change with changes in the entity's net asset value. Variable interests in an entity may arise from financial instruments, service contracts, guarantees, leases or other arrangements with the variable interest entity. An entity that will absorb a majority of the variable interest entity's expected losses or expected residual returns, as defined in FIN 46, is considered the primary beneficiary of the variable interest entity. The primary beneficiary must include the variable interest entity's assets, liabilities and results of operations in its consolidated financial statements. FIN 46 is immediately effective for all variable interest entities created after January 31, 2003. For variable interest entities created prior to this date, the provisions of FIN 46 were originally required to be applied no later than the Company's first quarter of Fiscal 2004. In December 2003, the FASB issued FASB Staff Position (FSP) FIN 46-6, Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities. The FSP provides a limited deferral (until the end of the Company's second quarter of 2004) of the effective date of FIN 46 for certain interests of a public entity in a variable interest entity or a potential variable interest entity. The Company adopted FIN 46 for the year ended June 30, 2003.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004): Share-Based Payment (SFAS 123-R), which replaces the existing SFAS 123 and supersedes APB 25. SFAS 123-R requires companies to measure and record compensation expense for stock options and other share-based payments based on the instruments' fair value. SFAS 123-R is effective for interim and annual reporting periods beginning after June 15, 2005. The Company will adopt SFAS 123-R on July 1, 2005 by using the modified prospective approach, which requires recognizing an expense for options granted prior to the adoption date equal to the fair value of the unvested amounts over their remaining vesting period. The portion of these options' fair value attributable to vested awards prior to the adoption of SFAS 123-R is never recognized. For unvested stock-based awards granted before January 1, 2003 ("APB 25 awards"), the Company will expense the fair value of the awards as at the grant date over the remaining vesting period. The Company expects that there will be a negative impact from recognizing the stock compensation expense for the unvested APB 25 awards under the new standard. The Company continues to evaluate other aspects of adopting SFAS 123-R.
Critical Accounting Policies
How We Recognize Revenue and Expenses
Revenue Recognition
Revenues are recognized at fair value of the consideration received net of the amounts of goods and services tax (GST).
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Rendering of Services
Revenues from the rendering of services are recognized when the provision of these services is completed and the fee for the services provided is recoverable. Service arrangements are of short duration (in most cases less than 3 months).
Sale of Marketable Securities
The securities consist of equity securities, which are stated at fair value, and unrealized gains or losses on the securities are recorded in the consolidated statement of operations.
Research and Development Grants
The Company receives non-refundable grants that assist the Company to fund specific research and development projects. These grants generally provide for reimbursement of approved costs incurred as defined in the various agreements. Government grants are recorded as revenue when key milestones set within each agreement are achieved and accepted by all parties to the grant, no performance obligation remains and collectibility is reasonably assured. Grant funds received in advance of the Company completing its performance are deferred. When the Company is required to make cash payments or purchases from the issuer of the grant as a requirement for the grant to be issued, the income is recorded net of the consideration payable by the Company.
License fee income
License fee income is recorded on the execution of a binding agreement where the Company has no future obligations, income is fixed and determinable, and collection is reasonably assured. Income under license arrangements with fixed terms and renewal options is deferred and recognized over the license period. Revenues are recognized at the fair value of the consideration received net of the amounts of goods and services tax (GST). Any securities received as a component of the upfront license fees are recorded as revenue, based on the market price of the securities at the date of signing the license agreement in the case of listed securities, and the price at which securities were most recently issued by the licensee in the case of unlisted securities. The Company grants no refunds to its customers.
Royalties
The Company licenses the use of its patented genetic technologies. Royalties from these licenses are recognized when earned and no future performance is required by the Company and collection is reasonably assured.
Patents
External costs incurred in filing, defending and protecting patent applications for which no future benefit is reasonably assured are expensed as patent fees as incurred. As of June 30, 2004 and 2003, none of these external costs have been capitalized. Acquired patents for which a future benefit is reasonably assured are capitalized and amortized over their useful life, being 10 years.
Impairment of Long-Lived Assets
Pursuant to guidance established in SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets the Company evaluates the recoverability of its long-lived assets at least annually, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Management considers the carrying value not to be recoverable if it exceeds the future projected cash flows (undiscounted and without interest charges) from the use of the asset and its
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eventual disposition. Management also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. An impairment loss is recognized when the carrying amount of the asset exceeds its fair value. The resulting impairment loss is classified as a component of loss from operations. No impairment losses have been recognized for any of the periods presented.
Non-Cash Stock Compensation
The Company has elected to account for its stock-based employee compensation plan under the intrinsic value method in accordance with the Accounting Principals Board Opinion No. 25: Accounting for Stock Issued to Employees ("APB 25") and related interpretations. The Company has adopted the disclosure-only provisions of FASB Statement No. 123: Accounting for Stock-Based Compensation ("SFAS 123") as amended by FASB Statement No. 148: Accounting for Stock Based CompensationTransition and Disclosure ("SFAS 148").
In accordance with APB 25, the Company records and amortizes, over the related vesting periods, deferred compensation representing the difference between the exercise price of stock options granted and the fair value of the Company's common shares on the measurement date. Options granted to consultants and other non-employees are accounted for in accordance with Emerging Issues Task Force Consensus No. 96-18: Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or Services , and valued using the Black-Scholes option valuation model. In circumstances in which the Company's shares are issued in exchange for services, compensation is recorded based on the fair value of the shares at the date of measurement, as determined by reference to quoted market price
On August 29, 2000 shareholders at the General Meeting approved the grant of 3,000,000 options to directors. Each option granted to directors is exercisable into one Ordinary Share at any time on or before April 14, 2005 at a fixed price of A$0.45 per share. During the year ended 30 June 2003, none of the options issued to directors were either exercised or lapsed. The equivalent market price per Ordinary Share at June 30, 2003 was A$0.49. On August 12, 2003 Ian Dennis exercised one million options at A$0.45 by paying A$450,000 and simultaneously sold the resulting one million shares.
On November 30, 2001, under our Constitution, shareholders approved the creation of a Staff Share Plan. Under the Plan, the directors may at their discretion, grant options over our Ordinary Shares to directors, executives and certain members of staff of the consolidated entity. The options, issued for nil consideration, are granted in accordance with guidelines established by the directors. The options are issued for a term of up to 6 years. In accordance with the Staff Share Plan, options vest on the basis of 25% per annum and can be exercised at any time after vesting to the date of their expiry. The options are not transferable and will not be quoted on the ASX. There are currently 5 directors, 8 executives and 24 staff eligible for this scheme. Options issued under the Staff Share Plan carry no rights to dividends and no voting rights.
Options issued under the Staff Share Plan are as follows:
2002: The Company issued the following 8,470,000 options under the Staff Share Plan on November 30, 2001 ("the grant date"):
|
Exercise Price
|
|
---|---|---|
1,570,000 options exercisable on or before 30 November 2007 | A$0.49 | |
2,150,000 options exercisable on or before 30 November 2007 | A$0.56 | |
4,750,000 options exercisable on or before 30 November 2007 | A$0.61 | |
|
||
8,470,000 (TOTAL) |
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3,500,000 of the A$0.61 options were issued to directors; the balance of 4,970,000 options were issued to employees and consultants. Each option granted to employees, consultants and directors is convertible into one ordinary share at any time on or before November 30, 2007. The options vest over a four-year period with the first tranche of 25% vesting on November 30, 2002 and a further 25% vest each subsequent anniversary of the grant date.
All options granted to directors under the Staff Share Plan in 2001 have a fixed exercise price of A$0.61 per share. 750,000 of the 8,470,000 options issued under the Staff Share Plan in 2001 lapsed during the period to June 30, 2003.
2003: A further grant of options was made under the Staff Share Plan in the fiscal year ended June 30, 2003, as follows:
Options
|
Exercise Price
|
|
---|---|---|
200,000 options exercisable on or before July 9, 2008 | A$0.56 | |
200,000 options exercisable on or before July 17, 2008 | A$0.49 | |
1,675,000 options exercisable on or before May 20, 2009 | A$0.44 | |
175,000 options exercisable on or before May 20, 2009 | A$0.38 | |
|
||
2,250,000 (TOTAL) |
None of these options were issued to directors, all were granted to employees and consultants. 1,225,000 of the options issued under the Staff Share Plan lapsed during the period to June 30, 2004.
2004: An additional 2,000,000 options were issued on December 15, 2003, having an exercise price of A$0.48 and expiring on May 20, 2009. These were granted to new Directors Russell Granzow (1,000,000) and Prof. Deon Venter (1,000,000). The options granted to Russell Granzow lapsed upon his resignation from the Company. In addition, on December 15, 2003 750,000 options were granted to Dr. Adrian Hodgson at A$0.59, exercisable on or before December 15, 2009.
As a result of such issuances, exercise of 237,500 options under the Staff Share Plan during fiscal year 2004 and the lapse of options on resignations, there were a total of 11,007,500 options outstanding under the Staff Share Plan as at June 30, 2004.
Post June 30, 2004
On July 29, 2004 we issued 1,080,000 new options under the Staff Share Plan. Of these options, 580,000 were issued at A$0.56 and 500,000 were issued at A$0.49, in either case expiring on February 27, 2010. On September 6, 2004 we issued 750,000 new options under the Staff Share Plan to Mr. Tom Howitt. These options were issued at A$0.48 and expire on September 6, 2010. On November 30, 2004 we issued 500,000 new options under the Staff Share Plan to Mr. Robert Edge. These options were issued at A$0.48 and expire on 19 April 2010.
As at the date of this Registration Statement, there were a total of 13,195,000 options issued under the Staff Share Plan.
On August 2, 2001, the Company announced that it had entered into an agreement with GTH Capital of New York to pursue its listing on the National Association of Securities Dealers Automated Quotations ("NASDAQ"). This agreement was assigned by GTH Capital to GMCG, LLC, the successor of GTH Capital, on April 1, 2002. In accordance with the agreement, Genetic Technologies issued 150,000 shares to GTH Capital on October 10, 2001 (see Note 11) and agreed to issue 900,000 options at an exercise price of $0.36 (A$0.70) to GTH Capital within three years. On January 14, 2002, GTH were entitled to receive 540,000 of the options, based on having met certain performance criteria. In accordance with SFAS 123, the Company has recorded an expense of $67,846 in the year ended June 30, 2002. During the year ended June 30, 2004 GMCG, LLC became entitled to a further 60,000
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options which in accordance with SFAS 123 we have recorded as an expense of $10,827 in the year ended June 30, 2004. We have issued to GMCG, LLC the 600,000 options that have met specific performance criteria. We have yet to issue 300,000 options, subject to meeting specific performance criteria in achieving the NASDAQ listing. The options have a contractual life of three years from the date of issue.
On May 22, 2001, Gtech International Resources Limited, a controlled entity issued 130,000 directors options to Dr. Mervyn Jacobson at an exercise price of CAD0.38 ($0.25) which vested immediately. These options expire on May 22, 2006. Stock compensation expense of $8,380 was recorded in the year ended June 30, 2001.
On February 3, 2005, Fred Bart and Ian Dennis exercised a total of 158,500 options in Gtech International Resources Limited at an exercise price of CAD0.20 ($0.16) each.
On September 4, 2003 as part of the placement of 13,333,333 shares at A$0.75, we issued the subscriber with 6,666,667 options exercisable at A$1.00 on or before September 30, 2005.
We use the intrinsic value method specified by APB 25 to recognize the cost of options granted to employees and directors. Stock based compensation cost recognized in income for employees was $976 for the period ended June 30, 2004 (2003: $692). Stock based compensation cost recognized as income for consultants in accordance with EITF No. 96-18 was $51,101 in the period ended June 30, 2004 (2003: $34,562).
Statement of Financial Accounting Standards ("SFAS") 123 states that stock based compensation must be recorded at fair value of options granted. We have adopted the disclosure only alternative of SFAS 123. This compensation, determined using the Black Scholes option pricing model, is expensed over the vesting periods of each option grant for purposes of pro forma disclosures. The pro forma compensation expense was calculated to be $532,408 for the year ended June 30, 2004 (2003: $366,658).
The following is additional information relating to all options outstanding as of June 30, 2004:
|
Options Outstanding
|
Options Exercisable
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exercise Price
Range |
Number of
Shares |
Weighted
Average Exercise Price |
Remaining
Weighted Average Contractual Life (Years) |
Number of
Shares |
Weighted
Average Exercise Price |
||||||||
$0.10-$0.20 | * | 65,835,614 | $ | 0.11 | 0.79 | 65,835,614 | $ | 0.11 | |||||
$0.21-$0.30 | 6,807,500 | $ | 0.27 | 3.05 | 3,910,000 | $ | 0.27 | ||||||
$0.31-$0.40 | 5,990,000 | $ | 0.33 | 3.70 | 2,715,000 | $ | 0.33 | ||||||
$0.41-$0.50 | 810,000 | $ | 0.44 | 5.50 | 60,000 | $ | 0.49 | ||||||
$0.61-$0.90 | 6,666,667 | $ | 0.64 | 1.25 | 6,666,667 | $ | 0.64 | ||||||
|
|
|
|
|
|||||||||
86,109,781 | $ | 0.19 | 1.25 | 79,187,281 | $ | 0.17 | |||||||
|
|
|
|
|
During 2004, 2,000,000 options (2003: 175,000) were issued at an exercise price equal to the market price of the stock on the grant date. The weighted average exercise price and weighted average fair value of these options were $0.36 (2003: $0.25) and $0.28 (2003: $0.16), respectively.
In addition, 7,476,667 options (2003: 2,075,000) were granted during 2004 at exercise prices exceeding the market prices of the stock on the respective grant dates. The weighted average exercise price and weighted average fair value of these options were $0.62 (2003: $0.29) and $0.19 (2003: $0.15), respectively.
53
Pro forma information regarding net income is required by SFAS 123, as amended by SFAS 148, and has been determined as if the Company had accounted for its employee stock options under that fair value method of SFAS 123 as of its effective date. The fair value for the options issued to employees was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions for June 30:
|
2004
|
2003
|
2002
|
||||
---|---|---|---|---|---|---|---|
Risk Free Interest Rate | 5.80 | % | 5.09 | % | 5.53 | % | |
Expected Dividend Yield |
|
|
|
|
|
|
|
Expected volatility |
|
0.89 |
|
0.63 |
|
0.57 |
|
Expected Lives (years) |
|
6 |
|
3.80 |
|
3.8 |
|
Had the Company elected to adopt the fair value recognition provisions of SFAS 123, pro forma net income would be as follows:
|
Year Ended
June 30, 2004 |
Year Ended
June 30, 2003 |
Year Ended
June 30, 2002 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Net loss as reported | $ | (4,816,726 | ) | $ | (960,395 | ) | $ | (3,222,179 | ) | |
Stock based compensation, net of taxes, as calculated under APB 25 included in net loss as reported |
|
|
976 |
|
|
692 |
|
|
84,158 |
|
Stock based compensation, net of taxes, as calculated under SFAS 123 |
|
|
(532,408 |
) |
|
(366,658 |
) |
|
(275,138 |
) |
|
|
|
||||||||
Pro forma net loss |
|
$ |
(5,348,158 |
) |
$ |
(1,326,361 |
) |
$ |
(3,413,109 |
) |
|
|
|
||||||||
Basic and diluted net loss per ordinary share as reported |
|
$ |
(0.02 |
) |
$ |
(0.00 |
) |
$ |
(0.01 |
) |
|
|
|
||||||||
Pro forma basic and diluted net loss per ordinary share |
|
$ |
(0.02 |
) |
$ |
(0.01 |
) |
$ |
(0.01 |
) |
|
|
|
Refer to Note 13 of the Financial Statements for further details regarding the Company's stock option plans.
54
Comparison of the Six Months Ended December 31, 2004 to the Six Months Ended December 31, 2003
Revenue
License revenues
We earned licensing revenue of $4,515,833 for the six months ended December 31, 2004 compared to $241,567 for the corresponding period in 2003, an increase of $4,274,266 or 1,769%. In 2004 we signed licenses with Genzyme Corporation, MetaMorphix Inc, Bionomics Limited and the Australian Genome Research Facility. Licensing revenue for 2004 increased from the previous year mainly as a result of the largest license agreement to date with Genzyme Corporation of $3,668,500. The number of new large licenses was restricted due to a pending legal case against Applera Inc. which has not yet been concluded. Whilst the Applera action is pending some companies which may need a license have been reluctant to commit to a license until the case is settled. In 2003 we signed commercial licenses with 3 companies, namely TM Biosciences of Canada, Quest Diagnostics of the USA and ViaLactia Biosciences of New Zealand which made up the majority of the licensing revenue.
Service testing revenues
Our service testing revenues of $1,219,555 were from fees received from our genetic testing and plant testing services in Melbourne, Australia. The fees received represented an overall increase of $159,348 or 15% as compared to $1,060,207 for the corresponding period in 2003. The net movement comprised a decrease in the volume of genetic testing as a result of increased competition in the paternity testing area, and an increase in plant testing. Genetic testing revenues decreased by $157,474 to $490,242 or 24% from $647,716 in the previous six months. Plant testing revenues increased by $316,822 to $729,313 or 77% compared to $412,491 in the previous corresponding period.
Grant income
We earned grant income of $108,875 for the six months ended December 31, 2004 compared to $96,844 for the corresponding period in 2003, an increase of $12,031 or approximately 12%. In 2004 we received a grant from Horticulture Australia Limited and an Export Marketing Development Grant from the Australian Government. In 2003 the grant was received from the Australian Meat and Livestock Corporation in relation to the Pathogen research project.
Other income
We received other income of $nil for the six months ended December 31, 2004 compared to $967 for the corresponding period in 2003, a decrease of $967.
Operating expenses
Total operating expenses increased by $2,172,724 or approximately 60% to $5,768,868 in 2004 compared to $3,596,144 in 2003. A significant portion of our operating expenses are denominated in Australian dollars and as a result of the Australian dollar strengthening by 7% during the period, the US dollar equivalent of these Australian expenses would have increased by 7%.
Research and development expenses
Research and development increased by $229,165 or approximately 59% to $617,754 in 2004 from $388,589 in 2003. The research and development expenditure predominantly comprises payments made by the Company to external facilities which conduct research on its behalf. During the period, payments were made in relation to the Parasitology project, RareCellect project and the AIDS project in Melbourne, Australia, a research project with King's College London and C.Y. O'Connor ERADE Village Foundation in Western Australia. A significant proportion of the increase in research and
55
development expenditure was due to the execution of the agreement with the C.Y. O'Connor Foundation in June 2004, pursuant to which the Company contributes A$900,000 per annum to fund certain research programs.
Patent and license fees
The heading Patent and license fees includes associated license and legal fees. License fees increased by $706,424 or 203% to $1,053,566 for 2004 as compared to $347,142 in 2003. License fees have increased due primarily to the securing of licenses to new genetic tests, increased legal effort in negotiating and securing licenses around the world and costs associated with the Applera litigation in the USA. These costs may increase in the future as we acquire further genetic tests and pursue more licenses.
Service testing expenses
Service testing expenses has increased by $782,342 or 69% to $1,916,201 for 2004 as compared to $1,133,859 in 2003. The increase partly relates to the charging of $325,000 in amortisation of patents (not charged in the corresponding previous period), an overall increase in service testing activities, as well as expenses incurred in commercializing additional genetic tests.
Sales and marketing
Sales and marketing expense has increased by $71,955 or 25% to $365,221 for 2004 as compared to $293,266 in 2003. The increased costs reflect the 2 additional internal staff employed to focus on sales and marketing of the non-coding licenses including identifying potential infringers of the patents.
General and administrative expenses
General and administration expense has increased by $382,838 or 27% to $1,816,126 for 2004 as compared to $1,433,288 in 2003, due partly to an increase in the number of employees and the increased use of consultants in respect of its Level II ADR program on the NASDAQ.
Other income (expense)
Interest income
Interest income has increased by $31,425 or 22% to $174,933 for 2004 as compared to $143,508 in 2003. This interest income represents interest income on surplus funds. The amount of surplus funds increased considerably as a result of the placement in August 2003 and the increased interest rates in 2004.
Net profit (loss) on sale of securities
Net profit on securities reduced by $224,749 to $0 for 2004 as compared to $224,749 in 2003. The profit on sale of securities in 2003 was as a result of the sale of listed securities arising from license deals negotiated by the Company.
Net foreign exchange losses
Foreign exchange losses decreased by $107,895 or 40% to $160,353 in 2004 as compared to $268,248 in 2003. The foreign exchange losses were primarily due to the increase in the value of the Australian dollar as compared to the US dollar which had a negative impact on our cash deposits in US dollars. During 2004 the Company reduced its holding of US Dollars. In addition, the movement in the value of AUD to USD was significantly less than 2003.
56
Taxes
Taxes increased by $133,040 or 1,936% to $139,912 in 2004 as compared to $6,872 in 2003. The increase relates to growing US licensing revenue which is subject to US withholding tax.
Comparison of the Year Ended June 30, 2004 to the Year Ended June 30, 2003
Revenue
License revenues
We earned licensing revenue of $507,910 for the year ended June 30, 2004 compared to $2,615,544 for the corresponding period in 2003, a decrease of $2,107,634 or 80%. In 2004 we signed licenses with Quest Diagnostics, University of Sydney, King's College London, ViaLactia Biosciences of New Zealand, University of Technology Sydney, TM Biosciences of Canada, LabCorp of USA, Colorado State University and Ovita Limited. The majority of license agreements are denominated in US dollars and were not affected by the increase in the value of the Australian dollar. Licensing revenue for 2004 decreased from the previous year due to a pending legal case against Applera Inc. which has not yet been concluded. Whilst the Applera action is pending some companies which may need a license have been reluctant to commit to a license until the case is settled. In 2003 we signed commercial licenses with 3 companies, namely Perlegen Sciences, Myriad Genetics and Pyrosequencing which made up the majority of the licensing revenue.
Service testing revenues
Our service testing revenues of $1,969,963 were from fees received from our genetic testing and plant testing services in Melbourne, Australia, compared to $1,727,617 for the previous 12 months. The increase of $242,346 or 14% was due to an increase in the volume of genetic testing, additional genetic tests and plant testing via AgGenomics Pty Limited. Genetic testing revenues increased by $264,984 to $1,179,927 or 29% from $914,942 in the previous year. Plant testing revenues decreased by $22,638 to $790,037 or (3)% compared to $812,674 in the previous 12 months. Service testing revenues in 2004 were reduced by the improvement in the value or the Australian dollar.
Grant income
We earned grant income of $154,702 for the year ended June 30, 2004 compared to $50,244 for the corresponding period in 2003, an increase of $104,458 or approximately 208%. In 2004 we received a grant from Horticulture Australia Limited and an Export Marketing Development Grant from the Australian Government. In 2003 the grant was received from the Australian Meat and Livestock Corporation in relation to the Pathogen research project.
Other income
We received other income of $12,427 for the year ended June 30, 2004 compared to $10,722 for the corresponding period in 2003, an increase of $1,705 or 16%.
Operating expenses
Total operating expenses increased by $3,392,221 or approximately 74% to $7,997,458 in 2004 compared to $4,605,237 in 2003. A significant portion of our operating expenses are denominated in Australian dollars and as a result of the Australian dollar strengthening by 4% during the year, the US dollar equivalent of these Australian expenses would have increased by 4%.
57
Research and development expenses
Research and development increased by $1,147,569 or approximately 224% to $1,659,914 in 2004 from $512,345 in 2003. The research and development expenditure continued in relation to the Parasitology project, RareCellect project and the AIDS project in Melbourne, Australia. The Company commenced a new research project with King's College London and C.Y. O'Connor ERADE Village Foundation in Western Australia.
Patent and license fees
The heading Patent and license fees includes associated license and legal fees. License fees increased by $335,404 or 78% to $763,739 for 2004 as compared to $428,335 in 2003. License fees have increased due primarily to the increased legal effort in negotiating and securing licenses around the world. These costs may increase in the future as we pursue more claims.
Service testing expenses
Service testing expenses has increased by $408,817 or 22% to $2,229,307 for 2004 as compared to $1,820,490 in 2003. The increase in expenses partly relates to the increase in service testing revenues as well as additional monies expended in finalizing additional genetic tests.
Sales and marketing
Sales and marketing expense has increased by $299,408 or 45% to $960,619 for 2004 as compared to $661,211 in 2003. The increased costs reflect the 10 additional internal staff employed to focus on sales and marketing of the non coding licenses including identifying potential infringers of the patents.
General and administrative expenses
General and administration expense has increased by $1,201,023 or 102% to $2,383,879 for 2004 as compared to $1,182,856 in 2003. General and administration expenses increased due to the increased use of consultants as the company was receiving advice on such matters as the Level II ADR program on the NASDAQ.
Other income (expense)
Interest income
Interest income has increased by $284,218 or 416% to $352,605 for 2003 as compared to $68,387 in 2003. This interest income represents interest income on surplus funds. The amount of surplus funds increased considerably as a result of the placement in August 2003.
Interest expense
Interest expense decreased by $5,979 to $0 for 2004 as compared to $5,979 in 2003.
Net profit (loss) on sale of securities
Net profit on securities increased by $506,415 to $460,224 for 2004 as compared to a loss of $100,191 in 2003. The profit on sale of securities in 2004 was as a result of the sale of listed securities arising from license deals negotiated by the Company. The losses in 2003 of $100,191 were as a result of sales of trading securities not associated with license deals and represent the final disposal of the remaining trading securities.
58
Net foreign exchange losses
Foreign exchange losses decreased by $386,332 or 69% to $171,960 in 2004 as compared to $558,292 in 2003. The foreign exchange losses were primarily due to the increase in the value of the Australian dollar as compared to the US dollar which had a negative impact on our cash deposits in US dollars. During 2004 the Company reduced its holding of US Dollars. In addition, the movement in the value of AUD to USD was significantly less than 2003.
Taxes
Taxes decreased by $139,833 or 84% to $27,579 in 2004 as compared to $167,412 in 2003. The decrease relates mainly due to the reduced US licensing revenue which is subject to US withholding tax.
Comparison of the Year Ended June 30, 2003 to the Year Ended June 30, 2002
Revenue
License revenues
We earned licensing revenue of $2,615,544 for the year ended June 30, 2003 compared to $778,131 for the corresponding period in 2002, an increase of $1,837,413 or 236%. In 2003 we signed licenses with Perlegen Sciences, Myriad Genetics Inc, Pyrosequencing AB of Sweden, Association of Regional and University Pathologists and University of Utah. All the license agreements are denominated in US dollars and were not affected by the increase in the value of the Australian dollar.
Service testing revenues
Our service testing revenues of $1,727,617 were from fees received from our genetic testing and plant testing services in Melbourne, Australia, compared to $838,969 for the previous 12 months. The increase of $888,648 or 105% was due to an increase in the volume of genetic testing and the commencement of plant testing via AgGenomics Pty Limited. Genetic testing revenues increased by $190,026 to $914,942 or 26% from $724,916 in the previous year. Plant testing revenues increased by $698,622 to $812,674 or 613% compared to $114,053 in the previous 12 months. Service testing revenues in 2003 were reduced by the improvement in the value of the Australian dollar.
Grant income
We earned grant income of $50,244 for the year ended June 30, 2003 compared to $91,610 for the corresponding period in 2002, a decrease of $41,366 or approximately 45%. In 2003 the grant was received from the Australian Meat and Livestock Corporation in relation to the Pathogen research project. In 2002 we received the grant income from the Australian Government under the START program for the Haplotyping project which ran over a three-year period. The Haplotyping project was completed during the year ended June 30, 2001. The payment received during the year ended June 30, 2002 was the final payment under the grant.
Other income
We received other income of $10,722 for the year ended June 30, 2003 compare to $17,343 for the corresponding period in 2002, a decrease of $6,621 or 38%.
Operating expenses
Total operating expenses increased by $1,367,199 or approximately 42% to $4,605,237 in 2003 compared to $3,238,038 in 2002. A significant portion of our operating expenses are denominated in
59
Australian dollars and as a result of the Australian dollar strengthening by 12% during the year ended June 30, 2003, the US dollar equivalent of these Australian expenses would have increased by 12%.
Research and development expenses
Research and development increased by $15,138 or approximately 3% to $512,345 in 2003 from $497,207 in 2002. The research and development expenditure continued in relation to the Parasitology project, RareCellect project and the AIDS project in Melbourne, Australia.
Patent and license fees
The heading Patent and license fees includes associated license and legal fees. License fees increased by $160,927 or 60% to $428,335 for 2003 as compared to $267,408 in 2002. License fees have increased due primarily to the increased legal effort in negotiating and securing licenses.
Service testing expenses
Service testing expenses has increased by $885,758 or 95% to $1,820,490 for 2003 as compared to $934,732 in 2002. The increase in expenses is in line with the increase in service testing revenues.
Sales and marketing
Sales and marketing expense has increased by $263,439 or 66% to $661,211 for 2003 as compared to $397,772 in 2002. The increased costs reflect the additional 6 internal staff employed to focus on sales and marketing of the non-coding licenses including identifying potential infringers of the patents.
General and administrative expenses
General and administration expense has increased by $41,937 or 4% to $1,182,856 for 2003 as compared to $1,140,919 in 2002. General and administration expenses increased due to the increased use of consultants as the company was receiving advice on such matters as the Level I and II ADR programs on the NASDAQ.
Other income (expense)
Interest income
Interest income has increased by $10,480 or 18% to $68,387 for 2003 as compared to $57,907 in 2002. This interest income represents interest income on surplus funds.
Interest expense
Interest expense has increased by $489 or 9% to $5,979 for 2003 as compared to $5,490 in 2002.
Net Profit on sale of mining operations
All of the mining assets were sold in 2002 resulting in a gain of $43,063. There was no revenue or gain from mining activities in 2003.
Net loss on securities
Net loss on securities has decreased by $1,053,118 or 91% to $100,191 for 2003 as compared to $1,153,309 in 2002. In 2002 we realized a profit of $272,571 on the sale of our entire shareholding in Cytomation Inc of Colorado, and unrealized loss of $1,050,269 associated with our investment in Anaconda Nickel Limited and losses of $375,611 on the trading of securities. The losses in 2003 of $100,191 were as a result of sales of trading securities.
60
Net foreign exchange losses
Foreign exchange losses decreased by $21,313 or 4% to $558,292 in 2003 as compared to $579,605 in 2002. The foreign exchange losses were primarily due to the increase in the value of the Australian dollar as compared to the US dollar which had a negative impact on our cash deposits in US dollars.
Taxes
Taxes increased by $84,412 or 102% to $167,412 in 2003 as compared to $83,000 in 2002. The increase relates to withholding tax on U.S. licensing revenue.
Item 5.B Liquidity and Capital Resources
Summary
Our overall cash position depends on numerous factors, including the success of licensing our non-coding patents, the numbers of genetic tests processed by our laboratory, completion of our product research and development activities, ability to commercialize our products, market acceptance of our products and how we choose to commercially exploit our technology. We expect to devote additional capital resources to the expansion of our licensing program on a worldwide basis, continue our research and development programs with a view to commercializing our technology in our target markets, hire and train additional staff, expand our research and development activities and acquire or make investments in businesses that are complementary to our business. Each of these activities will involve the outflow of cash reserves.
During the years ended June 30, 2002, 2003, 2004 and the six months ended December 31, 2004, we have incurred net losses of $3,222,179, $960,395, $4,816,726 and $413,190, respectively. We anticipate incurring substantial additional costs over at least the next several years as we expand our research and development activities and conduct further trials of our technology. The extent to which we will incur losses in future years depends largely on the success of the licensing program of our non-coding technologies and the expansion of our genetic testing business.
Since inception, our operations have been financed primarily from capital contributions by our stockholders, licensing revenues, service testing revenue, interest earned on those proceeds and interest income from cash and cash equivalents. Importantly, for the first time, we generated positive cash flow from operating activities for six months ended December 31, 2004.
During the period from January 1, 2005 to the date of this Registration Statement, a total of 63,362,892 options over common shares in the Company were exercised. The exercise of these options generated additional funds for the Company, such that its available cash and cash equivalents had risen from $8.5 million as of December 31, 2004 to approximately $14 million as of June 30, 2005. As a result of the exercise of these options, the number of common shares on issue as at the date of this Registration Statement had also risen to 362,369,899.
We believe that our cash and cash equivalents of approximately $14 million as of June 30, 2005, will provide us with sufficient capital to fund a base level of operations for the next 3 years from the date of this Registration Statement. During this period we expect to be able to continue to adequately fund our research and development activities, licensing program, product development and commercialization efforts and other operations. Further, as these activities continue to expand, we anticipate that the revenues generated should assist the Company achieve a cash break even result from operations on a more regular basis, thereby extending the base level of operations.
Our net cash used in operating activities was $1,728,869, $277,572 and $3,161,657 for the years ended June 30, 2002, 2003 and 2004, respectively. Cash provided from operating activities for the six months ended December 31, 2004 was $209,959. Cash used in operating activities for each period
61
consisted primarily of losses incurred in operations reduced by depreciation and amortisation expenses, exchange movements and unrealized profits and losses relating to investments. In approximate order of magnitude, cash outflows typically consist of staff-related costs, service testing expenses, general and administrative expenses, research and development costs and legal/patent fees.
Our net cash provided by/(used in) investing activities was $4,874,414, $(173,568) and $(640,737) for the years ended June 30, 2002, 2003 and 2004, respectively and $(539,128) for the six months ended December 31, 2004. Typically, cash used in investing activities related to the acquisition of laboratory equipment. It is envisaged that the establishment of the equipment finance facility described below should reduce cash outflows for investing activities in future years.
Our net cash provided by financing activities was $266,540, $10,939 and $6,994,357 for the years ended June 30, 2002, 2003 and 2004, respectively and $351,628 for the six months ended December 31, 2004. The vast majority of these funds were received from the issue of Ordinary Shares in the Company, either as part of a direct placement of Shares (as during the year ended June 30, 2004) or as the result of the exercise of options.
Capital expenditures. Apart from the purchase of laboratory equipment of $640,937 in 2004, we had no material capital expenditures for the years ended June 30, 2002, 2003 and 2004. During the six months ended December 31, 2004, we acquired further laboratory equipment costing approximately $540,000, the majority of which was subsequently sold and hired-back under the equipment hire purchase facility detailed below.
On January 14, 2005, the Company executed a Master Asset Finance Agreement with National Australia Bank Limited in respect of a $1,951,250 (AUD2.5 million) asset hire purchase facility (the "Facility"). As at the date of this Registration Statement, the Company had financed the acquisition of laboratory equipment under the Facility with a total value of $1,179,409 (AUD1,511,094). It is expected that future purchases of laboratory equipment will be financed under this Facility, to the extent that sufficient credit is available. The use of this Facility enables the Company to better match the cost of the equipment with the future revenues to be generated from it in a cost-effective manner and minimizes the outflow of valuable cash.
As at June 30, 2004, the Company had entered into a conditional purchase agreement to purchase an item of testing equipment for $316,316 (AUD455,000) exclusive of GST subject to installation and satisfactory performance criteria. On the basis that the equipment met the criteria, the purchase price would have been paid prior to September 28, 2004. However, we have returned the equipment as it did not meet the technical criteria and, other than the financing Facility mentioned above, we no longer have any commitments as at the date of this Registration Statement.
The long-term loan of $546,350 (AUD700,000) as of December 31, 2004 represents an unsecured, non-interest bearing loan from the Australian Commonwealth Government received under the Research & Development Start Program. The loan represents a portion of a grant received by the Company, which has been deferred in accordance with the grant agreement. The loan will be repayable on or before January 15, 2009, if the Company commercializes a product as a result of the research covered under the grant. If no product is commercialized, the Company will recognize grant revenue after January 15, 2009, when the loan is no longer repayable. The costs associated with the research have been expensed.
Future Cash Needs
We expect that operating expenses and, to a lesser extent, capital expenditures will be a material use of our cash resources. As of June 30, 2005 we had cash and cash equivalents totaling approximately $14 million. We believe that this working capital is sufficient for our anticipated needs for the next 3 years from the date of this Registration Statement. We do not have any lines of credit apart from the
62
equipment finance Facility and a nominal credit card facility of approximately $94,000 (AUD120,000). We anticipate generating additional cash in future years from our licensing activities and the expansion of our service testing business.
Operating Leases
We are obligated under various operating leases for periods expiring through 2013. Payments under non-cancelable operating lease arrangements for office premises and facilities expire on various dates through 2013, resulting in the following lease commitments over that period:
The following is a schedule of future minimum lease payments for operating leases that had initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2004:
Period ending June 30, | |||
2005 |
|
|
122,730 |
2006 |
|
|
345,459 |
2007 |
|
|
320,327 |
2008 |
|
|
295,194 |
2009 |
|
|
295,193 |
2010 and beyond |
|
|
1,033,180 |
|
|||
Total minimum lease payments |
|
$ |
2,412,083 |
|
The following is a schedule of future minimum hire purchase payments for equipment finance that had initial or remaining non-cancelable lease terms in excess of one year as of February 28, 2005:
Period ending June 30, | |||
2005 |
|
|
134,483 |
2006 |
|
|
403,450 |
2007 |
|
|
403,450 |
2008 |
|
|
386,973 |
|
|||
Total minimum hire purchase payments |
|
$ |
1,328,356 |
|
Rent expense totaled $264,764, $239,145 and $315,662 for the years ended June 30, 2002, 2003 and 2004, respectively and $195,765 for the six months ended December 31, 2004.
63
Item 5.C Research and Development, Patents and Licenses, etc.
Our principal business is biotechnology, with the main emphasis on genomics and genetics, the licensing of the non-coding patents, reduction to practice of our fetal cell patents and expansion of the related service testing business.
The following table details historic expenditure by project. All projects are described at Item 4.B above.
|
2004
US$(a) |
2003
US$(b) |
2002
US$(c) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
RareCellect | $ | 685,419 | $ | 165,321 | $ | 117,163 | |||||
ImmunAid | $ | 75,456 | $ | 268,219 | $ | 133,501 | |||||
PGGP (pathogen program) | $ | 254,836 | $ | 78,805 | $ | 200,806 | |||||
King's College, London research | $ | 74,330 | $ | 0 | $ | 0 | |||||
C.Y. O'Connor research | $ | 321,225 | $ | 0 | $ | 0 | |||||
Other general R & D | $ | 248,648 | $ | 0 | $ | 41,737 | |||||
|
|
|
|||||||||
Total R & D Expense | $ | 1,659,916 | $ | 512,345 | $ | 493,207 | |||||
Other |
|
$ |
6,337,544 |
|
$ |
4,092,892 |
|
$ |
2,744,831 |
|
|
|
|
|
|||||||||
Total Expenditure | 7,997,458 | $ | 4,605,237 | $ | 3,238,038 | ||||||
|
|
|
|||||||||
R & D as a % of Total Expenditure | 21 | % | 11 | % | 15 | % | |||||
Notes |
|
|
|
|
|
|
|
|
|
|
|
(a) Converted at A$1.00=$0.7132
(b) Converted at A$1.00=$0.5847 (c) Converted at A$1.00=$0.5236 |
For a discussion of significant R&D expenditures, see Item 4.B, "Business Overview."
Due to the nature of the Company's business it is important that any intellectual property in the form of new discoveries be protected. The table described in Item 4.B hereinabove provides the status of all patent applications the Company has filed.
The Direction of Genetic Research
Following upon the original non-coding inventions made by GeneType AG and the publication and dissemination of this work in the early 1990's, research groups world-wide increasingly have sought to investigate and if possible, establish non-coding associations in a great number of diseases which were hitherto unexplained.
In 2002, Nature Publishing Group produced a summary of some 284 separate research projects which sought to establish non-coding associations in relation to either the cause or the outcome of many human diseases. Within that group, more than 100 human conditions have since been shown to be linked to non-coding genetic variations. In 1999, an international collaboration, known as the "SNP Consortium" was established to identify all single nucleotide polymorphisms (SNPs) of relevance to a complete understanding of human genetics. More recently, the international "HapMap" project was launched to identify relevant human haplotypes.
All these projects depend significantly on the basic inventions owned by our company. In essence, the world has become our research laboratory. It remains our corporate stance to encourage all such research, which we expect will, in time, lead to a great number of new commercial licensing opportunities for GTG. Such opportunities are also not limited to human applications, given the recent
64
expansion of interest in the genetics of animals, plants and lower forms of life, including parasites and many organisms that contribute to either disease or to recuperative environmental systems of our planet. Such research is likely to expand significantly in the coming years.
Our ability to secure licensing agreements from these areas of research as they develop into commercial operations will determine the level of revenue in the future.
The Direction of Genetic Testing
Further to the completed first phase of the Human Genome Project in mid-2001, and then the Mouse Genome Project in December 2002, there is now a greatly improved general understanding of gene structure, gene function and gene expression. This is likely to lead to new genetic tests and new genetic treatmentsperhaps even tailored to an individual's unique genetic code. DNA testing for forensic purposes has already been shown to be extremely reliable in matters of criminal justice, disputed paternity and family relationships. Genetic testing will also be increasingly relied upon to assist with disease diagnosis, and also in the improved assessment disease risk factors. In addition, genetic testing will be applied more and more to help identify specific animal and plant traits that are either desirable or undesirable, in order to help breeders better select their future seed stock. We believe the demand for an expansion of genetic testing will grow substantially in the coming years.
Item 5E. Off-balance sheet arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Item 5F. Information about Contractual Obligations
The table below shows the contractual obligations and commercial commitments as at June 30, 2004:
|
0-1 year
|
1-3 years
|
3-5 years
|
>5 years
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Purchase obligations | $ | 1,037,788 | $ | 1,251,360 | $ | 938,520 | | |||||
Operating lease commitments |
|
$ |
307,704 |
|
$ |
570,637 |
|
$ |
548,250 |
|
$ |
920,265 |
Other Long-Term Liabilities Reflected on the Company's Balance Sheet |
|
|
|
|
|
|
|
|
|
|
$ |
486,640 |
The Company's purchase obligations are in respect of its subcontracted research and development activities and equipment purchases.
Item 6. Directors, Senior Management And Employees
Item 6.A Directors and Senior Management
The directors of the Company are:
Dr. Mervyn Jacobson , Executive Chairman, 63, M.B.B.S., is a legally qualified Medical Practitioner and a co-founder of GeneType AG. He has 30 years' experience in working with new medical technology and in bringing new medical/biomedical goods and services to the market. Dr Jacobson serves as adviser to research groups in Switzerland, UK, China and USA. In February 2000, he was appointed by the Governor of Colorado to The Governor's Advisory Council in Biotechnology. Dr. Jacobson is also Chairman of the Board of Directors of XY Inc, a biotechnology company based in Colorado, USA, and is a founding Director of the Colorado Biotechnology Association. In June 2004, Dr. Jacobson was invited to join the Scientific Advisory Board of the China National Animal Breeding
65
Stock Export/ Import Corporation Limited (CABS). He is a member of the Australian Institute of Company Directors. Appointed to the Board on May 15, 2000, Dr. Jacobson was appointed as Executive Chairman on August 31, 2000 and serves on the Company's Nomination and Remuneration Committee.
Fred Bart , 51, has been involved in the textile industry for the last 25 years as well as being a significant investor in the resource and property sectors in Australia and overseas. He brings to the company extensive commercial experience from his involvement in the manufacturing and textile industries. He is also Chairman of Electro Optic Systems Holdings Limited and Global Properties Limited and is a member of the Australian Institute of Company Directors. He was appointed to the Board on October 26, 1996.
Henry Bosch AO, 74, Non-Executive Director, was appointed to the Board on June 24, 2005 and serves on the Company's Audit Committee. He is a former Chairman of the National Companies and Securities Commission, the predecessor of the Australian Securities and Investments Commission (the Australian equivalent of the SEC), Australia's principal corporate regulator. He has also served as Chairman of the Working Group on Corporate Practices and Conduct and Chairman of the committee which produced the Australian Standard on corporate governance. He has been chairman, or a director, of over thirty companies and other organisations operating in both the government and private sectors. He has served on a number of audit committees and is an Honorary Fellow of the Institute of Internal Auditors. His extensive business career has spanned the aluminium, steel, man-made fibres and plastics industries in Canada, UK and Australia and included the positions of Marketing Director of John Lysaght (Australia) Ltd. and Managing Director of Nylex Corporation. He was made an Officer of the Order of Australia in January 1991.
John S. Dawkins AO, 57, Non-Executive Director, was appointed to the Board on November 24, 2004. He is Chairman of the Company's Nomination and Remuneration Committee and serves on its Audit Committee. Mr. Dawkins graduated in Agriculture from Roseworthy College and Economics from the University of Western Australia and for 18 years served in the Australian House of Representatives for the Australian Labor Party (ALP). From 1983 to 1993, he served in the Governments of R J Hawke and P J Keating as Finance Minister, Trade Minister, Employment Education and Training Minister and finally Treasurer. Mr. Dawkins left politics in 1994. A number of Australian and overseas companies have sought his advice on strategic issues. He has also advised Australian universities, State and foreign governments on issues relating to education, trade and investment. His board appointments include: Chairman Medical Corporation of Australia (1997-2001); Sealcorp Holdings (1994-2004); Chairman Elders Rural Bank (1998-present); Government Relations Australia (2000-present); Chairman Retail Energy Market Company (2003-present). On a number of occasions he has consulted to international organisations including The World Bank Group, the OECD, UNDP, and UNESCO. He is a participant in various international conferences covering economic and educational issues and travels frequently to Asia. He is a Patron of the Menzies School of Health Research and for three years until this year was Treasurer of the International Agency for the Prevention of Blindness and for nine years a member of the Board of the Fred Hollows Foundation. He chairs the Board of the Botanical Gardens of Adelaide and is a committee member of the Connemara Pony Breeders Society of Australia. He was awarded the honorary degree of Doctor of the University by the University of SA and the Queensland University of Technology. He was made an Officer of the Order of Australia in June 2000 and awarded the Centenary Medal in January 2000.
Professor Deon J. Venter , 49, Non-Executive Director, was appointed to the Board on March 17, 2003. Up until March 2005, he was Head of the Cancer Functional Genomics Laboratory at the Murdoch Children's Research Institute in Melbourne, and Head of the Cancer Epidemiology Program, Department of Pathology at University of Melbourne. He currently serves as Clinical Director of Pathology for the seven hospitals comprising the Mater Hospitals group in Brisbane, Queensland, and heads up the Molecular Genetics laboratory at the Mater Medical Research Institute. He is a specialist
66
pathologist, a Fellow of the Royal College of Pathologists of Australasia and the author of more than 80 papers on the genetics of cancer. He was appointed to the Board on April 17, 2003 and serves as a member of the Company's Nomination and Remuneration Committee.
Robert J. Edge , 55, Non-Executive Director and Chairman of the Audit Committee, was appointed to the Board on April 19, 2004. He is a Chartered Accountant, Official Liquidator and Tax Agent. Robert has extensive experience at Board level with public companies in Australia and overseas. He is currently CEO of International All Sports Limited. Prior to his appointment he was managing Director of Global Technology Limited. He has been a partner in B.D.O. and Ernst & Young and as a consultant to Ferrier Hodgson managed the asset realization and loans recovery program for the liquidation of Pyramid Building Society and the Farrow Group of Companies.
Senior Management
We have a professional team of qualified and experienced research and development scientists and technicians. The Company has 37 employees, of which eight have PhD qualifications.
The Management Team, and a brief summary of their relevant experience, is as follows:
Thomas G. Howitt , 41, a Chartered Accountant and member of the Taxation Institute of Australia and Institute of Chartered Secretaries, was appointed on June 1, 2004 as the Group's first full-time Chief Financial Officer and was appointed as Company Secretary on June 30, 2005. During a career spanning more than 15 years, he has served as CFO and Company Secretary for a number of public companies, on both the ASX and foreign exchanges. His experience covers all facets of financial management and control across a variety of industries, including resources and technology (domestic and international), having most recently played an important part in the successful development, patenting and commercialization of an innovative suite of technologies. Tom has played key roles in the successful raising of bank debt and equity capital and the management of complex due diligence programs. He has also worked as a Taxation Consultant for accountants Ernst & Young and in the investment banking industry.
William I. Smith , 41, has a degree in economics from the University of Western Australia. He comes from a corporate banking background and worked for one of the "big four" Australian banks in its Corporate and Treasury Departments. After this he spent seven years in corporate banking with the United Kingdom based Bank, Barclays.
Geoff E. Newing , 40, was appointed in November 2004 and has worked at a senior level in both listed and private companies chiefly responsible for business development and marketing to financial markets. Geoff was previously the CEO of Olea Australis Limited where he oversaw the development of Australia's most awarded brand of olive oil. He has also held a number of senior positions including an Executive Director of Ramsgate Resources Ltd, CEO of the Hancock Group of Companies controlled by the daughter of the late Lang Hancock, Group Financial Controller for Toplis and Harding, London and also spent three years in Melbourne with Elders Resources Limited. Geoff is responsible for business development and investor relations.
GTG retains a number of consultants on its Technical Review Committees and in advisory positions. These consultants are generally leading academics from Australian universities. They are Professor Martyn French from Royal Perth Hospital, Dr. Stephen Kent from Department of Microbiology and Immunology at University of Melbourne, Associate Professor Nicholas Deacon, former Head of AIDS Molecular Biology Unit at the Macfarlane Burnett Centre for Medical Research, Dr. Manfred Beilharz from University of Western Australia and Assoc. Professor Robin Gasser from the veterinary department of Melbourne University.
67
In August 2003 we formed a Scientific Advisory Committee of leading academics to review and monitor our research and scientific pursuits. The current members of the Committee are:
Prof. Colin Masters: Prof. Masters is the former Chair of Pathology at the University of Melbourne, and now holds one of the few Laureate Professorships at the University of Melbourne.
Prof. Michael Quinn: Prof. Quinn is Director of Oncology at the Royal Women's Hospital in Melbourne. He also chairs the Board of Management of the National Cancer Control Initiative, and is an Executive Committee Member of the Cancer Council of Victoria, as well as a Board Member of the Australian Cancer Society.
Prof. Simon Easteal: Prof. Easteal heads the Human Genetics Group at the Australian National University, Canberra, where he is also the co-director of the Centre for Bioinformation Science. He is a former editor of the prestigious journal Molecular Biology and Evolution , serves on the Advisory Board to the Sydney University Biological Informatics and Technology Centre, and is the author of two books and over 100 scientific papers.
Assoc. Prof. Robert Richards: Assoc. Prof. Richards is Deputy Director of the ARC Special Research Centre for Molecular Genetics Development and Convenor of the ARC / NHMRC Research Network in Genes and Environment in Development, both at the University of Adelaide.
The Convenor of the Scientific Advisory Committee is Prof. Deon Venter, Non-Executive Director of the Company whose credentials are more fully described under Item 6A.
Details of the nature and amount of each major element of the compensation of each director of the Company and each of the named officers of the Company and its consolidated entity, for services in all capacities to us in 2004 are listed below. All figures are stated in Australian dollars.
June 30, 2004
Name
|
Salary/Fees
|
Superannuation
Benefits |
Option
Incentive Schemes |
Total
|
||||
---|---|---|---|---|---|---|---|---|
|
(A$)
|
|
|
|
||||
Executive Directors | ||||||||
Dr Mervyn Jacobson |
|
300,000 |
|
|
|
|
|
300,000 |
Mr Ian Dennis
resigned November 24, 2004 |
200,500 | 19,500 | | 220,000 | ||||
Mr Russell Granzow
resigned 19 April 2004 |
115,800 | | | 115,800 | ||||
Non Executive Directors |
|
|
|
|
|
|
|
|
Prof Deon Venter |
|
137,725 |
|
|
|
52,183 |
|
189,908 |
Mr Fred Bart | 66,000 | | | 66,000 | ||||
Mr Robert Edge | 5,918 | | | 5,918 | ||||
|
|
|
|
|||||
Totals | 825,943 | 19,500 | 52,183 | 897,626 | ||||
|
|
|
|
Note that the 1,000,000 options granted to Mr Russell Granzow on December 15, 2003 lapsed on his resignation. The Annual General Meeting held on November 25, 2004 approved and we have granted and issued 500,000 options to our new director Robert Edge under the terms of the Employee Share Option Plan.
We issued to our directors, Messrs. Granzow and Venter, one million options each, exercisable at A$0.48 expiring on or before May 20, 2009. The one million options issued to Mr. Russell Granzow on December 15, 2003 lapsed on his resignation. We issued 750,000 options exercisable at A$0.48 expiring on September 6, 2010 to Mr. Howitt.
68
The following table discloses the remuneration of the specified executives of the consolidated entity. All figures are stated in Australian dollars.
June 30, 2004
Name
|
Salary/Fees
|
Superannuation
Benefits |
Option
Incentive Schemes |
Total
|
||||
---|---|---|---|---|---|---|---|---|
Executive Officers | ||||||||
(Excluding directors) | ||||||||
Dr Adrian Hodgson |
|
133,267 |
|
11,003 |
|
39,010 |
|
183,280 |
Mr Ian Smith | 128,868 | 11,598 | | 140,466 | ||||
Dr Glenn Tong | 124,992 | 11,249 | | 136,241 | ||||
Mr Ian Christensen | 113,415 | 18,200 | | 131,615 | ||||
Ms Luisa Ashdown | 118,938 | 10,074 | | 129,012 | ||||
Mr Thomas Howitt | 8,000 | 775 | | 8,775 | ||||
|
|
|
|
|||||
Totals | 627,480 | 62,899 | 39,010 | 729,389 | ||||
|
|
|
|
Executive officers are those officers involved in the strategic direction, general management or control of the business at a company or operating division level. We do not have a bonus or profit sharing plan or other form of discretionary share option scheme and do not currently anticipate establishing such a plan.
Glenn Tong resigned as an executive officer on October 29, 2004. Adrian Hodgson resigned as Director of Science and Chief Operating Officer on May 13, 2005.
During the year ended June 30, 2004 we paid a total of A$82,399 in pension, retirement and similar benefits to defined contribution plans on behalf of our directors and executives.
Options
We introduced a new Employee Share Option Plan on November 30, 2001. The Plan establishes the eligibility of our employees and those of any subsidiaries, and of consultants and independent contractors to a participating company who are declared by the Board to be eligible, to participate. Broadly speaking, the Plan permits us, at the discretion of the Board, to issue traditional options (with an exercise price) and other types of rights to shares (without an exercise price). The Plan conforms with the IFSA Executive Share and Option Scheme Guidelines and where participation is to be made available to staff who reside outside Australia, there may have to be modifications to the terms of grant to meet or better comply with local laws or practice.
Indemnification and Insurance with Respect to Directors
We are obligated pursuant to an indemnity agreement, to indemnify the current Directors and executive officers and former directors against all liabilities to third parties that may arise from their position as directors or officers of the Company and our controlled entities, except where to do so would be prohibited by law. Under the terms of this agreement, we are obligated to meet the full amount of any such liabilities, including costs and expenses. In connection with the GeneType AG acquisition, Fred Bart and Ian Dennis provided counter-indemnities to us and to GeneType AG shareholders in respect of the existence of undisclosed liabilities as at May 15, 2000. These counter-indemnities lapse on May 15, 2005.
In addition, we currently carry insurance in respect of directors' and officers' liabilities for current and former directors, secretary and executive officers or employees.
69
The Board of Directors
Under our constitution our Board of Directors is required to comprise at least three directors. As of the date of this Registration Statement, our Board comprised six directors.
The role of the Board includes:
The Board meets for regular business at least six times a year, with additional meetings when circumstances warrant. In the fiscal year ended June 30, 2004, 13 meetings of the full Board were held.
Audit Committee
The Board has established an Audit Committee, which operates under a charter approved by the Board. It is the Board's responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the consolidated entity to the Audit Committee. The Audit Committee held 2 meetings during fiscal year 2004.
The Audit Committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports.
The members of the Audit Committee as of the date of this Registration Statement were:
Name
|
|
|
---|---|---|
Mr. Robert J. Edge (Chairman) | ||
Mr. Henry Bosch AO |
|
|
Mr. John S. Dawkins AO |
|
|
The U.S. Public Company Accounting Reform and Investor Protection Act of 2002, also known as Sarbanes-Oxley Act of 2002, was enacted on July 30, 2002 and contains significant new rules on corporate governance for US and foreign companies reporting in the United States, especially in the area of audit committee composition and authority. We are closely monitoring SEC rulemaking
70
pursuant to the Sarbanes-Oxley Act to ensure our compliance with any rules as they become applicable to us as a foreign private issuer.
Nomination and Remuneration Committee
The Board established a Nomination and Remuneration Committee in March 2005. The Committee provides the Board with guidance on all matters relating to the nomination and remuneration of Directors and employees.
The members of the Nomination and Remuneration Committee as of the date of this Registration Statement were:
Name
|
|
|
---|---|---|
Mr. John S. Dawkins AO (Chairman) | ||
Dr. Mervyn Jacobson |
|
|
Prof. Deon J. Venter |
|
|
Compliance with NASDAQ Rules
NASDAQ listing rules require that we disclose the home country practices that we will follow in lieu of compliance with NASDAQ corporate governance rules. The following describes the home country practices and the related NASDAQ rule:
Majority of Independent Directors: We will follow home country practice rather than NASDAQ's requirement in Marketplace Rule 4350(c)(1) that the majority of the Board of each issuer be comprised of independent directors as defined in Marketplace Rule 4200. Our Board of Directors is not comprised of a majority of independent directors, a practice which is not prohibited by the laws of Australia. The ASX does not have a requirement that each issuer's Board be comprised of a majority of independent directors. Furthermore, no law, rule or regulation of the Australian Securities and Investments Commission ("ASIC"), the public authority which exercises securities law jurisdiction over the Company, has such a requirement nor does the Corporations Act (the "Act"), which is the applicable corporate law legislation.
Compensation of Officers: We will follow home country practice rather than NASDAQ's requirement in Marketplace Rule 4350(c)(3) that chief executive compensation be determined or recommended to the Board by the majority of independent directors or a compensation committee of independent directors. Similarly, compensation of other officers is not determined or recommended to the Board by a majority of the independent directors or a compensation committee comprised solely of independent directors. These decisions are made by our nomination and remuneration committee and it is not comprised of a majority of independent directors. The ASX does not have a requirement that each listed issuer have a remuneration committee or otherwise follow the procedures embodied in NASDAQ's Marketplace Rule. Furthermore, no law, rule or regulation of the ASIC has such a requirement nor does the applicable corporate law legislation. Such home country practices are not prohibited by the laws of Australia.
Nomination: We will follow home country practice rather than NASDAQ's requirement in Marketplace Rule 4350(c)(4) that director nominees be selected or recommended by a majority of the independent directors or by a nominations committee comprised of independent directors. These decisions are made by the nomination and remuneration committee and it is not comprised of a majority of independent directors. The ASX does not have a requirement that each listed issuer have a nominations committee or otherwise follow the procedures embodied in NASDAQ's Marketplace Rule.
71
Furthermore, no law, rule or regulation of the ASIC has such a requirement nor does the applicable corporate law legislation. Accordingly, selections or recommendations of director nominees by a committee that is not comprised of a majority of directors that are not independent is not prohibited by the laws of Australia.
Quorum: We will follow home country practice rather than NASDAQ's requirement in Marketplace Rule 4350(f) that each issuer provide for a quorum of at least 33 1 / 3 percent of the outstanding shares of the issuer's common stock (voting stock). Pursuant to our Constitution we are currently required to have a quorum for a general meeting of three persons holding at least 10% of our ordinary shares. The practice followed by us is not prohibited by Australian law.
Pursuant to the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission issued new rules that, among other things, require NASDAQ to impose independence requirements on each member of the audit committee of a listed company and the NASDAQ also reformulated its corporate governance requirements. The recently-adopted SEC and NASDAQ rules will apply to the Company as of July 31, 2005. The Company has taken the appropriate steps with respect to its corporate governance system, including the addition of independent directors to its audit committee, to assure timely compliance with the SEC rules and the amended corporate governance standards of NASDAQ.
There are currently 37 full time employees including executive directors. The average number of employees for the years ended June 30 are as follows:
2004 | 37 | |
2003 | 27 |
The relevant interest of each director in the share capital of the Company as notified by the directors to the Australian Stock Exchange in accordance with S205G(1) of the Corporations Act 2001 as of the date of this Registration Statement is as follows:
|
Ordinary Shares
|
Percentage
|
Options over
Ordinary Shares |
||||
---|---|---|---|---|---|---|---|
Mervyn Jacobson | 150,466,900 | 42 | % | 2,000,000 | (a) | ||
Fred Bart |
|
25,918,214 |
|
7 |
% |
500,000 |
(a) |
Henry Bosch |
|
|
|
|
|
|
|
John Dawkins |
|
|
|
|
|
|
|
Deon Venter |
|
|
|
|
|
1,000,000 |
(b) |
Robert Edge |
|
|
|
|
|
500,000 |
(c) |
72
Mervyn Jacobson has 150,466,900 shares in the Company as follows:
Mervyn Jacobson ApS | 49,000,000 | |
JGT ApS |
|
98,000,000 |
Dr. Mervyn Jacobson |
|
3,466,900 |
|
||
|
|
150,466,900 |
|
Item 7. Major Shareholders and Related Party Transactions
The following table sets forth the beneficial owners of 5% or more of our voting securities as of the date of this Registration Statement:
Name
|
Number of Ordinary
Shares Held |
Percentage of
Capital Held |
|||
---|---|---|---|---|---|
Dr. Mervyn Jacobson | 150,466,900 | (a) | 42 | % | |
Fred Bart |
|
25,918,214 |
(b) |
7 |
% |
The number of Ordinary Shares on issue in Genetic Technologies as of the date of this Registration Statement was 362,369,899.
The number of holders of Ordinary Shares in Genetic Technologies as of the date of this Registration Statement was approximately 4,020.
The Company is not aware of any direct or indirect ownership or control of it by another corporation(s), by any foreign government or by any other natural or legal person(s) severally or jointly. Principal shareholders do not enjoy any special or different voting rights from those to which other holders of Ordinary Shares are entitled.
The Company does not know of any arrangements, the operation of which may at a subsequent date result in a change in control of the Company.
73
Item 7.B Related Party Transactions
|
2004
|
2003
|
2002
|
||||
---|---|---|---|---|---|---|---|
Dennis Corporate Services Pty Limited is associated with Mr. I.A. Dennis (former Director in common) and provided management and accounting services to the Company at a cost of | | | $ | 17,101 | |||
4F Investments Pty Limited is associated with Mr. Fred Bart (Director in common) and provided management services to the Company at a cost of |
|
25,675 |
|
31,574 |
|
|
37,692 |
Bankberg Pty Limited is associated with Dr Mervyn Jacobson (Director in common) and provided the office and laboratory premises to a wholly-owned subsidiary at Hanover Street, Fitzroy. During the respective periods, the subsidiary paid Bankberg Pty Limited rent and outgoings of |
|
266,650 |
|
213,159 |
|
|
253,132 |
GrapeSeed International is associated with Mr. Russell Granzow and provided management services to the Company for the period April 17, 2003 to June 30, 2003 and received |
|
82,589 |
|
34,358 |
|
|
|
As stated in Note 5 to the Financial Statements, on May 12, 2003 the Company acquired an additional 17,500 common shares in XY, Inc. (a director related entity) valued at $171,676. As at June 30, 2003 the Company owned 0.42% of the issued common shares of XY, Inc.
Premises leased by Genetic Technologies Limited are subleased to Director related entities. Rental recoveries are netted against rent expenses in the consolidated statement of operations. Total rental recoveries received by Genetic Technologies Limited from its Director related entities in fiscal 2004 totaled $56,271 (2003: $30,995; 2002: $3,173; 2001: $0).
Transactions with directors are on normal commercial terms and conditions.
All these transactions are eliminated on consolidation and have no effect on the group result.
Item 7.C Interests of Experts and Counsel
Not applicable.
Item 8.A Consolidated Statements and Other Financial Information
The information included in Item 18 of this Registration Statement is referred to and incorporated by reference into this Item 8.A.
74
Item 8.B Litigation and Other Legal Proceedings
On April 1, 2003, we reported to the market that we had initiated legal action against three major publicly-traded U.S. biotechnology companies for patent infringement under the terms of a patent insurance policy held by us. Two of these actions were settled in November 2003. We continue to prosecute the case against the third company, Applera Corporation. This proceeding is pending in the U.S. District Court for the Northern District of California. Applera is the parent company of Applied Biosystems, Celera Diagnostics and Celera Corporation. Up until the date of this Registration Statement, the majority of the costs associated with this litigation have been met by our patent insurance. In the Markman hearing, in which a judge rules on the precise meaning of terms in the patent claims, the District Court ruled in favor of us in respect of 13 out of 15 disputed terms and, in respect of the remaining terms, the Court adopted positions of its own constructions, which were not inconsistent with our proposals. The Markman hearing (a claims construction hearing) took place on September 1, 2004, and the hearing date in the matter is scheduled for 2006, if court imposed mediation does not settle the matter beforehand. On February 16, 2005, the Company attended a second mediation settlement conference in San Francisco in respect of its action against Applera Corporation, under the supervision of Judge Spero. The case did not settle. Judge Spero indicated he would now confer with the attorneys for both parties in the subsequent weeks to discuss the next steps.
On August 13, 2004, Auckland District Health Board ("ADHB") lodged a Statement of Claim in the High Court of New Zealand alleging that the Company made "groundless threats of patent infringement" against ADHB. On October 22, 2004, the Company filed a Statement of Defense. A further amended Statement of Defense was filed by the Company on October 29, 2004, together with a Memorandum of Counsel. A Judicial Conference was attended by the attorneys for the parties in Auckland on February 23, 2005 in the presence of an Associate Judge of the High Court of New Zealand Auckland Registry, and a further timetable was set. On June 15, 16 and 17, 2005, the parties met in Auckland, New Zealand to pursue mediation discussions. As at the date of this Registration Statement, these discussions were continuing.
With the exception of these proceedings, we are unaware of any proceedings involving us.
Until our businesses are profitable beyond our expected research and development needs, our directors will not be able to recommend that any dividend be paid to our shareholders. Our directors will not resolve a formal dividend policy until we generate profits. Our current intention is to reinvest our income in the continued development and operation of our business.
Since June 30, 2004 there has not been any matter or circumstance, other than as referred to elsewhere in this Registration Statement, the Financial Statements or the notes thereto, that has arisen that has significantly affected, or may significantly affect our operations, results of those operations or the state of our affairs in future years.
Item 9.A Offer and Listing Details
The Company's Ordinary Shares were listed on the Australian Stock Exchange Ltd. (the "ASX") in July 1987 (under the name of Concord Mining NL). The following table sets forth, for the periods
75
indicated, the highest and lowest market quotations for the Ordinary Shares reported on the Daily Official List of the ASX.
Financial Year
|
Quarter/Month
|
High
|
Low
|
|||
---|---|---|---|---|---|---|
|
|
(in A$0.00)
|
||||
1998 | 0.16 | 0.04 | ||||
1999 | 0.09 | 0.02 | ||||
2000 | 0.80 | 0.04 | ||||
Third Quarter 2000 | 1.05 | 0.62 | ||||
Fourth Quarter 2000 | 0.85 | 0.60 | ||||
2001 | First Quarter 2001 | 0.75 | 0.39 | |||
Second Quarter 2001 | 0.79 | 0.51 | ||||
Third Quarter 2001 | 0.62 | 0.25 | ||||
Fourth Quarter 2001 | 0.59 | 0.38 | ||||
2002 | First Quarter 2002 | 0.58 | 0.40 | |||
Second Quarter 2002 | 0.76 | 0.42 | ||||
Third Quarter 2002 | 0.47 | 0.35 | ||||
Fourth Quarter 2002 | 0.40 | 0.28 | ||||
2003 | First Quarter 2003 | 0.33 | 0.18 | |||
Second Quarter 2003 | 0.53 | 0.20 | ||||
Third Quarter 2003 | 1.30 | 0.45 | ||||
Fourth Quarter 2003 | 0.69 | 0.43 | ||||
2004 | First Quarter 2004 | 0.59 | 0.38 | |||
Second Quarter 2004 | 0.46 | 0.34 | ||||
Third Quarter 2004 | 0.67 | 0.30 | ||||
Fourth Quarter 2004 | 0.64 | 0.43 | ||||
2005 | First Quarter 2005 | 0.61 | 0.38 | |||
Second Quarter 2005 | 0.445 | 0.32 | ||||
|
|
January 2005 |
|
0.58 |
|
0.455 |
February 2005 | 0.61 | 0.45 | ||||
March 2005 | 0.50 | 0.38 | ||||
April 2005 | 0.445 | 0.36 | ||||
May 2005 | 0.39 | 0.33 | ||||
June 2005 | 0.395 | 0.32 |
The securities being listed are Ordinary Shares of common stock of Genetic Technologies Limited in the form of American Depositary Shares. Each American Depositary Share will evidence thirty two Ordinary Shares. No new shares will be issued in connection with this Registration Statement. As of December 31, 2004 we had 299,007,007 Ordinary Shares on issue, without par value. As of the date of this Registration Statement, we had 362,369,899 Ordinary Shares on issue, without par value. See Item 10B "Our Constitution" for a detailed description of the rights attaching to our shares. Also see Item 12D "American Depositary Receipts" for a description of the rights attaching to the American Depositary Shares.
Upon effectiveness of this Registration Statement, our Ordinary Shares will be registered under Section 12 of the Securities Exchange Act of 1934 and we will file semi-annual reports with the Securities and Exchange Commission on Form 6-K and an Annual Report on Form 20-F. As a foreign private issuer, we will not be subject to the proxy rules under Section 14 of the Securities Exchange Act of 1934, and our officers, directors and principal stockholders will not be subject to the insider short-swing profit disclosure and recovery provisions of Section 16 of such Act.
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The Company has registered one class of American Depositary Shares (ADSs) on Form F-6 pursuant to the U.S. Securities Act of 1933, as amended. One American Depositary Share ("ADS") represents thirty Ordinary Shares without par value (the "ADSs). As of June 30, 2005 there were 4,400 ADSs outstanding.
Since January 14, 2002, the ADSs have traded in the U.S. over-the-counter market under the symbol "GNTLY" and dealers' prices for the ADSs have been quoted in the "pink sheets" published by the National Quotations Bureau, Inc. As of June 30, 2005 there were two registered holders of the ADSs. As of that date, there were two U.S. beneficial owners of the ADSs (based on their addresses only), representing less than 0.05% of the Shares. There have been no trades in our ADSs since March 2003.
The table below sets forth the high and low sales prices for the ADSs trading on the U.S. over-the-counter market during the periods indicated:
|
High
US$ |
Low
US$ |
||
---|---|---|---|---|
1Q2002 | | | ||
2Q2002 | | | ||
3Q2002 | | | ||
4Q2002 | 5.16 | 5.16 | ||
1Q2003 | 4.26 | 4.26 | ||
2Q2003 | | | ||
3Q2003 | | | ||
4Q2003 | | | ||
1Q2004 | | | ||
2Q2004 | | | ||
3Q2004 | | | ||
4Q2004 | | | ||
1Q2005 | | | ||
2Q2005 | | |
As of June 30, 2005 there was a total of 4,027 record holders of our Ordinary Shares, of which 12,848,469 shares (representing 3.5% of the total Ordinary Shares issued and outstanding) were held of record by 42 U.S. residents (based solely on their address).
Not applicable.
We intend to make application to list the ADSs on the NASDAQ SmallCap Market under the symbol "GENE". Our Ordinary Shares are listed and trade on the ASX under the symbol "GTG." Our Ordinary Shares were added to the S&P ASX 300 index starting September 22, 2003.
Not applicable.
Not applicable.
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Item 9.F Expenses of the Issue
Not applicable.
Item 10. Additional Information
We had a total of 296,808,561 Ordinary Shares authorized and issued as of June 30, 2004, all of which were listed and freely tradable. As of the date of this Registration Statement we had a total of 362,369,899 Ordinary Shares authorized and issued, all of which are listed and freely tradable.
Based on our review of shareholder records (based solely on the addresses) there are as of June 30, 2004 39 U.S. resident shareholders of our Ordinary Shares holding 12,220,803 shares representing 4.1% of the total issued and outstanding Ordinary Shares. Our Ordinary Shares do not have a par value.
During the last three years our capital has been increased, in connection with acquisition transactions and the exercise of options. In 2001 we issued 9,754,080 Ordinary Shares to owners of shares of Cytomation Inc. giving 257,793,804 Ordinary Shares at 30 June 2001. On July 30, 2001 we acquired the business of DNA-Id Labs of Perth, Western Australia, by payment of consideration that included 94,340 Ordinary Shares; further consideration was paid on August 1, 2002, following fulfillment of performance warranties. On September 4, 2000 our shares were transferred from the mining boards of the ASX to the industrial boards under the new symbol of "GTG". Between July 1, 2001 and June 30, 2003 we issued 4,440,621 Ordinary Shares in GTG as a result of the exercise of vendor options, exercise of options under the Staff Share Plan, a small placement for cash of 1,000,000 shares, two exchanges of GTG shares for shares in XY, Inc., and the issuance of shares in lieu of legal fees to our counsel which resulted in 262,234,425 Ordinary Shares outstanding as at June 30, 2003. Subsequently, on September 4, 2003, we completed a brokered private placement to professional Australian investors of 13,333,333 Ordinary Shares at A$0.75 each, raising A$10,000,000. As part of the placement we also issued 6,666,667 options to the subscribers to the placement with an exercise price of A$1.00 on or before September 20, 2005. On June 15, 2004 we issued 16,666,667 Ordinary Shares to the C.Y. O'Connor ERADE Village Foundation, as consideration under our licensing agreement with that Foundation (see point 17).
As at June 30, 2004 we had outstanding options convertible into Ordinary Shares as follows:
Number of options
|
Exercise expiration date
|
Exercise Price
|
||
---|---|---|---|---|
65,835,614 | April 14, 2005 (unlisted) | A$0.20 | ||
2,000,000 | April 14, 2005 (unlisted) | A$0.45 | ||
6,666,667 | September 30, 2005 (unlisted) | A$1.00 | ||
4,250,000 | November 30, 2007 (unlisted) | A$0.61 | ||
1,875,000 | November 30, 2007 (unlisted) | A$0.56 | ||
957,500 | November 30, 2007 (unlisted) | A$0.49 | ||
200,000 | July 9, 2008 (unlisted) | A$0.56 | ||
200,000 | July 17, 2008 (unlisted) | A$0.49 | ||
1,600,000 | May 20, 2009 (unlisted) | A$0.44 | ||
175,000 | May 20, 2009 (unlisted) | A$0.38 | ||
1,000,000 | May 20, 2009 (unlisted) | A$0.48 | ||
750,000 | December 15, 2009 (unlisted) | A$0.59 | ||
600,000 | September 7, 2007 | A$0.70 | ||
|
||||
86,109,781 | ||||
|
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12,087,500 of the outstanding options have been granted as executive compensation. See Item 6B "Compensation" for a description of the terms of options granted as executive compensation. See also Note 13 to the Financial Statements for a description of other options granted by us. 70,000,000 of such options, expiring on April 14, 2005, were issued in connection with acquisition of GeneType AG; 49,000,000 of such options are held by Dr. Mervyn Jacobson (see below). The 3,500,000 options to directors issued at the AGM in 2001 at A$0.61 were part of the Employee Share Option Plan. The 2,000,000 options at A$0.45 issued previously were not part of the Employee Share Option Plan. Pursuant to a consulting agreement with GTH Capital Inc. we are obligated to issue an aggregate of 900,000 options having a strike price of A$0.70, within three years from January 26, 2001, subject to the fulfillment of certain specified performance criteria. On October 25 2004, we issued 600,000 options for GMCG.
In respect of the 70,000,000 unlisted "vendor" options, a total of 4,164,386 had been exercised up to June 30, 2004, leaving a balance of 65,835,614 as at that date. Since that date, a further 65,418,838 such options have been exercised. The remaining 416,776 options lapsed on April 14, 2005. In addition, a further 2,000,000 options lapsed on April 14, 2005.
We are a public company limited by shares registered by the Australian Securities and Investments Commission or ASIC. We were registered on January 5, 1987 and our Australian Company Number is 009 212 328. Subject to the Australian Stock Exchange (ASX) Listing Rules and the Corporations Act of Australia (Corporations Act), the rights that attach to our shares are detailed in our constitution. Our current constitution was adopted on September 10, 1999. Under Australian law, a company has the legal capacity and powers of an individual both inside and outside Australia.
The material provisions of our constitution are summarized below. This summary is not intended to be complete, or to constitute a definitive statement of the rights and liabilities of our stockholders and is qualified in its entirety by reference to the constitution which is available as an exhibit to this Registration Statement.
The Corporations Act prohibits directors of companies listed on the Australian Stock Exchange from voting on matters in which they have a material personal interest, requires disclosure of such interest to stockholders, and requires stockholders' approval of any provision of related party benefits.
Directors' Compensation
Our directors are paid remuneration for their services as directors. The aggregate amount of remuneration payable to the directors is approved in a general meeting of stockholders. The aggregate, fixed sum for directors' remuneration is to be divided among the directors in such proportion as the directors themselves agree, and in accordance with our constitution. The fixed sum remuneration for directors shall not be by way of a commission on or percentage of the turnover of our company or (except in the case of a director who is the managing director or other executive director) its profits.
In the event of a proposal to increase the remuneration of the directors for their ordinary services the notice calling the meeting at which such increase is to be proposed shall state the amount of the proposed increase and the maximum sum that may be paid.
Pursuant to our constitution any director who devotes special attention to our business or who otherwise performs services which in the opinion of our board of directors are outside the scope of the ordinary duties of a director, or who at the request of the board of directors engages in any journey related to our business, shall be paid extra fixed remuneration or salary either in addition to or in substitution for his share in the remuneration above provided.
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In addition to other remuneration provided in our constitution, all directors are entitled to be paid by us for reasonable travel accommodation and other expenses incurred by the directors in attending company meetings, board meetings, committee meetings or while engaged on our business.
Additionally in accordance with our constitution, a director may be paid a retirement benefit as determined by the board of directors in accordance with the Corporations Act and the Australian Stock Exchange Listing Rules.
Options to directors in the aggregate amount of 3,500,000 were approved by shareholders at the AGM on November 30, 2001. These options were part of the Staff Share Plan 2001. We also issued 4,970,000 further options to staff and consultants under the Staff Share Plan 2001. Under the Staff Share Plan 2001 we granted an additional 2,250,000 options having expiry dates in 2008 and 2009. The Annual General Meeting held on November 25, 2004 approved, and we have since issued, 500,000 unlisted options to Mr. Robert Edge with an exercise price of A$0.48.
Borrowing Powers Exercisable by Directors
Pursuant to our constitution, the management and control of our business affairs are vested in our board of directors.
The board has the powers to raise or borrow any sums of money and to secure the payment or repayment of such monies and any other obligation or liability in the manner and on the terms it thinks fit, whether upon the security of any mortgage or by issue of debentures or debenture stock charged upon all or any of our property including its goodwill undertaking and uncalled capital for the time being or upon bills of exchange promissory notes or other obligations or otherwise.
Retirement of directors
Pursuant to our constitution, one third of directors other than the director who is the managing director, must retire from office at every annual general meeting. If the number of directors is not a multiple of three then the number nearest to but not less than one third must retire from office. The directors who retire in this manner are required to be the directors or director longest in office since last being elected. A director, other than the director who is a managing director, must retire from office at the conclusion of the third annual general meeting after which the director was elected.
There are no requirements in our constitution regarding the retirement of directors at any particular age. The Corporations Act, however, requires that directors retire at the conclusion of the first annual general meeting after a director reaches age 72. A person who has reached age 72 may by special resolution of our stockholders be appointed or re-appointed as a director, provided the notice of meeting and the resolution appointing such director states such director's age.
Rights and Restrictions on Classes of Shares
Subject to the Corporations Act and the Australian Stock Exchange Listing Rules rights attaching to our shares are detailed in our constitution. Our constitution provides that, any of our shares shall be Ordinary Shares and may be issued with preferred, deferred or other special rights, whether in relation to dividends, voting, return of share capital, payment of calls or otherwise as the board of directors may from time to time determine, and either at a premium or at par (subject to the provisions of the Corporations Act 2001) at a discount (subject to certain conditions set forth in our constitution). Subject to the prior approval at a general meeting and notwithstanding anything contained in our constitution, the board may allot, grant options over any shares to any person or company if such allotment would have the effect of transferring a controlling interest provided that this prohibition shall not apply in any case either where such allotment is pursuant to an offer of shares to the holders of Ordinary Shares as nearly as practicable in proportion to their respective shareholding or where such
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person or company is already registered as the holder of a majority of the issued shares prior to such allotments. Currently our outstanding share capital consists of only one class of Ordinary Shares.
Dividend Rights
The board may from time to time determine to pay dividends to stockholders as appear to the board to be justified by our profits. All dividends must be paid in accordance with the timetable set out in the Listing Rules. All unclaimed dividends may be invested or otherwise made use of by the board for our benefit until claimed or otherwise disposed of in accordance with our constitution.
Voting Rights
Under our constitution, each stockholder has one vote determined by a show of hands at a meeting of the stockholders. On a poll vote each stockholder shall have one vote for each fully paid share and a fractional vote for each share which is not fully paid, such fraction being equivalent to the proportion of the amount which has been paid to such date on that share. Under Australian law, stockholders are not permitted to approve corporate matters by written consent. Our constitution does not provide for cumulative voting.
Right to Share in our Profits
Pursuant to our constitution, our stockholders are entitled to participate in our profits only by payment of dividends.
The board may from time to time determine to pay dividends to the stockholders, however no dividend is payable except out of our profits. A declaration by the board as to the amount of our profits is conclusive.
Rights to Share in the Surplus in the Event of Liquidation
Our constitution provides, subject to the sanction of a special resolution, that the liquidator may divide amongst the members in-kind the whole or any part of the assets, and he may determine how the division shall be carried out as between the members or different classes of members.
Redemption Provisions
There are no redemption provisions in our constitution in relation to Ordinary Shares. Under our constitution and subject to the Corporations Act, any preference shares may be issued on the terms that they are or may at our option, be liable to be redeemed.
Sinking Fund Provisions
There are no sinking fund provisions in our constitution in relation to Ordinary Shares.
Liability for Further Capital Calls
According to our constitution, and subject to compliance with the requirements of the Corporations Act 2001, the board may make any calls from time to time upon stockholders in respect to all monies unpaid on shares, whether on account of the nominal value of the shares or by way of premium, and not by the terms of issue of those shares made payable at fixed times. Each stockholder is liable to pay the amount of each call in the manner, at the time, and at the place specified by the board. Calls may be made payable by installment.
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Provisions Discriminating Against Holders of a Substantial Number of Shares
There are no provisions under our constitution discriminating against any existing or prospective holders of a substantial number of our shares.
Variation of Share Rights
Our constitution provides that if at any time the capital is divided into different classes of shares, the rights attaching to any class of shares, may (unless otherwise provided by the terms of issue of the shares of that class), whether or not we are being wound up, be varied with the sanction of a special resolution passed at a separate meeting of the holders of the shares of such class. The provisions of our constitution relating to general meetings shall apply to every such meeting, except that the necessary quorum shall be members present holding or representing three quarters of the nominal amount of the issued shares of the class and that any member present holding shares of the class may demand a poll.
General Meetings of Stockholders
General meetings of stockholders may be called by the board of directors whenever it deem fit, provided that a general meeting to be called the annual general meeting must be held at least once every calendar year and held in accordance with the Corporations Act 2001. Except as permitted under the Corporations Act, stockholders may not convene a meeting. Under the Corporations Act, stockholders with at least 5% of the votes which may be cast at a general meeting may call and arrange to hold a general meeting. The Corporations Act requires the directors to call and arrange to hold a general meeting on the request of stockholders with at least 5% of the votes that may be cast at a general meeting or at least 100 stockholders who are entitled to vote at the general meeting. Twenty-eight days' notice of the proposed meeting of our stockholders is required under the Corporations Act.
Foreign Ownership Regulation
There are no limitations on the rights to own securities imposed by our constitution. However, acquisitions and proposed acquisitions of shares in Australian companies may be subject to review and approval by the Australian Federal Treasurer under the Foreign Acquisitions and Takeovers Act of 1974. Generally this act applies to acquisitions or proposed acquisitions:
The Australian Federal Treasurer may prevent a proposed acquisition in the above categories or impose conditions on such acquisition if the Treasurer is satisfied that the acquisition would be contrary to the national interest, or if it resulted in that foreign person, either alone or together with other non-associated or associated foreign persons, controlling the company and that such control is contrary to the national interest.
Ownership Threshold
There are no provisions in our constitution, which require a stockholder to disclose ownership above a certain threshold. The Corporations Act, however, requires a substantial stockholder to notify us and the Australian Stock Exchange once a 5% interest in our shares is obtained. Further, once a stockholder owns a 5% interest in us, such stockholder must notify us and the Australian Stock Exchange of any increase or decrease of 1% or more in its holding in our shares.
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Conditions for Change of Capital
There are no conditions imposed by our constitution relating to changes in our capital which are more stringent than are required by the Corporations Act.
Stock Issues and Takeover Attempts
We are governed by the Corporations Act which provides stockholders with broad protection in relation to takeovers, including:
Further, subject to limited exceptions provided in the Australian Stock Exchange Listing Rules, we must not issue or agree to issue shares, without the approval of holders of our Ordinary Shares, for three months after we are told in writing that a person is making or proposes to make, a takeover for our shares.
The exceptions to the listing rule are as follows:
Access to and Inspection of Documents
Inspection of our records is governed by the Corporation Act. Any person has the right to inspect our company registers on payment of a fee. Stockholders are not required to pay a fee for inspection. Any person may obtain copies of a register or any part of the register upon payment of a fee as prescribed by us. Further, we must ensure that the minute books for the meetings of our stockholders are open for inspection to our stockholders free of charge. Other corporate records including minutes of directors meetings, financial records and other documents are not open for inspections by stockholders, However, a stockholder may apply to a court to make an order for inspection of our books, if the applicant stockholder is acting in good faith and the inspection is make for a proper purpose.
CHESS
Holding Statements
We participate in the Clearing House Electronic Sub-Register System, known as CHESS, which is maintained by the CHESS Securities Clearing House pursuant to the Australian Stock Exchange Listing Rules and the Securities Clearing House Business Rules. CHESS is an electronic transfer and settlement system, with no requirement for paper transfer documents. Accordingly, the legal registered
83
record of holding balances for our CHESS-approved shares are recorded on either of the electronic CHESS sub-register or the electronic issuer sponsored sub-register, which together form the complete company register. We do not issue share certificates to stockholders. Instead, we provide stockholders with a holding statement (similar to a bank account statement) that sets out the number of Ordinary Shares registered in each stockholder's name. This statement also advises stockholders of their holder identification number or stockholder reference number and relevant particulars. If a shareholding changes during any month, stockholders will receive a statement after the end of that month. Stockholders may also request statements at any other time (subject to payment of a small administration fee).
The following are the contracts not entered into in the ordinary course of our business that have been entered into during the two years immediately preceding the date of this Registration Statement and that are or may be material to us:
Placement Agreement dated August 15, 2003 with Emerging Growth Capital Pty Limited to place 13,333,333 Ordinary Shares at A$0.75 cents each to raise A$10,000,000 plus 6,666,666 free options at A$1.00 expiring September 30, 2005. Placement mandate dated August 22, 2003. Under the terms of a related separate indemnity agreement, we agree to indemnify the placement agent in connection with their activities on our behalf.
See also Item 4B, "Our Licenses and Commercial Collaborations".
Item 10.D Exchange Controls and Other Limitations Affecting Security Holders
Under existing Australian legislation, the Reserve Bank of Australia does not inhibit the import and export of funds, and, generally, no permission is required to be given to Genetic Technologies for the movement of funds in and out of Australia. However, payments to or from (or relating to) Iraq, its agencies or nationals, the government or a public authority of Libya, or certain Libyan undertakings, the authorities in the Federal Republic of Yugoslavia (Serbia and Montenegro) or their agencies, the Taliban (also referred to as the Islamic Emirate of Afghanistan), or the National Union for the Total Independence of Angola (also known as UNITA), its senior officials or the adult members of their immediate families, may not be made without the specific approval of the Reserve Bank of Australia.
Accordingly, at the present time, remittances of any dividends, interest or other payment by Genetic Technologies to non-resident holders of Genetic Technologies' securities in the US are not, subject to the above, restricted by exchange controls or other limitations.
Takeovers Act
There are no limitations, either under the laws of Australia or under the Constitution of Genetic Technologies, to the right of non-residents to hold or vote Genetic Technologies Ordinary Shares other than the Commonwealth Foreign Acquisitions and Takeovers Act 1975 (the "Takeovers Act"). The Takeovers Act may affect the right of non-Australian residents, including US residents, to hold Ordinary Shares but does not affect the right to vote, or any other rights associated with, any Ordinary Shares held in compliance with its provisions. Acquisitions of shares in Australian companies by foreign interests are subject to review and approval by the Treasurer of the Commonwealth of Australia under the Takeovers Act. The Takeovers Act applies to any acquisition of outstanding shares of an Australian company that exceeds, or results in a foreign person or persons controlling the voting power of more than a certain percentage of those shares. The thresholds are 15% where the shares are acquired by a foreign person, or group of associated foreign persons, or 40% in aggregate in the case of foreign persons who are not associated. Any proposed acquisition that would result in an individual foreign person (with associates) holding more than 15% must be notified to the Treasurer in advance of the acquisition. As of the date of this Registration Statement, approximately 20% of the fully paid
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outstanding Ordinary Shares in the Company were held by shareholders whose registered addresses were located outside Australia. In addition to the Takeovers Act, there are statutory limitations in Australia on foreign ownership of certain businesses, such as banks and airlines, not relevant to Genetic Technologies. However, there are no other statutory or regulatory provisions of Australian law or Australian Stock Exchange requirements that restrict foreign ownership or control of Genetic Technologies.
Corporations Act 2001
As applied to Genetic Technologies, the Corporations Act 2001 (the "Corporations Act 2001") prohibits any legal person (including a corporation) from acquiring a relevant interest in Ordinary Shares if after the acquisition that person or any other person's voting power in Genetic Technologies increases from 20% or below to more than 20%, or from a starting point that is above 20% and below 90%.
This prohibition is subject to a number of specific exceptions set out in section 611 of the Corporations Act 2001 which must be strictly complied with to be applicable.
In general terms, a person is considered to have a "relevant interest" in a share in Genetic Technologies if that person is the holder of that share, has the power to exercise, or control the exercise of, a right to vote attached to that share, or has the power to dispose of, or to control the exercise of a power to dispose of that share.
It does not matter how remote the relevant interest is or how it arises. The concepts of "power" and "control" are given wide and extended meanings in this context in order to deem certain persons to hold a relevant interest. For example each person who has voting power above 20% in a company or a managed investment scheme which in turn holds shares in Genetic Technologies is deemed to have a relevant interest in those Genetic Technologies shares. Certain situations (set out in section 609 of the Corporations Act 2001) which would otherwise constitute the holding of a relevant interest are excluded from the definition.
A person's voting power in Genetic Technologies is that percentage of the total votes attached to Ordinary Shares in which that person and its associates (as defined in the Corporations Act 2001) holds a relevant interest.
This summary of material tax consequences is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions) and on the Australian tax law and practice as in effect on the date hereof. In addition, this summary is based on the income tax convention between the United States and Australia (the "Treaty"). The foregoing laws and legal authorities as well as the Treaty are subject to change (or changes in interpretation), possibly with retroactive effect. Finally, this summary is based in part upon the representations of our ADR Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.
The discussion does not address any aspects of U.S. taxation other than federal income taxation or any aspects of Australian taxation other than federal income taxation, stamp duty and goods and services tax. This discussion does not address all aspects of U.S. or Australian federal tax considerations that may be important to particular investors in light of their individual investment circumstances or investors subject to special tax regimes, like broker-dealers, insurance companies or financial institutions, tax-exempt organizations, regulated investment companies, real estate investment trusts or financial asset securitization investment trusts, persons who actually or constructively own ten percent or more of our ADRs or Ordinary Shares, persons who hold ADRs or Ordinary Shares as part of a straddle, "hedge" or "conversion transaction" with other investments, persons who have elected
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mark-to-market accounting, or persons who acquired their ADRs or Ordinary Shares through the exercise of options or similar derivative securities or otherwise as compensation. Prospective investors are urged to consult their tax advisers regarding the U.S. and Australian federal, state and local tax consequences and any other tax consequences of owning and disposing of ADRs and shares.
Australian Tax Consequences
In this section we discuss Australian tax considerations that apply to non-Australian tax residents who are residents of the United States with respect to the ownership and disposal by the absolute beneficial owners of ADRs. This summary does not discuss any foreign or state tax considerations, other than stamp duty.
Nature of ADRs for Australian Taxation Purposes
ADRs held by a U.S. holder will be treated for Australian taxation purposes as held under a "bare trust" for that holder. Consequently, the underlying Ordinary Shares will be regarded as owned by the ADR holder for Australian income tax and capital gains tax purposes. Dividends paid on the underlying Ordinary Shares will also be treated as dividends paid to the ADR holder, as the person beneficially entitled to those dividends. Therefore, in the following analysis we discuss the tax consequences to non-Australian resident holders of Ordinary Shares which, for Australian taxation purposes, will be the same as to U.S. holders of ADRs.
Taxation of Dividends
Australia operates a dividend imputation system under which dividends may be declared to be "franked" to the extent of tax paid on company profits. Fully franked dividends are not subject to dividend withholding tax. Dividends payable by our company to non-Australian resident stockholders will be subject to dividend withholding tax, to the extent the dividends are unfranked. Dividend withholding tax will be imposed at 30%, unless a stockholder is a resident of a country with which Australia has a double taxation agreement. Under the provisions of the Treaty, the Australian tax withheld on unfranked dividends paid by us to which a resident of the United States is beneficially entitled is generally limited to 15% if the U.S. resident holds less than 10% of the voting rights of our company, unless the shares are effectively connected to a permanent establishment or fixed base in Australia through which the stockholder carries on business or provides independent personal services, respectively. Where the U.S. resident holds 10% or more of the voting rights of our company, the withholding tax rate is reduced to 5%.
Tax on Sales or other Dispositions of SharesCapital Gains Tax
Non-Australian resident stockholders will not be subject to Australian capital gains tax on the gain made on a sale or other disposal of our shares, unless they, together with their associates, hold 10% or more of our issued capital at any time during the five years before the disposal of the shares. If a non-Australian resident stockholder did, together with his or her associates, own a 10% or more interest, that stockholder would be subject to Australian capital gains tax to the same extent as Australian resident stockholders. The Australian Taxation Office maintains the view that the Double Taxation Convention between the United States and Australia does not limit Australian capital gains tax. Australian capital gains tax applies to net capital gains charged at a taxpayer's marginal tax rate but, for certain stockholders, a discount of the capital gain may apply if the shares have been held for 12 months or more. For individuals, this discount is 50%. For superannuation funds, the discount is 33%. There is no discount for a company that derives a capital gain. Net capital gains are calculated after reduction for capital losses, which may only be offset against capital gains.
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Tax on Sales or other Dispositions of SharesStockholders Holding Shares on Revenue Account
Some non-Australian resident stockholders may hold shares on revenue rather than on capital account, for example, share traders. These stockholders may have the gains made on the sale or other disposal of the shares included in their assessable income under the ordinary income provisions of the income tax law, if the gains are sourced in Australia. Non-Australian resident stockholders assessable under these ordinary income provisions in respect of gains made on shares held on revenue account would be assessed for those gains at the Australian tax rates for non-Australian residents, which start at a marginal rate of 29%. Some relief from the Australian income tax may be available to non-Australian resident stockholders under the Double Taxation Convention between the United States and Australia, for example, because the stockholder does not have a permanent establishment in Australia.
To the extent an amount would be included in a non-Australian resident stockholder's assessable income under both the capital gains tax provisions and the ordinary income provisions, the capital gain amount would generally be reduced, so that the stockholder would not be subject to double tax on any part of the income gain or capital gain.
Dual Residency
If a stockholder were a resident of both Australia and the United States under those countries' domestic taxation laws, that stockholder may be subject to tax as an Australian resident. If, however, the stockholder is determined to be a U.S. resident for the purposes of the Double Taxation Convention between the United States and Australia, the Australian tax would be subject to limitation by the Double Taxation Convention. Stockholders should obtain specialist taxation advice in these circumstances.
Stamp Duty
Any transfer of shares through trading on the Australian Stock Exchange, whether by Australian residents or foreign residents, is not subject to stamp duty within Australia.
Australian Death Duty
Australia does not have estate or death duties. No capital gains tax liability is realized upon the inheritance of a deceased person's shares. The disposal of inherited shares by beneficiaries, may, however, give rise to a capital gains tax liability.
Goods and Services Tax
The issue or transfer of shares will not incur Australian goods and services tax and does not require a stockholder to register for Australian goods and services tax purposes.
United States Federal Income Taxation
As used below, a "U.S. holder" is a beneficial owner of an ADR that is, for U.S. federal income tax purposes, (i) a citizen or resident alien individual of the United States, (ii) a corporation (or an entity treated as a corporation) organized under the law of the United States, any State thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source or (iv) a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) the trust was in existence on August 20, 1996 and properly elected to continue to be treated as a United States person. For purposes of this discussion, a "non-U.S. holder" is a beneficial owner of an ADR that is (i) a nonresident alien individual, (ii) a corporation (or an entity treated as a corporation) created or organized in or under
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the law of a country other than the United States or a political subdivision thereof or (iii) an estate or trust that is not a U.S. Holder. If a partnership (including for this purpose any entity treated as a partnership for U.S. federal tax purposes) is a beneficial owner of an ADR, the U.S. federal tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. A holder of an ADR that is a partnership and partners in that partnership should consult their own tax advisers regarding the U.S. federal income tax consequences of holding and disposing of ADRs.
Nature of ADRs for U.S. Federal Income Tax Purposes
In general, for U.S. federal income tax purposes, a holder of an ADR will be treated as the owner of the underlying shares. Accordingly, except as specifically noted below, the tax consequences discussed below with respect to ADRs will be the same as for shares in the Company, and exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to U.S. federal income tax.
Taxation of Dividends
U.S. holders. In general, subject to the passive foreign investment company rules discussed below, a distribution on an ADR will constitute a dividend for U.S. federal income tax purposes to the extent it is made from the Company's current or accumulated earnings and profits as determined under U.S. federal income tax principles. If a distribution exceeds the Company's current and accumulated earnings and profits, it will be treated as a non-taxable reduction of basis to the extent of the U.S. holder's tax basis in the ADR on which it is paid, and to the extent it exceeds that basis it will be treated as capital gain. For purposes of this discussion, the term "dividend" means a distribution that constitutes a dividend for U.S. federal income tax purposes.
The gross amount of any dividend on an ADR will be subject to U.S. federal income tax as foreign source dividend income. The amount of a dividend paid in Australian dollars will be its value in U.S. dollars based on the prevailing spot market exchange rate in effect on the day the U.S. holder receives the dividend or, in the case of a dividend received in respect of an ADR, on the date the Depositary receives it, whether or not the dividend is converted into U.S. dollars. Any gain or loss realized on a conversion or other disposition of Australian dollars generally will be treated as U.S. source ordinary income or loss. A dividend generally will constitute foreign source "passive income" or, in the case of certain holders, "financial services income" for purposes of the foreign tax credit limitation rules. For taxable years beginning after December 31, 2006, "financial services income" generally will be treated as "general category income," and "passive income" generally will be treated as "passive category income." A U.S. holder will be denied a foreign tax credit with respect to Australian income tax withheld from dividends received with respect to the underlying Ordinary Shares represented by the ADRs to the extent the U.S. holder has not held the ADRs for at least 16 days of the 30-day period beginning on the date which is 15 days before the ex-dividend date or to the extent the U.S. holder is under an obligation to make related payments with respect to substantially similar or related property. Any days during which a U.S. holder has substantially diminished its risk of loss on the ADRs are not counted toward meeting the 16-day holding period required by the statute. The rules relating to the determination of the foreign tax credit are complex, and you should consult with your own tax advisers to determine whether and to what extent you would be entitled to this credit. A dividend will not be eligible for the corporate dividends received deduction.
Subject to certain exceptions for short-term and hedged positions, a dividend an individual receives on an ADR before January 1, 2009 will be subject to a maximum tax rate of 15% if the dividend is a "qualified dividend". A dividend on an ADR will be a qualified dividend if (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Secretary of the Treasury determines is satisfactory for purposes of these rules and that includes an exchange of information program, and (ii) the Company was not, in the year prior to the year the dividend was paid, and is not,
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in the year the dividend is paid, a passive foreign investment company ("PFIC"), foreign personal holding company ("FPHC") or foreign investment company ("FIC"). The Treaty satisfies the requirements of clause (i), and we are a resident of Australia entitled to the benefits of the Treaty. Based on our audited financial statements and relevant market and shareholder data, we believe we were not a PFIC, FPHC or FIC for U.S. federal income tax purposes for our 2004 taxable year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC, FPHC or FIC for our 2005 taxable year. However, because the determination of whether we are a PFIC is based upon the composition of our income and assets from time to time, it is possible that we may become a PFIC for any future taxable year. Effective for taxable years of foreign corporations beginning after December 31, 2004, the rules relating to FPHCs and FICs have been repealed. The U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of stock of non-U.S. corporations, and intermediaries though whom the stock is held, will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because those procedures have not yet been issued, it is not clear whether the Company will be able to comply with them. Special limitations on foreign tax credits apply to dividends subject to the reduced rate of tax. Holders of ADRs and shares should consult their own tax advisers regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.
Non-U.S. holders. A dividend paid to a non-U.S. holder of an ADR will not be subject to U.S. federal income tax unless the dividend is effectively connected with the conduct of trade or business by the non-U.S. holder within the United States (and is attributable to a permanent establishment or fixed base the non-U.S. holder maintains in the United States if an applicable income tax treaty so requires as a condition for the non-U.S. holder to be subject to U.S. taxation on a net income basis on income from the ADR). A non-U.S. holder generally will be subject to tax on an effectively connected dividend in the same manner as a U.S. holder. A corporate non-U.S. holder under certain circumstances may also be subject to an additional "branch profits tax," the rate of which may be reduced pursuant to an applicable income tax treaty.
Taxation of Capital Gains
U.S. holders. Subject to the passive foreign investment company rules discussed below, on a sale or other taxable disposition of an ADR, a U.S. holder will recognize capital gain or loss in an amount equal to the difference between the U.S. holder's adjusted basis in the ADR and the amount realized on the sale or other disposition, each determined in U.S. dollars. Any gain a U.S. holder recognizes generally will be U.S. source income for U.S. foreign tax credit purposes and, subject to certain exceptions, any loss generally will be a U.S. source loss. If an Australian tax is paid on a sale or other disposition of an ADR, the generally applicable limitations under U.S. federal income tax law on crediting foreign income taxes may preclude a U.S. holder from obtaining a foreign tax credit for the Australian tax.
In general, any adjusted net capital gain of an individual in a taxable year ending before January 1, 2009 is subject to a maximum tax rate of 15%. In later years, the maximum tax rate on the net capital gain of an individual will be 20%. The deductibility of capital losses is subject to limitations.
Non-U.S. holders. A non-U.S. holder will not be subject to U.S. federal income tax on gain recognized on a sale or other disposition of an ADR unless (i) the gain is effectively connected with the conduct of trade or business by the non-U.S. holder within the United States (and is attributable to a permanent establishment or fixed base the non-U.S. holder maintains in the United States if an applicable income tax treaty so requires as a condition for the non-U.S. holder to be subject to U.S. taxation on a net income basis on income from the ADR), or (ii) in the case of a non-U.S. holder who is an individual, the holder is present in the United States for 183 or more days in the taxable year of
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the sale or other disposition and certain other conditions apply. Any effectively connected gain of a corporate non-U.S. holder may also be subject under certain circumstances to an additional "branch profits tax," the rate of which may be reduced pursuant to an applicable income tax treaty.
Passive Foreign Investment Company Rules
A special set of U.S. federal income tax rules applies to a foreign corporation that is a PFIC for U.S. federal income tax purposes. As noted above, based on our audited financial statements and relevant market and shareholder data, we believe we were not a PFIC for U.S. federal income tax purposes for our 2004 taxable year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2005 taxable year.
The PFIC rules are designed generally to eliminate any benefits of deferral of U.S. federal income tax that a U.S. holder could derive from investing in a corporation that is organized outside the United States (a "foreign corporation"). In general, a foreign corporation is a PFIC if at least 75% of its gross income for the taxable year is passive income or if at least 50% of its assets for the taxable year produce passive income or are held for the production of passive income. In general, passive income for this purpose means, with certain designated exceptions, dividends, interest, rents, royalties (other than certain rents and royalties derived in the active conduct of trade or business), annuities, net gains from dispositions of certain assets, net foreign currency gains, income equivalent to interest, income from notional principal contracts and payments in lieu of dividends. The determination of whether a foreign corporation is a PFIC is a factual determination made annually and is therefore subject to change. Subject to exceptions pursuant to certain elections that generally require the payment of tax, once stock in a foreign corporation is stock in a PFIC in the hands of a particular shareholder that is a United States person, it remains stock in a PFIC in the hands of that shareholder.
If we are treated as a PFIC, contrary to the tax consequences described in "U.S. federal Income Tax ConsiderationsTaxation of Dividends" and "U.S. federal Income Tax ConsiderationsTaxation of Capital Gains" above, a U.S. holder that does not make an election described in the succeeding two paragraphs would be subject to special rules with respect to (i) any gain realized on a sale or other disposition of an ADR and (ii) any "excess distribution" by the Company to the U.S. holder (generally, any distribution during a taxable year in which distributions to the U.S. holder on the ADR exceed 125% of the average annual taxable distributions the U.S. holder received on the ADR during the proceeding three taxable years or, if shorter, the U.S. holder's holding period for the ADR). Under those rules, (i) the gain or excess distribution would be allocated ratably over the U.S. holder's holding period for the ADR, (ii) the amount allocated to the taxable year in which the gain or excess distribution is realized would be taxable as ordinary income and (iii) the amount allocated to each prior year, with certain exceptions, would be subject to tax at the highest tax rate in effect for that year, and the interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each of those years. A U.S. holder who owns an ADR during any year we are a PFIC must file Internal Revenue Service Form 8621.
The special PFIC rules described above will not apply to a U.S. holder if the U.S. holder makes a timely election to treat the Company as a "qualified electing fund" ("QEF") in the first taxable year in which the U.S. holder owns an ADR and the Company is a PFIC and if the Company complies with certain reporting requirements. Instead, a shareholder of a QEF generally is currently taxable on a pro rata share of the Company's ordinary earnings and net capital gain as ordinary income and long-term capital gain, respectively. Neither that ordinary income nor any actual dividend from the Company would qualify for the 15% maximum tax rate on dividends described above if the Company is a PFIC in the taxable year the ordinary income is realized or the dividend is paid or in the preceding taxable year. We have not yet determined whether, if we are a PFIC, we would make the computations
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necessary to supply U.S. holders with the information needed to report income and gain pursuant to a QEF election. It is, therefore, possible that U.S. holders would not be able to make or retain that election in any year we are a PFIC. Although a QEF election generally cannot be revoked, if a U.S. holder made a timely QEF election for the first taxable year it owned an ADR and the Company is a PFIC (or is treated as having done so pursuant to any of certain elections), the QEF election will not apply during any later taxable year in which the Company does not satisfy the tests to be a PFIC. If a QEF election is not made in that first taxable year, an election in a later year generally will require the payment of tax and interest, and in certain circumstances the election may cease to be available at a later date.
In lieu of a QEF election, a U.S. holder of stock in a PFIC that is considered marketable stock could elect to mark the stock to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the stock and the U.S. holder's adjusted basis in the stock. Losses would be allowed only to the extent of net mark-to-market gain previously included in income by the U.S. holder under the election for prior taxable years. A U.S. holder's adjusted basis in the ADRs will be adjusted to reflect the amounts included or deducted with respect to the mark-to-market election. If the mark-to-market election were made, the rules set forth in the second preceding paragraph would not apply for periods covered by the election. A mark-to-market election will not apply during any later taxable year in which the Company does not satisfy the tests to be a PFIC. In general, the ADRs will be marketable stock if the ADRs are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter on a national securities exchange that is registered with the SEC or on a designated national market system or on any exchange or market that the Treasury Department determines to have rules sufficient to ensure that the market price accurately represents the fair market value of the stock. The ADRs will be listed on the NASDAQ SmallCap Market. It is not clear whether their trading on that market will qualify them as readily tradable on an established securities market in the United States. Thus, there is no certainty that the ADRs will be considered "marketable stock" for this purpose unless and until the Internal Revenue Service designates the Australian Stock Exchange as having rules adequate to carry out the purposes of the PFIC rules. There can be no assurance that the Internal Revenue Service will make that designation.
Information Reporting and Backup Withholding
Dividends paid on, and proceeds from the sale or other disposition of, an ADR to a U.S. holder generally may be subject to information reporting requirements and may be subject to backup withholding at the rate of 28% unless the U.S. holder provides an accurate taxpayer identification number or otherwise establishes an exemption. The amount of any backup withholding collected from a payment to a U.S. holder will be allowed as a credit against the U.S. holder's U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided certain required information is furnished to the Internal Revenue Service. A non-U.S. holder generally will be exempt from these information reporting requirements and backup withholding tax but may be required to comply with certain certification and identification procedures in order to establish its eligibility for exemption.
The discussion above is not intended to constitute a complete analysis of all tax considerations applicable to an investment in ADRs or Ordinary Shares. A holder should consult your tax adviser concerning the tax consequences to you in your particular situation.
Item 10.F Dividends and Paying Agents
No dividends have been paid by the Company or recommended by the directors since the end of the previous financial year.
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Item 10.G Statement by Experts
The consolidated financial statements of Genetic Technologies Limited as of June 30, 2004 and 2003 appearing in this Registration Statement have been audited by Ernst & Young, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
Item 10.H Documents on Display
The documents concerning the Company which are referred to in this Registration Statement may be inspected at the offices of the Company at Suite 2, Level 12, 75 Elizabeth Street, Sydney NSW 2000 Australia. Upon effectiveness of this Registration Statement, we will become subject to the information requirements of the U.S. Securities Exchange Act of 1934, as amended, and, in accordance therewith, will be required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission in electronic form. These materials, including this Registration Statement and the exhibits thereto, may be inspected and copied at the Commission's public reference room in Washington, D.C. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. As a foreign private issuer, we are required to make filings with the Commission by electronic means. Any filings we make electronically will be available to the public over the Internet at the Commission's website at http://www.sec.gov. We also maintain a website at www.gtg.com.au . Information on our website and website linked to it do not constitute a part of this Registration Statement.
Item 10.I Subsidiary Information
The following is a list of the Company's subsidiaries as at the date of this Registration Statement:
GeneType AG | Switzerland | 100 | % | ||
GeneType Corporation | CaliforniaU.S. | 100 | % | ||
GeneType Pty Limited | Australia | 100 | % | ||
Simons GeneType Diagnostics Pty Limited | Australia | 100 | % | ||
Genetic Technologies Corporation Pty Limited | Australia | 100 | % | ||
Silbase Scientific Services Pty Limited | Australia | 100 | % | ||
RareCellect Limited | Australia | 100 | % | ||
ImmunAid Pty Limited | Australia | 65 | % | ||
Gtech International Resources Limited | Canada | 75.8 | % | ||
AgGenomics Pty Limited | Australia | 50.1 | % |
Item 11. Quantitative And Qualitative Disclosures About Market Risk
Genetic Technologies has exposure to changes in foreign currency exchange rates and interest rates.
We invest excess cash in interest-bearing, investment-grade securities and time deposits in high-quality institutions. We do not utilize derivative financial instruments, derivative commodity instruments, positions or transactions in any material matter. Accordingly, we believe that, while the investment-grade securities and time-deposits we hold are subject to changes in financial standing of the issuer of such securities, the principal is not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. Since we invest in locations outside Australia, we are subject to certain cross-border risks.
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We operate in Australia, and we will be subject to certain foreign currency exposure. Historically, currency translation gains and losses have been reflected as adjustments to stockholders' equity, while transaction gains and losses have been reflected as components of income and loss. Transaction gains and losses could be material depending upon changes in the exchange rate relationships between the Australian dollar and the U.S. dollar. A significant amount of our license revenue is denominated in U.S. dollars.
Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk (whether on or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Financial instruments on the balance sheet that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with high credit quality institutions in order to limit the degree of credit exposure. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. The Company does not require collateral to provide credit. In addition, the majority of the Company's licensing customers are large, reputable organizations, which also reduces the risk of credit exposure. The Company has not entered into any transactions that would qualify as a financial derivative instrument.
At June 30, 2004, four customers accounted for 24% ($58,138), 21% ($50,449), 16% ($38,479) and 14% ($34,760) of accounts receivable, respectively. At June 30, 2003, no single customer accounted for 10% or more of accounts receivable.
At June 30, 2004, three suppliers accounted for 24% ($339,485), 17% ($231,389) and 10% ($144,111) of accounts payable, respectively. At June 30, 2003, three suppliers accounted for 21% ($192,730), 12% ($107,080) and 11% ($103,950) of accounts payable, respectively.
In 2004, one customer accounted for 19% ($513,434) of the Company's revenue. In 2003, four customers accounted for approximately 24% ($1,056,620), 19% ($830,073), 18% ($773,884) and 14% ($625,214) of the Company's revenue, respectively, and there was no other customer which accounted for more than 10% of the Company's revenue.
Export sales, principally to the USA, were $306,938 and $2,615,544 in 2004 and 2003, respectively.
Item 12. Description Of Securities Other Than Equity Securities
Not applicable.
Not applicable.
Not applicable
Item 12.D American Depositary Shares
Description of American Depositary Shares
The Bank of New York will act as the depositary bank for the American Depositary Shares. The Bank of New York's depositary offices are located at 101 Barclay Street, New York, New York, 10286.
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American Depositary Shares are frequently referred to as "ADSs" and represent ownership interests in securities that are on deposit with the depositary bank. ADSs are normally represented by certificates that are commonly known as "American Depositary Receipts" or "ADRs." The depositary bank typically appoints a custodian to safekeep the securities on deposit. In this case, the custodians are Commonwealth Bank of Australia, National Australia Bank Limited, and the Australian office of the Australia and New Zealand Banking Group Limited.
We have appointed The Bank of New York as depositary bank pursuant to a deposit agreement. A copy of the deposit agreement is on file with the SEC under cover of a Registration Statement on Form F-6. You may obtain a copy of the deposit agreement from the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please refer to Registration Number 333-13162 when retrieving such copy.
We are providing you with a summary description of the ADSs and your rights as an owner of ADSs. Please remember that summaries by their nature lack the precision of the information summarized and that a holder's rights and obligations as an owner of ADSs will be determined by the deposit agreement and not by this summary. We urge you to review the deposit agreement in its entirety as well as the form of ADR attached to the deposit agreement.
Each ADS represents thirty two Ordinary Shares on deposit with the custodian bank. An ADS will also represent any other property received by the depositary bank or the custodian on behalf of the owner of the ADS but that has not been distributed to the owners of ADSs because of legal restrictions or practical considerations.
If you become an owner of ADSs, you will become a party to the deposit agreement and therefore will be bound to its terms and to the terms of the ADR that represents your ADSs. The deposit agreement and the ADR specify our rights and obligations as well as your rights and obligations as owner of ADSs and those of the depositary bank. As an ADS holder you appoint the depositary bank to act on your behalf in certain circumstances. The deposit agreement is governed by New York law. However, our obligations to the holders of Ordinary Shares will continue to be governed by the laws of the Australia, which are different from the laws in the United States.
As an owner of ADSs, you may hold your ADSs either by means of an ADR registered in your name or through a brokerage or safekeeping account. If you decide to hold your ADSs through your brokerage or safekeeping account, you must rely on the procedures of your broker or bank to assert your rights as ADS owner. Please consult with your broker or bank to determine what those procedures are. This summary description assumes you have opted to own the ADSs directly by means of an ADR registered in your name and, as such, we will refer to you as the "holder." When we refer to "you," we assume the reader owns new ADSs and will own ADSs at the relevant time.
Dividends and Distributions
As a holder, you generally have the right to receive the distributions we make on the securities deposited with the custodian bank. Your receipt of these distributions may be limited, however, by practical considerations and legal limitations. Holders will receive such distributions under the terms of the deposit agreement in proportion to the number of ADSs held as of a specified record date.
Distributions of Cash
Whenever we make a cash distribution for the securities on deposit with the custodian, we will notify the depositary bank. Upon receipt of such notice the depositary bank will arrange for the funds to be converted into U.S. dollars and for the distribution of the U.S. dollars to the holders.
The conversion into U.S. dollars will take place only if practicable and if the U.S. dollars are transferable to the United States. The amounts distributed to holders will be net of the fees, expenses,
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taxes and governmental charges payable by holders under the terms of the deposit agreement. The depositary will apply the same method for distributing the proceeds of the sale of any property (such as undistributed rights) held by the custodian in respect of securities on deposit.
Distributions of Shares
Whenever we make a stock dividend of Ordinary Shares for the securities on deposit with the custodian, we will notify the depositary bank. Upon receipt of such notice, the depositary bank will either distribute to holders new ADSs representing the Ordinary Shares deposited or modify the ADS to Ordinary Shares ratio, in which case each ADS you hold will represent rights and interests in the additional Ordinary Shares so deposited. Only whole new ADSs will be distributed. Fractional entitlements will be sold and the proceeds of such sale will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-Share ratio upon a distribution of Ordinary Shares will be made net of the fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes or governmental charges, the depositary bank may sell all or a portion of the new Ordinary Shares so distributed.
No such distribution of new ADSs will be made if it would violate a law (e.g., the U.S. securities laws) or if it is not operationally practicable. If the depositary bank does not distribute new ADSs as described above, it will use its best efforts to sell the Ordinary Shares received and will distribute the proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever we intend to distribute rights to purchase additional Ordinary Shares, we will give prior notice to the depositary bank and we will assist the depositary bank in determining whether it is lawful and reasonably practicable to distribute rights to purchase additional ADSs to holders.
The depositary bank will establish procedures to distribute rights to purchase additional ADSs to holders and to enable such holders to exercise such rights if it is lawful and reasonably practicable to make the rights available to holders of ADSs, and if we provide all of the documentation contemplated in the deposit agreement (such as opinions to address the lawfulness of the transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights. The depositary bank is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to purchase new Ordinary Shares directly rather than new ADSs.
The depositary bank will not distribute the rights to you if:
The depositary bank will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such sale will be distributed to holders as in the case of a cash distribution. If the depositary bank is unable to sell the rights, it will allow the rights to lapse.
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Elective Distributions
Whenever we intend to distribute a dividend payable at the election of shareholders either in cash or in additional shares, we will give prior notice thereof to the depositary bank and will indicate whether we wish the elective distribution to be made available to you. In such case, we will assist the depositary bank in determining whether such distribution is lawful and reasonably practical.
The depositary bank will make the election available to you only if it is reasonably practical and if we have provided all of the documentation contemplated in the deposit agreement. In such case, the depositary bank will establish procedures to enable you to elect to receive either cash or additional ADSs, in each case as described in the deposit agreement.
If the election is not made available to you, you will receive either cash or additional ADSs, depending on what a shareholder in Australia would receive for failing to make an election, as more fully described in the deposit agreement.
Other Distributions
Whenever we intend to distribute property other than cash, Ordinary Shares or rights to purchase additional Ordinary Shares, we will notify the depositary bank in advance and will indicate whether we wish such distribution to be made to you. If so, we will assist the depositary bank in determining whether such distribution to holders is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to you and if we provide all of the documentation contemplated in the deposit agreement, the depositary bank will distribute the property to the holders in a manner it deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental charges payable by holders under the terms of the deposit agreement. In order to pay such taxes and governmental charges, the depositary bank may sell all or a portion of the property received.
The depositary bank will not distribute the property to you and will sell the property if:
The proceeds of such a sale will be distributed to holders as in the case of a cash distribution.
Redemption
Whenever we decide to redeem any of the securities on deposit with the custodian, we will notify the depositary bank. If it is reasonably practicable and if we provide all of the documentation contemplated in the deposit agreement, the depositary bank will mail notice of the redemption to the holders.
The custodian will be instructed to surrender the shares being redeemed against payment of the applicable redemption price. The depositary bank will convert the redemption funds received into U.S. dollars upon the terms of the deposit agreement and will establish procedures to enable holders to receive the net proceeds from the redemption upon surrender of their ADSs to the depositary bank. You may have to pay fees, expenses, taxes and other governmental charges upon the redemption of your ADSs. If less than all ADSs are being redeemed, the ADSs to be retired will be selected by lot or on a pro rata basis, as the depositary bank may determine.
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Changes Affecting Ordinary Shares
The Ordinary Shares held on deposit for your ADSs may change from time to time. For example, there may be a change in nominal or par value, a split-up, cancellation, consolidation or classification of such Ordinary Shares or a recapitalization, reorganization, merger, consolidation or sale of assets.
If any such change were to occur, your ADSs would, to the extent permitted by law, represent the right to receive the property received or exchanged in respect of the Ordinary Shares held on deposit. The depositary bank may in such circumstances deliver new ADSs to you or call for the exchange of your existing ADSs for new ADSs. If the depositary bank may not lawfully distribute such property to you, the depositary bank may sell such property and distribute the net proceeds to you as in the case of a cash distribution.
Issuance of ADSs upon Deposit of Ordinary Shares
The depositary bank may create ADSs on your behalf if you or your broker deposit Ordinary Shares with the custodian. The depositary bank will deliver these ADSs to the person you indicate only after you pay any applicable issuance fees and any charges and taxes payable for the transfer of the Ordinary Shares to the custodian.
The issuance of ADSs may be delayed until the depositary bank or the custodian receives confirmation rights, if any, with respect to such Ordinary Shares have been validly waived or exercised.
Withdrawal of Shares Upon Cancellation of ADSs
As a holder, you will be entitled to present your ADSs to the depositary bank for cancellation and then receive the underlying Ordinary Shares at the custodian's offices. In order to withdraw the Ordinary Shares represented by your ADSs, you will be required to pay to the depositary the fees for cancellation of ADSs and any charges and taxes payable upon the transfer of the Ordinary Shares being withdrawn. You assume the risk for delivery of all funds and securities upon withdrawal. Once cancelled, the ADSs will not have any rights under the deposit agreement.
If you hold an ADR registered in your name, the depositary bank may ask you to provide proof of identity and genuineness of any signature and certain other documents as the depositary bank may deem appropriate before it will cancel your ADSs. The withdrawal of the Ordinary Shares represented by your ADSs may be delayed until the depositary bank receives satisfactory evidence of compliance with all applicable laws and regulations. Please keep in mind that the depositary bank will only accept ADSs for cancellations that represent a whole number of securities on deposit.
You will have the right to withdraw the securities represented by your ADSs at any time except for:
The deposit agreement may not be modified to impair your right to withdraw the securities represented by your ADSs except to comply with mandatory provisions of law.
97
Voting Rights
As a holder, you generally have the right under the deposit agreement to instruct the depositary bank to exercise the voting rights for the Ordinary Shares represented by your ADSs. The voting rights of holders of Ordinary Shares are described in Item 10. A, "Share Capital."
At our request, the depositary bank will mail to you any notice of shareholders' meeting received from us together with information explaining how to instruct the depositary bank to exercise the voting rights of the securities represented by ADSs.
If the depositary bank timely receives voting instructions from a holder of ADSs, it will endeavor to vote the securities represented by the holder's ADSs in accordance with such voting instructions.
Please note that the ability of the depositary bank to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. You may not receive voting materials in time to enable you to return voting instructions to the depositary bank in a timely manner. Securities for which no voting instructions have been received will not be voted.
Fees and Charges
As an ADS holder, you will be required to pay the following service fees to the depositary bank:
Service
|
Fees
|
|
---|---|---|
Issuance of ADSs | Up to 5¢ per ADS issued | |
Cancellation of ADSs |
|
Up to 5¢ per ADS canceled |
Exercise of rights to purchase |
|
Up to 5¢ per ADS issued additional ADSs |
Distribution of cash upon sale rights and other entitlements |
|
Up to 2¢ per ADS held |
As an ADS holder you will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such as:
We have agreed to pay certain other charges and expenses of the depositary bank. Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary bank. You will receive prior notice of such changes.
Amendments and Termination
We may agree with the depositary bank to modify the deposit agreement at any time without your consent. We undertake to give holders 90 days' prior notice of any modifications that would prejudice any of their substantial rights under the deposit agreement (except in very limited circumstances enumerated in the deposit agreement).
You will be bound by the modifications to the deposit agreement if you continue to hold your ADSs after the modifications to the deposit agreement become effective. The deposit agreement cannot
98
be amended to prevent you from withdrawing the Ordinary Shares represented by your ADSs (except as permitted by law).
We have the right to direct the depositary bank to terminate the deposit agreement. Similarly, the depositary bank may in certain circumstances on its own initiative terminate the deposit agreement. In either case, the depositary bank must give notice to the holders at least 90 days before termination.
Upon termination, the following will occur under the deposit agreement:
Books of Depositary
The depositary bank will maintain ADS holder records at its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit agreement.
The depositary bank will maintain in New York facilities to record and process the issuance, cancellation, combination, split-up and transfer of ADRs. These facilities may be closed from time to time, to the extent not prohibited by law.
Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositary bank's obligations to you. Please note the following:
99
securities on deposit or by reason of any act of God or war or other circumstances beyond our control.
Pre-Release Transactions
The depositary bank may, in certain circumstances, issue ADSs before receiving a deposit of Ordinary Shares or release Ordinary Shares before receiving ADSs. These transactions are commonly referred to as "pre-release transactions." The deposit agreement limits the aggregate size of pre-release transactions and imposes a number of conditions on such transactions (i.e., the need to receive collateral, the type of collateral required, the representations required from brokers, etc.). The depositary bank may retain the compensation received from the pre-release transactions. Pre-release transactions are required to be fully collateralized, in accordance with the depositary bank's standard credit procedures.
Taxes
You will be responsible for the taxes and other governmental charges payable on the ADSs and the securities represented by the ADSs. We, the depositary bank and the custodian may deduct from any distribution the taxes and governmental charges payable by holders and may sell any and all property on deposit to pay the taxes and governmental charges payable by holders. You will be liable for any deficiency if the sale proceeds do not cover the taxes that are due.
The depositary bank may refuse to issue ADSs, to deliver, transfer, split and combine ADRs or to release securities on deposit until all taxes and charges are paid by the applicable holder. The depositary bank and the custodian may take reasonable administrative actions to obtain tax refunds and reduced tax withholding for any distributions on your behalf. However, you may be required to provide to the depositary bank and to the custodian proof of taxpayer status and residence and such other information as the depositary bank and the custodian may require to fulfill legal obligations. You are required to indemnify us, the depositary bank and the custodian for any claims with respect to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary bank will arrange for the conversion of all foreign currency received into U.S. dollars if such conversion is practical, and it will distribute the U.S. dollars in accordance with the terms of the deposit agreement. You may have to pay fees and expenses incurred in converting foreign currency, such as fees and expenses incurred in complying with currency exchange controls and other governmental requirements.
100
If the conversion of foreign currency is not practical or lawful, or if any required approvals are denied or not obtainable at a reasonable cost or within a reasonable period, the depositary bank may take the following actions in its discretion:
Hold the foreign currency (without liability for interest) for the applicable holders
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to The Rights Of Security Holders and Use Of Proceeds
Not applicable.
Item 15. Controls and Procedures
Not applicable in the current year.
Item 16A. Audit Committee Financial Expert
Not applicable in the current year.
We have adopted a formal Code of of Conduct which applies to all of our Directors and employees, including our chief executive officer and chief financial officer. A copy is available on our website at www.gtg.com.au. Our Board of Directors is responsible for the corporate governance of the consolidated entity and guides and monitors the business and affairs of Genetic Technologies Limited on behalf of the shareholders by whom they are elected and to whom they are accountable. We are required to publish a Corporate Governance Statement annually that accords with the introduction last year of the Australian Stock Exchange Corporate Governance Council's (the "Council's") "Principles of Good Corporate Governance and Best Practice Recommendations". In accordance with the Council's recommendations, the Corporate Governance Statement must now contain certain specific information and must disclose the extent to which we have followed the guidelines during the period. Where a recommendation has not been followed, that fact must be disclosed, together with the reasons for the departure. Genetic Technologies Limited's Corporate Governance Statement is now structured with
101
reference to the Corporate Governance Council's principles and recommendations, which are as follows:
Principle 1. | Lay solid foundations for management and oversight | |
Principle 2. | Structure the Board to add value | |
Principle 3. | Promote ethical and responsible decision making | |
Principle 4. | Safeguard integrity in financial reporting | |
Principle 5. | Make timely and balanced disclosure | |
Principle 6. | Respect the rights of shareholders | |
Principle 7. | Recognize and manage risk | |
Principle 8. | Encourage enhanced performance | |
Principle 9. | Remunerate fairly and responsibly | |
Principle 10. | Recognize the legitimate interests of stakeholders |
Our corporate governance practices were in place throughout the year ended June 30, 2004 and embrace the Council's best practice recommendations which are being put in place as appropriate.
We do not meet Recommendation 2.3 of the Guidelines as the Executive Chairman, Dr. Mervyn Jacobson also has the role of Chief Executive Officer. We believe Dr. Jacobson is well qualified to carry out both roles particularly with his medical background and in his capacity as one of the founders of the original company GeneType AG. The audit committee composition did not fully comply with the recommendations throughout the year as not all Directors on the committee were non-executive. Once Robert Edge was appointed as a non-executive director on April 19, 2004 and was also appointed Chairman of the Audit Committee, the committee consisted of all non-executive directors. During the current year the Directors will establish a formal risk assessment plan in order to comply with Principle 7. Additional information regarding our corporate governance policies, its Directors and other relevant information can be found on our website: www.gtg.com.au.
Item 16C. Principal Accountant Fees And Services
Not applicable.
Item 16D. Exemptions From The Listing Standards For Audit Committees
Not applicable.
Item 16E. Purchases Of Equity Securities By The Issuer And Affiliated Purchasers
Not applicable.
The Company has responded to Item 18 in lieu of responding to this Item.
102
GENETIC TECHNOLOGIES LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
---|---|---|
Genetic Technologies LimitedConsolidated Financial Statements for the six months ended December 31, 2004 and 2003. | F-1 | |
Genetic Technologies LimitedConsolidated Financial Statements for the years ended June 30, 2004 and 2003. |
|
F-10 |
Genetic Technologies LimitedReport of Independent Registered Public Accounting Firm dated August 31, 2004. |
|
F-11 |
Genetic Technologies LimitedConsolidated Balance Sheets for the years ended June 30, 2004 and 2003. |
|
F-12 |
Genetic Technologies LimitedConsolidated Statements of Operations for the years ended June 30, 2004 and 2003. |
|
F-13 |
Genetic Technologies LimitedConsolidated Statements of Changes in Shareholders' Equity. |
|
F-14 |
Genetic Technologies LimitedConsolidated Statements of Cash Flows for the years ended June 30, 2004 and 2003. |
|
F-15 |
Genetic Technologies LimitedNotes to Consolidated Financial Statements. |
|
F-16 |
103
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
SIX-MONTHS ENDED DECEMBER 31, 2004 and 2003
UNAUDITED
F-1
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS)
|
December 31, 2004
|
June 30, 2004
|
||||||
---|---|---|---|---|---|---|---|---|
|
(unaudited)
|
|
||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 8,474,066 | $ | 7,899,760 | ||||
Trade accounts receivable | 331,378 | 243,531 | ||||||
GST receivable | | 869,000 | ||||||
Prepayments | 320,348 | | ||||||
Sundry debtors | 114,144 | 24,684 | ||||||
Restricted security deposits | 68,297 | 26,873 | ||||||
|
|
|||||||
Total current assets | $ | 9,308,233 | $ | 9,063,848 | ||||
|
|
|||||||
Non-current assets |
|
|
|
|
|
|
|
|
Cost-method investments * | $ | 500,009 | $ | 504,509 | ||||
Laboratory equipment, net of accumulated depreciation of $1,235,134 (December 2004) and $826,229 (June 2004) | 2,076,640 | 1,287,225 | ||||||
Patents, net | 4,777,309 | 4,481,143 | ||||||
Goodwill, net | 355,501 | 316,648 | ||||||
|
|
|||||||
Total non-current assets | $ | 7,709,459 | $ | 6,589,525 | ||||
|
|
|||||||
Total assets | $ | 17,017,692 | $ | 15,653,373 | ||||
|
|
|||||||
Liabilities and shareholders' equity |
|
|
|
|
|
|
|
|
Current liabilities | ||||||||
Trade accounts payable | $ | 1,779,822 | $ | 1,401,102 | ||||
GST relating to acquisition | | 869,000 | ||||||
Provision for tax | 460,937 | 277,991 | ||||||
Provision for employee entitlements | 271,420 | 222,183 | ||||||
Deferred revenue | 615,976 | 462,931 | ||||||
|
|
|||||||
Total current liabilities | $ | 3,128,155 | $ | 3,233,207 | ||||
|
|
|||||||
Non-current liabilities |
|
|
|
|
|
|
|
|
Unsecured loan | $ | 546,350 | $ | 486,640 | ||||
|
|
|||||||
Total non-current liabilities | $ | 546,350 | $ | 486,640 | ||||
|
|
|||||||
Total liabilities | $ | 3,674,505 | $ | 3,719,847 | ||||
|
|
|||||||
Commitments and contingencies | | | ||||||
|
|
|||||||
Minority interest | $ | 88,455 | $ | 82,196 | ||||
|
|
|||||||
Shareholders' equity |
|
|
|
|
|
|
|
|
Common shares, no par value, issued and outstanding299,007,007 shares (June 2004: 296,808,561 shares) | $ | 17,662,960 | $ | 17,291,502 | ||||
Accumulated deficit | (7,652,354 | ) | (7,239,164 | ) | ||||
Accumulated other comprehensive income | 3,244,126 | 1,798,992 | ||||||
|
|
|||||||
Total shareholders' equity | $ | 13,254,732 | $ | 11,851,330 | ||||
|
|
|||||||
Total liabilities and shareholders' equity | $ | 17,017,692 | $ | 15,653,373 | ||||
|
|
See accompanying notes to financial statements.
F-2
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. DOLLARS)
|
Six months ended December 31,
|
|||||||
---|---|---|---|---|---|---|---|---|
|
2004
|
2003
|
||||||
|
(unaudited)
|
(unaudited)
|
||||||
Revenues | ||||||||
Service testing revenues | $ | 1,219,555 | $ | 1,060,207 | ||||
Grant income | 108,875 | 96,844 | ||||||
License revenues | 4,148,983 | 241,567 | ||||||
Other income | | 967 | ||||||
|
|
|||||||
Total revenues | $ | 5,477,413 | $ | 1,399,585 | ||||
|
|
|||||||
Total operating income | $ | 5,477,413 | $ | 1,399,585 | ||||
|
|
|||||||
Operating expenses | ||||||||
Service testing expenses *, including stock compensation expense of $161 (2004) and $nil (2003) | $ | 1,916,201 | $ | 1,133,859 | ||||
Research and development *, including stock compensation expense of $19,328 (2004) and $25,089 (2003) | 617,754 | 388,589 | ||||||
Patent and license fees | 1,053,566 | 347,142 | ||||||
Sales and marketing | 365,221 | 293,266 | ||||||
General and administrative * #, including stock compensation expense of $341 (2004) and $nil (2003) | 1,816,126 | 1,433,288 | ||||||
|
|
|||||||
Total operating expenses | $ | 5,768,868 | $ | 3,596,144 | ||||
|
|
|||||||
Loss from operations | $ | (291,455 | ) | $ | (2,196,559 | ) | ||
|
|
|||||||
Other income (expenses) | ||||||||
Interest income | $ | 174,933 | $ | 143,508 | ||||
Net profit on securities | | 224,749 | ||||||
Net foreign exchange losses | (160,353 | ) | (268,248 | ) | ||||
|
|
|||||||
Total other income (expenses) | $ | 14,580 | $ | 100,009 | ||||
|
|
|||||||
Net loss before income taxes | $ | (276,875 | ) | $ | (2,096,550 | ) | ||
Income taxes (withholding taxes) | (139,912 | ) | (6,872 | ) | ||||
|
|
|||||||
Net loss before minority interest | $ | (416,787 | ) | $ | (2,103,422 | ) | ||
Minority interest | 3,597 | (13,725 | ) | |||||
|
|
|||||||
Net loss | $ | (413,190 | ) | $ | (2,117,147 | ) | ||
|
|
|||||||
Net loss per common share (basic and diluted) | $ | (0.00 | ) | $ | (0.01 | ) | ||
|
|
|||||||
Weighted average shares outstanding (basic and diluted) | 297,663,917 | 274,207,046 | ||||||
|
|
See accompanying notes to financial statements.
F-3
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. DOLLARS)
|
Number of
Common Shares |
Paid in
Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Loss |
Totals
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
BalanceJuly 1, 2003 | 262,234,425 | $ | 5,715,441 | $ | (2,422,438 | ) | $ | 911,307 | $ | 4,204,310 | ||||||
Issuance of shares at 48 cents each as part of capital raising | 13,333,333 | 6,395,000 | | | 6,395,000 | |||||||||||
Less associated transaction costs | | (223,825 | ) | | | (223,825 | ) | |||||||||
Issuance of common shares at 13 cents on exercise of Vendor options | 3,336,636 | 440,190 | | | 440,190 | |||||||||||
Issuance of common shares at 27 cents to acquire patents | 16,666,667 | 4,524,000 | | | 4,524,000 | |||||||||||
Issuance of common shares at 30 cents on exercise of Director options | 1,000,000 | 295,560 | | | 295,560 | |||||||||||
Issuance of common shares at 32 cents on exercise of Staff options | 112,500 | 36,032 | | | 36,032 | |||||||||||
Issuance of common shares at 37 cents on exercise of Staff options | 125,000 | 46,200 | | | 46,200 | |||||||||||
Stock options issued as compensation | | 62,904 | | | 62,904 | |||||||||||
Other comprehensive income (loss), net of tax of $nil: | ||||||||||||||||
Foreign Currency Translation adjustment | | | | 887,685 | 887,685 | |||||||||||
Net loss | | | (4,816,726 | ) | | (4,816,726 | ) | |||||||||
|
||||||||||||||||
Comprehensive loss # | (3,929,041 | ) | ||||||||||||||
|
|
|
|
|
||||||||||||
BalanceJune 30, 2004 | 296,808,561 | $ | 17,291,502 | $ | (7,239,164 | ) | $ | 1,798,992 | $ | 11,851,330 | ||||||
Issuance of common shares at 15 cents on exercise of Vendor options | 2,085,946 | 308,054 | | | 308,054 | |||||||||||
Issuance of common shares at 40 cents on exercise of Staff options | 75,000 | 29,984 | | | 29,984 | |||||||||||
Issuance of common shares at 36 cents on exercise of Staff options | 37,500 | 13,590 | | | 13,590 | |||||||||||
Stock options issued as compensation | | 19,830 | | | 19,830 | |||||||||||
Other comprehensive income (loss), net of tax of $nil: | ||||||||||||||||
Foreign Currency Translation adjustment | | | | 1,445,134 | 1,445,134 | |||||||||||
Net loss | | | (413,190 | ) | | (413,190 | ) | |||||||||
|
||||||||||||||||
Comprehensive profit | 1,031,944 | |||||||||||||||
|
|
|
|
|
||||||||||||
BalanceDecember 31, 2004 | 299,007,007 | $ | 17,662,960 | $ | (7,652,354 | ) | $ | 3,244,126 | $ | 13,254,732 | ||||||
|
|
|
|
|
See accompanying notes to financial statements.
F-4
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS)
|
Six months ended December 31,
|
|||||||
---|---|---|---|---|---|---|---|---|
|
2004
|
2003
|
||||||
|
(unaudited)
|
(unaudited)
|
||||||
Net cash provided by /(used in) operating activities | $ | 209,959 | $ | (2,666,256 | ) | |||
|
|
|||||||
Investing activities | ||||||||
Payment for laboratory equipment | $ | (539,128 | ) | $ | (127,362 | ) | ||
Proceeds from sale of investment securities | | 270,713 | ||||||
|
|
|||||||
Net cash provided by /(used in) investing activities | $ | (539,128 | ) | $ | 143,351 | |||
|
|
|||||||
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from issuance of common shares | $ | | $ | 6,171,175 | ||||
Proceeds from stock options exercised | 351,628 | 798,653 | ||||||
|
|
|||||||
Net cash provided by financing activities | $ | 351,628 | $ | 6,969,828 | ||||
|
|
|||||||
Net change before exchange rate changes | $ | 22,459 | $ | 4,446,923 | ||||
Effect of exchange rate changes on cash | 551,847 | 1,419,473 | ||||||
|
|
|||||||
Net change in cash and cash equivalents | $ | 574,306 | $ | 5,866,396 | ||||
Cash and cash equivalents, beginning of period | 7,899,760 | 3,909,202 | ||||||
|
|
|||||||
Cash and cash equivalents, end of period | $ | 8,474,066 | $ | 9,775,598 | ||||
|
|
|||||||
Supplemental disclosure of cashflow information | ||||||||
Cash paid for income tax | $ | | $ | | ||||
Cash paid for interest | | |
See accompanying notes to financial statements.
F-5
1. Basis of presentation and summary of significant accounting policies
Basis of presentation
The Company's principal activities include the licensing of its patented genetic technologies, the provision of genetic tests and the conducting of various research and developments projects in the fields of genetics and genomics. Revenues are principally generated from license fees and genetic testing. The consolidated financial statements are presented in United States dollars and have been prepared in accordance with US GAAP.
In the opinion of the Company, the accompanying consolidated unaudited financial statements contain all adjustments necessary to represent fairly their financial position as of December 31, 2004, the results of their operations and cash flows for the six months ended December 31, 2004 and 2003. These adjustments present only normal recurring items.
Foreign currency translation
The accounts of the Company are translated to the reporting currency in accordance with Statement of Financial Accounting Standards (SFAS) No. 52: Foreign Currency Translation . The Company's management has elected to present these consolidated financial statements in U.S. dollars ("USD"), the reporting currency. The Australian dollar ("AUD") is the functional currency for the Company. The method of foreign exchange translation adopted for foreign subsidiaries depends on the functional currency of such entities. In all cases for the Company, the functional currency of foreign, self-sustaining subsidiaries is their foreign currency, being the currency of the primary environment in which they operate. The financial statements of these entities are translated into AUD and consolidated into the parent company. The consolidated financial statements are then translated into USD, the reporting currency. Accordingly;
Receivables and liabilities denominated in foreign currencies are remeasured at period-end exchange rates. Gains and losses resulting from foreign currency transactions are reported in the consolidated statements of operations.
The rates used to translate AUD to USD for assets and liabilities were:
December 31, 2004
|
June 30, 2004
|
|
---|---|---|
$0.7805 | $0.6952 |
F-6
Revenues and expenses are translated at the average exchange rate during the six month period. The rates used to translate revenues and expenses were:
December 31,
|
||
---|---|---|
2004
|
2003
|
|
$0.7337 | $0.6872 |
Commitments, contingencies and expected future income detailed in the notes have been translated into U.S. currency at the rate of exchange at December 31, 2004 of AUD1.00 = $0.7805.
Stock-based compensation
The Company has elected to account for its stock-based employee compensation plan under the intrinsic value method in accordance with the Accounting Principals Board Opinion No. 25: Accounting for Stock Issued to Employees ("APB 25") and related interpretations. The Company has adopted the disclosure-only provisions of FASB Statement No. 123: Accounting for Stock-Based Compensation ("SFAS 123") as amended by FASB Statement No. 148: Accounting for Stock Based CompensationTransition and Disclosure ("SFAS 148").
In accordance with APB 25, the Company records and amortizes, over the related vesting periods, deferred compensation representing the difference between the exercise price of stock options granted and the fair value of the Company's common shares on the measurement date. Options granted to consultants and other non-employees are accounted for in accordance with Emerging Issues Task Force Consensus No. 96-18: Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or Services , and valued using the Black-Scholes option valuation model. In circumstances in which the Company's shares are issued in exchange for services, compensation is recorded based on the fair value of the shares at the date of measurement, as determined by reference to quoted market price.
Pro forma information regarding net loss is required by SFAS 123, as amended by SFAS 148, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS 123 as of its effective date. The fair value of the options issued to employees was estimated at the date of grant using the Binomial option-pricing model with the following weighted-average assumptions:
|
December 31,
|
|||
---|---|---|---|---|
|
2004
|
2003
|
||
Risk Free Interest Rate | 5.14%5.78% | 5.80% | ||
Expected Dividend Yield | | | ||
Expected Volatility | 0.7440.757 | 0.89 | ||
Expected Lives (years) | 5.0 | 6.0 |
F-7
Had the Company elected to adopt the fair value recognition provisions of SFAS 123, pro forma net loss would be as follows:
|
Six months ended December 31,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Net loss as reported | $ | (413,190 | ) | $ | (2,117,147 | ) | |
Employee stock-based compensation, net of taxes, as calculated under APB 25 included in net loss as reported |
|
|
502 |
|
|
470 |
|
Employee stock-based compensation, net of taxes, as calculated under SFAS 123 |
|
|
(347,580 |
) |
|
(231,860 |
) |
|
|
||||||
Pro forma net loss | $ | (760,268 | ) | $ | (2,348,537 | ) | |
|
|
||||||
Net loss per common share (basic and diluted) as reported | $ | (0.00 | ) | $ | (0.01 | ) | |
|
|
||||||
Pro forma net loss per common share (basic and diluted) as reported | $ | (0.00 | ) | $ | (0.01 | ) | |
|
|
New pronouncements
In December 2004, the FASB issued SFAS No. 123 (Revised 2004): Share-Based Payment (SFAS 123-R), which replaces the existing SFAS 123 and supersedes APB 25. SFAS 123-R requires companies to measure and record compensation expense for stock options and other share-based payments based on the instruments' fair value. SFAS 123-R is effective for interim and annual reporting periods beginning after June 15, 2005. The Company will adopt SFAS 123-R on July 1, 2005 by using the modified prospective approach, which requires recognizing an expense for options granted prior to the adoption date equal to the fair value of the unvested amounts over their remaining vesting period. The portion of these options' fair value attributable to vested awards prior to the adoption of SFAS 123-R is never recognized. For unvested stock-based awards granted before January 1, 2003 ("APB 25 awards"), the Company will expense the fair value of the awards as at the grant date over the remaining vesting period. The Company expects that there will be a negative impact from recognizing the stock compensation expense for the unvested APB 25 awards under the new standard. The Company continues to evaluate other aspects of adopting SFAS 123-R.
2. Patents, net
Patents consist of the following:
|
December 31, 2004
|
June 30, 2004
|
|||||
---|---|---|---|---|---|---|---|
Patents | $ | 5,073,250 | $ | 4,518,800 | |||
Accumulated amortization | (295,941 | ) | (37,657 | ) | |||
|
|
||||||
Patents, net | $ | 4,777,309 | $ | 4,481,143 | |||
|
|
F-8
Patents are reported entirely by the Australian segment of the Company. The change in the carrying value of patents is represented by:
|
December 31, 2004
|
June 30, 2004
|
|||||
---|---|---|---|---|---|---|---|
Patents, opening cost | $ | 4,518,800 | $ | | |||
Purchases | | 4,518,800 | |||||
Foreign currency exchange fluctuations | 554,450 | | |||||
Impairment losses | | | |||||
|
|
||||||
Patents, closing cost | $ | 5,073,250 | $ | 4,518,800 | |||
|
|
||||||
Accumulated amortization, opening | $ | 37,657 | $ | | |||
Amortization expense | 238,453 | 38,632 | |||||
Foreign currency exchange fluctuations | 19,831 | (975 | ) | ||||
|
|
||||||
Accumulated amortization, closing | $ | 295,941 | $ | 37,657 | |||
|
|
3. Commitments and contingencies
Contingencies
On August 13, 2004, Auckland District Health Board ("ADHB") lodged a Statement of Claim in the High Court of New Zealand alleging that the Company made "groundless threats of patent infringement" against ADHB. On October 22, 2004, the Company filed a Statement of Defence. A further amended Statement of Defence was filed by the Company on October 29, 2004, together with a Memorandum of Counsel. A Judicial Conference was attended by the attorneys for the parties in Auckland on February 23, 2005 in the presence of an Associate Judge of the High Court of New Zealand Auckland Registry, and a further timetable was set. Mediation between the parties is scheduled to occur in mid-June 2005. In accordance with FAS 5: Accounting for Contingencies, no accrual has been made in respect of any loss which may arise from this matter as, at the date of these financial statements, it is not possible to determine if it is probable that a liability has been incurred, nor is it possible to reasonably estimate any loss.
The Company has been notified of a number of native title claims covering exploration tenements in the Duketon Belt Joint Venture in Western Australia held by the Company under the Commonwealth Native Title Act, 1993. Until further information regarding the claims and the affected area is available, the Company will not be in a position to assess the likely effect, if any, of any claim. However, the directors expect that any future exploration will not be materially affected by any claim or the claims in aggregate.
4. Segment disclosures
The Company applies SFAS No. 131: Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"), which establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to shareholders. SFAS 131 also establishes standards for related disclosures about products and services and geographic areas.
F-9
The Company currently operates in Australia, Switzerland and Canada in two reportable segmentsthe biotechnology industry and investment activities. The different types of revenues received from the Biotechnology segment is disclosed in the consolidated statement of operations.
Revenues from external customers from the different operating activities of the Company related solely to the biotechnology industry.
Net loss based upon the operating activity, is as follows:
|
Six months ended December 31,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Biotechnology | $ | (413,190 | ) | $ | (2,341,896 | ) | |
Investment | | 224,749 | |||||
|
|
||||||
Total | $ | (413,190 | ) | $ | (2,117,147 | ) | |
|
|
Revenues from external customers based upon the country of origin of the sale related solely to Australia.
Net loss based upon the country of origin of the sale is recorded in, are as follows:
|
Six months ended December 31,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Australia | $ | (393,440 | ) | $ | (2,177,055 | ) | |
Switzerland | (7,603 | ) | (3,031 | ) | |||
Other | (12,147 | ) | 62,939 | ||||
|
|
||||||
Total | $ | (413,190 | ) | $ | (2,117,147 | ) | |
|
|
5. Subsequent events
On January 14, 2005, the Company executed a Master Asset Finance Agreement with National Australia Bank Limited in respect of a $1,951,250 (AUD2.5 million) asset finance facility (the "Facility"). Subsequent to December 31, 2004, the Company financed the acquisition of laboratory and other equipment under the Facility with a total value of $1,179,409 (AUD1,511,094). Each of the Company's Australian-resident controlled entities has provided guarantees to the Company in respect of the Facility.
On February 16, 2005, the Company attended a second mediation settlement conference in San Francisco in respect of its action against Applera Corporation, under the supervision of Judge Spero. The case did not settle. Judge Spero indicated he would now confer with the attorneys for both parties in the subsequent weeks to discuss the next steps.
Subsequent to December 31, 2004, the following unlisted options have been exercised, resulting in the issue of a further 63,362,892 common shares:
Description
|
Number
|
|
---|---|---|
Vendor options at 14.6 cents (AUD0.20) each, expiring April 14, 2005 | 63,332,892 | |
Staff options at 37.7 cents (AUD0.49) cents each, expiring November 30, 2007 | 30,000 |
F-10
On April 14, 2005, a total of 416,776 unexercised vendor options lapsed. On the same date, a total of 2,000,000 unexercised staff options also lapsed.
Subsequent to December 31, 2004, no unlisted options have been issued.
The financial effects of the above transactions have not been brought to account in the financial statements for the period ended December 31, 2004.
6. Taxes
During the six months ended December 31, 2004, the Company incurred taxes of $139,912 (December 2003: $6,872) relating to US withholding tax payable in respect of US licensing revenue generated by the Company.
F-11
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2004 and 2003
F-12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Genetic Technologies Limited
We have audited the accompanying consolidated balance sheets of Genetic Technologies Limited ("the Company") as of June 30, 2004 and 2003, and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Genetic Technologies Limited at June 30, 2004 and 2003, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young |
Sydney,
New South Wales, Australia
August 31, 2004
F-13
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS)
|
|
June 30,
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Note
|
2004
|
2003
|
|||||||
Assets | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 7,899,760 | $ | 3,909,202 | ||||||
Trade accounts receivable | 243,531 | 151,804 | ||||||||
GST receivable | 6 | 869,000 | | |||||||
Sundry debtors | 24,684 | 3,887 | ||||||||
Restricted security deposits | 26,873 | 33,367 | ||||||||
Marketable securities | 4 | | 176,254 | |||||||
|
|
|||||||||
Total current assets | $ | 9,063,848 | $ | 4,274,514 | ||||||
|
|
|||||||||
Non-current assets | ||||||||||
Cost-method investments * | 5 | $ | 504,509 | $ | 502,708 | |||||
Laboratory equipment, net of accumulated depreciation of $826,229 (2004) and $421,379 (2003) | 1,287,225 | 999,437 | ||||||||
Patents, net | 6 | 4,481,143 | | |||||||
Goodwill, net | 7 | 316,648 | 305,489 | |||||||
|
|
|||||||||
Total non-current assets | $ | 6,589,525 | $ | 1,807,634 | ||||||
|
|
|||||||||
Total assets | $ | 15,653,373 | $ | 6,082,148 | ||||||
|
|
|||||||||
Liabilities and shareholders' equity | ||||||||||
Current liabilities | ||||||||||
Trade accounts payable | $ | 1,401,102 | $ | 929,151 | ||||||
GST relating to acquisition | 6 | 869,000 | | |||||||
Provision for tax | 8 | 277,991 | 250,412 | |||||||
Provision for employee entitlements | 222,183 | 169,747 | ||||||||
Deferred revenue | 462,931 | | ||||||||
|
|
|||||||||
Total current liabilities | $ | 3,233,207 | $ | 1,349,310 | ||||||
|
|
|||||||||
Non-current liabilities | ||||||||||
Unsecured loan | 9 | $ | 486,640 | $ | 469,490 | |||||
|
|
|||||||||
Total non-current liabilities | $ | 486,640 | $ | 469,490 | ||||||
|
|
|||||||||
Total liabilities | $ | 3,719,847 | $ | 1,818,800 | ||||||
|
|
|||||||||
Commitments and contingencies | 11 | | | |||||||
|
|
|||||||||
Minority interest | $ | 82,196 | $ | 59,038 | ||||||
|
|
|||||||||
Shareholders' equity | ||||||||||
Common shares, no par value, issued and outstanding296,808,561 shares (2003: 262,234,425 shares) | 12 | $ | 17,291,502 | $ | 5,715,441 | |||||
Accumulated deficit | (7,239,164 | ) | (2,422,438 | ) | ||||||
Accumulated other comprehensive income | 1,798,992 | 911,307 | ||||||||
|
|
|||||||||
Total shareholders' equity | $ | 11,851,330 | $ | 4,204,310 | ||||||
|
|
|||||||||
Total liabilities and shareholders' equity | $ | 15,653,373 | $ | 6,082,148 | ||||||
|
|
See accompanying notes to financial statements.
F-14
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. DOLLARS)
|
|
Year ended June 30,
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Note
|
2004
|
2003
|
|||||||
Revenues | ||||||||||
Service testing revenues | $ | 1,969,963 | $ | 1,727,617 | ||||||
Grant income | 154,702 | 50,244 | ||||||||
License revenues | 507,910 | 2,615,544 | ||||||||
Other income | 12,427 | 10,722 | ||||||||
|
|
|||||||||
Total revenues | $ | 2,645,002 | $ | 4,404,127 | ||||||
|
|
|||||||||
Total operating income | $ | 2,645,002 | $ | 4,404,127 | ||||||
|
|
|||||||||
Operating expenses | ||||||||||
Service testing expenses | $ | 2,229,307 | $ | 1,820,490 | ||||||
Research and development *, including stock compensation expense of $52,077 (2004) and $35,254 (2003) | 1,659,914 | 512,345 | ||||||||
Patent and license fees | 763,739 | 428,335 | ||||||||
Sales and marketing | 960,619 | 661,211 | ||||||||
General and administrative #, including stock compensation expense of $10,827 (2004) and $nil (2003) | 2,383,879 | 1,182,856 | ||||||||
|
|
|||||||||
Total operating expenses | $ | 7,997,458 | $ | 4,605,237 | ||||||
|
|
|||||||||
Loss from operations | $ | (5,352,456 | ) | $ | (201,110 | ) | ||||
|
|
|||||||||
Other income (expenses) | ||||||||||
Interest income | $ | 352,605 | $ | 68,387 | ||||||
Net profit (loss) on sale of securities | 406,224 | (100,191 | ) | |||||||
Net foreign exchange losses | (171,960 | ) | (558,292 | ) | ||||||
Interest expense | | (5,979 | ) | |||||||
|
|
|||||||||
Total other income (expenses) | $ | 586,869 | $ | (596,075 | ) | |||||
|
|
|||||||||
Net loss before income taxes | $ | (4,765,587 | ) | $ | (797,185 | ) | ||||
Income taxes | 8 | (27,579 | ) | (167,412 | ) | |||||
|
|
|||||||||
Net loss before minority interest | $ | (4,793,166 | ) | $ | (964,597 | ) | ||||
Minority interest | (23,560 | ) | 4,202 | |||||||
|
|
|||||||||
Net loss | $ | (4,816,726 | ) | $ | (960,395 | ) | ||||
|
|
|||||||||
Net loss per common share (basic and diluted) | $ | (0.02 | ) | $ | (0.00 | ) | ||||
|
|
|||||||||
Weighted average shares outstanding (basic and diluted) | 277,806,689 | 261,541,405 | ||||||||
|
|
See accompanying notes to financial statements.
F-15
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. DOLLARS)
|
Note |
Number of
Common Shares |
Paid in
Capital |
Accumulated
Deficit |
Accumulated Other
Comprehensive Loss |
Totals
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
BalanceJuly 1, 2002 | 261,328,474 | $ | 5,470,407 | $ | (1,462,043 | ) | $ | 112,581 | $ | 4,120,945 | ||||||||
Issuance of shares at 22 cents each in respect of business acquisition | 121,951 | 27,165 | | | 27,165 | |||||||||||||
Issuance of shares at 25 cents each to acquire investments | 700,000 | 171,676 | | | 171,676 | |||||||||||||
Issuance of common shares at 13 cents each on exercise of stock options | 13 | 84,000 | 10,939 | | | 10,939 | ||||||||||||
Stock options issued as compensation | | 35,254 | | | 35,254 | |||||||||||||
Other comprehensive income (loss), net of tax of $nil: | ||||||||||||||||||
Foreign Currency Translation adjustment | | | | 798,726 | 798,726 | |||||||||||||
Net loss | | | (960,395 | ) | | (960,395 | ) | |||||||||||
|
||||||||||||||||||
Comprehensive loss | (161,669 | ) | ||||||||||||||||
|
|
|
|
|
||||||||||||||
BalanceJune 30, 2003 | 262,234,425 | $ | 5,715,441 | $ | (2,422,438 | ) | $ | 911,307 | $ | 4,204,310 | ||||||||
Issuance of shares at 48 cents each as part of capital raising | 13,333,333 | 6,395,000 | | | 6,395,000 | |||||||||||||
Less associated transaction costs | | (223,825 | ) | | | (223,825 | ) | |||||||||||
Issuance of common shares at 13 cents on exercise of Vendor options | 13 | 3,336,636 | 440,190 | | | 440,190 | ||||||||||||
Issuance of common shares at 27 cents to acquire patents | 16,666,667 | 4,524,000 | | | 4,524,000 | |||||||||||||
Issuance of common shares at 30 cents on exercise of Director options | 13 | 1,000,000 | 295,560 | | | 295,560 | ||||||||||||
Issuance of common shares at 32 cents on exercise of Staff options | 13 | 112,500 | 36,032 | | | 36,032 | ||||||||||||
Issuance of common shares at 37 cents on exercise of Staff options | 13 | 125,000 | 46,200 | | | 46,200 | ||||||||||||
Stock options issued as compensation | | 62,904 | | | 62,904 | |||||||||||||
Other comprehensive income (loss), net of tax of $nil: | ||||||||||||||||||
Foreign Currency Translation adjustment | | | | 887,685 | 887,685 | |||||||||||||
Net loss | | | (4,816,726 | ) | | (4,816,726 | ) | |||||||||||
|
||||||||||||||||||
Comprehensive loss | (3,929,041 | ) | ||||||||||||||||
|
|
|
|
|
||||||||||||||
BalanceJune 30, 2004 | 296,808,561 | $ | 17,291,502 | $ | (7,239,164 | ) | $ | 1,798,992 | $ | 11,851,330 | ||||||||
|
|
|
|
|
F-16
GENETIC TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS)
|
|
Year ended June 30,
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
Note
|
2004
|
2003
|
||||||||
Operating activities | |||||||||||
Net loss | $ | (4,816,726 | ) | $ | (960,395 | ) | |||||
Depreciation | 399,542 | 79,855 | |||||||||
Amortization | 38,632 | | |||||||||
Net loss (gain) from sale of marketable securities | (406,224 | ) | 14,570 | ||||||||
Proceeds from sale of marketable securities | 593,647 | 288,026 | |||||||||
Stock-based compensation | 62,904 | 35,254 | |||||||||
Net foreign exchange losses | 34,141 | 459,221 | |||||||||
Net write-down of cost-method investments | | 85,621 | |||||||||
Equipment received as part of license fees | | (440,727 | ) | ||||||||
Marketable securities received as part of license fees | | (205,037 | ) | ||||||||
Loss on disposal of laboratory equipment | | 42,864 | |||||||||
Minority interest | 23,560 | (4,202 | ) | ||||||||
Net change in operating assets and liabilities | |||||||||||
(Increase) decrease in assets | |||||||||||
Receivables | (960,727 | ) | (98,645 | ) | |||||||
Sundry debtors | (20,797 | ) | 5,758 | ||||||||
Restricted security deposits | 6,494 | | |||||||||
Increase (decrease) in liabilities | |||||||||||
Payables | 1,340,951 | 207,071 | |||||||||
Provisions | 80,015 | 213,194 | |||||||||
Deferred revenue | 462,931 | | |||||||||
|
|
||||||||||
Net cash used in operating activities | $ | (3,161,657 | ) | $ | (277,572 | ) | |||||
|
|
||||||||||
Investing activities | |||||||||||
Payment for laboratory equipment | $ | (640,737 | ) | $ | (117,428 | ) | |||||
Payment for acquisition of business | | (56,140 | ) | ||||||||
|
|
||||||||||
Net cash used in investing activities | $ | (640,737 | ) | $ | (173,568 | ) | |||||
|
|
||||||||||
Financing activities | |||||||||||
Proceeds from issuance of common shares | $ | 6,400,200 | $ | | |||||||
Proceeds from stock options exercised | 817,982 | 10,939 | |||||||||
Share issue costs | (223,825 | ) | | ||||||||
|
|
||||||||||
Net cash provided by financing activities | $ | 6,994,357 | $ | 10,939 | |||||||
|
|
||||||||||
Net change before exchange rate changes | $ | 3,191,963 | $ | (440,201 | ) | ||||||
Effect of exchange rate changes on cash | 798,595 | 329,611 | |||||||||
|
|
||||||||||
Net change in cash and cash equivalents | $ | 3,990,558 | $ | (110,590 | ) | ||||||
Cash and cash equivalents, beginning of year | 3,909,202 | 4,019,792 | |||||||||
|
|
||||||||||
Cash and cash equivalents, end of year | $ | 7,899,760 | $ | 3,909,202 | |||||||
|
|
||||||||||
Supplemental disclosure of cashflow information | |||||||||||
Cash paid for income tax | $ | | $ | | |||||||
Cash paid for interest | | 5,979 |
Refer Note 16 for non-cash investing and financing transactions.
See accompanying notes to financial statements.
F-17
1. The Company and its operations
Organization and nature of operations
GeneType AG ("GeneType") was incorporated in Switzerland on September 25, 1989 and is an enterprise engaged in research and development in the area of genetics and the licensing of its patented genetic technologies. An Australian company, Duketon Goldfields Ltd. ("Duketon"), acquired GeneType effective September 30, 2000 as a wholly owned subsidiary. Under accounting principles generally accepted in the United States of America ("US GAAP"), the company whose former shareholders retain the majority of the voting rights in the combined business must be treated as the acquirer for accounting purposes. Accordingly, this transaction was accounted for as a reverse acquisition for financial reporting purposes, with GeneType identified as the accounting acquirer.
Concurrent with the reverse acquisition, the combined company changed its name to Genetic Technologies Limited ("Genetic Technologies" or the "Company"). Since the reverse acquisition, the Company has focused primarily on biotechnology and, during the year ended June 30, 2004, has realized all of its trading investments.
The Company is a public company incorporated in Australia and listed on the Australian Stock Exchange ("ASX"). It operates in Australia, Canada and Europe and owns patents in the areas of human, animal and plant genetic diagnostics and genomics. The Company is pursuing commercial opportunities in three main areas of activity:
The Company generates revenue from two principal sources: firstly, by entering into licensing agreements with companies wishing to use Genetic Technologies' intellectual property relating to non-coding DNA; and secondly, from the provision of a wide range of genetic tests on a fee-for-service basis. In addition, the Company performs research in other areas relating to genetics and genomics and receives funds from grants made by the private and government sectors.
Registered Office and Principal Place of Business | Sydney Business Office | |
60-66 Hanover Street Fitzroy, Victoria 3065 Australia |
|
Suite 2, Level 12 75 Elizabeth Street Sydney, New South Wales 2000 Australia |
2. Basis of presentation and summary of significant accounting policies
Basis of presentation
The Company's principal activities include the licensing of its patented genetic technologies, the provision of genetic tests and the conducting of various research and developments projects in the fields of genetics and genomics. Revenues are principally generated from license fees and genetic testing. The consolidated financial statements are presented in United States dollars and have been prepared in accordance with US GAAP.
F-18
Principles of consolidation
The accompanying consolidated financial statements include the accounts of Genetic Technologies and its subsidiaries (collectively referred to as the "Company"), all of which are majority owned and controlled by Genetic Technologies. All significant intercompany balances and transactions have been eliminated on consolidation. The consolidated financial statements include information and results of each controlled entity from the date on which the Company obtains control and until such time as the Company ceases to control such entities.
Foreign currency translation
The accounts of the Company are translated to the reporting currency in accordance with Statement of Financial Accounting Standards (SFAS) No. 52: Foreign Currency Translation . The Company's management has elected to present these consolidated financial statements in U.S. dollars ("USD"), the reporting currency. The Australian dollar ("AUD") is the functional currency for the Company. The method of foreign exchange translation adopted for foreign subsidiaries depends on the functional currency of such entities. In all cases for the Company, the functional currency of foreign, self-sustaining subsidiaries is their foreign currency, being the currency of the primary environment in which they operate. The financial statements of these entities are translated into AUD and consolidated into the parent company. The consolidated financial statements are then translated into USD, the reporting currency. Accordingly;
Receivables and liabilities denominated in foreign currencies are remeasured at period-end exchange rates. Gains and losses resulting from foreign currency transactions are reported in the consolidated statements of operations.
The rates used to translate AUD to USD for assets and liabilities were:
June 30,
|
||||
---|---|---|---|---|
2004
|
2003
|
|||
$ | 0.6952 | $ | 0.6713 |
Revenues and expenses are translated at the average exchange rate during the year. The rates used to translate revenues and expenses were:
June 30,
|
||||
---|---|---|---|---|
2004
|
2003
|
|||
$ | 0.7132 | $ | 0.5847 |
Commitments, contingencies and expected future income detailed in the notes have been translated into U.S. currency at the rate of exchange at June 30, 2004 of AUD1.00 = $0.6952.
F-19
Accounting estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. In preparing these consolidated financial statements, estimates and assumptions have been made by management concerning the selection of useful lives of property and equipment and goodwill, provisions necessary for trade receivables and contingent liabilities, the carrying value of certain investments, income tax valuation allowances, assumptions relating to the value of stock options, and other similar evaluations. Actual results may vary from those estimates.
Cash and cash equivalents
Cash and cash equivalents primarily are comprised of cash on deposit and short-term, highly liquid investments with original maturity dates of three months or less.
Marketable securities
The Company classifies its marketable securities as trading securities. The securities consist of equity securities, which are stated at fair value, and unrealized gains or losses on the securities are recorded in the consolidated statement of operations. Dividends on securities classified as trading are included in dividend income when declared.
Cost-method investments
Investments in which the Company does not have significant influence or in which the Company holds an ownership interest of less than 20% are recorded using the cost method of accounting. Such investments are periodically reviewed for impairment, with fair values determined based on the latest round of fund raising. If a decline in value is judged to be other than temporary, the cost basis of the investment is written down to the recoverable amount. The resulting realized loss is included in the consolidated statements of operations in the period in which the decline was deemed to be other than temporary. The fair value of the cost-method investments is not estimated as there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment and it is not practicable to do so.
Laboratory equipment
Laboratory equipment comprises one class of assets and is stated at cost, net of accumulated depreciation. Expenditures for upgrades, maintenance and repairs are expensed as incurred. Depreciation is computed on the straight-line method based on the estimated useful lives of two to eight years.
Goodwill
Goodwill represents the excess of the cost of businesses acquired over the fair value of the identifiable net assets acquired. Prior to the adoption of SFAS No. 142: Goodwill and Other Intangible Assets ("SFAS 142"), through June 30, 2002, goodwill was amortized on a straight-line basis over a period of 10 to 20 years. Subsequent to the adoption of SFAS 142 on July 1, 2002, amortization of goodwill ceased. Goodwill attributable to purchase business combinations completed subsequent to June 30, 2001 was never amortized pursuant to SFAS No. 142.
F-20
The Company tests goodwill for impairment annually and on an interim basis if events or changes in circumstances between annual tests indicate that the asset might be impaired using the two-step process prescribed in SFAS 142. The first step is a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If this step reflects impairment, then the loss is measured as the excess of the recorded goodwill over its implied fair value. Implied fair value is the excess of the fair value of the reporting unit over the fair value of all identified assets and liabilities. The Company has not recorded any impairment of goodwill since SFAS 142 was adopted.
Impairment of long-lived assets
Pursuant to guidance established in SFAS No. 144: Accounting for the Impairment or Disposal of Long-Lived Assets the Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Management considers the carrying value not to be recoverable if it exceeds the future projected cash flows (undiscounted and without interest charges) from the use of the asset and its eventual disposition. Management also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. An impairment loss is recognized when the carrying amount of the asset exceeds its fair value. The resulting impairment loss is classified as a component of loss from operations. No impairment losses have been recognized.
Accruals for employee entitlements
The Company accrues compensated absences and related benefits as current charges to earnings when the following criteria are met: (i) the employee's right to receive compensation for the future absences is attributable to services already performed by the employee; (ii) the employee's right to receive the compensation for the future absences is vested, or accumulates; (iii) it is probable that the compensation will be paid; and (iv) the amount of compensation is reasonably estimable.
Patents
External costs incurred in filing, defending and protecting patent applications for which no future benefit is reasonably assured are expensed as patent fees as incurred. As of June 30, 2004 and 2003, none of these external costs have been capitalized. Acquired patents for which a future benefit is reasonably assured, are capitalized and amortized over their useful life, being 10 years.
Research and development
Research and development costs are charged to expense as incurred. Such costs include direct salaries, laboratory expenses, contractor fees, rent, utilities and certain related administrative expenses.
Income taxes
The Company accounts for income taxes under the provisions of SFAS No. 109: Accounting for Income Taxes ("SFAS 109"). SFAS 109 requires recognition of deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations in the period that includes the enactment date.
F-21
Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.
Revenue recognition
Revenues are recognized at the fair value of the consideration received net of the amounts of goods and services tax (GST).
Rendering of services
Revenues from the rendering of services are recognized when the provision of these services is completed and the fee for the services provided is recoverable. Service arrangements are of short duration (in most cases less than three months).
Interest revenue
Interest income is recognized as it accrues.
Research and development grants
The Company receives non-refundable grants that assist the Company to fund specific research and development projects. These grants generally provide for reimbursement of approved costs incurred as defined in the various agreements. Government grants are recorded as revenue when key milestones set within each agreement are achieved and accepted by all parties to the grant, no performance obligation remains and collectibility is reasonably assured. Grant funds received in advance of the Company completing its performance obligations are deferred. When the Company is required to make cash payments or purchases from the issuer of the grant as a requirement for the grant to be issued, the income is recorded net of the consideration payable by the Company.
Royalties
The Company licenses the use of its patented genetic technologies. Royalties from these licenses are recognized when earned and no future performance is required by the Company, and collection is reasonably assured.
License fee income
When the Company has no future obligations in relation to its license agreements that do not have fixed terms and renewal options, license fee income is recorded on the execution of a binding agreement, because the Company has no future obligations, income is fixed and determinable, and collection is reasonably assured. Income under license arrangements with fixed terms and renewal options is deferred and recognized on a straight-line basis over the license period. The Company has no other arrangements with its licensees to provide services besides the license agreement. Revenues are recognized at the fair value of the consideration received net of the amounts of goods and services tax (GST). Any securities received as a component of the upfront license fees are recorded as revenue, based on the market price of the securities at the date of signing the license agreement in the case of listed securities, and the price at which securities were most recently issued by the licensee in the case of unlisted securities. The Company grants no refunds to its customers.
In 2003, in partial payment for a license fee, the Company received laboratory equipment with a fair value $440,719 and shares of the licensee with a fair value of $205,033. The fair value of the equipment was determined based on the price charged by the licensee to other purchasers in Australia,
F-22
being the fair value declared by the licensee for Australian goods and services taxation purposes when the equipment was imported to Australia. The fair value of the shares was determined based on the licensee's sale of shares in a private placement transaction shortly before the license with the Company was executed.
Receivables
Trade receivables and other receivables are recorded at amounts due less any estimate for doubtful debts. Bad debts are charged off directly to accounts receivable. Amounts are charged off when management has deemed them to be uncollectible. In determining whether amounts are uncollectible, management considers multiple factors including the aging of the accounts, historical bad debt experience, and the general economic environment. The Company recorded bad debt expenses of $28,597 and $nil during the years ended June 30, 2004 and 2003, respectively.
Stock-based compensation
The Company has elected to account for its stock-based employee compensation plan under the intrinsic value method in accordance with the Accounting Principals Board Opinion No. 25: Accounting for Stock Issued to Employees ("APB 25") and related interpretations. The Company has adopted the disclosure-only provisions of FASB Statement No. 123: Accounting for Stock-Based Compensation ("SFAS 123") as amended by FASB Statement No. 148: Accounting for Stock Based CompensationTransition and Disclosure ("SFAS 148").
In accordance with APB 25, the Company records and amortizes, over the related vesting periods, deferred compensation representing the difference between the exercise price of stock options granted and the fair value of the Company's common shares on the measurement date. Options granted to consultants and other non-employees are accounted for in accordance with Emerging Issues Task Force Consensus No. 96-18: Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or Services , and valued using the Black-Scholes option valuation model. In circumstances in which the Company's shares are issued in exchange for services, compensation is recorded based on the fair value of the shares at the date of measurement, as determined by reference to quoted market price.
Pro forma information regarding net loss is required by SFAS 123, as amended by SFAS 148, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS 123 as of its effective date. The fair value of the options issued to employees was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
June 30,
|
||||
---|---|---|---|---|---|
|
2004
|
2003
|
|||
Risk Free Interest Rate | 5.80 | % | 5.09 | % | |
Expected Dividend Yield | | | |||
Expected Volatility | 0.89 | 0.63 | |||
Expected Lives (years) | 6.0 | 3.8 |
F-23
Had the Company elected to adopt the fair value recognition provisions of SFAS 123, pro forma net loss would be as follows:
|
Year ended June 30,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Net loss as reported | $ | (4,816,726 | ) | $ | (960,395 | ) | |
Employee stock-based compensation, net of taxes, as calculated under APB 25 included in net loss as reported | 976 | 692 | |||||
Employee stock-based compensation, net of taxes, as calculated under SFAS 123 | (532,408 | ) | (366,658 | ) | |||
|
|
||||||
Pro forma net loss | $ | (5,348,158 | ) | $ | (1,326,361 | ) | |
|
|
||||||
Net loss per common share (basic and diluted) as reported | $ | (0.02 | ) | $ | (0.00 | ) | |
|
|
||||||
Pro forma net loss per common share (basic and diluted) as reported | $ | (0.02 | ) | $ | (0.01 | ) | |
|
|
Refer to Note 13 for further details regarding the Company's stock options plans.
Goods and services tax
Revenues, expenses and assets are recognized net of the amount of goods and services tax ("GST"), except where the amount of GST incurred is not recoverable from the Australian Taxation Office ("ATO"). In these circumstances, the GST is recognized as part of the cost of acquisition of the asset or as part of an item of revenue or expense. Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or a liability in the consolidated balance sheet.
Net loss per share
Basic net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. The computation of diluted net loss per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue common shares were exercised or converted into common shares or resulted in the issue of common shares that then shared in the net loss of the Company.
All of the common shares for which the options were exercisable were excluded from the computation of diluted loss per share because their inclusion would have had an antidilutive effect on loss per share in all periods.
Comprehensive loss
SFAS No. 130: Reporting Comprehensive Income establishes standards for reporting and display of comprehensive income and its components in financial statements. It requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For the Company, comprehensive loss consists of net loss and foreign currency translation adjustments, and is presented in the consolidated statements of changes in shareholders' equity.
F-24
Sales and marketing expenses
Sales and marketing expenses, including advertising expenses, are expensed as incurred. Total advertising expenses incurred during the years ended June 30, 2004 and 2003 were $405,372 and $262,232, respectively.
Variable interest entities
In January 2003, the FASB issued Interpretation No. 46: Consolidation of Variable Interest Entities ("FIN 46"), which addresses the consolidation of business enterprises (variable interest entities) to which the usual condition of consolidation, a controlling financial interest, does not apply. FIN 46 requires an entity to assess its business relationships to determine if they are variable interest entities. As defined in FIN 46, variable interests are contractual, ownership or other interests in an entity that change with changes in the entity's net asset value. Variable interests in an entity may arise from financial instruments, service contracts, guarantees, leases or other arrangements with the variable interest entity. An entity that will absorb a majority of the variable interest entity's expected losses or expected residual returns, as defined in FIN 46, is considered the primary beneficiary of the variable interest entity. The primary beneficiary must include the variable interest entity's assets, liabilities and results of operations in its consolidated financial statements. FIN 46 was immediately effective for all variable interest entities created after January 31, 2003. For variable interest entities created prior to this date, the provisions of FIN 46 were originally required to be applied no later than the Company's first quarter of Fiscal 2004. In December 2003, the FASB issued FASB Staff Position (FSP) FIN 46-6, Effective Date of FASB Interpretation No. 46: Consolidation of Variable Interest Entities . The FSP provided a limited deferral (until the end of the Company's second quarter of 2004) of the effective date of FIN 46 for certain interests of a public entity in a variable interest entity or a potential variable interest entity. The Company adopted FIN 46 for the year ended June 30, 2003.
During 2002, the Company formed an incorporated joint venture with Agriculture Victoria Services Pty. Ltd. ("AVS") for the purpose of using ultra-high throughput genomic technologies to facilitate breeding programs in both the plant and animal agricultural industries. The Company owns 50.1% of the shares in the joint venture company AgGenomics Pty. Ltd. ("AgGenomics"). Under the terms of the agreement, the Company is required to provide working capital to AgGenomics to help fund AgGenomics' operations. At June 30, 2004 and 2003, AgGenomics has outstanding loans payable to the Company in the amount of $322,335 and $287,758, respectively. AgGenomics has no other outstanding debt. The Company also receives a management fee for various services provided to AgGenomics. AVS is not required to provide funding in addition to its capital contribution of $28. The Company is the primary beneficiary of AgGenomics and, accordingly consolidates AgGenomics in the accompanying financial statements.
F-25
Legislation to allow groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to consolidate and be treated as a single entity for income tax purposes, was substantively enacted on October 21, 2002. The legislation, which includes both mandatory and elective elements, is applicable to the Company. Effective July 1, 2003, for the purposes of income tax, Genetic Technologies and its wholly owned subsidiaries have formed a tax consolidation group. Members of the group propose to enter into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a pro-rata basis when they lodge the income tax return. In addition, the agreement will provide for the allocation of income tax liabilities between the entities should the Company default on its tax payment obligations.
Joint ventures
All joint ventures have been valued at nil and no revenue or expenses have been derived for the years ended June 30, 2003 and 2004, respectively.
Operating leases
The Company has operating leases in respect of business premises. The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense.
3. Acquisitions
On July 30, 2001, the Company completed the purchase of the business of DNA-ID Labs in Perth, Australia as part of its strategy of expanding its paternity testing business. The Company paid $107,449 in cash and issued 94,340 common shares in the Company with an estimated fair value of $25,449 at the time of settlement. The cash payment of $107,449 was made in two partsan initial cash payment of $51,309 made on July 30, 2001 and a second cash payment of $56,140 made on July 31, 2002.
On August 1, 2002, 121,951 of the Company's common shares with a fair value of $27,165 were issued in satisfaction of various performance warranties. The Company recorded goodwill of $159,463. The operating results of the acquired business have been included in the accompanying consolidated financial statements from the effective date of acquisition, July 30, 2001.
Of the total purchase price of $160,063 to acquire all the DNA-ID Labs, $600 was allocated to fixed assets, with the remainder allocated to goodwill.
4. Marketable securities
|
June 30,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Cost | $ | | $ | 237,408 | |||
Gross unrealised gains | | 2,602 | |||||
Gross unrealised losses | | (52,623 | ) | ||||
Foreign currency translation | | (11,133 | ) | ||||
|
|
||||||
Fair value | $ | | $ | 176,254 | |||
|
|
||||||
Net realised gains | $ | 406,224 | $ | 35,451 | |||
|
|
||||||
Net gains (losses) on marketable securities | $ | 406,224 | $ | (14,570 | ) | ||
|
|
F-26
5. Cost-method investments
On December 13, 2001, the Company acquired 12,689 common shares, or approximately 1% of the outstanding share capital, of XY, Inc., an unlisted company based in Fort Collins, Colorado. This acquisition was financed by the issuance of 507,560 common shares of the Company valued at $138,407. On May 12, 2003, the Company increased its holding in XY, Inc. by acquiring 17,500 common shares through the issuance of 700,000 common shares of the Company, valued at $171,676. The CEO and Chairman of XY, Inc. is also the CEO and Chairman of the Company. As at June 30, 2004 and 2003, the Company owned a total of 30,189 common shares in XY, Inc. (representing approximately 0.42% of the issued common shares of XY, Inc.), valued at $304,607 (2003: $303,519).
In September 2002, the Company issued a limited license to Perlegen Sciences, Inc. ("Perlegen"), at which time Perlegen paid $860,000 in up-front fees for the license. These fees were satisfied by the payment of cash and the issuance of 127,000 Series B shares, giving the Company an insignificant share holding in Perlegen. As at June 30, 2004 and 2003, the Company owned a total of 127,000 Series B shares in Perlegen, valued at $199,902 (2003: $199,189).
6. Patents, net
On June 15, 2004, Genetic Technologies acquired a suite of intellectual property from the C.Y. O'Connor ERADE Village Foundation ("CYO") in Perth, Western Australia. Consideration for the acquisition was satisfied via the issue by the Company of 16,666,667 common shares with a market value of $0.27 (AUD0.39) each on the date of issue, or $4,524,000 (AUD6,500,000) in total. As part of the acquisition, GST of $869,000 was payable to CYO by the Company as of June 30, 2004. In turn, a receivable for the same amount was due from the Australian Taxation Office.
Patents consist of the following:
|
June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Patents | $ | 4,518,800 | $ | | ||
Accumulated amortization | (37,657 | ) | | |||
|
|
|||||
Patents, net | $ | 4,481,143 | $ | | ||
|
|
Patents are reported entirely by the Australian segment of the Company. The change in the carrying value of patents is represented by:
|
June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Patents, opening cost | $ | | $ | | ||
Purchases | 4,518,800 | | ||||
Impairment losses | | | ||||
|
|
|||||
Patents, closing cost | $ | 4,518,800 | $ | | ||
|
|
|||||
Accumulated amortization, opening | $ | | $ | | ||
Amortization expense | 38,632 | | ||||
Foreign currency exchange fluctuations | (975 | ) | | |||
|
|
|||||
Accumulated amortization, closing | $ | 37,657 | $ | | ||
|
|
F-27
Below is a schedule of estimated aggregate amortization expense for patents for the 5 succeeding years, as at June 30, 2004:
Year ending, | |||
2005 | $ | 903,760 | |
2006 | 903,760 | ||
2007 | 903,760 | ||
2008 | 903,760 | ||
2009 | 866,103 | ||
|
|||
Total estimated amortization | $ | 4,481,143 | |
|
7. Goodwill, net
Goodwill consists of the following:
|
June 30,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Goodwill | $ | 332,314 | $ | 320,603 | |||
Accumulated amortization | (15,666 | ) | (15,114 | ) | |||
|
|
||||||
Goodwill, net | $ | 316,648 | $ | 305,489 | |||
|
|
Goodwill is reported entirely by the Australian segment of the Company. The change in the carrying value of goodwill is represented by:
|
June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Goodwill, opening cost | $ | 320,603 | $ | 240,286 | ||
Purchases | | 33,535 | ||||
Impairment losses | | | ||||
Foreign currency exchange fluctuations | 11,711 | 46,782 | ||||
|
|
|||||
Goodwill, closing cost | $ | 332,314 | $ | 320,603 | ||
|
|
|||||
Accumulated amortization, opening | $ | 15,114 | $ | 12,650 | ||
Amortization expense | | | ||||
Foreign currency exchange fluctuations | 552 | 2,464 | ||||
|
|
|||||
Accumulated amortization, closing | $ | 15,666 | $ | 15,114 | ||
|
|
F-28
8. Income taxes
Loss before income taxes for the years ended June 30, 2004 and 2003 was realized in the following jurisdictions:
|
Year ended June 30,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Australia | $ | (4,668,845 | ) | $ | (474,341 | ) | |
Switzerland | (181,292 | ) | (301,405 | ) | |||
Canada | 84,550 | (21,439 | ) | ||||
|
|
||||||
Loss before income taxes | $ | (4,765,587 | ) | $ | (797,185 | ) | |
|
|
Significant components of the Company's deferred income tax assets at June 30, 2004 and 2003 are as follows:
|
June 30,
|
|||||||
---|---|---|---|---|---|---|---|---|
|
2004
|
2003
|
||||||
Deferred tax asset | ||||||||
Temporary differences | ||||||||
Patents | $ | 927,409 | $ | 997,959 | ||||
Foreign withholding taxes | 277,991 | 250,412 | ||||||
Employee provisions and other | 96,725 | 79,265 | ||||||
Net operating loss carry forward | 5,399,517 | 3,637,387 | ||||||
|
|
|||||||
Total deferred tax asset | $ | 6,701,642 | $ | 4,965,023 | ||||
Impact of valuation allowance | (6,701,642 | ) | (4,965,023 | ) | ||||
|
|
|||||||
Net | $ | | $ | | ||||
|
|
Impact of foreign currency movement in gross deferred tax assets relating to tax losses:
|
June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Deferred tax asset relating to tax losses | ||||||
Tax losses brought forward from prior year | $ | 3,637,387 | $ | 2,859,524 | ||
Current year tax losses | 1,451,205 | 1,529 | ||||
Effect of foreign currency translations | 310,925 | 776,334 | ||||
|
|
|||||
Total gross deferred tax asset relating to tax losses | $ | 5,399,517 | $ | 3,637,387 | ||
|
|
The Company, based upon its history of losses, location of losses and management's assessment of when operations are anticipated to generate taxable income, has concluded that it is more likely than not that the deferred tax asset will not be realized through future taxable earnings and has established a valuation allowance for the full amount.
F-29
The following table reconciles the income tax provision at the Australian statutory rate to that in the financial statements:
|
June 30,
|
|||||||
---|---|---|---|---|---|---|---|---|
|
2004
|
2003
|
||||||
Loss before income taxes and minority interest | $ | (4,765,587 | ) | $ | (797,185 | ) | ||
Income tax rate | 30 | % | 30 | % | ||||
|
|
|||||||
Income tax benefit at statutory rate | $ | (1,429,676 | ) | $ | (239,156 | ) | ||
Tax losses utilized | 38,985 | 274,060 | ||||||
Adjust for permanent differences: | ||||||||
Stock compensation | 13,732 | 11,738 | ||||||
Difference in tax rates | 44,896 | 63,302 | ||||||
Research and development concessions | (119,142 | ) | (111,473 | ) | ||||
|
|
|||||||
Benefits of operating loss carry forward | $ | (1,451,205 | ) | $ | (1,529 | ) | ||
Increase in valuation allowance | 1,451,205 | 1,529 | ||||||
Foreign taxes | 27,579 | 167,412 | ||||||
|
|
|||||||
Income tax expense | $ | 27,579 | $ | 167,412 | ||||
Opening provision for income tax | 250,412 | 83,000 | ||||||
|
|
|||||||
Closing provision for income tax | $ | 277,991 | $ | 250,412 | ||||
|
|
The Company has consulting arrangements that are conducted in tax jurisdictions outside of Australia. Based on the advice of legal counsel, management does not believe the Company is subject to any foreign taxes as a result of these arrangements.
The net operating loss carried forward which relates to tax losses generated in Australia of $4,453,998 is indefinite as to use. The net operating loss carried forward which relates to tax losses generated in Switzerland of $60,255 expires over seven years commencing the financial year ending June 30, 2008. The net operating loss carried forward that relates to tax losses generated in the United States of America of $739,187 expires over fifteen years commencing with the financial year ending June 30, 2006 up to and including financial year ending June 30, 2021. Finally, the net operating loss carried forward which relates to tax losses generated in Canada of $146,077 expires over seven years commencing the financial year ending June 30, 2008. The foreign tax credits of $277,991 expire over 5 years commencing in the financial year ending June 30, 2007.
|
Year ended June 30,
|
||||
---|---|---|---|---|---|
|
2004
|
2003
|
|||
Tax rates | |||||
Australia | 30 | % | 30 | % | |
United States | 39 | % | 39 | % | |
Switzerland | 8.5 | % | 8.5 | % | |
Canada | 37 | % | 37 | % |
F-30
9. Unsecured loan
|
June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Unsecured loan | $ | 486,640 | $ | 469,490 | ||
|
|
|||||
$ | 486,640 | $ | 469,490 | |||
|
|
The long-term loan represents an unsecured, non-interest bearing loan from the Australian Commonwealth Government received under the Research & Development Start Program. The loan represents a portion of a grant received by the Company, which has been deferred in accordance with the grant agreement. The loan will be repayable on or before January 15, 2009, if the Company commercializes a product as a result of the research covered under the grant. If no product is commercialized, the Company will recognize grant revenue after January 15, 2009, when the loan is no longer repayable and the balance of the loan will be recognized as grant income. The costs associated with the research have been expensed.
10. Related party transactions and balances
|
As of and for the year ended June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
4F Investments Pty. Ltd. is associated with Mr. Fred Bart (director in common) and provided management services to the Company at a cost of |
|
$ |
25,675 |
|
$ |
31,574 |
Bankberg Pty. Ltd. is associated with Dr. Mervyn Jacobson (director in common) and provided the office and laboratory premises to GeneType Pty. Ltd., a wholly owned subsidiary at Hanover Street, Fitzroy. During the respective periods, GeneType Pty. Ltd. paid Bankberg Pty. Ltd. rent and outgoings of |
|
$ |
266,650 |
|
$ |
213,159 |
GrapeSeed International is associated with Mr. Russell Granzow, a former director of the Company, and provided management services to the Company for the period April 17, 2003 to January 31, 2004 and received |
|
$ |
82,589 |
|
$ |
34,358 |
On May 12, 2003, the Company increased its holding in XY, Inc. by acquiring 17,500 common shares through the issuance of 700,000 common shares of the Company, valued at $171,676. As at June 30, 2004 and 2003 the Company owned a total of 30,189 common shares in XY, Inc. (representing approximately 0.42% of the issued common shares of XY, Inc.), valued at $304,607 and $303,519, respectively.
Premises leased by the Company are subleased to director related entities. Rental recoveries are included against rent expenses in the consolidated statement of operations. Total rental recoveries received by the Company from director related entities during the year ended June 30, 2004 amounted to $56,271 (2003: $30,993).
F-31
11. Commitments and contingencies
Capital expenditure commitments
The Company does not have any significant capital expenditure commitments that are subject to binding contracts. However, the Company has continuing minimal expenditure requirements of the Western Australian Mines Department in respect of its prospecting and exploration licenses and mining leases, which are met by its joint venture partners.
The Company has entered into a conditional purchase agreement to purchase an item of testing equipment for $316,316 exclusive of GST subject to installation and satisfactory performance criteria. On the basis that the equipment meets the criteria, the purchase price is due to be paid prior to September 28, 2004.
The Company has an investment in the Duketon Belt Joint Venture with Johnson's Well Mining NL. The Company is not contributing any funding towards the project by agreement with the joint venture partner and does not have any involvement in its operations. All liabilities are borne by the joint venture partner. The Company's investment has been valued at nil in the years ended June 30, 2004 and 2003, respectively. As a result of this election not to contribute its share of expenditures, the Company's interest in the joint venture was diluted down to 18.82% as at June 30, 2004 (2003: 19.84%).
Research and development commitments
On June 15, 2004, the Company entered into a Sponsored Research Agreement with C.Y. O'Connor ERADE Village Foundation whereby Genetic Technologies will contribute $625,680 (AUD900,000) per annum in research for the next 5 years, being a total commitment of $3,128,400 (AUD4,500,000) and own any intellectual property arising from the research. Since the end of the financial year, the Company has paid the first instalment of $320,625 (AUD450,000) in cash and supplied a letter of credit for $325,440 (AUD450,000) for the term of the agreement.
On August 10, 2004, the Company agreed to extend its research agreement with King's College, London on the "Bioinformatic and Functional Analysis of VNTR's" project for a further six months from July 26, 2004 to January 26, 2005. The funding commitment is $95,792 (GBP53,000) and is due in two instalments, the first of which, being $47,896 (GBP26,500) is due on October 6, 2004. Refer Note 17: Significant research and development agreements for further information on the King's College arrangement.
Leases
Operating leases relate to office premises in Sydney and Melbourne and laboratory facilities in Melbourne with lease terms between 2 and 10 years. The Melbourne laboratory facility has an option to extend for a further 10 years. A company associated with the Executive Chairman owns the Melbourne laboratory facilities (see Note 10). All operating lease contracts contain market review clauses in the event that the Company exercises its option to renew. The Company does not have an option to purchase the leased assets at the expiry of the lease periods.
F-32
The following is a schedule of future minimum lease payments for operating leases that had initial or remaining non-cancellable lease terms in excess of one year as of June 30, 2004:
Year ending,
|
|
||
---|---|---|---|
2005 | $ | 307,704 | |
2006 | 307,704 | ||
2007 | 262,933 | ||
2008 | 285,318 | ||
2009 | 262,932 | ||
2010 and beyond | 920,264 | ||
|
|||
Total minimum lease payments | $ | 2,346,855 | |
|
Rent expense totalled $315,662 and $239,145 for the years ended June 30, 2004 and 2003, respectively.
Contingencies
The Company has been notified of a number of native title claims covering exploration tenements in the Duketon Belt Joint Venture in Western Australia held by the Company under the Commonwealth Native Title Act, 1993. Until further information regarding the claims and the affected area is available, the Company will not be in a position to assess the likely effect, if any, of any claim. However, the directors expect that any future exploration will not be materially affected by any claim or the claims in aggregate.
On August 13, 2004, Auckland District Health Board ("ADHB") lodged a Statement of Claim in the High Court of New Zealand alleging that the Company made "groundless threats of patent infringement" against ADHB. In accordance with FAS 5: Accounting for Contingencies, no accrual has been made in respect of any loss which may arise from this matter as, at the date of these financial statements, it is not possible to determine if it is probable that a liability has been incurred, nor is it possible to reasonably estimate any loss.
12. Shareholders' equity
Terms and conditions
Common shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Common shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Restricted securities
On August 29, 2000, the shareholders approved the issue of 140,000,000 common shares and 70,000,000 unlisted options to the shareholders of GeneType AG. The Australian Stock Exchange, in accordance with its Listing Rules, has determined that these securities were restricted securities, as defined, and cannot be sold during the escrow period. 116,004,000 common shares and 58,002,000 unlisted options issued to Dr. Mervyn Jacobson related entities, his three children and Maurie and Bernie Stang were subject to a 24-month escrow period, which expired on December 28, 2002.
On June 15, 2004, the Company issued a total of 16,666,667 common shares to C.Y. O'Connor ERADE Village Foundation pursuant to a Sponsored Research Agreement between the parties. Under
F-33
the terms of the Agreement, these common shares are subject to a voluntary escrow period contractually agreed by the parties the details of which are tabled below:
Date of escrow expiry
|
Number of
common shares released from escrow |
|
---|---|---|
December 15, 2004 | 3,333,333 | |
December 15, 2005 | 3,333,333 | |
December 15, 2006 | 3,333,334 | |
December 15, 2007 | 3,333,333 | |
December 15, 2008 | 3,333,334 | |
|
||
Total number of common shares | 16,666,667 | |
|
Restricted securities have all the rights and obligations of unrestricted securities during the escrow period, other than the ability to sell the shares.
13. Stock options
On August 29, 2000, the shareholders of Duketon approved the grant of 70,000,000 stock options ("Vendor Options") at an exercise price of $0.11 (AUD0.20) as partial consideration for the acquisition of GeneType. Each option is exercisable into one common share of the Company at any time on or before April 14, 2005. These options vested immediately and carry no rights to dividends and no voting rights.
Also on August 29, 2000, the shareholders of Duketon approved the grant of 3,000,000 stock options to employee-directors at an exercise price of $0.26 (AUD0.45). Each option granted is exercisable into one common share at any time on or before April 14, 2005. These options were made in recognition of the directors' efforts in finalizing the transaction between Duketon and GeneType. Director stock options carry no rights to dividends and no voting rights. The options can be exercised at any time from the date of their issue to the date of their expiry. No expense was recognised for 2004 and 2003.
On May 22, 2001, Gtech International Resources Limited, a subsidiary of the Company, issued 130,000 directors' options to Dr. Mervyn Jacobson at an exercise price of $0.25 (CAD0.38) which vested immediately. These options expire on May 22, 2006. No expense was recognised for 2004 and 2003.
On August 2, 2001, the Company announced that it had entered into an agreement with GTH Capital of New York to pursue its listing on the National Association of Securities Dealers Automated Quotations ("Nasdaq"). In accordance with the agreement, the Company agreed to issue 900,000 options at an exercise price of $0.36 (AUD0.70) to GTH Capital within three years. The issue of the options is subject to meeting specified performance criteria in achieving the Nasdaq listing. The options have a contractual life of six years. On January 14, 2002, GTH was entitled to receive 540,000 of the options, based on meeting certain performance criteria. On June 30, 2004, GTH was entitled to receive a further 60,000 of the options, based on meeting certain performance criteria. In accordance with SFAS 123, the Company has recorded an expense of $10,827 in the year ended June 30, 2004. No expense was recognised for 2003. All of the 600,000 options are outstanding and exercisable at June 30, 2004.
On September 4, 2003, the Company granted 6,666,667 stock options at an exercise price of $0.64 (AUD1.00) as part of a placement of common shares. Each option is exercisable into one common share of the Company at any time on or before September 30, 2005. These options vested immediately
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and carry no rights to dividends and no voting rights. These options are non-compensatory and are accounted for in permanent equity.
On November 30, 2001, the Company established a Staff Share Plan that permits the Company, at the discretion of the Board, to issue incentive stock options to directors, employees and consultants. The Company is required to receive shareholder approval if the Company wishes to grant any options to directors. The number of options available to be issued by the Board is not restricted in number, but if the Company issues options under the Plan which, together with other share issues, represents greater than 15% of the total share capital, the Company is required to obtain shareholder approval.
Options issued under the Staff Share Plan carry no rights to dividends and no voting rights. In accordance with the terms of the Staff Share Plan, options vest on the basis of 25% per annum and can be exercised at any time after vesting to the date of their expiry. The options have an expiry date of six years from the date of grant. The Company records an expense based upon the difference between the exercise price and the issue price of the Company's common shares at the date of the option grant. In the years ended June 30, 2004 and 2003, this expense was $976 and $692, respectively.
Under the Staff Share Plan, the Company also issued options to consultants who would not be deemed employees of the Company. The Company records an expense in accordance with SFAS 123 based on the fair value of the options issued in exchange for the services and the vesting period. In the years ended June 30, 2004 and 2003, this expense was $51,101 and $34,562, respectively.
In accordance with SFAS 123, the Company recorded a total compensation expense relating to non-employees of $61,928 and $34,562 in the years ended June 30, 2004 and 2003, respectively.
A summary of the Company's stock option activity for years ended June 30, 2004 and 2003 follows:
|
Number of
share options |
Exercise price
per option |
Weighted average
exercise price per option |
|||||
---|---|---|---|---|---|---|---|---|
Outstanding at June 30, 2002 | 81,016,250 | $0.11 $0.36 | $ | 0.14 | ||||
Granted |
|
|
2,250,000 |
|
$0.25 $0.32 |
|
$ |
0.29 |
Exercised | (84,000 | ) | $0.13 | $ | 0.13 | |||
Forfeited/expired | (750,000 | ) | $0.27 $0.36 | $ | 0.33 | |||
|
|
|
||||||
Outstanding at June 30, 2003 | 82,432,250 | $0.11 $0.36 | $ | 0.14 | ||||
Granted |
|
|
9,476,667 |
|
$0.36 $0.64 |
|
$ |
0.56 |
Exercised | (4,574,136 | ) | $0.13 $0.37 | $ | 0.18 | |||
Forfeited/expired | (1,225,000 | ) | $0.30 $0.40 | $ | 0.36 | |||
|
|
|
||||||
Outstanding at June 30, 2004 | * | 86,109,781 | $0.11 $0.64 | $ | 0.19 | |||
|
|
|
The number of unissued common shares subject to options issued to employees at June 30, 2004 was 11,007,500 (2003: 9,720,000).
F-35
The following is additional information relating to all options outstanding as of June 30, 2004:
|
Options outstanding
|
Options exercisable
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of
exercise prices |
Number of
options |
Weighted average
exercise price |
Remaining weighted
average contractual life (years) |
Number of
options |
Weighted average
exercise price |
|||||||||
$0.10 $0.20 | * | 65,835,614 | $ | 0.11 | 0.79 | * | 65,835,614 | $ | 0.11 | |||||
$0.21 $0.30 | 6,807,500 | $ | 0.27 | 3.05 | 3,910,000 | $ | 0.27 | |||||||
$0.31 $0.40 | 5,990,000 | $ | 0.33 | 3.70 | 2,715,000 | $ | 0.33 | |||||||
$0.41 $0.50 | 810,000 | $ | 0.44 | 5.50 | 60,000 | $ | 0.49 | |||||||
$0.61 $0.70 | 6,666,667 | $ | 0.64 | 1.25 | 6,666,667 | $ | 0.64 | |||||||
|
|
|
|
|
||||||||||
86,109,781 | $ | 0.19 | 1.25 | 79,187,281 | $ | 0.17 | ||||||||
|
|
|
|
|
The following is additional information relating to all options outstanding as of June 30, 2003:
|
Options outstanding
|
Options exercisable
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of
exercise prices |
Number of
options |
Weighted average
exercise price |
Remaining weighted
average contractual life (years) |
Number of
options |
Weighted average
exercise price |
|||||||
$0.10 $0.20 | * | 69,172,250 | $ | 0.11 | 1.79 | *69,172,250 | $0.11 | |||||
$0.21 $0.30 | 8,145,000 | $ | 0.27 | 3.80 | 5,060,000 | $0.27 | ||||||
$0.31 $0.40 | 5,115,000 | $ | 0.32 | 4.47 | 2,746,250 | $0.33 | ||||||
|
|
|
|
|
||||||||
82,432,250 | $ | 0.14 | 2.16 | 76,978,500 | $0.13 | |||||||
|
|
|
|
|
During 2004, 2,000,000 options (2003: 175,000) were issued at an exercise price equal to the market price of the stock on the grant date. The weighted average exercise price and weighted average fair value of these options were $0.36 (2003: $0.25) and $0.28 (2003: $0.16), respectively.
In addition, 7,476,667 options (2003: 2,075,000) were granted during 2004 at exercise prices exceeding the market prices of the stock on the respective grant dates. The weighted average exercise price and weighted average fair value of these options were $0.62 (2003: $0.29) and $0.19 (2003: $0.15), respectively.
14. Financial instruments
Fair value of financial instruments
The following table presents the carrying amounts and fair values of the Company's financial instruments for which it is practicable to estimate fair value. SFAS No. 107: Disclosures about Fair Value of Financial Instruments defines the fair value of a financial instrument as the amount at which the
F-36
instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
|
June 30,
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2004
|
2003
|
||||||||||
|
Carrying amount
|
Estimated fair value
|
Carrying amount
|
Estimated fair value
|
||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 7,899,760 | $ | 7,899,760 | $ | 3,909,202 | $ | 3,909,202 | ||||
Trade accounts receivable | 243,531 | 243,531 | 151,804 | 151,804 | ||||||||
GST receivable | 869,000 | 869,000 | | | ||||||||
Sundry debtors | 24,684 | 24,684 | 3,887 | 3,887 | ||||||||
Restricted security deposits | 26,873 | 26,873 | 33,367 | 33,367 | ||||||||
Marketable securities | | | 176,254 | 176,254 | ||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable | $ | 1,401,102 | $ | 1,401,102 | $ | 929,151 | $ | 929,151 | ||||
GST relating to acquisition | 869,000 | 869,000 | | | ||||||||
Unsecured loan | 486,640 | Refer below | 469,490 | Refer below |
The values provided are representative of the fair values as of June 30, 2004 and 2003 and do not reflect subsequent changes in the economy, interest and tax rates, and other variables that may impact determination of fair value. The following methods and assumptions were used in estimating fair values for financial instruments for which it is practicable to estimate values:
Cash and cash equivalents The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value due to the short maturity of these instruments.
Accounts receivable The carrying amounts reported in the balance sheet for trade accounts receivable, GST receivable and sundry debtors approximate fair values due to the short-term nature of the balances.
Restricted security deposits The carrying amounts reported in the balance sheet for restricted security deposits approximate fair values due to the short-term nature of the balances.
Marketable securities The carrying amount reported in the balance sheet for marketable securities is equivalent to fair value as the securities are reported at fair value based on quoted market prices.
Accounts payable The carrying amounts reported in the balance sheet for trade accounts payable and GST relating to acquisition approximate fair values due to the short-term nature of the balances.
Unsecured loan The fair value of the carrying amount reported in the balance sheet cannot be reasonably determined given that the loan is forgiven if commercial revenues are not generated.
It is not practicable to estimate the fair value of the Company's cost-method investments because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.
Concentrations of credit risk
Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk (whether on or off-balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Financial instruments on the balance sheet that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with high credit quality institutions in order to limit the degree of credit exposure.
F-37
The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. The Company does not require collateral to provide credit. In addition, the majority of the Company's customers are large, reputable organizations, which also reduces the risk of credit exposure. The Company has not entered into any transactions that would qualify as a financial derivative instrument.
At June 30, 2004, four customers accounted for 24% ($58,138), 21% ($50,449), 16% ($38,479) and 14% ($34,760) of accounts receivable, respectively. At June 30, 2003, no single customer accounted for 10% or more of accounts receivable.
At June 30, 2004, three suppliers accounted for 24% ($339,485), 17% ($231,389) and 10% ($144,111) of accounts payable, respectively. At June 30, 2003, three suppliers accounted for 21% ($192,730), 12% ($107,080) and 11% ($103,950) of accounts payable, respectively.
In 2004, one customer accounted for 19% ($513,434) of the Company's revenue. In 2003, four customers accounted for approximately 24% ($1,056,620), 19% ($830,073), 18% ($773,884) and 14% ($625,214) of the Company's revenue, respectively, and there was no other customer which accounted for more than 10% of the Company's revenue.
Export sales, principally to the USA, were $306,938 and $2,615,544 in 2004 and 2003, respectively.
Interest rate risk exposures
Cash assets totalling $7,899,760 (2003: $3,909,202) have a weighted average floating interest rate of 4.5% (2003: 1.9%). A weighted floating interest rate of 4.98% (2003: nil%) on security deposits totalling $26,873 (2003: $33,367) is included in other current financial assets. Other accounts receivable, security deposits, accounts payable and the unsecured loan are non-interest bearing.
Foreign exchange rate risk exposures
The Company is exposed to foreign currency exchange rate risk through primary financial assets and liabilities. It is the Company's policy not to hedge these transactions as the exposure is considered to be minimal from a consolidated operations perspective.
Financing facilities available
At reporting date, the following financing facilities had been negotiated and were available:
|
June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Total facilities | ||||||
Credit cards | $ | 83,424 | $ | 50,303 | ||
Facilities used at reporting date |
|
|
|
|
|
|
Credit cards | $ | 4,662 | $ | 2,619 | ||
Facilities unused at reporting date |
|
|
|
|
|
|
Credit cards | $ | 78,762 | $ | 47,684 |
15. Employee superannuation
As required by Australian superannuation legislation, the Company contributes 9% (2003: 9%) of every employee's salary to an approved superannuation fund nominated by the employee for their retirement benefit; such funds represents defined contribution plans. The Company contributed $158,943 to such superannuation funds in the year ended June 30, 2004 (2003: $92,569).
F-38
16. Non-cash investing and financing activities
2004
On June 15, 2004, Genetic Technologies issued 16,666,667 common shares at $0.27 (AUD0.39) to C.Y. O'Connor ERADE Village Foundation to acquire patents and other intellectual property at a value of $4,524,000. This transaction represents a non-cash investing activity and is part of the biotechnology segment.
2003
On May 12, 2003, the Company issued 700,000 common shares at $0.25 each to acquire a shareholding in XY, Inc. at a value of $171,676. This transaction represents a non-cash investing activity and is part of the investment segment operations.
On August 1, 2002, the Company issued 121,951 common shares at $0.22 each as part of the consideration to acquire DNA-ID Labs at a value of $27,165.
Part of the consideration for a licensing transaction with Pyrosequencing of Sweden, included three machines for the Company's Melbourne laboratory with a fair value of $440,727. The equipment was delivered in July 2003, however, for financial statement presentation, the receivable in relation to this equipment is presented in property and equipment at June 30, 2003.
17. Significant research and development agreements
The Company currently has the following key research and development agreements in place. Under the details of these agreements, each agency is responsible for its own costs in relation to the work undertaken. The Company is not liable for any costs incurred by other parties to these agreements. No costs have been deferred in relation to any of the Company's contracts.
Collaborative Research AgreementPathogen Genomics and Genetics Program ("PGGP")
The Company is party to a research agreement with the University of Melbourne whereby the Company and the University of Melbourne will conduct research into the field of molecular parasitology from April 2003 to March 2006. The agreement provides that all intellectual property developed under the agreement belongs to the Company. As at June 30, 2004, Genetic Technologies is required to contribute further GST-exclusive funds in the order of $207,809 (AUD298,920) towards further research over the term of the agreement. In March 2003, Meat and Livestock Australia Limited, a third party in an industry affected by molecular parasitology, agreed to contribute an additional $340,811 (AUD490,235) towards the PGGP project over three years. Payments made by the Company in accordance with the agreement totaled $144,751 (AUD202,960) and $97,913 (AUD167,459) for the years ended 30 June 2004 and 2003, respectively.
Sponsored Research AgreementC.Y. O'Connor ERADE Research Foundation ("Foundation")
On June 15, 2004, the Company entered into a Sponsored Research Agreement with C.Y. O'Connor ERADE Village Foundation whereby Genetic Technologies is required to contribute $625,680 (AUD900,000) per annum to fund research for the next 5 years amounting to a total commitment of $3,128,400 (AUD4,500,000). Genetic Technologies will own any and all intellectual property arising from the research. On July 7, 2004, the Company supplied a letter of credit for $325,440 (AUD450,000) for the term of the agreement. On July 2, 2004, the Company paid the first instalment of $320,625 (AUD450,000) in cash. As at June 30, 2004, an amount of $869,000 in Goods
F-39
and Services Tax (GST) was payable by the Company to the Foundation in respect of the purchase of certain items of intellectual property. An equivalent amount of GST was also receivable from the Australian Taxation Office in respect of the same transaction.
Research AgreementKing's College, London
In March 2004, the Company initiated a joint research project in the United Kingdom to explore the functionality of certain non-coding DNA elements, initially with special focus on the genetics of breast cancer susceptibility and the genetics of certain neuro-psychiatric conditions, such as schizophrenia. On August 10, 2004, the Company agreed to extend its research agreement with King's College, London on the "Bioinformatic and Functional Analysis of VNTR's" project for a further six months from July 26, 2004 to January 26, 2005. The funding commitment is $95,792 (GBP53,000) and is due in two instalments. Payments made by the Company in accordance with the agreement totaled $36,056 (AUD50,555) for the year ended June 30, 2004. No payments were made during the year ended June 30, 2003.
Collaborative Research AgreementHorticulture Australia Limited
On June 18, 2003, AgGenomics Pty. Ltd., a subsidiary of the Company, entered into a three-year Collaborative Research Agreement with Horticulture Australia Limited ("HAL") to try to identify a genetic trait for day neutrality in strawberries which, if found, could lead to an extension of the cultivation season and consequently higher production. Under the terms of the agreement, the parties agree to spend $1.5 million (AUD2.1 million), to be funded 45% by HAL and 55% by AgGenomics. Any and all intellectual property generated from the project will be owned in the same proportions. During the year ended June 30, 2004, AgGenomics Pty. Ltd. contributed an amount of $562,821 to the project (2003: $32,469).
Research AgreementUniversity of Western Australia
In March 2001, the Company entered into an agreement with the University of Western Australia, which is investigating a method for combating retrovirus-induced immunodeficiency. The intellectual property, covered by a provisional patent, was transferred by the scientists and inventors of the intellectual property, to a company ImmunAid Pty. Ltd. ("ImmunAid"), initially owned 60% by the Company and 40% by the scientists who have developed the hypothesis and tested it. In exchange for the 60% interest in ImmunAid, the Company agreed to fund the first $134,260 of research expenditure incurred by ImmunAid.
18. Segment disclosures
The Company applies SFAS No. 131: Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"), which establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to shareholders. SFAS 131 also establishes standards for related disclosures about products and services and geographic areas.
The Company currently operates in Australia, Switzerland and Canada in two reportable segmentsthe biotechnology industry and investment activities. The different types of revenues received from the Biotechnology segment is disclosed in the consolidated statement of operations.
F-40
Revenues from external customers from the different operating activities of the Company are as follows:
|
Year ended June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Biotechnology | $ | 2,645,002 | $ | 4,404,127 | ||
Investment | | | ||||
|
|
|||||
Total | $ | 2,645,002 | $ | 4,404,127 | ||
|
|
Interest revenues of $352,605 (2004) and $68,387 (2003) related solely to operations in the Biotechnology sector. Interest expenses of $nil (2004) and $5,979 (2003) also related solely to operations in the Biotechnology sector.
Income tax expenses of $27,579 (2004) and $167,412 (2003) related solely to operations in the Biotechnology sector.
Depreciation expense based upon the operating activity, is as follows:
|
Year ended June 30
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Biotechnology | $ | 399,542 | $ | 79,855 | ||
Investment | | | ||||
|
|
|||||
Total | $ | 399,542 | $ | 79,855 | ||
|
|
Net loss based upon the operating activity, is as follows:
|
Year ended June 30,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Biotechnology | $ | (5,222,950 | ) | $ | (686,499 | ) | |
Investment | 406,224 | (273,896 | ) | ||||
|
|
||||||
Total | $ | (4,816,726 | ) | $ | (960,395 | ) | |
|
|
Net loss for the investment segment has been determined based on the accounting policy described in Note 2 relating to marketable securities and cost-method investments.
Revenues from external customers based upon the country of origin of the sale are as follows:
|
Year ended June 30,
|
|||||
---|---|---|---|---|---|---|
|
2004
|
2003
|
||||
Australia | $ | 2,645,002 | $ | 4,402,971 | ||
Switzerland | | | ||||
Other | | 1,156 | ||||
|
|
|||||
Total | $ | 2,645,002 | $ | 4,404,127 | ||
|
|
During the years ended June 30, 2004 and 2003, one government grant individually accounted for 19% and 2% of the Company's total revenue, respectively.
F-41
Interest revenues of $352,605 (2004) and $68,387 (2003) related solely to operations carried out in Australia. Interest expenses of $nil (2004) and $5,979 (2003) also related solely to operations carried out in Australia.
Income tax expenses of $27,579 (2004) and $167,412 (2003) related solely to operations carried out in Australia.
Depreciation expense of $399,542 (2004) and $79,855 (2003) related solely to operations carried out in Australia.
Net loss based upon the country of origin of the sale is recorded in, are as follows:
|
Year ended June 30,
|
||||||
---|---|---|---|---|---|---|---|
|
2004
|
2003
|
|||||
Australia | $ | (4,911,915 | ) | $ | (641,170 | ) | |
Switzerland | (12,904 | ) | (301,606 | ) | |||
Other | 108,093 | (17,619 | ) | ||||
|
|
||||||
Total | $ | (4,816,726 | ) | $ | (960,395 | ) | |
|
|
The Company's long-lived assets totalled $1,287,225 (2004) and $999,437 (2003). All such assets are in the biotechnology sector and are located in Australia.
Non-cash transactions
All non-cash transactions relate to Australia. Non-cash investing and financing transactions that related to a specific segment are further described in Note 16. Non-cash operating transactions are disclosed in the consolidated statement of cash flows. All non-cash operating transactions excluding depreciation and transactions relating to marketable securities and cost-method investments relate to the Biotechnology segment. Transactions relating to marketable securities and cost-method investments relate to the investment segment. The allocation of depreciation between segments is further described above.
19. Subsequent events (unaudited)
On August 13, 2004, Auckland District Health Board ("ADHB") lodged a Statement of Claim in the High Court of New Zealand alleging that the Company made "groundless threats of patent infringement" against ADHB. On October 22, 2004, the Company filed a Statement of Defence. A further amended Statement of Defence was filed by the Company on October 29, 2004, together with a Memorandum of Counsel. It is anticipated that a further Directions Conference will be held in early calendar 2005. In accordance with FAS 5: Accounting for Contingencies, no accrual has been made in respect of any loss which may arise from this matter as, at the date of these financial statements, it is not possible to determine if it is probable that a liability has been incurred, nor is it possible to reasonably estimate any loss. The lower end of the range of loss is $nil, while the upper range cannot be estimated.
The Company is the plaintiff in a patent infringement matter against Applera Corporation of Foster City, California. On September 16, 2004, a ruling was handed down by the United States District Court in favour of the Company in respect of 13 out of 15 disputed terms and, in respect of the
F-42
remaining terms, the Court adopted positions of its own construction, which were not inconsistent with the Company's proposals. The Court ruled that the matter proceed to mediation.
On September 22, 2004, the Company announced that it had signed its biggest license to date with Genzyme Corporation, a large biotechnology company listed on Nasdaq (GENZ) based in Cambridge, Massachusetts. Under the license, Genzyme paid a signing fee of approximately $5.3 million (AUD7.5 million) on the date of execution, of which $3,658,500 was paid in cash on 15 October 2004. The remaining $1,738,000 (AUD2.5 million) will be satisfied by the granting of a license to Genetic Technologies over certain intellectual property owned by Genzyme, the details of which are being negotiated by the parties. In addition to the initial fees, Genzyme will also pay the Company a fee of $695,200 (AUD1 million) per year for the life of the non-coding patents (currently till 2015). The license granted by Genetic Technologies to Genzyme covers human genetic testing applications, including research, pre-clinical trials and commercial genetic testing. These rights apply non-exclusively in the USA, Europe and Japanbut not in the Asia-Pacific region, where Genetic Technologies continues to build its own genetic testing capability.
On October 4, 2004, Genetic Technologies announced that it had executed two agreements with MetaMorphix, Inc., a US biotechnology company specializing in the genetics and genomics of certain animals species, based in Savage, Maryland. Under the first agreement, Genetic Technologies granted to MetaMorphix a non-exclusive world-wide license to the Company's non-coding patents, limited to livestock, aquaculture and companion animals. The signing fee plus annual payments to be received by Genetic Technologies in cash under this agreement together total some $1,251,360 (AUD1.8 million). Under the second agreement, Genetic Technologies acquired from MetaMorphix and its wholly owned subsidiary, MMI Genomics, a license to a broad range of diagnostic assays and testing rights for cattle and for dogs, for which the Company made a one-time, all-inclusive payment to MetaMorphix for all these rights.
Subsequent to June 30, 2004, the Company returned an item of testing equipment as it did not meet its technical criteria. Consequently, its commitment (refer Note 11) has been extinguished.
As at June 30, 2004, the foreign exchange rate of one Australian dollar to one US dollar was 0.6952, which is greater than the foreign exchange rate at December 31, 2004 of 0.7805. Management is unable to assess the impact of this change on the accounts.
Since the end of the financial year, the following unlisted options have been issued:
Description
|
Number
|
|
---|---|---|
Staff options at AUD56 cents each, expiring February 27, 2010 | 580,000 | |
Staff options at AUD49 cents each, expiring February 27, 2010 | 500,000 | |
Staff options at AUD48 cents each, expiring April 19, 2010 | 500,000 | |
Staff options at AUD48 cents each, expiring September 6, 2010 | 750,000 |
Since the end of the financial year, the following unlisted options have been exercised:
Description
|
Number
|
|
---|---|---|
Vendor options at 14.6 cents each, expiring April 15, 2005 | 1,709,344 | |
Staff options at 39.9 cents each, expiring November 30, 2007 | 75,000 | |
Staff options at 36.3 cents each, expiring November 30, 2007 | 37,500 |
The financial effects of the above transactions have not been brought to account in the financial statements for the year ended June 30, 2004.
F-43
The following documents are filed as exhibits to this Registration Statement on Form 20-F:
1.1 | Constitution of the Registrant. | |
2.1 | Deposit Agreement, dated as of January 14, 2002, by and among Genetic Technologies Limited, The Bank of New York, as Depositary, and the Owners and Holders of American Depositary Receipts (such agreement is incorporated herein by reference to the Registration Statement on Form F-6 relating to the ADSs (File No. 333-14270) filed with the Commission on January 14, 2002). | |
2.2. | The total indebtedness authorized under any instrument relating to long term debt of the Company does not exceed 10% of our total consolidated assets. Any instrument relating to indebtedness will be supplied to the Commission upon its request. | |
4.1 | Consulting contract with Dr. Stephen Kent for Technical Review Committee for ImmunAid Pty. Limited, dated September 14, 2001. | |
4.2 | Staff Share Plan 2001 dated November 30, 2001. | |
4.3 | License Agreement dated 5 April 2002 between Genetic Technologies Limited and Sequenom Inc. | |
4.4 | License Agreement dated 12 April 2002 between Genetic Technologies Limited and Nanogen Inc. | |
4.5 | License Agreement dated 20 August 2002 between Genetic Technologies Limited and Perlegen Sciences Inc. | |
4.6 | License Agreement and related Patent and Trademark License Agreement dated 24 October 2002 between Genetic Technologies Limited and Myriad Genetics Inc. | |
4.7 | License agreement with an effective date of 7 March 2003 between Genetic Technologies Limited and Pyrosequencing AB. | |
4.8 | Research license dated as of July 22, 2003 between Genetic Technologies Limited and University of Sydney, and Agreement to Assign Intellectual Property dated September 4, 2003. | |
4.9 | License agreement dated as of August 1, 2003 between Genetic Technologies Limited and Quest Diagnostics Inc. | |
4.10 | License Agreement dated as of December 31, 2003 between Genetic Technologies Limited and TM Bioscience Corporation. | |
4.11 | License Agreement dated as of February 5, 2004 between Genetic Technologies Limited and Laboratory Corporation of America Holdings.* | |
4.12 | Settlement and License Agreement dated as of June 15, 2004 between Genetic Technologies Limited and C.Y. O'Connor ERADE Village Foundation (incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated). | |
4.13 | Sponsored Research Agreement dated as of June 15, 2004 between Genetic Technologies Limited and the C.Y. O'Connor ERADE Village Foundation. | |
4.14 | IP Sale and Royalty Agreement dated as of June 15, 2004 between Genetic Technologies Limited and C.Y. O'Connor ERADE Village Foundation. | |
4.15 | License Agreement dated as of September 17, 2004 between the Company and Genzyme Corporation.* | |
4.16 | License Agreement dated as of September 17, 2004 between the Company and MetaMorphix, Inc. | |
4.17 | License Agreement dated as of September 27, 2004 among the Company, MetaMorphix, Inc. and MMI Genomics, Inc. | |
8.1 | List of subsidiaries of the Company | |
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15.01 | Consent of Ernst & Young. |
105
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Registration Statement on its behalf.
GENETIC TECHNOLOGIES LIMITED | |||
Dated: August 19, 2005 |
|
By: |
/s/ MERVYN JACOBSON Name: Dr. Mervyn Jacobson Title: Chairman and Chief Executive Officer |
106
Corporations Law
A Company Limited by Shares
CONSTITUTION
OF
DUKETON GOLDFIELDS LIMITED
A.C.N. 009 212 328
Name
Change To Genetic Technologies Limited On 29 August 2000
Australian Company Services Pty Limited
ACN 003 961 733
Level 7, 14 Martin Place
Sydney NSW 2000
Ph: (02) 9224 8925 Fax: (02) 9224 8995
Dennis Corporate Services Pty Limited
Attn: Ian Dennis
2 Holdsworth Avenue
St Leonards NSW 2065
Remove this top section if desired before framing
Certificate of Registration
on Change of Name
This is to certify that
DUKETON GOLDFIELDS LIMITED
Australian Company Number 009 212 328
did on the twenty-ninth day of August 2000 change its name to
GENETIC TECHNOLOGIES LIMITED
Australian Company Number 009 212 328
The company is a public company.
The company is limited by shares.
The
company is taken to be registered as a company
under the Corporations Law of Western Australia.
Issued
by the
Australian Securities and Investments Commission
this twenty-ninth day of August, 2000.
Alan
Cameron
Chairman
Dennis Corporate Services Pty Limited
Attn: Ian Dennis
2 Holdsworth Avenue
Greenwich NSW 2065
Remove this top section if desired before framing
Certificate of Registration
on Change of Type
This is a certify that
DUKETON GOLDFIELDS NL
Australian Company Number 009 212 328
on the fifteenth day of October 1999 converted to
a company limited by shares
and that the name of the company is now
DUKETON GOLDFIELDS LIMITED
Australian Company Number 009 212 328
The company is a public company.
The
company is taken to be registered as a company
under the Corporations Law of Western Australia.
Issued
by the
Australian Securities and Investments Commission
on this fifteenth day of October, 1999.
Alan
Cameron
Chairman
Corporations Law
A Company Limited by Shares
CONSTITUTION
OF
DUKETON GOLDFIELDS LIMITED
A.C.N. 009 212 328
Australian Company Services
Pty Limited
ACN 003 961 733
Level 7, 14 Martin Place
Sydney NSW 2000
Ph: (02) 9224 8925 Fax: (02) 9224 8995
CONSTITUTION
OF
DUKETON GOLDFIELDS LIMITED
(formerly Duketon Goldfields NL)
A.C.N. 009 212 328
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DUKETON GOLDFIELDS LIMITED
ACN 009 212 328
A Company Limited by Shares
Registered under the Corporations Law of Western Australia
CONSTITUTION
" ASIC " means the Australian Securities & Investments Commission;
" ASX " means the Australian Stock Exchange Limited;
" Auditor " means any person appointed to perform the duties of an auditor of the Company;
" Board " means the whole or any number of the Directors for the time being assembled at a Meeting of Directors and not being less than a quorum;
" Branch Register " means any register of Members authorised and established outside the State in accordance with this Constitution;
" Business days " means Monday to Friday inclusive, except New Year's Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day;
" Capital " means the capital for the time being of the Company;
" Certified Holding " means a holding of shares by a Member who has not waived a certificate under Clause 10 and 11 of this Constitution;
" Chairman " means Chairman of the Board of Directors;
" CHESS " means the Clearing House Electronic Subregister System established and operated by ASX Settlement and Transfer Corporation Pty Limited, AGN 006 504 532 for:
" CHESS Approved Securities " means securities of a company for which CHESS approval has been given in accordance with the SCH Business Rules;
" Company " means Duketon Goldfields Limited;
" Constitution " means the Constitution of the Company in force from time to time;
" Directors " means the Directors for the time being of the Company or the Directors assembled as a Board and, unless the context otherwise requires, includes all Alternate Directors;
" Dividend " includes Bonus;
" Executive Director " means a Director in full time employment of the Company and includes the Managing Director;
" Home Branch " means the branch of ASX designated to the Company by ASX as the Company's home branch for administrative purposes;
" In writing " or " Written " includes printing, facsimile transmission, lithography, photography or other means or representing or reproducing words in a visible form;
" Law " means the Corporations Law and includes an amendment or re-enactment of same or any legislation passed in substitution;
" Listing Rules " means the Listing Rules of the ASX and any other rules of ASX which are applicable while the Company is admitted to the Official List of ASX, each as amended or replaced from time to time, except to the extent of any express written waiver by ASX;
" Managing Director " means any person appointed to perform the duties of managing director of the Company;
" Meeting " means a meeting of Members duly called and constituted in accordance with this Constitution and any adjourned holding of such meeting;
" Member ", " Shareholder " or " Holder " means any person entered in the Register as a Member for the time being of the Company;
" Member Present " a reference to a "Member present" is a reference to a Member present at any General Meeting of the Company in person or by proxy or attorney, or in the case of a corporation, by a duly appointed representative;
" Office " means the Registered Office for the time being of the Company;
" Official List " means the Official List of Companies that ASX has admitted and not removed;
" Prescribed Interest Rate " means the rate determined by the Directors for the purpose of this constitution, and in the absence of a determination means 10% per annum;
" Proper SCH Transfer " means a SCH regulated transfer that is effected in accordance with the SCH Business Rules or that is taken by Section 1097D of the Corporations Law to be a proper SCH Transfer;
" Record Date " means 5.00 p.m. (in the case of a proper SCH transfer, a later time permitted by the SCH Business Rules) on the date a Company specifies for lodging transfers for the purpose of identifying the persons who are entitled to dividends, interest, new securities, rights to priority of applications for issues of securities, or any other entitlement.
" Register " means the Register of Members to be kept pursuant to the Law and where the context requires shall also include any Branch Register;
" Resolution " means a resolution other than a special resolution;
"Restricted Securities" means:
" Restriction Agreement " means a restriction agreement entered into by the Company under the Listing Rules;
" SCH Business Rules " means the business rules of the Securities Clearing House in force from time to time;
" SCH Regulated Transfer " means a transfer of CHESS approved securities in accordance with the SCH Business Rules;
" Seal " means the common seal of the Company and includes any official seal of the Company;
" Secretary " means any person appointed to perform the duties of Secretary of the Company or any person appointed to act temporarily as such;
2
" Securities Clearing House " and " SCH " means ASX Settlement and Transfer Corporation Pty. Limited, ACN 008 504 532 or such other body as is approved under Section 779B of the Corporations Law from time to time;
" Shares " and " Share " mean the shares of the Company;
" Special Resolution " means a special resolution as defined in Section 9 of the Corporations Law;
" State " means the State of New South Wales;
" Transfer Auditor " means such person as the Board has appointed for the purpose of certifying as to the correctness of transfers of shares and other securities, the allotment of shares and other securities and the issue of certificates in respect of such shares and other securities;
" Uncertified Holding " means the holding of shares by a Member who has waived his entitlement to a certificate under Clause 10 or a holding of shares by a Member pursuant to a proper SCH transfer;
A reference to control of the voting power in the Company is a reference to control that is direct or indirect, including control that is exercisable as a result of or by means of arrangements or practices, whether or not having legal or equitable force and whether or not based on legal or equitable rights;
Headings are for convenience only and shall not be used in the interpretation of this Constitution or of any part of this Constitution.
Words importing persons shall include partnerships, associations, corporations, companies unincorporated and incorporated, whether by Act of Parliament or otherwise, as well as individuals.
Words importing the singular number shall include the plural number and vice versa,
Where any word or phrase is given a defined meaning in this Constitution, any other part of speech or other grammatical form in respect of such word or part of speech shall have a corresponding meaning.
An expression used in a particular Part or Division of the Corporations Law that is given by that Part or Division a special meaning for the purposes of that Part or Division has, in this Constitution that deals with a matter dealt with by that Part or Division, unless the contrary intention appears, the same meaning as in that Part or Division.
Words and expressions defined in the Listing Rules shall have the same meaning where used in this Constitution unless the context or subject matter otherwise requires.
Capital and Variation of Rights
3
as nearly as practicable in proportion to their respective shareholdings or where such person or company is already registered as the holder of a majority of the issued shares in the Company prior to such allotments;
7. | (a) | The Company may exercise the power to make payments by way of brokerage or commission conferred by the Law in the manner provided by the Law. | |
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(b) |
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Payments by way of brokerage or commission may be satisfied by the payment of cash, by the allotment of fully or partly paid shares or partly by the payment of cash and partly by the allotment of fully or partly paid shares. |
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(c) |
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Except as required by Law, the Company shall not recognise a person as holding a share on trust. The Company is not bound or compelled in any way to recognise (whether or not it has notice of the interest or rights concerned) any equitable, contingent, future or partial interest in any share or unit of a share (except as otherwise provided by this Constitution or by the Law) any other right in respect of a share except an absolute right of ownership in the registered holder. |
8. | (a) | Securities classified as restricted securities under a current Restriction Agreement cannot be disposed of during the escrow period except as permitted by the Listing Rules or ASIC. | |
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(b) |
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The Company must refuse to acknowledge a disposal (including registering a transfer) of securities so classified as restricted securities during the escrow period except as permitted by the Listing Rules or ASIC. |
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(c) |
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During the breach of the Listing Rules relating to securities so classified as restricted securities, or a breach of a Restriction Agreement, the holder of the restricted securities is not entitled to any dividend or distribution, or voting rights, in respect of the restricted securities. |
4
A certificate for the securities need not be issued if the Corporations Law so permits. Directors may cancel a certificate and not issue a replacement if the Corporations Law so permits.
The Company in every such case:
5
of payment to the date of repayment (the 'period) and may deduct from or set off against any such dividend or other money payable to the Members any reasonable expenses paid by the Company together with any interest payable pursuant to this Constitution.
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21. | (a) | The Directors may, subject to compliance with the requirements of the Corporations Law and the Listing Rules, make calls on a Member in respect of any money unpaid on the Shares of that Member (whether on account of the nominal value of the Shares or by way of premium) and not by the terms of issue of those Shares made payable at fixed times. | |
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(b) |
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A call may be made payable by instalments. |
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(c) |
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The directors may not revoke or postpone a call. |
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(d) |
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The Company will give Members notice of any call which shall specify the amount of the call, the time and place of payment, to whom the call is to be paid and give such other information as is required by the Listing Rules. |
7
any other matters whatsoever but proof of the matters set out in this Clause shall be conclusive evidence of the debt.
30. | (a) | The Directors may accept from a Member the whole or a part of the amount unpaid on a Share although no part of that amount has been called. | |
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(b) |
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The Directors may authorise payment by the Company of interest on the whole or any part of an amount so accepted, until the amount becomes payable, at such a rate, not exceeding the Prescribed Interest Rate, as is agreed between the Directors and the Member paying the sum. |
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(c) |
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The Directors may at any time repay any amount so advanced upon. |
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(d) |
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Any advance payment by a Member does not confer on the Member a right to participate in profits during the period prior to the date on which the amount so advanced would but for such payment have become payable. Any amount paid or credited as paid on a share in advance of a call is not to be taken as paid or credited on the share for the purposes of determining voting entitlements. |
8
Upon any refusal to register an instrument of transfer of shares hereunder or under Clause 37 or 39 the Directors shall give written notice of the refusal to the lodging party and the reasons for such refusal within five (5) business days after the date on which the instrument was lodged with the Company.
"offer period" has the meaning given to that expression in Section 603 of the Corporations Law;
"relevant day" in relation to a take over scheme, means the day that is the fourteenth day before the last day of the offer period;
"proportional takeover scheme" has the meaning given to that expression in Section 603 of the Corporations Law;
a reference to "a person associated with" another person has the meaning given to the expression "associate reference" in Sections 10,11,12 and 15 of the Corporations Law.
9
10
Forfeiture and Surrender of Shares
11
12
Proceedings at General Meetings
13
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he shall satisfy the Directors of his right to transfer such shares unless the Directors shall have previously admitted his right to vote at such meeting in respect thereof.
82. | (a) | An objection may be raised to the qualification of a voter only at the meeting or adjourned meeting at which the vote objected to is given or tendered. | |
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(b) |
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Any such objection must be referred to the chairman of the meeting, whose decision is final. |
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(c) |
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A vote not disallowed under such an objection is valid for all purposes. |
Appointment and Removal of Directors
15
16
17
117. | (a) | Upon a Director ceasing or at any time after his ceasing whether by retirement or otherwise to hold that office, the Directors may pay to the former Director, or in the case of his death to his legal personal representative, or to his dependants or any of them a lump sum payment in respect of past services of such Director of an amount not exceeding the amount permitted by Law or the Listing Rules. The Company may contract with any Director other than an Executive Director to secure payment of any such sum to him, to his legal personal representative or to his dependants or any of them. | |
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(b) |
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A determination made by the Directors in good faith that a person is or was at the time of the death of such Director a dependant of such Director shall be conclusive for all purposes of paragraph (a) of this Clause. |
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122. | (a) | For the purposes of this Constitution, the contemporaneous linking together by instantaneous communication device of a number of consenting Directors being no less than the quorum, whether or not any one or more of the Directors is out of Australia, shall be deemed to constitute a meeting of the Directors and all the provisions of this Constitution as to meetings of the Directors shall apply to such meeting held by instantaneous communication device so long as the following conditions are met: |
19
the Directors duly convened and held. Any such resolution may consist of several documents in like form each signed by one or more Directors. Every resolution so approved and signed shall be as soon as practicable be entered in the Minutes of the Directors' meetings. A telex, telegram, facsimile or such similar means of communication addressed to or received by the Company and purporting to be signed by a Director shall for the purpose of this Clause be in writing signed by such Director.
127. | (a) | The Directors may delegate any of their powers to committees consisting of such Directors as they think fit and may from time to time revoke such delegation. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may from time to time be imposed upon it by the Directors. | |
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(b) |
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Except as set out in this Clause, the meetings and proceedings of any such committee consisting of two or more Members shall be governed by the provisions contained in this Clause for regulating the meetings and proceedings of the Directors. |
Directors' Contracts with Company
129. | (a) | No director shall be disqualified by his office from holding any other office or place of profit under the Company or any of its subsidiary companies or under any company in which the Company is or becomes a shareholder or is otherwise interested or from contracting or arranging with this Company or any other such company either as vendor, purchaser or otherwise howsoever nor shall any such contract or any contract or arrangement entered into or to be entered into by or from or on behalf of the Company in which the Director shall or maybe in any way interested be avoided nor shall the Director so contracting or being so interested be liable to account to the Company for any profit arising from any such office or place of profit or realised by any such contract or arrangement by reason only of the Director holding that office or of the fiduciary relationship thereby established but the nature of the Director's interest must be disclosed by him before or at the meeting of Directors at which the question of entering into the contract or arrangement is first taken into consideration if his interest then exists or in any other case at the first meeting of the Directors after he becomes so interested. Such Director may as a Director vote in respect of any contract or arrangement in which he is so interested other than any such contract or arrangement in which he has directly or indirectly a material interest and if he does so vote when prohibited by this Clause his vote shall not be counted. Any such Director may be counted in forming a quorum and may join in the authorisation of the affixing of the Seal to any document evidencing such contract or arrangement and may attest the affixing thereto of the Seal or the common seal of any subsidiary company or any other company or corporation of which the Director may be a Director and which is a party to any such document. |
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Powers and Duties of Directors
21
Any such minutes if purporting to be signed by any person purporting to be the Chairman of such meeting or to be the Chairman of the next succeeding meeting shall be received in evidence without any further proof as sufficient evidence that the matters and things recorded by or appearing in such minutes actually took place or happened as recorded or appearing and of the regularity of such matters or things in all respects and that the same took place at a meeting duly convened and held.
142. | (a) | The Company may have a common seal which must bear the name of the Company and its ACN as required by the Law. The directors must provide for the safe custody of the seal. | |
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(b) |
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If the Company does have a common seal it must be affixed to every document executed by the Company and must be witnessed by: |
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148. | (a) | Subject to the rights of persons (if any) entitled to shares with special rights as to dividends all dividends shall be paid according to the amounts paid or credited as paid on the shares in respect of which the dividend is paid. | |
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(b) |
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The sum paid upon a share on which all amounts payable have not been paid or credited as paid is that proportion of the sum referred to in paragraph (a) that the amount paid (not credited) on the share bears to the total of the amounts paid and payable (excluding amounts credited) on the share. |
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(c) |
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An amount paid or credited as paid on a share in advance of a call shall not be taken for the purposes of this paragraph to be paid or credited as paid on the share. |
150. | (a) | The payment of any dividend may be made by payment in cash, the issue of shares, the grant of options or the transfer of assets. | |
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(b) |
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Where a difficulty arises in regard to such a distribution, the directors may settle the matter as they consider expedient and fix the value for distribution of the specific assets or any part of those assets and may determine that cash payments will be made to any Members on the basis of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as they consider expedient. |
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and any agreement made under an authority referred to in paragraph (e) is effective and binding on all the Members concerned.
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26
27
Share Capital and Share Rights
28
Minority Members are sold at or about the same time to one person, the transfer may be effected by one instrument of transfer.
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the process of sale on the part of any person (other than the Minority Member) even when the Company has notice of it.
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THIS DEED is made the day of
between:
IMMUNAID PTY. LTD. ACN 096 281 542 , of 60-66 Hanover Street, Fitzroy, Victoria ("the Company"); and
Stephen Kent of 9 St John's Avenue Camberwell, Victoria, ("the Consultant").
WHEREAS:
THE PARTIES HEREBY AGREE:
1. DEFINITIONS AND INTERPRETATION
In this agreement, and in any instrument created pursuant to or in accordance with it, unless the context otherwise indicates or requires:
" Board " means the board of directors of the Company.
" Confidential Information " means all information relating to the Research Project including the information and material disclosed in any patents, any patent applications, intended or future patent applications, specifications, reports, plans, devices, designs, all statements (oral or written), contracts, agreements, communications, "tricks of the trade", engineering and design drawings, manufacturing procedures, processes, computer software, trade secrets, marketing procedures, samples, methods, research and development information, copyright material, technical data, drawings, sketches, proposals, notes, any other related documents, information and other matter or data whatsoever.
" Consultancy Fee " means the remuneration specified in clause 7.
" Consultancy Services " means, such services in respect of the ImmunAid Research Project, including but not limited to:
" Engagement " means the engagement of the Consultant to provide the Consultancy Services constituted by this agreement.
" Research Project " means the any program conducted by the Company to research and develop new procedures and systems for the treatment of Acquired Immune Deficiency Syndrome (AIDS), or related projects dealing with regulation of the immune system.
" Term " means the term of this agreement specified in clause 3.
In the interpretation of this agreement, and of any instrument created pursuant to or in accordance with it, unless the context otherwise indicates or requires:
2. ENGAGEMENT OF THE CONSULTANT
3. TERM
The term of the Engagement commences on the date of this deed and continues until terminated pursuant to clause 10.
4. REVIEW
The terms of this agreement may be reviewed from time to time by the parties and the results of each review may be recorded in writing and signed by the parties.
2
5. POWERS AND DUTIES
as conferred, delegated or specified by the Company from time to time.
6. PERFORMANCE
7. CONSULTANCY FEE AND BENEFITS
8. CONFIDENTIAL INFORMATION
3
9. COVENANTS
4
5
10. TERMINATION
11. NATURE OF RELATIONSHIP
12. NOTICES
6
13. MISCELLANEOUS
The Consultant will be liable for and duly pay all stamp duty on or relating to this agreement and any document executed under it.
Each party will bear its own legal and other costs and expenses relating directly or indirectly to the performance of its obligations under this agreement.
This agreement may only be varied or replaced by a document duly executed by the parties.
Subject to any express provision in this agreement to the contrary, the rights of a party under this agreement are cumulative and are in addition to any other rights of that party.
Each party will promptly execute all agreements and do all things that any other party from time to time reasonably requires of it to effect, perfect or complete the provisions of this agreement and any transaction contemplated by it.
The Consultant may not assign, dispose of or encumber any right under this agreement without the prior consent of the Company.
This agreement may consist of a number of counterparts and if so the counterparts taken together constitute one and the same instrument.
7
This agreement is not binding on any party unless it or a counterpart has been duly executed by, or on behalf of, each person named as a party to the agreement
If any term, provision, covenant, or condition of this agreement, or the application thereof to any person or circumstances is or becomes invalid, void or unenforceable, the remaining provisions of this agreement are valid and enforceable and shall in no way be affected, impaired or invalidated.
This agreement constitutes the entire agreement between the parties pertaining to the subject matter of this agreement and this agreement supersedes any previous agreements, understandings and negotiations on that subject matter, whether oral or written.
8
Executed as a deed. | ||
THE COMMON SEAL of IMMUNAID
PTY. LTD. is affixed in accordance with its Articles of Association in the presence of: |
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Director: | ||
Director/Secretary: | ||
SIGNED SEALED AND DELIVERED
by Stephen Kent in the presence of: |
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Signature of Stephen Kent |
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Signature of Witness: |
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Full Name, Address and Occupation of Witness: |
9
GENETIC TECHNOLOGIES LIMITED
ACN 009 212 328
GENETIC TECHNOLOGIES STAFF SHARE PLAN 2001
RULES
PART IINTERPRETATION
DICTIONARY
In these Rules, and in the Terms of Grant of each Right, unless the context otherwise requires:
" Associate " has the meaning given by section 139GE of the Income Tax Assessment Act 1936
" Board " means the Board of Directors of the Company or a committee appointed by the Board of Directors
" Business Day " has the meaning given in the Listing Rules
" Ceasing to be Employed by a Group Company " means ceasing to be employed by a Group Company and not being employed by any other Group Company
" Company " means Genetic Technologies Limited (ACN 009 212 328)
" Corporations Act " means the Corporations Act 2001
" Demerger " means a transfer, direct or indirect, by the Company or a Subsidiary to the shareholders of the Company, of shares in a Subsidiary, so that that Subsidiary ceases to be a Group Company
" Eligible Person " means any of:
who is declared by the Board to be an Eligible Person for the purposes of the Plan
" Employee " means, in relation to a Right, the Eligible Person to whom, or to whose nominated Associate, the Company grants the Right
" Employee Share " means a Share resulting from the exercise of a Right
" Employment " means employment or appointment (in the sense of holding office) by or being engaged by, or being contracted to provide goods or services to a Group Company
" Exercise Date " means the date on which a Right is exercisable, being the date stated by the Board as the Exercise Date, or fixed by a method of calculation prescribed by the Board in the Invitation
" Exercise Price " means the amount payable on exercise of a Right (if any)
" Expiry Date " means the date on which a Right lapses, being the date stated by the Board as the Expiry Date, or fixed by a method of calculation prescribed by the Board in the Invitation
" Grant Date " means the date on which a Right is granted or deemed to be granted
" Group Company " means each of the Company and its Subsidiaries and any other entity in which the Company has a direct or indirect economic interest that is declared by the Board to be a Group Company for the purposes of the Plan
" Incapacity " means an Employee's inability, in the opinion of the Board, to perform his or her duties because of his or her illness or incapacity
" Invitation " means an invitation that is issued to an Eligible Person under Rule 2 ("Invitation to Apply for Rights")
" Listing Rules " means the Listing Rules of the Stock Exchange (including the terms of any waiver given under those rules) as they apply to the Company from time to time
" Market Value " means the market value of a Share determined under section 139FA of the Income Tax Assessment Act 1936
" Participant " means:
" Participating Company " means each Group Company to which the Board resolves that the Plan extends
" Performance Condition " means a condition prescribed by the Board as a condition that must be satisfied before a Right may be exercised
" Plan " means the Genetic Technologies Staff Share Plan 2001 under these Rules
" Plan Share " means, in relation to a Right, each Share that a Participant has a right to acquire under the Right
" Redundancy " means termination of Employment of an Employee by a Participating Company due to economic, technological, structural or other organisational change where, through no act or default of the Employee:
" Resignation " means a resignation by an Employee
" Retirement " means termination of the Employment of an Employee by a Participating Company because the Employee attains the age that the Board accepts as his or her retirement age
" Right " means each of a right under the Plan to acquire (in the case of an option that has an Exercise Price, by subscription or purchase):
" Rules " means these rules
" Share " means a fully paid ordinary share in the capital of the Company
" Stock Exchange " means the Australian Stock Exchange Limited or any other stock exchange on which Shares of the Company are traded
2
" Subsidiary " means, in relation to a company, a body corporate that is a subsidiary of the Company in terms of Division 6 of Part 1.2 of the Corporations Act
" Takeover Bid " has the meaning given in section 9 of the Corporations Act
" Terms of Grant " means, in relation to a Right:
" Tranche " means a number of Rights, each having the same Grant Date, Exercise Date and Expiry Date
" Vested " means, in relation to a Right, that any Performance Condition applicable to the Right has been achieved and a Participant is otherwise entitled to exercise the Right.
In these Rules, and in the Terms of Grant of each Right, unless the context otherwise requires:
3
1. RIGHTS
or both.
2. INVITATION TO APPLY FOR RIGHTS
4
3. GRANT OF RIGHTS
5
4. REGISTER OF RIGHTS
Rights granted under the Plan (and Shares issued on their exercise) will be registered in the appropriate register of the Company.
5. EXERCISE OF RIGHTS
except when expressly permitted otherwise by the Terms of the Grant.
6
6. EXERCISE FOLLOWING DEATH OR OTHER CESSATION OF EMPLOYMENT
then (subject to the provisions of Rule 5 ("Exercise of Rights")) the Participant may exercise the Right on and from the date of death until the expiry of whatever term the Board may determine, and in the absence of such determination, of twelve months after that date.
the Participant may exercise the Right only if and to the extent permitted by the Board in writing, and during the period so permitted by the Board (or whatever additional time may be allowed if the Employee or the Participant dies), and
7
then the Participant may exercise the Right on and from the date of cessation of Employment until the expiry of whatever term the Board may determine, and in the absence of such determination, of three months after that date (or whatever additional period may be allowed if the Employee or the Participant dies).
If the Participant, being an Associate of the Employee and a natural person, dies before a Vested Right is exercised and the Participant is or becomes entitled to exercise the Right under Rule 6.1 or 6.2 following the Employee's death or Ceasing to be Employed by a Group Company then, subject to Rule 5 ("Exercise of Rights"), the period during which the Participant may exercise the Right extends to the later of:
7. A RIGHT LAPSES FOLLOWING DEATH OR OTHER CESSATION OF EMPLOYMENT
but no later than the Expiry Date.
8. DELIVERY OF SHARES ON EXERCISE OF RIGHTS
8
paragraph (a) or as near as may be, and if there is a fractional Share, the value thereof shall be paid in cash.
9. TAKEOVER BID, PROPOSED SCHEME OF ARRANGEMENT OR DEMERGER
then, subject to Rule 5 ("Exercise of Rights") but whether or not any Performance Condition has been satisfied, the Participant may exercise the Rights within that period in addition to any other period during which the Rights may be exercised.
9
Company, a Participant may exercise the Participant's Rights within two months from the last date when any of the Shares were so acquired.
the Board may give written notice to each Participant, stating that the Participant's Rights may be exercised by a prescribed date.
10. TAKEOVER, RECONSTRUCTION, AMALGAMATION, WINDING UP
If:
then, subject to Rule 5 ("Exercise of Rights") but whether or not any Performance Condition has been satisfied, a Participant may exercise the Participant's Rights within one month after the occurrence of the relevant event.
11. RIGHT LAPSES IN CASE OF TAKEOVER, RECONSTRUCTION, AMALGAMATION, WINDING UP
If a Participant becomes entitled to exercise a Right under Rule 10 ("Takeover, Reconstruction, Amalgamation, Winding Up"), the Right lapses on the later of:
10
but no later than the Expiry Date
12. ADJUSTMENT TO RIGHTS
If:
the Exercise Price of each Right (where there is an Exercise Price) is reduced according to the following formula:
O' = O - |
E(P-(S+D))
N+1 |
Where: | ||||||
O' | = | the new Exercise Price of the Right | ||||
O | = | the old Exercise Price of the Right | ||||
E | = | the number of Plan Shares that relate to the Right at the time it is exercised | ||||
P | = | the average market price per Share (weighted by reference to volume) in the ordinary course of trading on the Stock Exchange during the 5 trading days ending on the day before the ex rights or ex entitlements date | ||||
S | = | the subscription price for a Share under the pro rata issue | ||||
D | = | the dividend due but not yet paid on Shares of the same class as the Plan Shares (except those to be issued under the pro rata issue referred to in paragraph (a)) | ||||
N | = | the number of Shares with rights or entitlements that must be held to receive a right to one new Share. |
11
13. ADMINISTRATION OF PLAN
If:
12
the Company may enter into an employee share scheme buy-back arrangement with the Participant or trustee, as the case may be, in respect of those Shares under the Corporation's Act Chapter 2J Pt 2J.1 Div2.
14. AMENDMENTS TO THE PLAN
13
15. TERMS OF EMPLOYMENT OR APPOINTMENT NOT AFFECTED
and participation in the Plan does not in any way affect the rights and obligations of an Eligible Person under the terms of his or her Employment or arrangement.
16. NOTICES
14
17. CONSTITUTION, LISTING RULES AND GOVERNING LAW
15
GENETIC TECHNOLOGIES LIMITED
ACN 009 212 328
GENETIC TECHNOLOGIES
STAFF SHARE PLAN
2001
Equity Strategies Pty Ltd
ABN 98 056 937 163
Level 6, 350 George Street
Sydney NSW 2000 Australia
Tel: (02) 9232 4140 Fax: (02) 9232 4141
Copyright © Equity Strategies Pty Limited 2001
Effective April 5th , 2002 ("EFFECTIVE DATE"), GeneType AG, a wholly owned subsidiary of Genetic Technologies Limited, having an office at 60-66 Hanover Street, Fitzroy, Victoria 3065, Australia ("LICENSOR") and Sequenom, Inc., having an office at 3595 John Hopkins Court, San Diego, California, USA and its Affiliates ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
1
ARTICLE III
RELEASE
ARTICLE IV
GRANT TO LICENSEE
2
ARTICLE V
PAYMENTS
ARTICLE VI
WAIVER
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
ARTICLE VIII
ASSURANCE REGARDING NO MORE FAVORABLE FINANCIAL TERMS
3
ARTICLE IX
INDEMNIFICATION
ARTICLE X
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
4
disclosure is reasonably necessary in prosecuting or defending litigation, complying with applicable law, governmental regulation or court order, submitting information to tax or other governmental authorities, or otherwise exercising its rights hereunder.
ARTICLE XI
NOTICE
Jay
Lichter
Executive Vice President, Business Development
Sequenom, Inc.
3595 John Hopkins Court
San Diego, CA 92121
with a copy to:
Clarke
W. Neumann, Esq.
Vice President and General Counsel
Sequenom, Inc.
3595 John Hopkins Court
San Diego, CA 92121
5
or, if given or rendered to the LICENSOR, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Blakely Sokoloff Taylor & Zafman LLP
8055 E. Tufts Ave., Suite 1300
Denver, Colorado 80237
USA
or, in any case, to such changed address or person as the LICENSOR or the LICENSEE shall have specified to the other by written notice.
ARTICLE XII
MODIFICATION OF AGREEMENT
ARTICLE XIII
MISCELLANEOUS
6
NOTICE TO PURCHASER
Certain usages of the product described herein (or covered by this invoice) are covered by Genetic Technologies Limited's United States Patent Nos. 5,612,179 and 5,851,762 and foreign counterparts thereof.
You are authorized to practice the methods covered by or claimed in the above-referenced patents, but such authorized use is strictly limited to practice of such methods for or with the use of the product or products described herein (or covered by this invoice). Any other use or commercialization of such methods require a license directly from Genetic Technologies Limited. Persons wishing information regarding Genetic Technologies Limited's licensing terms should write to:
Genetic
Technologies Limited
Attention: Licensing Department
60-66 Hanover Street
Fitzroy, Victoria 3065
Australia
7
Rules of Arbitration of the American Arbitration Association (AAA) by an arbitral tribunal comprised of three arbiters. Each party shall nominate one arbiter appointed in accordance with the Rules. If a party fails to nominate an arbiter within thirty (30) days from the date on which the claimant's demand for arbitration has been communicated to the other party, the AAA shall make such appointment. The two arbiters so appointed shall agree upon a third arbiter who shall act as chair of the arbitral tribunal. If the two arbiters fail to nominate a chair within forty-five (45) days from the second of the two appointments, the AAA shall select the chair. The language of the arbitration shall be in English. The parties agree to exclude any right to appeal to any court of law on the merits of the dispute, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction over the award, either of the parties, or their assets.
8
IN WITNESS WHEREOF, each of the parties hereto has caused this AGREEMENT to be executed in duplicate originals by its duly authorized officers or representatives.
LICENSOR: | LICENSEE: | |||
GeneType AG |
|
Sequenom, Inc. |
||
By |
Dr. Mervyn Jacobson Board Member and Power of Attorney |
|
By |
Jay Lichter Executive Vice President, Business Development |
Date |
|
Date |
9
United
States Patent No. 5,612,179
United States Patent No. 5,851,762
10
Effective April 12, 2002 , 2002 ("EFFECTIVE DATE"), GeneType AG, a wholly owned subsidiary of Genetic Technologies Limited, having an office at 60-66 Hanover Street, Fitzroy, Victoria 3065, Australia ("LICENSOR") and Nanogen, Inc., having an office at 10398 Pacific Center Court, San Diego, CA 92121, USA ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
1
ARTICLE III
RELEASE
ARTICLE IV
GRANT TO LICENSEE
ARTICLE V
PAYMENTS
2
ARTICLE VI
WAIVER
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
ARTICLE VIII
INDEMNIFICATION
ARTICLE IX
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
3
constitutes the confidential and proprietary information of the Disclosing Party and the Receiving Party agrees to treat all CONFIDENTIAL INFORMATION of the other in the same manner as it treats its own similar proprietary information, but in no case will the degree of care be less than reasonable care. The Receiving Party shall use CONFIDENTIAL INFORMATION of the Disclosing Party only in performing under this AGREEMENT and shall retain the CONFIDENTIAL INFORMATION in confidence and not disclose to any third party (except as authorized under this AGREEMENT) without the Disclosing Party's express written consent. The Receiving Party shall disclose the Disclosing Party's CONFIDENTIAL INFORMATION only to those employees and contractors of the Receiving Party who have a need to know such information for the purposes of this AGREEMENT, and such employees and contractors must be bound by this AGREEMENT or have entered into agreements with the Receiving Party containing confidentiality provisions covering the CONFIDENTIAL INFORMATION, or similar confidential information, with terms and conditions at least as restrictive as those set forth herein.
ARTICLE X
NOTICE
4
mailed by certified or registered mail, return receipt requested, and if given or rendered to the LICENSEE, addressed to:
V.
Randy White
Chief Executive Officer
Nanogen, Inc.
10398 Pacific Center Court
San Diego, CA 92121
or, if given or rendered to the LICENSOR, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Blakely Sokoloff Taylor & Zafman LLP
8055 E. Tufts Ave., Suite 1300
Denver, Colorado 80237
USA
or, in any case, to such changed address or person as the LICENSOR or the LICENSEE shall have specified to the other by written notice.
ARTICLE XI
MODIFICATION OF AGREEMENT
ARTICLE XII
MISCELLANEOUS
5
NOTICE TO PURCHASER
Certain usages of the product described herein (or covered by this invoice) may be covered by Genetic Technologies Limited's United States Patent No. 5,612,179 and foreign counterparts thereof.
You are authorized to practice the methods covered by or claimed in the above-referenced patent, but such authorized use is strictly limited to practice of such methods for or with the use of the product or products described herein (or covered by this invoice). Any other use or commercialization of such methods requires a license directly from Genetic Technologies Limited. Persons wishing information regarding Genetic Technologies Limited's licensing terms should write to:
Genetic
Technologies Limited
Attention: Licensing Department
60-66 Hanover Street
Fitzroy, Victoria 3065
Australia
6
District of California. Notwithstanding the preceding sentence, nothing contained in this AGREEMENT shall preclude either Party from bringing an action in any appropriate forum to enforce the terms and provisions of this AGREEMENT or any award or judgment thereon.
7
IN WITNESS WHEREOF, each of the parties hereto has caused this AGREEMENT to be executed in duplicate originals by its duly authorized officers or representatives.
LICENSOR: | LICENSEE: | |||
GeneType AG |
|
Nanogen, Inc. |
||
By |
Dr. Mervyn Jacobson Board Member and Power of Attorney |
|
By |
Dr. Randy White Chief Executive Officer |
Date |
|
Date |
8
United
States Patent No. 5,612,179
United States Patent No. 5,192,659
United States Patent No. 5,789,568
9
Effective August 20, 2002 ("EFFECTIVE DATE"), GeneType AG, a wholly owned subsidiary of Genetic Technologies Limited, having an office at 60-66 Hanover Street, Fitzroy, Victoria 3065, Australia ("LICENSOR") and Perlegen Sciences, Inc., having an office at 2021 Stierlin Court, Mountain View, California, 94043 ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
1
ARTICLE III
RELEASE
ARTICLE IV
GRANT TO LICENSEE
2
products, or services in the field of HIGH RESOLUTION, WHOLE GENOME ANALYSIS prior to the EFFECTIVE DATE, LICENSEE may provide written notice to LICENSOR, along with reasonable evidence of such infringement. LICENSOR may, at its option, within ninety (90) days of such notice elect to bring action in the appropriate court to halt such infringement in at least the FIELD OF USE. In the event that LICENSOR does not elect to bring an action to halt such infringement, LICENSEE and/or any PERLEGEN ENTITY shall be permitted, but not required, to bring such action in its own name, at its own expense, and on its own behalf; provided however, that LICENSEE's and/or any PERLEGEN ENTITY's choice of counsel in pursuing such action must first meet with the reasonable approval of LICENSOR, and LICENSOR shall have reasonable access to all papers, including, but not limited to claims, pleadings, briefs, motions, declarations, and affidavits, prior to filing with the court as well as an opportunity to comment on such papers prior to their filing. In either event, the other party shall provide reasonable cooperation in such action, including, if required by the relevant court, to allow its name to be added to any pleadings or complaint.
3
assignment or transfer in violation hereof shall be void and shall automatically terminate all rights of LICENSEE under this AGREEMENT.
ARTICLE V
PAYMENTS
ARTICLE VI
WAIVER
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
4
ARTICLE VIII
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
ARTICLE IX
NOTICE
Perlegen
Sciences, Inc.
2021 Stierlin Court
Mountain View, California 94043
Attn: General Counsel
or, if given or rendered to LICENSOR, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065
Australia
5
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
Seventeenth Street, Suite 2500
Denver, CO 80202
USA
or, in any case, to such changed address or person as LICENSOR or LICENSEE shall have specified to the other by written notice pursuant to the terms of this Section 9.1.
ARTICLE X
MISCELLANEOUS
6
(collectively, "CLAIMS"), including, but not limited to, reasonable attorneys' fees and court costs, arising out of or in connection with: a) the design, development, manufacture, use, packaging, distribution, or shipment of LICENSED PRODUCTS; b) any breach of any representation, warranty, or covenant of LICENSEE hereunder; or c) the failure of LICENSEE to perform any covenants or obligations contained in this AGREEMENT. LICENSEE shall have the exclusive right to control the defense of any such CLAIM, including the right to select counsel and to settle any claim, provided that LICENSEE shall consult with LICENSOR, and obtain LICENSOR's consent, which shall not be unreasonably withheld or delayed, before settling any claim that affects the LICENSED PATENTS. The obligations of LICENSEE set forth in this Section 10.4(a) shall apply only if LICENSOR notifies LICENSEE in writing within 15 days following receipt of written notice of any CLAIM brought against LICENSOR in respect of which LICENSOR intends to invoke the provisions of this Section 10.4(a). LICENSEE shall keep LICENSOR informed on a current basis of its defense of any claims pursuant to this Section 10.4(a).
7
set forth on or subsequent to the EFFECTIVE DATE in writing and signed by duly authorized representatives of the party to be bound thereby.
8
IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
LICENSOR: | LICENSEE: | |||
GeneType AG |
|
Perlegen Sciences, Inc. |
||
By |
|
|
By |
|
Printed Name/Date |
|
Printed Name/Date |
||
Title |
|
Title |
9
United States Patent Nos. 5,612,179; 5,851,762; 5,192,659; 5,789,568; and 5,096,557
United States Patent Application Nos. 551,239, 465,863, 405,499, 398,217, 949,652, 971,856, 550,939, 550,940
10
APPENDIX "B"
Subscription Agreement
PERLEGEN SCIENCES, INC.
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this " Agreement ") is made by and among PERLEGEN SCIENCES, INC ., a Delaware corporation (the " Company "), and GENETYPE AG , a wholly owned subsidiary of Genetic Technologies Limited, having an office at 60-66 Hanover Street, Fitzroy, Victoria 3065, Australia (" Purchaser ").
1. Purchase . Subject to the terms and conditions of this Agreement, the Company agrees to sell to Purchaser, and Purchaser agrees to purchase from the Company, One Hundred Twenty-Seven Thousand (127,000) shares of Series B Preferred Stock), at a price of $3.60 per share (the " Shares "). The consideration for the Shares shall be in the form of a license of the Licensed Patents (as listed on Appendix A of the License Agreement) from the Purchaser to the Company pursuant to that certain Licensing Agreement, by and between the Purchaser and the Company, of even date herewith (the " License Agreement ").
2. Delivery and Payment . The Company will deliver to Purchaser a certificate or certificates, registered in Purchaser's name, representing the Shares against receipt of the executed License Agreement from the Purchasers.
3. Rights of Refusal.
(a) Transfer Notice . If at any time, or from time to time, the Purchaser proposes to transfer any or all of the Shares, or the Common Stock of the Company into which the Shares are convertible (the " Conversion Shares "), to one or more third parties (a " Transfer "), then the Purchaser shall give the Company written notice of the Purchaser's intention to make the Transfer (the " Transfer Notice "), which Transfer Notice shall include (i) a description of the securities to be transferred (" Offered Shares "), (ii) the identity of the prospective transferee(s) and (iii) the consideration and the material terms and conditions upon which the proposed Transfer is to be made.
(b) Company's Option . The Company shall have an option for a period of ten (10) business days from the Company's receipt of the Transfer Notice to elect to purchase all or any portion of the Offered Shares at the same price and subject to the same material terms and conditions as described in the Transfer Notice. The Company may exercise such purchase option and, thereby, purchase all or any portion of the Offered Shares by notifying the Purchaser in writing before expiration of such ten (10) business day period as to the number of such shares which it wishes to purchase. If the Company gives the Purchaser notice that it desires to purchase such shares, then such notice shall constitute an irrevocable commitment to purchase such shares and payment for the Offered Shares shall be by check or wire transfer, against delivery of the Offered Shares to be purchased at a place agreed upon between the parties and at the time of the scheduled closing therefor, which shall be no later than thirty (30) business days after the Company's receipt of the Transfer Notice, unless the Transfer Notice contemplated a later closing with the prospective third party transferee(s) or unless the value of the purchase price has not yet been established pursuant to Section 3(c) or unless antitrust or other regulatory approvals or expirations of legally mandated waiting periods require a closing at a later date.
(c) Valuation of Property . Should the purchase price specified in the Transfer Notice be payable in property other than cash or evidences of indebtedness, the Company shall have the
11
right to pay the purchase price in the form of cash equal in amount to the fair market value of such property, as determined in good faith by the Board of Director's of the Company.
(d) Non-Exercise of Rights . In the event that the Company has not exercised its right to purchase the Offered Shares within the time period specified in this Section 3, the Purchaser shall have a period of sixty (60) days from the expiration of such rights (or such longer period as is necessary to comply with any applicable regulatory waiting period or obtain any applicable regulatory approval) in which to sell the Offered Shares upon terms and conditions (including the purchase price) no more favorable than those specified in the Transfer Notice to the third-party transferee(s) identified in the Transfer Notice. The third-party transferee(s) shall acquire the Offered Shares free and clear of subsequent rights of first refusal under this Agreement. In the event the Purchaser does not consummate the sale or disposition of the Offered Shares within the sixty (60) day period from the expiration of these rights (or such longer period as is necessary to comply with any applicable regulatory waiting period or obtain any applicable regulatory approval), the Company's first refusal rights shall continue to be applicable to any subsequent disposition of the Offered Shares by the Purchaser until such right lapses in accordance with the terms of this Agreement. Furthermore, the exercise or non-exercise of the rights of the Company under this Section 3 to purchase equity securities from the Purchaser shall not adversely affect their rights to make subsequent purchases from the Purchaser of equity securities.
(e) Notwithstanding the foregoing, any attempt by the Purchaser to transfer equity securities in violation of Section 2 hereof shall be void and the Company will not effect such a transfer nor will it treat any alleged transferee(s) as the holder of such shares.
4. Representations of Purchaser . Purchaser hereby represents and warrants to the Company as follows:
(a) Experience . Purchaser has experience in evaluating and investing in private placement transactions so that Purchaser is capable of evaluating the merits and risks of Purchaser's investment in the Company. Purchaser, by reason of his, her or its business or financial experience or the business or financial experience of his, her or its professional advisors who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, has the capacity to protect his, her or its own interests in connection with the purchase of the Shares hereunder.
(b) Investment . Purchaser is acquiring the Shares for investment for Purchaser's own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. Purchaser understands that the Shares to be purchased and the Conversion Shares have not been, and will not be, registered under the Securities Act of 1933, as amended (the " Securities Act "), by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Purchaser's representations as expressed herein. Purchaser has not been formed for the specific purpose of acquiring the Shares (or the underlying Common Stock).
(c) Rule 144 . Purchaser acknowledges that the Shares and the Conversion Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including a requirement that the securities be held prior to resale for the applicable holding periods specified in Rule 144, the existence of a public market for the shares, and, in some cases, the availability of certain current public information about the Company, compliance with the manner of sale requirements of Rule 144, and the number of shares being sold during any three-month period not exceeding specified limitations.
12
(d) No Public Market . Purchaser understands that no public market now exists for any of the securities issued by the Company, that the Company has made no assurances that a public market will ever exist for the Shares (or the underlying Common Stock) and that, even if such a public market exists at some future time, the Company may not then be satisfying the current public information requirements of Rule 144.
(e) Access to Data . Purchaser and its representatives have met with representatives of the Company and thereby have had the opportunity to ask questions of, and receive answers from, said representatives concerning the Company and the terms and conditions of this transaction as well as to obtain any information requested by Purchaser. Any questions raised by Purchaser or his, her or its representatives concerning the transaction have been answered to the satisfaction of Purchaser and his, her or its representatives. Purchaser's decision to purchase the Shares is based in part on the answers to such questions as Purchaser and its representatives have raised concerning the transaction and on its own evaluation of the risks and merits of the purchase and the Company's proposed business activities.
(f) Accredited Investor . Purchaser is an "accredited investor" for purposes of Regulation D under the Securities Act and it is able financially to bear the risks of purchasing and owning the Shares.
(g) Authorization . All corporate action on the part of Purchaser, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement by Purchaser, the performance of all obligations of hereunder by Purchaser has been taken and this Agreement constitutes a valid and legally binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.
(h) Tax Consequences . Purchaser has reviewed with his, her or its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents and understands that Purchaser (and not the Company) shall be responsible for Purchaser's own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
(i) Foreign Purchaser . Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares and the Conversion Shares, its receipt of the Shares and the Conversion Shares and any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase or receipt of the Shares, (ii) any foreign exchange restrictions applicable to such purchase or receipt, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares. Purchaser represents that Purchaser's subscription and payment for and continued beneficial ownership of the Shares and the Conversion Shares, will not violate any applicable securities or other laws of the Purchaser's jurisdiction.
5. Representation of Company . The Company hereby represents and warrants to Purchaser as follows:
(a) Authorization . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and the authorization, issuance and delivery of the Shares and Conversion Shares has been taken and this
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Agreement constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies.
(b) Valid Issuance of Securities . The Shares being issued to Purchaser hereunder, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free of any liens or encumbrances except as set forth herein or in the Company Certificate of Incorporation; provided, however, that the Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein. Based in part upon the representations of Purchaser in this Agreement, the Shares will be issued in compliance with all applicable federal and state securities laws. The Conversion Shares issuable upon conversion of the Shares has been duly and validly reserved for issuance, and upon issuance in accordance with the terms of the Company's Certificate of Incorporation shall be duly and validly issued, fully paid and non-assessable and free of any liens or encumbrances except as set forth herein or in the Company Certificate of Incorporation (provided, however, that such Conversion Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein) will be issued in compliance with all applicable federal and state securities laws.
6. Qualification of Securities . The sale of the securities that are the subject of this Agreement has not been qualified with the Commissioner of Corporations of the State of California, and the issuance of such securities or the payment or receipt of any part of the consideration therefor prior to such qualification is unlawful, unless the sale of securities is exempt from the qualification by Section 25100, 25102 or 25105 of the California Corporations Code. The rights of all parties to this Agreement are expressly conditioned upon such qualification being obtained, unless the sale is so exempt.
7. Legends . Purchaser acknowledges and understands that the certificate evidencing the Shares (and the Conversion Shares) shall bear the following legends (and any other legends required under state securities laws or otherwise in the opinion of legal counsel for the Company):
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERITIFICATE IS SUBJECT TO A RIGHT OF FIRST REFUSAL BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF SUCH RIGHT OF FIRST REFUSAL MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY. ANY TRANSFER IN VIOLATION OF THE RIGHT OF FIRST REFUSAL IS VOID."
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) IF REGISTERED UNDER THE SECURITIES ACT OR (2) IN A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION (IT BEING UNDERSTOOD THAT NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF AN EXEMPTION) AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES."
8. Counterparts . This Agreement may be executed in any number of counterparts and signatures may be delivered by facsimile, each of which may be executed by less than all parties, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.
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9. Severability . If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement and the balance of this Agreement shall be enforceable in accordance with its terms.
10. Confidentiality . Each party hereto agrees that, except with the prior written permission of the other party, it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the business or financial affairs of the other parties to which such party has been or shall become privy by reason of this Agreement, discussions or negotiations relating to this Agreement, the performance of its obligations hereunder or the ownership of Shares (or Common Stock receivable upon conversion of the Shares) purchased hereunder. The provisions of this Section 10 shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by the parties hereto with respect to the transactions contemplated hereby or contained in the License Agreement.
11. General . This Agreement shall be governed by the internal laws of the State of California, is not assignable by any party and represents the entire agreement among the parties. This Agreement may only be modified or amended in writing with the consent of the Company and Purchaser. This Agreement and all acts and transactions pursuant hereto shall be governed, construed and interpreted in all respects by the internal laws of the State of California, without regard to conflict of laws provisions.
12. "Market Stand-off" Agreement . Purchaser agrees not to sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company held by it for a period not to exceed one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act if so requested by the Company and underwriter of Common Stock (or other securities) of the Company, provided that:
(a) such agreement shall apply only to the first underwritten registered public offering of the Company;
(b) such agreement shall apply only to securities held by Purchaser prior to the effective date of such registration statement and shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement; and
(c) all officers and directors of the Company and all holders of 5% or more of the Company's securities enter into similar agreements. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of such period.
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IN WITNESS WHEREOF, the parties have executed this Agreement on June 7, 2002.
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Perlegen Sciences, Inc.,
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"Purchaser" |
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GENETYPE AG , a wholly owned subsidiary of Genetic Technologies Limited |
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APPENDIX "C"
EXISTING LICENSES
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Myriad/Genetic Technologies Marketing and
Patent License Agreement
This Myriad/Genetic Technologies Patent License Agreement (" Agreement ") is entered into as of October , 2002 (" Effective Date ") by and between the Parties,
Myriad Genetics, Inc., a corporation organized under the laws of the State of Delaware, having a principal place of business at 320 Wakara Way, Salt Lake City, Utah 84108 ("Myriad"), and
Genetic Technologies Limited, having offices at 60-66 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG"),
and the Parties agree as follows.
1.1 Myriad is the owner or the exclusive licensee, with the right to sublicense, of patents relating to genetic testing with respect to the BRCA1, BRCA2, MLH1, MSH2, APC, P16 and AGT genes.
1.2 GTG is interested in marketing and potentially performing current and future genetic testing services, including, but not limited to, COLARIS SM , COLARIS AP SM , MELARIS SM , CardiaRisk®, and other genetic testing services provided by Myriad relating to determining a specific DNA sequence or sequences of the MLH1, MSH2, APC, P16 and/or AGT gene(s).
1.3 GTG is interested in marketing and performing certain genetic testing services and marketing genetic testing services, including, but not limited to, BRACAnalysis®, provided by Myriad relating to determining a specific DNA sequence or sequences of the BRCA1, BRCA2 gene(s).
1.4 The Parties have concluded that the needs and interests of the Parties will be served by the grant of rights and licenses from Myriad to GTG with respect to genetic testing relating to the BRCA1, BRCA2, MLH1, MSH2, APC, P16 and/or AGT genes.
2.1 "Diagnostic Services I" means genetic testing, including, but not limited to, BRACAnalysis®, to determine a specific DNA sequence or sequences of the BRCA1 and/or BRCA2 gene(s) in a given individual including mutations or alterations thereof, when such determination is performed for the purpose of providing information to physicians, healthcare practitioners and/or patients with respect to a patient's relative risks of inherited cancer or the diagnosis or monitoring of cancer; provided, however, that Diagnostic Services I do not include: (a) Diagnostic Products (as defined in Article 2.3), and/or (b) Therapeutic Products (as defined in Article 2.13); and/or (c) activities in which the DNA sequences of one or more individuals are ascertained for purposes other than evaluating a patient's relative risks of inherited breast and ovarian cancer or diagnosing or monitoring breast and ovarian cancer (for example, developing Diagnostic Products and/or Therapeutic Products).
2.2 "Diagnostic Services II" means current and future genetic testing developed and commercialized by Myriad, including, but not limited to, COLARIS SM , COLARIS AP SM , MELARIS SM , CardiaRisk®, and other genetic testing to determine a specific DNA sequence or sequences of the MLH1, MSH2, APC, P16 and/or AGT gene(s) in a given individual including mutations or alterations thereof, when such determination is performed for the purpose of providing information to physicians, healthcare practitioners and/or patients with respect to a patient's relative health risks, or the diagnosis or monitoring of such health risks; provided, however, that Diagnostic Services II do not include: (a) Diagnostic Products (as defined in Article 2.3), and/or (b) Therapeutic Products (as defined in
Article 2.13); and/or (c) activities in which the DNA sequences of one or more individuals are ascertained for purposes other than evaluating a patient's relative health risks, or diagnosing or monitoring such health risks (for example, developing Diagnostic Products and/or Therapeutic Products).
2.3 "Diagnostic Products" means any reagent, article, equipment and/or apparatus that (i) is used, either alone or in combination with other reagents, articles and/or equipment, to determine the specific DNA sequence or sequences of genes in a given individual, including mutations thereof and relative risks of cancer, and (ii) is sold to a customer who actually performs a test to determine a DNA sequence or sequences of the genes in a given individual, including mutations thereof and relative risks of cancer or high blood pressure, without the provision from the maker or distributor of such products of any testing or interpretive services covering such DNA sequences.
2.4 "Full Sequence Testing" means any analytical method of determining the sequence of a gene.
2.5 "Improvement" means any discovery or invention made by GTG or GTG Subsidiaries relating to an improvement in, or a new use or application of, or a new method of determining a specific DNA sequence or sequences of the BRCA1, BRCA2, MLH1, MSH2, APC, P16 and/or AGT gene(s), including but not limited to the discovery of any novel mutations of the BRCA1, BRCA2, MLH1, MSH2, APC, P16 and/or AGT gene(s).
2.6 "Licensed Patents" means patents owned, licenseable, or sub-licensable by Myriad, and claiming (i) a BRCA1, BRCA2, MLH1, MSH2, APC, P16, AGT or other gene sequence which is the coding sequence or the genomic sequence set forth in the sequence listing of a patent as specifically limited by that base discovered at each of a specific set of polymorphic sites along the coding or genomic sequence, (ii) mutations, polymorphisms, alterations and variants in, such BRCA1, BRCA2, MLH1, MSH2, APC, P16, AGT, or other sequences; or (iii) processes and methods for using (i) and (ii), and all divisions, continuations, continuations-in-part, reexaminations, and reissues of such patents.
2.7 "Myriad Testing Services" means all genetic testing services performed by Myriad.
2.8 "Net Revenues" means gross revenues recognized in accordance with generally accepted accounting principles for Diagnostic Services I and/or Diagnostic Service II, less governmental and healthcare rebates, and hospital, insurance company and HMO performance incentive program rebates.
2.9 "Southeast Asia" means the region of Asia bounded by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east, including Indochina, the Malay Peninsula, and the Malay Archipelago, including the countries of Singapore, Malaysia, Indonesia, Brunei, Burma (Myanmar), Cambodia, Laos, The Philippines, Thailand, and Vietnam.
2.10 "Specific Mutation Testing" means site-specific detection of a predetermined, known mutation of a gene.
2.11 "Subsidiaries" means any corporation, company or other legal entity, in which more than fifty percent (50%) of the shares entitled to vote for the election of directors or persons performing similar functions are, now or hereafter, owned or controlled, directly or indirectly by a Party hereto, or jointly by the Parties hereto; provided, however, that any corporation, company or other legal entity shall be a Subsidiary only for as long as such ownership or control exists.
2.12 "Territory" means Australia and New Zealand.
2.13 "Therapeutic Products" means compositions of matter, including but not limited to DNA sequences, proteins or polypeptides produced from such DNA sequences or vectors harboring such DNA sequences, intended for either preventing or treating various forms of cancer or high blood pressure.
2.14 "Third Party" means any person or entity other than Myriad, GTG, and GTG's Subsidiaries.
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3.1 Myriad grants GTG and GTG's Subsidiaries the exclusive (except as provided in Article 3.8) right and license under Licensed Patents issued in the Territory to market, sell, offer to sell, and import Diagnostic Services II performed by Myriad, including Full Sequence Testing and Specific Mutation Testing.
3.2 Myriad grants GTG and GTG's Subsidiaries an exclusive (except as provided in Article 3.8), fee-bearing, non-transferable (except as provided in Article 7.1) right and license under Licensed Patents issued in the Territory to market, sell, offer to sell, perform, and import Diagnostic Services I, including Full Sequence Testing, Specific Mutation Testing, and Myriad Testing Services, in the Territory.
3.3 Myriad grants GTG and GTG's Subsidiaries an exclusive (except as provided in Article 3.8), fee-bearing, non-transferable (except as provided in Article 7.1) right and license under Licensed Patents issued in the Territory to market, sell, offer to sell, perform, and import Diagnostic Services II, limited to Specific Mutation Testing, in the Territory.
3.4 GTG shall pay Myriad an annual fee of One Hundred Thousand United States Dollars (US$100,000) on each anniversary date of the Effective Date as consideration for the marketing rights granted in Article 3.1 and the rights and licenses granted in Articles 3.2 and 3.3.
3.5 The rights and licenses granted under Articles 3.1, 3.2, and 3.3 of this Agreement exclude the right to grant sublicenses.
3.6 During the term of this Agreement GTG shall have the right to prosecute, at GTG's own expense, any infringement of Licensed Patents issued in the Territory and to collect damages for such infringement, provided that:
3.6.1 GTG provides Myriad with written notice identifying (a) the alleged infringer, and (b) the alleged infringer's accused products, and (c) the specific claims of the Licensed Patents that GTG intends to assert against the alleged infringer's accused products, and (d) reasonable evidence of infringement; and
3.6.2 Within ninety (90) days of the notice specified in Article 3.6.1 of this Agreement, Myriad elects not to prosecute the alleged infringer identified by GTG and notifies GTG in writing that Myriad has elected not to prosecute the alleged infringer; and
3.6.3 GTG shall be responsible for the total cost of any infringement action brought by GTG; and
3.6.4 GTG shall pay Myriad fifty percent (50%) of any cash amount actually received by GTG as an award in any action or in settlement of any action brought by GTG for infringement of the Licensed Patents; provided, however, that the total value of any cash paid to Myriad by GTG shall be reduced by the amount of the total out-of-pocket fees and costs incurred by GTG in the prosecution and/or defense of the Licensed Patents in any such action; and
3.6.5 No settlement, consent judgment or other voluntary final disposition of any action for infringement of the Licensed Patents or any declaratory judgment action alleging invalidity or non-infringement of the Licensed Patents may be entered into without the consent of Myriad, which consent shall not be unreasonably withheld.
3.7 No right or license is granted by Myriad to GTG under this Agreement, by implication or by estoppel, or otherwise to any patents, inventions, patent application, know-how, technology, trademark,
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copyright, trade secret, or other property right, other than the rights and licenses expressly granted in Articles 3.1, 3.2, 3.3, 3.6, and 5 of this Agreement.
3.8 GTG shall use commercially reasonable and timely efforts to commercialize Diagnostic Services I and Diagnostic Services II in the Territory, and in the event that GTG or a GTG Subsidiary does not commercialize Diagnostic Services I and Diagnostic Services II in the Territory within two (2) years of the Effective Date, the rights and licenses granted in Articles 3.1, 3.2, and 3.3 of this Agreement shall convert to non-exclusive rights and licenses and the right to sue infringers provided under Article 3.6 of this Agreement shall be revoked.
3.9 Myriad shall use reasonable efforts to maintain the Licensed Patents in the Territory, including, but not limited to, paying all maintenance and/or annuity fees.
3.10 Improvements . GTG and/or GTG's Subsidiaries shall promptly provide Myriad with a complete disclosure of all Improvements.
3.10.1 At the request of Myriad, GTG and/or GTG's Subsidiaries shall grant Myriad an exclusive, fully-paid, royalty-free, perpetual right and license under all applicable patent and other proprietary rights relating to such Improvement(s), to make, have made, use, sell, offer for sale, market, perform, and import Diagnostic Services I and/or Diagnostic Services II, including Full Sequence Testing and Specific Mutation Testing, in all jurisdictions other than those jurisdictions in which GTG and GTG's Subsidiaries have exclusive rights or an option to obtain exclusive rights.
3.10.2 If GTG and/or GTG's Subsidiary elects not to obtain patent coverage for an Improvement, GTG and/or GTG's Subsidiary shall provide Myriad with the opportunity to prepare and file appropriate patent applications covering the Improvement.
3.10.3 GTG and/or GTG's Subsidiaries shall require all employees to assign all inventions made by them in the course of developing, marketing, selling, offering for sale, performing, or importing Diagnostic Services I and Diagnostic Services II to GTG and/or GTG's Subsidiaries.
A R T I C L E 4
TESTING SERVICES AND FEES
4.1 Subcontracting to Myriad . All Diagnostic Services I and/or Diagnostic Services II subcontracted by GTG or GTG's Subsidiaries shall be subcontracted solely to Myriad, and not to any other Third Party.
4.1.1 All subcontracted Diagnostic Services I and/or Diagnostic Services II shall be performed by Myriad at the prices set forth in Exhibit A; provided, however, that:
4.1.1.1 Myriad may, at Myriad's discretion, increase the prices set forth in Exhibit A, provided that such increases are consistent with increases for Myriad's other commercial partners.
4.1.1.2 Myriad shall provide GTG with prices for Diagnostic Services I and/or Diagnostic Services II as favorable as the most favorable terms provided to current Myriad customers.
4.1.2 GTG shall provide to Myriad all patient specimens required by Myriad to perform subcontracted Diagnostic Services I and/or Diagnostic Services II in the form of whole blood or extracted DNA, and shall code such specimens using a unique alpha-numeric identifier and not the patient's name.
4.1.3 Myriad shall promptly return all results of subcontracted Diagnostic Services I and/or Diagnostic Services II requested by GTG or GTG's Subsidiaries to GTG or GTG's Subsidiary and shall be paid directly by GTG or GTG's Subsidiary in United States dollars the subcontract price
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within thirty (30) days of the date a request to perform Full Sequence Testing and/or Specific Mutation Testing is submitted to Myriad.
4.2 Exclusive Commercial Relationship . In accordance with the exclusive rights and licenses granted to GTG and GTG's Subsidiaries in this Agreement, Myriad shall not accept requests to conduct Diagnostic Services I and/or Diagnostic Services II directly from a commercial laboratory or physician originating in the Territory or reasonably believed to have originated in the Territory, except as follows:
4.2.1 In the event that Myriad receives any samples for Diagnostic Services I and/or Diagnostic Services II from a commercial laboratory or physician in the Territory subsequent to the Effective Date, Myriad shall have the right to perform Diagnostic Services I and/or Diagnostic Services II but shall (a) immediately notify GTG of the commercial laboratory or physician; (b) immediately notify the commercial laboratory or physician that it will not accept any additional samples in the future; and (c) refer the commercial laboratory or physician to GTG for future testing requests.
4.2.2 If Myriad performs any Diagnostic Services I and/or Diagnostic Services II pursuant to Article 4.2.1, Myriad will credit GTG a fee in the amount of two hundred United States Dollars (US$200.00) for such Diagnostic Services I and/or Diagnostic Services II.
4.3 Regulatory Approvals . GTG shall obtain all data necessary for and shall obtain all applicable regulatory approvals required to be filed with any applicable government regulatory authority in the Territory to obtain or maintain permission to perform Diagnostic Services I and/or Diagnostic Services II. All research and clinical studies required for regulatory approval in the Territory shall be conducted at the sole cost of GTG. Myriad shall cooperate with and provide reasonable assistance to GTG in obtaining such regulatory approvals.
4.4 Marketing. GTG shall be responsible for preparing educational materials relating to Diagnostic Services I and/or Diagnostic Services II and appropriate to the Territory, and distributing such educational materials in the Territory. GTG shall assign all copyright rights to all such marketing and educational materials to Myriad. All marketing and educational materials shall bear the name of Myriad in an equally prominent size and position as the name of GTG and/or GTG's Subsidiaries.
4.5 Insurance . Myriad shall not be responsible for negotiating or obtaining reimbursement from insurance carriers (including governmental insured health care systems). Myriad shall, if requested by GTG, provide reasonable assistance to GTG, at GTG's expense, in negotiating such reimbursement for GTG's benefit.
4.6 Genetic Counseling . Myriad shall not be responsible for providing genetic counseling services with respect to Diagnostic Services I and/or Diagnostic Services II provided by GTG or GTG's Subsidiaries in the Territory. All such genetic counseling shall be provided pursuant to applicable laws and regulations within the Territory.
4.7 Reporting Results to Research Databases . With respect to Diagnostic Services I and/or Diagnostic Services II performed by Myriad for GTG or GTG's Subsidiaries, Myriad shall have the right to report applicable mutations detected to applicable research database service providers. Myriad will notify GTG of all such mutations reported.
4.8 Quality Laboratory Practices . GTG and GTG's Subsidiaries shall maintain quality laboratory practices in providing Diagnostic Services I and/or Diagnostic Services II in accordance with reasonable guidelines provided by Myriad. Myriad shall have the right at any time, upon reasonable notice to GTG and/or GTG's Subsidiaries and at times and places reasonably acceptable to GTG and/or GTG's Subsidiaries, to audit the laboratory practices of GTG and/or GTG's Subsidiaries once per Calendar Quarter. In the event that Myriad determines that such laboratory practices are deficient, Myriad shall
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notify GTG and/or GTG's Subsidiaries of steps required to correct such deficiencies and GTG and/or GTG's Subsidiaries shall have the right to make such corrections within sixty (60) days following notice from Myriad. Myriad shall have the right to conduct one or more audits (in addition to the audit permitted once per Calendar Quarter) in order to confirm that steps have been taken to correct the deficiencies. Failure of GTG and/or GTG's Subsidiaries to correct such deficiencies within such sixty day period shall constitute material breach of this Agreement.
4.9 Insurance . GTG shall procure and maintain, at GTG's sole expense, liability insurance covering the activities of GTG (1) in providing Diagnostic Services I and/or Diagnostic Services II in the amounts equivalent to One Million United States Dollars (US$1,000,000) per occurrence and Three Million United States Dollars (US$3,000,000) aggregate and (2) comprehensive general and/or umbrella liability insurance in the amount of One Million United States Dollars (US$1,000,000) per occurrence and aggregate.
5.1 Myriad grants GTG an option, exercisable prior to the third anniversary of the Effective Date, for GTG to expand the license granted in Article 3.3 to include Full Sequence Testing performed by GTG and/or GTG's Subsidiaries. In the event that GTG exercises this option, GTG shall:
5.1.1 Pay Myriad an up-front license fee of three hundred thousand United States Dollars (U.S. $300,000); and
5.1.2 Pay to Myriad royalties of five percent (5%) of GTG's Net Revenues for Diagnostic Services II Full Sequence Testing; and
5.1.3 Keep full and accurate records of Diagnostic Services II Full Sequence Testing in the Territory, and furnish Myriad, within forty-five (45) days after the last day of June and December of each calendar year, a report showing the basis upon which royalty payments are paid, and to accompany such report with the payment of the royalty accrued. To enable Myriad to verify the accuracy of such reports, GTG agree to permit an independent certified public accountant, no more often than once per calendar year, to inspect GTG's pertinent records at GTG's place(s) of business during reasonable business hours and at Myriad's expense; provided, however, that the report of such accountant to Myriad shall be confined to statements regarding the accuracy of royalty payments made by GTG. In the event that the report of such accountant indicates an underpayment of royalties, GTG shall immediately pay Myriad the amount of the underpayment and interest on the underpayment at the rate of the U.S. Prime Rate plus three percent (3%).
5.2 Myriad grants GTG an option, exercisable prior to the third anniversary of the Effective Date, for GTG to obtain an exclusive, royalty-bearing, non-transferable (except as provided in Article 7.1) right and license to market, sell, offer to sell, perform, and import Diagnostic Services I, limited to Specific Mutation Testing, in Singapore, Malaysia and Indonesia on terms and conditions to be negotiated in good faith, which shall include the following terms and conditions:
5.2.1 In the event that GTG exercises this option, GTG shall pay Myriad an up-front fee of Three Hundred Thousand United States Dollars (U.S. $300,000);
5.2.2 GTG will pay to Myriad royalties of three percent (3%) of GTG's Net Revenues in the countries of Malaysia, Singapore, and Indonesia; and
5.2.3 GTG shall keep full and accurate records, provide reports, and permit inspections in the manner specified in Article 4.1.3 with respect to revenues for Diagnostic Services I in Malaysia, Singapore, and Indonesia.
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5.3 Myriad grants GTG an option, exercisable prior to the fifth anniversary of the Effective Date, for GTG to obtain an exclusive, fully-paid, non-transferable (except as provided in Article 6.1) right and license to market, sell, offer to sell, import, and perform Diagnostic Services I only for Specific Mutation Testing, in Southeast Asia (excluding Singapore, Malaysia and Indonesia) on terms and conditions to be negotiated in good faith.
A R T I C L E 6
TERM AND TERMINATION
6.1 The term of this Agreement and the rights and licenses granted by this Agreement shall extend until the anniversary of the Effective Date in the year 2012.
6.2 Either party shall have the right to terminate this Agreement upon any material breach of any term or condition of this Agreement by the other party, which has not been corrected within thirty (30) days after receipt of a notice in writing.
6.3 In the event that GTG fails to make any payment required under this Agreement, Myriad shall have the right to terminate this Agreement and the licenses and rights granted under this Agreement by providing written notice of termination; provided, however, that such notice of termination shall not be effective if the required payment is made within thirty (30) days after receipt of the written notice.
6.4 In the event of a termination of this Agreement under Article 6.3, Myriad shall be relieved of all obligations to make payments to GTG under the License Agreement between GTG and Myriad having an Effective Date of .
6.5 In the event of termination of this Agreement all rights granted to GTG hereunder shall revert to Myriad.
6.6 This Agreement, the licenses granted under this Agreement, and the payment obligations set forth in this Agreement shall survive the invalidity and/or the unenforceability of the Licensed Patents.
A R T I C L E 7
TRANSFERABILITY
7.1 GTG shall not transfer this Agreement or the license and rights granted to GTG under this Agreement to any third party, by agreement, assignment, merger, asset sale, consolidation, operation of law, or otherwise, without the prior written consent of Myriad; provided, however, that GTG may transfer this Agreement to a successor in ownership of all or substantially all of the assets of GTG, if the successor expressly assumes in writing GTG's obligations under this Agreement.
A R T I C L E 8
REPRESENTATIONS AND WARRANTIES
8.1 Myriad represents and warrants that Myriad has the full right, power, and authority to enter into and perform its obligations under this Agreement and grant to GTG the license and other rights as set forth herein, and there are no outstanding agreements, grants, licenses, encumbrances, liens, or agreements, either written or implied, inconsistent therewith or pursuant to which this Agreement or the parties' performance hereunder would violate, breach, or cause a default. Myriad further represents and warrants that Myriad is not aware of any patents owned, licenseable, or sub-licensable by Myriad (other than Licensed Patents) that may be infringed by marketing, using, selling, offering to sell, importing, or performing Diagnostic Services I and/or Diagnostic Services II.
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8.2 The execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate actions on the part of Myriad.
8.3 GTG represents and warrants that GTG has the full right, power, and authority to enter into and perform GTG obligations under this Agreement, and there are no outstanding agreements, grants, licenses, encumbrances, liens, or agreements, either written or implied, inconsistent therewith or pursuant to which this Agreement or the parties' performance hereunder would violate, breach, or cause a default.
8.4 The execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate actions on the part of GTG.
8.5 DISCLAIMER OF WARRANTIES. Except as expressly set forth herein, each party expressly disclaims, to the extent allowed by applicable law, any and all warranties of any kind, express or implied, including without limitation the warranties of design, merchantability, fitness for a particular purpose (even if informed of such purpose), noninfringement of the intellectual property rights of third parties, or arising from a course of dealing, usage or trade practices, in all cases with respect thereto.
8.6 LIMITATION OF LIABILITY. Except for breach of payment terms under Articles 3 and/or 4 or for liability for breach of any confidentiality provisions in this agreement, neither party shall be entitled to recover from the other party any special, incidental, consequential or punitive damages in connection with this Agreement or any license granted hereunder.
8.7 Nothing in this Agreement shall be construed as:
8.7.1 a representation or warranty by Myriad of the validity, enforceability or scope of any Licensed Patents; or
8.7.2 a requirement that Myriad shall file any patent application or secure any patent; or
8.7.3 a representation or warranty that any product made, used, sold, or otherwise disposed of by GTG is free from infringement of patents of third parties; or
8.7.4 an obligation of Myriad to bring or prosecute actions or suits against third parties for infringement of any patent; or
8.7.5 inferring a right of GTG to use in advertising, publicity, or otherwise any trademark or trade name of Myriad.
9.1 Any controversy or claim arising from a breach of this Agreement shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court in California having jurisdiction thereof. This arbitration agreement shall not apply to any controversy or claim involving an issue of the infringement, validity, or enforceability of any patent. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§.1-16, to the exclusion of any provisions of state law inconsistent therewith or which would produce a different result.
9.1.1 A single arbitrator shall be selected by agreement between the parties. If the parties fail to agree on an arbitrator, a single arbitrator shall be selected in accordance with the procedures set forth in the Arbitration Rules. The arbitrator shall render a final award in accordance with the substantive law of the State of California, excluding the conflicts provisions of such law.
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9.1.2 The arbitrator shall be fully compensated in accordance with his or her normal hourly or per diem rates for all time spent in connection with the arbitration proceeding. Pending a final award, the arbitrator's compensation and expenses shall be advanced equally by the parties.
9.1.3 The parties may request a court for interim or provisional relief, and any such request shall not be deemed incompatible with the agreement to arbitrate or as a waiver of that agreement.
9.1.4 In no event will the arbitrator have the power to include any element of punitive damages or incidental or consequential damages in the arbitration award.
A R T I C L E 10
GENERAL PROVISIONS
10.1 The Parties shall keep the terms of this Agreement confidential except where disclosure is required by law, legal process or tax purposes or where the disclosure is made pursuant to an undertaking or understanding of confidentiality. Each Party agrees that it will not make a public announcement of this Agreement without the approval of the other party.
10.2 Any notices shall be deemed to be delivered when the notice is personally delivered, delivered by a commercial delivery service, received via certified or registered mail, return receipt requested, or received via facsimile. Notices shall be addressed as follows:
Notices to Myriad | Notices to GTG | |||
Myriad Genetics, Inc. Attention: General Counsel 320 Wakara Way Salt Lake City, Utah 84108 Facsimile: 801.584.3640 |
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Dr. Mervyn Jacobson Executive Chairman Genetic Technologies Limited 60-66 Hanover Street Fitzroy, Victoria 3065 Australia Facsimile: |
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With a copy to George A. Riley, Esq O'Melveny & Myers LLP 275 Battery Street San Francisco, California 94111 Facsimile: 415.984.8701 |
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With a copy to Michael A. DeSanctis, Esq. Faegre & Benson LLP Seventeenth Street, Suite 2500 Denver, Colorado 80202 Facsimile: 303.607.3600 |
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10.3 Any waiver by either Party of the breach of any term or condition of this Agreement will not be considered as a waiver of any subsequent breach of the same or any other term or condition hereof.
10.4 Neither Party will be in breach hereof by reason of its delay in the performance of or failure to perform any of its obligations hereunder, if that delay or failure is caused by strikes, acts of God or the public enemy, riots, or any other fault beyond its control or without its fault or negligence.
10.5 This Agreement constitutes the entire understanding of the Parties with respect to the subject matter and supersedes all prior and contemporaneous oral or written negotiations, agreements and understandings.
10.6 This Agreement may not be modified or amended except in writing signed by authorized persons on behalf of the Parties.
10.7 The validity, construction, interpretation and performance of this Agreement, and any disputes or legal actions arising thereunder or therefrom, shall be governed by the laws and regulations of the
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United States of America and the State of California without regard to conflict of law doctrines. Each Party submits to jurisdiction in San Francisco, California and the United States District Court for the Northern District of California with respect to any claims arising out of this Agreement.
10.8 The Parties acknowledge that each Party has been represented by counsel in connection with this Agreement. Accordingly, any rule of law that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived.
10.9 This Agreement can be executed in counterparts, including those transmitted by facsimile, and each counterpart will be considered an original.
10.10 Unless the context clearly requires a different interpretation, words denoting the singular will include the plural and vice versa; words denoting any gender will include all genders; words denoting persons will include corporations, partnerships, joint ventures, proprietorships and other business entities.
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IN WITNESS THEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized representative.
MYRIAD GENETICS, INC.
Dated: October , 2002
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Name: |
Peter Meldrum
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Title: | President and Chief Executive Officer | ||
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GENETYPE AG
Dated: October , 2002
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By: |
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Name: |
Mervyn Jacobson
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Title | |||
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GENETIC TECHNOLOGIES LIMITED
Dated: October , 2002
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By: |
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Name: |
Mervyn Jacobson
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Title | |||
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Test
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Fee
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Effective as of March 7, 2003 ("EFFECTIVE DATE"), GENETIC TECHNOLOGIES LIMITED , having an office at 60-66 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG") and PYROSEQUENCING AB , having an office at SE-752 28, Uppsala, Sweden ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
1
2
ARTICLE III
RELEASE
GTG agrees that GTG releases, acquits and forever discharges LICENSEE and all purchasers and users of LICENSED PRODUCTS acquired from LICENSEE from all claims, demands, and rights of action which GTG may now have on account of any infringement of any LICENSED PATENT prior to the EFFECTIVE DATE, provided however, that if this AGREEMENT is terminated due to a material breach by LICENSEE in accordance with Article 7.2, such termination shall forthwith restore to GTG its full rights as they existed just prior to the EFFECTIVE DATE subject, however, to what is stated in the last paragraph of Article 0.
ARTICLE IV
GRANT TO LICENSEE
ARTICLE V
REPORTS AND CONSIDERATION
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Any payment made by LICENSEE to GTG under this Article 0 shall be nonrefundable. However, should GTG, following a material breach of this AGREEMENT by LICENSEE, make any claim, demand or take any other action against LICENSEE on account of any infringement of any LICENSED PATENT, any amounts paid under this Article 0 shall be offset against any obligation of payment for LICENSEE for the benefit of GTG.
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Key Bank
#307070267
1130 Haxton Drive
Fort Collins, Colorado 80525
Account: Genetic Technologies Limited
Account Number: 76009 000 2576
ARTICLE VI
WAIVER
No waiver by either party, express or implied, of any breach of any term, condition, or obligation of this AGREEMENT by the other party shall be construed as a waiver of any subsequent breach of that term, condition, or obligation, or of any other term, condition, or obligation of this AGREEMENT of the same or different nature.
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ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
ARTICLE VIII
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
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ARTICLE IX
NOTICE
Mr. Erik
Walldén, President and CEO
Pyrosequencing AB
SE-752 28 Uppsala, Sweden
with a copy to:
Mr. Anders
Fritzell, Attorney-at-law
Mannheimer Swartling Advokatbyrå
P.O. Box 1711
SE-111 87 Stockholm, Sweden
or, if given or rendered to GTG, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065, Australia
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with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
Seventeenth Street, Suite 2500
Denver, CO 80202, USA
or, in any case, to such changed address or person as GTG or LICENSEE shall have specified to the other by written notice.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
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ARTICLE XI
MISCELLANEOUS
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developing expertise and proficiency with regard to manufacturing, use, and sale, of LICENSED PRODUCTS and in this respect it shall indemnify, hold harmless, and defend GTG, and GTG's subsidiaries, affiliates, officers, directors, representatives, employees, or agents against any and all claims, causes of action, demands, judgments, settlements, expenses, or losses including, but not limited to, reasonable attorneys' fees and court costs arising out of or in connection with: a) the design, development, manufacture, use, packaging, distribution, or shipment of LICENSED PRODUCTS; b) any breach of any representation, warranty, or covenant hereunder, or c) the failure of LICENSEE to perform any covenants or obligations contained in this AGREEMENT. Notwithstanding anything of the aforesaid, LICENSEE shall not be obliged to indemnify GTG with regard to any claims only arising from LICENSEE's use of the LICENSED PATENTS.
Certain usages of the product described herein, including genomic mapping and intron sequence analysis, may be covered by Genetic Technologies Limited's United States Patent Nos. 5,789,568; 5,192,659; 5,612,179 and 5,851,762 and foreign counterparts thereof.
You are authorized to practice the methods covered by or claimed in the above-referenced patents, but such authorized use is strictly limited to practice of such methods for or with the use of the product or products described herein (or covered by this invoice). Any other use or commercialization
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of such products may require a license directly from Genetic Technologies Limited. Persons wishing information regarding Genetic Technologies Limited's licensing terms should write to:
Genetic
Technologies Limited
Attention: Licensing Department
60-66 Hanover Street
Fitzroy, Victoria 3065
Australia
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IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
GTG: | LICENSEE: | |||
Genetic Technologies Limited |
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Pyrosequencing AB |
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By |
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Printed Name/Date |
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Title |
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Title |
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US Patent No.
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Earliest Priority
Date |
Filing Date
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Issue Date
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Expiration Date
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5,789,568 | 8/25/1989 | 7/16/1996 | 8/4/1998 | 8/25/2009 | ||||
5,192,659 | 8/25/1989 | 7/11/1990 | 3/9/1993 | 3/9/2010 | ||||
5,612,179 | 8/25/1989 | 9/23/1992 | 3/18/1997 | 3/9/2010 | ||||
5,851,762 | 7/11/1990 | 8/22/1994 | 12/22/1998 | 12/22/2015 |
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For purposes of Article 5.2(b), the location for delivery, installation and testing of PYROSEQUENCING SYSTEMS shall be GTG's headquarters in Australia:
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065, Australia
For purposes of Article 5.2(c), the location for delivery of REAGENTS shall be GTG's headquarters in Australia:
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065, Australia
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APPENDIX "C"
Media/Press Release
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APPENDIX "D"
Operating Forecast
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Non-Commercial Research License
Effective July 22, 2003 ("EFFECTIVE DATE"), GENETIC TECHNOLOGIES LIMITED , having an office at 60 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG") and THE UNIVERSITY OF SYDNEY , being a body corporate established pursuant to the University of Sydney Act (1989) of The University of Sydney, New South Wales 2006, Australia ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
1
ARTICLE III
RELEASE
ARTICLE IV
GRANT TO LICENSEE
ARTICLE V
CONSIDERATION
ARTICLE VI
WAIVER
2
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
ARTICLE VIII
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
3
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
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PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.
ARTICLE X
NOTICE
Dr
Claire Baxter
Director,
Business Liaison Office A20
The University of Sydney NSW 2006
or, if given or rendered to GTG, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln Street
Denver, CO 80203
USA
or, in any case, to such changed address or person as GTG or LICENSEE shall have specified to the other by written notice.
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ARTICLE XI
MISCELLANEOUS
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IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
"LICENSEE" | The University of Sydney | ||
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Title: |
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"GTG" |
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Genetic Technologies Limited |
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Australian Patent Number
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Title
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654111 | Intron Sequence Analysis Method for Detection of Adjacent and Remote Locus Alleles as Haplotypes | |
672519 | Intron Sequence Analysis Method for Detection of Adjacent and Remote Locus Alleles as Haplotypes | |
647806 | Genomic Mapping Method by Direct Haplotyping Using Intron Sequence Analysis |
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Execution Version
Effective as of August 1, 2003 ("EFFECTIVE DATE"), GENETIC TECHNOLOGIES LIMITED , having an office at 60 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG") and QUEST DIAGNOSTICS INCORPORATED , a Delaware corporation having an office at One Malcolm Avenue, Teterboro, NJ 07608, USA ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
1
continuations-in-part, substitutions, and extensions of the '179 Patent, applications therefore, and patents which may issue upon such applications, and foreign counterparts of the foregoing.
ARTICLE III
RELEASE
Subject to the terms and conditions set forth herein, GTG agrees that, providing LICENSEE fully and faithfully discharges the obligation to pay the license issue fee, GTG will release LICENSEE from all claims, demands, and rights of action which GTG may have as of the EFFECTIVE DATE relating to LICENSED SERVICES on account of infringement of any LICENSED PATENT prior to the EFFECTIVE DATE to the extent the acts constituting such infringement would be licensed hereunder.
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ARTICLE IV
GRANT TO LICENSEE
ARTICLE V
CONSIDERATION
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Key Bank
#307070267
1130 Haxton Drive
Fort Collins, Colorado 80525
Account: Genetic Technologies Limited
Account Number: 76009 000 2576
ARTICLE VI
WAIVER
No waiver by either party, express or implied, of any breach of any term, condition, or obligation of this AGREEMENT by the other party shall be construed as a waiver of any subsequent breach of that term, condition, or obligation, or of any other term, condition, or obligation of this AGREEMENT of the same or different nature.
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
ARTICLE VIII
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
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confidence and not disclose to any third party (except as authorized under this AGREEMENT) without the Disclosing Party's express written consent. The Receiving Party shall disclose the Disclosing Party's CONFIDENTIAL INFORMATION only to those employees and contractors of the Receiving Party who have a need to know such information for the purposes of this AGREEMENT, and such employees and contractors must have entered into agreements with the Receiving Party containing confidentiality provisions covering the CONFIDENTIAL INFORMATION, or similar confidential information, with terms and conditions at least as restrictive as those set forth herein.
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ARTICLE IX
NOTICE
Quest
Diagnostics Incorporated
Attn: General Counsel
One Malcolm Avenue
Teterboro, New Jersey 07608
USA
or, if given or rendered to GTG, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln Street
Denver, CO 80203
USA
or, in any case, to such changed address or person as GTG or LICENSEE shall have specified to the other by written notice.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
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implied, inconsistent therewith or pursuant to which this AGREEMENT or the parties' performance hereunder would violate, breach, or cause a default.
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ARTICLE XI
MISCELLANEOUS
8
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IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
GTG: | LICENSEE: | |||
Genetic Technologies Limited |
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Quest Diagnostics Incorporated |
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By |
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By |
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Printed Name |
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Printed Name |
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Title |
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Title |
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This License Agreement ("AGREEMENT"), effective this 31 st day of December, 2003 ("EFFECTIVE DATE"), is by and between GENETIC TECHNOLOGIES LIMITED and its AFFILIATES, having an office at 60 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG") and TM BIOSCIENCE CORPORATION and its AFFILIATES, having an office at 439 University Avenue, Suite 1050, Toronto, Ontario, M5G 1Y8, Canada (collectively the "LICENSEE").
ARTICLE I
BACKGROUND
1.1 LICENSEE wishes to acquire a right and license to practice certain patents of GTG, subject to the terms and conditions of this AGREEMENT.
1.2 GTG is prepared to grant a non-exclusive license to LICENSEE under certain patents, subject to the terms and conditions of this AGREEMENT.
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
2.1 "AFFILIATE" shall mean any legal entity (such as a corporation, partnership, or limited liability company) which directly or indirectly controls, is controlled by, or is under common control with either party or its successors or assigns, or any successor or assign of such an entity. For the purposes of this definition, the term "control" means (i) beneficial ownership of at least fifty percent (50%) of the voting securities of a corporation or other business organization with voting securities or (ii) a fifty percent (50%) or greater interest in the net assets or profits of a partnership or other business organization without voting securities.
2.3 "CONFIDENTIAL INFORMATION" means any and all information contained in this AGREEMENT, or relating to correspondence or communications (whether verbal, electronic, visual or written) disclosed in the negotiation of this AGREEMENT, including without limitation all payment and royalty terms.
2.4 "EXCLUDED FIELD" means genetic analysis using or based upon, in whole or in part, the genotyping of more than one hundred thousand (100,000) putative single nucleotide polymorphisms, such polymorphisms found in three (3) or more chromosomes of the relevant organism.
2.5 "EXCLUSION TIME PERIOD" means the period from the EFFECTIVE DATE until August 31, 2006.
2.6 "FIELD OF USE" means, during the EXCLUSION TIME PERIOD, human genetic testing and diagnostic products outside of the EXCLUDED FIELD, and upon expiration of the EXCLUSION TIME PERIOD means, human genetic testing and diagnostic products without limitation.
2.7 GTG and LICENSEE may hereunder each be referred to as a "party" and are hereunder commonly referred to as "parties" (in singular and plural usage, as required by the context).
2.8 "LICENSED PATENT" means the United States patents and patent applications, and other national and foreign patents and patent applications listed in Appendix "A" attached to this AGREEMENT and all foreign counterpart patents and patent applications thereto (including future counterparts to the patents and patent applications listed in Appendix "A"), all reissues, reexaminations, divisionals, continuations, continuations-in-part, substitutions and extensions of the foregoing, and any
1
patent which issues or is granted based on an application which claims as a priority any document, whether or not abandoned or expired, which is also claimed as a priority by any of the foregoing.
2.9 "LICENSED PRODUCT(S)" means products manufactured by or on behalf of LICENSEE and designed by or on behalf of LICENSEE that but for the license granted herein would infringe or contribute to the infringement of one or more VALID CLAIMS of a LICENSED PATENT, and for clarity does not include products which are manufactured and/or designed by LICENSEE as a third party contract manufacturer/developer.
2.10 "TERM" means from the EFFECTIVE DATE until the expiration or abandonment of the last-to-expire LICENSED PATENT, except as otherwise provided in Article VII.
2.11 "TERRITORY" means worldwide.
2.12 "VALID CLAIM(S)" means a claim or claims of an issued or granted patent within the LICENSED PATENT which has not lapsed, became abandoned or been declared invalid or unenforceable by a court of competent jurisdiction or an administrative agency from which no appeal can be or is taken.
ARTICLE III
RELEASE & NON-ADMISSION
3.1 GTG hereby releases, acquits and forever discharges LICENSEE from any and all claims, demands, liability and rights of action which GTG may have on the EFFECTIVE DATE on account of any infringement of any LICENSED PATENT, by LICENSEE's performance or acts that occurred prior to the EFFECTIVE DATE.
3.2 Nothing in this AGREEMENT constitutes or may be construed as, an admission, statement, declaration or other evidence, without limitation, concerning any product of LICENSEE in relation to LICENSED PATENT. In particular, nothing in this AGREEMENT constitutes an admission by LICENSEE that any current or future product of LICENSEE whether in commercial use, development or planned for development, will infringe any claim of the LICENSED PATENT or that any such claim is valid or enforceable in any jurisdiction worldwide.
ARTICLE IV
GRANT TO LICENSEE
4.1 Subject to the terms and conditions of this AGREEMENT, GTG hereby grants LICENSEE, during the TERM of this AGREEMENT, a nonexclusive, non-transferable (except as provided herein), annual fee-bearing, irrevocable license under the LICENSED PATENT (without the right to sublicense) to make, have made, use, sell, offer for sale, and import LICENSED PRODUCTS in the FIELD OF USE throughout the TERRITORY.
4.2 The rights and licenses granted by GTG in this AGREEMENT are personal to LICENSEE and LICENSEE shall not assign or otherwise transfer any license or right granted hereunder or any interest therein except as contemplated in Section 11.6.
4.3 Without limiting the patent exhaustion rights under the law, the rights and licenses to use, re-sell, distribute, import or export granted to LICENSEE in this AGREEMENT shall extend to all customers, users and/or purchasers of LICENSED PRODUCTS from LICENSEE (whether directly or indirectly).
4.4 All rights not explicitly granted to LICENSEE are reserved by GTG. Not limiting the foregoing, LICENSEE acknowledges that it is not granted any rights to any other patents or other intellectual property rights of GTG or any third party.
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ARTICLE V
CONSIDERATION
5.1 As partial consideration for the release of Article III and the licenses granted by this AGREEMENT, LICENSEE agrees to pay to GTG a non-refundable license fee of one-hundred thousand United States Dollars (US $100,000), payable in four (4) equal installments of twenty-five thousand United States Dollars (US $25,000) and due on the EFFECTIVE DATE, April 1, 2004, July 1, 2004, and October 1, 2004, respectively.
5.2 As additional consideration for the rights and licenses granted by this AGREEMENT, LICENSEE agrees to pay to GTG for the TERM an annual royalty on the LICENSED PRODUCTS of fifty thousand United States Dollars (US $50,000) on or before the anniversary date of the EFFECTIVE DATE of this AGREEMENT which represents an annual fee in lieu of royalties. No other sums or royalties shall be due GTG, its successors, assigns and/or legal representatives as a result of this AGREEMENT or the license hereunder.
5.3 All fees payable hereunder by LICENSEE to GTG shall be sent by electronic wire transfer to:
Key
Bank
#307070267
1130 Haxton Drive
Fort Collins, Colorado 80525
Account: Genetic Technologies Limited
Account Number: 76009 000 2576
5.4 LICENSEE agrees to pay interest of ten percent (10%) per year or the maximum rate allowed by law, whichever is less, on annual fees payable but not paid to GTG when due.
5.5 All fees payable hereunder by LICENSEE are payable to GTG's successors, heirs, or assigns, as appropriate.
ARTICLE VI
WAIVER
6.1 No waiver by either party, express or implied, of any breach of any term, condition, or obligation of this AGREEMENT by the other party shall be construed as a waiver of any subsequent breach of that term, condition, or obligation, or of any other term, condition, or obligation of this AGREEMENT of the same or different nature.
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
7.1 This AGREEMENT shall be in effect for the TERM, unless terminated earlier as provided herein.
7.2 Either party shall have the right to terminate this AGREEMENT upon any material breach of any term or condition of this AGREEMENT by the other party, which has not been corrected within thirty (30) days after receipt of a notice in writing with reference to this Section 7.2 and such termination shall be without prejudice to any other rights or claims the aggrieved party may have against the other party. GTG shall have the right to terminate this AGREEMENT in the event that LICENSEE shall become involved in dissolution or in the event that LICENSEE entirely discontinues business for any reason, excepting in the event that business is discontinued as a result of the sale of all or substantially all of LICENSEE's capital stock, business or assets as contemplated in Section 11.6.
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7.3 LICENSEE shall have the right to terminate this AGREEMENT for any reason or no reason upon thirty (30) days written notice to GTG; after which period LICENSEE shall have no further obligations to make royalty payments to GTG under this AGREEMENT.
7.4 Termination or expiration of this AGREEMENT shall not affect any obligation owed by LICENSEE to GTG prior to the termination or expiration. Upon termination or expiration of this AGREEMENT for any reason whatsoever:
7.4.1 All rights granted to LICENSEE hereunder shall revert to GTG and LICENSEE shall immediately cease all activities authorized by this AGREEMENT;
7.4.2 LICENSEE shall pay GTG the pro-rated amount of the annual payment set forth in Section 5.2 that had accumulated as of the date of termination or expiration for that year of the AGREEMENT.
7.4.3 LICENSEE shall have no further obligations to make royalty payments to GTG under this AGREEMENT.
7.5 SURVIVAL: Articles II, III, VIII, IX and XI, Section 7.4 and all payment obligations incurred prior to termination or expiration shall survive the termination or expiration of this AGREEMENT.
ARTICLE VIII
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
8.1 LIMITATIONS ON USE AND DISCLOSURE: The parties agree that as regards the CONFIDENTIAL INFORMATION, each party is both a receiving party ("RECEIVING PARTY") and a disclosing party ("DISCLOSING PARTY"). The parties agree to treat all CONFIDENTIAL INFORMATION in the same manner as it treats its own similar proprietary information, but in no case will the degree of care be less than reasonable care. The RECEIVING PARTY shall use CONFIDENTIAL INFORMATION of the DISCLOSING PARTY only in performing under this AGREEMENT and shall retain the CONFIDENTIAL INFORMATION in confidence and not disclose to any third party (except as authorized under this AGREEMENT) without the DISCLOSING PARTY's express written consent. The RECEIVING PARTY shall disclose the DISCLOSING PARTY's CONFIDENTIAL INFORMATION only to those employees and contractors of the RECEIVING PARTY who have a need to know such information for the purposes of this AGREEMENT, and such employees and contractors must have entered into agreements with the RECEIVING PARTY containing confidentiality provisions covering the CONFIDENTIAL INFORMATION, or similar confidential information, with terms and conditions at least as restrictive as those set forth herein. Notwithstanding the foregoing, each party's confidentiality obligations hereunder shall not apply to information which as evidenced by written records:
8.1.1 is already known to the RECEIVING PARTY, without an obligation of confidentiality, prior to disclosure by the DISCLOSING PARTY;
8.1.2 becomes publicly available without fault of the RECEIVING PARTY;
8.1.3 is rightfully obtained by the RECEIVING PARTY from a third party without restriction as to disclosure, or is approved for release by written authorization of the DISCLOSING PARTY; or
8.1.4 is developed independently by the RECEIVING PARTY without use of or access to the DISCLOSING PARTY's CONFIDENTIAL INFORMATION.
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8.2 PERMITTED USE AND DISCLOSURE: Each party hereto is permitted to disclose this AGREEMENT and use or disclose the CONFIDENTIAL INFORMATION disclosed to it by the other party:
8.2.1 To the extent such use or disclosure is reasonably necessary in connection with complying with any public stock exchange or securities rules; or
8.2.2 To its legal and/or financial advisors, provided such advisors maintain the confidentiality of this AGREEMENT; or
8.2.3 To the extent such use or disclosure is reasonably necessary in prosecuting or defending litigation, complying with applicable law, governmental regulation or court order, submitting information to tax or other governmental authorities, or otherwise exercising its rights hereunder; or
8.2.4 To the extent necessary to enforce its rights under this AGREEMENT in connection with a legal proceeding or as required to be disclosed by law or governmental regulation.
8.2.5 In the instances set forth in Sections 8.2.3 or 8.2.4, the RECEIVING PARTY shall provide reasonable advance written notice to DISCLOSING PARTY of such disclosure and reasonably cooperate with the DISCLOSING PARTY in limiting such disclosure.
8.3 NON-PUBLICITY: For clarity, no media/press release shall be prepared by either party relating to this AGREEMENT, except in accordance with Section 8.2. In all circumstances, where the existence of this AGREEMENT must be disclosed, parties shall make every effort to prevent disclosure of the contents or terms of this AGREEMENT, or any portion thereof.
8.3.1 Any other disclosure shall be permitted only with the express written consent of the parties, which may be declined at such party's sole discretion.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
9.1 GTG represents and warrants that it has the full right, power, and authority to enter into and perform its obligations under this AGREEMENT and has the sole and exclusive power and authority to grant to LICENSEE the license and other rights as set forth herein, and there are no outstanding agreements, grants, licenses, encumbrances, liens, or agreements, either written or implied, inconsistent therewith or pursuant to which this AGREEMENT or the parties' performance hereunder would violate, breach, or cause a default.
9.2 GTG represents and warrants that it has the sole and exclusive power and authority to prosecute and enforce the LICENSED PATENT worldwide, except for the authority to enforce the LICENSED PATENT within the EXCLUDED FIELD during the EXCLUSION TIME PERIOD.
9.3 GTG represents and warrants that the execution, delivery, and performance of this AGREEMENT have been duly authorized by all necessary corporate actions on the part of GTG.
9.4 GTG represents and warrants that GTG owns and/or controls no other intellectual property rights, other than the LICENSED PATENT, to which a right or a license is required from GTG for the manufacture, use, sale, importation, exportation, distribution or other commercialization of products of LICENSEE, including without limitation the LICENSED PRODUCTS. In addition, GTG hereby covenants not to sue and agrees not to assert against LICENSEE and customers, users and/or purchasers of LICENSED PRODUCTS from LICENSEE (whether directly or indirectly), in respect of LICENSED PRODUCTS, any such intellectual property right that is not included in this AGREEMENT.
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9.5 LICENSEE represents and warrants that it has the full right, power, and authority to enter into and perform its obligations under this AGREEMENT.
9.6 LICENSEE represents and warrants that the execution, delivery, and performance of this AGREEMENT have been duly authorized by all necessary corporate actions on the part of LICENSEE.
9.7 INDEMNIFICATION:
9.7.1 BY LICENSEE: LICENSEE agrees to hold GTG harmless from any claims by third parties and shall indemnify, hold harmless, and defend GTG, and GTG's subsidiaries, affiliates, officers, directors, representatives, or employees, against any and all claims, causes of action, demands, judgments, settlements, expenses, or losses including, but not limited to, reasonable attorneys' fees and court costs arising out of or in connection with any breach by LICENSEE of any representation, warranty, or covenant hereunder.
9.7.2 BY GTG: GTG shall defend, indemnify and hold harmless LICENSEE, and LICENSEE's subsidiaries, affiliates, officers, directors, representatives, or employees against any and all claims, causes of action, demands, judgments, settlements, expenses, or losses including, but not limited to, reasonable attorneys' fees and court costs arising out of or in connection with any breach by GTG of any representation, warranty, or covenant hereunder.
9.7.3. The indemnifying party's indemnification obligations under this Section 9.7 are conditioned upon the indemnified party (a) giving prompt notice of the claim to the indemnifying party; (b) granting sole control of the defense or settlement of the claim or action to the indemnifying party; and (c) providing reasonable cooperation to the indemnifying party and, at the indemnifying party's request and expense, assistance in the defense or settlement of the claim.
9.8 DISCLAIMER OF WARRANTIES: EXCEPT AS EXPRESSLY SET FORTH HEREIN, WITH REGARD TO THE LICENSED PATENT, GTG EXPRESSLY DISCLAIMS, TO THE EXTENT ALLOWED BY APPLICABLE LAW, ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE (EVEN IF INFORMED OF SUCH PURPOSE), NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.
9.9 LIMITATION OF LIABILITY: TO THE GREATEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, WITH RESPECT TO ANY CAUSE OF ACTION RELATING TO OR ARISING FROM THIS AGREEMENT (WHETHER UNDER THIS ARTICLE IX OR OTHERWISE), NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER.
9.10 Except as expressly provided in this AGREEMENT, nothing contained in this AGREEMENT shall be construed as:
9.10.1 a warranty or representation by GTG as to the validity or scope of the LICENSED PATENT except as provided expressly herein;
9.10.2 a warranty or representation that any use or performance contemplated herein will be free from infringement of patents other than the LICENSED PATENTS under which and to the extent to which licenses are in force hereunder;
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9.10.3 an agreement to bring or prosecute actions or suits against third parties for infringement or conferring any right to bring or prosecute actions or suits against third parties for infringement;
9.10.4 conferring any right to use by either party, in advertising, publicity, or otherwise, any trademark, trade name or name, or any contraction, abbreviation or simulation thereof, of the other party, except where expressly stated otherwise;
9.10.5 conferring by implication, estoppel or otherwise, upon LICENSEE, any license or other right under any intellectual property or patent, except that expressly granted hereunder.
ARTICLE X
NOTICE
10.1 Any notice, request or statement hereunder shall be deemed to be sufficiently given or rendered when personally delivered, delivered by a major commercial rapid delivery courier service or mailed by certified or registered mail, return receipt requested, and if given or rendered to LICENSEE, addressed to:
Richard
Janeczko, Ph.D.
Chief Scientific Officer
Tm Bioscience Corporation
439 University Avenue, Suite 1050
Toronto, Ontario M5G 1Y8
Canada
or, if given or rendered to GTG, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln Street
Denver, CO 80203
USA
or, in any case, to such changed address or person as GTG or LICENSEE shall have specified to the other by written notice.
ARTICLE XI
MISCELLANEOUS
11.1 CONSTRUCTION: This AGREEMENT has been negotiated by the parties and their respective counsel. This AGREEMENT shall be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. This AGREEMENT shall not be construed in favor or against either party by reason of the authorship of any provisions hereof. The
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existence or absence of any term or condition of this AGREEMENT shall not be used in the construction or interpretation of any other agreement between the parties.
11.2 MARKINGS: LICENSEE shall display on materials provided with LICENSED PRODUCTS, such as packaging, literature or instructions (in paper, electronic or other format), a notice indicating relevant LICENSED PATENTS.
11.3 EQUITABLE REMEDIES: Each party acknowledges and agrees that the other party may seek any available remedy, whether in law or equity, upon the other party's breach of any of its obligations set forth in Article VIII.
11.4 MODIFICATION: This AGREEMENT including its Appendices sets forth the entire agreement and understanding between the parties as to the subject matter of this AGREEMENT and merges all prior discussions between the parties, and no one of the parties shall be bound by any modification of this AGREEMENT, or by any conditions, definitions, warranties, or representations with respect to the subject matter of this AGREEMENT, other than as expressly provided for herein, or as duly set forth on or subsequent to the EFFECTIVE DATE in writing and signed by duly authorized representatives of the party to be bound thereby.
11.5 CHOICE OF LAW: This AGREEMENT and matters connected with the performance thereof shall be construed, interpreted, applied and governed in all respects in accordance with the laws of the State of New York and of the United States of America.
11.6 ASSIGNMENT: Neither party may assign this AGREEMENT without the prior written consent of the other party, except in the event of the sale of all or substantially all of a party's capital stock, business, or assets, whether by merger or otherwise pertaining to the subject matter of this AGREEMENT, such party may assign this AGREEMENT to its successor and shall provide notice of such assignment to the other party; provided however, that prior to any assignment permitted herein by LICENSEE, LICENSEE's successor must expressly assume in writing LICENSEE's obligations under this AGREEMENT and expressly acknowledge in writing that products of such successor existing prior to such assignment shall not be LICENSED PRODUCTS.
11.7 GOVERNING DOCUMENT: This AGREEMENT may be translated into languages other than English for the convenience of the parties hereto provided, however, the English language version of this AGREEMENT shall be the governing version and shall not be affected by the interpretation of any other language versions.
11.8 INDEPENDENT BUSINESS: The parties acknowledge that their business operations are completely independent and nether party shall at any time hold itself out as an agent or representative of the other party. No partnership, joint venture, or other relationship shall be deemed to exist by virtue of this AGREEMENT.
11.9 INDEPENDENT TERMS: All the terms of this AGREEMENT shall be independent and unconditional so that the performance of any one term shall not be subject to any set off or counterclaim.
11.10 SEVERABILITY: In the event any clause or term of this AGREEMENT is determined to be void, invalid, or unenforceable, the clause shall be reformed to the extent necessary in order to overcome the limitation and give effect to the original intent and economic effect of the original provision and, as revised this AGREEMENT shall remain in full force and effect.
11.11 HEADINGS: The headings contained within this AGREEMENT are for convenience and reference purposes only. They do not form a part hereof and shall not affect the meaning or interpretation of this AGREEMENT.
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11.12 FURTHER ASSURANCES: The parties hereto shall execute such further documents and perform such further acts as may be necessary to comply with the terms of this AGREEMENT and consummate the transactions herein provided.
11.13 FORCE MAJEURE: Neither party shall be held responsible if the fulfillment of any terms or provisions of this AGREEMENT are delayed or prevented by wars, revolutions, fires, floods, acts of God, acts of terrorism whether actual or threatened, or other causes similar to those enumerated and not within the control of the party whose performance is interfered with, and which by the exercise of reasonable diligence, the party is unable to prevent.
11.14 COUNTERPARTS: This AGREEMENT may be executed in counterparts (and evidenced by facsimile signatures), each of which will be deemed an original and all of which together constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
GTG: | LICENSEE: | ||||
Genetic Technologies Limited |
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Tm Bioscience Corporation |
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By: |
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By: |
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|
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Dr. Mervyn Jacobson
Executive Chairman |
Dr. Richard Janeczko
Chief Scientific Officer |
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United
States Patent No. 5,612,179
US Patent 5,192,659
US Patent 5,789,568
US Patent 5,851,762
US Patent 5,069,557
PATENT
FAMILY:
AUSTRIA (AT)
Patent (No,Kind,Date): AT 144797 E 19961115
VERFAHREN ZUM NACHWEIS VON BENACHBARTEN UND ENTFERNT LOKALISIERTEN
ALLELEN ALS HAPLOTYPEN MITTELS INTRONSEQUENZANALYSE (German)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): EP 90309107 A 19900820
Addnl Info: 00414469 19961030
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: German
AUSTRIA (AT)
Legal Status (No,Type,Date,Code,Text): |
||||
AT 144797 |
R 19961115 AT REF CORRESPONDS TO EP-PATENT
(ENTSPRICHT EP-PATENT) EP 414469 P 19961030 |
|||
AT 144797 |
R 19970615 AT UEP PUBLICATION OF TRANSLATION
OF EUROPEEN PATENT SPECIFICATION (UEBERSETZUNG DER EUROPAEISCHEN PATENTSCHRIFT AUSGEGEBEN) |
|||
AT 144797 |
R 20030915 AT EEIH CHANGE IN THE PERSON OF
PATENT OWNER (AENDERUNG IN DER PERSON DES INHABERS) |
AUSTRALIA
(AU)
Patent (No,Kind,Date): AU 9061319 A1 19910228
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE A G
Author (Inventor): SIMONS MALCOLM J
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): AU 9061319 A 19900824
IPC: * C12Q-001/68; C12N-009/22; C12N-015/12; C12P-019/34; G01N-033/50
Language of Document: English
Patent (No,Kind,Date): AU 9472850 A1 19941124
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
11
LOCUS
ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG
Author
(Inventor): SIMONS MALCOLM J
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): AU 9472850 A 19940908
IPC: * C12Q-001/68; C12N-015/11
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG
Author (Inventor): SIMONS MALCOLM J
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): AU 9061319 A 19900824
IPC: * C12Q-001/68; C12N-009/22; C12N-015/12; C12P-019/34; G01N-033/50
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG
Author (Inventor): SIMONS MALCOLM J
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): AU 9472850 A 19940908
IPC: * C12Q-001/68; C12N-015/11
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
CANADA
(CA)
Patent (No,Kind,Date): CA 2023888 AA 19910226
INTROL SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English; French)
Patent Assignee: SIMONS MALCOLM J (AU)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): CA 2023888 A 19900823
National Class: * D3195000112 M; 15000085 S
IPC: * C07H-021/00; C12Q-001/68
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
12
GERMAN
DEMOCRATIC REPUBLIC (DD)
Patent (No,Kind,Date): DD 299319 A5 19920409
INTRONSEQUENZANALYSEVERFAHREN ZUM NACHWEIS VON BENACHBARTEN UND
ENTFERNTEN GENORTALLELEN ALS HAPLOTYPEN (German)
Patent Assignee: GENETYPE A G (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): DD 343632 A 19900824
IPC: * C12Q-001/68
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: German
GERMAN DEMOCRATIC REPUBLIC (DD)
Legal Status (No,Type,Date,Code,Text):
DD 299319 |
P 20030213 DD RPI CHANGE IN THE PERSON, NAME
OR ADDRESS OF THE PATENTEE (SEARCHES ACCORDING TO ART. 11 AND 12 EXTENSION ACT) (AENDERUNG IN DER PERSON, IM NAMEN ODER IM WOHNORT DES INHABERS (RECHERCHEN GEMAESS PAR. 11 UND 12 ERSTRECKUNGSGESETZ)) Genetic Technologies Limited, Fitzroy, Victoria 3065, AU |
|||
DD 299319 |
P 20030213 DD RPV CHANGE IN THE PERSON, THE
NAME OR THE ADDRESS OF THE REPRESENTATIVE (SEARCHES ACCORDING TO ART. 11 AND 12 EXTENSION ACT) (AENDERUNG IN DER PERSON, IM NAMEN ODER IM WOHNORT DES VERTRETERS (RECHERCHEN GEMAESS PAR. 11 UND 12 ERSTRECKUNGSGESETZ)) Patentanwalt Dr. Peter Barz, 80803 M nchen |
GERMANY
(DE)
Patent (No,Kind,Date): DE 69029018 C0 19961205
VERFAHREN ZUM NACHWEIS VON BENACHBARTEN UND ENTFERNT LOKALISIERTEN
ALLELEN ALS HAPLOTYPEN MITTELS INTRONSEQUENZANALYSE (German)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): DE 69029018 A 19900820
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: German
13
Priority
(No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): DE 69029018 A 19900820
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: German
GERMANY
(DE)
Legal Status (No,Type,Date,Code,Text):
DE 69029018 |
P 19961205 DE REF CORRESPONDS TO
(ENTSPRICHT) EP 414469 P 19961205 |
|||
DE 69029018 |
P 19970522 DE 8373 TRANSLATION OF PATENT
DOCUMENT OF EUROPEAN PATENT WAS RECEIVED AND HAS BEEN PUBLISHED (UEBERSETZUNG DER PATENTSCHRIFT DES EUROPAEISCHEN PATENTES IST EINGEGANGEN UND VEROEFFENTLICHT WORDEN) |
|||
DE 69029018 |
P 19971127 DE 8364 NO OPPOSITION DURING TERM OF
OPPOSITION (EINSPRUCHSFRIST ABGELAUFEN OHNE DASS EINSPRUCH ERHOBEN WURDE) |
|||
DE 69029018 |
P 20030828 DE 8327 CHANGE IN THE
PERSON/NAME/ADDRESS OF THE PATENT OWNER (AENDERUNG IN PERSON, NAMEN ODER WOHNORT DES PATENTINHABERS) GENETIC TECHNOLOGIES LTD., FITZROY, VICTORIA, AU |
DENMARK
(DK)
Patent (No,Kind,Date): DK 414469 T3 19970414
INTRONSEKVENSANALYSEFREMGANGSMAADE TIL PAAVISNING AF NABOSTILLEDE OG
FJERNT LOKALISEREDE ALLELER SOM HAPLOTYPER (Danish)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): DK 9090309107 A 19900820
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: Danish
EUROPEAN
PATENT OFFICE (EP)
Patent (No,Kind,Date): EP 414469 A2 19910227
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English; French; German)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711 Applic (No,Kind,Date): EP 90309107 A 19900820
14
Designated
States: (National) AT; BE; CH; DE; DK; ES; FR; GB; GR; IT; LI; LU; NL; SE
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No:; 115(07)066222Y
Derwent WPI Acc No:; C 91-059664
Language of Document: English
Patent
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English; French; German)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): EP 90309107 A 19900820
Designated States: (National) AT; BE; CH; DE; DK; ES; FR; GB; GR; IT; LI; LU; NL; SE
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
Patent
(No,Kind,Date): EP 414469 B1 19961030
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English; French; German)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): EP 90309107 A 19900820
Designated States: (National) AT; BE; CH; DE; DK; ES; FR; GB; GR; IT; LI; LU; NL; SE
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
EUROPEAN PATENT OFFICE (EP)
Legal Status (No,Type,Date,Code,Text): |
||||
EP 414469 |
P 19890825 EP AA PRIORITY (PATENT APPLICATION) (PRIORITAET (PATENTANMELDUNG))
US 398217 A 19890825 |
|||
EP 414469 |
P 19890911 EP AA PRIORITY (PATENT APPLICATION) (PRIORITAET (PATENTANMELDUNG))
US 405499 A 19890911 |
|||
EP 414469 |
P 19900116 EP AA PRIORITY (PATENT APPLICATION) (PRIORITAET (PATENTANMELDUNG))
US 465863 A 19900116 |
|||
EP 414469 |
P 19900711 EP AA PRIORITY (PATENT APPLICATION) (PRIORITAET (PATENTANMELDUNG))
US 551239 A 19900711 |
|||
EP 414469 |
P 19900820 EP AE EP-APPLICATION (EUROPAEISCHE ANMELDUNG)
EP 90309107 A 19900820 |
|||
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EP 414469 |
P 19910227 EP AK DESIGNATED CONTRACTING STATES IN AN APPLICATION WITHOUT SEARCH REPORT (IN EINER ANMELDUNG OHNE RECHERCHENBERICHT BENANNTE VERTRAGSSTAATEN)
AT BE CH DE DK ES FR GB GR IT LI LU NL SE |
|||
EP 414469 | P 19910227 EP A2 PUBLICATION OF APPLICATION WITHOUT SEARCH REPORT (VEROEFFENTLICHUNG DER ANMELDUNG OHNE RECHERCHENBERICHT) | |||
EP 414469 |
P 19920923 EP AK DESIGNATED CONTRACTING STATES IN A SEARCH REPORT (IN EINEM RECHERCHENBERICHT BENANNTE VERTRAGSSTAATEN)
AT BE CH DE DK ES FR GB GR IT LI LU NL SE |
|||
EP 414469 | P 19920923 EP A3 SEPARATE PUBLICATION OF THE SEARCH REPORT (ART. 93) (GESONDERTE VEROEFFENTLICHUNG DES RECHERCHENBERICHTS (ART. 93)) | |||
EP 414469 | P 19930120 EP 17P REQUEST FOR EXAMINATION FILED (PRUEFUNGSANTRAG GESTELLT) 921127 | |||
EP 414469 | P 19940921 EP 17Q FIRST EXAMINATION REPORT (ERSTER PRUEFUNGSBESCHEID) 940805 | |||
EP 414469 |
P 19961030 EP AK DESIGNATED CONTRACTING STATES MENTIONED IN A PATENT SPECIFICATION (IN EINER PATENTSCHRIFT ANGEFUEHRTE BENANNTE VERTRAGSSTAATEN)
AT BE CH DE DK ES FR GB GR IT LI LU NL SE |
|||
EP 414469 | P 19961030 EP B1 PATENT SPECIFICATION (PATENTSCHRIFT) | |||
EP 414469 | P 19961030 EP REF IN AUSTRIA REGISTERED AS: (IN AT EINGETRAGEN ALS:) AT 144797 R 19961115 | |||
EP 414469 | P 19961205 EP REF CORRESPONDS TO: (ENTSPRICHT) DE 69029018 P 19961205 | |||
EP 414469 | P 19970127 EP ITF IT: TRANSLATION FOR A EP PATENT FILED (IT: DEPOSITO TRADUZIONE DI BREVETTO EUROPEO) MODIANO & ASSOCIATI S.R.L. | |||
EP 414469 | P 19970228 EP ET FR: TRANSLATION FILED (FR: TRADUCTION A ETE REMISE) | |||
EP 414469 | P 19970301 ES FG2A/REG DEFINITIVE PROTECTION (PROTECCION DEFINITIVA) 2095859T3 | |||
EP 414469 | P 19970414 DK T3/REG TRANSLATION OF EP PATENT | |||
EP 414469 | P 19971022 EP 26N NO OPPOSITION FILED (KEIN EINSPRUCH EINGELEGT) | |||
EP 414469 | P 20020101 GB IF02/REG EUROPEAN PATENT IN FORCE AS OF 2002-01-01 | |||
EP 414469 | P 20030314 CH PUE/REG ASSIGNMENT (UEBERTRAGUNG) GENETYPE AG -DANN AN- GENETIC TECHNOLOGIES LIMITED | |||
EP 414469 | P 20030319 GB 732E/REG PROCEEDING UNDER SECTION 32 PATENTS ACT 1977 (PROC. UNDER SECT. 32 PAT. ACT 1977) | |||
EP 414469 | P 20030701 EP NLS NL: ASSIGNMENTS OF EP-PATENTS (NL: MEDEDELINGEN VAN OVERDRACHT VAN EUROPESE OCTROOIEN) GENETIC TECHNOLOGIES LIMITED | |||
EP 414469 | P 20030816 ES PC2A/REG TRANSFER GRANTED (TRANSMISION CONCEDIDA) | |||
EP 414469 | P 20030912 FR TP/REG TRANSMISSION OF PROPERTY (TRANSMISSION DE PROPRIETE) |
SPAIN
(ES)
Patent (No,Kind,Date): ES 2095859 T3 19970301
PROCEDIMIENTO DE ANALISIS DE UNA SECUENCIA DE INTRON PARA LA DETECCION
DE ALELOS DE LOCUS ADYACENTES Y REMOTOS COMO HAPLOTIPOS. (Spanish)
Patent Assignee: GENETYPE AG
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): ES 90309107 EP 19900820
16
Addnl
Info: 0414469 EP patent valid in AT
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: Spanish
SPAIN (ES)
Legal Status (No,Type,Date,Code,Text): |
||||
ES 2095859 | P 19970301 ES FG2A DEFINITIVE PROTECTION (PROTECCION DEFINITIVA) 414469 |
FINLAND
(FI)
Patent (No,Kind,Date): FI 9004200 A0 19900824
INTRONSEKVENSANALYSMETOD FOER DETEKTERING AV NAERLIGGANDE OCH AVLAEGSNA
LOKUSALLELER SOM HAPLOTYPER. (Swedish)
Patent Assignee: GENETYPE A G (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): FI 904200 A 19900824
IPC: * C12Q
Language of Document: Finnish; Swedish
FINLAND
(FI)
Legal Status (No,Type,Date,Code,Text):
FI 904200 A 19930228 FI FD Application shelved
(J tetty sillens 4 kk)
GREECE
(GR)
Patent (No,Kind,Date): GR 3022410 T3 19970430
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): GR 400134 A 19970129
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: Greek
HONG
KONG (HK)
17
CA
Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
ISRAEL
(IL)
Patent (No,Kind,Date): IL 95467 A0 19910630
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Assignee: GENETYPE A G
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): IL 95467 A 19900823
IPC: * C12Q
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
Patent (No,Kind,Date): IL 95467 A1 19950731
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG (CH)
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): IL 95467 A 19900823
IPC: * C12Q-001/68; C07K-014/00
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
ISRAEL (IL)
Legal Status (No,Type,Date,Code,Text): |
||||
IL 95467 | P 19961031 IL FF PATENTS GRANTED | |||
IL 95467 | P 20010111 IL KB PATENTS RENEWED | |||
IL 95467 | P 20030624 IL HP CHANGES IN PROPRIETORSHIP |
JAPAN
(JP)
Patent (No,Kind,Date): JP 3139300 A2 19910613
METHOD OF ANALYZING INTRON SEQUENCE FOR DETECTING THE ALLEL ADJACENT TO
GENE LOCUS AS HALO TYPE AND DISTANT THEREFROM (English)
Patent Assignee: JIINTAIPU AG
Author (Inventor): MARUKOMU JIEI SAIMONZU
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): JP 90224176 A 19900824
IPC: * C12Q-001/68; C12N-015/11; A61K-048/00
Language of Document: Japanese
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELE AS HAPLOTYPE (English)
Patent Assignee: GENETYPE AG
Author (Inventor): SIMONS MALCOLM J
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
18
Applic
(No,Kind,Date): JP 200192923 A 20010328
IPC: * C12N-015/09; C12Q-001/68
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: Japanese
Patent (No,Kind,Date): JP 3206812 B2 20010910
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): JP 90224176 A 19900824
IPC: * C12Q-001/68; C12N-015/09
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: Japanese
NEW
ZEALAND (NZ)
DETECTING ALLELES, SPECIFICALLY THE HLA LOCUS INVOLVING DNA
AMPLIFICATION AND ITS APPLICATION IN PATERNITY TESTING (English)
Patent Assignee: GENETYPE AG
Author (Inventor): SIMONS MALCOLM J
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): NZ 235051 A 19900824
IPC: * G01N-033/50; C12N-015/10; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
SINGAPORE
(SG)
Patent (No,Kind,Date): SG 4700747 A1 19980417
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG
Author (Inventor): SIMONS MALCOLM J
Priority (No,Kind,Date): US 398217 A 19890825; US 405499 A
19890911; US 465863 A 19900116; US 551239 A 19900711
Applic (No,Kind,Date): SG 9604155 A 19900820
IPC: * C12Q-001/68; C07H-021/04
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
UNITED
STATES OF AMERICA (US)
Patent (No,Kind,Date): US 5192659 A 19930309
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 465863 B2 19900116; US 405499 B2
19890911; US 398217 B2 19890825
Applic (No,Kind,Date): US 551239 A 19900711
National Class: * 435006000; 435091000; 935017000; 935018000;
19
935076000;
935077000; 935078000
IPC: * C12Q-001/68; C12P-019/34
Derwent WPI Acc No: * C 91-059664
Language of Document: English
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (NZ)
Priority (No,Kind,Date): US 949652 A 19920923; US 551239 A1
19900711; US 465863 B2 19900116; US 405499 B2 19890911; US 398217 B2 19890825
Applic (No,Kind,Date): US 949652 A 19920923
Addnl Info: 5192659 19930309 Patented
National Class: * 435006000; 435091100; 435091200; 536023100;
536024300; 536024310; 536024330; 935077000; 935078000
IPC: * C12Q-001/68; C12P-019/34; C07H-021/04; C12N-015/00
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
HUMAN LEUKOCYTE ANTIGEN (HLA) LOCUS-SPECIFIC PRIMERS (English)
Patent Assignee: GENETYPE AG (CH)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 682054 A 19960716; US 949652 A3
19920923; US 551239 A1 19900711; US 465863 B2 19900116; US 405499
B2 19890911; US 398217 B2 19890825
Applic (No,Kind,Date): US 682054 A 19960716
Addnl Info: 5192659 19930309 Patented
National Class: * 536024330; 435006000; 435091200; 935008000
IPC: * C07H-021/04; C12P-019/34; C12N-015/00
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
Patent (No,Kind,Date): US 20030119003 AA 20030626
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG (US)
Author (Inventor): SIMONS MALCOLM J (AU)
Priority (No,Kind,Date): US 5626 A 20011203; US 70497 B1 19980430;
US 682054 A1 19960716; US 949652 A3 19920923; US 551239 A1
19900711; US 465863 B2 19900116; US 405499 B2 19890911; US 398217 B2 19890825
Applic (No,Kind,Date): US 5626 A 20011203
Addnl Info: 5789568 Patented; 5612179 Patented; 5192659 Patented
National Class: * 435006000; 435091200
IPC: * C12Q-001/68; C12P-019/34
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
20
UNITED STATES OF AMERICA (US)
Legal Status (No,Type,Date,Code,Text): |
||||
US 5192659 | P 19890825 US AA PRIORITY | |||
US 398217 | B2 19890825 | |||
US 5192659 | P 19890911 US AA PRIORITY | |||
US 405499 | B2 19890911 | |||
US 5192659 | P 19900116 US AA PRIORITY | |||
US 465863 | B2 19900116 | |||
US 5192659 | P 19900711 US AE APPLICATION DATA (PATENT) (APPL. DATA (PATENT)) | |||
US 551239 | A 19900711 | |||
US 5192659 | P 19900711 US AS02 ASSIGNMENT OF ASSIGNOR'S INTEREST GENETYPE A.G., NEUGASSE 11, 6300 ZUG A CORP. OF SWITZERLAND; SIMONS, MALCOLM J.: 19900606 | |||
US 5192659 | P 19930309 US A PATENT | |||
US 5192659 | P 19940614 US CC CERTIFICATE OF CORRECTION | |||
US 5612179 | P 19890825 US AA PRIORITY | |||
US 398217 | B2 19890825 | |||
US 5612179 | P 19890911 US AA PRIORITY | |||
US 405499 | B2 19890911 | |||
US 5612179 | P 19900116 US AA PRIORITY | |||
US 465863 | B2 19900116 | |||
US 5612179 | P 19900711 US AA PRIORITY | |||
US 551239 | A1 19900711 | |||
US 5612179 | P 19920923 US AE APPLICATION DATA (PATENT) (APPL. DATA (PATENT)) | |||
US 949652 | A 19920923 | |||
US 5612179 | P 19970318 US A PATENT | |||
US 5789568 | P 19890825 US AA PRIORITY | |||
US 398217 | B2 19890825 | |||
US 5789568 | P 19890911 US AA PRIORITY | |||
US 405499 | B2 19890911 | |||
US 5789568 | P 19900116 US AA PRIORITY | |||
US 465863 | B2 19900116 | |||
US 5789568 | P 19900711 US AA PRIORITY | |||
US 551239 | A1 19900711 | |||
US 5789568 | P 19920923 US AA PRIORITY | |||
US 949652 | A3 19920923 | |||
US 5789568 | P 19960716 US AE APPLICATION DATA (PATENT) (APPL. DATA (PATENT)) | |||
US 682054 | A 19960716 | |||
US 5789568 | P 19980804 US A PATENT | |||
US 20030119003 | P 19890825 US AA PRIORITY | |||
US 398217 | B2 19890825 | |||
US 20030119003 | P 19890911 US AA PRIORITY | |||
US 405499 | B2 19890911 | |||
US 20030119003 | P 19900116 US AA PRIORITY | |||
US 465863 | B2 19900116 | |||
US 20030119003 | P 19900711 US AA PRIORITY (CONTINUATION) | |||
US 551239 | A1 19900711 | |||
US 20030119003 | P 19920923 US AA PRIORITY (DIVISION) | |||
US 949652 | A3 19920923 | |||
US 20030119003 | P 19960716 US AA PRIORITY (CONTINUATION) | |||
US 682054 | A1 19960716 | |||
21
US 20030119003 | P 19980430 US AA PRIORITY | |||
US 70497 | B1 19980430 | |||
US 20030119003 | P 20011203 US AE APPLICATION DATA (PATENT) (APPL. DATA (PATENT)) | |||
US 5626 | A 20011203 | |||
US 20030119003 | P 20030626 US A1A1 PATENT APPLICATION PUBLICATION (PRE-GRANT) |
SOUTH
AFRICA (ZA)
Patent (No,Kind,Date): ZA 9006765 A 19910626
INTRON SEQUENCE ANALYSIS METHOD FOR DETECTION OF ADJACENT AND REMOTE
LOCUS ALLELES AS HAPLOTYPES (English)
Patent Assignee: GENETYPE AG
Author (Inventor): SIMONS MALCOLM J; MALCOLM J SIMONS
Priority (No,Kind,Date): US 398217 A 19890825
Applic (No,Kind,Date): ZA 906765 A 19900824
IPC: * C12N; A61K; C07H
CA Abstract No: * 115(07)066222Y
Derwent WPI Acc No: * C 91-059664
Language of Document: English
22
"CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS, WHICH ARE IDENTIFIED BY ***."
Effective as of February 5, 2004 ("EFFECTIVE DATE"), GENETIC TECHNOLOGIES LIMITED , having an office at 60 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG") and LABORATORY CORPORATION OF AMERICA HOLDINGS , a Delaware corporation having an office at 430 South Spring Street, Burlington, NC 27215, USA ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
LICENSEE or a SUBSIDIARY of LICENSEE; and (ii) that but for the license granted herein would infringe or contribute to the infringement of one or more claims of a LICENSED PATENT.
ARTICLE III
RELEASE
2
(a) any acts or omissions of the RELEASED PARTIES on or before the *** or ***, whichever is later (the "RELEASE DATE"), (b) any events, occurrences, conditions or circumstances occurring on or before the RELEASE DATE, or (c) any transactions, relationships, arrangements or other matters of any kind or nature existing at any time on or before the RELEASE DATE (collectively, the "RELEASED MATTERS"). This waiver and release includes, but is not limited to, any claims arising from or related to the infringement or misappropriation, or alleged infringement or misappropriation, of any intellectual property or other proprietary rights of GTG (including without limitation the LICENSED PATENTS) by the RELEASED PARTIES.
ARTICLE IV
GRANT TO LICENSEE
3
ARTICLE V
CONSIDERATION
Key
Bank
#307070267
1130 Haxton Drive
Fort Collins, Colorado 80525
Account: Genetic Technologies Limited
Account Number: 76009 000 2576
ARTICLE VI
WAIVER
No waiver by either party, express or implied, of any breach of any term, condition, or obligation of this AGREEMENT by the other party shall be construed as a waiver of any subsequent breach of that term, condition, or obligation, or of any other term, condition, or obligation of this AGREEMENT of the same or different nature.
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
4
ARTICLE VIII
CONFIDENTIALITY, PUBLICITY, PRESS RELEASES AND MARKING
5
ARTICLE IX
NOTICE
Laboratory
Corporation of America Holdings
Attn: General Counsel
430 South Spring Street
Burlington, NC 27215
USA
or, if given or rendered to GTG, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln Street
Denver, CO 80203
USA
6
or, in any case, to such changed address or person as GTG or LICENSEE shall have specified to the other by written notice.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
7
ARTICLE XI
MISCELLANEOUS
8
construed in favor or against either party by reason of the authorship of any provisions hereof. The existence or absence of any term or condition of this AGREEMENT shall not be used in the construction or interpretation of any other agreement between the parties.
9
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
GTG: |
|
LICENSEE: |
||||
GENETIC TECHNOLOGIES LIMITED | LABORATORY CORPORATION OF AMERICA HOLDINGS | |||||
By: | By: | |||||
|
|
|||||
Printed Name/Date |
Printed Name/Date |
|||||
Title |
||||||
Title |
11
Exhibit A
Licensed Patents
United States Patent No. 5,192,659
United States Patent No. 5,612,179
United States Patent No. 5,789,568
United States Patent No. 5,851,762
United States Patent No. 5,096,557
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
Clayton Utz
Settlement and Licence Agreement
Genetic Technologies Limited
ACN 009 212 328
C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of
Molecular Genetics and Immunology Incorporated
(ABN 67 161 830 965)
If
you have any questions about the details of this document
please contact Vince Annetta on + 61 3 9286 6000
Clayton Utz
Lawyers
Level 18 333 Collins Street Melbourne VIC 3000 Australia
DX 38451 333 Collins VIC
T + 61 3 9286 6000 F + 61 3 9629 8488
www.claytonutz.com
Our reference 160/385/31720916
Table of Contents
i
Settlement and Licence Agreement made at on
Parties |
|
Genetic Technologies Limited (ACN 009 212 328) of 60-66 Hanover Street, Fitzroy in the State of Victoria ( Licensor ) |
|
|
C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) (formerly known as Immunogenetics Research Foundation of WA Inc.) of Cnr Nicholson and Warton Roads, Canning Vale in the State of Western Australia ( Licensee ) |
Recitals
This agreement provides
Adjustment Events has the meaning given to it in the GST Legislation.
ASX means Australia Stock Exchange Limited (ACN 008 624 691).
Claim means any action, suit, demand, proceeding, claim for Loss or any other form of claim, whether based in contract, tort (including, without limitation, negligence), misrepresentation, breach of warranty or on any other statutory, legal or equitable grounds.
Confidential Information means all information in any form (including Documents and things in electronic, magnetic, digital and other intangible forms, whether capable of being read by human beings or not) relating to any of the business, products, IP, research, development, customers, licensees and suppliers of a party and any and all other information of any nature and in any form (including Documents and things in electronic, magnetic, digital and other intangible forms, whether capable of being read by human beings or not) that is designated by a party as being confidential or is confidential having regard to its nature or the context in which it was disclosed. For the purposes of this agreement Confidential Information of the Licensor includes information relating to the GTG IP and the Sub-Licensable GTG IP.
Consequential Loss means any loss or damage suffered by the Licensor:
1
Improvement means any IP which:
IP Sale and Royalty Agreement means the IP Sale and Royalty Agreement to be executed by the parties in accordance with the Heads of Agreement.
Loss means any damage, loss (including Consequential Loss), liability, cost, charge, expense, outgoing or payment (whether present, contingent, unascertained, immediate, future, indirect, incidental or otherwise).
Public Good Licensee means any person to whom a licence is granted in accordance with clause 0.
Purpose means conducting research and development work in the Territory in the fields of any of genetics and genomics.
Term means the period from the Effective Date until termination of this agreement in accordance with clause 0.
Territory means the State of Western Australia.
In this agreement:
and unless the context indicates a contrary intention:
2
Clauses 0 to 0 of this agreement will not become binding on, nor grant any rights to or impose any obligations on, either party unless the IP Sale and Royalty Agreement and the Sponsored Research Agreement are executed by all parties on or before the Effective Date or such other date as the parties may agree in writing.
Subject to clauses 0 and 0, the Licensor by this agreement grants to the Licensee during the Term an irrevocable and continuing non-exclusive licence to use (without a right to sub-licence the use of):
for the Purpose.
The licence in clause 00 for the Licensee to use the Sub-Licensable GTG IP is subject to the conditions precedent that:
3
must pay to the Licensor any amounts requested by the Licensor to be paid in accordance with this clause 00 within 5 Business Days after the Licensee receives a Tax Invoice for that amount; and
a non-exclusive licence (on terms reasonably required by GTG) during the Term to use (without a right to sub-licence the use of) the GTG IP for the Purpose and for similar non-commercial applications in the Territory.
The licence granted by clause 0 and all licences granted by the Licensor in accordance with clause 0 are and will be granted on the conditions that:
4
The Licensor acknowledges and agrees that:
For the avoidance of doubt, nothing in this agreement prevents the Licensor granting or restricts the discretion of the Licensor in granting to another person a licence to use and exploit the GTG IP in the Territory if the Licensor reasonably believes that it is in the best interests of the Licensor to do so.
The parties have for a number of years conducted research and development work (whether themselves or through their Related Bodies Corporate) in comparable fields of scientific endeavour. Their respective areas of endeavour may have overlapped and may lead to conflicting claims.
The Licensee by this agreement releases and forever discharges:
5
from all and any Claims which any of the Licensee and any Related Body Corporate of the Licensee now have or but for this agreement could or might have had against any of them relating to, arising out of or in connection with any of the infringement and misuse of the IP or other rights of any of the Licensee and any Related Body Corporate of the Licensee at any time before the date of the Heads of Agreement.
The Licensor by this agreement releases and forever discharges:
from all and any Claims which any of the Licensor and any Related Body Corporate of the Licensor now have or but for this agreement could or might have had against any of them relating to, arising out of or in connection with any of the infringement and misuse of the IP or other rights of any of the Licensor and any Related Body Corporate of the Licensor at any time before the date of the Heads of Agreement.
This agreement can be pleaded by each party and its Related Bodies Corporate and their officers, employees, agents, licensees, successors and permitted assigns in bar to any Claim relating to, arising out of or in connection with any of the infringement and misuse of the IP or other rights of the other party.
Each party acknowledges and agrees that the inclusion of the release in this agreement is not an admission by either party of liability or the amount of any liability.
In consideration of:
the Licensee:
6
For the avoidance of doubt, if the Licensee notifies the Licensor in accordance with clause 7.2(a)(ii) of the IP Sale and Royalty Agreement that it wishes to pay the licence fee that the Licensee is required to pay under clause 00 of this agreement by reducing the number of Shares which the Licensor is required to issue to the Licensee or its nominee under the IP Sale and Royalty Agreement and the Licensor issues to the Licensee or to the Licensee's nominee 16,666,667 (sixteen million, six hundred and sixty six thousand, six hundred and sixty seven) Shares, then after the Effective Date the Licensee has no further obligation to the Licensor to pay the licence fee specified in clause 00 of this agreement.
will be owned by the Licensee or the Public Good Licensee who creates or develops the Improvement.
any right, title or interest in or to any of the GTG IP and the Sub-Licensable GTG IP except to the extent that they are granted an express licence under clause 0 or an express licence in accordance with clause 0.
7
the Sub-Licensable GTG IP on which the Improvement may be based or which it may incorporate.
which is an improvement in, addition to, modification of, based on or incorporates any of the GTG IP and the Sub-Licensable GTG IP.
provide all information and assistance (at the reasonable cost of the Licensor) reasonably requested by the Licensor to:
any of IP referred to in clause 00.
challenge, contest, oppose or question directly or indirectly any of:
8
Each party warrants to the other that, to the best of that party's knowledge, it is the only person that has any Claim against the other party in respect of the subject matter of the release granted to the other party by clause 0.
9
Where any laws of the Commonwealth of Australia or any State or Territory of Australia having jurisdiction imply a term, condition or warranty into this agreement or any relationship created by this agreement between the Licensor and the Licensee or otherwise gives the Licensee or the Licensor a particular remedy against the Licensor or the Licensee respectively, the application of, exercise of or liability under which cannot be excluded, then the liability of the Licensor or the Licensee (as the case may be) for any breach of such implied term, condition or warranty or under such remedy will be limited at the option of the party on whom the liability is imposed in any one or more of the ways permitted by that legislation including, where so permitted:
The Licensor indemnifies the Licensee and all of the Licensee's officers, employees, agents and Related Bodies Corporate against any liability or cost which the Licensee or any of the Licensee's officers, employees, agents or Related Bodies Corporate incur concerning, arising out of or in consequence of any Claim by any person arising from:
The Licensee indemnifies the Licensor and all of the Licensor's officers, employees, agents and Related Bodies Corporate against any liability or cost which the Licensor or any of the Licensor's officers, employees, agents or Related Bodies Corporate incur concerning, arising out of or in consequence of any Claim by any person arising from:
Each party by this agreement indemnifies and agrees in future to indemnify any of the other party and the Related Bodies Corporate of the other party and their officers, employees, agents,
10
licensees, successors and permitted assigns from and against all Claims which that party, any Related Body Corporate of that party and any person claiming under or by virtue of that party:
against any of the other party and the Related Bodies Corporate of the other party and their officers, employees, agents, licensees, successors and permitted assigns relating to, arising out of or in connection with any of the infringement and misuse of IP or other rights of the party before the date of the Heads of Agreement.
If the Licensee or a Public Good Licensee:
11
the Licensee must promptly provide a written notice to the Licensor setting out details of the alleged Claim.
The Licensee must co-operate and must make sure that the Public Good Licensees co-operate with the insurers of the Licensor in the investigation of all Claims made which fall within the risks covered by any insurances held by the Licensor.
12
Either party may terminate this agreement immediately if the other party:
If any of:
is terminated, either party may terminate this agreement by giving ten Business Days' notice in writing to the other party.
Clauses 0, 0, 00, 00, 00, 0, 00, 00, 0 and this clause 0 survive termination of this agreement to the extent they operated immediately before termination of this agreement.
If a Public Good Licensee:
the Licensor may by notice in writing to that Public Good Licensee immediately terminate the agreement by which that Public Good Licensee is granted a licence to use the GTG IP. After receipt of such notice the Public Good Licensee will need to cease using the GTG IP within twenty Business Days.
Each party must treat as confidential and must make sure that any person to whom it discloses in accordance with this agreement treats as confidential:
and must not:
13
The obligations of confidentiality imposed by this clause 0 do not apply in relation to any information:
Any communication under or in connection with this agreement:
14
Except as provided to the contrary in the Heads of Agreement:
This agreement can only be amended by an instrument in writing signed by both parties.
This Deed is governed by the laws of the State of Western Australia, Australia. The parties irrevocably submit to the non-exclusive jurisdiction of the Courts of the State of Western Australia and the Federal Court of Australia, including any Court which may hear appeals from those Courts. The parties must not object to the jurisdiction of such a Court on the basis that it is an inconvenient forum.
Neither party can assign, novate or otherwise transfer any of its rights or obligations under this agreement without the prior written consent of the other party (which must not be unreasonably withheld).
To the extent permitted by law, in relation to the subject matter of this agreement, this agreement:
For the avoidance of doubt, this clause does not derogate from or limit the requirement that the condition precedent in clause 0 is satisfied before clauses 0 to 0 of this agreement become binding on, grant any rights to or impose any obligations on either party.
15
A provision in or right created under this agreement may not be:
A waiver of a breach of this agreement does not constitute a waiver of any future breach of this agreement (including a future breach of the same provision of this agreement).
If any part or a provision of this agreement is judged invalid or unenforceable in a jurisdiction, it is severed for that jurisdiction and the remainder of this agreement will continue to operate.
In entering into this agreement the parties have not relied on any representations or warranties about its subject matter except as provided in this agreement.
Nothing contained in this agreement should be construed as constituting a partnership, joint venture or fiduciary or agency relationship between the parties.
16
Signed as an agreement.
Signed by Professor Roger Dawkins on behalf of C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) in the presence of: |
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Signature |
Signature of Witness |
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Name of Witness in full |
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Signed by Dr Mervyn Jacobson on behalf of Genetic Technologies Limited (ACN 009 212 328) in the presence of: |
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Signature |
Signature of Witness |
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Name of Witness in full |
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17
CLAYTON UTZ
Sponsored Research Agreement
Genetic Technologies Limited
ACN 009 212 328
C Y O'Connor ERADE Village Foundation incorporating the
Immunogenetics Research Foundation and the Institute of Molecular
Genetics and Immunology Incorporated
(ABN 67 161 830 965)
If
you have any questions about the details of this document
please contact Vince Annetta on + 61 3 9286 6000
Clayton Utz
Lawyers
Level 18 333 Collins Street Melbourne VIC 3000 Australia
DX 38451 333 Collins VIC
T + 61 3 9286 6000 F + 61 3 9629 8488
www.claytonutz.com
Our reference 160/385/31720916
Table of Contents
i
Sponsored Research Agreement made at on
Parties |
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Genetic Technologies Limited (ACN 009 212 328) of 60-66 Hanover Street, Fitzroy in the State of Victoria ( GTG ) |
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C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) (formerly known as Immunogenetics Research Foundation WA Inc.) of Cnr Nicholson and Warton Roads, Canning Vale in the State of Western Australia ( Foundation ) |
Recitals
This agreement provides
Foundation Personnel means the personnel employed or directly or indirectly engaged by the Foundation from time to time who are involved in one or more Research Projects, the Development Committee or the creation of a Research and Development Program.
Funds means the amounts to be paid by GTG to the Foundation as set out in clause 0.
IP Sale and Royalty Agreement means the IP Sale and Royalty Agreement to be executed by the parties in accordance with the Heads of Agreement.
Milestones means the milestones (in terms of deadlines by when work is to be carried out) and key performance indicators (in terms of how work is carried out) related to a Research Project as set out in any of a Research and Development Program and a Research Project Plan.
Project IP means all IP in and to the Research Documents and any other IP which is directly or indirectly created or developed during the course of and as a result of the carrying out of a Research and Development Program, a Research Project or otherwise arising from the activities of the Foundation under or pursuant to this agreement.
Research and Development Program means a research and development program to be undertaken by or on behalf of the Foundation which relates to any of the GTG IP and genetics and genomics generally, and their application, including prospectively with respect to:
1
Research Documents means any and all records, notes, reports (including all reports prepared pursuant to clause 0) and Documents created by or on behalf of the Foundation in the course of or in connection with the performance of any of this agreement, a Research and Development Plan, a Research Project Plan and a Research Project, including the preparation for, the conduct of and the recording, analysis and measurement of the outcomes and successes of each Research Project.
Research Project Plan means a plan for the carrying out of a Research Project.
Research Project means a discrete, time-limited research and/or development activity to be carried out by the Foundation in accordance with or pursuant to a Research and Development Program.
Term means the period of this agreement outlined in clause 0.
Year means a calendar year during the Term and, if the Term includes part of a calendar year, such part of a calendar year.
In this agreement:
and unless the context indicates a contrary intention:
2
Clauses 0 to 0 (inclusive) and 0 to 0 (inclusive) of this agreement will not become binding on, nor grant any rights to or impose any obligations on, either party unless the IP Sale and Royalty Agreement and the Settlement and Licence Agreement are executed by all parties on or before the Effective Date or such other date as the parties may agree in writing.
This agreement is deemed to start on the Effective Date and will continue for a period of five years after the Effective Date unless it is:
If a party wishes to extend the term of this agreement, it must not later than three months before the end of the then-current Term send a notice in writing to the other party stating that:
3
4
remainder of the relevant Year, including provision of a Research Project Plan for the new Research Project and details of the Milestones and intended objectives for the new Research Project.
The Foundation must ensure and undertakes and warrants to GTG that:
5
6
The Foundation must make sure that representatives of GTG have access on reasonable notice at all reasonable times to the premises at which the Research Projects are carried out, for the purpose of the representatives of GTG inspecting the carrying out of the Research Projects and monitoring the progress of the then-current Research and Development Program.
Subject to this agreement, at all times during the Term (except the period of six months immediately before the fifth anniversary of the Effective Date and six months before the end of any extended term of this agreement) GTG will provide the Foundation with a bank guarantee from an Australian trading bank for the sum of $450,000 to guarantee the payment of the Funds from time to time in accordance with clause 0. For the avoidance of doubt, the Foundation must not draw or call on such bank guarantee unless the Foundation is at that time entitled to the Funds, has requested GTG to pay the Funds for the relevant period and GTG has failed (after a reasonable period) or refused to do so.
7
If, as a consequence of an audit or otherwise, it becomes apparent to a party that any Funds have been used by the Foundation other than in accordance with this agreement, that party must, within ten Business Days of becoming aware of such matter, provide written notice of that fact to the other party. Unless otherwise agreed, the Foundation must, within twenty Business Days after receiving or giving such notice, rectify the error.
Any items (or series of related items) of a durable nature (including equipment) purchased using the Funds and being of a value that is over $10,000 at the time such item or series or items is purchased (wholly or in part):
8
provide all information and assistance (at the reasonable cost of GTG) reasonably requested by GTG to:
any Project IP and any results of the Research Projects.
challenge, contest, oppose or question directly or indirectly any of:
If any of:
wishes to commercialise, deploy, exploit or apply any of the Project IP, the results of the Research Projects and any Documents recording, incorporating or referring to any of them in a manner which (pursuant to the Copyright Act 1968 (Cth)) may infringe the moral rights of an author of any copyright material forming part of or included in any of the Project IP, the results of the Research Projects and any Documents recording, incorporating or referring to any of them, the Foundation must upon receipt of a written request from GTG obtain a consent to such commercialisation, deployment, exploitation or application from the relevant author of that copyright material.
9
The Foundation must treat as confidential and must make sure that the Foundation Personnel and any other people to whom the Foundation discloses it treat as confidential:
and the Foundation must not and must make sure that the Foundation Personnel do not:
10
The obligations of confidentiality imposed on the Foundation by this clause 0 do not apply in relation to any information:
The Foundation must make sure that all opportunities identified by or on behalf of the Foundation during the Term for the Foundation to carry out any of research and development relating to any of genetics and genomics are disclosed in writing to GTG and are considered in good faith for inclusion in a Research and Development Program.
Subject to clause 0, prior to offering to any person any right to sponsor, fund or otherwise support or be involved in any research and development relating to any of genetics and genomics which are outside the scope of a Research and Development Program, the Foundation must first offer that right to GTG on reasonable terms and give GTG twenty Business Days to accept the offer. If GTG rejects or does not accept such an offer and the Foundation subsequently wants to grant to any other person any right to sponsor, fund or otherwise support or be involved in any research and development at a price less (or otherwise on better terms) than that offered to GTG, the Foundation must first offer that right to GTG at that lower price (or the better terms, as appropriate) before entering into any agreement with the other person relating to the sponsorship or funding of or other support of or involvement in such research or development.
11
Subject to clauses 0 and 0, the Foundation is not restrained from:
provided that such other service or research arrangements and research undertaken by the Foundation will not prejudice or adversely interfere with the performance of any of the Foundations obligations under this agreement.
Prior to offering to any person any right to license, acquire, commercialise, deploy, exploit or apply any IP created or developed by or behalf of the Foundation during the course of or as a result of any research and development relating to any of genetics and genomics carried out by the Foundation independently of a Research and Development Program, the Foundation must first offer that right to GTG on reasonable terms and give GTG thirty Business Days to accept the offer.
If GTG does not accept or rejects an offer made by the Foundation under clause 0, the Foundation may for a period of thirty Business Days offer the relevant right to other persons on the same terms as those offered to, and not accepted or rejected by, GTG. If the Foundation does not grant the right to any other person during that thirty Business Day period, or wishes to grant the right on terms not the same as the terms on which that right was offered to GTG, the Foundation must not offer or grant the relevant right to any third party without again first complying with the procedure in clauses 0 and 0.
Clause 0 does not apply to the extent that any research and development carried out by the Foundation were funded by another person and it is a condition of such funding that the Foundation can not grant a right of first refusal in relation to the IP arising from those activities.
A party may terminate this agreement by notice in writing to the other party if:
If any of:
12
is terminated, either party may terminate this agreement by giving ten Business Days' notice in writing to the other party.
The Foundation must not sub-contract the performance of any of its obligations under this agreement without the prior written approval of GTG.
GTG may impose any terms and conditions it reasonably considers appropriate as a condition precedent to giving its approval under clause 0.
Without limiting clauses 0 and 0:
13
Any communication under or in connection with this agreement:
Except as provided to the contrary in the Heads of Agreement:
This agreement can only be amended by an instrument in writing signed by both parties.
This agreement is governed by the laws of the State of Western Australia, Australia. The parties irrevocably submit to the non-exclusive jurisdiction of the Courts of the State of Western Australia and the Federal Court of Australia, including any Court which may hear appeals from those
14
Courts. The parties must not object to the jurisdiction of such a Court on the basis that it is an inconvenient forum.
Neither party can assign, novate or otherwise transfer any of its rights or obligations under this agreement without the prior written consent of the other party (which must not be unreasonably withheld).
To the extent permitted by law, in relation to the subject matter of this agreement, this agreement:
For the avoidance of doubt, this clause does not derogate from or limit the requirement that the condition precedent in clause 0 is satisfied before clauses 0 to 0 and clauses 0 to 0 of this agreement become binding on, grant any rights to or impose any obligations on either party.
A provision in or right created under this agreement may not be:
A waiver of a breach of this agreement does not constitute a waiver of any future breach of this agreement (including a future breach of the same provision of this agreement).
If any part or a provision of this agreement is judged invalid or unenforceable in a jurisdiction, it is severed for that jurisdiction and the remainder of this agreement will continue to operate.
In entering into this agreement the parties have not relied on any representations or warranties about its subject matter except as provided in this agreement.
Nothing contained in this agreement should be construed as constituting a partnership, joint venture or fiduciary or agency relationship between the parties.
15
Signed as an agreement.
Signed by Professor Roger Dawkins on behalf of C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) |
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Signature |
in the presence of: |
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Signature of Witness |
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Name of Witness in full |
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Signed by Dr Mervyn Jacobson on behalf of Genetic Technologies Limited (ACN 009 212 328) in the presence of: |
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Signature |
Signature of Witness |
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Name of Witness in full |
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16
CLAYTON UTZ
IP Sale and Royalty Agreement
Genetic Technologies Limited
ACN 009 212 328
C Y O'Connor ERADE Village Foundation incorporating the
Immunogenetics Research Foundation and the Institute of Molecular
Genetics and Immunology Incorporated
(ABN 67 161 830 965)
If
you have any questions about the details of this document
please contact Vince Annetta on + 61 3 9286 6000
Clayton Utz
Lawyers
Level 18 333 Collins Street Melbourne VIC 3000 Australia
DX 38451 333 Collins VIC
T + 61 3 9286 6000 F + 61 3 9629 8488
www.claytonutz.com
Our reference 160/385/31720916
Table of Contents
i
IP Sale and Royalty Agreement made at on
Parties |
|
Genetic Technologies Limited (ACN 009 212 328) of 60-66 Hanover Street, Fitzroy in the State of Victoria ( Assignee ) |
|
|
C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) (formerly known as Immunogenetics Research Foundation WA Inc.) of Cnr Nicholson and Warton Roads, Canning Vale in the State of Western Australia ( Assignor ) |
Recitals
This agreement provides
Adjustment Events has the meaning given to it in the GST Legislation.
ASX means Australia Stock Exchange Limited (ACN 008 624 691).
Business Day means a day that Australian trading banks are generally open for business in both Perth and Melbourne.
Documents includes software (including source code, object code and executable versions), data in any material form, photographs, manuals, diagrams, graphs, charts, correspondence, letters and papers of every description, including all copies of and extracts from the same.
Effective Date means 10 Business Days after the execution of this agreement.
Foundation IP means the Primary IP and the Provisional IP and all other IP owned by the Foundation as at the Effective Date in the field of any of genetics and genomics, including:
1
Gross Revenue means:
but, for the sake of clarity, excluding all revenue from the development, deployment, exploitation, application and/or commercialisation of any Other GTG IP discretely from the Foundation IP or from the development, deployment, exploitation, application and/or commercialisation of any Sub-Licensable GTG IP; less
GST is the tax payable on Taxable Supplies under the GST Legislation.
GST Legislation is the A New Tax System (Goods and Services Tax) Act 1999 and any related Act imposing such tax or legislation that is enacted to validate, recapture or recoup such tax.
GTG IP means the Foundation IP (from the Effective Date) and the Other GTG IP.
Heads of Agreement means the Heads of Agreement between the Assignor and the Assignee executed by each of them on about 13 October 2003.
Input Tax Credit has the meaning given to it in the GST Legislation. Execution Copy
IP includes any and all intellectual and industrial property rights throughout the world, whether subsisting now or in the future, including rights of any kind in:
2
whether created or in existence before or after the Commencement Date. Without limitation, IP includes any thing, whether tangible or intangible, which incorporates, embodies or is based on any of the things referred to in paragraphs (a) to (f) inclusive of this definition.
Other GTG IP means:
but excludes anything in relation to which registered IP or an application for registered IP has ceased or expired.
Patent Life means the period from the date of the Heads of Agreement to the expiry date of the last to expire of the patents comprising the Primary IP and the Provisional IP.
Purpose means conducting research and development work in the fields of any of genetics and genomics.
Primary IP means:
and all IP arising from or relating to any of them.
Provisional IP means the Australian Provisional Patent Application Number 2003903971 (Bidirectional amplification of complementary duplicons using a single primer) (filed 23 July 2003), all other granted patents and patent applications for any of the inventions claimed in that patent and all IP arising from or relating to any of them.
Related Body Corporate has the meaning given to that term in section 10 of the Corporations Act 2001 (Cth).
Royalty Rate is 3%.
Royalty Payment Date means 31 July (with respect to the immediately preceding 6 month period expiring 30 June) and 31 January (with respect to the immediately preceding 6 month period expiring 31 December) in any year.
Settlement and Licence Agreement means the Settlement and Licence Agreement to be executed by the parties in accordance with the Heads of Agreement.
3
Shares means fully paid ordinary shares in the issued capital of the Assignee quoted, or agreed by the ASX to be quoted, on the official lists of the ASX.
Sponsored Research Agreement means the Sponsored Research Agreement to be executed by the parties in accordance with the Heads of Agreement.
Sub-Licensable GTG IP means all IP (if any) licensed as at the Effective Date to the Assignee or any Related Body Corporate of the Assignee relating to genomics and genetics and related or associated fields of scientific endeavour whether now or hereafter existing, but expressly excluding IP licensed to the Assignee or any Related Body Corporate of the Assignee which (by reason of the terms of the licence granted to the Assignee or otherwise) the Assignee is prohibited from licensing to the Foundation in accordance with the Settlement and Licence Agreement.
Tax Invoice means an invoice that complies with the GST Legislation.
Taxable Supply has the meaning given to it in the GST Legislation.
In this agreement:
and unless the context indicates a contrary intention:
Clauses 0 to 0 of this agreement will not become binding on, nor grant any rights to or impose any obligations on, either party unless the Sponsored Research Agreement and the Settlement and
4
Licence Agreement are executed by all parties on or before the Effective Date or such other date as the parties may agree in writing.
In consideration of the matters referred to in clause 0, the Assignor irrevocably assigns to the Assignee on and from the Effective Date and with effect from the Effective Date all right, title and interest throughout the world in and to all of the Foundation IP (including all IP and other rights of whatsoever nature in the Foundation IP).
The Assignee:
neither of which licences includes:
5
any of the Foundation IP.
To the extent, if any, that the Assignor has the right to take action against third parties for infringement of or as a result of the use or misuse of any of the Foundation IP, the Assignor by this agreement further assigns, transfers and sets over to the Assignee all rights, title and interest that the Assignor has or might have in the future to take action against any person:
any of the Foundation IP, whether or not such infringement, use or misuse took place prior to the execution of this agreement and whether or not such infringement, use or misuse occurred in Australia or in any other country.
Unless the Assignee complies with the procedure in clause 0, the Assignee must maintain all Foundation IP in full force and effect (to the extent the Foundation IP is able to be maintained) from the Effective Date until at least 5 years after the Effective Date.
6
The Assignee acknowledges that it currently intends to maintain (to the extent it is able to be maintained) the Other GTG IP in full force and effect, having regard to its status as at the Effective Date, from the Effective Date until at least 5 years after the Effective Date.
Upon presentation by the Assignor of an itemised Tax Invoice for the relevant costs, the Assignee will reimburse the Assignor for any costs reasonably incurred by the Assignor in relation to maintenance of the Foundation IP after the Effective Date.
To the extent that the Foundation IP consists of or includes any of systems, processes, techniques, algorithms, confidential information, know how and trade secrets, the Assignor will within 10 Business Days after the Effective Date and otherwise on reasonable written demand by the Assignee disclose to the Assignee all such information and provide to the Assignee all Documents in which all of that information is recorded.
The Assignor will not after the Effective Date, except as permitted by any of the Sponsored Research Agreement and the Settlement and Licence Agreement, without the written consent of the Assignee use or disclose in any way any of the Foundation IP which consists of or includes any of systems, processes, techniques, algorithms, confidential information, know how and trade secrets.
In consideration of the assignment of the Foundation IP by the Assignor, the Assignee by this agreement agrees to issue Shares to the Assignor in the manner set out in clause 0.
7
is required to issue to the Assignor or the Assignor's nominee by this agreement, issue to the Assignor or to the Assignor's nominee 16,666,667 (sixteen million, six hundred and sixty six thousand, six hundred and sixty seven) Shares, provided that the Assignor has by not less than five Business Days before the Effective Date sent a Tax Invoice to the Assignee for $12,500,000 (exclusive of GST).
on the ASX or any other stock or similar market on which the fully paid ordinary shares in the issued capital of the Assignee are quoted from time to time.
8
The Assignee will after the Effective Date pay to the Assignor during the Patent Life a royalty at the Royalty Rate on Gross Revenue.
For the avoidance of doubt, nothing in this agreement requires the Assignee to pay a royalty on any Gross Revenue earned by:
resulting directly or indirectly from the deployment, development, exploitation, application and/or commercialisation of:
If any component of Gross Revenue is not received in Australian currency, the value of that component will be converted to Australian currency at the mid-quote rate applicable on the date the currency conversion is to be made.
Subject to clause 0, the Assignee must by no later than the Royalty Payment Date pay the applicable royalty for the immediately preceding six month period ending 30 June or 31 December (as applicable) to the bank account (as nominated in writing by the Assignor from time to time) of the Assignor or its nominee, plus the amount of GST attributable to that royalty.
9
The Assignee must within 15 Business Days after 30 June and 31 December in each calendar year send to the Assignor a statement detailing the Gross Revenue in respect of which the Assignee is required to pay a royalty in accordance with clause 0 and containing information about:
The Assignee must maintain for 5 years after the end of the calendar year to which they relate, separate records and accounts for the Gross Revenue in respect of which the Assignee is required to pay a royalty in accordance with clause 0, including the amount of royalties paid to the Assignor or its nominee, taxes deducted or withheld and taxes paid to relevant taxation authorities in respect of royalties paid by the Assignee under this agreement, in sufficient detail to enable the conduct of the audit under clause 0.
The Assignee must every financial year cause its auditor to audit the royalties due to the Assignor under this agreement. The Assignee will provide to the Assignor a copy of any report produced as a result of any audit conducted under this clause 0.
10
The Assignee in this agreement provides no warranties and makes representations to the Assignor in relation to any of the subject matter of this agreement (including the Other GTG IP).
The Assignor indemnifies the Assignee and all of the Assignee's officers, employees, agents and Related Bodies Corporate against any liability or cost which the Assignee or any of the Assignee's officers, employees, agents or Related Bodies Corporate incur concerning, arising out of or in consequence of any claim, action or demand by any person arising from:
The Assignee indemnifies the Assignor and all of the Assignor's officers, employees, agents and Related Bodies Corporate against any liability or cost which the Assignor or any of the Assignor's officers, employees, agents or Related Bodies Corporate incur concerning, arising out of or in consequence of any claim, action or demand by any person arising from:
11
If the amount paid by the Recipient is less than the GST on the Taxable Supply, the Recipient shall pay the deficiency to the Supplier.
The Assignor must treat as confidential and must make sure that any person to whom it discloses in accordance with this agreement treats as confidential all information in relation to this agreement and any information which it receives from the Assignee in relation to any component of Gross Revenue and must not:
12
The obligations of confidentiality imposed on the Assignor by this clause 0 do not apply in relation to any information:
Either party may terminate this agreement if:
If any of:
is terminated, either party may terminate this agreement by giving ten Business Days' notice in writing to the other party.
13
Any communication under or in connection with this agreement:
Except as provided to the contrary in the Heads of Agreement:
This agreement can only be amended by an instrument in writing signed by both parties.
This Deed is governed by the laws of the State of Western Australia, Australia. The parties irrevocably submit to the non-exclusive jurisdiction of the Courts of the State of Western Australia and the Federal Court of Australia, including any Court which may hear appeals from those Courts. The parties must not object to the jurisdiction of such a Court on the basis that it is an inconvenient forum.
Neither party can assign, novate or otherwise transfer any of its rights or obligations under this agreement without the prior written consent of the other party (which must not be unreasonably withheld).
To the extent permitted by law, in relation to the subject matter of this agreement, this agreement:
14
For the avoidance of doubt, this clause does not derogate from or limit the requirement that the condition precedent in clause 0 is satisfied before clauses 0 to 0 of this agreement become binding on, grant any rights to or impose any obligations on either party.
A provision in or right created under this agreement may not be:
A waiver of a breach of this agreement does not constitute a waiver of any future breach of this agreement (including a future breach of the same provision of this agreement).
If any part or a provision of this agreement is judged invalid or unenforceable in a jurisdiction, it is severed for that jurisdiction and the remainder of this agreement will continue to operate.
In entering into this agreement the parties have not relied on any representations or warranties about its subject matter except as provided in this agreement.
Nothing contained in this agreement should be construed as constituting a partnership, joint venture or fiduciary or agency relationship between the parties.
15
Signed as an agreement.
Signed by Professor Roger Dawkins on behalf of C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) in the presence of: |
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Signature |
Signature of Witness |
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Name of Witness in full |
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Signed by Dr Mervyn Jacobson on behalf of Genetic Technologies Limited (ACN 009 212 328) in the presence of: |
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Signature |
Signature of Witness |
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Name of Witness in full |
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16
Annexure 1Other Assignor IP and Material
Letters Patent issued to the Assignor
Patent Applications filed by the Assignor
Existing data, trade secrets, confidential information and know-how of the Assignor
Existing data, trade secrets, confidential information and know-how of the Assignor described in Professor Roger Dawkins's bibliography [to what document/paper?]
1
Existing data, trade secrets, confidential information and know-how of the Assignor described in its 2003 annual report and in the abstracts for the Assignor's December 2003 retreat
2
3
1
Deed of Assignment made at on
Parties |
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Genetic Technologies Limited (ACN 009 212 328) of 60-66 Hanover Street, Fitzroy in the State of Victoria ( Assignee ) |
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C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) (formerly known as Immunogenetics Research Foundation WA Inc.) of Cnr Nicholson and Warton Roads, Canning Vale in the State of Western Australia ( Assignor ) |
Recitals
This deed provides
Effective Date means the date on which this deed is executed.
Foundation IP means the Primary IP and the Provisional IP and all other IP owned by the Foundation as at the Effective Date in the field of any of genetics and genomics, including without limitation all IP necessary to support or related to the effective utilisation, exploitation, development, deployment and commercialisation of any of the Primary IP and the Provisional IP.
Heads of Agreement means the Heads of Agreement between the Assignor and the Assignee executed by each of them on about 13 October 2003.
IP includes any and all intellectual and industrial property rights throughout the world, whether subsisting now or in the future, including rights of any kind in:
1
whether created or in existence before or after the Commencement Date. Without limitation, IP includes any thing, whether tangible or intangible, which incorporates, embodies or is based on any of the things referred to in paragraphs (a) to (f) inclusive of this definition.
Primary IP means:
Provisional IP means the Australian Provisional Patent Application Number 2003903971 (Bidirectional amplification of complementary duplicons using a single primer) and all other granted patents and patent applications for any of the inventions claimed in that patent.
In this deed:
and unless the context indicates a contrary intention:
The Assignor assigns to the Assignee on and from the Effective Date and with effect from the Effective Date all right, title and interest throughout the world in and to all of the Foundation IP (including all IP and other rights of whatsoever nature in the Foundation IP).
The Assignor agrees that it will at its own expense do all further things and execute all further documents which the Assignee reasonably requests or requires to perfect or record its right, title and interest in the Foundation IP.
2
To the extent, if any, that the Assignor has the right to take action against third parties for infringement of or as a result of use or misuse of any of the Foundation IP, the Assignor hereby further assigns, transfers and sets over to the Assignee all rights, title and interest that the Assignor has or might have in the future to take action against any person:
any of the Foundation IP, whether or not such infringement, use or misuse took place prior to the execution of this agreement and whether or not such infringement, use or misuse occurred in Australia or in any other country.
In consideration of the assignment of the Foundation IP in accordance with clause 0, the Assignee will on the Effective Date pay to the Assignor $10 and other good and valuable consideration (receipt of which is acknowledged by Assignor).
3
Executed as a Deed:
Signed sealed and delivered by Professor Roger Dawkins for and on behalf of C Y O'Connor ERADE Village Foundation incorporating the Immunogenetics Research Foundation and the Institute of Molecular Genetics and Immunology Incorporated (ABN 67 161 830 965) in the presence of: |
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Signature |
Signature of Witness |
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Name of Witness in full |
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Signed sealed and delivered by Dr Mervyn Jacobson for and on behalf of Genetic Technologies Limited (ACN 009 212 328) in the presence of: |
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Signature |
Signature of Witness |
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Name of Witness in full |
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4
"CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS, WHICH ARE IDENTIFIED BY ***."
Effective as of September 17, 2004 ("EFFECTIVE DATE"), Genetic Technologies Limited , having an office at 60 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG") and Genzyme Corporation , having an office at 500 Kendall Street, Cambridge, MA, 02142, USA ("LICENSEE"), agree as follows:
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
1
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written consent of GTG (which may be withheld in GTG's sole and absolute discretion), except to a purchaser of all or substantially all of the business of LICENSEE to which this AGREEMENT relates, whether by merger, sale of stock, sale of assets or otherwise; provided, however that prior to the transfer of ownership such purchaser must expressly assume in writing LICENSEE's obligations under this AGREEMENT and expressly acknowledge in writing that services of such purchaser performed prior to the transfer of ownership shall not be considered LICENSED PRODUCTS.
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royalties shall be due GTG, its successors, assigns and/or legal representatives as a result of this AGREEMENT or the license hereunder.
St. George Bank
333 Collins Street, Melbourne
Victoria, Australia
Bank State Branch Number: 333.030
Account: Genetic Technologies Limited
Account Number: 700390978
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
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ARTICLE VIII
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
5
approval; provided, however , that such press releases shall not contain any financial terms of this AGREEMENT. Neither party shall issue any other press releases relating to this AGREEMENT without prior written approval of the other party; provided however, that:
Genzyme
Genetics
Attention: President
3400 Computer Drive
Westborough, MA 01581
USA
with a copy to:
Attention:
General Counsel
Genzyme Corporation
500 Kendall Street
Cambridge, MA 02142
USA
or, if given or rendered to GTG, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln Street
Denver, CO 80203
USA
or, in any case, to such changed address or person as GTG or LICENSEE shall have specified to the other by written notice.
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ARTICLE X
REPRESENTATIONS AND WARRANTIES
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FOR A PARTICULAR PURPOSE (EVEN IF INFORMED OF SUCH PURPOSE), NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.
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respect to any matter pending conclusion of the arbitration proceeding or to enforce or protect any of its intellectual property rights.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
GTG: | LICENSEE: | |||||
GENETIC TECHNOLOGIES LIMITED |
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GENZYME CORPORATION |
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By |
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By |
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Dr. Mervyn Jacobson Executive Chairman |
Henri A. Termeer President, Chairman and Chief Executive Officer |
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By |
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Michael S. Wyzga Chief Financial Officer |
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By |
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Thomas J. DesRosier Senior Vice President, General Counsel & Chief Patent Counsel |
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APPLICATION/PATENT NUMBER
|
COUNTRY
|
STATUS
|
||
---|---|---|---|---|
5,192,659 | United States | Granted | ||
5,612,179 | United States | Granted | ||
5,789,568 | United States | Granted | ||
E144797 | Austria | Granted | ||
BE0414469 | Belgium | Granted | ||
CA2023888 | Canada | Granted | ||
DK414469 | Denmark | Granted | ||
EP0414469 | Europe | Granted | ||
FR0414469 | France | Granted | ||
DE69029018 | Germany | Granted | ||
DD299319 | Germany | Granted | ||
GR3022410 | Greece | Granted | ||
IL95467 | Israel | Granted | ||
IT0414469 | Italy | Granted | ||
JP3206812 | Japan | Granted | ||
LI0414469 | Liechtenstein | Granted | ||
LU0414469 | Luxemburg | Granted | ||
NL0414469 | Netherlands | Granted | ||
906765 | South Africa | Granted | ||
ES2095859 | Spain | Granted | ||
SE0414469 | Sweden | Granted | ||
CH0414469 | Switzerland | Granted | ||
GB0414469 | United Kingdom | Granted | ||
5,851,762 | United States | Granted | ||
BE0570371 | Belgium | Granted | ||
CA2087042 | Canada | Granted | ||
DK0570371 | Denmark | Granted | ||
EP0570371 | Europe | Granted | ||
FR0570371 | France | Granted | ||
DE691316910 | Germany | Granted | ||
IE912426 | Ireland | Granted | ||
GR0570371 | Greece | Granted | ||
IL98793 | Israel | Granted | ||
IT0570371 | Italy | Granted | ||
JP5506998 | Japan | Granted | ||
LI0570371 | Liechtenstein | Granted | ||
LU0570371 | Luxemburg | Granted | ||
NL0570371 | Netherlands | Granted | ||
915422 | South Africa | Granted | ||
ES0570371 | Spain | Granted | ||
SE0570371 | Sweden | Granted | ||
CH0570371 | Switzerland | Granted | ||
GB0570371 | United Kingdom | Granted |
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Effective this day of September, 2004 ("EFFECTIVE DATE"), GENETIC TECHNOLOGIES LIMITED , having an office at 60 Hanover Street, Fitzroy, Victoria 3065, Australia ("GTG") and METAMORPHIX, INC. , a Delaware corporation, having an office at 8510A Corridor Road, Savage, Maryland 20763 ("LICENSEE"), agree as follows:
ARTICLE I
BACKGROUND
1.1 As a result of privately funded research over the course of many years, GTG now holds certain intellectual property rights including patent rights in a variety of countries throughout the world, relating to methods and processes used to extract gene discovery and diagnostic utility from the non-coding region of genomes.
1.2 GTG recognizes and supports the role basic research plays in our society. Consequently, GTG is committed to encouraging the expansion of genetic research and development programs into the non-coding regions of genomes by making its non-coding patents pertaining to genomic mapping accessible for such purposes.
1.3 LICENSEE wishes to acquire a license under, and to obtain access to GTG's non-coding patents in order to commercialize applications of DNA/RNA-based diagnostic assays for use in the livestock, aquaculture and companion animal industries (the "PURPOSE").
1.4 GTG is prepared to grant a non-exclusive license to LICENSEE under its non-coding patents, subject to the terms and conditions of this AGREEMENT.
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
2.1 "AGREEMENT" means this document, its attachments, all addenda, schedules, exhibits, appendices, and any amendments to the foregoing.
2.2 "CONFIDENTIAL INFORMATION" means any and all information which is disclosed by either party to the other verbally, electronically, visually, or in a written or other tangible form which is either identified at the time of disclosure as confidential or should be reasonably understood to be confidential or proprietary. CONFIDENTIAL INFORMATION includes, but is not limited to, the specific terms and/or conditions of this AGREEMENT, trade secrets, ideas, processes, formulas, programs, software, source of supply, technology, discoveries, developments, inventions, techniques, marketing plans, strategies, forecasts, unpublished financial statements, prices, costs, and customer lists.
2.3 "EXCLUDED FIELD" means genetic analysis using or based upon, in whole or in part, the genotyping of more than one hundred thousand (100,000) putative single nucleotide polymorphisms, such polymorphisms found in three (3) or more chromosomes of the relevant organism.
2.4 "EXCLUSION TIME PERIOD" means the period from the EFFECTIVE DATE until August 31, 2006.
2.5 "FIELD OF USE" means, during the EXCLUSION TIME PERIOD, applications in livestock, aquaculture and companion animals, other than the EXCLUDED FIELD, and upon expiration of the EXCLUSION TIME PERIOD means applications in livestock, aquaculture and companion animals without limitation.
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2.6 GTG and LICENSEE may hereunder be commonly referred to as "parties" (in singular and plural usage, as required by the context).
2.7 "LICENSE ANNUITY FEE" means a fee of (i) twenty five thousand United States Dollars ($25,000.00) for the period covering the EFFECTIVE DATE to the first anniversary of the EFFECTIVE DATE; (ii) fifty thousand United States Dollars ($50,000.00) for the period covering the first anniversary of the EFFECTIVE DATE to the second anniversary of the EFFECTIVE DATE; (iii) seventy-five thousand United States Dollars ($75,000.00) for the period covering the second anniversary of the EFFECTIVE DATE to the third anniversary of the EFFECTIVE DATE; (iv) one hundred thousand United States Dollars ($100,000.00) for the period covering the third anniversary of the EFFECTIVE DATE to the forth anniversary of the EFFECTIVE DATE; and (v) one hundred thousand United States Dollars ($100,000.00) for each anniversary of the EFFECTIVE DATE thereafter for the TERM.
2.8 "LICENSED PATENT(S)" means individually or collectively (i) the United States patents of GTG listed in the attached Appendix "A"; (ii) all reissues, reexaminations, divisionals, continuations, continuations-in-part, substitutions, additions, improvements, or other applications claiming priority from such patents and any patents which may issue on such other applications, or extensions of such patents; and (iii) foreign counterparts of any of the foregoing.
2.9 "LICENSED PRODUCT(S)" means diagnostic assays manufactured by LICENSEE and of LICENSEE's own design that but for the license granted herein would infringe or contribute to the infringement of one or more claims of a LICENSED PATENT.
2.10 "SUBSIDIARY" means any corporation, company, or other legal entity, in which more than fifty percent (50%) of the shares entitled to vote for the election of directors or persons performing similar functions are, now or hereafter, owned or controlled, directly or indirectly by a party hereto, or jointly by the parties hereto (including, but not limited to, as of the EFFECTIVE DATE, vis á vis LICENSEE, LICENSEE's wholly-owned subsidiary, MMI Genomics, Inc., a Delaware corporation); provided, however, that any corporation, company or other legal entity shall be a SUBSIDIARY only for as long as such ownership or control exists.
2.11 "TERM" means from the EFFECTIVE DATE until the expiration of the last to expire of the LICENSED PATENTS, except as otherwise provided in Article VII.
2.12 "TERRITORY" means world-wide.
ARTICLE III
RELEASE
3.1 Upon payment in full of the amounts to be paid to GTG pursuant to Section 5.1 below, GTG hereby releases, acquits and forever discharges LICENSEE and SUBSIDIARIES of LICENSEE from all claims, demands, and rights of action which GTG may now have on account of any infringement of any LICENSED PATENT, by performance or acts, prior to the EFFECTIVE DATE by (a) LICENSEE and (b) SUBSIDIARIES of LICENSEE (including, but not limited to, MMI Genomics, Inc.). LICENSEE, however, does not admit or deny that it (or any other entity) infringed any LICENSED PATENT prior to the EFFECTIVE DATE.
ARTICLE IV
GRANT TO LICENSEE
4.1 Subject to the terms and conditions of this AGREEMENT, GTG hereby grants LICENSEE and SUBSIDIARIES of LICENSEE, during the TERM of this AGREEMENT, a nonexclusive, non-assignable (except as provided in Section 4.2), non-transferable, annual fee-bearing, license under the LICENSED PATENTS (without the right to sublicense) to make, use, sell, offer for sale, and
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import LICENSED PRODUCTS in the FIELD OF USE throughout the TERRITORY solely for the PURPOSE.
4.2 The rights and licenses granted by GTG in this AGREEMENT are personal to LICENSEE and LICENSEE shall not assign or otherwise transfer any license or right granted hereunder or any interest therein without the prior written consent of GTG (which may be withheld in GTG's sole and absolute discretion), except to a purchaser of all or substantially all of the genomics business of LICENSEE to which this AGREEMENT relates, whether by merger, sale of stock, sale of assets or otherwise (e.g., upon a sale by LICENSEE (or any SUBSIDIARY) of the stock or assets of MMI Genomics, Inc. to a third party); provided, however that prior to the transfer of ownership such purchaser must expressly assume in writing LICENSEE's obligations under this AGREEMENT and expressly acknowledges in writing that products and/or services of such purchaser existing prior to the transfer of ownership shall not be LICENSED PRODUCTS; and provided further that upon any such assignment or transfer (whether with the consent of GTG or upon the sale of the genomics business), neither MetaMorphix, Inc., nor MMI Genomics, Inc. shall retain or enjoy any continuing license under the LICENSED PATENTS.
4.3 All rights not explicitly granted to LICENSEE are reserved by GTG. Not limiting the foregoing, LICENSEE acknowledges that it is not granted any rights to any other patents or other intellectual property rights of GTG or any third party.
ARTICLE V
CONSIDERATION
5.1 As partial consideration for the release of Article III and the licenses granted by this AGREEMENT, LICENSEE agrees to pay to GTG a non-refundable license issue fee of one hundred fifty thousand United States Dollars ($150,000.00) within fifteen (15) days of the EFFECTIVE DATE.
5.2 As additional consideration for the rights and licenses granted by this AGREEMENT, LICENSEE agrees to pay to GTG the LICENSE ANNUITY FEE payments representing an annual fee in lieu of royalties. Such LICENSE ANNUNITY FEE payments are due and payable to GTG within fifteen (15) days of the EFFECTIVE DATE each year for the TERM. No other sums or royalties shall be due GTG, its successors, assigns and/or legal representatives as a result of this AGREEMENT or the license hereunder.
5.3 The annual fee payments by LICENSEE to GTG shall be sent by electronic wire transfer to:
Key
Bank
#307070267
1130 Haxton Drive
Fort Collins, Colorado 80525
Account: Genetic Technologies Limited
Account Number: 76009 000 2576
5.4 LICENSEE agrees to pay interest of ten percent (10%) per year or the maximum rate allowed by law, whichever is less, on fees payable but not paid to GTG when due.
5.5 All fees payable hereunder by LICENSEE are payable to GTG's successors, heirs, or assigns, as appropriate.
5.6 MATERIAL BREACH: Breach of any provision of this Article V or part thereof shall be deemed a material breach.
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ARTICLE VI
WAIVER
6.1 No waiver by either party, express or implied, of any breach of any term, condition, or obligation of this AGREEMENT by the other party shall be construed as a waiver of any subsequent breach of that term, condition, or obligation, or of any other term, condition, or obligation of this AGREEMENT of the same or different nature.
ARTICLE VII
TERM AND TERMINATION OF AGREEMENT
7.1 This AGREEMENT shall be in effect for the TERM, unless terminated earlier as provided herein.
7.2 Either party shall have the right to terminate this AGREEMENT upon any material breach of any term or condition of this AGREEMENT by the other party, which has not been corrected within thirty (30) days after receipt of a notice in writing with reference to this Section 7.2 and such termination shall be without prejudice to any other rights or claims the aggrieved party may have against the other party.
7.3 GTG shall have the right to terminate this AGREEMENT, upon written notice, in the event that LICENSEE discontinues business for any reason and LICENSEE does not resume such business (or refute such allegation) within thirty (30) days of receiving such notice.
7.4 Termination or expiration of this AGREEMENT shall not affect any obligation owed by one party to the other party prior to the termination or expiration. Upon termination or expiration of this AGREEMENT for any reason whatsoever:
7.4.1 all rights granted to LICENSEE hereunder shall revert to GTG and, in the event of a pre-expiration termination, LICENSEE shall immediately cease all activities authorized by this AGREEMENT;
7.4.2 the parties shall promptly return all CONFIDENTIAL INFORMATION and copies thereof of the other party to the other party or certify that they have destroyed all CONFIDENTIAL INFORMATION and copies thereof.
7.5 SURVIVAL: Article II, III, VIII, IX, and XI and all payment obligations incurred prior to termination or expiration shall survive the termination or expiration of this AGREEMENT.
ARTICLE VIII
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
8.1 LIMITATIONS ON USE AND DISCLOSURE: The parties agree that the terms and conditions set forth in this AGREEMENT are CONFIDENTIAL INFORMATION. The CONFIDENTIAL INFORMATION disclosed by either party ("DISCLOSING PARTY") to the other party ("RECEIVING PARTY") constitutes the confidential and proprietary information of the DISCLOSING PARTY and the RECEIVING PARTY agrees to treat all CONFIDENTIAL INFORMATION of the other in the same manner as it treats its own similar proprietary information, but in no case will the degree of care be less than reasonable care. The RECEIVING PARTY shall use CONFIDENTIAL INFORMATION of the DISCLOSING PARTY only in performing under this AGREEMENT and shall retain the CONFIDENTIAL INFORMATION in confidence and not disclose to any third party (except as authorized under this AGREEMENT) without the DISCLOSING PARTY's express written consent. The RECEIVING PARTY shall disclose the DISCLOSING PARTY's CONFIDENTIAL INFORMATION only to those employees and contractors of the RECEIVING PARTY (and, in the case of LICENSEE, those employees and contractors of MMI Genomics, Inc.)
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who have a need to know such information for the purposes of this AGREEMENT, and such employees and contractors must have entered into agreements with the RECEIVING PARTY containing confidentiality provisions covering the CONFIDENTIAL INFORMATION, or similar confidential information, with terms and conditions at least as restrictive as those set forth herein. Notwithstanding the foregoing, each party's confidentiality obligations hereunder shall not apply to information which as evidenced by written records:
8.1.1 is already known to the RECEIVING PARTY, without an obligation of confidentiality, prior to disclosure by the DISCLOSING PARTY;
8.1.2 becomes publicly available without fault of the RECEIVING PARTY;
8.1.3 is rightfully obtained by the RECEIVING PARTY from a third party without restriction as to disclosure, or is approved for release by written authorization of the DISCLOSING PARTY; or
8.1.4 is developed independently by the RECEIVING PARTY without use of or access to the DISCLOSING PARTY's CONFIDENTIAL INFORMATION.
8.2 PERMITTED USE AND DISCLOSURE: Each party hereto is permitted to disclose this AGREEMENT and use or disclose the CONFIDENTIAL INFORMATION disclosed to it by the other party:
8.2.1 To the extent such use or disclosure is reasonably necessary in connection with complying with stock exchange rules; or
8.2.2 To its legal and/or financial advisors, provided such advisors maintain the confidentiality of this AGREEMENT; or
8.2.3 To the extent such use or disclosure is reasonably necessary in prosecuting or defending litigation, complying with applicable law, governmental regulation or court order, submitting information to tax or other governmental authorities, or otherwise exercising its rights hereunder; or
8.2.4 To the extent necessary to enforce its rights under this AGREEMENT in connection with a legal proceeding or as required to be disclosed by law or governmental regulation.
8.2.5 In the instances set forth in Sections 8.2.3 or 8.2.4, the RECEIVING PARTY shall provide reasonable advance written notice to DISCLOSING PARTY of such disclosure and reasonably cooperate with the DISCLOSING PARTY in limiting such disclosure.
8.3 PUBLICITY AND PRESS RELEASES: The parties shall mutually agree upon and jointly issue one or more appropriate media/press releases with regard to the existence of this AGREEMENT within seven (7) days of the EFFECTIVE DATE or as soon as reasonably practical thereafter. Neither party shall issue any other press releases relating to this AGREEMENT without prior written approval of the other party; provided however, that:
8.3.1 Each party shall be permitted to post a copy of or provide a link on its web site to any permitted disclosures made under this AGREEMENT;
8.3.2 GTG shall be able to disclose to other licensees and/or prospective licensees the identity of LICENSEE and the existence of this AGREEMENT; and
8.3.3 LICENSEE shall be able to disclose to its SUBSIDIARIES the existence of this AGREEMENT and the general nature, scope and limitations of this AGREEMENT.
8.4 NON-DISPARAGEMENT: LICENSEE shall not make any disclosures, issue any statements or otherwise cause to be disclosed any information, statement, press release or other public disclosure
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which is designed, intended, or might reasonably be anticipated to disparage, defame, criticize or denigrate GTG, or its officers, directors, and employees, the LICENSED PATENTS, this AGREEMENT, or GTG's patent licensing activities ("STATEMENTS"). Additionally, LICENSEE shall not direct or expressly permit its officers, directors or employees or those of its SUBSIDIARIES to issue any such STATEMENTS.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
9.1 GTG represents and warrants that it has the sole and exclusive power and authority to prosecute and enforce the LICENSED PATENTS worldwide, except for the authority to enforce the LICENSED PATENTS within the EXCLUDED FIELD during the EXCLUSION TIME PERIOD.
9.2 GTG represents and warrants that, other than the LICENSED PATENTS, GTG owns and/or controls no other patent rights to which a right or a license is required from GTG for use of the methods claimed in the LICENSED PATENTS (and, except as may be underway as included in Section 2.8(ii), GTG does not have any patent applications or filings that, upon issuance of any resultant patent, would require to obtain an additional or expanded license from GTG for LICENSEE to undertake trait and SNP association analysis within the FIELD OF USE).
9.3 GTG represents and warrants that it has the full right, power, and authority to enter into and perform its obligations under this AGREEMENT and grant to LICENSEE the license and other rights as set forth herein, and there are no outstanding agreements, grants, licenses, encumbrances, liens, or agreements, either written or implied, inconsistent therewith or pursuant to which this AGREEMENT or the parties' performance hereunder would violate, breach, or cause a default.
9.4 GTG represents and warrants that the execution, delivery, and performance of this AGREEMENT have been duly authorized by all necessary corporate actions on the part of GTG.
9.5 LICENSEE represents and warrants that it has the full right, power, and authority to enter into and perform its obligations under this AGREEMENT, and there are no outstanding agreements, grants, licenses, encumbrances, liens, or agreements, either written or implied, inconsistent therewith or pursuant to which this AGREEMENT or the parties' performance hereunder would violate, breach, or cause a default.
9.6 LICENSEE represents and warrants that the execution, delivery, and performance of this AGREEMENT have been duly authorized by all necessary corporate actions on the part of LICENSEE.
9.7 INDEMNIFICATION:
9.7.1 BY LICENSEE: LICENSEE agrees to hold GTG harmless from any claims by third parties arising from and/or associated with LICENSEE's manufacture, use, sale, offer for sale, or other disposition of the LICENSED PRODUCTS and shall indemnify, hold harmless, and defend GTG, and GTG's subsidiaries, affiliates, officers, directors, representatives, employees, or agents against any and all claims, causes of action, demands, judgments, settlements, expenses, or losses including, but not limited to, reasonable attorneys' fees and court costs arising out of or in connection with: (i) any breach by LICENSEE of any representation, warranty, or covenant hereunder; (ii) the failure of LICENSEE to perform any covenants or obligations contained in this AGREEMENT; or (iii) LICENSEE's negligent, reckless, or willful misconduct.
9.7.2 BY GTG: GTG shall indemnify and defend LICENSEE, and LICENSEE's subsidiaries, affiliates, officers, directors, representatives, employees, or agents against any and all claims, causes of action, demands, judgments, settlements, expenses, or losses including, but not limited to, reasonable attorneys' fees and court costs arising out of or in connection with: (i) any breach by
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GTG of any representation, warranty, or covenant hereunder; (ii) the failure of GTG to perform any covenants or obligations contained in this AGREEMENT; or (iii) GTG's negligent, reckless, or willful misconduct.
9.7.3 The indemnifying party's indemnification obligations under this Section 9 are conditioned upon the indemnified party (i) giving prompt notice of the claim to the indemnifying party; (ii) granting sole control of the defense or settlement of the claim or action to the indemnifying party; and (iii) providing reasonable cooperation to the indemnifying party and, at the indemnifying party's request and expense, assistance in the defense or settlement of the claim.
9.8 DISCLAIMER OF WARRANTIES: EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY EXPRESSLY DISCLAIMS, TO THE EXTENT ALLOWED BY APPLICABLE LAW, ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE (EVEN IF INFORMED OF SUCH PURPOSE), NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.
9.9 LIMITATION OF LIABILITY: TO THE GREATEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, EXCEPT FOR A BREACH OF A PARTY'S OBLIGATIONS PURSUANT TO ARTICLE VIII, WITH RESPECT TO ANY CAUSE OF ACTION RELATING TO OR ARISING FROM THIS AGREEMENT (WHETHER UNDER THIS ARTICLE IX OR OTHERWISE): (I) NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER, AND (II) GTG SHALL NOT BE LIABLE FOR ANY AMOUNTS IN EXCESS OF THE TOTAL AMOUNTS PAID TO GTG BY LICENSEE HEREUNDER.
9.10 Except as expressly set forth herein, nothing contained in this AGREEMENT shall be construed as:
9.10.1 a warranty or representation by GTG as to the validity or scope of any LICENSED PATENT;
9.10.2 a warranty or representation that any use or performance contemplated herein will be free from infringement of patents other than those LICENSED PATENTS under which and to the extent to which licenses are in force hereunder;
9.10.3 an agreement to bring or prosecute actions or suits against third parties for infringement or conferring any right to bring or prosecute actions or suits against third parties for infringement;
9.10.4 conferring any right to use by either party, in advertising, publicity, or otherwise, any trademark, trade name or name, or any contraction, abbreviation or simulation thereof, of the other party;
9.10.5 conferring by implication, estoppel or otherwise, upon LICENSEE, any license or other right under any intellectual property or patent.
9.11 Notwithstanding anything in this Article IX (particularly Sections 9.7.2, 9.8, and 9.10.1-9.10.3) to the contrary, in the event that (a) LICENSEE receives notice of a claim against infringement of a third party's patent due to LICENSEE's practice under GTG's LICENSED PATENTS (i.e., a challenge to GTG's LICENSED PATENTS and not in respect to patents held by third parties vis á vis particular SNP relationships and specific diagnostics), (b) LICENSEE informs GTG of such claim, and (c) GTG fails to defend such claim, LICENSEE (in its absolute, sole discretion) may defend and, upon advanced written notice to GTG, may settle such claim against LICENSEE's LICENSED PATENTS, vis á vis
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LICENSEE. In such event, the LICENSE ANNUITY FEES due under Sections 2.7 and 5.2 may rightfully be suspended by LICENSEE and, upon any settlement or judgment, LICENSEE may deduct from any suspended and future LICENSE ANNUITY FEES any amounts so paid to the entity claiming such infringement.
ARTICLE X
NOTICE
10.1 Any notice, request or statement hereunder shall be deemed to be sufficiently given or rendered when personally delivered, delivered by a major commercial rapid delivery courier service or mailed by certified or registered mail, return receipt requested, and if given or rendered to LICENSEE, addressed to:
Edwin
C. Quattlebaum, Ph.D.
President and CEO
MetaMorphix, Inc.
8510A Corridor Road
Savage, Maryland 20763
USA
with a copy to:
William
E. Carlson, Esq.
Shapiro Sher Guinot & Sandler
36 S. Charles Street, Suite 2000
Baltimore, Maryland 21201
USA
or, if given or rendered to GTG, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln Street
Denver, Colorado 80203
USA
or, in any case, to such changed address or person as GTG or LICENSEE shall have specified to the other by written notice.
ARTICLE XI
MISCELLANEOUS
11.1 CONSTRUCTION: This AGREEMENT has been negotiated by the parties and their respective counsel. This AGREEMENT shall be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. This AGREEMENT shall not be construed in favor or against either party by reason of the authorship of any provisions hereof. The
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existence or absence of any term or condition of this AGREEMENT shall not be used in the construction or interpretation of any other agreement between the parties.
11.2 MARKINGS: LICENSEE shall use markings as GTG may reasonably request from time to time, including, but not limited to, marking the LICENSED PRODUCTS and/or documentation related thereto with patent number(s).
11.3 NOTICE REGARDING INFRINGEMENT: LICENSEE shall promptly notify GTG of any third party that it reasonably believes to be infringing a LICENSED PATENT, and shall use reasonable efforts to provide to GTG any non-confidential information it has in support of such belief. If such third party competes in the markets of LICENSEE's LICENSED PRODUCTS, then upon receipt of a written request from LICENSEE with reference to this Section 11.3, GTG shall undertake a review of the activities of such third party and if such activities are found to be infringing one or more of the LICENSED PATENT(S) within the FIELD OF USE (determined in GTG's sole and absolute discretion), GTG agrees to reasonably pursue a license with such third party.
11.4 ACKNOWLEDGEMENT REGARDING VALIDITY AND ENFORCEABILITY: LICENSEE hereby acknowledges that to the best of LICENSEE's knowledge, as of the EFFECTIVE DATE the LICENSED PATENTS are valid and enforceable and that all right, title and interest in the LICENSED PATENTS belong to GTG. LICENSEE will not knowingly induce, encourage or assist any third party in connection with attacking the title or right of GTG in and to the LICENSED PATENTS or attacking the validity or enforceability of the LICENSED PATENTS.
11.5 MODIFICATION: This AGREEMENT sets forth the entire agreement and understanding between the parties as to the subject matter of this AGREEMENT and merges all prior discussions between the parties, and no one of the parties shall be bound by any modification of this AGREEMENT, or by any conditions, definitions, warranties, or representations with respect to the subject matter of this AGREEMENT, other than as expressly provided for herein, or as duly set forth on or subsequent to the EFFECTIVE DATE in writing and signed by duly authorized representatives of the party to be bound thereby.
11.6 CHOICE OF LAW: This AGREEMENT and matters connected with the performance thereof shall be construed, interpreted, applied and governed in all respects in accordance with the laws of the State of California and the United States.
11.7 DISPUTE RESOLUTION:
11.7.1 In the event of any difference, dispute or question, arising from this AGREEMENT, the parties will endeavor to settle such matters amicably between themselves in good faith. Should the parties be unable to do so within a period of thirty-five (35) working days, except as provided for elsewhere herein, the matter shall be promptly submitted to arbitration in accordance with the rules of the American Arbitration Association (within which pre-hearing discovery shall be permitted), and judgment upon the award rendered by the arbitrators may be entered in any court in California having jurisdiction thereof. This arbitration agreement shall not apply to any controversy or claim involving either (a) an issue of the infringement, validity, or enforceability of any patent or (b) a dispute involving a necessary third party (e.g., third-party defendant or cross-claimant). The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§ 1-16, to the exclusion of any provisions of state law inconsistent therewith or which would produce a different result.
11.7.2 A single arbitrator who is (i) fluent in written and spoken English; and (ii) skilled and experienced in technology licensing shall be selected by agreement between the parties. If the parties fail to agree on an arbitrator, a single arbitrator shall be selected in accordance with the procedures set forth in the Arbitration Rules. The arbitrator shall render a final award in
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accordance with the substantive law of the State of California, excluding the conflicts provisions of such law.
11.7.3 The arbitrator shall be fully compensated in accordance with his or her normal hourly or per diem rates for all time spent in connection with the arbitration proceeding. Pending a final award, the arbitrator's compensation and expenses shall be advanced equally by the parties.
11.7.4 The parties may request a court for interim or provisional relief, and any such request shall not be deemed incompatible with the agreement to arbitrate or as a waiver of that agreement.
11.7.5 In no event will the arbitrator have the power to include any element of punitive damages or incidental or consequential damages in the arbitration award.
11.7.6 Notwithstanding the foregoing or anything to the contrary herein, either party may seek and obtain an injunction or other appropriate relief from a court to preserve the status quo with respect to any matter pending conclusion of the arbitration proceeding or to enforce or protect any of its intellectual property rights.
11.8 EQUITABLE REMEDIES: LICENSEE acknowledges that its failure to perform any of the material terms or conditions of this AGREEMENT shall result in immediate and irreparable damage to GTG. LICENSEE also acknowledges that there may be no adequate remedy at all for such failures and that in the event thereof, GTG shall be entitled to equitable relief in the nature of an injunction, pre-award attachment of assets, and/or other equitable remedies.
11.9 ASSIGNMENT: Neither party may assign (except, as provided in Section 4.2, in connection with the sale of all or substantially all of a party's capital stock, business, or assets, whether by merger or otherwise pertaining to the subject matter of this AGREEMENT) this AGREEMENT without the prior written consent of the other party. Prior to any assignment permitted herein by LICENSEE to a successor, the successor must expressly assume in writing LICENSEE's obligations under this AGREEMENT and expressly acknowledge in writing that products of the successor existing prior to such assignment shall not be LICENSED PRODUCTS.
11.10 GOVERNING DOCUMENT: This AGREEMENT may be translated into languages other than English for the convenience of the parties hereto provided, however, the English language version of this AGREEMENT shall be the governing version and shall not be affected by the interpretation of any other language versions.
11.11 INDEPENDENT BUSINESS: The parties acknowledge that their business operations are completely independent and nether party shall at any time hold itself out as an agent or representative of the other party. No partnership, joint venture, or other relationship shall be deemed to exist by virtue of this AGREEMENT.
11.12 INDEPENDENT TERMS: All the terms of this AGREEMENT shall be independent and unconditional so that the performance of any one term shall not be subject to any set off or counterclaim.
11.13 SEVERABILITY: In the event any clause or term of this AGREEMENT is determined to be void, invalid, or unenforceable, the clause shall be reformed to the extent necessary in order to overcome the limitation and give effect to the original intent and economic effect of the original provision and, as revised this AGREEMENT shall remain in full force and effect.
11.14 HEADINGS: The headings contained within this AGREEMENT are for convenience and reference purposes only. They do not form a part hereof and shall not affect the meaning or interpretation of this AGREEMENT.
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11.15 FURTHER ASSURANCES: The parties hereto shall execute such further documents and perform such further acts as may be necessary to comply with the terms of this AGREEMENT and consummate the transactions herein provided.
11.16 FORCE MAJEURE: Neither party shall be held responsible if the fulfillment of any terms or provisions of this AGREEMENT are delayed or prevented by wars, revolutions, fires, floods, acts of God, acts of terrorism whether actual or threatened, or other causes similar to those enumerated and not within the control of the party whose performance is interfered with, and which by the exercise of reasonable diligence, the party is unable to prevent.
11.17 COUNTERPARTS: This AGREEMENT may be executed in counterparts (and evidenced by facsimile signatures), each of which will be deemed an original and all of which together constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
GTG: | LICENSEE: | |||
Genetic Technologies Limited |
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MetaMorphix, Inc. |
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By: |
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By: |
Edwin C. Quattlebaum, Ph.D. President and CEO |
Printed Name/Date |
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Date: September , 2004 |
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Title |
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Date: September , 2004 |
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United States Patent No. 5,612,179: | "Intron sequence analysis method for detection of adjacent and remote locus alleles as haplotypes" |
United States Patent No. 5,851,762: |
"Genomic mapping method by direct haplotyping using intron sequence analysis" |
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Effective this day of September, 2004 ("EFFECTIVE DATE"), GENETIC TECHNOLOGIES LIMITED , having an office at 60 Hanover Street, Fitzroy, Victoria 3065, Australia ("LICENSEE") and METAMORPHIX, INC., a Delaware corporation, having an office at 8510A Corridor Road, Savage, Maryland 20763, and MMI GENOMICS, INC. , a Delaware corporation, having an office at 1756 Picasso Avenue, Davis, California, 95616, USA (collectively, "LICENSOR"), agree as follows:
ARTICLE I
BACKGROUND
1.1 LICENSOR has certain intellectual property rights, including patent rights and associated know-how, relating to cattle and canine genotyping services for identity and parentage verification.
1.2 LICENSEE wishes to acquire a license under, and to obtain access to LICENSOR's patents and associated know-how in order to perform internal DNA-based diagnostic assays for use in its cattle and canine identity and parentage verification services (the "PURPOSE") within only the EXCLUSIVE TERRITORY and the NON EXCLUSIVE TERRITORY.
1.3 LICENSOR is prepared to grant a non-exclusive, field-restricted license to LICENSEE under its patents and associated know-how, subject to the terms and conditions of this AGREEMENT.
ARTICLE II
GENERAL DEFINITIONS AND RELATIONSHIPS AMONG DEFINITIONS
2.1 "AGREEMENT" means this document, its attachments, all addenda, schedules, exhibits, appendices, and any amendments to the foregoing.
2.2 "APPLERA-LICENSED PRODUCTS" means any product or products covered by at least one valid claim of the LICENSED PATENTS, including, but not limited to, kits for use by LICENSEE'S customers.
2.3 "CONFIDENTIAL INFORMATION" means any and all information which is disclosed by either party to the other verbally, electronically, visually, or in a written or other tangible form which is either identified at the time of disclosure as confidential or should be reasonably understood to be confidential or proprietary. CONFIDENTIAL INFORMATION includes, but is not limited to, the specific terms and/or conditions of this AGREEMENT, TECHNOLOGY, trade secrets, ideas, processes, know-how, formulas, programs, software, source of supply, technology, discoveries, developments, inventions, techniques, marketing plans, strategies, forecasts, unpublished financial statements, prices, costs, and customer lists.
2.4 "EXCLUSIVE TERRITORY" means Australia and New Zealand.
2.5 "FIELD OF USE" means identity and parentage services performed only at a LICENSEE-controlled facility or facilities (and expressly excluding, as further set forth in Section 4.5 and by way of example, the sale of diagnostic kits or other APPLERA-LICENSED PRODUCTS to LICENSEE'S customers and other third parties).
2.6 LICENSOR and LICENSEE may hereunder be commonly referred to as "parties" (in singular and plural usage, as required by the context).
2.7 "LICENSED PATENT(S)" means individually or collectively (i) the United States patent of LICENSOR listed in the attached Appendix "A"; (ii) all reissues, reexaminations, divisionals, continuations, continuations-in-part, substitutions, additions, improvements, or other applications
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claiming priority from such patents and any patents which may issue on such other applications, or extensions of such patents; and (iii) foreign counterparts of any of the foregoing (including, but not limited to, the Australian patent of LICENSOR listed in the attached Appendix "A").
2.8 "LICENSED SERVICE(S)" means microsatellite-based cattle and/or canine identity and/or parentage verification genotyping services developed, performed, or provided by LICENSEE or a SUBSIDIARY of LICENSEE that, but for the license granted herein, would infringe or contribute to the infringement of one or more claims of a LICENSED PATENT and which, in no respect, includes any making, having made, importing, or selling for internal use by customers of any APPLERA-LICENSED PRODUCTS.
2.9 "NONEXCLUSIVE TERRITORY" means all territories falling within the continent of Asia.
2.10 "SUBSIDIARY" means any corporation, company or other legal entity, in which more than fifty percent (50%) of the shares entitled to vote for the election of directors or persons performing similar functions are, now or hereafter, owned or controlled, directly or indirectly by a party hereto, or jointly by the parties hereto; provided, however, that any corporation, company or other legal entity shall be a SUBSIDIARY only for as long as such ownership or control exists.
2.11 "TECHNOLOGY" means any technology, know-how, trade secrets, or the like, in any form whatsoever, owned, controlled or licensable by LICENSOR as of the EFFECTIVE DATE and related to or associated with: (i) the LICENSED PATENTS; (ii) microsatellite-based cattle and/or canine identity and/or parentage verification genotyping services; and/or (iii) any methods, techniques, processes, procedures, protocols, databases, or interpretive aids utilized by LICENSOR in the exploitation of the LICENSED PATENTS or in connection with microsatellite-based canine and cattle identity and/or parentage testing services.
2.12 "TERM" means, unless sooner terminated as hereinafter provided, ten (10) years from the EFFECTIVE DATE with automatic five (5) year renewals thereafter (but not beyond the expiration of the last to expire of the LICENSED PATENTS), provided LICENSEE is not in breach of any terms or conditions of this AGREEMENT on the date of renewal.
ARTICLE III
RELEASE
3.1 Upon payment in full of the amount to be paid to LICENSOR pursuant to Section 5.1 below, LICENSOR hereby releases, acquits and forever discharges LICENSEE and SUBSIDIARIES of LICENSEE from all claims, demands, and rights of action which LICENSOR may now have on account of any infringement of any LICENSED PATENT, by performance or acts, prior to the EFFECTIVE DATE by LICENSEE or SUBSIDIARIES of LICENSEE. Notwithstanding anything in the foregoing to the contrary, however, LICENSOR makes no release, acquittal, or discharge in respect to making, having made, importing, or selling for internal use by its customers any APPLERA-LICENSED PRODUCTS, although LICENSOR acknowledges that it is not aware of any infringement of LICENSEE in respect to any APPLERA-LICENSED PRODUCT.
ARTICLE IV
GRANT TO LICENSEE
4.1 Subject to the terms and conditions of this AGREEMENT, LICENSOR hereby grants LICENSEE and SUBSIDIARIES of LICENSEE, during the TERM of this AGREEMENT:
4.1.1 a nonexclusive, non-assignable (except as provided in Section 4.2), non-transferable (except as provided in Section 4.2), fully paid-up, irrevocable (except as provided in Article 8), license under the LICENSED PATENTS and TECHNOLOGY (without the right to sublicense) to
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make, have made, use, sell, offer for sale, import and perform LICENSED SERVICES in the FIELD OF USE throughout the NONEXCLUSIVE TERRITORY solely for the PURPOSE; and
4.1.2 an exclusive, non-assignable (except as provided in Section 4.2), non-transferable (except as provided in Section 4.2), fully paid-up, irrevocable (except as provided in Article 8), license under the LICENSED PATENTS and TECHNOLOGY (without the right to sublicense) to make, have made, use, sell, offer for sale, import and perform LICENSED SERVICES in the FIELD OF USE throughout the EXCLUSIVE TERRITORY solely for the PURPOSE.
4.2 The rights and licenses granted by LICENSOR in this AGREEMENT are personal to LICENSEE and LICENSEE shall not assign or otherwise transfer any license or right granted hereunder or any interest therein without the prior written consent of LICENSOR (which shall not be unreasonably withheld), except to a purchaser of all or substantially all of the business of LICENSEE to which this AGREEMENT relates, whether by merger, sale of stock, sale of assets or otherwise; provided, however that (i) prior to the transfer of ownership such purchaser must expressly assume in writing LICENSEE's obligations under this AGREEMENT; (ii) LICENSEE expressly acknowledges in writing that products and/or services of such purchaser existing prior to the transfer of ownership shall not be LICENSED SERVICES; and (iii) LICENSEE obtains LICENSOR's prior written consent, which consent shall not be unreasonably withheld.
4.3 All rights not explicitly granted to LICENSEE are reserved by LICENSOR. Not limiting the foregoing, LICENSEE acknowledges that it is not granted any rights to any other patents or other intellectual property rights of LICENSOR or any third party and that it is not granted any rights now held by Applera Corporation, acting by and through its Celera Genomics Group, under the February 28, 2002 License Agreement between LICENSOR and PE Corporation (NY).
4.4 LICENSEE shall be responsible for all acts and omissions of its SUBSIDIARIES related to the rights granted to its SUBSIDIARIES under this AGREEMENT and LICENSEE shall ensure that its SUBSIDIARIES are in compliance with the terms and conditions of this AGREEMENT at all times during the TERM.
4.5 Notwithstanding anything in this Article IV to the contrary, no grant of license is made to LICENSEE to make, have made, import, and sell for internal use by its customers any APPLERA-LICENSED PRODUCTS, which are the subject of an exclusive February 28, 2002 License Agreement by LICENSOR to PE Corporation (NY) which has since been assigned by such license to Applera Corporation, acting by and through its Celera Genomics Group. LICENSOR represents to LICENSEE, however, that such 2002 License Agreement provides that PE (and its successors and assigns) is not licensed to provide services to third parties under the Licensed Patents (which right was reserved by LICENSOR).
4.6 Nothing in this Article IV provides LICENSEE with any license to any Microsoft® or other third-party operating software intellectual property.
ARTICLE V
CONSIDERATION
5.1 In consideration for the release of Article III and the licenses granted by this AGREEMENT, LICENSEE agrees to pay to LICENSOR a non-refundable license fee of one hundred thousand United States Dollars ($100,000.00) within fifteen (15) days of the EFFECTIVE DATE.
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5.2 The license fee payment by LICENSEE to LICENSOR shall be sent by electronic wire transfer to:
Bank
of America, N.A.
ABA (Bank Routing) Number: 052 001 633
Account Number: 39 636 2583
Account Name: MetaMorphix, Inc.
Bank Address: 10 Light Street, Baltimore, Maryland 21202
5.3 LICENSEE agrees to pay interest of ten percent (10%) per year or the maximum rate allowed by law, whichever is less, on fees payable but not paid to LICENSOR when due.
5.4 All fees payable hereunder by LICENSEE are payable to LICENSOR's successors, heirs, or assigns, as appropriate.
5.5 MATERIAL BREACH: Breach of any provision of this Article V or part thereof shall be deemed a material breach.
ARTICLE VI
TRANSFER OF TECHNOLOGY
6.1 LICENSOR shall use reasonable efforts to fully disclose the TECHNOLOGY as it has been practiced by the LICENSOR (which disclosure would be best and fully understood if LICENSEE were to participate in the Additional Services offered in accordance with Appendix "B").
6.2 Within one week of the LICENSOR's receipt of payment under Section 5.1, LICENSOR shall provide to LICENSEE an initial package of TECHNOLOGY containing materials related to the know-how and technology set forth in the attached Appendix "B". Such initial package shall be furnished by LICENSOR in the English language. The cost of additional copies and translation shall be borne by LICENSEE. Nothing in this AGREEMENT shall be construed to require LICENSOR to either (a) engage in special engineering or technical studies on behalf of LICENSEE (notwithstanding the provisions of Section 6.3) or (b) except as expressly set forth in Section 6.3 and Section 6.4, have a continuing, post-EFFECTIVE DATE obligation to provide new, additional, or evolving TECHNOLOGY.
6.3 During the first three (3) years of the TERM, upon prior written request of the LICENSEE (reasonably made and not more than twice each year), LICENSOR shall have its management representatives meet from time to time (by phone or in person), and whenever reasonably requested by LICENSEE, with representatives of LICENSEE, to review generally the scope and content of any new, additional, or evolved TECHNOLOGY of interest to LICENSEE and to work out practical procedures for promptly disclosing any such item of TECHNOLOGY to LICENSEE. LICENSOR shall, during the first three (3) years of the TERM, upon prior written request of LICENSEE disclose to LICENSEE's designated representatives, without unjustified delay, any new, additional, or evolved TECHNOLOGY requested by LICENSEE. Such requests shall, in each case, be for specific items of such TECHNOLOGY. LICENSOR and LICENSEE shall each bear their own costs associated with the provision of TECHNOLOGY to LICENSEE.
6.4 LICENSOR shall, during the first three (3) years of the TERM, upon prior written request of LICENSEE (reasonably made and not more than twice each year), arrange for duly authorized representatives of LICENSEE to visit offices, laboratories, or other facilities of LICENSOR where LICENSOR exploits the LICENSED PATENTS, the TECHNOLOGY and/or microsatellite-based cattle or canine identity and parentage genotyping to inspect, at such offices, laboratories, or other facilities, all such operations that utilize TECHNOLOGY. LICENSOR shall not be obligated to arrange for visits to an extent that by reason of the number of visits, or the number of representatives, such visits shall interfere with the operation of any of LICENSOR's facilities so visited.
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6.5 LICENSOR shall, during the first three (3) years of the TERM (but only as provided for under the "Additional Services" provisions of Appendix "B"), upon prior written request of LICENSEE (reasonably made and not more than twice per year), make available to LICENSEE, without charge, at offices, laboratories, or other facilities of LICENSOR in the United States of America, the services of personnel of LICENSOR who are familiar with the LICENSED SERVICES, for consultation and advice concerning LICENSEE's operations relating to LICENSED SERVICES and the evaluation and/or purchase by LICENSEE of any machines, devices, laboratory equipment, production systems, or reagents which were used or have been considered by LICENSOR in connection with the exploitation of the LICENSED PATENTS and/or performance of microsatellite-based canine and cattle identity and/or parentage testing. LICENSOR shall not be required under this paragraph to provide more than ten (10) man days of such services in any calendar year.
6.6 LICENSOR shall, during the first three (3) years of the TERM (but only as provided for under the "Additional Services" provisions of Appendix "B"), upon prior written request of LICENSEE (reasonably made and not more than twice each year), make available to LICENSEE, at its Davis, California facility, the services of one or more employees of LICENSOR who are familiar with TECHNOLOGY for the following tasks: (a) consultation and advice concerning LICENSOR's utilization of the TECHNOLOGY and LICENSEE's utilization of the TECHNOLOGY; and (b) the training of LICENSEE's personnel, provided that LICENSOR shall not furnish more than two qualified personnel at a time, no more than two weeks at a time, and no more than twice in any calendar year. LICENSEE shall pay LICENSOR, in United States Dollars, or the currency in which the expense is incurred, or the salary paid, the amount of (a) the reasonable travel and subsistence expense incurred by any such LICENSOR employee in traveling from his place of regular employ to, visiting, and returning to his place of regular employ from the plants of LICENSEE, and (b) the allowances for any such employee, on a per-diem basis, for the entire period such employee is engaged away from his place of regular employ in providing services to LICENSEE and in traveling to and returning from LICENSEE's plant or plants, the total of such allowances not varying unreasonably from an estimate thereof provided by LICENSOR prior to the rendering of such services. After the return of such employee, LICENSOR will advise LICENSEE of the actual amounts of items (a) and (b) above, and LICENSEE shall pay such total within thirty (30) days after receipt of LICENSOR's invoice. LICENSEE shall pay all salaries, travel and subsistence expenses of LICENSEE's representatives in availing itself of LICENSOR's facilities or assistance under any provision of this Article VI.
6.7 From time to time during the first three (3) years of the TERM, LICENSOR shall provide to LICENSEE copies of technical reports and evaluations relating to the manufacture, performance, use and interpretation of results of LICENSED SERVICES which LICENSOR, in its sole discretion, shall deem to be of interest to LICENSEE. During any meeting of representatives of LICENSEE and LICENSOR, or in response to any subsequent written request of LICENSEE, subject to the other terms of this Article VI, LICENSOR shall transmit to LICENSEE any requested specific item of technical data at its disposal, relating to the LICENSED PATENTS, TECHNOLOGY, microsatellite-based canine and cattle identity and/or parentage testing, or the interpretation of results of LICENSED SERVICES, including the design and implementation of production systems and equipment employed in such performance, use and/or interpretation. Subject to LICENSEE's obligations under Article VI, LICENSOR hereby grants to LICENSEE a nonexclusive, unrestricted right and license to use such information transmitted to LICENSEE in the manufacture, performance, use, interpretation of results, and sale of LICENSED SERVICES subject to the limitations of the license set forth in Article IV.
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ARTICLE VII
WAIVER
7.1 No waiver by either party, express or implied, of any breach of any term, condition, or obligation of this AGREEMENT by the other party shall be construed as a waiver of any subsequent breach of that term, condition, or obligation, or of any other term, condition, or obligation of this AGREEMENT of the same or different nature.
ARTICLE VIII
TERM AND TERMINATION OF AGREEMENT
8.1 This AGREEMENT shall be in effect for the TERM, unless terminated earlier as provided herein.
8.2 Either party shall have the right to terminate this AGREEMENT upon any material breach of any term or condition of this AGREEMENT by the other party (including, but not limited to LICENSEE's failure to make payment under Article V), which has not been corrected within thirty (30) days after receipt of a notice in writing with reference to this Section 8.2 and such termination shall be without prejudice to any other rights or claims the aggrieved party may have against the other party.
8.3 LICENSOR shall have the right to terminate this AGREEMENT, upon written notice, in the event that LICENSEE discontinues its cattle and canine identity and parentage verification genotyping services business for any reason and LICENSEE does not resume such business (or refute such allegation) within one hundred twenty (120) days of receiving such notice.
8.4 Termination or expiration of this AGREEMENT shall not affect any obligation owed by one party to the other party prior to the termination or expiration. Upon termination of this AGREEMENT due to (a) LICENSEE's material breach of its obligations set forth herein, (b) in accordance with Section 8.3, or (c) upon LICENSEE's intentional relinquishment and surrender of its license under this Agreement, all rights granted to LICENSEE hereunder shall revert to LICENSOR and, in the event of a pre-expiration termination, LICENSEE shall immediately cease all activities authorized by this AGREEMENT.
8.5 Upon termination or expiration of this AGREEMENT for any reason the parties shall promptly return all CONFIDENTIAL INFORMATION and copies thereof of the other party to the other party or certify that they have destroyed all CONFIDENTIAL INFORMATION and copies thereof.
8.6 SURVIVAL: Article II, III, IX, X and XII and all payment obligations incurred prior to termination or expiration shall survive the termination or expiration of this AGREEMENT.
ARTICLE IX
CONFIDENTIALITY, PUBLICITY AND PRESS RELEASES
9.1 LIMITATIONS ON USE AND DISCLOSURE: The parties agree that the terms and conditions set forth in this AGREEMENT are CONFIDENTIAL INFORMATION. The CONFIDENTIAL INFORMATION disclosed by either party ("DISCLOSING PARTY") to the other party ("RECEIVING PARTY") constitutes the confidential and proprietary information of the DISCLOSING PARTY and the RECEIVING PARTY agrees to treat all CONFIDENTIAL INFORMATION of the other in the same manner as it treats its own similar proprietary information, but in no case will the degree of care be less than reasonable care. The RECEIVING PARTY shall use CONFIDENTIAL INFORMATION of the DISCLOSING PARTY only in performing under this AGREEMENT and shall retain the CONFIDENTIAL INFORMATION in confidence and not disclose to any third party (except as authorized under this AGREEMENT) without the DISCLOSING
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PARTY's express written consent. The RECEIVING PARTY shall disclose the DISCLOSING PARTY's CONFIDENTIAL INFORMATION only to those employees and contractors of the RECEIVING PARTY who have a need to know such information for the purposes of this AGREEMENT, and such employees and contractors must have entered into agreements with the RECEIVING PARTY containing confidentiality provisions covering the CONFIDENTIAL INFORMATION, or similar confidential information, with terms and conditions at least as restrictive as those set forth herein. Notwithstanding the foregoing, each party's confidentiality obligations hereunder shall not apply to information which as evidenced by written records:
9.1.1 is already known to the RECEIVING PARTY, without an obligation of confidentiality, prior to disclosure by the DISCLOSING PARTY;
9.1.2 becomes publicly available without fault of the RECEIVING PARTY;
9.1.3 is rightfully obtained by the RECEIVING PARTY from a third party without restriction as to disclosure, or is approved for release by written authorization of the DISCLOSING PARTY; or
9.1.4 is developed independently by the RECEIVING PARTY without use of or access to the DISCLOSING PARTY's CONFIDENTIAL INFORMATION.
9.2 PERMITTED USE AND DISCLOSURE: Each party hereto is permitted to disclose this AGREEMENT and use or disclose the CONFIDENTIAL INFORMATION disclosed to it by the other party:
9.2.1 To the extent such use or disclosure is reasonably necessary in connection with complying with stock exchange rules; or
9.2.2 To its legal and/or financial advisors, provided such advisors maintain the confidentiality of this AGREEMENT; or
9.2.3 To the extent such use or disclosure is reasonably necessary in prosecuting or defending litigation, complying with applicable law, governmental regulation or court order, submitting information to tax or other governmental authorities, or otherwise exercising its rights hereunder; or
9.2.4 To the extent necessary to enforce its rights under this AGREEMENT in connection with a legal proceeding or as required to be disclosed by law or governmental regulation.
9.2.5 In the instances set forth in Sections 9.2.3 or 9.2.4, the RECEIVING PARTY shall provide reasonable advance written notice to DISCLOSING PARTY of such disclosure and reasonably cooperate with the DISCLOSING PARTY in limiting such disclosure.
9.3 PUBLICITY AND PRESS RELEASES: The parties shall mutually agree upon and jointly issue one or more appropriate media/press releases with regard to the existence of this AGREEMENT within seven (7) days of the EFFECTIVE DATE or as soon as reasonably practical thereafter. Neither party shall issue any other press releases relating to this AGREEMENT without prior written approval of the other party; provided however, that:
9.3.1 Each party shall be permitted to post a copy of or provide a link on its web site to any permitted disclosures made under this AGREEMENT;
9.3.2 LICENSOR shall be able to disclose to other licensees and/or prospective licensees the identity of LICENSEE and the existence of this AGREEMENT; and
9.3.3 LICENSEE shall be able to disclose to its SUBSIDIARIES the existence of this AGREEMENT and the general nature, scope and limitations of this AGREEMENT.
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9.4 NON-DISPARAGEMENT: LICENSEE shall not make any disclosures, issue any statements or otherwise cause to be disclosed any information, statement, press release or other public disclosure which is designed, intended, or might reasonably be anticipated to disparage, defame, criticize or denigrate LICENSOR, or its officers, directors, and employees, the LICENSED PATENTS, this AGREEMENT, or LICENSOR's patent licensing activities ("STATEMENTS"). Additionally, LICENSEE shall not direct or expressly permit its officers, directors or employees or those of its SUBSIDIARIES to issue any such STATEMENTS.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 LICENSOR represents and warrants that, except in respect to the February 28, 2002 License Agreement between LICENSOR and PE Corporation (NY), it has the sole and exclusive ownership of the LICENSED PATENTS and TECHNOLOGY, and that it has sole and exclusive power and authority to prosecute and enforce the LICENSED PATENTS worldwide.
10.2 LICENSOR represents and warrants that, other than the LICENSED PATENTS and the TECHNOLOGY, LICENSOR owns and/or controls no other intellectual property rights to which a right or a license is required from LICENSOR for use and commercialization as intended hereunder by LICENSOR of the TECHNOLOGY and methods undertaken in the provision of the LICENSED SERVICES.
10.3 LICENSOR represents and warrants that it has the full right, power, and authority to enter into and perform its obligations under this AGREEMENT and grant to LICENSEE the license and other rights as set forth herein without violating any third party's rights, and there are no outstanding agreements, grants, licenses, encumbrances, liens, or agreements, either written or implied, inconsistent therewith or pursuant to which this AGREEMENT or the parties' performance hereunder would violate, breach, or cause a default.
10.4 LICENSOR represents and warrants that the execution, delivery, and performance of this AGREEMENT have been duly authorized by all necessary corporate actions on the part of LICENSOR.
10.5 LICENSEE represents and warrants that it has the full right, power, and authority to enter into and perform its obligations under this AGREEMENT, and there are no outstanding agreements, grants, licenses, encumbrances, liens, or agreements, either written or implied, inconsistent therewith or pursuant to which this AGREEMENT or the parties' performance hereunder would violate, breach, or cause a default.
10.6 LICENSEE represents and warrants that the execution, delivery, and performance of this AGREEMENT have been duly authorized by all necessary corporate actions on the part of LICENSEE.
10.7 INDEMNIFICATION:
10.7.1 BY LICENSEE: LICENSEE agrees to hold LICENSOR harmless from any claims by third parties arising from and/or associated with either (a) LICENSEE'S provision of the LICENSED SERVICES and shall indemnify, hold harmless, and defend LICENSOR, and LICENSOR'S subsidiaries, affiliates, officers, directors, representatives, employees, or agents against any and all claims, causes of action, demands, judgments, settlements, expenses, or losses including, but not limited to, reasonable attorneys' fees and court costs arising out of or in connection with: (i) any breach by LICENSEE of any representation, warranty, or covenant hereunder; (ii) the failure of LICENSEE to perform any covenants or obligations contained in this AGREEMENT; or (iii) LICENSEE'S negligent, reckless, or willful misconduct; or (b) LICENSEE's sale of APPLERA-LICENSED PRODUCTS to LICENSEE's customers or other
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third parties (unless it has first obtained a license from Applera Corporation, its successors or assigns).
10.7.2 BY LICENSOR: LICENSOR shall indemnify and defend LICENSEE, and LICENSEE'S subsidiaries, affiliates, officers, directors, representatives, employees, or agents against any and all claims, causes of action, demands, judgments, settlements, expenses, or losses including, but not limited to, reasonable attorneys' fees and court costs arising out of or in connection with: (i) any breach by LICENSOR of any representation, warranty, or covenant hereunder; (ii) the failure of LICENSOR to perform any covenants or obligations contained in this AGREEMENT; or (iii) LICENSOR's negligent, reckless, or willful misconduct .
10.7.3 The indemnifying party's indemnification obligations under this Section 10 are conditioned upon the indemnified party (i) giving prompt notice of the claim to the indemnifying party; (ii) granting sole control of the defense or settlement of the claim or action to the indemnifying party; and (iii) providing reasonable cooperation to the indemnifying party and, at the indemnifying party's request and expense, assistance in the defense or settlement of the claim.
10.8 DISCLAIMER OF WARRANTIES: EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY EXPRESSLY DISCLAIMS, TO THE EXTENT ALLOWED BY APPLICABLE LAW, ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE (EVEN IF INFORMED OF SUCH PURPOSE), NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.
10.9 LIMITATION OF LIABILITY: TO THE GREATEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, EXCEPT FOR A BREACH OF A PARTY'S OBLIGATIONS PURSUANT TO ARTICLE IX, WITH RESPECT TO ANY CAUSE OF ACTION RELATING TO OR ARISING FROM THIS AGREEMENT (WHETHER UNDER THIS ARTICLE X OR OTHERWISE): (I) NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER AND (II). LICENSOR SHALL NOT BE LIABLE FOR ANY AMOUNTS IN EXCESS OF THE TOTAL AMOUNTS PAID TO LICENSOR BY LICENSEE HEREUNDER.
10.10 Except as expressly set forth herein, nothing contained in this AGREEMENT shall be construed as:
10.10.1 a warranty or representation that any use or performance contemplated herein will be free from infringement of patents other than, subject to Section 4.5, those LICENSED PATENTS under which and to the extent to which licenses are in force hereunder;
10.10.2 an agreement to bring or prosecute actions or suits against third parties for infringement or conferring any right to bring or prosecute actions or suits against third parties for infringement;
10.10.3 conferring any right to use by either party, in advertising, publicity, or otherwise, any trademark, trade name or name, or any contraction, abbreviation or simulation thereof, of the other party;
10.10.4 conferring by implication, estoppel or otherwise, upon LICENSEE, any license or other right under any intellectual property or patent.
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ARTICLE XI
NOTICE
11.1 Any notice, request or statement hereunder shall be deemed to be sufficiently given or rendered when personally delivered, delivered by a major commercial rapid delivery courier service, or mailed by certified or registered mail, return receipt requested, and if given or rendered to LICENSOR, addressed to:
Edwin
C. Quattlebaum, Ph.D.
President and CEO
MetaMorphix, Inc.
8510A Corridor Road
Savage, MD 20763
USA
and
Dennis
Fantin, Ph.D.
Director, Operations,
MMI Genomics
1756 Picasso Avenue
Davis, CA 95616
USA
with a copy to:
William
E. Carlson, Esq.
Shapiro Sher Guinot & Sandler
36 S. Charles Street, Suite 2000
Baltimore, MD 21201
USA
or, if given or rendered to LICENSEE, addressed to:
Dr. Mervyn
Jacobson
Executive Chairman
Genetic Technologies Limited
60 Hanover Street
Fitzroy, Victoria 3065
Australia
with a copy to:
Michael
A. DeSanctis, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln Street
Denver, CO 80203
USA
or, in any case, to such changed address or person as LICENSOR or LICENSEE shall have specified to the other by written notice.
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ARTICLE XII
MISCELLANEOUS
12.1 CONSTRUCTION: This AGREEMENT has been negotiated by the parties and their respective counsel. This AGREEMENT shall be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. This AGREEMENT shall not be construed in favor or against either party by reason of the authorship of any provisions hereof. The existence or absence of any term or condition of this AGREEMENT shall not be used in the construction or interpretation of any other AGREEMENT between the parties.
12.2 MARKINGS: LICENSEE shall use markings as LICENSOR may reasonably request from time to time, including, but not limited to, marking materials related to the LICENSED SERVICES with patent number(s).
12.3 NOTICE REGARDING INFRINGEMENT: LICENSEE shall promptly notify LICENSOR of any third party that it reasonably believes to be infringing a LICENSED PATENT, and shall use reasonable efforts to provide to LICENSOR any non-confidential information it has in support of such belief. If such third party competes in the markets of LICENSEE's LICENSED SERVICES, then upon receipt of a written request from LICENSEE with reference to this Section 12.2, LICENSOR shall undertake a review of the activities of such third party and if such activities are found to be infringing one or more of the LICENSED PATENT(S) within the FIELD OF USE (determined in LICENSOR's sole and absolute discretion), LICENSOR agrees to reasonably pursue a license with such third party.
12.4 ACKNOWLEDGEMENT REGARDING VALIDITY AND ENFORCEABILITY: LICENSEE hereby acknowledges that to the best of LICENSEE's knowledge, as of the EFFECTIVE DATE the LICENSED PATENTS are valid and enforceable. During the TERM, LICENSEE will not knowingly induce, encourage or assist any third party in connection with attacking the title or right of LICENSOR in and to the LICENSED PATENTS or attacking the validity or enforceability of the LICENSED PATENTS.
12.5 MODIFICATION: This AGREEMENT sets forth the entire AGREEMENT and understanding between the parties as to the subject matter of this AGREEMENT and merges all prior discussions between the parties, and no one of the parties shall be bound by any modification of this AGREEMENT, or by any conditions, definitions, warranties, or representations with respect to the subject matter of this AGREEMENT, other than as expressly provided for herein, or as duly set forth on or subsequent to the EFFECTIVE DATE in writing and signed by duly authorized representatives of the party to be bound thereby.
12.6 CHOICE OF LAW: This AGREEMENT and matters connected with the performance thereof shall be construed, interpreted, applied and governed in all respects in accordance with the laws of the State of New York and the United States (which also governs the 2002 License Agreement between LICENSOR and PE Corporation (NY)).
12.7 DISPUTE RESOLUTION:
12.7.1 In the event of any difference, dispute or question, arising from this AGREEMENT, the parties will endeavor to settle such matters amicably between themselves in good faith. Should the parties be unable to do so within a period of thirty-five (35) working days, except as provided for elsewhere herein, the matter shall be promptly submitted to arbitration in accordance with the rules of the American Arbitration Association (within which pre-hearing discovery shall be permitted), and judgment upon the award rendered by the arbitrators may be entered in any court in California having jurisdiction thereof. This arbitration AGREEMENT shall not apply to any controversy or claim involving either (a) an issue of the infringement, validity, or enforceability of any patent or (b) a dispute involving Applera Corporation and/or any necessary third party (e.g., third-party defendant or cross-claimant) unless such party agrees to participate in such arbitration.
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The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§ 1-16, to the exclusion of any provisions of state law inconsistent therewith or which would produce a different result.
12.7.2 A single arbitrator who is (i) fluent in written and spoken English; and (ii) skilled and experienced in technology licensing shall be selected by AGREEMENT between the parties. If the parties fail to agree on an arbitrator, a single arbitrator shall be selected in accordance with the procedures set forth in the Arbitration Rules. The arbitrator shall render a final award in accordance with the substantive law of the State of New York, excluding the conflicts provisions of such law.
12.7.3 The arbitrator shall be fully compensated in accordance with his or her normal hourly or per diem rates for all time spent in connection with the arbitration proceeding. Pending a final award, the arbitrator's compensation and expenses shall be advanced equally by the parties.
12.7.4 The parties may request a court for interim or provisional relief, and any such request shall not be deemed incompatible with the AGREEMENT to arbitrate or as a waiver of that AGREEMENT.
12.7.5 In no event will the arbitrator have the power to include any element of punitive damages or incidental or consequential damages in the arbitration award.
12.7.6 Notwithstanding the foregoing or anything to the contrary herein, either party may seek and obtain an injunction or other appropriate relief from a court to preserve the status quo with respect to any matter pending conclusion of the arbitration proceeding or to enforce or protect any of its intellectual property rights.
12.8 EQUITABLE REMEDIES: LICENSEE acknowledges that its failure to perform any of the material terms or conditions of this AGREEMENT shall result in immediate and irreparable damage to LICENSOR. LICENSEE also acknowledges that there may be no adequate remedy at all for such failures and that in the event thereof, LICENSOR shall be entitled to equitable relief in the nature of an injunction, pre-award attachment of assets, and/or other equitable remedies.
12.9 ASSIGNMENT: Except as set forth in Section 4.2, neither party may assign (including in connection with the sale of all or substantially all of a party's capital stock, business, or assets, whether by merger or otherwise pertaining to the subject matter of this AGREEMENT) this AGREEMENT without the prior written consent of the other party.
12.10 GOVERNING DOCUMENT: This AGREEMENT may be translated into languages other than English for the convenience of the parties hereto provided, however, the English language version of this AGREEMENT shall be the governing version and shall not be affected by the interpretation of any other language versions.
12.11 INDEPENDENT BUSINESS: The parties acknowledge that their business operations are completely independent and nether party shall at any time hold itself out as an agent or representative of the other party. No partnership, joint venture, or other relationship shall be deemed to exist by virtue of this AGREEMENT.
12.12 INDEPENDENT TERMS: All the terms of this AGREEMENT shall be independent and unconditional so that the performance of any one term shall not be subject to any set off or counterclaim.
12.13 SEVERABILITY: In the event any clause or term of this AGREEMENT is determined to be void, invalid, or unenforceable, the clause shall be reformed to the extent necessary in order to overcome the limitation and give effect to the original intent and economic effect of the original provision and, as revised this AGREEMENT shall remain in full force and effect.
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12.14 HEADINGS: The headings contained within this AGREEMENT are for convenience and reference purposes only. They do not form a part hereof and shall not affect the meaning or interpretation of this AGREEMENT.
12.15 FURTHER ASSURANCES: The parties hereto shall execute such further documents and perform such further acts as may be necessary to comply with the terms of this AGREEMENT and consummate the transactions herein provided.
12.16 FORCE MAJEURE: Neither party shall be held responsible if the fulfillment of any terms or provisions of this AGREEMENT are delayed or prevented by wars, revolutions, fires, floods, acts of God, acts of terrorism whether actual or threatened, or other causes similar to those enumerated and not within the control of the party whose performance is interfered with, and which by the exercise of reasonable diligence, the party is unable to prevent.
12.17 COUNTERPARTS: This AGREEMENT may be executed in counterparts (and evidenced by facsimile signatures), each of which will be deemed an original and all of which together constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused their authorized representatives to execute this AGREEMENT.
LICENSOR: | LICENSEE: | |||
MetaMorphix, Inc. |
|
Genetic Technologies Limited |
||
By: |
Edwin C. Quattlebaum, Ph.D. President and CEO |
|
By: |
|
Printed Name/Date |
||||
Date: September , 2004 |
|
Title |
||
|
|
|
Date: September , 2004 |
|
MMI Genomics, Inc. |
|
|
|
|
By: |
Stephen Bates Executive Vice President |
|
|
|
Date: September , 2004 |
|
|
|
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United States
United States Patent No. 5,874,217, granted February 23, 1999 ("Microsatellite Sequences for Canine Genotyping")
Australia
Australian Patent No. 699,308, granted March 18, 1999 ("Microsatellite Sequences for Canine Genotyping Containing Trinucleotide and Tetranucleotide Repeat Motifs")
Japan
Japanese Patent Pending No. 9-515067 applied for on September 27, 1996 ("Microsatellite Sequences for Canine Genotyping Containing Trinucleotide and Tetranucleotide Repeat Motifs")
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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In accordance with Article VI, LICENSOR will provide to LICENSEE the following:
1. Dogs:
a) LICENSOR's Canine Laboratory Information Management System (LIMS) database to store sample records and genotypes with automated ID and parentage evaluation:
b) Sampling protocols and sample collection procedures:
c) DNA preparation/extraction protocols:
d) PCR protocols, including setup, post-PCR preparation, and electrophoresis (ABI 10-plex kit plus LICENSOR's custom 5-plex):
e) ABI 3100 protocols:
f) Data analysis protocols:
(1) Macro to enable automated allelic calling
(2) Data review and interpretation guidelines
(3) Standardized allele nomenclature:
2. Cattle:
a) LICENSOR's Cattle LIMS:
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b) Sampling protocols and sample collection procedures
c) DNA preparation/extraction protocols
d) PCR protocols, including setup, post-PCR preparation, and electrophoresis (ABI's 11-plex kit):
e) ABI 3100 protocols:
f) Data analysis protocols
(1) Automated allelic calling software
(2) Data review and interpretation guidelines
(3) Standardized allele nomenclatureISAG and/or
LICENSOR's proprietary alphabetic allele naming system
Additional Services Available during the first two (2) years on a "fee" basis:
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The following is a list of the Company's subsidiaries as at the date of this Registration Statement:
GeneType AG | Switzerland | 100% | ||
GeneType Corporation | California U.S. | 100% | ||
GeneType Pty Limited | Australia | 100% | ||
Simons GeneType Diagnostics Pty Limited | Australia | 100% | ||
Genetic Technologies Corporation Pty Limited | Australia | 100% | ||
Silbase Scientific Services Pty Limited | Australia | 100% | ||
RareCellect Limited | Australia | 100% | ||
ImmunAid Pty Limited | Australia | 65% | ||
Gtech International Resources Limited | Canada | 75.8% | ||
AgGenomics Pty Limited | Australia | 50.1% |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the caption "Statement by Experts" and to the use of our reports dated August 31, 2004 and June 16, 2004, in the Registration Statement on Form 20-F of Genetic Technologies Limited.
/s/ Ernst & Young
Sydney,
New South Wales, Australia
January 19, 2005