GTG entered into confidential discussions with BCG in June 2017 and has on an ongoing basis continued to evaluate a multitude of blockchain solutions that could be of benefit to GTG, culminating in a non-binding terms sheet being entered into between the parties on 2 February 2018. This strategic alliance will only become binding upon completion of commercial discussions between the parties, including completion of a due diligence, entry into formal agreements to reflect the alliance, as well as ultimately seeking approval from shareholders. There is no guarantee that any transaction will be concluded.The key terms of the proposed BCG strategic alliance are as follows:
- The parties in good faith are to explore and seek to agree the provision by BCG, on a perpetual royalty free licence terms or transfer, to GTG of a suite of potential Biotech/Medical Blockchain Opportunities ( BCG Alliance opportunities).
- The BCG Alliance opportunities may include:
- Assistance by BCG with GTG's utilisation of its existing labs and Genomic Testing Platform to support a USA DNA genomic data Platform utilising the Blockchain to enable rapid collection and dissemination of Genomic data to big pharma, researchers and the general public for personalised medicine and health initiatives.
- Assist with the development of Blockchain based solutions to tackle the estimated $200B a year loss by big pharma as a result of drug counterfeiting.
- Establish a division incorporating a Blockchain accelerator and seed investment arm focussing on new technologies in the Biotech and Medical markets.
- Where the parties are able to reach agreement on the BCG Alliance opportunities and certain pre-conditions are satisfied, in consideration of the entry into the BCG Alliance opportunities; the BCG terms sheet contemplates the potential issue by GTG to BCG (or its nominees) of up to 486 million new fully paid ordinary shares in GTG (credited as fully paid) on achievement of the milestones detailed in section 4 below. The Milestone Shares reflect approximately 15% of GTG's issued share capital after the dilution from the proposed contemporaneous capital raise by Lodge Partners.
- The milestones are proposed to be based on sustained share price performance of GTG shares on the ASX official list reflecting the entry into and the performance in respect of the BCG Alliance opportunities with:
- 162 million GTG shares to be issued upon the shares achieving 2.5c for a period of 10 consecutive ASX trading days and subject to the commencement by GTG of one blockchain opportunity to be developed in conjunction with BCG,
- a further 162 million GTG shares when the GTG share price on the ASX official list achieves 3c and remains above this price for 10 consecutive ASX trading days and subject to the commencement by GTG of a second blockchain opportunity to be developed in conjunction with BCG; and
- a further 162 million GTG shares when the GTG share price on the ASX official list achieves 3.5c and remains above this price for 10 consecutive ASX trading days and subject to the commencement by GTG of a third blockchain opportunity to be developed in conjunction with BCG.
The intention is that the non-binding terms sheet will enable GTG to undertake further due diligence before the final selection of proposed blockchain projects for GTG.Proposed Private Placement As outlined above GTG has mandated Lodge Corporate Pty Ltd to assist in a proposed private placement of up to 324.7m new GTG fully paid ordinary shares on the following terms:
- up to 324.7 million new GTG fully paid ordinary shares at an issue price of 0.014c per GTG share; and
- Wholesale investors under the proposed private placement would also be issued, for no additional consideration (other than the payment of the exercise price where exercised); an option exercisable at 2c on a 1 new option for each GTG share subscribed under the private placement, a 3 year maturity and otherwise on terms and conditions consistent with ASX Listing Rules.
- Receipt by GTG of all necessary shareholder approvals to enable the transaction to proceed, including but not limited to, all approvals under the ASX Listing Rules, and the Corporations Act.
- BCG undertaking and being reasonably satisfied with the results of its due diligence of GTG and its assets.
- The parties then agreeing and entering into the BCG Strategic opportunities.
Safe Harbor StatementAny statements in this press release that relate to the Company's expectations are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act . The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees. Since this information may involve risks and uncertainties and are subject to change at any time, the Company's actual results may differ materially from expected results. Additional risks associated with Genetic Technologies' business can be found in its periodic filings with the SEC. Annexure to Announcement ANNEXURE In order to ensure that all important facts with regards to the proposed Strategic Alliance with BCG are adequately disclosed to the market, GTG has worked closely with the ASX from 2 February 2018 to date of this announcement. The following additional background information is provided by way of disclosure: • Immediately after the General Meeting of shareholders held on 31 January 2018, at which Messer's Peter Rubinstein, Samuel Lee and Dr Jerzy Muchnicki were elected as Directors of GTG, a GTG board meeting was held and a draft BCG terms sheet was tabled. Declaration of interests made by the newly elected Directors were as follows:
- Mr Peter RubinsteinPersonal interest: Blockchain Global Limited - Shareholder & Consultant
- Dr Paul KasianPersonal interest Blockchain Global Limited - Director
- Dr Jerzy MuchnickiPersonal interest Blockchain Global Limited - Shareholder
- Mr Sam LeePersonal interest Blockchain Global Limited - Founder, CEO and Shareholder
- Dr Lindsay Wakefield - None
• Additionally, the original terms sheet had included a Cryptocurrency Exchange proposal, which subsequent to ASX Intervention has been removed due the ASX's concern that this may result in a change to GTG's current activities and trigger the application of ASX Listing Rule 11.1. GTG was comfortable with this, in that the Cryptocurrency exchange proposal was only one of a pipeline of opportunities that strategic alliance is designed to deliver to improve the fundamental value of GTG.• Whilst GTG has stated that, in considering the performance milestones of the Milestone shares, it believes that the market is the best indicator of any potential enhanced shareholder value of any blockchain development by GTG, it acknowledges that no independent corporate or valuation advice has been sought as yet. In fact, it was only subsequent to discussions that have been held with the ASX that the milestones were tied to commencement by GTG of blockchain opportunities to be developed in conjunction with BCG. It is intended that during the due diligence period with the selection of the potential blockchain applications to be pursued by the Company, that the Company will be able to assess in greater detail market size for the selected blockchain application and the resulting potential value which may be generated for shareholders in pursuing those selected blockchain opportunities. The Company envisages that the explanatory memorandum to accompany the requisite shareholder notice of meeting will contain further information on this assessment of potential value (with a comparison to the value of the proposed GTG shares which may be issued where the milestones are achieved).