Genesis Research and Development may ask investors for money to fund the business as the sale of a subsidiary stalls and cash reserves run low.
The NZX-listed biotech company said Pure Power Global had been unable to make the final payment to Genesis for shares in its subsidiary
BioJoule.
The difficult financial market conditions had prevented Pure Power from raising sufficient funds to repay an outstanding debt of $2 million plus accrued interest and Genesis was not able to assess the likelihood or timing of a repayment, the company said.
Chief executive Stephen Hall said Pure Power was talking to a number of groups about investment, while Genesis and other vendors had the right to resume ownership of the shares.
"As a result of the limited cash reserves of Genesis, accounting standards for the going concern assumption would not be satisfied for the financial report as at December 31, 2008, although sufficient funds were available for the next half year," Hall said.
The company was considering opportunities to raise capital from existing or new investors.
"Certainly it shortens our runway in terms of cash reserves and makes it more important that we do raise further capital."
The company had a cash-burn of about $300,000 a month.
"With our years of experience, the capability and market knowledge we've built here makes us a very strong entity," Hall said.
"At the end of the day biotechs do need ongoing funding and that is in, of course, the lap of the Gods with the markets being difficult but we're hopeful that our supportive shareholders will follow through."
Further information about a capital raising was expected to be provided to shareholders next month.
GENESIS R&D:
* Auckland-based NZX-listed biotechnology founded in 1994.
* In 2000, Genesis became New Zealand's first listed biotechnology firm on the NZX and ASX, raising $34.5 million with shares offered at $6 each.
* A promising treatment for psoriasis saw shares rise to more than $7 each in 2000 but the cure never made it and the shares plummeted.
* Shares closed yesterday at 9c.
