Wellington, Feb 23 NZPA - Biotech company Genesis Research and Development Ltd has posted a loss of $7.5 million, bigger than expected for the year to December 30, 2008, apparently because it has not been fully paid for shares it sold in a willow biofuel project.

Not only was the loss greater than anticipated, but the cash balance of $900,000 at December 30 fell below expectations.

The company's cash balance at the same time in 2007 was $5.8 million, following a cash burn of $3.2m during that year, when it predicted good progress with research programmes "is expected to lead to milestone achievements during 2008".

During 2007, Genesis Research shares ranged between 12c and 38c but were today trading in penny-stock territory, falling 2c to just 4c each.

And directors said in an ominous note that because Genesis Research's cash balance is not sufficient to fund the next 12 months its accounts are no longer being run on a "going concern" basis.

Instead, the accounts have been done as though the business is ceasing operation -- a requirement set down in accounting standards.

This has triggered provisions and write-downs of $333,000 and auditors have given a qualified opinion the accounts do not provide for the premises lease which is due over the next six years.

"The directors believe that this would be unreasonable, as it is highly likely that the premises could be sublet or the lease could revert to the landlord with no significant penalty, should the company cease to occupy the premises," said Genesis chief executive Stephen Hall.

The company says this is because its shares in former subsidiary BioJoule Ltd have not yet been paid for in full by Pure Power Global (PPG) a Singapore-based renewable energy company which picked the 65 percent Genesis stake in Biojoule's willow-energy project last year for $3.9 million, plus shares in PPG then valued at $744,000, taking the total purported sale price to $4.6m.

In February last year, the company said no formal valuation was then available to support the value then ascribed to PPG shares.

PPG quickly began marketing cuttings of the trees grown near Taupo to farmers and foresters, even though settlement of the debt in August was deferred to December. Claims have been made that technology is being developed to not only turn the willow into ethanol as a transport fuel, but also to produce lignin for high-value plastics.

Today Genesis chief executive Stephen Hall said final payment from PPG had not been received.

"Efforts to realise this debt are continuing," he said in a statement.

The net loss for the period includes provisions against the debt due from PPG of $2.1 million and the investment in Pure Power Global of $0.7 million, "due to the uncertainty of realisation in current market conditions".

Auckland-based Genesis has built a broad therapeutic development platform targeting immune disorders and cancers, and Mr Hall said that new "gene-silencing" technology had generated significant international interest from potential collaborators. "Discussions are continuing with a number of parties, with the objective of generating funding for the programme.

"Interest continues to be shown by a number of potential licensees and collaborators for the Zyrogen antibody programme. A further animal study is expected to clarify the therapeutic potential for this programme."

Since balance date Genesis had converted a stream of royalty payments on software it created into an interest of about 10 percent in the outstanding equity of Real Time Genomics Inc, a new USA-based company.

The interest in Real Time Genomics, Inc. has a current valuation of approximately $1.4 million based on the initial financing round -- about 5.2c a share.

Set up in 1994, Genesis was initially involved in gene mapping of radiata pine, and Fletcher Forests was one of its big shareholders.

In 1996 it started trading on the "grey" market, and by 2000, its shares were selling above 550c.

Later in the year, after the share price had risen further and the company was capitalised at around $90m, it was then the nation's biggest biotechnology company and reportedly considered floating on the US technology index Nasdaq.

Then managing director Jim Watson lectured state science companies and universities on having "blurred vision" and losing sight of what their core businesses should be or might be.

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