Genesis signs assets transfer contract with Hongrui and Medicine College

Pursuant to the terms of the agreement, Laiyang will purchase the majority of the assets owned by Hongrui, including all tangible assets, including without limitation, all manufacturing and office buildings, land, equipment and inventories and all rights to manufacture and distribute Hongrui’s 22 traditional Chinese medicines, for a total purchase price of $16.1 million consisting of $9.6 million and 643,651 shares of the company’s common stock. Because the current fair market value share price is approximately $2.6 million; the company has valued the transaction at approximately $12.2 million.

The purchase will be consummated in stages following the receipt by the parties of all required regulatory approvals including the approval of the Shandong Province Food and Drug Administration (SFDA) and the approval of the Shandong State Owned Assets Administration Department.

Pursuant to the terms of the contract, the purchase consideration will be paid to the Medicine College as follows: $2.9 million of the purchase price will be paid to the Medicine College in cash within one month of the initial transfer of assets to Laiyang (by February 23, 2009). Another $6.7 million of the purchase price will be paid to the Medicine College in cash once the SFDA transfers the owner registration of Hongrui’s 22 traditional Chinese medicines (TCM) products from Hongrui to Laiyang.

The contract provides that in the event that the SFDA does not approve the transfer of the ownership of Hongrui’s 22 TCM products from Hongrui to Laiyang that Laiyang may cancel the contract and rescind any transfers and payments previously consummated or made.