DRAFT
Immune System Therapeutics Limited (Administrators Appointed)(“ISTL”) Adjourned second meeting of creditors 14 January 2015
2
Formalities
Voting
Purpose of the meeting
Circular to creditors
Vote on the Company’s future
Remuneration
Committee of Inspection
Other resolutions
Questions
Agenda
Formalities
3
Open meeting
Administrator Chairman: Corporations Regulation 5.6.17(1)
Introductions:
Barry Kogan (Administrator)
Mitchell Mansfield (Senior Manager)
Bryce Carmine (Director – ISTL)
Quorum: Corporations Regulation 5.6.16 (2)
Attendee register
Time and place convenient: Corporations Regulation 5.6.14
Proofs of debt and proxies
Formalities (cont’d)
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Voting on voices unless poll demanded: Corporations Regulation 5.6.19
Poll can be demanded by:
Chairperson; or
2 persons present and entitled to vote; or
Creditors representing at least 10% of claims.
When a poll is conducted, a resolution is passed if:
more than half the creditors (in number) vote in favour of the resolution; and
more than half the creditors (in value) vote in favor of the resolution.
If there is a deadlock, the Chairperson may use their casting vote
Purpose of meeting
5
Convened under Section 439A of the Corporations Act to:
Provide a further update regarding ISTL’s business, property, affairs and financial circumstances
set out the Administrators’ opinion on the courses of action available to the Company
vote on the Company’s future:
> return Company to its Directors; or
> execute a Deed of Company Arrangement (“DOCA”); or
> enter into liquidation
consider and (if thought fit) approve the Administrators’ and Liquidators’ remuneration
consider the appointment of a Committee of Inspection
consider authorising the Liquidators to compromise debts of the Company
consider authorising the Liquidators to enter into agreements that may take longer than three months to complete
Background
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Incorporated on 22 June 2001
Main activity: development of a drug (IST-1097) for the treatment of blood cancers and disorders
Secured approximately $38m in external funding, applied:
- $20.6m to fund R&D activities (outsourced to third parties); and
- $15.4m to fund day to day activities (mainly in-house R&D)
Administrators were appointed on 3 October 2014
Shortly following appointment we commenced marketing the business/assets of ISTL for sale to extract value from its R&D activities
On 10 November 2014, creditors resolved to adjourn this meeting for up to 45 business days
Course of action was recommended to retain the option of a DOCA structure for buyers of ISTL’s assets
Bidders have now indicated that they wish to acquire ISTL’s assets (rather than a DOCA structure)
Activities since 10 November 2014
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Since 10 November 2014 our efforts have focused on:
- advancing the sale process;
- preserving ISTL’s assets;
- managing, renewing and registering intellectual property;
- investigating ISTL’s entitlement to a R&D tax credit;
- calculating and repaying employee entitlements; and
- attending to other statutory and operational matters.
Sale process
8
Following our appointment, we commenced marketing the business/assets of ISTL for sale to extract value from its R&D activities
To date, we have engaged with over 40 interested parties
Final bids were due by 10 December 2014
A number of parties have undertaken detailed diligence (both scientific and financial)
Several parties have submitted offers to purchase ISTL’s assets
We are currently in final stages of negotiations
During the sale process significant asset preservation costs have been incurred which has impacted the return to creditors (discussed later)
Accordingly, our overall objective is to execute a sale and purchase agreement as soon as possible (i.e. prior to 31 January 2015) and have advised bidders that it is challenging for us to meet preservation costs beyond this date
Estimated return to creditors in a liquidation
Particulars High $ Low $
Assets 1,139,819 775,784
Costs (587,128) (655,938)
Amount available for unsecured creditors 552,691 119,846
Unsecured creditor claims (including noteholder claims) 6,745,308 6,745,308
Estimated return to unsecured creditors 8.19% 1.78%
Residual funds available to shareholders Nil Nil
Anticipated return to creditors
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Range available to creditors has decreased due to the sale timetable being extended to accommodate further interested party due diligence and contract negotiations
The above analysis does not include any recoveries from ISTL’s business/assets or from voidable transactions
Under either scenario:
a significant shortfall to unsecured creditors (including noteholders) is incurred; and
there are no funds available for shareholders of ISTL.
Vote on ISTL’s future (as per the circular to creditors)
10
Administration to end
As ISTL is insolvent, control of ISTL should not be returned to the Directors
DOCA
No DOCA has been proposed, we are unable to recommend that creditors vote in favour of the Company executing a DOCA
ISTL be wound up
As there is no DOCA and ISTL is insolvent, we recommend that creditors vote in favour of ISTL being placed into liquidation
Vote on ISTL’s future – resolution
11
Liquidation
I now put the following resolution to the meeting:
“That ISTL be wound up and Barry Kogan and Tony McGrath be appointed Joint and Several Liquidators”
Resolutions – Administrators’ remuneration
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Resolution – remuneration incurred from 11 November 2014 to 26 December 2014
I now put the following resolution to the meeting:
“That the remuneration of the Administrators for the period from 11 November 2014 to 26 December 2014, calculated on hours spent at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $114,570.50 (excluding GST), is hereby approved for payment.”
Resolutions – Administrators’ remuneration (cont)
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Resolution – estimated remuneration incurred from 27 December 2014 to 14 January 2015
I now put the following resolution to the meeting:
“That the Administrators’ remuneration for the period from 27 December 2014 to 14 January 2015 shall be a sum equal to the time cost spent by the Administrators, their partners and their staff, calculated at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $35,789 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the Administrators are only authorised to draw the amount incurred. Creditors also acknowledge that if actual costs incurred exceed the amount approved, the Administrators will seek further approval from creditors.
The Administrators are approved to draw their remuneration as and when it is incurred from funds under their control”
Resolutions – Liquidators’ remuneration
14
I now put the following resolution to the meeting:
“That the remuneration of the Liquidators, for the period from 15 January 2015 onwards, shall be a sum equal to the time cost spent by the Liquidators, their partners and their staff, calculated at the rates detailed in the Schedule of Remuneration Methods and Hourly Rates provided to creditors, in the amount of $138,810 (exclusive of GST).
Creditors acknowledge that if actual costs incurred are below the amount approved, the Liquidators are only authorised to draw the amount incurred. Creditors also acknowledge that if actual costs incurred exceed the amount approved, the Liquidators will seek further approval from creditors.
The Liquidators are approved to draw their remuneration as and when it is incurred from funds under their control”.
Resolutions – Committee of Inspection
15
I now put the following resolution to the meeting:
“That a committee of inspection be formed, with the following to be members:
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………
………………………… representing …………………………”
Resolutions – Compromise of debts & long term agreements
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I now put the following resolution to the meeting:
“That so far as is necessary for the beneficial winding up of ISTL the Liquidators are hereby authorised pursuant to subsections 506(1A), 477(2A) and 477(2B) of the Corporations Act 2001 to compromise any debt to ISTL greater than the prescribed amount (currently $100,000) and to enter any agreement on behalf of ISTL involving a term or obligations extending for more than three months.”
Q & A