Dragon-Tex (Group) Limited
TSX VENTURE : DTX

Dragon-Tex (Group) Limited

August 17, 2005 12:42 ET

Dragon-Tex Signs Amalgamation Agreement for Reverse Take-Over by Med BioGene

CALGARY, ALBERTA--(CCNMatthews - Aug. 17, 2005) - Dragon-Tex (Group) Limited (TSX VENTURE:DTX) ("Dragon-Tex") is pleased to announce, further to its news release of June 1, 2005 announcing the signing of a letter of intent, that it has entered into an amalgamation agreement, dated August 12, 2005, with Med BioGene Inc. ("MBG") whereby Dragon-Tex will amalgamate with a subsidiary of MBG. The amalgamation is an arm's length transaction that will constitute a reverse take-over of Dragon-Tex by MBG pursuant to the Policies of the TSX Venture Exchange (collectively, the "RTO"). Golden Capital Securities Ltd. has indicated that it is prepared to act as sponsor in connection with this transaction; however, it has not yet been formally engaged.

MBG is developing genetic content for molecular diagnostic tests. MBG utilizes its expertise in gene expression, bioinformatics and micro arrays to develop the tests' genetic content. These test kits, once developed, will provide additional information to physicians to allow them to create more suitable and more effective treatments for an improved prognosis.

Concurrently with the signing of the amalgamation agreement, MBG completed a private placement at $0.30 per share for total proceeds of $200,000. Prior to the RTO, MBG intends to complete a private placement at $0.30 per share for additional proceeds of up to $80,000. Concurrently with the closing of the RTO, MBG intends to complete a brokered private placement at $0.40 per share for total proceeds of at least $800,000. The proceeds from the private placements will be used by MBG to advance its business and research and development.

Dragon-Tex has issued and outstanding 17,659,993 common shares. Dragon-Tex will be taking measures to enable it to cancel a total of up to 7,933,133 common shares held by original shareholders of its wholly-owned subsidiary, South Champ Trading Limited. After this cancellation, Dragon-Tex will have 9,726,801 common shares outstanding (the "Post-Cancellation Shares"). Prior to the RTO, Dragon-Tex may also issue to certain third parties in settlement of arm's length outstanding debts up to 273,199 common shares. In aggregate, the Post-Cancellation Shares and any additional common shares issued for debt settlement will not exceed a total of 10,000,000 common shares. Dragon-Tex will also use commercial reasonable efforts to cancel its outstanding stock options. Upon closing of the RTO, the shareholders of Dragon-Tex will receive one common share of MBG for two common shares of Dragon-Tex, provided that, this exchange ratio is subject to change in the event that Dragon-Tex is unable to cancel all or a portion the shares as described above.

After giving effect to the $200,000 private placement, MBG has 10,498,100 common shares outstanding, assuming the conversion of Class B series I and series II preferred shares into common shares of MBG and the exercise of outstanding stock options. 1,000,000 of these common shares, held by MBG's President, Nathan Yoganathan, will be subject to a cancellation provision that will lapse three years from the date of closing of the RTO. Such cancellation provision shall terminate upon MBG making a commercial sale of a diagnostic tool based on technology developed or licensed by MBG; provided that, if MBG has not by the expiration of the three year lapsing period made a commercial sale as aforesaid, then Mr. Yoganathan shall immediately return to MBG for cancellation such 1,000,000 common shares.

The directors of MBG are Senator Wilbert Keon, M.D., O.C., John Rayson, M.D., Bruce Sells, Ph.D. and Nathan Yoganathan Ph.D., and such persons will remain the directors of MBG post-RTO.

The RTO will be subject to meeting all regulatory requirements, including approval of the TSX Venture Exchange, meeting the minimum listing requirements and approval by the shareholders of Dragon- Tex at a special meeting of shareholders to be called for that purpose.

Dragon-Tex has been re-classified as a Tier 2 issuer and its shares are subject to cease trade orders by the Alberta Securities Commission and British Columbia Securities Commission. The trading of Dragon-Tex's shares is suspended on the TSX Venture Exchange. The completion of the transaction is subject to the revocation or variation of the cease trade orders and the listing of the common shares of MBG on the TSX Venture Exchange.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and disinterested shareholder approval. The RTO cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular and/or Filing Statement to be prepared in connection with the RTO, any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon. Trading in the common shares of Dragon-Tex should be considered to be highly speculative.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

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