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Genenews ltd gets US$10 million in unsecured convertible notes

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GoldMonsterHunter   Sunday, 04/10/16 03:23:17 PM
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Genenews ltd gets US$10 million in unsecured convertible notes

2016-04-07 08:03 ET - News Release

Mr. James Howard-Tripp reports
GeneNews Ltd. has closed a first tranche of its non-brokered private placement, previously announced on March 14, 2016. The First Tranche closing consisted of the issuance of approximately 5.6 million common shares of the Company at a price of $0.10 per common, for gross proceeds of approximately $560,000, which GeneNews will use for working capital purposes.

The Company also announced it has executed a term sheet with Alumina Partners LLC, an arms' length party, for a second tranche (the "Second Tranche") of the Offering, whereby the Company will draw down on US$10 million in structured, unsecured convertible notes (the "Notes"), at the Company's option, in installments of US$200,000 over a 24 month period. The initial draws will be limited to US$1 million within the first 120 days after the execution of definitive documentation and will be accelerated after that. The Notes will have a term of one (1) year from date of issue, with interest accrued and payable at 12% per annum. Beginning 120 days after issue of each Note, the issuer may convert all or part of the Note into GeneNews common shares at a conversion price equal to a 25% discount to the five (5) day volume-weighted average price per common share on the date of conversion. The conversion will become mandatory if the common shares trade above a 25% premium to the intraday high trading price during the 10 days immediately preceding the day on which the Notes become eligible for conversion into common shares and remains above this price for 20 consecutive trading days provided however that the conversion shall not result in the holder of the Note owning more than 9.9% of the issued and outstanding common shares of GeneNews. In connection with the transaction, GeneNews has agreed to issue as a commitment fee, in aggregate, a total of US$845,000 in restricted common shares over the term of the agreement, to be paid US$200,000 upon the first draw and the remainder in 10 equal payments of US$64,500 to be paid upon each issuance of US$ 1 million in Notes. The restricted common shares will be issued at the market price at the time of issuance. The completion of the Second Tranche is subject to the negotiation and execution of definitive documentation.

Further to its press release of March 14, 2016, GeneNews also continues to negotiate the issuance of up to a $2 million senior secured, collateralized convertible debenture as part of the Offering. The Company confirmed that the aggregate number of common shares issued in the Offering will not exceed 50 million.

"We are very satisfied with the success of this private placement, which yielded us gross proceeds that surpassed our expectations," commented GeneNews Executive Chairman, James R. Howard-Tripp. "These financings were structured to allow GeneNews to maximize its capital resources, while limiting the number of shares that the Company offers. We intend to take full advantage of this opportunity, and make good use of these proceeds to advance GeneNews' leadership position in advanced cancer diagnostics and personalized medicine."

Closing of the Offering is subject to the receipt of applicable regulatory approvals including approval of the TSX. The First Tranche is expected to close immediately, with the Second Tranche closing anticipated in approximately five to ten days. The securities issued will be subject to a hold period.
Financial Hardship Exemption

As the aggregate number of Common Shares issuable pursuant to the Offering exceeds 25% of the currently issued and outstanding Common Shares of the Company, the Offering may result in a new control person of the Company and the discount on pricing is above the allowable limits, GeneNews would ordinarily be required to obtain shareholder approval pursuant to the applicable policies of the TSX, which are section 607(g)(i) and section 604(1)(i) and section 607(e), respectively, of the TSX Company Manual (the "Manual"). However, the Company has applied to the TSX, pursuant to the provisions of Section 604(e) of the Manual, for a "financial hardship" exemption from the requirement to obtain shareholder approval, on the basis that the Company is in serious financial difficulty and the Offering is designed to improve the Company's financial situation. The application was made upon the recommendation of the board, free from any interest in the transaction and unrelated to the parties involved in the transaction and was based on their determination that the transaction is reasonable for GeneNews in the circumstances.
We seek Safe Harbor.


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