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TORONTO, Dec. 9 /CNW/ - GeneNews Limited (TSX: GEN) ("GeneNews" or the "Company"), an emerging molecular diagnostics and personalized health management company, today announced that it is proposing to complete a non-brokered private placement (the "Private Placement") of up to 4,444,444 common shares from treasury at a price of $0.45 per share for total gross proceeds to the Company of up to $2,000,000. GeneNews will use the proceeds for general working capital purposes, the continued marketing of ColonSentry(TM) in Canada, and pre-launch preparation for the commercial launch of the ColonSentry(TM) test in the United States, Europe and Asia.
It is anticipated that a specific labour sponsored investment fund corporation ("Fund") will subscribe for 2,222,222 common shares for an aggregate purchase price of approximately $1,000,000. The Fund, through its current holdings and through the number of common shares of the Company that are held, directed or controlled by the Fund's associates and affiliates (which, in the aggregate, total 13.1% of the Company's outstanding common shares), is deemed to be an insider of the Company pursuant to securities legislation and the requirements of the Toronto Stock Exchange ("TSX"). The balance of the common shares to be issued pursuant to the Private Placement is expected to be subscribed for by arm's length parties. The number of common shares of the Company issuable pursuant to the Private Placement will represent approximately 7.0% of the 63,893,437 currently issued and outstanding common shares of the Company on a non-diluted basis. The number of common shares issuable to the Fund pursuant to the Private Placement will represent approximately 3.5% of the Company's currently issued and outstanding common shares on a non-diluted basis.
On December 23, 2008, the closing price of the Company's common shares was $0.085 per share on the TSX. On December 31, 2008, January 16, 2009 and February 11, 2009 the Company announced the completion of a private placement of convertible debentures (the "Debentures") that were issued at par and were sold for an aggregate principal amount of $3,252,342. In connection with this Debenture private placement, the purchasers of the Debentures also received an aggregate of 13,009,370 warrants (the "Warrants"), where each Warrant is exercisable for one common share of the Company at an exercise price of $0.25 per share with expiry dates ranging from December 31, 2011 to February 11, 2012. Pursuant to the terms of the Debentures, the principal amount of each Debenture together with any accrued and unpaid Interest (the "Conversion Amount") is convertible at the option of the Debenture holder into any common shares and/or warrants of the Company that may be offered for sale by the Company (the "Equity Securities") by way of any prospectus or private placement offering made during the term of the Debentures (an "Offering"). The Debentures are only convertible at times when the Company decides to undertake an Offering of Equity Securities. Should a Debenture holder wish to convert the Conversion Amount, then at least two business days prior to the closing of an Offering the Debenture holder must provide notice to the Company by delivery of an executed copy of a conversion notice. The Conversion Amount shall then be converted into the Equity Securities at a price that is 10% below the price at which the Equity Securities are sold in the Offering, subject to any upward adjustment that may be required to this discount in order to comply with the maximum allowable discount permitted by the TSX and any other TSX requirements.
The Private Placement accordingly provides the Debenture holders with the opportunity to convert their Conversion Amounts into common shares at a price of $0.405 per common share (an amount that represents a 10% discount to the price at which the common shares are being offered pursuant to the Private Placement). The total aggregate principal amount of Debentures that were issued by the Company was $3,252,342. Accrued and unpaid interest owing on these Debentures will total $440,287 on the expected closing date of the Private Placement. As a result, the potential number of common shares of the Company issuable pursuant to the potential conversion of the Debentures (if all Debenture holders elect to convert their Conversion Amounts) is 9,117,602 which represents approximately 14.3% of the 63,893,437 currently issued and outstanding common shares of the Company on a non-diluted basis. Since more than one-quarter of the Debentures were purchased by members of the Company's management and the Company's board of directors, the number of potential common shares issuable to current insiders of the Company pursuant to the potential conversion of Debentures will represent approximately 8.9% of the Company's currently issued and outstanding common shares on a non-diluted basis. However, the Company has confirmed that no insiders will be electing to convert their Debentures pursuant to this conversion opportunity.
"We are pleased with our decision last year to refinance the Company at that time by way of the convertible debenture offering instead of issuing common shares when their trading value was at an historic low. We are also pleased by the financial support that key shareholders have continued to provide to the Company to support our commercialization efforts. The proceeds from our current offering will assist with the continued marketing of ColonSentry(TM) in Canada as well as preparation for the commercial launch of the ColonSentry(TM) test in Europe, Asia and regions of the United States not covered by our recently announced marketing partnership with Enzo Clinical Labs," said Dr. Heiner Dreismann, Lead Director and Interim CEO of GeneNews.
When considering: (i) the common shares that may be issued pursuant to the Private Placement; and (ii) the issuance of common shares pursuant to the potential conversion of Debentures this aggregate number of common shares represents approximately 21.2% of the 63,893,437 currently issued and outstanding common shares of the Company on a non-diluted basis. The number of common shares potentially issuable to insiders of the Company pursuant to the Private Placement and the potential conversion of Debentures will represent approximately 12.4% of the Company's currently issued and outstanding common shares on a non-diluted basis.
The Private Placement and the issuance of common shares pursuant to the conversion of any Debentures is subject to the approval of the TSX. Since the acceptance of the expected Private Placement subscription from the Fund, as well as the potential issuance of common shares pursuant to the conversion of any Debentures held by insiders, will provide for the issuance of common shares to insiders of the Company during a six-month period of greater than 10% of the number of common shares of the Company, the rules of the TSX require that the Company obtain approval for such issuances from the holders of a majority of the Company's common shares (excluding votes attached to the common shares of the Company that are held by any insiders and their associates and affiliates participating, directly or indirectly, in the Private Placement or the conversion of a Debenture). However, the rules of the TSX also provide that such approval may be obtained in writing from the shareholders of the Company without the need to convene a shareholders meeting for such purposes. The Company intends to rely on this exemption in connection with the Private Placement and the issuance of any common shares pursuant to the conversion of any Debentures. Persons who beneficially own, direct or control any of the Company's common shares should immediately request a Consent and Approval Form by contacting Gailina Liew, Chief Operating Officer, GeneNews Limited, tel.: +1-905-739-2030 (main), tel.: +1-905-739-2036 (direct), tel. +1-866-375-0442 (toll free), email: firstname.lastname@example.org.
The closing of the Private Placement and the issuance of any common shares pursuant to the conversion of any Debentures are expected to occur on or about December 18, 2009 or as soon as is practicable after that date. Shareholders submitting a completed Consent and Approval Form should do so at their earliest opportunity and prior to December 16, 2009. Any Debenture holder electing to convert their Conversion Amount into common shares must provide the Company with a conversion notice by 4:00 p.m. (Toronto time) on December 16, 2009.
GeneNews is an emerging molecular diagnostics company focused on the application of functional genomics to enable early diagnosis and personalized health management based on disease-specific biomarkers. The Company has been granted a U.S. patent for its core platform technology, the Sentinel Principle(R), which has the power to detect and stage virtually any disease or medical condition from a simple blood sample. GeneNews is currently applying the Sentinel Principle(R) in major areas with unmet clinical needs such as cancer, arthritis, cardiovascular disease and neurological disorders. GeneNews launched its first commercial product, ColonSentry(TM), a blood-based test to assess an individual's risk for colorectal cancer, in Canada in 2008. For more information on GeneNews and ColonSentry(TM), visit www.genenews.com or www.colonsentry.com.
This press release contains forward-looking statements, which reflect the Company's current expectations regarding future events. The forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein. Investors should consult the Company's ongoing quarterly filings and annual reports for additional information on risks and uncertainties relating to these forward-looking statements. The reader is cautioned not to rely on these forward-looking statements. The Company disclaims any obligation to update these forward-looking statements.
For further information: Gailina Liew, Chief Operating Officer, (905) 739-2036, email@example.com