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GeneNews Closes First Tranche of Private Placement

NEW YORK (GenomeWeb) – GeneNews announced today that it has closed the first tranche of a previously announced private placement, raising C$560,000 (US$426,000) after issuing approximately 5.6 million common shares for C$.10 each. The proceeds will be used as working capital.

The Canadian molecular diagnostics firm also said it has executed a term sheet with Alumina Partners for a second tranche of the offering, where it will draw down on US$10 million in structured, unsecured convertible notes in installments of US$200,000 over a period of 24 months.

GeneNews first announced its plans to sell up to C$5 million in common stock through an unbrokered private placement in mid-March, saying it would sell up to 50 million shares at C$.10 apiece, and would raise any remaining unfunded portion of the offering through the issuance of a senior secured, collateralized convertible debenture issued with a one-year term and payable at 15 percent with a conversion price of C$.16 per share.

GeneNews said it planned to use about C$700,000 of the proceeds from the offering to settle aged payables, C$300,000 to pay interest associated with third-party debts, and the remaining C$4 million for general corporate purposes and working capital.

GeneNews also said today that it's continuing to negotiate the issuance of a senior secured, collateralized convertible debenture worth up to C$2 million as part of the offering, and 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," said Executive Chairman James Howard-Tripp in a statement. "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."

GeneNews has suffered some recent hardships, and in fact applied with the Toronto Stock Exchange for a financial hardship exemption to allow the offering to go forward without shareholder approval.

At the beginning of March, the company said it had signed an agreement to acquire Cobalt Healthcare Consultants' stake in clinical reference lab Innovative Diagnostic Laboratory (IDL), which was formed in 2013 as a joint venture between GeneNews, Cobalt, and Health Diagnostic Laboratory (HDL). In mid-2015, GeneNews and Cobalt bought HDL's 33 percent stake in IDL for $4 million, giving them each equal ownership of the lab. But the company had already been facing financial troubles with IDL, and late last year was considering restructuring and possibly selling itself. At the end of 2015, GeneNews announced that it was borrowing $400,000 to stay afloat and had laid off 16 workers at IDL.

The firm did receive some positive news at the end of March, when consulting group JTS Health Partners said it would take an equity stake in the firm. The parties have also signed a collaboration agreement for Atlanta-based JTS Health to help promote GeneNews' tests for cancer risk.

GeneNews' shares rose nearly 6 percent to C$.19 in morning trading on the Toronto Stock Exchange.