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GeneNews Lands C$5M Capital Commitment

NEW YORK (GenomeWeb) – GeneNews has announced a C$5 million ($3.9 million) capital commitment agreement with Global Emerging Markets (GEM) Global Yield Fund.

Under the terms of the agreement, GeneNews has the right, but no obligation, to draw funds for a term of three years. Common shares will be issued to GEM at a price per share equal to either the floor price set by GeneNews or a 10 percent discount to the market price of common shares based on the immediately preceding five-day volume-weighted average price, whichever is higher.

GeneNews will issue GEM up to 6 million warrants, to be issued along with each of the first 6 million shares purchased under the agreement. The five-year warrants have an exercise price of C$0.50 per common share, as long as the market price of shares is less than that amount.

GeneNews will also pay GEM Investment America a commitment fee of C$140,000 in cash or stock upon the second draw or after 12 months from the execution of the agreement, or a change in control of the company, whichever comes first.

The firm said in a statement that it would use the proceeds for working capital and general corporate purposes.

The Canadian molecular diagnostics firm is in the process of restructuring following financial trouble with Innovative Diagnostic Laboratory (IDL), a joint venture with Cobalt Healthcare Consultants and Health Diagnostic Laboratory. So far this year, the firm has bought the JV outright, given JTS an equity stake, closed the first tranche of a private placement, and borrowed C$400,000

In March, the firm announced plans to raise exactly C$5 million in a private placement.

Draw downs are subject to remaining within a 25 percent dilution cap within the private placement, certain market out rights of GEM, and approval of the Toronto Stock Exchange.

GeneNews Executive Chairman James Howard-Tripp said in a statement that the investment "gives us the immediate capital resources required to prepare for anticipated growth in our test volumes as our partnership with JTS Health results in new users, and provides us with additional financial flexibility as we wait to be in a position to access the full range of financial instruments we have put in place."

In morning trading on the TSX, shares of GeneNews were trading down 3 percent at C$0.16.