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Rosetta Defaults on Payment to Prometheus, Warns of Potential Bankruptcy Protection

NEW YORK (GenomeWeb News) – Rosetta Genomics has defaulted on a $650,000 payment to Prometheus Laboratories, putting it at risk of having to file for bankruptcy protection, the microRNA-based molecular diagnostics firm disclosed last week in a document filed with the US Securities and Exchange Commission.

In its filing, Rosetta said that it defaulted on the $650,000 principal payment, plus accrued and unpaid interest that was due to Prometheus on Nov. 22, 2011, pursuant to the $1.4 million unsecured promissory note dated Nov. 22, 2010, issued to Prometheus as part of a settlement of a dispute between the firms over commercialization rights of certain Rosetta tests in the US.

Under the terms of the promissory note, Prometheus may, after five business days' notice, declare the complete unpaid balance of $1.4 million and all accrued and unpaid interest immediately due and payable. It may also pursue all avenues of collection available to it, including "without limitation by filing any consent judgments related thereto," Rosetta said. Prometheus, it added, has informed the firm that it intends to do just that.

Israel-based Rosetta is seeking arrangements to pay the $650,000 principal payment plus the accrued and unpaid interest to Prometheus, but said that it may not be successful in its efforts, or that even if it is successful, Prometheus may not waive the default under the promissory note.

If it ultimately cannot make the $650,000 payment or if Prometheus chooses not to waive the default, Rosetta "may be required to file for protection under Israeli and US bankruptcy laws," it said.

Rosetta is in the midst of a corporate restructuring that will result in the elimination of 35 jobs. During the first half of 2011, revenues dropped 39 percent from a year ago and over the summer it carried out a four-for-one reverse stock split in order to regain Nasdaq compliance.

Earlier this month, it said that it had raised $1.5 million of a targeted $1.9 million in a private placement.

As of June 30, Rosetta had $3.1 million in cash and cash equivalents.

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