Thursday, June 9, 2016

$5M capital commitment deal

GeneNews enters $5M capital commitment deal with GEM

2016-06-09 08:14 ET - News Release

Mr. James Howard-Tripp reports
GeneNews Ltd. has entered into a capital commitment (CC) agreement with GEM Global Yield Fund LLC SCS for a $5-million capital commitment. Proceeds raised from the investment will be used for working capital and general corporate purposes, particularly to support the activities being generated by the recently announced JTS partnership.

"We are very pleased to secure this non-debt agreement with GEM Global Yield Fund," commented GeneNews executive chairman James R. Howard-Tripp. "Simply put, this agreement allows us to expand our options. It gives us the immediate capital resources required to prepare for anticipated growth in our test volumes as our partnership with JTS 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."

CC details
GeneNews has the right, but not the obligation, to draw down under the CC for a term of three years. Common shares will be issued to GEM at a price per share equal to the higher of the floor price set by GeneNews and a 10-per-cent discount to the market price of the common shares based on the immediately preceding five-day volume-weighted average price at the end of an evaluation period. Each drawdown is subject to remaining within a 25-per-cent dilution cap within the private placement, certain market out rights of GEM and approval of the Toronto Stock Exchange. GEM will hold freely trading common shares of the company through a share lending facility provided by certain current shareholders.

As part of the transaction, GeneNews will issue up to six million warrants to GEM, issued one for one against the first six million shares purchased by GEM under the CC. The warrants have an exercise price of 50 cents per common share (so long as the market price for the common shares at the time of issuance of the warrants is less than 50 cents) and may be exercised for five years. On the first anniversary of the date of the agreement, if the market price of GeneNews's common shares is less than 90 per cent of the then-current exercise price of the warrants, the exercise price of the warrants will adjust to 105 per cent of the market price of the common shares at that time. If the company does not issue the six million warrants within 24 months of the initial execution of the agreement, the company shall pay GEM 8 per cent of the exercise value of any unissued warrants, subject to a maximum of $240,000.

GeneNews will also be required to pay GEM Investment America LLC a commitment fee equal to $140,000 upon the sooner of the second draw, 12 months from execution of the agreement or a change of control of the company. GeneNews may elect to pay the commitment fee in cash or stock (subject to TSX approval). The agreement has received the approval of the TSX. Each drawdown, however, is subject to the approval of the TSX.
We seek Safe Harbor.

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