The Warrant Exercise Program will be open for a 22-day period (the "Early Exercise Period"), which will commence on May 17, 2011 and end on June 8, 2011. During the Early Exercise Period, existing holders of certain warrants issued by GeneNews as set out below (each a "Warrant") may exercise their Warrants for incentive compensation. Each Warrant exercised in accordance with the terms of the Warrant Exercise Program will entitle the exercising holder to receive one common share in the capital of GeneNews (each a "Common Share") and one Common Share purchase warrant (each an "Incentive Warrant"). Each whole Incentive Warrant will entitle the holder to purchase one Common Share at a price of $0.25 until July 31, 2012.
The Warrants are not listed on a stock exchange nor are they publicly traded. The Incentive Warrants and any Common Shares issuable on the exercise thereof will be subject to a four month hold period pursuant to Canadian securities laws commencing on the date of issuance of the Incentive Warrants. All Common Shares issuable pursuant to exercises of the Warrants, all Incentive Warrants and all Common Shares issuable on the exercise thereof will be subject to a hold period pursuant to United Stated securities laws, regardless of the jurisdiction of residence of the holder.
If all Warrants eligible to participate in the Warrant Exercise Program are exercised on or before the expiry of the Early Exercise Period, the Company expects it will:
- receive gross proceeds of up to approximately $4.1 million;
- issue up to approximately 17.2 million Common Shares pursuant to the exercise of the existing Warrants; and
- issue up to approximately 17.2 million Incentive Warrants.
If a Warrantholder does not exercise his or her Warrants prior to the end of the Early Exercise Period, such unexercised Warrants will remain outstanding and will continue to be exercisable for Common Shares on the same terms applicable to such Warrants as they existed prior to the Warrant Exercise Program.
The Warrants were originally issued pursuant to the following private placements:
a) 4,233,400 warrants dated December 31, 2008, having an exercise price of $0.25 and expiring December 31, 2011;
b) 2,875,131 warrants dated January 16, 2009, having an exercise price of $0.25 and expiring January 16, 2012;
c) 5,900,839 warrants dated February 11, 2009, having an exercise price of $0.25 and expiring February 11, 2012; and
d) 4,250,903 Series A warrants dated November 12, 2010, having an exercise price of $0.20 and expiring July 12, 2011.
Warrantholders who elect to participate in the Warrant Exercise Program will be required to deliver the following to the Company:
(i) a duly executed letter of transmittal and exercise form ("Exercise Form"), including the original certificate representing the Warrants being exercised;
(ii) a duly executed subscription form; and
(iii) the applicable aggregate exercise price payable to the Company by way of certified cheque, bank draft or wire transfer.
The terms and conditions of the Warrant Exercise Program and the method of exercising Warrants pursuant to the Program will be set forth in the Exercise Form, which will be mailed to the registered address of each Warrantholder on or about April 29, 2011. The summary of the Program herein is subject in its entirety to the terms and conditions of the Exercise Form. Only Warrantholders who are "accredited investors" under applicable securities laws or who provide satisfactory evidence that they meet the requirements of a similar exemption from the prospectus and registration requirements of applicable securities laws may participate in the Warrant Exercise Program.
Insiders of the Company hold an aggregate of 8,358,594 Warrants which represent 48.4% of the total eligible Warrants that may participate in the Early Exercise Program.
In addition to the Warrant Exercise Program, the holders of outstanding convertible secured debentures (the "Convertible Debentures") may convert their debentures into Common Shares during the Early Exercise Period (the "Debenture Conversion Opportunity"), subject to the approval of the requisite number of holders of the Convertible Debentures to an amendment to the Convertible Debentures (the "Debenture Amendment") and applicable shareholder approval. During this period, the principal together with accrued and unpaid interest of each Convertible Debenture is convertible into Common Shares at a price of $0.225 per Common Share. Insiders of the Corporation hold an aggregate principal amount of $1,917,079 Convertible Debentures which represent 45.7% of the total Convertible Debentures of $4,197,749. The total face value and accrued interest owing on the Convertible Debentures to June 8, 2011 is $5,438,390 and insiders of the Corporation hold total face value and accrued interest owing on the Convertible Debentures to June 8, 2011 of $2,506,734 or 46.1% of this total amount. If all holders of Convertible Debentures participate in the Debenture Conversion Opportunity, the Company expects it will issue 24,170,620 Common Shares. The Convertible Debentures are not listed on a stock exchange nor are they publicly traded.
The subject debentureholders are the subscribers of the following private placements:
a) Five-year convertible debentures dated December 31, 2008 bearing simple interest at 15% per annum to be accrued and paid at the date of maturity;
b) Five-year convertible debentures dated January 16, 2009 bearing simple interest at 15% per annum to be accrued and paid at the date of maturity;
c) Five-year convertible debentures dated February 11, 2009 bearing simple interest at 15% per annum to be accrued and paid at the date of maturity; and
d) Five-year convertible debentures dated November 12, 2010 bearing simple interest at 15% per annum to be accrued and paid at the date of maturity.
Debentureholders who elect to participate in the Debenture Conversion Opportunity will be required to deliver to the Company a duly executed conversion notice attached to their Convertible Debenture, including the original certificate representing the Convertible Debentures being exercised not less than 2 Business Days prior to June 8, 2011.
The Toronto Stock Exchange has conditionally approved the Warrant Exercise Program and the listing of the Common Shares underlying the Incentive Warrants and Convertible Debentures subject to the approval of the disinterested holders of Common Shares of GeneNews, being those holders of Common Shares that do not also hold Warrants or Convertible Debentures, respectively. Shareholders will consider these matters at an annual and special meeting of shareholders to be held at 4:30 pm EST on May 16, 2011, at Fasken Martineau DuMoulin LLP, 333 Bay Street, Toronto, Ontario. A notice of meeting and information circular will be mailed to registered shareholders and non-objecting beneficial owners of GeneNews in the near future.
As related parties of the Corporation for purposes of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions may participate in the Warrant Exercise Program and Debenture Amendment, there may be related party transactions under that instrument. The Corporation is relying on an exemption from the formal valuation requirements in respect of the Warrant Exercise Program as neither the fair market value of the subject matter of the transaction nor the fair market value of the consideration for the transaction insofar as it involves interested parties exceeds 25 per cent of the Corporation's market capitalization.
About GeneNews
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 a patented core platform technology, the Sentinel Principle®, 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® in major areas with unmet clinical needs such as cancer, arthritis, cardiovascular disease and neurological disorders. GeneNews launched its first commercial product, ColonSentry™, a blood-based test to pre-screen and assess an individual's risk for colorectal cancer, in Canada in 2008. The company's marketing partners, GeneDiagnostics, Enzo Clinical Labs and GeneNews Diagnostics, are expected to launch the ColonSentry™ test in China, the United States and Malaysia in 2011. For more information on GeneNews and ColonSentry™, www.genenews.com or www.ColonSentry.com.