Diagonal Bio

Karin Wehlin, interim CEO of Diagonal Bio, comments

”We have come a long way in a very short time – from the initial idea to now having a CE-marked instrument produced and externally validated by an accredited laboratory, in only three years! Diagonal Bio is now in an extremely exciting and intensive phase transitioning into the commercial phase with LAMPlify® via studies with potential customers, distributors and KOL’s for testing and evaluation with the aim of translating good data into the generation of the first initial revenue. We will continue to work vigorously to realize our vision and deliver innovative solutions that can make a real difference and create added value for our customers and society on a global scale. The capital from the planned Rights Issue is intended to further this development and shape a successful future for Diagonal Bio."

Motive and use of proceeds

In order to finance the Diagonal Bio's future development, the Company plans to carry out a rights issue of units that can initially bring the Company a maximum of approximately SEK 32 million (before issue costs) and approximately six months later a further maximum of approximately SEK 9.5 million (before issue costs) through the exercise of warrants. The transaction related costs for the Rights Issue are estimated to amount to a maximum of approximately SEK 5.5 million (of which approximately SEK 2.5 million refers to guarantee compensation, if all guarantors desire cash compensation). The issue proceeds will also be used for repayment of bridge loan.

It is the Board's assessment that the net proceeds from a fully subscribed Rights Issue and warrant exercise are sufficient to finance the Company's operations and plans until cash flow positivity in Q1 2026.

Objectives

Below is a selection of the Company's goals for the years 2024-2025.

2024

• 6-10 LAMPlify® studies with potential customers, distributors, and KOL’s that can translate into commercial agreements and sales.
• Sales and Marketing activities related to the launch of LAMPlify®.
• Create value by generating a product portfolio of multiple genetic markers.
• Expand IP protection of Diagonal Bio’s core technology in key global markets/regions.
• Regulatory Strategy and planning for human diagnostics using PANVIRAL® and future IVDR approval.

2025

• Expand LAMPlify® studies with customers, distributors, and KOL’s in new market segments.
• End of the year 2025 a total of at least 40 LAMPlify® instruments are in use at clients which is generating recurring revenue based on Diagonal Bio’s product portfolio and consumables.
• Adapt the PANVIRAL® platform i.e., instrument and consumables required for the regulatory application.

Terms for the Rights Issue

The Board has today, subject to the approval of the extraordinary general meeting, decided on the implementation of an issue of a maximum of 39,975,779 units consisting of a maximum of 639,612,464 shares and a maximum of 79,951,558 warrants of series TO 1. Diagonal Bio's existing shareholders have preferential rights to subscribe for units in proportion to their existing shareholdings. The public also has the right to subscribe for units in the Rights Issue.

One (1) existing share in the Company on the record date of April 4, 2024, entitles to one (1) unit right. One (1) unit right entitles the holder to subscribe for one (1) unit in Diagonal Bio. Each unit consists of sixteen (16) shares and two (2) warrants of series TO 1. The subscription price in the Rights Issue has been set at SEK 0.80 per unit, which corresponds to SEK 0.05 per share. Subscription options of series TO 1 are issued free of charge.

Subscription of units must take place during the subscription period that runs from and including April 8, 2024, to and including April 22, 2024. Unit rights that are not used during the subscription period become invalid and lose their value. Trading in unit rights is expected to take place on the Nasdaq First North Growth Market from and including April 8, 2024, to and including April 17, 2024. Trading in BTU (Paid Subscription Unit) is expected to take place during the period from and including April 8, 2024, until the Rights Issue registered with the Swedish Companies Registration Office.

The Rights Issue will initially increase the share capital by a maximum of SEK 31,980,623.20, from SEK 3,997,577.90 to SEK 35,978,201.10 (it is to be noted that the Company will do a reduction of share capital both prior the Rights Issue and after the Rights Issue) and the total number of shares will increase by a maximum of 639,612,464 shares, from 39,975,779 shares to 679,588,243 shares. Existing shareholders who choose not to participate in the Rights Issue will be recognized with a dilution effect corresponding to approximately 94.1 percent of the votes and capital, calculated on the number of shares in the Company after the Rights Issue has been fully subscribed. Shareholders who choose not to participate in the Rights Issue have the opportunity to partially compensate themselves for the financial dilution effect by selling their unit rights no later than April 17, 2024.

Terms for warrants of series TO 1

One (1) TO 1 gives the holder the right to subscribe for one (1) new share in Diagonal Bio during the period that runs from and including September 12, 2024, to and including September 26, 2024. The subscription price for TO 1 shall amount to seventy (70) percent of the average volume-weighted price of the share according to the official price statistics of the Nasdaq First North Growth Market during a period of twenty (20) trading days ending two (2) banking days before the beginning of the exercise period and the subscription price will be determined within the range SEK 0.05 per new share and SEK 0.12 per new share. The subscription price must be rounded to the nearest whole öre. The Company will announce the subscription price the day before the first day of the exercise period. Upon full subscription of the Rights Issue and full utilization of TO 1 issued thereby at the highest subscription price, the Company may receive a maximum of approximately SEK 9.5 million before transaction costs, which are estimated to amount to approximately SEK 0.7 million.

Through TO 1, the share capital can increase by a maximum of SEK 470,303.28. Provided that the Rights Issue is fully subscribed and that TO 1 is fully utilized, TO 1 will result in a dilution of approximately 10.5 percent of the votes and capital. TO 1 is planned to be admitted to trading on the Nasdaq First North Growth Market as soon as possible after final registration of the Rights Issue with the Swedish Companies Registration Office. The last day of trading in TO 1 is expected to be September 24, 2024.

Pre-subscription and guarantee commitment agreements

The Rights Issue is secured in writing by members of the Board, management, certain existing shareholders and external investors to a total of approximately 56.4 percent (equivalent to approximately SEK 18 million) through pre-subscription and guarantee commitments. The pre-subscription commitments amount to approximately SEK 1.5 million, which corresponds to approximately 4.6 percent of the Rights Issue. The guarantee commitments amount to a total of approximately SEK 16.5 million, corresponding to approximately 51.8 percent of the Rights Issue. Out of the guarantee commitments, approximately SEK 4 million are bottom guarantee (activated directly after the pre-subscription and up to approximately 17.1 percent), approximately SEK 11.5 million are a separate guarantee tranche from the level of 17.1 percent up to the level of 52.9 percent, and approximately SEK 1.1 million, corresponding to approximately 3.4 percent, are in a top guarantee (from 100 percent down).

For the bottom guarantee commitment tranche, a guarantee fee of 13 percent in cash or 15 percent in the form of newly issued units, which are issued on the same terms as the Rights Issue, is paid. For the second guarantee commitment tranche, a guarantee fee of 15 percent in cash or 17 percent in the form of newly issued units, which are issued on the same terms as the Rights Issue, is paid. For the top guarantee commitment tranche, a guarantee fee of 17 percent in cash or 20 percent in the form of newly issued units, which are issued on the same terms as the Rights Issue, is paid. No compensation is paid for the pre-subscription commitments that have been submitted.

The pre-subscription and guarantee commitments are not secured by bank guarantee, blocking funds, pledging or similar arrangements.

Bridge loan

In order to secure the Company's short-term working capital need until the capital from the Rights Issue accrues to Diagonal Bio, the Company has taken out a bridge loan of a total of SEK 4 million from Formue Nord Markedsneutral, among others. For the bridge loan, an interest rate of 2 percent is paid per started 30-day period. The bridge loan is intended to be repaid with cash from the Rights Issue. The Board of Directors of the Company assesses the terms of the bridge loan as market-based.

The loan that was raised in the fall of 2023 is also intended to be repaid with capital from the Rights Issue, or set off for units to the same terms as in the Rights Issue.

Extraordinary General Meeting

The Board's decision on the Rights Issue is subject to approval at an Extraordinary General Meeting which is scheduled to be held on April 2, 2024. The decision on the Rights Issue presupposes and is conditional upon that changes to the limits of the share capital and number of shares in the articles of association are made, as well as a reduction of the share capital in order to lower the shares' quota value and thus release capital from the Rights Issue at the disposal of the business under company law. The maximum reduction of the share capital will not exceed the share capital increase that takes place through the Rights Issue. The share capital will therefore in total be reduced by SEK 31,980,623.20 at most. The notice for the Extraordinary General Meeting will be published through a separate press release.

Indicative timeline for the Rights Issue

• Last day for trading in shares, including the right to receive unit rights: April 2, 2024.
• First day for trading in shares, excluding the right to receive unit rights: April 3, 2024.
• Record date for participation in the Rights Issue: April 4, 2024.
• Subscription period: 8-22 April 2024.
• Trading in unit rights: 8-17 April 2024.
• Trading in BTU: from April 8, 2024, until the Rights Issue has been registered with the Swedish Companies Registration Office. The last day for trading in BTU will be announced through a separate press release after the Rights Issue has been completed.
• Press release on the outcome of the Rights Issue: around April 23, 2024.

Prospectus, teaser and the possibility to subscribe for units

Prospectus and teaser about the Rights Issue will be made available via the Company's (www.diagonalbio.com), Sedermera Corporate Finance AB's (www.sedermera.se) and Nordic Issuing AB's (www.nordic-issuing.se) websites no later than the subscription period begins. Via Nordic Issuing AB's website, it will also be possible to subscribe for units.

Advisors

In connection with the Rights Issue, Diagonal Bio has engaged Sedermera Corporate Finance AB as financial advisor, Markets & Corporate Law Nordic AB as legal advisor and Nordic Issuing AB as issuing agent.

For further information about the Rights Issue, please contact:

Sedermera Corporate Finance AB
Phone: +46 (0)40 615 14 10
E-mail: cf@sedermera.se
www.sedermera.se

For additonal information about Diagonal Bio AB, Please contact:

Karin Wehlin, Interim CEO
Phone: +46 703 052 488
E-mail: kw@diagonalbio.com

Kerstin Åkesson Jakobsson
Chair of the Board of Directors
Phone: +46 705 504 540
E-mail: kj@diagonalbio.com

Certified Adviser

Svensk Kapitalmarknadsgranskning AB
E-mail: ca@skmg.se

This press release contains inside information that Diagonal Bio AB (publ) is required to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication on February 28, 2024, at 17:40 CET.

Diagonal Bio is a Swedish Medtech company founded in 2020 with the vision to limit the spread of infectious diseases worldwide by creating an easy-to-use, cost-efficient, quick, and accurate platform technology based on Diagonal Bio’s patented technology for detection of genetic markers.
At Diagonal Bio we are creating two separate product lines intended for different market segments: LAMPlify®️for the less regulated market segments; PANVIRAL®️ for the in-vitro diagnostic market segments.
www.diagonalbio.com