The Board of Directors proposes decision on a rights issue of units and a directed issue of convertibles

The Board of Directors of Phase Holographic Imaging PHI AB (”PHI” or ”the Company”) has today, on the 22^nd of February 2022, decided to propose that the Extraordinary General Meeting shall decide on a rights issue of units (shares and warrants), which initially can provide the Company with approx. SEK 72.4 million. The proposed rights issue is in writing secured to approx. 80 percent by guarantee commitments. The Board of Directors has also decided to propose that the Extraordinary General Meeting decides on a directed issue of convertibles to Formue Nord Fokus A/S, which shall replace the majority of the outstanding loans the Company has from Formue Nord Markedsneutral A/S. Notice to the Extraordinary General Meeting will be published through a separate press release within this week.

Peter Egelberg, CEO PHI, comments

“PHI is in an exciting growth phase and has during the pandemic taken important steps forward in terms of sales – the transition to online sales and marketing without intermediaries has resulted in the advantage of having direct contact with our customers, which gives us a more detailed understanding of their needs. And on the other hand, direct contact gives our customers a deeper understanding of our products, which also benefits sales. Our assessment is that the trend we have seen in recent quarters will continue and that interest in PHI’s products will increase even more. In addition, we see good opportunities to break new ground in the field of regenerative medicine – an area Big Pharma has entered – where the cells themselves are the treatment. The market for non-destructive analysis of cell cultures is a crucial piece of the puzzle in the development of the treatment of common diseases such as Alzheimer’s and diabetes. We see that we have a significant competitive advantage in regenerative medicine given our innovative and proven technology, proprietary software and cost position.”

Background and motive

Over the past two years, largely due to the pandemic, PHI has invested in digitizing the Company’s distribution chain – a strategic shift that has proven to be very positive, as direct sales and the absence of distributors as intermediaries have contributed increased margins for the Company and lower costs per unit sold.

During the past six months, the Company’s sales have increased by close to 340 %, in comparison to the same period last year. It is the Board’s assessment that this positive sales trend will continue due to the increasingly successful online sales.

In addition, PHI has for several years worked to develop a fluorescence unit for HoloMonitor® where the Company, by integrating two functionalities in the same instrument, is estimated to be able to more than double its market. Following a first proof-of-concept, the first prototype of such an instrument has been manufactured and the fluorescence project is now in a phase of internal and external testing, technical iterations and software development. The Company is preparing for a market launch of the fluorescence unit during the current half year. The module will in a business perspective be the Company’s second hardware platform, and PHI also intends to surround the platform with a new family of software modules (so-called Live Cell Assays) to make the data generated by the platform.

The non-invasive properties of HoloMonitor® have shown that the product is well suited for clinical applications in regenerative medicine, which is why the Board believes that the Company has a significant competitive advantage in the area. According to the board, fully developed regenerative medicine is expected to compete with drugs and surgery in both market size and significance for modern health care systems. As early as August 2021, PHI entered into a partnership with the RegenMed Development Organization (ReMDO) with the aim of establishing the Company’s non-invasive imaging technology as a standard tool to support large-scale production of cell therapies and artificial organs, and the Company plans a number of additional activities related to this area. Among other things, the Company intends to expand collaborations with important industry players, which according to the Board’s assessment will increase the commercial value of PHI’s technology and products and in turn benefit future partnership discussions.

In light of the above, the Board and management of PHI see great opportunities to take the Company further into clinical applications and the planned capitalization is therefore intended to finance the Company’s establishment and progress in regenerative medicine. In addition, part of the capitalization is intended to finance the market introduction of PHI’s fluorescence unit and the continued development of the Company’s digital sales strategy, with expanded activities related to marketing and digitization. The proceeds are also planned to finance the expansion of the Company’s marketing department, as well as partial repayment of existing loans that the Company has with Formue Nord Markedsneutral A/S.

Rights issue of units

The proposed rights issue of units may – provided the Extraordinary General Meeting decides to approve the Board’s decision – in the event of full subscription initially provide the Company with approx. SEK 72.4 million before issue costs, which in the case of fully subscribed initial issue is estimated to amount to approx. SEK 10 million (of which guarantee compensation is approx. SEK 5.8 million paid as cash). The attached warrants come in two series – series TO 3 and series TO 4 – where warrants of series TO 3, with exercise period in April/May 2023, when fully exercised, provide the Company an additional SEK 50.4 million, and where series TO 4, with an exercise period in September/October 2024, can provide the Company with a maximum of approx. SEK 26.2 million.

Use of funds from initial part of the rights issue

Objective to continue strong revenue growth:

• Product launch of the Company’s fluorescence unit with estimated finalization 2022.
• Expand the online sales and marketing organization for major markets: Europe, USA and China, estimated finalization 2022.
• Partial repayment of loans from Formue Nord received to bridge the effects of the pandemic, estimated finalization 2022.

Objective to obtain proof-of-concept supported by important opinion leaders:

• Through contract research, fund important selected opinion leaders, such as the Wake Forest Institute for Regenerative Medicine, estimated finalization 2022.
• Develop AI-based software so that critical cell transformations can be identified during bioproduction without the use of fluorochromes or any other type of cell staining. Because the cells will be transplanted back to the patient, it is unacceptable to stain them, estimated finalization 2022-2023.
• Using the fluorescence unit as a reference, key opinion leaders gather a large data set of coloured and uncoloured cells to train and evaluate the AI-based software, estimated finalization 2022-2023.

Use of funds from the exercise of warrants

Objective to obtain GLP/GMP qualifications for regulatory approval and market introduction:

• GLP/GAMP validation at and for bio-manufacturing facilities, estimated finalization 2025.

Objective to accelerate sales to biomanufacturing facilities:

• Market introduction of clinical implementation phase 1, estimated finalization 2025.

Objective to initiate sales to biopsy clinics:

• Initiate clinical implementation phase 2, estimated finalization 2026.

Other:

• Repayment of planned convertible loan to Formue Nord, if conversion to shares has not taken place. Estimated finalization 2023-2023.

The planned offer in brief

• Preliminary subscription period: March 30 – April 13, 2022.
• Subscription price: SEK 85.50 per unit, corresponding to SEK 9.50 per share. Warrants are obtained free of charge. Each unit consists of nine shares, five warrants of series TO 3 and two warrants of series TO 4.
• Scope of the offer: initially a maximum of 846,763 units, which corresponds to 7,620,867 shares, 4,233,815 warrants of series TO 3 and 1,693,526 warrants of series TO 4. Through the initial issue of units, this can provide the Company with a maximum of SEK 72,398,236.50.
• Planned record date and preferential rights: Those who on the record date, which is scheduled to take place on March 24^th, 2022, are registered as shareholders in PHI have a preferential right to subscribe for units in the proposed rights issue. For each existing share, one (1) unit right is received. Seventeen (17) unit rights entitle to subscribe for one (1) unit. Each unit consists of nine (9) shares, five (5) warrants of series TO 3 and two (2) warrant of series TO 4. The last day for trading in the Company’s share, including the right to receive unit rights, is scheduled for March 22^nd, 2022. The first day of trading in the share, excluding the right to receive unit rights, is scheduled for March 23^rd, 2022.
• Number of shares before issue: 14,394,971 shares.
• Valuation (pre money) in the current offer: Approximately SEK 136.8 million.
• Guarantee subscription: The Company has received guarantee commitments corresponding to a total of approx. 80 percent of the initial issue volume. For the guarantee commitments, the guarantors have the option of choosing between compensation corresponding to 10 percent on the guaranteed amount in the form of capital, or alternatively corresponding to 12 percent on the guaranteed amount in the form of units.
• Trading in unit rights: Trading in unit rights is planned to take place on Spotlight Stock Market during the period March 30^th, 2022, to April 8^th, 2022.
• Trading with BTU: Trade with BTU (Paid Subscribed Unit) is planned to take place on Spotlight Stock Market from March 30^th, 2022 and continue until the Swedish Companies Registration Office has registered the rights issue. This registration is expected to take place at the beginning of May 2022.
• Series TO 3 warrants: TO 3 series warrants have a planned exercise period from April 11^th, 2023, to May 2^nd, 2023. The exercise price is planned to amount to 70 percent of the volume-weighted average price during a period prior to the exercise period, within the interval SEK 0.20 (the Company’s quota value) as the lowest, and with SEK 11.90 per new share as the highest exercise price. Upon full exercise of warrants of series TO 3 at the highest exercise price (SEK 11.90 per new share), the warrants will provide the Company with approx. SEK 50.4 million.
• Series TO 4 warrants: TO 4 series warrants have a planned exercise period from September 12^th, 2024, to October 3^rd, 2024. The exercise price is planned to amount to 70 percent of the volume-weighted average price during a period prior to the exercise period, within the interval SEK 0.20 (the Company’s quota value) as the lowest, and with SEK 15.45 per new share as the highest exercise price. Upon full exercise of warrants of series TO 4 at the highest exercise price (SEK 15.45 per new share), the warrants will provide the Company with approximately SEK 26.2 million.
• Dilution: provided fully subscribed initial issue, as well as full exercise of warrants of series TO 3 and series TO 4, the rights issue and warrant exercises entail a dilution of a total of approx. 48.8 percent for the shareholders who do not participate in the issue.

Directed issue of convertibles

In addition to the above-described proposal for a resolution on a rights issue, the Board of Directors of the Company has also decided to propose to the Extraordinary General Meeting to decide on a directed new issue of convertibles to Formue Nord Fokus A/S. The purpose of the directed issue of convertibles is to have the planned convertible loan replace the part of the existing loan that the Company has with Formue Nord Markedsneutral A/S that is not repaid using the issue proceeds from the proposed rights issue. The directed issue of convertibles is proposed to amount to approx. SEK 20.23 million and is proposed in accordance with the terms below.

• Number of convertibles: 1,700,000 convertibles, with the right for conversion into 1,700,000 new shares.
• Conversion price: SEK 11.90 per new share until and including May 2^nd, 2023 (the last day in the exercise period for the warrants of series TO 3) and SEK 15.45 per new share from May 3^rd, 2023, until and including October 16^th, 2024.
• Convertible amount: SEK 20,230,000.00.
• Converitble period: the convertible holder is entitled during the period from the date of payment, planned for after the Extraordinary General Meeting, until October 16^th, 2024, to convert the loan into shares.
• Running period: in the event that the entire loan has not been converted, repayment of the loan and interest must take place no later than October 16^th, 2024.
• Interest:the convertibles are running with a quarterly interest rate of three (3) percent.
• Dilution: provided that a fully subscribed planned issue of units, full exercise of warrants of series TO 3 and series TO 4, full conversion of the convertibles entails a dilution of approx. six (6) percent.

Prospectus, teaser and subscription form

Prospectus, teaser and subscription form regarding the planned rights issue will be made available via the Company’s (www.phiab.com) and Sedermera Corporate Finance AB’s (www.sedermera.se) websites by the time of the initiation of the planned subscription period, at the latest.

Advisors

In connection with the rights issue PHI has appointed Sedermera Corporate Finance AB as the financial advisor, Markets & Corporate Law Nordic AB as the legal advisor, and Nordic Issuing as the issuing agent. Shark Communication AB has provided the Company with advice regarding communication.

For more information about the planned capitalization, please contact:

Sedermera Corporate Finance AB
Phone: +46 40-615 14 10
E-mail: info@sedermera.se

For more information about the Company, please contact:

Peter Egelberg, CEO
Email: ir@phiab.se
Web: phiab.com

This information is such that PHI is required to publish in accordance with the EU Market Abuse Regulation (EU No. 596/2014). The information was submitted, through the care of the specified contact person, for publication on 22-02-2022 21:47 CET.