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DiaMedica Inc. Announces Completion of Sanomune Inc. Acquisition and $2.26 Million Prospectus Offering

7/1/2010 11:36:16 AM

WINNIPEG, MANITOBA--(Marketwire - June 30, 2010) - DiaMedica Inc. (TSX VENTURE: DMA) ("DiaMedica" or the "Company"), is pleased to announce the completion today of its $2.26 million short form prospectus offering of units (the "Offering") and its previously announced acquisition (the "Acquisition") of Sanomune Inc., a privately held biopharmaceutical company focused on neurological disorders ("Sanomune").

The Offering

Pursuant to the completion of the Offering, DiaMedica has issued a total of 5,650,000 units (each a "Unit") at a price of $0.40 per Unit for aggregate gross proceeds of $2.26 million. Each Unit is comprised of one common share in the capital of the Company (each a "Common Share") and one Common Share purchase warrant (each a "Warrant"), with each Warrant entitling the holder thereof to acquire a further Common Share until the second anniversary of the closing of the Offering. The expiry date of the Warrants is subject to acceleration if the volume-weighted average trading price of the Common Shares on the TSX Venture Exchange (the "TSX-V") exceeds $0.75 per share for a period of 10 consecutive trading days.

The Offering was led by Bolder Investment Partners, Ltd., as agent ("Bolder"). In connection with the completion of the Offering, Bolder exercised its agent's option to increase the size of the Offering by 13%, or 650,000 Units.

The net proceeds of the Offering will be used to fund DiaMedica's ongoing research and development programs, including planned pre-clinical trials for our lead products, and for general working capital purposes.

As compensation for its services as agent, Bolder received a cash commission of $226,000, and received broker warrants to acquire up to 565,000 Common Shares exercisable at the price of $0.40 per share at any time on or prior to June 30, 2011.

The Acquisition

Pursuant to the completion of the Sanomune Acquisition, DiaMedica has issued a total of 12,807,377 Common Shares to Sanomune shareholders as consideration for all of the issued and outstanding shares of Sanomune.

"With the completion of this financing and the strategic acquisition of Sanomune, we have brought together two of Canada's Top 10™ Life Sciences Companies," stated Mr. Rick Pauls, President and Chief Executive Officer of DiaMedica. "This acquisition allows us to take advantage of a unique opportunity to strengthen our patent portfolio and expand into neurological and autoimmune disorders targeted by our lead program, DM-99/199, which has demonstrated neural protection (protects brain cells) and neural cell proliferation (creates brain cells)".

As a result of the Acquisition, in addition to Sanomune's lead compound, SAN-61, DiaMedica also acquires a panel of monoclonal antibodies that trigger the inhibition of glycogen synthase kinase 3 beta (GSK-3ss). GSK-3ss plays an important role as a regulatory switch for numerous cell-signaling pathways and has been linked to diabetes, cancer, infectious diseases and a variety of neurological disorders. It is anticipated that the monoclonal antibody program will compliment DiaMedica's DM-99/199 program, which has also been shown to have GSK-3ss inhibiting properties.

As announced in its April 20, 2010 press release, DiaMedica obtained the required minority shareholder approval (the "Minority Approval") for the Acquisition under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), by securing written consents to the transaction from shareholders representing approximately 65% of the Common Shares held by parties eligible to vote for approval of the transaction under Part 8 of MI 61-101. This is in excess of the simple majority requirement (i.e., 50%+1) set out in MI 61-101 for such Minority Approval.

In addition to the related parties described in DiaMedica's February 18, 2010 press release regarding the Acquisition (each a "Related Party" and collectively, the "Related Parties"), Common Shares held by two investment funds, Manitoba Science & Technology Fund ("MST") and Crocus Investment Fund ("CIF") were also excluded for the purposes of obtaining Minority Approval for the Acquisition. MST and CIF each hold approximately 24.75% of the voting common shares of Genesys Ventures Inc., a Related Party, and are therefore each "a related party of an interested party" as described in MI 61-101. Immediately prior to the completion of the Acquisition and the Offering, the Related Parties, in the aggregate, beneficially owned, or exercised control or direction over, a total of 5,493,523 Common Shares, or 28.60% of the total issued and outstanding Common Shares. To the knowledge of the Company, based on public filings by each of MST and CIF, immediately prior to the completion of the Acquisition and the Offering, MST and CIF held, in the aggregate, a total of 3,065,764 Common Shares, or 15.96% of the total issued and outstanding Common Shares.

Management Changes

DiaMedica further announces the appointment of Mr. Pauls to the full-time position of President and Chief Executive Officer and the appointment of Dr. Mark Williams to Vice-President, Research. Dr. Stephen Waters has resigned from his interim role as Executive Vice-President and Interim Chief Scientific Officer.

Mr. Pauls, who has been an active board member since 2005, and is currently the Chairman of the Board of DiaMedica, has served as the acting President and Chief Executive Officer of the Company since July 2009. Mr. Pauls was previously the Managing Director of CentreStone Ventures Inc., a life sciences venture capital fund which he was involved with from inception. While with CentreStone, Mr. Pauls led investments in Orasi Medical Inc., winner of the Red Herring Global 100; LED Medical Inc., winner of Red Herring Canada 50 award in the Health category; as well as DiaMedica and Sanomune, both named among Canada's Top 10™ Life Sciences Companies. Prior to his role with CentreStone, Mr. Pauls was employed by Centara Corporation, another early stage venture capital fund.

"We would like to express our gratitude to Dr. Stephen Waters for his valuable contributions to our strategic planning efforts and we look forward to working with him as a consultant," continued Mr. Pauls. "The Board of Directors of DiaMedica joins me in thanking Dr. Waters for his efforts, and we wish him continued success in his future endeavors".

In conjunction with these management changes, the Board of Directors has approved a grant of 457,500 stock options to certain directors, executives and employees under the terms of the Company's stock option plan. The options have an exercise price of $0.42 per share and are exercisable for a period of 5 years. This grant of such options is subject to acceptance by the TSX-V.

Please visit DiaMedica's new company website at

About DiaMedica and Sanomune

DiaMedica is a biopharmaceutical company, focused on developing novel treatments for diabetes and neurological disorders. The Company's diabetes program is based on a critical liver nerve signaling mechanism involved in enhancing insulin sensitivity after meal consumption. Two of DiaMedica's products have demonstrated human efficacy in lowering blood sugar levels in diabetics based on this novel nerve signaling mechanism.

As a result of the Sanomune Acquisition, DiaMedica plans to expand its DM-199 program into neurological and autoimmune disorders. Sanomune has demonstrated that its lead compound, SAN-61, a naturally occurring protein, confers neural protection (protects brain cells) and triggers neural stem cell proliferation (creates brain cells) for the treatment of numerous neurological disorders including Alzheimer's disease. DiaMedica has also acquired from Sanomune a panel of monoclonal antibodies targeting diabetes, neurological disorders and cancers through the inhibition of GSK-3ss.

Both DiaMedica and Sanomune were recognized as one of Canada's Top 10™ Life Sciences Companies in 2008/2009. DiaMedica is listed on the TSX Venture Exchange under the trading symbol "DMA".

For further information please visit

Caution Regarding Forward-Looking Information

Certain statements contained in this press release constitute forward-looking information within the meaning of applicable Canadian provincial securities legislation (collectively, the "forward-looking statements"). These forward-looking statements relate to, among other things, DiaMedica's objectives, goals, targets, strategies, intentions, plans, beliefs, estimates and outlook, and can, in some cases, be identified by the use of words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may" and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Specifically, this press release contains forward-looking statements regarding matters such as, but not limited to, the anticipated use of proceeds from the Offering, management's assessment of DiaMedica's future plans, information with respect to the advancement of DiaMedica's research and development programs, and DiaMedica's other estimates and expectations.

These statements reflect management's current beliefs and are based on information currently available to management. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results to differ materially from these expectations include, among other things: uncertainties and risks related to our research and development programs, the availability of additional financing, risks and uncertainties relating to the anticipated use of proceeds, changes in debt and equity markets, uncertainties related to clinical trials and product development, rapid technological change, uncertainties related to forecasts, competition, potential product liability, additional financing requirements and access to capital, unproven markets, the cost and supply of raw materials, management of growth, effects of insurers' willingness to pay for products, risks related to regulatory matters and risks related to intellectual property matters. Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found in the body of this news release, as well as under the heading "Risk Factors" contained in DiaMedica's 2009 annual information form. DiaMedica cautions that the foregoing list of important factors that may affect future results is not exhaustive. When relying on DiaMedica's forward-looking statements to make decisions with respect to DiaMedica, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Such forward-looking statements are based on a number of estimates and assumptions which may prove to be incorrect, including, but not limited to, assumptions regarding the availability of additional financing for research and development companies, and general business and economic conditions. These risks and uncertainties should be considered carefully and investors and others should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this press release are based upon what management believes to be reasonable assumptions, DiaMedica cannot provide assurance that actual results will be consistent with these forward-looking statements. DiaMedica undertakes no obligation to update or revise any forward-looking statement. Additional risk factors, factors which could cause actual results to differ materially from expectations, and assumptions relating specifically to our acquisition of Sanomune may be found in our press releases dated February 18, 2010 and April 20, 2010.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

DiaMedica Inc.
Kevin Richardson, Ph.D
204.453.3745 (FAX)

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