Brain+ A/S: Brain+ restructures to reduce OPEX by 35%, maintaining €1M ARR target for end 2025 and now expecting break-even by mid-2026, and announces 50% secured intended Rights Issue

Summary of the Rights Issue

• The Rights Issue comprises of units that include new Brain+ shares and warrants of series TO 5. The transaction offers preferential subscription rights to the Company's existing shareholders. If the Rights Issue is fully subscribed, the Company can receive approximately DKK 16 million in initial proceeds, before deduction of transaction-related costs.

• The subscription price of the new shares in the issue will be equal to 70% of the theoretical ex-rights price (TERP), which will be based on the historical 10-day volume weighted average price (VWAP) of Brain+' existing shares at the time of the final board resolution to carry out the Rights Issue. The subscription price cannot be lower than DKK 0.01.  The warrants of series TO 5 will be issued free of charge.

• Brain+ has received pre-subscription commitments from existing shareholders and new investors of approximately DKK 4.2 million, including approximately DKK 1.0 million from the Board of Directors and Management, and guarantee commitments of approximately DKK 3.8 million. Hence, the Rights Issue is secured to approximately DKK 8 million, corresponding to approximately 50% of the Rights Issue.

• The formal board decision to carry out the Rights Issue is indicatively planned for end of February 2025 and the subscription period is scheduled for March 2025. A detailed overview of important dates related to the Rights Issue will be communicated by Brain+ in a Company Announcement following the formal board decision.

• One (1) warrant of series TO 5 will grant the right to subscribe for one (1) new Brain+ share during the exercise period that is scheduled for June 2025. If the Rights Issue is fully subscribed, and if all issued warrants subsequently are exercised at the maximum exercise price, Brain+ can receive approximately DKK 24 million in additional proceeds from the warrant exercise.  

Background

Brain+ is a Danish life-science company pioneering digital solutions for better dementia care to help people affected by dementia live better lives. The Company is building Ayla - the world's first scalable digital dementia care platform, digitizing Cognitive Stimulation Therapy (CST). CST is a proven and highly cost-effective non-drug dementia therapy, recommended for global implementation by the World Alzheimer's Association, gaining growing worldwide attraction and poised to revolutionize the treatment and care of people living with dementia.

In 2024, Brain+ finalized the development of its first Ayla product, Ayla - your CST Assistant, in both Danish and English versions to offer effective and scalable delivery of group-based CST. This included obtaining medical device software certification in the United Kingdom (UK), making Ayla - your CST Assistant the first CST-based medical device in the country to be supported by clinical benefit claims. This achievement was key to unlocking the UK market, which is the most attractive market for Brain+, since CST is endorsed by the UK National Institute for Health and Care Excellence (NICE) and broadly recognized by the medical community. Commercial success in the UK is Brain+' top strategic priority.

Following the UK launch of Ayla - your CST Assistant in October 2024, Brain+ has focused its go-to-market activities on two key markets: Private Care Homes and Memory Services under the National Health Services (NHS). Both markets have shown strong interest, with several customer leads building into a robust sales pipeline. Feedback from advanced customer dialogues in both markets highlights the value of Brain+' dementia care offerings, supporting the Company's expectations to close the first UK sales in Q1 2025 and reach €1 million in Annual Recurring Revenue (ARR) by year-end with further significant growth projected for 2026.

In Denmark, Brain+ has secured contracts and the first multi-year extension, further boosting confidence in its commercial trajectory.

Motive for the Rights Issue

As announced in previous Company Announcements, Brain+ requires additional working capital from the beginning of 2025 to execute its commercialization plans for Ayla - your CST Assistant in the UK, establish commercial validation of its offerings and meet its revenue target of €1 million in ARR in 2025.

To address this funding need, Brain+ is now raising new capital through a 50% secured Rights Issue, which is intended to provide the Company with sufficient financing to build a solid revenue stream from licenses and sales of Ayla - your CST Assistant in the UK, get commercial validation and set the foundation for future growth.

While Brain+' strategic objectives remain unchanged, the decision to raise new capital is aligned with a comprehensive restructuring initiative to implement a leaner business model, significantly reduce costs and extend the company's financial runway. This implies pausing new product development and shifting all remaining resources to fully support ongoing UK sales and customer-focused activities.

The restructuring will reduce Brain+' operating expenses (OPEX) by 35% with full effect of the cost reductions expected from mid-2025. Because the restructuring measures only implies holding back on new product development, while allocating as many resources as possible to UK revenue-generating activities, the initiative will only support the Company's expectations to reach an ARR level of €1 million by end-2025, driven by licenses and growing sales of Ayla - your CST Assistant in the UK. The strong interest the product is being met with from several customer leads and the robust and growing customer pipeline established over just 2-3 months, install confidence that Brain+ will be able to close the first sales contracts in Q1 2025 and grow revenue through 2025 and into 2026. The shorter sales cycles and high demand uncovered in the private care home market further strengthen this outlook.

With unchanged sales projections for Ayla - your CST Assistant and the effect of the operational restructuring, Brain+ now foresees to achieve cash-flow break-even by mid-2026, a full 6 months earlier than previous forecasts.

The current product pipeline that is put on pause includes an extended backbone of the Ayla dementia care platform and new digital CST products: Ayla - your Home Companion, intended to enable in home CST support to people with dementia, and Ayla - your Virtual CST Assistant enabling the delivery of virtual CST at scale to extend access to therapy. Market release of the first versions of the platform and the new products was earlier targeted for end 2025. The long-term strategy remains unchanged, and so new product development will be reactivated once Brain+ is in a stronger financial position to do so. The relevance and value potential in the Ayla dementia product pipeline are considered substantial and will allow the Company to significantly scale future sales. The mid-to-long term full market potential for the Ayla dementia care platform has previously been estimated at €70 million in ARR for the UK alone.

All actions taken by the Company support its vision to build the world's first scalable dementia care platform to help people affected by dementia live better lives. By focusing first on sales and commercial validation, while minimizing funding needs and maintaining its commercial trajectory, Brain+ aims to establish a position to become financially sustainable and from there scale its innovative solutions to transform dementia care.

Use of proceeds
Based on the revenue projections for Ayla - your CST Assistant in 2025 and 2026 combined with the cost reduction initiatives, the company expects to attain cash-flow break-even by mid-2026. As a result, Brain+ now forecasts that the total capital needs of the Company to reach cash-flow break-even amounts to DKK 9-10 million.

Thus, if the combined proceeds from subscriptions in the Rights Issue and subsequent exercise of the TO 5 warrants provide Brain+ with DKK 10 million net of costs, the Company is expected to be fully funded to meet its commercial milestones and revenue targets as the basis for operational cash-flow break-even.

The 50% secured proceeds from the Rights Issue will fund Brain+ to July 2025. From June 2025, when the +35% OPEX reduction will be fully implemented, further funding will be secured from the exercise of the TO 5 warrants. Up until the TO 5 warrant exercise, the Company expects to close several commercially validating sales contracts for Ayla - your CST Assistant, primarily in the UK to support the level of warrant exercise and the exercise price. At a 50% exercise of the TO 5 warrants at the lowest exercise price, the Company will receive sufficient additional proceeds to ensure its financial runway into 2026 and to execute on its € 1 million ARR target for end 2025.

Combined proceeds from the scenario above will be used as follows:

• Upscaled UK sales and marketing activities for Ayla - your CST Assistant - 50%
• Ayla - your CST Assistant customer support and product maintenance - 30%
• Other operating expenses, including public company costs - 20%

If Brain+ succeeds in raising more than DKK 10 million in proceeds net of costs from the Rights Issue and the TO 5 warrant exercise combined, the extra capital will be spent on reactivating the product pipeline and on further commercial scaling in the UK to support accelerated market penetration and growth to help more people living with dementia.   

Bridge financing
In order to maintain operational momentum and implement a leaner organizational structure during the period up to the Rights Issue, Brain+ has secured a bridge loan of approximately DKK 4.8 million. The loan runs with a monthly interest of 2 percent and a set-up fee of 20% or 5%, depending on whether lenders have agreed to pre-commit to convert loan claims into subscription of units in the Rights Issue or not. For lenders having pre-committed to convert, the loan set-up fee is 20%. For lenders who will have their loan claims and compensation repaid, the set-up fee is 5%.

Lenders accounting for DKK 3.1 million have committed to convert the loan and compensation into subscription in the Rights Issue. The principal amount of such loan claims will be offset for pre-subscription of corresponding amount in the Rights Issue. These lenders' right to compensation will be accommodated via a separate directed issue of units after the Rights Issue. The terms in such directed issue will be the same as in the Rights Issue.

Reduction in the share capital of the Company

As part of its strategic initiatives to create the best possible financial foundation for Brain+ and in this regard provide the best basis for a successful outcome of Rights Issue and the subsequent exercise of TO 5 warrants, the Board of Director will propose for the general meeting to reduce the share capital in the Company and lower the nominal value per share.

To allow the Company the flexibility to offer shares in the intended Rights Issue at sufficiently attractive terms to increase the likelihood of a successful transaction, it is proposed for the general meeting to resolve to decrease the share capital of Brain+ by DKK 14,877,834, from DKK 17,003,238.80 to DKK 2,125,404.00 to cover accumulated financial losses and to consequently reduce the nominal value of the Company's shares from DKK 0.08 to DKK 0.01. Reducing the nominal value per share opens the possibility for the Company to offer shares at a price lower than the current nominal value limit of DKK 0.08, which may be an essential step in making sure that the subscription price to be set in the Rights Issue is lower than the prevailing share market share price, thereby increasing the likelihood of the Rights Issue being fully subscribed.

Subscription commitments and guarantee commitments
The initial part of the Rights Issue is covered up to 50% (corresponding to approximately DKK 8 million) by pre-subscription and guarantee commitments. Approximately DKK 4.2 million of the total commitments are pre-subscription commitments from existing shareholders and whereof approximately DKK 1.0 million are from members of Brain+' Board of Directors and management). Approximately DKK 3.8 million corresponds to a "bottom-up" guarantee, guaranteeing subscription in the Rights Issue up to a total of approximately DKK 8.0 million. Pre-subscription commitments and guarantee commitments are not secured via bank guarantee, pledge or similar arrangements.

No compensation is payable for pre-subscription commitments. Providers of the bottom-up guarantee commitments can choose to receive compensation of either 15% in cash or 25% in units on their guaranteed amounts. Compensation in units will be issued at the same terms as in the Rights Issue.

Warrants of series TO 5
One (1) warrant of series TO 5 gives the right to subscribe for one (1) new share in the Company during the exercise period that is planned to take place in June 2025. The exercise price for the warrants of series TO 5 will amount to seventy (70) percent of the volume weighted average price (VWAP) of Brain+' existing shares according to Nasdaq First North Growth Market's official price statistics during a period of ten (10) trading days ending two (2) business days before the exercise period begins. The Company will publish the exercise price the day before the first day of the exercise period. The exercise price must be rounded to the nearest whole øre. The exercise price shall not exceed 150% of the subscription price in the Rights Issue. The exercise price cannot be below the nominal value per share.

Terms, conditions and instructions

Full terms and conditions along with complete instructions of the Rights Issue will be published in a separate company announcement closer to the planned subscription period.

Advisors

In connection with the Rights Issue, Sedermera Corporate Finance AB acts as financial advisors to Brain+. HC Andersen Capital 2 ApS acts as legal advisor.

For more information about Brain+, please contact:

CEO and Co-founder, Kim Baden-Kristensen: +45 31 39 33 17, kim@brain-plus.com 

CFO, Hanne Vissing Leth: +53 88 99 02, hanne@brain-plus.com 

For more 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

Certified Adviser

HC Andersen Capital 2 ApS
Phone: +45 28 74 66 40
E-mail: ca@hcandersencapital.dk
www.hcandersencapital.dk

Brain+ Vision

Building the world's first scalable dementia care platform to help people affected by dementia live better lives.

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This disclosure contains information that Brain+ A/S is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 22-01-2025 19:30 CET.

Important information

The information in this corporate announcement does not contain or constitute an offer to acquire, subscribe or otherwise trade in shares, warrants or other securities in Brain+. No action has been taken and measures will not be taken to permit a public offering in any jurisdictions other than Denmark and Sweden. Any invitation to the persons concerned to subscribe for units in Brain+ will only be made through the company announcement that Brain+ estimates to publish in late February 2025 on Brain+ website www.brain-plus.com (the "Planned Announcement"). This release is not a prospectus in accordance with the definition in the Prospectus Regulation (EU) 2017/1129 ("Prospectus Regulation") and this announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in shares, warrants or other securities in Brain+. In order for investors to fully understand the potential risks and benefits associated with a decision to participate in the Rights Issue, any investment decision should only be made based on the information in the Planned Announcement. Thus, investors are encouraged to review the Company Announcement in its entirety. In accordance with article 2 k of the Prospectus Regulation this corporate announcement constitutes an advertisement.

The information in this corporate announcement may not be released, distributed or published, directly or indirectly, in or into the United States of America, Australia, Belarus, Canada, Hong Kong, Japan, New Zealand, Russia, Singapore, South Africa, South Korea, Switzerland or any other jurisdiction in which such action would be unlawful or would require registration or any other measures than those required by Danish law. Actions in violation of these restrictions may constitute a violation of applicable securities laws. No shares, warrants or other securities in Brain+ have been registered, and no shares, warrants or other securities will be registered, under the United States Securities Act of 1933, as amended (the "Securities Act") or the securities legislation of any state or other jurisdiction in the United States of America and no shares or other securities may be offered, sold or otherwise transferred, directly or indirectly, in or into the United States of America, except under an available exemption from, or in a transaction not subject to, the registration requirements under the Securities Act and in compliance with the securities legislation in the relevant state or any other jurisdiction of the United States of America.

Within the European Economic Area ("EEA"), no public offering of shares, warrants or other securities ("Securities") is made in other countries than Denmark. In other member states of the EU, such an offering of Securities may only be made in accordance with the Prospectus Regulation. In other member states of the EEA which have implemented the Prospectus Regulation in its national legislation, any offer of Securities may only be made in accordance with an applicable exemption in the Prospectus Regulation and/or in accordance with an applicable exemption under a relevant national implementation measure. In other member states of the EEA which have not implemented the Prospectus Regulation in its national legislation, any offer of Securities may only be made in accordance with an applicable exemption under national law.

In the United Kingdom, this document and any other materials in relation to the securities described herein is only being distributed to, and is only directed at, and any investment or investment activity to which this document relates is available only to, and will be engaged in only with, "qualified investors" (within the meaning of the United Kingdom version of the EU Prospectus Regulation (2017/1129/ EU) which is part of United Kingdom law by virtue of the European Union (Withdrawal) Act 2018) who are (i) persons having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); (ii) high net worth entities etc. falling within Article 49(2)(a) to (d) of the Order; or (iii) such other persons to whom such investment or investment activity may lawfully be made available under the Order (all such persons together being referred to as "relevant persons"). In the United Kingdom, any investment or investment activity to which this communication relates is available only to, and will be engaged in only with, relevant persons. Persons who are not relevant persons should not take any action on the basis of this corporate announcement and should not act or rely on it.

This corporate announcement may contain forward-looking statements which reflect the Company's current view on future events and financial and operational development. Words such as "intend", "expect", "anticipate", "may", "believe", "plan", "estimate" and other expressions which imply indications or predictions of future development or trends, and which are not based on historical facts, are intended to identify forward-looking statements. Forward-looking statements inherently involve both known and unknown risks and uncertainties as they depend on future events and circumstances. Forward-looking statements do not guarantee future results or development and the actual outcome could differ materially from the forward-looking statements.