The Board of Directors in Brain+ A/S has resolved on the previously announced intention to execute a rights issue of units

COMPANY ANNOUNCEMENT

Copenhagen, Denmark, April 24, 2023 – Brain+ A/S (Nasdaq First North: BRAINP)

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, 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 THE RELEASE, DISTRIBUTION OR PUBLICATION WOULD BE UNLAWFUL OR REQUIRE REGISTRATION OR ANY OTHER MEASURE.

The Board of Directors in Brain+ A/S (“Brain+” or the “Company”) has, with the mandated authorization from the extraordinary general meeting on 13 April 2023, resolved to carry out a preferential rights issue of units of initially approximately DKK 15.7 million (the “Rights Issue”), in accordance with the previously published company announcement on 29 March 2023. Shareholders on the record date 9 May 2023, have preferential rights to subscribe for one (1) unit for each (1) existing share during the subscription period commencing 10 May 10 2023 and ending 25 May 2023. One unit consists of two (2) shares, two (2) warrants of series TO 2 and two (2) warrants of series TO 3. The subscription price is DKK 1.00 per unit corresponding to DKK 0.50 per share, the warrants of series TO 2 and TO 3 are issued free of charge. The Rights Issue is through subscription- and guarantee commitments secured to approximately DKK 13.4 million, corresponding to approximately 85 percent of the issue volume. The Board of Directors may carry out an over-allotment issue of approximately DKK 5.8 million if the Rights Issue is oversubscribed (the “Over-Allotment Issue”).

Summary of the Rights Issue

• The Board of Directors of Brain+ has today, with the mandated authorization from the extraordinary general meeting on 13 April 2023, resolved on the Rights Issue.

• Shareholders in Brain+ on the record date, 9 May 2023, have preferential rights to subscribe for one (1) unit consisting of two (2) new shares, two (2) warrants of series TO 2 and two (2) warrants of series TO 3 for each (1) existing shares.
• The subscription price is DKK 1.00 per unit corresponding to DKK 0.50 per share. The warrants of series TO 2 and TO 3 are issued free of charge.
• The Rights Issue compromises a maximum of 15,720,518 units, corresponding to 31,441,036 shares, 31,441,036 warrants of series TO 2 and 31,441,036 warrants of series TO 3. Upon full subscription to the Rights Issue, Brain+ will initially receive approximately DKK 15.7 million before transaction related costs. Subsequently warrant exercise of TO 2 and TO 3 can, if fully subscribed, provide the Company with additional amount of approximately DKK 6.3 – 25.2 million and DKK 9.4 – 37.7 million in gross proceeds.
• The net proceeds from the Rights Issue are intended to finance expansion of Brain+’s commercial activities to reach break-even on monthly basis by the end of 2025, including launch of new products and gaining reimbursement at scale to support this goal.
• The record date to receive pre-emptive the Rights Issue is 9 May 2023 and the subscription period runs from and including 10 May 2023 to and including 25 May 2023.
• One (1) warrant of series TO 2 gives the right to subscribe for one (1) new share in the Company during the exercise period runs from and including 2 October 2023 to and including 16 October 2023.
• One (1) warrant of series TO 3 gives the right to subscribe for one (1) new share in the Company during the exercise runs from and including 8 March 2024 to and including 22 March 2024.
• The Company has received pre-subscription commitments amounting to approximately DKK 4.44 million and guarantee commitments amounting to approximately DKK 8.93 million. Hence, the Rights Issue is secured to approximately DKK 13.40 million, corresponding to approximately 85 percent of the initial part of the Rights Issue.

Background and rationale
Brain+ is a pioneer in developing medical software to treat the cognitive symptoms of dementia, and the most common cause of dementia, namely Alzheimer’s disease. Together with world-leading experts and institutions, the Company digitize the best-in-class, non-drug dementia therapies, and make them broadly available on standard digital devices – for use both in people’s homes and at healthcare clinics. This approach is referred to as Digital Therapeutics or Digital Medicine.

The clinical target of the Company is to counteract and prevent cognitive decline, and the mission is to make effective treatments available to everyone in need as Digital Therapeutics.

The Company is now concentrating on two main tracks: expanding its commercial activities to reach break-even on monthly basis in the end of 2025 and developing its product pipeline to support this goal. The Company has three product programs:

1) CST-Therapist Companion, for people with mild-to-moderate dementia,
2) CST-Home Care, for people with mild-to-moderate dementia, and
3) CST-for-MCI (mild cognitive impairment), for people with mild cognitive impairment.

Market access, regulatory compliance and large scale reimbursement, is enabled by the Company’s clinical program.

CST-Therapist Companion

In November 2022, Brain+ introduced its first product, CST-Therapist Companion, to the Danish market and received the first sale in December 2022 to the municipality of Herning. The Company now focuses on commercial roll out of the Therapist Companion, and plans to release a second, MDR-compliant version of the product which is eligible for reimbursement. The Company aims to reach break-even on a monthly basis in the end of  2025 based on sales of CST-Therapist Companion. It is the Company’s assessment that approximately DKK 15 million is required to reach this target.

CST-Home Care

The Company’s second product, the CST – Home Care, is intended to allow people who have finished the 7-week basic CST group program CST to continue the CST therapy in their own homes. In this case the person with dementia will do the CST with a relative, spouse, volunteer or other type of caregiver in the home.  The CST-Home Care product is designed to support patients with the continued exposure of the benefits from basic CST program in the comfort of their own homes. The Company plans to conduct an additional clinical study in 2024 to document the benefits of CST – Home Care, specifically with the intention to meet DIGA required endpoints validating clinical benefits in relation to slowed cognitive decline and quality of life for care givers and users. CST-Home Care is currently expected to complete product development in 2024 and subject to finalized product development and regulatory approvals, the time to market is expected to be in 2025. Development and commercial roll out of CST-Home Care is expected to cost approximately DKK 6 million.

CST for MCI

Brain+ is developing and researching the CST for MCI (Mild Cognitive Impairment) product, which combines CST with the Company’s product within Computerized Cognitive Training (CCT) technology for MCI. CST for MCI is intended as a therapeutic intervention based on CST but using specific CCT modules for core cognitive functions affected in MCI to treat cognitive symptoms in areas of visual spatial attention, memory, attentional control, and episodic memory. Brain+ has a range of initiatives to progress clinical maturation of the product, including a pilot study and proof of concept study. Those studies are assessed to be important in order to attract interest from pharma companies. The capital requirement to execute on the development plan for CST for MCI is estimated to approximately DKK 6 million.

Use of proceeds
The proceeds from the Rights Issue are intended to finance the following activities:

• Commercial activities to scale sales of CST-Therapist Companion in Denmark, Germany, the United Kingdom
• Clinical program (CST Claims study on first product and pilot study on CCT use in Mild Cognitive Impairment)
• Development of UK version of the CST – Therapist Companion
• Other operating expenses through November 2024

The proceeds from warrants of series TO 2 are intended to finance the following activities:

• Clinical program (CST claims study on Cognitive Stimulation Therapy – Home Care product, and CST for MCI proof of Concept Study)

The proceeds from warrants of series TO 3 are intended to finance the following activities:

• Clinical program (CST claims study on Cognitive Stimulation Therapy – Home Care product, and CST for MCI proof of Concept Study)
• Commercial activities to scale sales in target markets to breakeven

Terms of the Rights Issue
The Board of Directors of Brain+ has today, with the mandated authorization from the extraordinary general meeting held on 13 April 2023, resolved on the Rights Issue of a maximum of 15,720,518 new units, consisting of 31,441,036, 31,441,036 warrants of series TO 2 and 31,441,036 warrants of series TO 3. The Rights Issue can initially provide the Company with a maximum amount of approx. DKK 15.7 million before deduction of transaction related costs. Subsequent exercising of warrants of series TO 2 and TO 3 can provide the Company with a maximum of approx. DKK 25.2 million and DKK 37.7 million before deduction of transaction related costs.

Brain+ existing shareholders have pre-emptive rights to subscribe for units in relation to existing shareholdings. Those who are registered as shareholders in Brain+ on the record date of 9 May 2023 have pre-emptive rights to subscribe for units in the Rights Issue. The subscription price in the Rights Issue is DKK 1.00 per unit, which corresponds to DKK 0.50 per new share. For each existing share, one (1) pre-emptive unit right is obtained. One (1) pre-emptive unit right entitles the holder to subscribe for one (1) new unit. Each (1) unit consists of two (2) new shares, two (2) new warrants of series TO 2 and two (2) new warrant of series TO 3. The warrants of series TO 2 and TO 3 are issued free of charge.

Units must be subscribed during the subscription period starting from 10 May 2023 up to and including 25 May 2023. The public also has the possibility to subscribe for units in the Rights Issue.

Last day of trading in Brain+ shares including the right to receive pre-emptive unit rights in the Rights Issue is 4 May 2023. First day for trading in Brain+ shares excluding the right to receive pre-emptive unit rights is 8 May 2023. The registration of the Rights Issue is expected to take place around 2 June 2023. The Board of Directors has the right to extend the subscription period and last day for payment.

Complete terms and conditions for the Rights Issue as well as more information about Brain+ will be presented in the prospectus which is expected to be published on the Company’s website around 24 April 2023.

Preliminary timetable for the Rights Issue

Over-Allotment Issue
If the Rights Issue is fully subscribed, the Board of Directors has the option to resolve on an Over-Allotment Issue of up to 5,821,544. The Over-Allotment Issue corresponds to additional issue proceeds of approximately DKK 5.8 million before transaction costs. The potential net proceeds from the Over-Allotment Issue will accelerate clinical and commercial activities. In the event that the Company's Board of Directors decides to exercise the Over-Allotment Issue, it will be communicated as soon as possible after the Rights Issue.

Subscription commitments and guarantee commitments
The initial part of the Rights Issue is covered up to 85 percent (corresponding to approximately DKK 13.4 million) by pre-subscription- and guarantee commitments from Board members, members from the management team and other external investors. Approximately DKK 4.4 million of the total commitment corresponds to pre-subscription commitments (whereof approximately 0.6 million is commitment from members of the Board and management), approximately DKK 6.3 million corresponds to a “bottom-up” guarantee, covering the range between 0-40 percent public subscription in the Rights Issue (“Tranche 1”) and approximately DKK 2.6 million corresponds to a second tranche of guarantee commitments covering the range 54-71 percent subscription in the Rights Issue (“Tranche 2”). Subscription rate of the Rights Issue below 54 percent will result in full activation of Tranche 2. Investors who have entered into pre-subscription agreements will be allocated units after subscriptions from existing shareholders, the public and any potential activated guarantee commitments have been considered.  Pre-subscription commitments and underwriting commitments are not secured via bank guarantee, pledge or similar arrangements. Guarantors in Tranche 1 will receive an alternative compensation of either fourteen (14) percent in cash or sixteen (16) percent as units on the guaranteed amount. Compensation as units will be issued at the same terms as in the Rights Issue. Guarantors in Tranche 2 will receive twenty (20) percent in cash as compensation.

Lock-up undertakings
Members from the board and management who together own approximately 11 percent of the outstanding shares in the Company have entered into a lock-up agreement corresponding to 90 percent of the holding. The lock-up undertaking also covers any pre-emptive unit rights and warrants of series TO 2 and TO 3. The lock-up period last until completion of the exercise period for warrants of TO 3.

Warrants of series TO 2
The exercise price in the warrant exercise of series TO 2 will amount to seventy (70) percent of the average volume-weighted price for the share according to Nasdaq First North Growth Market's official price statistics during the period of 20 trading days ending two (2) banking days before the exercise period begins. The Company will publish the exercise price the day before the first day of the exercise period. Last day of trading in Warrants of series TO 2 is 12 October 2023. Any Warrants of series TO 2 not exercised during the subscription period or sold before the last day of trading will laps with no value, and the holder of such warrant will not be entitled to compensation. The exercise price must be rounded to the nearest whole øre. The exercise price shall not exceed DKK 0.80. The exercise price shall not fall below DKK 0.20. One (1) warrant of series TO 2 gives the right to subscribe for one (1) new share in the Company during the exercise period that is from October 2 – October 16, 2023.

Warrants of series TO 3
The exercise price in the warrant exercise of series TO 3 will amount to seventy (70) percent of the average volume-weighted price for the share according to Nasdaq First North Growth Market's official price statistics during the period of 20 trading days ending two (2) banking days before the exercise period begins. The Company will publish the exercise price the day before the first day of the exercise period. Last day of trading in Warrants of series TO 3 is 20 March 2024. Any Warrants of series TO 3 not exercised during the subscription period or sold before the last day of trading will laps with no value, and the holder of such warrant will not be entitled to compensation. The exercise price must be rounded to the nearest whole øre. The exercise price shall not exceed DKK 1.20. The exercise price shall not fall below DKK 0.30. One (1) warrant of series TO 3 gives the right to subscribe for one (1) new share in the Company during the exercise period that is from March 8 – March 22, 2024.

Change of share capital and number of shares and dilution
Through the Rights Issue, the number of shares in Brain+ will initially increase by a maximum of 31,441,036, shares, from 15,720,518 shares to 47,161,554 shares and the share capital will increase by a maximum of DKK 3,144,103.60, from DKK 1,572,051.80 to DKK 4,716,155.40. For existing shareholders who do not participate in the Rights Issue this means, upon full subscription, a dilution effect of approximately 66.7 percent of the votes and capital in the Company.

In the event that all warrants of series TO 2 are fully exercised for subscription of new shares in the Company, the number of shares will increase by an additional 31,441,036 to a total of 78,602,590 shares and the share capital will increase by an additional DKK 3,144,103.60 to DKK 7,860,259.00. This corresponds to a dilution effect from the warrants of an additional maximum of approximately 40.0 percent.

In the event that all warrants of series TO 3 are fully exercised for subscription of new shares in the Company, the number of shares will increase by an additional 31,441,036 to a total of 110,043,626 shares and the share capital will increase by an additional DKK 3,144,103.60 to DKK 11,004,362.60. This corresponds to a dilution effect from the warrants of an additional maximum of approximately 28.6 percent.

Upon full exercise of the Over-allotment Issue, an additional 5,821,544 units, consisting of 11,643,088 shares, 11,643,088 warrants of series TO 2 and 11,643,088 warrants series TO 3 may be issued.

Prospectus
Full terms and conditions and instructions for the Rights Issue, as well as other information about the Company and information about subscription and guarantee commitments will be presented in the prospectus. Prospectus is expected to be published 24 April 2023.

Advisors
In connection with the Rights Issue, Sedermera Corporate Finance AB and Gemstone Capital A/S act as financial advisors to Brain+. Markets & Corporate Law Nordic AB act as legal advisor. VP Securities A/S it the issuing agent and Nordic Issuing the settlement agent.

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

Gemstone Capital A/S
Phone: +45 33 22 07 00

E-mail: sh@gemstonecapital.com

www.gemstonecapital.com 

For more information about Brain+, please contact:

Kim Baden-Kristensen, CEO
Phone: +45 31393317
E-mail: kim@brain-plus.com 

www.brain-plus.com

Certified Adviser

Keswick Global AG

Phone: +43 1 740 408 045

E-mail: info@keswickglobal.com

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 Prospectus that Brain+ estimates to publish in April 2023 on Brain+ website www.brain-plus.com. The upcoming approval of the Prospectus by the Danish Financial Supervisory Authority shall not be regarded as an approval of the shares, warrants or any other securities. This release is however 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 Prospectus. Thus, investors are encouraged to review the Prospectus 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 and Sweden. 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.