BrainCool AB (publ) - Financial Report for Q1 2024

Group
The period in brief

Jon Berg, CEO comments

BrainCool has taken a number of measures to strengthen the company's long-term development during the first quarter. Among other things, we have strengthened the management team. It has been an intense and challenging period since I took over the CEO role at the beginning of February this year. However, I would like to emphasize that the underlying business has performed well.

This is confirmed by the fact that sales of BrainCool™ System and consumables rose to SEK 8.2 million during the first quarter compared to SEK 2.7 million in the same period in 2023. We delivered 20 systems to customers during the period at agreed and fixed list prices. During the first quarter we have started deliveries of consumables to ZOLL®, in line with orders placed during the period.

As we are now moving into serial production, we are implementing an investment program for the BrainCool™ /IQool™ System consumables. The main purpose of the investment program is to increase production capacity and significantly decrease production costs.

Going forward we expect to see higher margins, in particular with regard to the consumables. We believe this is achievable due to rising production volumes and reduced costs for the manufacturing of consumables. We are also trimming overall cost in particular regarding the US organization that will have full effect in 2025.

So far this year, BrainCool has been able to announce a number of important steps in the company's development confirming BrainCool as a competitive player in the market. Karolinska announced the start of PRINCESS 2 by enrolling the first patent. PRINCESS 2 is a unique clinical study of early and rapid cooling of patients who have suffered cardiac arrest. BrainCool's product RhinoChill® System is the sole cooling device used at the scene of the cardiac arrest. The German Medical Agency approved the COTTIS 2 study, which is a groundbreaking clinical trial of the treatment of patients who have suffered a stroke with the combination of cooling and thrombectomy where RhinoChill® System and BrainCool™ System is also used. The first patient in COTTIS 2 is expected to be enrolled during the second quarter of 2024.

BrainCool System received market approval in Thailand, which can facilitate the approval processes in other ASEAN countries such as Malaysia, Singapore, Indonesia and the Philippines. The collaboration with ZOLL® was expanded in August of 2023 to include the distribution of the BrainCool System in the ASEAN countries.

Our cooperation with ZOLL® is gradually expanding. This is evidenced by the extended distribution agreement for the Japanese market. The agreement, which the parties recently signed, covers at least 90 BrainCool™ Systems with an order value of at least SEK 20 million. At the same time, ZOLL® takes over the regulatory approval process in Japan.

The positive development has to some extent been clouded by the fact that the former CEO had taken an unlawful loan (sw.
förbjudet lån) from the company to himself, which led to him being reported to the police and dismissed from the company. Evidently, this unexpected event has brought some challenges. However, our professional and competent employees have continued to deliver. In March I appointed Mohammed Fazel as Head of Clinical Studies and Christian Strand as Head of Global Distribution to strengthen the company's management team.

In late March we communicated that we have identified a capital need of approximately SEK 85 – 95 million and that we intend to secure this through a new issue where the intention is that the capital injection will take BrainCool to a phase where the business generates a positive cash flow. In connection herewith, it was reassuring to be able to communicate that six of BrainCool’s largest shareholders, together representing approximately 22 per cent of the share in the company, have declared themselves positive to subscribe for shares in the new issue. The terms and time plan for the financing will be communicated as soon as resolved. To secure the company’s liquidity needs and to be able to continue with ongoing cost reduction projects and industrialization projects until the financing has been completed, the company has raised a bridge loan of a total of SEK 20 million.

As for the second quarter, the focus is on delivering the BrainCool™ System to ZOLL® in accordance with the agreement signed in June last year. The agreement covers at least 350 systems with an order value of at least SEK 100 million over a period of 24 months, with quarterly deliveries from 1 April this year. In addition, the second order of consumables for ZOLL®, signed in the first quarter will be delivered during the quarter.

Overall, we believe that BrainCool will be able to show strong sales growth and an increased gross profit going forward. I look forward to leading BrainCool on its journey towards becoming a global commercial player.