SoftOx Solutions AS — Capital/Financing Update 2023

May 11, 2023

SoftOx Solutions AS: Company update: Secured first step of financing, completed successful restructuring, and signed agreement with University of Copenhagen

SoftOx Solutions AS: Company update: Secured first step of financing, completed successful restructuring, and signed agreement with University of Copenhagen

OSLO – May 11, 2023: SoftOx Solutions AS (“SoftOx” or the “Company”), a medtech and clinical-stage pharmaceutical company based in Oslo, Norway,has secured financing of approx. NOK 9 million which gives the Company a runway of approx. 6 months within which the Company plans to raise further capital through a contemplated pre-emptive rights issue towards existing shareholders.

“This raise of funds, a material change of strategy including a considerable reduction of burn rate, expected further grants and prepaid assets ready for sale, is expected to fully finance the company’s future product development both for the military and the civil markets.” says Executive Chairman of SoftOx Solutions AS, Geir Almås.

As stated in previous stock exchange notice, including the announcement made March 27 and March 23, the Company has over some time been exploring funding alternatives to secure the Company's operations and liabilities, and that it would restructure and explore strategic alternatives. This work has now been further progressed, through the contemplated financing and the restructuring of the company. The restructuring involves securing key personnel and signing a Letter of Intent (LOI) with the Department of lmmunology and Microbiology (ISIM), Faculty of Health and Medical Sciences, University of Copenhagen, who will now lead the future product development as further described below.

Outsourcing the Company’s product development

The two parties state in the LoI that the potential partnership is based on the highly promising clinical results observed in treatment of chronic wounds, the proof of concept for treatment of influenza in mice and prevention of Sendai virus (parainfluenza) in mice, safety and tolerability studies of SoftOx lnhalation Solution (SIS) and the two parties' partnership in the European Defense Fund's COUNTERACT consortium. The agreement is conditional upon fully financing of SoftOx Solutions including payment of debts and sufficient runway.

“At the University of Copenhagen we find some of the best researchers in the world within the field of antimicrobial resistance and chronic infections. This partnership is a big step towards our goal of developing the future solutions for treatment of virucidal infections in the respiratory tract and infections in chronic wounds”, says Almås.

Together the two parties intend to establish new and innovative solutions based on the SoftOx technology for fighting antimicrobial resistance and chronic infections in wounds and together an inhaled broad spectrum of anti-infective treatment for the respiratory tract.

The two parties state in the LOI:

“The first development project the parties want to move from SoftOx to the University of Copenhagen is the research and development of medical countermeasure solutions against biological threats and for civil preparedness toward the next pandemic. The cost of University of Copenhagen's work packages will be covered by future payments of grants already awarded by European Defense Fund and The Norwegian Ministry of Defense.”

“SoftOx furthermore intends to outsource its civil product development of the SoftOx lnhalation Solution for treatment of influenza-like illnesses and prevention of hospital-acquired pneumonia (HAP) to the University of Copenhagen to ensure that proof of concept in humans”, says Thomas Bjarnsholt, Chief Scientific Officer at SoftOx Solutions, and professor within bacteriology at the University of Copenhagen.

Future projects at University of Copenhagen depends on funding from SoftOx Solutions AS and will give the investors of SoftOx a great opportunity of conducting an effect study in humans on its inhalation solution for a much lower price than originally planned.

SoftOx will keep the commercial rights and ownership to the technology.

Reducing the burn rate, securing key personnel

The Company has reduced the burn rate in the holding company SoftOx Solutions AS from approx. NOK 8 million per month to approx. NOK 1 million per month. This reduction has been achieved through layoffs, closing down our own production facilities for GMP production and other outsourcing of activities.

The Company will in the future only retain a small staff to coordinate and lead the company’s product development.

As already mentioned the University of Copenhagen will take over and perform SoftOx' scientific development under the European Defense Funds Medical Counter Measurement program. SoftOx Defense Solutions AS will have a core scientific team paid by funding from already received grants working on the program.

“By doing this our burn rate has decreased significantly and at the same time securing a strategic collaboration with the University of Copenhagen and University hospitals, we get the ability to do future product development with top notch scientific and clinical teams”, says Almås.

Divestment or co-fund technology after early proof of concept

Based on a change in strategy, where the Company will develop its products to the stage of proof of concept in humans, SoftOx Solutions has started a process to either divest the wound care and the disinfection technology or carve it out in in separate funded companies with a clear pathway of a well-timed potential divestment of ownership.

“We have several leads both within wound care and disinfection, which we will explore further. The interest is solid, and we are optimistic”, says Almås.

Further details regarding first and second round of funding

NOK 9 million is already committed by way of share capital contribution and loan and the Company is in close dialog with other investors with the aim to increase the first round of funding to NOK 16 million in total. 80% of the funding will be in the form of a loan to the group subsidiary Water Innovation AB (WIAB), which will in turn use the funds to secure the company’s intellectual property and pay back a loan to the holding company. The remaining 20% of the funding will be by way of a private placement in SoftOx Solutions AS with up to 400.000 new shares to be subscribed at a subscription price of NOK 8 per share. The loan, which matures on the 31st of January 2024 and will be repaid with an amount equal to 125% of the loan. The lender will at the time of repayment of the loan have a warrant to buy share an amount equal to the original loan with strike NOK 8 per share. Each lender will also receive a number of warrants amounting to double the gross proceeds paid by the respective investor in the first funding round (i.e. share capital and loan amount). These warrants will expire on the date falling 5 years after the issue.

In addition to the NOK 9-16 million in the form of equity and loans in the first funding round, the Board of Directors also expects to propose to the general meeting that it receives an authorization to increase the share capital of the Company by way of conversion of up to NOK 5 million in debt to employees and their companies on to shares with a share price of NOK 8 per share. Each lender will also receive a number of warrants amounting to double the gross proceeds paid by the respective investor in the first funding round (i.e. share capital and loan amount). These warrants will expire on the date falling 5 years after the issue.

Gross proceeds of NOK 20 to 50 million

In order to secure a well-planned process for the divestment of technology and to pay off its accumulated debt, the Company intends to raise NOK 20 to 50 million in a second round of funding. This is expected to be in the form of a rights issue, but other structures may be considered, depending on market conditions and investor appetite. Under the condition that the Company in the second round raise NOK 50 million at NOK 8 per share, today's shareholders will keep ownership of 63,1% of the total amount of shares in the company after the conversion of today’s convertible loan and the execution of the warrants.

The process planning for securing this financing has started and the Company expects to conclude this second round of financing at the latest by the end of the third quarter 2023.

The extraordinary General meeting to approve the share issue, the subscription rights and the authorisations to the Board of Directors to issue new shares will be convened in due course.

For further information, please contact:

Geir Almås, Executive Chairman of SoftOx Solutions AS

Mail: ir@soft-ox.com

Phone: Front Desk: (+47) 948-59-599 or (+47) 977-59-071