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NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2021
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
| Page | ||
| Unaudited Interim Condensed Balance Sheets as of June 30, 2021 and December 31, 2020 | 3 | |
| Unaudited Interim Condensed Statements of Operating and Comprehensive Loss for the Six Months Ended June 30, 2021 and 2020 | 4 | |
| Unaudited Interim Condensed Statements of Changes in Equity for the Six Months Ended June 30, 2021 and 2020 | 5 | |
| Unaudited Interim Condensed Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 | 6 | |
| Notes to the Unaudited Interim Condensed Financial Statements | 7 |
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED BALANCE SHEETS
| June 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 7,092,115 | $ | 93,711 | ||||
| Prepaid expenses and other current assets (Note 4) | 1,149,247 | 103,000 | ||||||
| Total current assets | 8,241,362 | 196,711 | ||||||
| Deferred offering costs | - | 946,912 | ||||||
| Property and equipment (Note 5) | 27,733 | - | ||||||
| Other receivables, net - related party (Note 6) | - | 67,954 | ||||||
| Total assets | $ | 8,269,095 | $ | 1,211,577 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable, including related party of $ 14,547 and $ 454,315 , as of June 30, 2021 and December 31, 2020, respectively | $ | 527,203 | $ | 4,006,473 | ||||
| Interest payable | - | 316,174 | ||||||
| Convertible promissory notes - related parties (Note 7) | - | 591,693 | ||||||
| Current portion of credit facilities, subordinated - related parties (Note 8) | - | 150,000 | ||||||
| Current portion of convertible loan, including related party of $ 0 and $ 113,130 as of June 30, 2021 and December 31, 2020, respectively, net of discount of $ 0 and $ 37,362 as of June 30, 2021 and December 31, 2020, respectively (Note 9) | - | 463,980 | ||||||
| Bridge loan (Note 10) | - | 565,650 | ||||||
| Accrued salaries | - | 459,195 | ||||||
| Other accrued liabilities, including related party of $ 63,859 and $ 40,842 as of June 30, 2021 and December 31, 2020, respectively (Note 11) | 665,648 | 650,753 | ||||||
| Total current liabilities | 1,192,851 | 7,203,918 | ||||||
| Convertible loans, net of discount of $ 0 and $ 4,248 as of June 30, 2021 and December 31, 2020, respectively (Note 9) | - | 32,463 | ||||||
| Swiss government loan (Note 12) | - | 281,015 | ||||||
| Deferred revenues (Note 13) | 2,499,969 | 2,499,969 | ||||||
| Accrued pension liability | 327,320 | 178,269 | ||||||
| Total liabilities | 4,020,140 | 10,195,634 | ||||||
| Commitments and contingencies (Note 14) | ||||||||
| Shareholders' equity (deficit) | ||||||||
| Common shares, CHF 0.02 ($ 0.02 ) par value; 17,945,915 authorized; 12,068,325 and 6,960,000 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively | 259,729 | 145,139 | ||||||
| Additional paid-in capital | 38,532,118 | 20,649,882 | ||||||
| Accumulated deficit | ( 34,363,039 | ) | ( 29,759,697 | ) | ||||
| Accumulated other comprehensive loss | ( 179,853 | ) | ( 19,381 | ) | ||||
| Total shareholders' equity (deficit) | 4,248,955 | ( 8,984,057 | ) | |||||
| Total liabilities and shareholders' equity (deficit) | $ | 8,269,095 | $ | 1,211,577 |
The accompanying notes are an integral part of
these Unaudited Interim Condensed Financial Statements.
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF OPERATING
AND COMPREHENSIVE LOSS
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2020 (as restated) | |||||||
| Operating expenses: | ||||||||
| Research and development 1 | $ | 1,862,735 | $ | 41,421 | ||||
| General and administrative 1 | 2,680,018 | 1,040,273 | ||||||
| Total operating expenses | 4,542,753 | 1,081,694 | ||||||
| Operating loss | ( 4,542,753 | ) | ( 1,081,694 | ) | ||||
| Other income (expense), net | 7,544 | ( 62,193 | ) | |||||
| Interest expense | ( 48,099 | ) | ( 37,094 | ) | ||||
| Interest on related party loans | ( 20,034 | ) | ( 51,235 | ) | ||||
| Net loss | ( 4,603,342 | ) | ( 1,232,216 | ) | ||||
| Other comprehensive loss: | ||||||||
| Defined pension plan adjustments | ( 160,472 | ) | - | |||||
| Comprehensive loss | $ | ( 4,763,814 | ) | $ | ( 1,232,216 | ) | ||
| Basic and diluted net loss per common share | $ | ( 0.42 | ) | $ | ( 0.18 | ) | ||
| Weighted average common shares used for computing basic and diluted net loss per common share | 11,069,254 | 6,960,000 |
The accompanying notes are an integral part of
these Unaudited Interim Condensed Financial Statements.
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CHANGES
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
| Common Shares | Additional Paid in | Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||
| BALANCE, JANUARY 1, 2021 | 6,960,000 | $ | 145,139 | $ | 20,649,882 | $ | ( 29,759,697 | ) | $ | ( 19,381 | ) | $ | ( 8,984,057 | ) | ||||||||||
| Issuance of common shares in initial public offering, net | 4,819,277 | 108,347 | 9,946,310 | - | - | 10,054,657 | ||||||||||||||||||
| Issuance of warrants | - | - | 6,742,638 | - | - | 6,742,638 | ||||||||||||||||||
| Issuance of common shares to consultant | 12,048 | 268 | 49,732 | - | - | 50,000 | ||||||||||||||||||
| Warrant exercises | 277,000 | 5,975 | 1,143,556 | - | - | 1,149,531 | ||||||||||||||||||
| Defined pension plan adjustments | ( 160,472 | ) | ( 160,472 | ) | ||||||||||||||||||||
| Net loss | - | - | - | ( 4,603,342 | ) | - | ( 4,603,342 | ) | ||||||||||||||||
| BALANCE, JUNE 30, 2021 | 12,068,325 | $ | 259,729 | $ | 38,532,118 | $ | ( 34,363,039 | ) | $ | ( 179,853 | ) | $ | 4,248,955 |
| Common Shares | Additional Paid in | Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||
| BALANCE, JANUARY 1, 2020 | 6,960,000 | $ | 145,139 | $ | 20,600,871 | $ | ( 26,898,262 | ) | $ | ( 18,698 | ) | $ | ( 6,170,950 | ) | ||||||||||
| Debt discount on convertible loans | - | - | 39,496 | - | - | 39,496 | ||||||||||||||||||
| Debt discount on related party loans | - | - | 30,030 | - | - | 30,030 | ||||||||||||||||||
| Net loss | - | - | - | ( 1,232,216 | ) | - | ( 1,232,216 | ) | ||||||||||||||||
| BALANCE, JUNE 30, 2020 | 6,960,000 | $ | 145,139 | $ | 20,670,397 | $ | ( 28,130,478 | ) | $ | ( 18,698 | ) | $ | ( 7,333,640 | ) |
The accompanying notes are an integral part of
these Unaudited Interim Condensed Financial Statements.
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CASH
| For the Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( 4,603,342 | ) | $ | ( 1,232,216 | ) | ||
| Adjustments to reconcile net loss to net cash used in in operating activities: | ||||||||
| Amortization of debt discount | 41,611 | 36,664 | ||||||
| Depreciation expense | 5,022 | - | ||||||
| Provision for doubtful accounts | 77,714 | - | ||||||
| Periodic pension costs | 13,352 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( 1,046,247 | ) | 85,605 | |||||
| Other receivables, net - related parties | ( 9,760 | ) | ( 1,719 | ) | ||||
| Accounts payable | ( 3,479,270 | ) | 246,734 | |||||
| Interest payable | ( 313,342 | ) | 51,789 | |||||
| Other accrued liabilities | ( 419,073 | ) | 280,219 | |||||
| Net cash used in operating activities | ( 9,733,335 | ) | ( 532,924 | ) | ||||
| Investing Activities: | ||||||||
| Purchases of property and equipment | ( 32,755 | ) | - | |||||
| Net cash used in investing activities | ( 32,755 | ) | - | |||||
| Financing Activities: | ||||||||
| Proceeds from the issuance of common shares in initial public offering, net | 11,001,569 | - | ||||||
| Proceeds from the issuance of warrants | 6,742,638 | - | ||||||
| Exercise of warrants | 1,149,531 | - | ||||||
| Proceeds from bridge loan | 108,610 | - | ||||||
| Payment on Swiss government loan | ( 277,537 | ) | - | |||||
| Payment on second credit facility | ( 150,000 | ) | - | |||||
| Payment on convertible loans | ( 420,020 | ) | - | |||||
| Payment on convertible loans - related party | ( 111,730 | ) | - | |||||
| Payment on bridge loan | ( 670,380 | ) | - | |||||
| Payment of shareholder loans | ( 583,443 | ) | - | |||||
| Proceeds from convertible loans | - | 174,215 | ||||||
| Proceeds from convertible loan - related party | - | 105,530 | ||||||
| Proceeds from Swiss government loan | - | 262,137 | ||||||
| Deferred offering costs | - | ( 102,319 | ) | |||||
| Net cash provided by financing activities | 16,789,238 | 439,563 | ||||||
| Effect of exchange rate on cash and cash equivalents | ( 24,744 | ) | 18,498 | |||||
| Change in cash and cash equivalents | 6,998,404 | ( 74,863 | ) | |||||
| Cash and cash equivalents at the beginning of period | 93,711 | 220,267 | ||||||
| Cash and cash equivalents at the end of period | $ | 7,092,115 | $ | 145,404 | ||||
| Supplemental disclosure of non-cash and financing activities: | ||||||||
| Deferred financing costs transferred to additional paid in capital | $ | 946,912 | $ | - | ||||
| Issuance of common shares to consultant for payment of expenses | $ | 50,000 | $ | - | ||||
| Debt discount on convertible loans | $ | - | $ | 39,496 | ||||
| Debt discount on convertible loan - related party | $ | - | $ | 30,030 |
The accompanying notes are an integral part of
these Unaudited Interim Condensed Financial Statements.
NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL
NLS Pharmaceutics Ltd.
(Nasdaq: NLSP, NLSPW) (the "Company") is an emerging biopharmaceutical company engaged in the discovery and development of
life-improving drug therapies to treat rare and complex central nervous system disorders, including narcolepsy, idiopathic hypersomnia
and other rare sleep disorders, and of neurodevelopmental disorders, such as Attention Deficit Hyperactivity ("ADHD"). The
Company's lead product candidates are Quilience, to treat narcolepsy (type 1 and type 2), and Nolazol, to treat ADHD.
On March 12, 2019, the
Company merged NLS-0 Pharma Ltd. and NLS Pharma Ltd. into NLS-1 Pharma Ltd. (the "Merger"),
the predecessor of the Company, retroactively and effective on January 1, 2019 and renamed the Company NLS Pharmaceutics Ltd. Due
to the high degree of common ownership among the three companies and because individual investors' ownership is in substance the
same after the transaction, this Merger was deemed to be a non-substantive merger, with no step up in basis of the assets and liabilities
in the Merger. The financial statements presented were prepared as if the Merger occurred on January 1, 2019. All intercompany transactions
and balances were eliminated in the Merger.
2, 2021, the Company completed the closing of its initial public offering of 4,819,277 units at a price of $4.15 per unit. Each
unit consisted of one common share and one warrant to purchase one common share (the "Warrants"). The common shares and Warrants
were immediately separable from the units and were issued separately. The common shares and Warrants began trading on the Nasdaq Capital
Market on January 29, 2021 under the symbols "NLSP" and "NLSPW," respectively. The Company received net proceeds
of $17 million, after deducting underwriting discounts and commissions and other estimated offering expenses. The Warrants are exercisable
immediately, expire five years from the date of issuance and have an exercise price of $4.15 per share. In addition, the Company granted
the underwriters a 45-day option to purchase up to an additional 722,891 common shares and/or Warrants to purchase 722,891 common shares
at the public offering price of $0.01 per Warrant, of which the underwriters exercised their option to purchase Warrants to purchase up
to 722,891 common shares. These Warrants were issued in the Company's initial public offering and therefore have the same exercise
price of $4.15 per share.
As of June 30, 2021, the Company had an accumulated
deficit of approximately $34.4 million and the Company incurred an operating loss for the six months ended June 30, 2021 of approximately
$4.6 million. To date, the Company has dedicated most of its financial resources to research and development, clinical studies associated
with its ongoing biopharmaceutical business and general and administrative expenses.
As of June 30, 2021, the Company's cash
and cash equivalents were $7.1 million. The Company expects that its existing cash and cash equivalents will be sufficient to fund operations
into the second quarter of 2022. These conditions raise substantial doubt about the Company's ability to continue as a going concern
for one year from the issuance of these financial statements. Additionally, the Company's operating plans may change as a result
of many factors that may currently be unknown to the Company including:
| the length of the novel strain of coronavirus ("COVID-19") pandemic and its impact on the Company's planned clinical trials, operations and financial condition; | ||
| the progress and costs of the Company's pre-clinical studies, clinical trials and other research and development activities; | ||
| the scope, prioritization and number of the Company's clinical trials and other research and development programs; | ||
| any cost that the Company may incur under in- and out-licensing arrangements relating to its product candidate that it may enter into in the future; |
NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL
| the costs and timing of obtaining regulatory approval for the Company's product candidates; | ||
| the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; | ||
| the costs of, and timing for, strengthening the Company's manufacturing agreements for production of sufficient clinical and commercial quantities of its product candidates; | ||
| the potential costs of contracting with third parties to provide marketing and distribution services for the Company or for building such capacities internally; and | ||
| the costs of acquiring or undertaking the development and commercialization efforts for additional therapeutic applications of the Company's product candidates and the magnitude of the Company's general and administrative expenses. |
As a result, the Company may require additional capital to finance
expenditures related to the manufacture of the Company's product candidates for use in clinical trials, conducting clinical trials
and general and administration expenses.
The Company has historically financed its activities
primarily with cash from an initial public offering, private placement of equity and debt securities and borrowings under credit facilities,
shareholder loans, Swiss Government COVID-19 loan and an upfront payment from a collaboration partner. The Company intends to raise additional
capital through public offerings of debt and equity securities, private placements of debt and equity securities or through loans from
third parties, but there can be no assurance that these funds will be available, or if they are available, that their availability will
be on terms acceptable to the Company or in an amount sufficient to enable the Company to fully complete its development activities or
sustain operations. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further
extend payables and indebtedness, reduce overhead, or scale back its current business plan until sufficient additional capital is raised
to support further operations or force the Company to grant rights to develop and commercialize product candidates that it would otherwise
prefer to develop and commercialize on its own. There can be no assurance that such a plan will be successful.
Accordingly, the accompanying unaudited interim
condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of
America ("U.S. GAAP"), which contemplate continuation of the Company as a going concern for a period within one year from
the issuance of these unaudited interim condensed financial statements and the realization of assets and satisfaction of liabilities in
the normal course of business. The carrying amounts of assets and liabilities presented in these unaudited interim condensed financial
statements do not necessarily purport to represent realizable or settlement values. These unaudited interim condensed financial statements
do not include any adjustment that might result from the outcome of this uncertainty.
14, 2020, the Company filed an amendment to its Articles of Incorporation and effected a 5,000-for-1 stock split of its issued and outstanding
common shares, CHF 0.02 ($0.02) par value, whereby 1,392 outstanding Company's common shares were exchanged for 6,960,000 of the
Company's common shares. All per share amounts and number of shares in these unaudited condensed financial statements and related
notes have been retroactively restated to reflect the stock split.
Summary of Significant Accounting Policies:
Basis of Preparation
The unaudited interim condensed financial statements
have been prepared in accordance with U.S. GAAP for interim financial information and accordingly do not include all information and
disclosures as required by U.S. GAAP for complete financial statements. The year-end unaudited interim condensed balance sheet was derived
from audited financial statements, but does not include all disclosures required by U.S. GAAP. These unaudited interim condensed financial
statements should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form
20-F for the year ended December 31, 2020 and any public announcements made by the Company during the interim reporting period.
NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL