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NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2022
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
| Page | |
| Unaudited Interim Condensed Balance Sheets as of June 30, 2022 and December 31, 2021 | 1 |
| Unaudited Interim Condensed Statements of Operating and Comprehensive Loss for the Six Months Ended June 30, 2022 and 2021 | 2 |
| Unaudited Interim Condensed Statements of Changes in Equity for the Six Months Ended June 30, 2022 and 2021 | 3 |
| Unaudited Interim Condensed Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 | 4 |
| Notes to the Unaudited Interim Condensed Financial Statements | 5 |
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED BALANCE SHEETS
| June 30, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,354,187 | $ | 5,431,202 | ||||
| Prepaid expenses and other current assets (Note 3) | 668,321 | 291,954 | ||||||
| Total current assets | 2,022,508 | 5,723,156 | ||||||
| Property and equipment (Note 4) | 23,806 | 29,510 | ||||||
| Other assets | 11,735 | 12,044 | ||||||
| Total assets | $ | 2,058,049 | $ | 5,764,710 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Note payable (Note 5) | $ | 354,336 | $ | - | ||||
| Accounts payable, including related party of $ 60,195 and $ 62,231 , as of June 30, 2022 and December 31, 2021, respectively | 2,521,857 | 1,737,013 | ||||||
| Other accrued liabilities, including related party of $ 20,445 and $ 6,877 as of June 30, 2022 and December 31, 2021, respectively (Note 6) | 534,600 | 666,449 | ||||||
| Total current liabilities | 3,410,793 | 2,403,462 | ||||||
| Deferred revenues (Note 7) | 2,499,969 | 2,499,969 | ||||||
| Accrued pension liability | 188,761 | 318,891 | ||||||
| Total liabilities | 6,099,523 | 5,222,322 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Shareholders' equity (deficit) | ||||||||
| Common shares, CHF 0.02 ($ 0.02 ) par value; 29,346,768 authorized; 19,564,512 and 16,223,389 shares issued; 17,785,920 and 14,748,536 shares outstanding on June 30, 2022 and December 31, 2021, respectively | 411,268 | 344,445 | ||||||
| Treasury shares | ( 35,572 | ) | ( 29,497 | ) | ||||
| Additional paid-in capital | 45,962,126 | 42,084,954 | ||||||
| Accumulated deficit | ( 50,346,584 | ) | ( 41,705,775 | ) | ||||
| Accumulated other comprehensive loss | ( 32,712 | ) | ( 151,739 | ) | ||||
| Total shareholders' equity (deficit) | ( 4,041,474 | ) | 542,388 | |||||
| Total liabilities and shareholders' equity (deficit) | $ | 2,058,049 | $ | 5,764,710 |
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, | ||||||||
| 2022 | 2021 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | 5,544,093 | $ | 1,862,735 | ||||
| General and administrative | 3,143,933 | 2,680,018 | ||||||
| Total operating expenses | 8,688,026 | 4,542,753 | ||||||
| Operating loss | ( 8,688,026 | ) | ( 4,542,753 | ) | ||||
| Other income, net | 56,397 | 7,544 | ||||||
| Interest expense | ( 9,180 | ) | ( 48,099 | ) | ||||
| Interest on related party loans | - | ( 20,034 | ) | |||||
| Net loss | ( 8,640,809 | ) | ( 4,603,342 | ) | ||||
| Other comprehensive loss: | ||||||||
| Defined pension plan adjustments | 119,027 | ( 160,472 | ) | |||||
| Comprehensive loss | $ | ( 8,521,782 | ) | $ | ( 4,763,814 | ) | ||
| Basic and diluted net loss per common share | $ | ( 0.54 | ) | $ | ( 0.42 | ) | ||
| Weighted average common shares used for computing basic and diluted net loss per common share | 15,892,327 | 11,069,254 |
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, 2022 AND 2021
| Common Shares | Treasury | Additional Paid in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||
| Shares | Amount | Shares | Capital | Deficit | Loss | Total | ||||||||||||||||||||||
| BALANCE, JANUARY 1, 2022 | 16,223,389 | $ | 344,445 | $ | ( 29,497 | ) | $ | 42,084,954 | $ | ( 41,705,775 | ) | $ | ( 151,739 | ) | $ | 542,388 | ||||||||||||
| Issuance of common shares direct offering, net | 1,562,531 | 31,251 | 29,057 | 1,851,205 | - | - | 1,911,513 | |||||||||||||||||||||
| Issuance of warrants, net | - | - | - | 900,798 | - | - | 900,798 | |||||||||||||||||||||
| Issuance of pre-funded warrants, net | - | - | - | 1,094,616 | - | - | 1,094,616 | |||||||||||||||||||||
| Issuance of common shares in At-The-Market (ATM) financing | - | - | 440 | 30,553 | - | - | 30,993 | |||||||||||||||||||||
| Issuance of treasury shares | 1,778,592 | 35,572 | ( 35,572 | ) | - | - | - | - | ||||||||||||||||||||
| Defined pension plan adjustments | - | - | - | - | - | 119,027 | 119,027 | |||||||||||||||||||||
| Net loss | - | - | - | - | ( 8,640,809 | ) | - | ( 8,640,809 | ) | |||||||||||||||||||
| BALANCE, JUNE 30, 2022 | 19,564,512 | $ | 411,268 | $ | ( 35,572 | ) | $ | 45,962,126 | $ | ( 50,346,584 | ) | $ | ( 32,712 | ) | $ | ( 4,041,474 | ) |
| Common Shares | Treasury | Additional Paid in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||
| Shares | Amount | Shares | 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 |
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, | ||||||||
| 2022 | 2021 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( 8,640,809 | ) | $ | ( 4,603,342 | ) | ||
| Adjustments to reconcile net loss to net cash used in in operating activities: | ||||||||
| Amortization of debt discount | - | 41,611 | ||||||
| Depreciation expense | 5,704 | 5,022 | ||||||
| Provision for doubtful accounts | - | 77,714 | ||||||
| Periodic pension costs | ( 11,103 | ) | 13,352 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | 327,792 | ( 1,046,247 | ) | |||||
| Other receivables, net - related parties | - | ( 9,760 | ) | |||||
| Accounts payable | 784,844 | ( 3,479,270 | ) | |||||
| Interest payable | - | ( 313,342 | ) | |||||
| Other accrued liabilities | ( 131,848 | ) | ( 419,073 | ) | ||||
| Net cash used in operating activities | ( 7,665,420 | ) | ( 9,733,335 | ) | ||||
| 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 common shares in ATM financing | 30,993 | - | ||||||
| Proceeds from the issuance of common shares in direct offering, net | 1,911,513 | - | ||||||
| Proceeds from the issuance of pre-funded warrants, net | 1,094,616 | - | ||||||
| Proceeds from the issuance of warrants, net | 900,798 | 6,742,638 | ||||||
| Payments on notes payable | ( 349,824 | ) | ||||||
| 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 | ) | |||||
| Net cash provided by financing activities | 3,588,096 | 16,789,238 | ||||||
| Effect of exchange rate on cash and cash equivalents | 309 | ( 24,744 | ) | |||||
| Change in cash and cash equivalents | ( 4,077,015 | ) | 6,998,404 | |||||
| Cash and cash equivalents at the beginning of period | 5,431,202 | 93,711 | ||||||
| Cash and cash equivalents at the end of period | $ | 1,354,187 | $ | 7,092,115 | ||||
| Supplemental disclosure of non-cash and financing activities: | ||||||||
| Issuance of note payable for prepaid insurance | $ | 704,160 | $ | - | ||||
| Deferred financing costs transferred to additional paid in capital | $ | - | $ | 946,912 | ||||
| Issuance of common shares to consultant for payment of expenses | $ | - | $ | 50,000 |
The accompanying notes are an integral part of
these unaudited interim condensed financial statements.
NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
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 disorder ("ADHD").
The Company's lead product candidates are Quilience, to treat narcolepsy (type 1 and type 2), and Nolazol, to treat ADHD.
2, 2021, the Company completed the closing of its initial public offering (the "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 underwriter exercised its 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, 2022, the Company had an accumulated
deficit of approximately $50.3 million and the Company incurred an operating loss for the six months ended June 30, 2022 of approximately
$8.7 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, 2022, the Company's cash and
cash equivalents were $1.4 million. The Company expects that its existing cash and cash equivalents, including the $1.5 million in short-term
notes issued in August 2022 (see Note 11), will not be sufficient to fund operations for a period of one year from the issuance of these
financial statements. The Company expects to continue to generate operating losses and negative operating cash flows for the next few
years and will need additional funding to support its planned operating activities through profitability. 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; | ||
| 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 will 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.
NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
The Company has put in place multiple options to raise
the funds necessary to support its operations, including access to $18.5 million of funding through a Standby Equity Distribution Agreement
(the "SEDA") executed with YA II PN, Ltd. ("YA"), and $230 thousand of potential funding via an ATM agreement
with Virtu Americas LLC ("Virtu"). The Company has access to the funds under SEDA. The Company plans to raise additional funds
besides through the SEDA and ATM agreement with Virtu. 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.
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.
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, 2021 and any public announcements made by the Company during the interim reporting period.
In the opinion of management, these unaudited
interim condensed financial statements reflect all adjustments necessary, which are of a normal recurring nature, to fairly state the
balance sheets, statements of operating and comprehensive loss, changes in equity and cash flows for the interim reporting periods presented.
The preparation of the unaudited interim condensed
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported of
assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the interim reporting
periods. Actual results could differ from those estimates and be based on events different from those assumptions. As part of these financial
statements, the more significant estimates include the valuation allowance related to the Company's deferred tax assets.
NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Property and equipment
Property and equipment are recorded at cost, net