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NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
AND FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
| Page | ||
| Interim Condensed Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024 | 1 | |
| Unaudited Interim Condensed Statements of Operations and Comprehensive Loss for the Six Months Ended June 30, 2025 and 2024 | 2 | |
| Unaudited Interim Condensed Statements of Changes in Shareholders' Equity (Deficit) for the Six Months Ended June 30, 2025 and 2024 | 3 | |
| Unaudited Interim Condensed Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 | 4 | |
| Notes to the Unaudited Interim Condensed Financial Statements | 5 |
NLS PHARMACEUTICS LTD.
INTERIM CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,072,376 | $ | 1,665,395 | ||||
| Prepaid expenses and other current assets | 963,511 | 560,157 | ||||||
| Total current assets | 4,035,887 | 2,225,552 | ||||||
| Deferred offering costs | 296,154 | - | ||||||
| Property and equipment, net | 5,303 | 7,290 | ||||||
| Other assets | 283 | 283 | ||||||
| Total assets | $ | 4,337,628 | $ | 2,233,125 | ||||
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable, including a related party of $ 10,000 and $ 15,000 , as of June 30, 2025 and December 31, 2024, respectively | $ | 1,021,052 | $ | 515,486 | ||||
| Other accrued liabilities | 434,069 | 311,278 | ||||||
| Total liabilities | 1,455,121 | 826,764 | ||||||
| Commitments and contingencies (Note 5) | ||||||||
| Shareholders' equity(deficit) | ||||||||
| Preferred participation certificates, CHF 0.03 ($ 0.0369 ) par value, 583,198 registered shares issued and outstanding at June 30, 2025, and 206,452 at December 31,2024. | 21,424 | 8,586 | ||||||
| Preferred shares, CHF 0.03 ($ 0.0369 ) par value, 1,249,904 registered shares issued and outstanding at June 30, 2025, and none at December 31,2024. | 42,539 | - | ||||||
| Common shares, CHF 0.03 ($ 0.0369 ) par value, 4,152,056 registered shares issued and outstanding at June 30, 2025 and 3,159,535 at December 31, 2024. | 153,141 | 118,918 | ||||||
| Additional paid-in capital | 77,361,856 | 75,600,478 | ||||||
| Accumulated deficit | ( 74,805,306 | ) | ( 74,430,474 | ) | ||||
| Accumulated other comprehensive loss | 108,853 | 108,853 | ||||||
| Total shareholders' equity (deficit) | 2,882,507 | 1,406,361 | ||||||
| Total liabilities and shareholders' equity (deficit) | $ | 4,337,628 | $ | 2,233,125 |
The accompanying notes are an integral part of
these unaudited interim condensed financial statements.
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| OPERATIONS | ||||||||
| Operating expenses: | ||||||||
| Research and development | $ | 142,083 | $ | 271,350 | ||||
| General and administrative | 1,637,132 | 1,782,142 | ||||||
| Merger transaction costs | 420,289 | - | ||||||
| Total operating expenses | 2,199,504 | 2,053,492 | ||||||
| Operating loss | ( 2,199,504 | ) | ( 2,053,492 | ) | ||||
| Other income (expense): | ||||||||
| Other income (expense), net | ( 20,782 | ) | 104,643 | |||||
| Interest expense | ( 385 | ) | ( 11,012 | ) | ||||
| Interest expense on related party loans | - | ( 75,973 | ) | |||||
| Total other income (expense) | ( 21,167 | ) | 17,658 | |||||
| Net loss | ( 2,220,671 | ) | ( 2,035,834 | ) | ||||
| Deemed dividends - make whole shares | ( 1,231,900 | ) | - | |||||
| Deemed dividends- warrants | ( 613,939 | ) | - | |||||
| Accrued dividends on preferred shares | ( 126,367 | ) | - | |||||
| Net loss attributable to common shareholders | $ | ( 4,192,877 | ) | $ | ( 2,035,834 | ) | ||
| Basic and diluted net loss per common share | $ | ( 1.05 | ) | $ | ( 1.94 | ) | ||
| Weighted average common shares used in computing basic and diluted net loss per common share | 4,004,867 | 1,048,632 | ||||||
| COMPREHENSIVE LOSS | ||||||||
| Other comprehensive loss: | ||||||||
| Net loss | $ | ( 2,220,671 | ) | $ | ( 2,035,834 | ) | ||
| Effect of exchange rate changes | - | 121,428 | ||||||
| Defined pension plan adjustments | - | 40,850 | ||||||
| Comprehensive loss | $ | ( 2,220,671 | ) | $ | ( 1,873,556 | ) |
The accompanying notes are an integral part of
these unaudited interim condensed financial statements.
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2025, AND 2024
| Preferred Participation Certificates | Preferred Shares | Common Shares | Additional Paid | (Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | in Capital | Deficit) | Loss | Total | |||||||||||||||||||||||||||||||
| BALANCE, JANUARY 1, 2025 | 206,452 | $ | 8,586 | - | $ | - | 3,159,535 | $ | 118,918 | $ | 75,600,478 | $ | ( 74,430,474 | ) | $ | 108,853 | $ | 1,406,361 | ||||||||||||||||||||||
| Issuance of equity in private placement offerings, net | 568,278 | 20,332 | 1,249,904 | 42,539 | 161,290 | 5,394 | 3,231,735 | - | - | 3,300,000 | ||||||||||||||||||||||||||||||
| Issuance of common shares due to exercise of warrants | - | - | - | - | 76,847 | 2,570 | 178,212 | - | - | 180,782 | ||||||||||||||||||||||||||||||
| Issuance of pre-funded preferred shares in private placement offerings, net | 360,000 | 11,799 | - | - | - | - | ( 11,799 | ) | - | - | - | |||||||||||||||||||||||||||||
| Conversion of preferred participation certificates into common shares | ( 551,532 | ) | ( 19,293 | ) | - | - | 754,384 | 26,259 | ( 6,966 | ) | - | - | - | |||||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | - | 46,248 | - | - | 46,248 | |||||||||||||||||||||||||||||||
| Deemed dividend-make whole shares | - | - | - | - | ( 1,231,900 | ) | 1,231,00 | - | - | |||||||||||||||||||||||||||||||
| Deemed dividend-warrants | - | - | - | - | ( 613,939 | ) | 613,939 | - | - | |||||||||||||||||||||||||||||||
| Accrued dividends on preferred shares | - | - | - | - | - | ( 126,367 | ) | - | - | ( 126,367 | ) | |||||||||||||||||||||||||||||
| Pre-funded warrant issued as a deferred offering cost | - | - | - | - | - | - | 296,154 | - | - | 296,154 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | ( 2,220,671 | ) | - | ( 2,220,671 | ) | ||||||||||||||||||||||||||||
| BALANCE, JUNE 30, 2025 | 583,198 | $ | 21,424 | 1,249,904 | $ | 42,539 | 4,152,056 | $ | 153,141 | $ | 77,361,856 | $ | ( 74,805,306 | ) | $ | 108,853 | $ | 2,882,507 |
| Preferred Participation Certificates | Preferred Shares | Common Shares | Additional Paid | (Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | in Capital | Deficit) | Loss | Total | |||||||||||||||||||||||||||||||
| BALANCE, JANUARY 1, 2024 | - | $ | - | - | $ | - | 810,723 | $ | 27,625 | $ | 61,670,367 | $ | ( 70,373,484 | ) | $ | ( 158,071 | ) | $ | ( 8,833,563 | ) | ||||||||||||||||||||
| Issuance of common shares in private placement offerings, net | - | - | - | - | 175,000 | 5,964 | 1,374,327 | - | - | 1,380,291 | ||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | - | - | - | 58,570 | - | - | 58,570 | ||||||||||||||||||||||||||||||
| Defined pension plan adjustments | - | - | - | - | - | - | - | 40,850 | 40,850 | |||||||||||||||||||||||||||||||
| Effect of exchange rate changes on short-term loans | - | - | - | - | - | - | 121,428 | 121,428 | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( 2,035,834 | ) | ( 2,035,834 | ) | ||||||||||||||||||||||||||||||
| BALANCE, JUNE 30, 2024 | - | $ | - | - | $ | - | 985,723 | $ | 33,589 | $ | 63,103,265 | $ | ( 72,409,318 | ) | $ | 4,207 | $ | ( 9,268,258 | ) |
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, | ||||||||
| 2025 | 2024 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( 2,220,671 | ) | $ | ( 2,035,834 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | 1,986 | 5,704 | ||||||
| Share-based compensation expense | 46,248 | 58,570 | ||||||
| Periodic pension costs | - | 40,850 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( 403,354 | ) | 687,545 | |||||
| Accounts payable | 505,566 | ( 49,249 | ) | |||||
| Interest payable | - | 86,985 | ||||||
| Other accrued liabilities | ( 3,576 | ) | ( 325,069 | ) | ||||
| Net cash used in operating activities | ( 2,073,801 | ) | ( 1,530,498 | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from the issuance of common shares in private placement, net | 3,300,000 | 1,380,291 | ||||||
| Proceeds from exercise of common share warrants | 180,782 | - | ||||||
| Payments on notes payable | - | ( 194,715 | ) | |||||
| Net cash provided by financing activities | 3,480,782 | 1,185,576 | ||||||
| Change in cash and cash equivalents | 1,406,981 | ( 344,922 | ) | |||||
| Cash and cash equivalents at the beginning of period | 1,665,395 | 897,680 | ||||||
| Cash and cash equivalents at the end of period | $ | 3,072,376 | $ | 552,758 | ||||
| Supplemental disclosure of non-cash and financing activities: | ||||||||
| Issuance of note payable for prepaid insurance | $ | - | $ | 396,000 | ||||
| Pre-funded warrant issued as a deferred offering cost | $ | 296,154 | $ | - | ||||
| Deemed dividends on make whole shares and warrants | $ | 1,845,839 | $ | - | ||||
| Issuance of pre-funded preferred shares in private placement offerings, net | $ | 11,799 | $ | - | ||||
| Conversion of preferred participation certificates into common shares | $ | 6,966 | $ | - | ||||
| Accrued dividends on preferred shares | $ | 126,367 | $ | - |
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") and its wholly-owned subsidiaries NLS Pharmaceutics (Israel) Ltd., an Israeli company (the "Merger Sub")
and NLS Pharmaceutics Inc., a Delaware corporation, ("NLS Inc."), 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,
The accompanying consolidated financial statements
include the results of the Company, NLS Inc. and the Merger Sub. All references hereinafter to the Company mean the Company and its subsidiaries
NLS Inc. and the Merger Sub.
On January 7, 2025, the Company convened an
extraordinary shareholders' meeting (the "Meeting"), at which the shareholders approved the proposal of the Board
of Directors to reduce the nominal value of each registered share (common and preferred shares, if any) and each preferred
participation certificate (if any) equally to CHF 0.03 ($0.0369) per share, with the released amounts to be allocated to the
Company's reserves. The par value was reduced from CHF 0.80 ($0.88) per share, and this change has been reflected
retrospectively in all periods presented.
Agreement and Plan of Merger
On November 4, 2024, the Company, the Merger
Sub, and Kadimastem Ltd., an Israeli publicly traded company limited by shares (TASE: KDST) ("Kadimastem"), entered into
an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which (i) Kadimastem will merge with and into
Merger Sub, with Merger Sub as the surviving company (the "Merger"), and (ii) at the effective time of the Merger (the
"Effective Time"), each issued and outstanding ordinary share of Kadimastem, no par value ("Kadimastem Ordinary
Share"), will be exchanged for and automatically converted into the right to receive from the Company that certain number of
fully paid and nonassessable common shares, 0.03 Swiss Franc (CHF) par value per share, of the Company ("common share")
as calculated in accordance with the terms of the Merger Agreement (the "Exchange Ratio"). It was initially anticipated
that the initial Exchange Ratio is estimated to result in Kadimastem shareholders holding 80% of the issued and outstanding common
shares on a fully diluted basis, subject to certain adjustments as of the closing of the Merger (the
The Merger Agreement provides that, upon the terms
and subject to the conditions thereof, following the Closing, the Company shall work diligently to dispose of any intellectual property,
assets, rights, contracts, agreements, leases, arrangements (regardless of form), approvals, licenses, permits, whether current or future,
whether or not contingent, of the Company and its subsidiaries related solely to any product candidate of the Company and its subsidiaries,
other than the Company's Dual Orexin Agonist platform (such assets to be disposed, the "Legacy Assets"). It is expected
that the proceeds from any such disposition will be distributed to the shareholders and warrant holders of the Company as of immediately
prior to the Effective Time pursuant to the terms and conditions of a contingent value rights agreement, (the "CVR Agreement").
At the Effective Time, each:
The Merger Agreement and the consummation of the
transactions contemplated thereby have been approved by the Company's board of directors (the "Board") and Kadimastem's
board of directors, and the Board has resolved, subject to customary exceptions, to recommend that the shareholders of the Company approve
the Merger Agreement and the transactions contemplated therein.
The Merger Agreement contains customary
termination rights for each of the Company and Kadimastem. The Merger Agreement also provides that the Company shall pay to
Kadimastem a termination fee of $10.0 million plus the Company Operating Expenses (as defined in the Merger Agreement), and the
Transaction Expenses (as defined in the Merger Agreement) if the Company terminates the Merger Agreement prior to obtaining the
Parent Requisite Vote (as defined in the Merger Agreement) to enter into a definitive agreement providing for a Parent Superior
Proposal (as defined in the Merger Agreement) in accordance with terms of the Merger Agreement.
On June 5, 2025, the Company entered into a fourth
amendment (the "Fourth Amendment") to the Merger Agreement. The previous amendments
to the Merger Agreement were limited to extending the dates for consummation of the merger and related closing conditions.
Pursuant to the terms of the Fourth Amendment,
the parties clarified the definition and calculation of "Exchange Ratio" (as defined in the Merger Agreement) to account for
the valuation of the Company and the Combined Company (as defined in the Merger Agreement) and to reflect the initial target post-Closing
fully diluted share split between the shareholders of Kadimastem and the shareholders of the Company of 85% (Kadimastem shareholders)
and 15% (Company shareholders). In addition, pursuant to the terms of the Fourth Amendment, the parties clarified the potential adjustments
to such initial target as a result of the Closing Cash (as defined in the Merger Agreement), the Closing Indebtedness (as defined in the
Merger Agreement), the Parent Adjusted Cash Amount (as defined in the Merger Agreement), and any adjustments thereto.
In addition, pursuant to the terms of the Fourth
Amendment, the parties clarified that, notwithstanding anything to the contrary contained in the Merger Agreement, unless the Company
has entered into a binding term sheet or a definitive agreement, in either case with respect to the sale of the Legacy Assets (as defined
in the Merger Agreement), or unless otherwise determined by the board of directors of the Company, the Company shall, beginning on the
one-year anniversary of the Closing (as defined in the Merger Agreement), abandon attempts to consummate the Legacy Sale (as defined in
the Merger Agreement) and instead dispose of the Legacy Assets in a manner that it deems appropriate and expedient.
Finally, the parties revised the closing conditions
to require that the Company shall have convened a shareholder meeting for the election of the Kadimastem board members as members of the
board of the Company, effective as of the Effective Time (as defined in the Merger Agreement), and such individuals shall have been so
elected at such shareholder meeting.
Except as stated above, the Fourth Amendment does
not make any other substantive changes to the Merger Agreement.
On August 29, 2025, the Company entered into a
seventh amendment (the "Seventh Amendment") to the Merger Agreement that were limited to extending the dates for consummation