Exhibit 99.1
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
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NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED BALANCE SHEETS
June 30, 2021 | December 31, 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Prepaid expenses and other current assets (Note 4) | ||||||||
Total current assets | ||||||||
Deferred offering costs | ||||||||
Property and equipment (Note 5) | ||||||||
Other receivables, net – related party (Note 6) | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable, including related party of $ | $ | $ | ||||||
Interest payable | ||||||||
Convertible promissory notes – related parties (Note 7) | - | |||||||
Current portion of credit facilities, subordinated – related parties (Note 8) | ||||||||
Current portion of convertible loan, including related party of $ | ||||||||
Bridge loan (Note 10) | ||||||||
Accrued salaries | ||||||||
Other accrued liabilities, including related party of $ | ||||||||
Total current liabilities | ||||||||
Convertible loans, net of discount of $ | ||||||||
Swiss government loan (Note 12) | ||||||||
Deferred revenues (Note 13) | ||||||||
Accrued pension liability | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 14) | ||||||||
Shareholders’ equity (deficit) | ||||||||
Common shares, CHF | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Total shareholders’ equity (deficit) | ( | ) | ||||||
Total liabilities and shareholders’ equity (deficit) | $ | $ |
The accompanying notes are an integral part of
these Unaudited Interim Condensed Financial Statements.
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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 | $ | $ | ||||||
General and administrative 1 | ||||||||
Total operating expenses | ||||||||
Operating loss | ( | ) | ( | ) | ||||
Other income (expense), net | ( | ) | ||||||
Interest expense | ( | ) | ( | ) | ||||
Interest on related party loans | ( | ) | ( | ) | ||||
Net loss | ( | ) | ( | ) | ||||
Other comprehensive loss: | ||||||||
Defined pension plan adjustments | ( | ) | - | |||||
Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
Weighted average common shares used for computing basic and diluted net loss per common share |
1 |
The accompanying notes are an integral part of these Unaudited Interim Condensed Financial Statements.
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NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CHANGES IN EQUITY
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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
Issuance of common shares in initial public offering, net | ||||||||||||||||||||||||
Issuance of warrants | - | |||||||||||||||||||||||
Issuance of common shares to consultant | ||||||||||||||||||||||||
Warrant exercises | ||||||||||||||||||||||||
Defined pension plan adjustments | ( | ) | ( | ) | ||||||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
BALANCE, JUNE 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ |
Common Shares | Additional Paid in | Accumulated | Accumulated Other Comprehensive | |||||||||||||||||||||
Shares | Amount | Capital | Deficit | Loss | Total | |||||||||||||||||||
BALANCE, JANUARY 1, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
Debt discount on convertible loans | - | |||||||||||||||||||||||
Debt discount on related party loans | - | |||||||||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
BALANCE, JUNE 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these Unaudited Interim Condensed Financial Statements.
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NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Operating Activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in in operating activities: | ||||||||
Amortization of debt discount | ||||||||
Depreciation expense | - | |||||||
Provision for doubtful accounts | - | |||||||
Periodic pension costs | - | |||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | ( | ) | ||||||
Other receivables, net – related parties | ( | ) | ( | ) | ||||
Accounts payable | ( | ) | ||||||
Interest payable | ( | ) | ||||||
Other accrued liabilities | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Investing Activities: | ||||||||
Purchases of property and equipment | ( | ) | - | |||||
Net cash used in investing activities | ( | ) | - | |||||
Financing Activities: | ||||||||
Proceeds from the issuance of common shares in initial public offering, net | - | |||||||
Proceeds from the issuance of warrants | - | |||||||
Exercise of warrants | - | |||||||
Proceeds from bridge loan | - | |||||||
Payment on Swiss government loan | ( | ) | - | |||||
Payment on second credit facility | ( | ) | - | |||||
Payment on convertible loans | ( | ) | - | |||||
Payment on convertible loans – related party | ( | ) | - | |||||
Payment on bridge loan | ( | ) | - | |||||
Payment of shareholder loans | ( | ) | - | |||||
Proceeds from convertible loans | - | |||||||
Proceeds from convertible loan – related party | - | |||||||
Proceeds from Swiss government loan | - | |||||||
Deferred offering costs | - | ( | ) | |||||
Net cash provided by financing activities | ||||||||
Effect of exchange rate on cash and cash equivalents | ( | ) | ||||||
Change in cash and cash equivalents | ( | ) | ||||||
Cash and cash equivalents at the beginning of period | ||||||||
Cash and cash equivalents at the end of period | $ | $ | ||||||
Supplemental disclosure of non-cash and financing activities: | ||||||||
Deferred financing costs transferred to additional paid in capital | $ | $ | - | |||||
Issuance of common shares to consultant for payment of expenses | $ | $ | - | |||||
Debt discount on convertible loans | $ | - | $ | |||||
Debt discount on convertible loan – related party | $ | $ |
The accompanying notes are an integral part of these Unaudited Interim Condensed Financial Statements.
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Note 1
Background:
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.
On February
2, 2021, the Company completed the closing of its initial public offering of
Going Concern
As of June 30, 2021, the Company had an accumulated
deficit of approximately $
As of June 30, 2021, the Company’s cash
and cash equivalents were $
● | 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; |
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
● | 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.
Note 1A
Stock Split
Note 2
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.
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
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.
Use of Estimates
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 (1) pension and other post-employment benefits, including certain asset values that are based on significant unobservable inputs; (2) the inputs used in determining the fair value of equity per share; (3) the beneficial conversion feature on the convertible loans and (4) valuation allowance related to the Company’s deferred tax assets.
Property and equipment
Property and equipment are recorded at cost, net of accumulated depreciation and any accumulated impairment losses. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful lives of property and equipment are five years for furniture and fixtures and three years for software.
Upon retirement or sale, the cost of disposed assets and their related accumulated depreciation are removed from the balance sheet. Any resulting net gains or losses on dispositions of property and equipment are included as a component of operating expenses within the Company’s statements of operating and comprehensive loss. Repair and maintenance costs that do not significantly add value to the property and equipment, or prolong its life, are charged to operating expense as incurred.
Deferred Offering Costs
Specific incremental legal, accounting and other
fees and costs directly attributable to a proposed or actual offering of securities may properly be deferred and charged against the
gross proceeds of such an offering. In the event the Company’s planned initial public offering did not occur or was significantly
delayed, all of the costs would have been expensed. As of December 31, 2020, there were $
Earnings per Share
Basic loss per common share is computed by dividing
the net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted loss
per common share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional
potential common shares that would have been outstanding if the potential common shares had been issued and if the additional common
shares were dilutive. Potential common shares are excluded from the computation for a period in which a net loss is reported or if their
effect is anti-dilutive. The Company’s potential common shares consist of warrants, convertible promissory notes and convertible
loans with their potential dilutive effect considered using the “if-converted” method. For the six months ended June 30,
2021,
Segment Reporting
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is on developing therapeutics for the treatment of neurobehavioral and neurocognitive disorders. All of the Company’s tangible assets are held outside the United States of America.
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Note 3
Restatement of Previously Issued Financial Statements
During the audit of the Company’s financial statements for the year ended December 31, 2020, the Company identified an error in the presentation of the intellectual property expenses, including in the six months ended June 30, 2020. The intellectual property expenses should have been classified as general and administrative expenses instead of research and development expenses.
This resulted in a restatement to correct previously reported amounts in the financial statements of the Company for the six months ended June 30, 2020. This reclassification of expenses had no impact on total operating expenses, net loss, loss per share or the balance sheet.
The following table presents the impact of the restatement in the financial statements for the six months ended June 30, 2020:
For the Six Months Ended June 30, 2020 | ||||||||||||
As Previously Reported | Adjustments | As Restated | ||||||||||
Research and development expenses | $ | $ | ( | ) | $ | |||||||
General and administrative expenses | ||||||||||||
Total operating expenses | $ | $ | $ |
Note 4
Prepaid Expenses and Other Current Assets:
The Company’s prepaid expenses and other current assets consisted of the following as of June 30, 2021 and December 31, 2020:
June 30, 2021 | December 31, 2020 | |||||||
Vendor prepayments | $ | $ | ||||||
VAT recoverable and other current assets | ||||||||
Prepaid insurance | ||||||||
Prepaid expenses | ||||||||
Total prepaid expenses and other current assets | $ | $ |
The Company’s prepaid expenses and other current assets as of June 30, 2021 and December 31, 2020, consisted mainly of some vendor prepayments and value added tax (“VAT”) recoverable, that were returned to the Company during the following fiscal periods.
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Note 5
Property and Equipment, net:
The following table shows the property and equipment acquired during the six months ended June 30, 2021 and the year ended December 31, 2020:
June 30, 2021 | December 31, 2020 | |||||||
(unaudited) | ||||||||
Cost | ||||||||
Furniture and fixtures | $ | $ | ||||||
Software | ||||||||
Total cost | ||||||||
Accumulated depreciation | ( | ) | ||||||
Total property and equipment, net | $ | $ |
Deprecation and related amortization expense was
$
Note 6
Other Receivables, net – Related Party
The Company’s majority shareholders are
also majority shareholders in Pegasus Advanced Research SAS, formerly NeuroLifeScienses SAS (“Pegasus”), and as such Pegasus
is considered to be a related party to the Company. In December 2015, Pegasus assigned its exclusive global license to certain compounds
involving mazindol to the Company (the “License Agreement”). The License Agreement includes a royalty payment of
Since assigning the License Agreement to the Company,
the Company and Pegasus have paid for some operating expenses for each other. The transactions between the companies are minimal and are
not considered to be a funding source for either entity. The Company offsets the related receivables and payable to/from Pegasus for a
combined net other long-term receivable. As of June 30, 2021, the Company evaluated the financial stability of Pegasus and the likelihood
of the Company’s recovering the receivable in the near future and determined that a
Note 7
Convertible Promissory Notes – Related Parties:
The following summarizes the Company’s convertible promissory notes with related parties as of December 31, 2020.
December 31, 2020 | ||||
Convertible promissory notes | $ |
In January 2019, the Company entered into an agreement
with Magnetic Rock Investment AG (“MRI”), which is owned by certain shareholders of the Company, to loan the Company CHF
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
In March 2019, MRI and the Company agreed to convert
an aggregate amount of CHF
In January 2019, the Company entered into four
additional convertible promissory notes, on the same terms, with certain Company shareholders. The promissory notes were for CHF
In February 2021, all of the convertible promissory notes, including accrued interest, were repaid in full.
Note 8
Credit Facilities, Subordinated – Related Parties:
The following summarizes the Company’s credit facilities with related parties as of December 31, 2020.
December 31, 2020 | ||||
Second Credit Facility | $ | |||
Less: current portion | ( | ) | ||
Credit facilities, long-term | $ |
In August 2015, the Company entered into a second
credit facility agreement (the “Second Credit Facility”) with shareholders (the “Lenders”). The maximum borrowings
under the Second Credit Facility were $
In June 2018, the Company and the Lenders entered into a subordination agreement regarding the Second Credit Facility. The subordination agreement deferred payments on the Second Credit Facility during the term of the agreement. The agreement was to expire if (i) the Lenders irrevocably waive the subordinated claims; or (ii) if the claims are converted to share capital or participation capital of the Company.
The remaining balance of the Second Credit Facility
of $
In February 2021, the remaining balance on the Second Credit Facility and the accrued interest on an expired credit facility were paid in full.
Note 9
Convertible Loans:
The following summarizes the Company’s convertible loans as of December 31, 2020.
December 31, 2020 | ||||
Convertible loans, net of discount of $ | $ | |||
Convertible loans – related party | ||||
Less: current portion | ( | ) | ||
Convertible loans, long term | $ |
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
In December 2019,
In February 2021, all of the Convertible Loans, including accrued interest, were repaid in full.
Note 10
Bridge Loan:
In August 2020, the Company received the first
tranche of CHF
In February 2021, the Bridge Loan, including accrued interest, was repaid in full.
Note 11
Other Accrued Liabilities:
Other accrued liabilities consisted of the following as of June 30, 2021 and December 31, 2020:
June 30, 2021 | December 31, 2020 | |||||||
(unaudited) | ||||||||
Professional consultants’ expenses | $ | $ | ||||||
Vendor liabilities | ||||||||
Payroll related liabilities | ||||||||
Related party expenses | ||||||||
Accrued board fees | ||||||||
Total other accrued liabilities | $ | $ |
Note 12
Swiss Government Loan:
In April 2020, in response to the COVID 19 pandemic,
the Swiss Federal Council issued the COVID-19 Ordinance on Joint and Several Guarantees, according to which companies domiciled in Switzerland
that are economically affected by the COVID-19 pandemic could apply for financial support in the form of emergency bank loans of up to
In February 2021, the COVID-19 loan was repaid in full.
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Note 13
Deferred Revenues:
In February 2019, the Company entered into a license agreement (the “EF License Agreement”), to develop and commercialize its product candidate, Nolazol, in Latin American countries with Eurofarma, a Brazilian pharmaceutical company. The EF License Agreement covers the grant of non-transferable licenses, without the right to sublicense, to Eurofarma to develop and commercialize Nolazol in Latin America. The EF License Agreement also specifies the Company’s obligation to advance ongoing development activities with respect to Nolazol in the United States. A joint steering committee will oversee the development and regulatory activities directed towards marketing approval, manufacturing and commercialization phases. The Company believes its participation in the joint steering committee is not of material significance to the licenses in the context of the EF License Agreement on the whole and, as such, management has excluded these activities in the determination of its performance obligation(s) under the EF License Agreement.
The EF License Agreement provides that the parties shall enter into a separate manufacturing and supply agreement during the term of the EF License Agreement.
Under the EF License Agreement, the Company received
a non-refundable, upfront payment of $
The Company identified the licenses granted to Eurofarma and its obligation to advance development activities with respect to Nolazol in the United States as the material promises under the EF License Agreement. For purposes of identifying the Company’s performance obligations under the EF License Agreement, management believes that while the exclusive licenses were granted to Eurofarma at the outset of the EF License Agreement, the grant of those licenses does not singularly result in the transfer of the Company’s broader obligation to Eurofarma under the EF License Agreement.
The Company is obligated under the EF License Agreement to advance its development activities in the United States and those activities precede Eurofarma’s necessary regulatory approvals for commercialization of Nolazol, in Latin American countries. The Company intends to apply its proprietary know-how to the ongoing development activities in the United States involving its intellectual property relating to Nolazol. These development activities are specific to the Company and the Company believes they are not capable of being distinct in the context of the EF License Agreement on the whole.
The licenses provided to Eurofarma are not transferable and without the right to sublicense therefore Eurofarma is not presently able to monetize its investment in Nolazol as clinical development in the United States or any Latin American countries has yet to be completed and Eurofarma has yet to seek or obtain regulatory approval in any Latin American country. The licenses to Eurofarma represent rights to use the Company’s intellectual property with respect to Nolazol for which revenue is recognized at a point in time which is when Eurofarma is able to use and benefit from the licenses. The licenses are considered of limited value without the Company’s development activities with respect to Nolazol in the United States. As such, the licenses are not capable of being distinct until after successful clinical development and regulatory approval and alone do not have standalone functionality to Eurofarma. Management has determined that the licenses, while capable of being distinct, are not distinct as they do not have stand-alone value to Eurofarma without the Company’s planned development activities in the United States and the approval for sale in Latin America.
Bundled together with the Company’s development activities of Nolazol in the United States, the licenses granted under the EF License Agreement will enable Eurofarma to seek regulatory approvals and ultimately seek to commercialize Nolazol in Latin America. Therefore, management believes the licenses bundled together with the Company’s development activities in the United States constitute a single distinct performance obligation under the EF License Agreement for accounting purposes, or (the “License Performance Obligation”).
The Company has initially estimated a total transaction
price of $
The Company has allocated the transaction price
entirely to the single License Performance Obligation and recorded the $
Amounts expected to be recognized as revenue within
the 12 months following the balance sheet date are classified as a current portion of deferred revenue in the accompanying condensed balance
sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred
revenue, net of current portion. As of June 30, 2021 and December 31, 2020, the Company has long-term deferred revenues of $
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Note 14
Commitments and Contingencies:
Commitments
In December 2019, the
Company entered into a feasibility development agreement (the “Development Agreement”) with Adare Pharmaceuticals, Inc. (“Adare”),
pursuant to which the Company intended to utilize Adare’s proprietary modified release technologies in the development of Mazindol
for use in the Company’s product candidates used for the treatment of narcolepsy and ADHD. The formulation to be developed by Adare
under this Development Agreement was intended to be owned solely by the Company. Upon completion of certain milestones, as defined in
the Development Agreement, the Company would be obligated to pay Adare up to $
On March 10, 2021, the Company entered into a
License Agreement with Novartis Pharma AG (“Novartis”), whereby the Company obtained, on an exclusive basis in the U.S., all
of the available data referred to and included in the original new drug application (“NDA”)
for Sanorex® (mazindol) submitted to the U.S. Food and Drug Administration (“FDA”) in February 1972. The agreement encompasses
all preclinical and clinical studies, data used for manufacturing including stability and other chemistry manufacturing and controls data,
formulation data and know-how for all products containing mazindol as an active substance, and all post-marketing clinical studies and
periodic safety reports from 1973 onwards. Under the Agreement, the Company has obtained the same rights on a non-exclusive basis in all
territories outside of the U.S. except for Japan, with the right to cross-reference the Sanorex NDA with non-U.S. regulatory agencies
in the licensed territories. The Agreement includes the right to sublicense or assign the license to third parties, subject to such third
parties meeting certain obligations. As consideration for the license, the Company paid Novartis $
Litigation
The Company may become involved in miscellaneous litigation and legal actions, including product liability, consumer, commercial, tax and governmental matters, which can arise from time to time in the ordinary course of the Company’s business. Litigation and legal actions are inherently unpredictable, and excessive verdicts can result in such situations. The Company is not currently involved in any such matters.
COVID-19
In December
2019, COVID-19 emerged in Wuhan, China. Since then, it has spread to several other countries and infections have been reported around
the world. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. In response to the outbreak,
governmental authorities in the United States, Canada and internationally, including in Switzerland, have introduced various recommendations
and measures to try to limit the pandemic, including travel restrictions, border closures, non-essential business closures, quarantines,
self-isolations, shelters-in-place and social distancing. While COVID-19 is still spreading globally, and the final implications of the
pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population.
At this time, the pandemic has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines
established in certain jurisdictions and various institutions and companies being closed. We are actively monitoring any developments
regarding the pandemic and we are taking any necessary measures to respond to the situation in cooperation with our various stakeholders.
The continued spread of COVID-19 in the United States, Canada and globally, including in Switzerland, could have an adverse impact on
the Company’s business, operations and financial results, including through disruptions in the Company’s supply chains, as
well as a deterioration of general economic conditions including a possible national or global recession. Shelter-in-place orders and
social distancing practices designed to limit the spread of COVID-19 may affect the Company’s ability to conduct clinical studies.
The Company has not been adversely affected from the effects of the COVID-19 outbreak, either from any delay in its clinical development activities nor by its ability to source necessary financing to fund its operations. In view of the continuing uncertainty about the further development of COVID-19, an adverse development can be expected in 2021, but its financial impact on the Company cannot yet to be adequately and conclusively assessed.
Note 15
Share Capital and Public Offerings:
As of June 30, 2021, the Company had
On February
2, 2021, the Company completed the closing of its initial public offering of
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
Additionally, the Company issued
The following table summarizes the common share warrant activity for the six months ended June 30, 2021:
Balance at January 1, 2021 | ||||
Issuances | ||||
Exercises | ( | ) | ||
Balance at June 30, 2021 |
Note 16
Related party consulting agreements:
In October 2019, the Company entered into a collaboration
agreement with Adya Consulting, a company founded and managed by the Company’s current Chief Operating Officer, Silvia Panigone.
Pursuant to the collaboration agreement, the Company agreed to pay Adya Consulting a one-time fee of CHF
In January 2017, and as subsequently amended in
October 2020, the Company entered into a consulting agreement with CHG BioVenture SA, an entity controlled by Mr. Hervé Girsault,
the Company’s current Head of Business Development. Pursuant to the consulting agreement, the Company agreed to pay CHG BioVenture
SA a monthly fee of CHF
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NLS PHARMACEUTICS LTD.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
The Company has entered into a new consulting
agreement starting May 1, 2021 for the continuation of Mr. Girsault’s engagement with the Company in his current role. Pursuant
to the new agreements,
In March 2021, the Company entered into a consulting
agreement with Mr. Subhasis Roy, the Company’s current Interim Chief Financial Officer, pursuant to which the Company agreed to
pay Mr. Roy a daily rate of CHF
In February 2021, the Company entered into a consulting
agreement with Mr. Eric Konofal, the Company’s current Chief Scientific Officer, pursuant to which the Company agreed to pay Mr.
Konofal a daily rate of CHF
In March 2021, the Company entered into a consulting
agreement with Mr. Carlos Camozzi, the Company’s current Interim Medical Director, pursuant to which the Company agreed to pay Mr.
Camozzi an hourly rate of CHF
Note 17
Subsequent Events:
Subsequent to the balance sheet date of these
Unaudited Interim Condensed Financial Statements, the Company has entered into a Standby Equity
Distribution Agreement (“SEDA”) with a fund managed by Yorkville Advisors Global, LP (“Yorkville”).
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