The purpose of the arrangements is to attract and retain the best available personnel and to provide participants with additional incentive to increase their efforts on behalf and in the best interest of the Company and its subsidiaries.

As a result of the Business Combination, the Company has adjusted the share numbers related to the Restricted Founder Shares and Common Shares (under the MoonLake AG ESPP and MoonLake AG ESOP plans) prior to the Business Combination by the Exchange Ratio. The assumptions used in the valuation of the awards granted prior to Closing of the Business Combination have not been adjusted. The reference to “Common Shares” below refers to shares in MoonLake AG.

MoonLake AG's compensation plans are settled with MoonLake AG's Common Shares, and with a number of Class C Ordinary Shares determined multiplying the MoonLake AG's Common Shares by the Exchange Ratio. The owners of MoonLake AG's Common Shares have the right to exchange their Common Shares for a number of the Company’s Class A Ordinary Shares derived using the Exchange Ratio. In the event MoonLake AG shareholders elect to exchange their Common Shares, a number of Class C shares equivalent to the number of Class A shares issued is forfeited (refer Note 9 — Shareholders’ equity (deficit) - Class C Ordinary Shares).

For the three and six months ended June 30, 2022, the Company has recognized an increase in equity in the condensed consolidated balance sheet, and share-based compensation expense in the condensed consolidated statement of operations of $2.5 and $4.5 million respectively. The share-based compensation expense was driven by the following share-based compensation plans and programs:


Compensation Plan	Three months ended June 30, 2022		Three months ended June 30, 2021		Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
MoonLake AG Restricted Founder Shares	$	1,197,953	$	1,250,365	$	2,408,035	$	1,250,365
MoonLake AG ESPP	1,056,516		—		1,749,194		—


MoonLake AG ESOP	114,615		—		200,726		—


MoonLake Immunotherapeutics 2022 Equity Incentive Plan	115,139		—		115,139		—
Total share-based compensation expense4	$	2,484,223	$	1,250,365	$	4,473,094	$	1,250,365
Of which: included in R&D expense	138,037		—		218,930		—
Of which: included in G&A expense	2,346,186		1,250,365		4,254,164		1,250,365

As of June 30, 2022, 22,756 treasury shares (the equivalent of 765,482 Class C Ordinary Shares) and 14,596 Common Shares (the equivalent of 490,990 Class C Ordinary Shares) issuable from the authorized conditional capital shares remain available for future grants under the ESPP and the ESOP by MoonLake AG.

On April 28, 2021, the shareholders’ agreement between the co-founders, the Series A investors and MoonLake AG imposed a reverse vesting condition on 90% of the total 110,000 Common Shares (the equivalent of 3,700,257 Class C Ordinary Shares) held by each of the three co-founders. Therefore, 99,000 Common Shares (the equivalent of 3,330,231 Class C Ordinary Shares) held by each of the co-founders were subject to these restrictions and considered unvested. The Restricted Founder Shares vest on the 28th of each month at a rate of 4.166% over a period of two years until April 28, 2023. If, before the end of the vesting period, the contractual relationship of the relevant co-founders is terminated, MoonLake AG in first priority, or any third party designated by it, and the other shareholders in second priority pro rata to their shareholdings, shall have an option to purchase all or a pro rata portion of the leaver shares that are unvested on the day the termination becomes effective at nominal value of CHF 0.10 (equivalent of $0.0001) per share.


Grant date			4/28/2021
Estimated fair value per share of Restricted Founder Shares on the grant date ($) (1)			49
Estimated fair value of Restricted Founder Shares on the resignation date of one of the co-founders of MoonLake AG ($) (2)			336.39
Purchase price (CHF)			0.10
(1) MoonLake AG estimated the fair value of the Restricted Founder Shares with reference to the market-based transaction with the other Series A Preferred Shares Investors (refer to Note 9 of the audited consolidated financial statements for the year ended December 31, 2021).
(2) MoonLake AG estimated the fair value of the Restricted Founder Shares at co-founder’s resignation date by dividing the Company Enterprise Value ($360,000,000) as defined by the Business Combination Agreement by the Company’s fully diluted shares (1,070,196).

The ESPP grants will vest 25% on each anniversary of the grant date. In the event of a termination of contractual relationship between the Company and the entitled employee, the awards can be deemed forfeited by MoonLake AG if certain conditions are met. Awards feature an accelerated vesting condition linked to a “Change of Control”, defined as any transfer of shares that results in the proposed acquirer holding more than 50% of the then issued share capital of MoonLake AG or the Company, as the case may be, where the grants will be deemed fully vested on the earlier of (i) 12 months (or such shorter period determined by the Board of Directors) after the occurrence of a “change of control” or (ii) the date after the occurrence of the change of control on which a termination notice is served to the participant by MoonLake AG (other than a bad leaver termination, described below) or by the participant for good cause (as defined under Swiss law or any other applicable foreign law). For awards made after September 30, 2021, the Closing of the Business Combination between MoonLake AG and Helix does not qualify as a Change of Control.


ESPP 2021
Assumptions for the awards issued during the six months ended June 30, 2022
Grant dates			01/18/2022
Estimated fair value per share of Common Shares on the grant date ($) (1)			336.39
Purchase price (CHF)			0.10
(1) MoonLake AG estimated the fair value of the Common Shares by dividing the Company Enterprise Value ($360,000,000) as defined by the Business Combination Agreement by the Company’s fully diluted shares (1,070,196).

Grants awarded
Program			ESPP
Awards outstanding at January 1, 2022			1,060,561



Awards granted for the six months ended June 30, 2022			1,177,354
Awards outstanding at June 30, 2022			2,237,915

The ESOP grants will vest 25% on each anniversary of the grant date. In the event of a termination of contractual relationship between the Company and the entitled employee, options can be deemed forfeited by MoonLake AG if certain conditions are met. Awards feature an accelerated vesting condition linked to a “Change of Control”, defined as any transfer of shares that results in the proposed acquirer holding more than 50% of the then issued share capital of MoonLake AG or the Company, as the case may be, where the grants will be deemed fully vested on the earlier of (i) 12 months (or such shorter period determined by the Board of Directors) after the occurrence of a “change of control” or (ii) the date after the occurrence of the change of control on which a termination notice is served to the participant by MoonLake AG (other than a bad leaver termination, described below) or by the participant for good cause (as defined under Swiss law or any other applicable foreign law). For awards made after September 30, 2021, the Closing of the Business Combination between MoonLake AG and Helix does not qualify as a Change of Control.


Weighted average assumptions for the awards issued during the six months ended June 30, 2022
Grant dates			5/1/2022, 6/22/2022
Estimated fair value of the option on the grant date using Black-Scholes model ($) (1)			172.57
Exercise price (CHF)			27.25
Expected term of the award on the grant date (years) (2)			6
Expected volatility of the share price (3)			0.75
Risk-free interest rate (4)			3%
Expected dividend rate			0
(1) MoonLake AG estimated the fair value of the Common Shares multiplying the MoonLake Immunotherapeutics closing date trading share price on the grant date by the Exchange Ratio. (2) The expected term represents the period that share-based awards are expected to be outstanding. (3) The expected volatility was derived from the historical stock volatilities of comparable peer public companies within the Company’s industry. (4) The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the measurement date with maturities approximately equal to the expected term.

On April 5, 2022 (the “Effective Date”) the Company created the “MoonLake Immunotherapeutics 2022 Equity Incentive Plan” (the “Equity Incentive Plan”) to promote and closely align the interests of employees, officers, non-employee directors and other service providers of MoonLake Immunotherapeutics and its shareholders by providing share-based compensation and other performance-based compensation.

The Equity Incentive Plan provides for the grant of options, stock appreciation rights, restricted stock units, restricted stock and other share-based awards and for incentive bonuses, which may be paid in cash, Common Shares or a combination thereof, as determined by the compensation committee of the board of directors or such other committee as designated by the board of directors to administer the Equity Incentive Plan. The Equity Incentive Plan shall remain available for the grant of awards until the 10th anniversary of the Effective Date.

On April 6, 2022, the Company granted 180,000 options under the Equity Incentive Plan, each option representing the right to acquire one Class A Ordinary Share, par value $0.0001 per share, of MoonLake. The options will vest one-third on each April 6, 2023, April 6, 2024 and April 6, 2025.


Grant date			4/6/2022
Estimated fair value of the option on the grant date using Black-Scholes model ($)			8.25
Exercise price ($)			12.25
Expected term of the award on the grant date (years)			6
Expected volatility of the share price			75%
Risk-free interest rate			3%
Expected dividend rate			-


Grants awarded
Program	MoonLake Immunotherapeutics 2022 Equity Incentive Plan
Awards outstanding at January 1, 2022		—



Awards granted for the six months ended June 30, 2022		180,000
Awards outstanding at June 30, 2022		180,000
Awards exercisable at June 30, 2022		—