MoonLake AG's compensation plans are settled with Common Shares, and with a number of Class C Ordinary Shares determined by multiplying the number of Common Shares by the Exchange Ratio. The reference to “Common Shares” in this Note 14 refers to common shares in MoonLake AG. 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 ESPP and ESOP) prior to the Business Combination by the Exchange Ratio. The owners of Common Shares have the right to exchange their Common Shares for a number of Class A Ordinary Shares derived using the Exchange Ratio. In the event MoonLake AG shareholders elect to exchange their Common Shares, such MoonLake AG shareholder forfeits a number of Class C Ordinary Shares equal to the number of Class A Ordinary Shares issued (refer to Note 12 — Shareholders’ Equity (Deficit) - Class C Ordinary Shares).

For the year ended December 31, 2023, the Company has recognized an increase in equity in the consolidated balance sheet, and share-based compensation expense in the consolidated statement of operations of $7.1 million. The share-based compensation expense was driven by the following share-based compensation plans and programs:


Compensation Plan	Year Ended December 31, 2023		Year Ended December 31, 2022
MoonLake AG Restricted Founder Shares	$	1,574,300	$	4,840,608
ESPP	3,352,885		3,910,076


ESOP	973,868		539,713


MoonLake Immunotherapeutics 2022 Equity Incentive Plan	1,204,952		364,381
Total share-based compensation expense	$	7,106,005	$	9,654,778
Of which: included in research and development expense	1,524,715		954,379
Of which: included in general and administrative expense	5,581,290		8,700,399

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”). The Restricted Founder Shares vested on the 28th of each month at a rate of 4.166% over a period of two years until April 28, 2023. In the event of a termination of the contractual relationship of the relevant co-founder before the end of the vesting period, MoonLake AG in first priority, or any third party designated by it, and the other shareholders in second priority pro rata to their shareholdings, had an option to purchase all or a pro rata portion of the leaver shares that remained unvested on the effective day of the termination at nominal value of CHF 0.10 (equivalent of $0.0001) per share.


Grant date			4/28/2021
Estimated fair value of Restricted Founder Shares on the grant date (USD) (1)			49
Estimated fair value of Restricted Founder Shares on the resignation date of one of the co-founders (USD) (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 MoonLake AG's audited consolidated financial statements for the year ended December 31, 2021, as filed by Helix Acquisition Corp. together with its revised definitive proxy soliciting materials with the SEC on March 4, 2022).
(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).








Grants awarded
Program			Restricted Founder Shares
Awards unvested as of January 1, 2022			4,440,309
Awards vested for the year ended December 31, 2022			(3,330,231)
Awards unvested as of January 1, 2023			1,110,078
Awards vested for the year ended December 31, 2023			(1,110,078)
Awards unvested as of December 31, 2023			0

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 all the outstanding awards (whether currently outstanding or granted in the future) will be deemed fully vested.



ESPP 2021
Assumptions for the awards issued during the year ended December 31, 2022
Grant date			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 (USD 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 as of January 1, 2022			1,060,561
Additional awards granted for the year ended December 31, 2022			1,177,354
Awards outstanding as of January 1. 2023			2,237,915
Of which vested as of January 1, 2023			307,794
Awards granted for the year ended December 31, 2023			—
Awards outstanding as of December 31, 2023			2,237,915
Of which vested as of December 31, 2023			1,607,425

The ESOP grants will vest 25% on each anniversary of the grant date. In the event of a termination of the 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 all the outstanding awards (whether currently outstanding or granted in the future) will be deemed fully vested.


ESOP 2021
Weighted average assumptions for the awards issued during the year ended December 31, 2022
Grant dates			5/1/2022, 6/22/2022
Estimated fair value of the option on the grant date using Black-Scholes model ($)			4.21
Exercise price (USD)			3.64
Expected term of the award on the grant date (years) (1)			6
Expected volatility of the share price (2)			75%
Risk-free interest rate (3)			3%
Expected dividend rate			—%
(1) The expected term represents the period that share-based awards are expected to be outstanding. (2) The expected volatility was derived from the historical stock volatilities of comparable peer public companies within the Company’s industry. (3) 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.


Weighted average assumptions for the awards issued during the year ended December 31, 2023
Grant dates			01/01/2023, 04/24/2023, 07/03/2023, 07/17/2023, 08/01/2023, 08/07/2023, 08/21/2023, 08/29/2023, 09/01/2023, 09/11/2023
Estimated fair value of the option on the grant date using Black-Scholes model ($)			25.5
Exercise price (USD)			37.1
Expected term of the award on the grant date (years) (1)			6
Expected volatility of the share price (2)			75%
Risk-free interest rate (3)			4%
Expected dividend rate			—%
(1) The expected term represents the period that share-based awards are expected to be outstanding. (2) The expected volatility was derived from the historical stock volatilities of comparable peer public companies within the Company’s industry. (3) 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.


Grants awarded
Program			ESOP
Awards issued as of January 1, 2022			224,033
Additional awards granted for the year ended December 31, 2022			242,736
Awards issued as of January 1, 2023			466,769
Awards granted for the year ended December 31, 2023			133,446
Awards forfeited for the year ended December 31, 2023			(15,137)
Awards outstanding at December 31, 2023			585,078
Of which exercisable as of December 31, 2023			219,223

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.

Awards made under the Equity Incentive Plan to a person who is initially elected or appointed to the Board, and who is a non-employee director at the time of such initial election or appointment, vests and becomes exercisable in 3 equal yearly installments occurring over the three year period following the date of grant, subject to the non-employee director continuing in service on the Board through each such vesting date. Each subsequent award vests and becomes exercisable on the earlier of (i) the 12-month anniversary of the date of grant, and (ii) the next annual meeting of the Company’s stockholders following the date of grant, subject to the non-employee director continuing in service on the Board through such vesting date. Awards made to employees, officers and other service providers of the Company under the Equity Incentive Plan vest 25% on each anniversary date. In the event of a termination of the contractual relationship between the Company and the beneficiary, options can be deemed forfeited by the Company 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 all the outstanding awards (whether currently outstanding or granted in the future) will be deemed fully vested.


Weighted average assumptions for the awards issued during the year ended December 31, 2022
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) (1)			6
Expected volatility of the share price (2)			75%
Risk-free interest rate (3)			3%
Expected dividend rate			-
(1)The expected term represents the period that share-based awards are expected to be outstanding. (2) The expected volatility was derived from the historical stock volatilities of comparable peer public companies within the Company's industry. (3) 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.


Weighted average assumptions for the awards issued during the year ended December 31, 2023
Grant dates			06/08/2023, 10/11/2023, 10/25/2023, 11/01/2023, 11/06/2023, 11/15/2023, 11/16/2023, 11/20/2023, 11/27/2023, 12/01/2023, 12/04/2023
Estimated fair value of the option on the grant date using Black-Scholes model ($)			25.58
Exercise price ($)			37.22
Expected term of the award on the grant date (years) (1)			6
Expected volatility of the share price (2)			0.75
Risk-free interest rate (3)			4%
Expected dividend rate			0
(1)The expected term represents the period that share-based awards are expected to be outstanding. (2) The expected volatility was derived from the historical stock volatilities of comparable peer public companies within the Company's industry. (3) 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.


Grants awarded
Program	MoonLake Immunotherapeutics 2022 Equity Incentive Plan
Awards issued as of January 1, 2022		—
Awards granted for the year ended December 31, 2022		180,000
Awards issued as of December 31, 2022		180,000
Awards exercisable as of December 31, 2022		—
Awards granted for the year ended December 31, 2023		132,400
Awards issued as of December 31, 2023		312,400
Awards exercisable as of December 30, 2023		60,000