Exhibit 99.1
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
AS OF
JUNE 30, 2025
AND FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024
NLS PHARMACEUTICS LTD.
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
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NLS PHARMACEUTICS LTD.
INTERIM CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Deferred offering costs | ||||||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable, including a related party of $ | $ | $ | ||||||
| Other accrued liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 5) | ||||||||
| Shareholders’ equity(deficit) | ||||||||
| Preferred participation certificates, CHF | ||||||||
| Preferred shares, CHF | ||||||||
| 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 OPERATIONS AND COMPREHENSIVE LOSS
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| OPERATIONS | ||||||||
| Operating expenses: | ||||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Merger transaction costs | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Other income (expense), net | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense on related party loans | ( | ) | ||||||
| Total other income (expense) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Deemed dividends - make whole shares | ( | ) | ||||||
| Deemed dividends- warrants | ( | ) | ||||||
| Accrued dividends on preferred shares | ( | ) | ||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares used in computing basic and diluted net loss per common share | ||||||||
| COMPREHENSIVE LOSS | ||||||||
| Other comprehensive loss: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Effect of exchange rate changes | ||||||||
| Defined pension plan adjustments | ||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||
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 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 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| Issuance of equity in private placement offerings, net | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares due to exercise of warrants | ||||||||||||||||||||||||||||||||||||||||
| Issuance of pre-funded preferred shares in private placement offerings, net | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Conversion of preferred participation certificates into common shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | – | – | – | |||||||||||||||||||||||||||||||||||||
| Deemed dividend-make whole shares | – | – | – | ( | ) | |||||||||||||||||||||||||||||||||||
| Deemed dividend-warrants | – | – | – | ( | ) | |||||||||||||||||||||||||||||||||||
| Accrued dividends on preferred shares | – | – | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Pre-funded warrant issued as a deferred offering cost | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | – | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| BALANCE, JUNE 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||
| Issuance of common shares in private placement offerings, net | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | – | – | – | |||||||||||||||||||||||||||||||||||||
| Defined pension plan adjustments | – | – | – | |||||||||||||||||||||||||||||||||||||
| Effect of exchange rate changes on short-term loans | – | – | – | |||||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| BALANCE, JUNE 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||
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, | ||||||||
| 2025 | 2024 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Share-based compensation expense | ||||||||
| Periodic pension costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Interest payable | ||||||||
| Other accrued liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from the issuance of common shares in private placement, net | ||||||||
| Proceeds from exercise of common share warrants | ||||||||
| Payments on notes payable | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| 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: | ||||||||
| Issuance of note payable for prepaid insurance | $ | $ | ||||||
| Pre-funded warrant issued as a deferred offering cost | $ | $ | ||||||
| Deemed dividends on make whole shares and warrants | $ | $ | ||||||
| Issuance of pre-funded preferred shares in private placement offerings, net | $ | $ | ||||||
| Conversion of preferred participation certificates into common shares | $ | $ | ||||||
| Accrued dividends on preferred shares | $ | $ | ||||||
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”) 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, to treat ADHD.
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
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,
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:
| ● | Kadimastem Ordinary Share issued and outstanding immediately prior to the Effective Time will be exchanged for and converted into the right to receive a number of newly issued, fully paid and nonassessable common shares equal to the Exchange Ratio; |
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| ● | option, restricted share unit, restricted share, warrant or other rights issued and outstanding, whether vested or unvested, to purchase Kadimastem Ordinary Shares, shall be assumed by the Company and converted into an option, warrant, other award, or right, as applicable, to purchase common shares in accordance with the terms of the Merger Agreement; and |
| ● | each common share issued and outstanding immediately prior to the Effective time, and each common share acquirable upon the exercise of outstanding warrants and pre-funded warrants of the Company, shall continue to remain outstanding and, in addition, be entitled to a contingent value right (“CVR”) pursuant to the terms of the Merger Agreement and the CVR Agreement. |
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 $
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
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.
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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 of the merger and related closing conditions.
Pursuant to the Seventh Amendment, the parties agreed to extend the termination date of the Merger Agreement from August 31, 2025, to October 31, 2025, to facilitate completion of the merger.
The parties remain focused on and fully committed to aligning their efforts to completing the merger as soon as possible and with the utmost diligence. The parties are actively working to fulfill all commitments related to the process and adhere to the requirements set forth by all regulatory agents.
Contingent Value Right Agreement
Prior to the Closing, the Company will enter into the CVR Agreement with VStock Transfer, LLC, which will govern the terms of the CVRs. Each CVR will represent the right to additional payments based on the proceeds, subject to certain adjustments, received by the Company from the disposition of the Legacy Assets.
The right to the CVRs as evidenced by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement.
Going Concern
As of June 30, 2025, the Company had an accumulated
deficit of approximately $
As of June 30, 2025, the Company’s cash
and cash equivalents were approximately $
Accordingly, the accompanying 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.
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Note 2
Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying financial statements have been prepared in accordance with U.S. GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The interim results for the six months ended June 30, 2025, are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any future interim periods.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 20-F as of and for the year ended December 31, 2024 filed with the Securities Exchange Commission on May 16, 2025.
Effective September 27, 2024, the Company filed
amended articles of association with the commercial registry of Zurich reflecting an increase in share capital to CHF
Use of Estimates
The preparation of the 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 amounts of expenses during the reporting periods. Actual results could differ from those estimates and be based on events different from those assumptions. As part of these unaudited interim condensed financial statements, the Company’s significant estimates include the valuation allowance related to the Company’s deferred tax assets, the share-based compensation, and deemed dividends resulting from the triggering of down round provisions embedded in equity-linked instruments.
JOBS Act Accounting Election
The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, an EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company intends to take advantage of the exemptions until it is no longer an EGC.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk include cash. At June 30, 2025 and 2024, substantially all of the cash balances are deposited in one banking institution. At various times, the Company has deposits in financial institutions which are in excess of federally insured limits.
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Functional Currency
The Company has operations in Switzerland and the United States. The Company’s functional currency is the U.S. dollar (“USD”). The results of its non-USD based operations are translated to USD at the average exchange rates during the year. The Company’s assets and liabilities are translated using the current exchange rate as of the balance sheet date and shareholders’ equity is translated using historical rates. Foreign exchange transaction gains and losses are included in other income/expense in the Company’s results of operations and comprehensive loss.
Research and Development
Costs for research and development, or R&D of products, including vendor expenses and supplies and consultant fees, are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. Where contingent milestone payments are due to third parties under research and development arrangements, the obligations are recorded when the milestone results are probable of being achieved.
Fair Value Measurements
The Company measures and discloses fair value in accordance with ASC 820, “Fair Value,” which defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
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As a basis for considering such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - unadjusted quoted prices are available in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
Level 2 - pricing inputs are other than quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 - pricing inputs are unobservable for the non-financial asset or liability and only used when there is little, if any, market activity for the non-financial asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
The Company’s cash and cash equivalents are carried at fair value, determined according to the fair value hierarchy described above. The carrying value of the Company’s accounts payable and accruals approximates fair value due to the short-term nature of these liabilities. The Company did not hold any cash equivalents.
Deferred Offering Costs – Equity Line of Credit
Deferred offering costs consist of legal, accounting, commitment fees, and other professional fees directly related to anticipated equity financings. Such costs are capitalized until the related equity issuance is completed, at which time they are recorded as a reduction of the offering proceeds. If the planned equity issuance is abandoned or the facility expires without utilization, the costs are expensed in the period of termination.
As of June 30, 2025, the Company had recorded $
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
Due to the fact that the Company has a history of generating losses, and expects to generate losses in the foreseeable future, a full valuation allowance has been recorded.
The Company accounts for uncertain tax positions in accordance with an amendment to ASC Topic 740-10, “Income Taxes (Accounting for Uncertainty in Income Taxes),” which clarified the accounting for uncertainty in tax positions. This amendment provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is “more-likely-than-not” to be sustained were it to be challenged by a taxing authority.
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The assessment of the tax position is based solely
on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. If an uncertain
tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than
Share-Based Compensation
The Company measures all share-based awards granted based on the fair value on the date of the grant and recognizes compensation expense with respect to those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company recognizes forfeitures related to share-based compensation awards as they occur and reverses any previously recognized compensation cost associated with forfeited awards in the period the forfeiture occurs.
The Company classifies share-based compensation expense in the accompanying consolidated statements of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.
The fair value of each share option is estimated on the date of grant using the Black-Scholes option-pricing model (“Black-Scholes”). Black-Scholes requires a number of assumptions, of which the most significant are share price, expected volatility, expected option term (the time from the grant date until the options are exercised or expire), risk-free rate and expected dividend rate. The grant date fair value of a common share is determined by the board of directors (the “Board of Directors”) considering, among other factors, the assistance of a valuation specialist and management. The grant date fair value of a common share is determined using the valuation methodologies, which utilize certain assumptions, including probability weighting of events, volatility, time to liquidation, and risk-free interest rate.
Preferred Shares and Preferred Participation Certificates
Upon issuance of a convertible preferred share instrument, the Company evaluates its classification as either equity or debt. In accordance with ASC 480, the Company’s preferred shares and preferred participation certificates (“PPCs”) were classified as permanent equity as it does not contain any mandatorily redeemable provisions. Further, in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in an Entity’s Own Equity,” the preferred shares and PPCs did not meet any of the criteria that would preclude equity classification. The Company concluded that the preferred shares were more akin to an equity-type instrument than a debt-type instrument, therefore the conversion features associated with the convertible preferred shares and PPCs were deemed to be clearly and closely related to the host instrument and were not bifurcated as a derivative under ASC 815.
Earnings per Share
Basic net loss per common share is computed by dividing the net loss applicable to common shareholders by the weighted-average number of common shares outstanding for the period. 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, options to purchase common shares and shares issuable upon the conversion of preferred shares and PPCs.
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A summary of the potentially dilutive securities that were excluded from diluted net loss per share each year because their effect would be antidilutive are presented as follows:
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Share options | ||||||||
| Warrants (excluding pre-funded) | ||||||||
| Convertible preferred shares | ||||||||
Segment Reporting
The Company manages its operations as a single segment for the purpose 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 in Switzerland.
The significant expenses regularly reviewed by the CODM are consistent with those reported on the Company’s consolidated statement of operations and expenses are not regularly reviewed on a more disaggregated basis for assessing segment performance and deciding how to allocate resources. The CODM does not regularly review total assets for the Company’s single reportable segment as total assets are not used to assess performance or allocate resources.
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09,
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). The ASU focuses
on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 requires public business entities to
disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages. The guidance requires the rate reconciliation
to include specific categories and provides further guidance on disaggregation of those categories based on a quantitative threshold equal
to
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For entities reconciling to the US statutory rate
of
The adoption of ASU 2023-09 is expected to have a financial statement disclosure impact only and is not expected to have a material impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses” a new accounting standard to improve the disclosures about an entity’s expenses and address requests from investors for more detailed information about the types of expenses included in commonly presented expense captions. The new standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with retrospective application permitted. The Company is evaluating the disclosure requirements related to the new standard and its impact on the Company’s consolidated financial statements.
The Company has implemented all new accounting pronouncements currently in effect that may impact its consolidated financial statements and does not believe any other recently issued standards will have a material impact on its financial position or results of operations.
Note 3
Prepaid Expenses and Other Current Assets:
The Company’s prepaid expenses and other current assets consisted of the following as of June 30, 2025, and December 31, 2024:
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Vendor prepayments | $ | $ | ||||||
| VAT recoverable and other current assets | ||||||||
| Other short-term receivables | ||||||||
| Prepaid insurance | ||||||||
| Prepaid expenses | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
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Note 4
Other Accrued Liabilities:
Other accrued liabilities consisted of the following as of June 30, 2025, and December 31, 2024:
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Professional consultants’ expenses | $ | $ | ||||||
| Stamp tax | ||||||||
| Accrued board fees | ||||||||
| Other accrued expenses | ||||||||
| Accrued dividends on preferred share | ||||||||
| Total other accrued liabilities | $ | $ | ||||||
Note 5
Commitments and Contingencies:
Commitments
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.
On August 27, 2024, the Company received
correspondence from Université de Lausanne, initiating the official “audience de conciliation” procedure, overseen
by the ordinary civil court in Lausanne. The hearing was scheduled for October 9, 2024, at the Tribunal d’arrondissement de Lausanne.
The complaint pertains to an unpaid invoice for research services amounting to $
On
May 9, 2025 the Company filed its response denying any liability and raised a counterclaim in CHF 30’000 plus
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Note 6
Equity:
Preferred Shares and PPCs
On October 9, 2024, the Company entered into a
securities purchase agreement, or the Debt Securities Purchase Agreement, (“Debt SPA”) with an accredited investor, pursuant
to which in exchange for the satisfaction of the Company’s debt in the aggregate amount of $
In October 2024, the Company amended and restated
its articles of association to designate
| ● | Accrue dividends at an annual rate of eight percent
( |
| ● | Stated value and initial conversion price of
$ |
| ● | Have no voting rights. |
Upon any liquidation, dissolution or winding up of the Company, the preferred shareholders will be entitled to receive an amount equal to the stated value of any Preferred Shares held at the time of such an event prior to any holders of common shares.
On November 13, 2024, as disclosed in the Company’s Report on Form 6-K filed with the SEC on November 15, 2024, the Company filed amended and restated articles of association with the commercial registry of the Canton of Zurich, Switzerland, to reflect the following:
| ● | Capital increase of CHF |
| ● | Conversion of |
| ● | Exchange of |
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PPCs have no voting rights and have the same
rights, preferences and privileges as the Preferred Shares. Following this transaction, and in connection with the creation of the
PPCs, one of the Company’s accredited investors elected to exchange
On March 27, 2025, the Company entered into a
securities purchase agreement, or the March 2025 SPA, with three accredited investors. Pursuant to the terms of the March 2025 SPA, the
Company agreed to issue and sell to the investors, in a private placement offering,
Pursuant to the terms of the March 2025 SPA, the
Company issued an aggregate of
The initial conversion and exercise prices in the Preferred Shares, PPC and common share warrants issued in March and June 2025 are subject to adjustment, for share splits, dividends and the subsequent sale or issuance of equity and equity-linked instruments with an effective price per share that is lower than the initial conversion price.
During the six months ended June 30, 2025, the
Down Round Provision embedded in the October 2024 Preferred Shares and PPCs was triggered twice. Once in January 2025 with the sale of
common shares at $
In connection with the January 2025 trigger, the
Company issued
As of June 30, 2025 and December 31, 2024, the
total issued and outstanding Preferred Shares and PPCs were
As of June 30, 2025, there are
Pursuant to the Company’s articles of association,
PPCs accrue dividends on the stated value at a rate of
Treasury Shares per the Swiss Corporate Law
The Company may hold common shares in treasury per
Swiss Corporate Law and may consider issuing additional common shares to the Exchange Agent during a capital increase. Swiss law limits
the Company’s right to purchase and hold its own shares. The Company and its subsidiaries may purchase shares only if and to the extent that (i) freely
disposable equity capital is available in the required amount; and (ii) the combined par value of all such shares does not exceed
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Shares held by the Company or its subsidiaries are not entitled to vote at the shareholders’ meeting but are entitled to the economic benefits applicable to the shares generally, including dividends and pre-emptive rights in the case of share capital increases.
Swiss law and the Company’s articles of association do not impose any restrictions on the exercise of voting or any other shareholder rights by shareholders residing outside of Switzerland.
Furthermore, according to Swiss accounting rules,
the Company needs to reflect the amount of the purchase price of the acquired treasury shares as a negative position through the creation of a
special reserve on its balance sheet. The Company may face negative Swiss tax implications, if it holds more than
Common Shares
In January 2025, the Company sold
On March 31, 2025, the Company entered into a
Common Shares Purchase Agreement (the “ELOC SPA”) with Alpha Capital Anstalt (“Alpha”), relating to a committed
equity line of credit. Pursuant to the ELOC SPA, the Company has the right from time to time at its option to sell to Alpha up to $
The purchase price of the common shares that the
Company elects to sell to Alpha pursuant to the ELOC SPA will be
In connection with the execution of the ELOC SPA,
the Company issued a pre-funded warrant to purchase
As of June 30, 2025, no shares have been sold
under the ELOC SPA. The Company has reflected the estimated fair value of the pre-funded warrants of $
Deemed Dividends
Down Round Provision Triggers
The Company has issued and outstanding Preferred
Shares and warrants to purchase common shares that include down round provisions. During the six months ended June 30, 2025, these down-round
provisions were triggered twice when the Company sold common shares at $
The January 2025 Trigger resulted in the reduction
of the conversion price of the
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This was due to the Company executing the sale
of a securities purchase agreement in December 2024, (December 2024 SPA”) and delays of the closing being caused by the Company.
The Company issued
Further, the conversion price was further reduced
from $
The Company determined the incremental value provided
to the preferred shareholder for the reduction in the conversion price from $
Make Whole Provision
Pursuant to the March 2025 Offering, the Company
agreed to a make whole arrangement with Alpha. The Company agreed to issue Alpha
During the six months ended June 30, 2025, the
Company has reflected a total of $
Warrants
During the six months ended June 30, 2025, the Company had the following common share warrant issuances:
| ● |
| ● |
| ● |
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The following table summarizes the common share warrant activity for the six-month period ended June 30, 2025:
| Shares | Weighted Average Exercise Price | Weighted Average Contractual Term | ||||||||||
| Balance at January 1, 2025 | $ | |||||||||||
| Issuances | ||||||||||||
| Exercises | ( | ) | ||||||||||
| Balance outstanding and exercisable at June 30, 2025 | $ | |||||||||||
The intrinsic value of exercisable but unexercised
in-the-money common share warrants at June 30, 2025 was $
Option Plan
On December 14, 2021, the Board of Directors adopted
the Share Option Plan Regulation 2021 (the “Option Plan”). The purpose of the Option Plan is to retain, attract and motivate
management, employees, directors and consultants by providing them with options to purchase common shares. The Board of Directors
allocated fifteen percent (
The exercise prices, vesting and other restrictions
of the awards to be granted under the Option Plan are determined by the Board of Directors, except that no share option may be issued
with an exercise price less than the fair market value of the common shares at the date of the grant or have a term in excess of
The following table summarizes total share option activity for the six-month period ended June 30, 2025:
| Number of Options | Weighted Average Exercise Price | |||||||
| Balance at December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired/cancelled | ||||||||
| Balance at June 30, 2025 | $ | |||||||
| Options vested and exercisable | ||||||||
The weighted average remaining contractual life of each of the options outstanding, options vested and exercisable and options expected to vest at June 30, 2025 was years.
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The following table summarizes unvested share option activity for the six-month period ended June 30, 2025:
| Non-Vested Options | Weighted Average Grant date Fair Value | |||||||
| Balance at December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Balance at June 30, 2025 | $ | |||||||
The aggregate intrinsic value of share options
is calculated as the difference between the exercise price of the share options and the fair value of the Company’s common shares
for those share options that had exercise prices lower than the fair value of the Company’s common shares. The share price as of
June 30, 2025, was $
Share-based compensation expense for the six months
ended June 30,2025 and 2024, was $
Note 7
Related party consulting agreements:
The Company entered into consulting agreements with several of its senior management.
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
On March 19, 2024, the Company entered into
an exclusive license agreement (the “Aexon Agreement”), with Aexon Labs Inc., a Delaware corporation (“Aexon”). Alexander
Zwyer, (the Company’s Chief Executive Officer) owns
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compounds for narcolepsy and other neuro degenerative
disorders in the respective country or region in which it was used. Pursuant to the terms of the Aexon Agreement, the Company agreed to
pay Aexon a royalty on a country-by-country basis of
The Company made an upfront payment of $
In October 2024, the Company entered into a consulting
agreement with Ms. Nicole Fernandez-McGovern, the Company’s current Chief Financial Officer, pursuant to which the Company agreed
to pay Mr. Fernandez-McGovern a monthly retainer for her services of $
Note 8
Revisions of previously issued financial statements:
The Company identified an error in the classification of Preferred Shares and common shares within shareholders’ equity on the Consolidated Balance Sheets as of December 31, 2024. The error was limited to the line item presentation of “preferred shares” and “common shares” and did not affect total shareholders’ equity (deficit), the consolidated statements of operations, the consolidated statements of equity, the consolidated statements of cash flows, or any other financial statement captions.
The Consolidated Balance Sheets have been revised to correct the presentation of preferred shares and common shares as of December 31, 2024.
The table below summarizes the effect of the revision
correcting the error on the Company’s previously issued financial statements as of December 31, 2024 (such revisions are prior to the retrospective restatement of the change in par value equally from CHF
| Shareholders’ Equity (Deficit) | As Previously Reported | Adjustment | As Revised | |||||||||
| Preferred shares, CHF | $ | $ | ( | ) | $ | |||||||
| Common shares, CHF | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| Accumulated other comprehensive loss | ||||||||||||
| Total shareholders’ equity (deficit) | $ | $ | $ | |||||||||
As of December 31, 2024, preferred shares includes preferred participation certificates.
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Note 9
Subsequent Events:
Management has evaluated subsequent events that have occurred through the date these unaudited interim condensed financial statements were issued.
Warrant Exchange Agreement
On August 5, 2025,
the Company entered into a warrant exchange agreement (the “Exchange Agreement”) with Alpha. Pursuant to the terms of
the Exchange Agreement, the Company and Alpha agreed to exchange a certain common share purchase warrant dated October 10, 2024 to
purchase
The Exchange Shares are
being issued in reliance on an exemption from registration under Section 3(a)(9) of the Securities Act of 1933, as amended. Pursuant to
the Exchange Agreement, the Company agreed to issue the Exchange Shares within
In addition, Alpha waived any liquidated damages related solely to the Company’s registration obligations under the securities purchase agreements dated October 9, 2024 and December 4, 2024, and the related Registration Rights Agreement, all as previously executed between the Company and Alpha. No other rights under any other agreements were waived.
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