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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to



Commission file number: 001-39630

MOONLAKE IMMUNOTHERAPEUTICS
(Exact Name of Registrant as Specified in Its Charter)

Cayman IslandsN/A
(State or other jurisdiction of incorporation or organization)     (I.R.S. Employer Identification No.)
Dorfstrasse 29
6300 Zug
SwitzerlandN/A
(Address of principal executive offices)(ZIP Code)

41 415108022
(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A ordinary share, par value $0.0001 per share 
MLTX
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ☐                    Accelerated filer        ☐
Non-accelerated filer        ☒                    Smaller reporting company    
Emerging growth company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of November 14, 2022, there were 38,977,600 Class A Ordinary Shares, $0.0001 par value (the "Class A Ordinary Shares"), and 13,723,511 Class C Ordinary Shares, $0.0001 par value (the "Class C Ordinary Shares"), issued and outstanding.

MOONLAKE IMMUNOTHERAPEUTICS


FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS
















1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

MOONLAKE IMMUNOTHERAPEUTICS
s
s

CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in USD, except share data)


September 30, 2022 (Unaudited)December 31, 2021
Current assets
Cash and cash equivalents$41,204,667$8,038,845
Short-term marketable debt securities42,254,788
Other receivables600,536148,774
Prepaid expenses4,479,1941,449,096
Total current assets88,539,1859,636,715
Non-current assets
Property and equipment, net52,67945,739
Total non-current assets52,67945,739
Total assets$88,591,864 $9,682,454
Current liabilities
Trade and other payables$1,056,253 $1,569,290 
Short-term loans15,000,000
Accrued expenses and other current liabilities4,962,4704,518,311
Total current liabilities6,018,72321,087,601
Non-current liabilities
Pension liability4,985239,860
Total non-current liabilities4,985239,860
Total liabilities6,023,70821,327,461
Commitments and contingencies (Note 15)
Equity (deficit)
Series A Preferred Shares, CHF 0.10 par value; 22,880,908 authorized; 22,880,908 shares issued and outstanding as of December 31, 2021 (liquidation preference of $33.4 million);
72,466
Common Shares, CHF 0.10 par value; 13,119,092 authorized; 12,161,331 shares issued and 10,218,495 shares outstanding as of December 31, 2021
38,537
Treasury Shares, 1,942,837 as of December 31, 2021
(6,202)
Class A Ordinary Shares: $0.0001 par value; 500,000,000 shares authorized; 36,925,639 shares issued and outstanding as of September 30, 2022
3,693
Class C Ordinary Shares: $0.0001 par value; 100,000,000 shares authorized; 15,775,472 shares issued and outstanding as of September 30, 2022
1,578
Additional paid-in capital123,825,89642,061,984
Accumulated deficit(68,788,276)(53,643,615)
Accumulated other comprehensive income (loss)245,283(168,177)
Total shareholders’ equity (deficit) 55,288,174(11,645,007)
Noncontrolling interests27,279,982
Total equity (deficit)82,568,156(11,645,007)
Total liabilities and equity (deficit)

$88,591,864$9,682,454


The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
2

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in USD, except share and per share data)

(Unaudited)
    
Three Months Ended September 30, Nine Months Ended September 30,
20222021 (As restated)12022
2021 (As restated)1
Operating expenses
Research and development(9,024,437)(669,528)(30,679,842)(30,536,746)
General and administrative(5,746,064)(5,597,688)(17,685,152)(8,762,925)
Total operating expenses(14,770,501)(6,267,216)(48,364,994)(39,299,671)
Operating loss(14,770,501)(6,267,216)(48,364,994)(39,299,671)

Other income (expense), net37,593(20,840)352,227(25,839)
Loss before income tax(14,732,908)(6,288,056)(48,012,767)(39,325,510)



Income tax expense(8,740)(25,354)
Net loss$(14,741,648)$(6,288,056)$(48,038,121)$(39,325,510)
Of which: net loss attributable to controlling interests shareholders(10,110,452)(6,288,056)(32,865,429)(39,325,510)
Of which: net loss attributable to noncontrolling interests shareholders(4,631,196)(15,172,692)



Net unrealized gain on marketable securities and short term investments77,00677,006
Foreign currency Translation567
Actuarial income (loss) on employee benefit plans89,5861,000456,883
Other comprehensive income (loss)166,5921,000534,456
Comprehensive loss$(14,575,056)$(6,287,056)$(47,503,665)$(39,325,510)
Comprehensive loss attributable to controlling interests shareholders(9,998,892)(6,287,056)(32,507,526)(39,325,510)
Comprehensive loss attributable to noncontrolling interests(4,576,164)(14,996,139)



Weighted-average number of Class A Ordinary Shares, basic and diluted236,925,63925,830,560
Basic and diluted net loss per share attributable to controlling interests shareholders$(0.27)$$(1.27)$
Weighted-average number of Common Shares, basic and diluted2
2,390,5879,689,627
Basic and diluted net loss per Common Share$$(2.63)$$(4.06)


The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.    
1 For additional details, refer to Note 3 - Basis of Presentation and Significant Accounting Policies - Restatement of Consolidated Financial Statements as of and for the Three and Nine-months Ended September 30, 2021.

2 As a result of the Business Combination, the Company has retroactively restated the weighted average number of shares outstanding prior to April 5, 2022 to give effect to
the Exchange Ratio.
3

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Amounts in USD, except share data)
(Unaudited)
MoonLake AG Series A Preferred SharesMoonLake AG Common SharesMoonLake AG Common Shares Held In TreasuryClass A Ordinary SharesClass C Ordinary SharesAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Shareholders' Equity (Deficit) Noncontrolling InterestsTotal Equity (Deficit)
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at March 10, 2021 (As previously reported)— $— 1,000,000 $106,508 — $— — $— — $— $— $— $— $106,508 $ $106,508 
Retroactive application of the recapitalization due to the Business Combination (Note 2)— — 32,638,698 — — — — — — — — — —    
Balance at March 10, 2021, effect of Business Combination (Note 2) $ 33,638,698 $106,508  $  $  $ $ $ $ $106,508 $ $106,508 
Net loss for the period from March 10, 2021 to March 31, 2021— — — — — — — — — — — (351,673)— (351,673) (351,673)
Balance at March 31, 2021, effect of Business Combination (Note 2) $ 33,638,698 $106,508  $  $  $ $ $(351,673)$ $(245,165)$ $(245,165)
Share-based compensation expense through transfer of existing Common Shares (3,330,231) to Merck KGaA, Darmstadt, Germany, and conversion of transferred shares into Series A Preferred Shares
3,330,231 10,544 (3,330,231)(10,544)— — — — — — 4,851,000 — — 4,851,000  4,851,000 
Share based compensation granted under the equity incentive plans ESPP, ESOP, and Restricted Founders Shares— — — — — — — — — — 1,250,365 — — 1,250,365  1,250,365 
Transfer of existing Common Shares (19,207,697) to new shareholders, concurrent capital contribution by new shareholders net of share issuance cost of $279,364, and conversion of transferred shares into Series A Preferred Shares
19,207,697 60,816 (19,207,697)(60,816)— — — — — — 27,659,237 — — 27,659,237  27,659,237 
Net loss for the three months ended June 30, 2021— — — — — — — — — — — (32,685,779)— (32,685,779) (32,685,779)
Other comprehensive loss— — — — — — — — — — — — (1,000)(1,000) (1,000)
Balance at June 30, 2021, effect of Business Combination (Note 2)22,537,928 $71,360 11,100,770 $35,148  $  $  $ $33,760,602 $(33,037,452)$(1,000)$828,658 $ $828,658 
Preferred Shares purchased by a director following his appointment as chairman of the board of directors (net of share issuance cost of $4951)
342,980 1,106 — — — — — — — — 493,944 — — 495,050  495,050 
Share based compensation granted under the equity incentive plans (ESPP and ESOP) and reverse vesting of Restricted Founder Shares— — 1,026,956 3,281 — — — — — — 1,855,827 — — 1,859,108  1,859,108 
Net loss for the period from June 30, 2021 to September 30, 2021— — — — — — — — — — — (6,288,056)— (6,288,056) (6,288,056)
Other comprehensive income— — — — — — — — — — — — 1,000 1,000  1,000 
Balance at September 30, 2021, effect of Business Combination (Note 2)22,880,908 $72,466 12,127,726 $38,429  $  $  $ $36,110,373 $(39,325,508)$ $(3,104,240)$ $(3,104,240)


The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
4

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Amounts in USD, except share data)
(Unaudited)
MoonLake AG Series A Preferred SharesMoonLake AG Common SharesMoonLake AG Common Shares Held In TreasuryClass A Ordinary SharesClass C Ordinary SharesAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Shareholders' Equity (Deficit) Noncontrolling InterestsTotal Equity (Deficit)
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 2021 (As previously reported)680,196 $72,466 361,528 $38,537 (57,756)$(6,202)— $— — $— $42,061,984 $(53,643,615)$(168,177)$(11,645,007)$ $(11,645,007)
Retroactive application of the recapitalization due to the Business Combination (Note 2)22,200,712 11,799,803 (1,885,081)— — — — — — —    
Balance at December 31, 2021, effect of Business Combination (Note 2)22,880,908 $72,466 12,161,331 $38,537 (1,942,837)$(6,202) $  $ $42,061,984 $(53,643,615)$(168,177)$(11,645,007)$ $(11,645,007)
Share-based compensation granted under the equity incentive plan ESPP, and reverse vesting of Restricted Founder Shares— — — — 1,177,354 3,791 — — — — 1,988,871 — — 1,992,662  1,992,662 
Net loss for the three months ended March 31, 2022— — — — — — — — — — — (15,880,142)— (15,880,142) (15,880,142)
Other comprehensive income— — — — — — — — — — — — 266,269 266,269  266,269 
Balance at March 31, 2022, effect of Business Combination (Note 2)22,880,908 $72,466 12,161,331 $38,537 (765,483)$(2,411) $  $ $44,050,855 $(69,523,757)$98,092 $(25,266,218)$ $(25,266,218)
Noncontrolling interests recognized on historical net assets of MoonLake AG in connection with the Business Combination— (23,939)— (12,730)— 797 — — — — (14,551,870)22,966,652 (32,404)8,346,506 (8,346,506) 
Conversion of MoonLake AG shares into Class A Ordinary Shares and issuance of Class C Ordinary shares following the Business Combination(22,880,908)(48,527)(12,161,331)(25,807)765,483 1,614 18,501,284 1,850 15,775,472 1,578 70,870 — — 1,578  1,578 
Issuance of Class A Ordinary Shares upon Business Combination— — — — — — 18,424,355 1,843 — — 90,782,089 — — 90,783,932 43,869,269 134,653,201 
Share-based compensation granted under the equity incentive plan ESPP, ESOP, reverse vesting of Restricted Founder Shares and 2022 MoonLake Immunotherapeutics Equity Incentive Plan— — — — — — — — — — 1,701,614 — — 1,701,614 782,609 2,484,223 
Net loss for the three months ended June 30, 2022— — — — — — — — — — — (12,120,719)— (12,120,719)(5,295,610)(17,416,329)
Other comprehensive income— — — — — — — — — — — — 68,035 68,035 33,562 101,597 
At June 30, 2022 $  $  $ 36,925,639 $3,693 15,775,472 $1,578 $122,053,558 $(58,677,824)$133,723 $63,514,728 $31,043,324 $94,558,052 
Share-based compensation granted under the equity incentive plan ESPP, ESOP, reverse vesting of Restricted Founder Shares and 2022 MoonLake Immunotherapeutics Equity Incentive Plan— — — — — — — — — — 1,772,338 — — 1,772,338 812,822 2,585,160 
Net loss for the three months ended September 30, 2022— — — — — — — — — — — (10,110,452)— (10,110,452)(4,631,196)(14,741,648)
Other comprehensive income— — — — — — — — — — — — 111,560 111,560 55,032 166,592 
At September 30, 2022 $  $  $ 36,925,639 $3,693 15,775,472 $1,578 $123,825,896 $(68,788,276)$245,283 $55,288,174 $27,279,982 $82,568,156 
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
5

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in USD, except share and per share data)

(Unaudited)




Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021 (As restated)3
Cash flow from operating activities
Net loss$(48,038,121)$(39,325,510)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation9,0692,484
Share-based payment7,058,2553,106,192
Share-based compensation for the in-licensing agreement4,851,000
Net periodic pension benefit cost for the qualified pension plan227,691150,000
Other non-cash items(5,504)10,270
Changes in operating assets and liabilities:
Other receivables(451,762)(66,810)
Prepaid expenses(3,030,098)(43,645)
Trade and other payables(513,037)762,550
Accrued expenses and other current liabilities445,5892,830,291
Net cash flow used in operating activities(44,297,918)(27,723,178)
Cash flow from investing activities
Purchase of Short-term marketable debt securities(42,226,022)
Purchase of property and equipment(16,008)(32,332)
Net cash flow used in investing activities(42,242,030)(32,332)
Cash flow from financing activities
Issuance of shares at incorporation106,508
Issuance of Series A Preferred Shares, net28,154,287
Proceeds from Business Combination134,646,009
Contribution for Par Value of Class V Shares42,935
Repayment of Loan Liability(15,000,000)
Grants of additional Shares under ESPP3,281
Net cash flow provided by financing activities119,688,94428,264,076
Effect of movements in exchange rates on cash held16,826(1,005)
Net change in cash and cash equivalents33,165,822507,561
Cash and cash equivalents, beginning of period8,038,845
Cash and cash equivalents, end of period$41,204,667$507,561


The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.




3 For additional details, refer to Note 3 - Basis of Presentation and Significant Accounting Policies - Restatement of Consolidated Financial Statements as of and for the Three and Nine-months Ended September 30, 2021.
6

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD, except share and per share data)

(Unaudited)
s
Note 1 — Overview of the Company
Corporate Information
MoonLake Immunotherapeutics is a clinical-stage biotechnology company engaged in leveraging Nanobody® technology to develop next-level medicines for immunologic diseases, including inflammatory skin and joint diseases. MoonLake Immunotherapeutics focuses on developing its novel tri-specific Nanobody® Sonelokimab (“SLK”), an IL-17A and IL-17F inhibitor, in multiple inflammatory diseases in dermatology and rheumatology where the pathophysiology is known to be driven by IL-17A and IL-17F.
Unless the context otherwise requires, “MoonLake,” and the “Company” refer to the combined company following the Business Combination (as defined in Note 2 - Business Combination Agreement with Helix and Recapitalization), together with its subsidiaries.




Note 2 — Business Combination Agreement with Helix and Recapitalization

On April 5, 2022 (the “Closing Date”), MoonLake Immunotherapeutics, a Cayman Islands exempted company (formerly known as Helix Acquisition Corp.) (prior to the Closing Date, “Helix” and after the Closing Date, “MoonLake” or the “Company”) consummated the previously announced business combination (the “Closing”) pursuant to that certain Business Combination Agreement dated October 4, 2021 (the “Business Combination Agreement”), by and among Helix, MoonLake Immunotherapeutics AG, a Swiss stock corporation (Aktiengesellschaft) registered with the commercial register of the Canton of Zug, Switzerland under the number CHE-433.093.536 (“MoonLake AG”), the existing equity holders of MoonLake AG set forth on the signature pages to the Business Combination Agreement and the equityholders of MoonLake AG that executed joinders to the Business Combination Agreement (collectively, the “ML Parties”), Helix Holdings LLC, a Cayman Islands limited liability company and the sponsor of Helix (the “Sponsor”), and the representative of the ML Parties (such transactions contemplated by the Business Combination Agreement collectively, the “Business Combination”). Net proceeds from the Business Combination totaled $134.7 million, which included funds held in Helix’s trust account and the completion of a concurrent PIPE investment.
Pursuant to the Business Combination Agreement, approved by the boards of directors of each of MoonLake AG and Helix, (i) the Company changed its name from Helix Acquisition Corp. to MoonLake Immunotherapeutics, and (ii) MoonLake AG merged with and into MoonLake, with MoonLake AG as the surviving company in the Business Combination and, after giving effect to such Business Combination, MoonLake AG as a subsidiary of MoonLake.
The Business Combination Agreement provided for, among other things, the following transactions:
i.Two business days prior to the Closing Date, the ML Parties and MoonLake AG effectuated a restructuring of MoonLake AG’s share capital to, among other things, (x) convert the existing Series A preferred shares of MoonLake AG, par value of CHF 0.10 per share, into an equal number of MoonLake AG Common Shares such that the ML Parties held a single class of capital share of MoonLake AG immediately prior to the Closing and (y) approve a capital increase for the issuance of 4,006,736 Class V Voting Shares of MoonLake AG, par value CHF 0.01 per share, to Helix, each Class V Voting Share due to its lower par value having ten times the voting power of a MoonLake AG Common Share (the “Restructuring”).
ii.At the Closing, 2,875,000 Class B ordinary shares of Helix, par value $0.0001 per share (the “Class B Ordinary Shares”), constituting all of the then-outstanding Class B Ordinary Shares, were automatically converted into Class A Ordinary Shares on a one-for-one basis.
iii.At the Closing, Helix amended and restated its existing memorandum and articles of association to, among other things, establish a share structure consisting of the Class A Ordinary Shares, which carry economic and voting rights, and Class C Ordinary Shares, which carry voting rights but no economic rights.
iv.On the Closing Date, Helix paid all unpaid transaction expenses and contributed $134.7 million to MoonLake AG, including $15.0 million loan repayment pursuant to a convertible loan agreement dated March 20, 2022, by and between MoonLake AG and Cormorant Asset Management LP (“Cormorant”), and assigned by Cormorant to Helix on March 31, 2022.
7

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD, except share and per share data)

(Unaudited)
v.On the Closing Date, following the Restructuring, Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., and Biotechnology Value Trading Fund OS, L.P. (collectively, the “BVF Shareholders”) assigned all of their MoonLake AG Common Shares to Helix and Helix issued to the BVF Shareholders 18,501,284 Class A Ordinary Shares.
vi.On the Closing Date, following the Restructuring, Helix issued 15,775,472 Class C Ordinary Shares to the ML Parties (other than the BVF Shareholders). Please refer to Note 11 - Shareholders’ Equity (Deficit) for additional details on the exchange mechanism adopted.
Additionally, on the Closing Date, Helix issued to the PIPE Investors (as defined below in the section entitled “PIPE Financing”) an aggregate of 11,700,000 Class A Ordinary Shares.
As of the open of trading on April 6, 2022, the Class A Ordinary Shares, formerly those of Helix, began trading on The Nasdaq Capital Market (“Nasdaq”) under the trading symbol “MLTX.”


PIPE Financing
On October 4, 2021, concurrently with the execution of the Business Combination Agreement, and subsequently on March 31, 2022 and April 4, 2022, Helix entered into subscription agreements with certain investors (collectively, the “PIPE Investors,” which includes affiliates of the Sponsor and certain existing equityholders of MoonLake AG) pursuant to which, and on the terms and subject to the conditions of which, the PIPE Investors have collectively subscribed for 11,700,000 Class A Ordinary Shares, 11,600,000 shares of which were issued at a price of $10.00 per share for gross proceeds of $116.0 million and 100,000 shares of which were issued to placement agents of the PIPE in satisfaction of an aggregate of $1.0 million of fees owed by Helix to such placement agents.

Summary of Net Proceeds
The following table summarizes the elements of the net proceeds from the Business Combination:
in thousands
Investments held in Trust Account$115,051
Less cash to cover redemptions of the Class A Ordinary Shares issued by Helix
prior to the Closing Date
(80,842)
Plus PIPE investment116,000
Less Helix transaction expense(15,520)
of which accrued expenses(5,798)
of which deferred IPO underwriting fee(4,025)
of which other transaction expenses(5,697)
Available Closing Date Cash$134,689




Summary of Ordinary Shares Issued
8

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD, except share and per share data)

(Unaudited)
The following table summarizes the number of Ordinary Shares outstanding immediately following the consummation of the Business Combination:
Helix Acquisition Corp. Ordinary Shares prior to the Business Combination14,805,000
Of which Class A Ordinary Shares (Helix management - IPO private placement shares)430,000
Of which Class A Ordinary Shares redeemable11,500,000
Of which Class B Ordinary Shares (Helix management - sponsor promote)2,875,000
Less redemptions of the Class A Ordinary Shares issued by Helix prior to the Closing Date
(8,080,645)
Plus issuance of Helix Class A Ordinary Shares to PIPE Investors11,700,000
Plus issuance of Helix Class A Ordinary Shares to BVF Shareholders18,501,284
Total MoonLake Class A Ordinary Shares Outstanding at Closing
36,925,639
Plus issuance of Helix Class C Ordinary Shares to ML Parties (other than the BVF Shareholders)15,775,472
Total MoonLake Class A and Class C Ordinary Shares Outstanding at Closing52,701,111

Further information about the Business Combination can be found on Form S-1/A filed with the SEC on July 26, 2022, declared effective on August 2, 2022 and to the exhibits included therein, available at www.sec.gov.


Note 3 — Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include those of the Company and its subsidiaries, MoonLake AG and MoonLake Immunotherapeutics Ltd., after elimination of all intercompany accounts and transactions. The accompanying unaudited condensed consolidated financial statements and notes hereto have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”). 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 FASB.
In the opinion of management, all adjustments necessary for a fair statement of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. Results of operations for the three and nine months ended September 30, 2022 and 2021 are not necessarily indicative of the results for the entire fiscal year or any other period. The unaudited condensed consolidated financial information for the three and nine months ended September 30, 2022 and 2021 have been prepared on the same basis as and should be read in conjunction with MoonLake AG’s audited financial statements and notes thereto for the year ended December 31, 2021 included in the final prospectus filed with the SEC pursuant to Rule 424(b)(3) on August 2, 2022.

Pursuant to ASC 805, for financial accounting and reporting purposes, MoonLake AG was deemed the accounting acquirer and Helix was treated as the accounting acquiree, and the Business Combination was accounted for as a reverse recapitalization. Accordingly, the Business Combination was treated as the equivalent of MoonLake AG issuing shares for the net assets of Helix, accompanied by a recapitalization. The net assets of Helix were stated at historical costs, with
9

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD, except share and per share data)

(Unaudited)
no goodwill or other intangible assets recorded, and are consolidated with MoonLake AG’s financial statements on the Closing Date.

In accordance with the Business Combination Agreement, the ML Parties received 33.638698 Ordinary Shares in the Company for every MoonLake AG Common Share or Series A Preferred Share (the “Exchange Ratio”). The BVF Shareholders received 18,501,284 Class A Ordinary Shares whereas the rest of the ML Parties (excluding the BVF Shareholders) received 15,775,472 Class C Ordinary Shares which can be converted into Class A Ordinary Shares at the discretion of the shareholder (refer to Note 11 — Shareholders’ Equity (Deficit) for further details on the classes of ordinary shares). The number of shares, and the number of shares within the net income (loss) per share held by the ML Parties in MoonLake AG prior to the Business Combination have been adjusted by the Exchange Ratio to reflect the equivalent number of ordinary shares in the Company (identified as “the equivalent of” throughout these condensed consolidated financial statements).

Certain MoonLake AG shareholders (ML Parties other than the BVF Shareholders), did not exchange their shares in MoonLake AG for Class A Ordinary Shares in the Company and therefore continue to hold an economic interest in MoonLake AG and Class C Ordinary Shares in the Company. The Company recognized a noncontrolling interest equal to the ML Parties’ (other than the BVF Shareholders) proportionate interest in the net assets of MoonLake AG.

All amounts are presented in U.S. Dollar (“$”), unless otherwise indicated. The term “Swiss franc” and “CHF” refer to the legal currency of Switzerland, and “€” refers to euros.

Restatement of Consolidated Financial Statements as of and for the Three and Nine-months Ended September 30, 2021
On April 28, 2021, a shareholders’ agreement between MoonLake AG, its Series A investors, and its co-founders 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 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 per share. The Restricted Founder Shares are legally outstanding and continue to have voting and dividend rights.

Management had initially determined that the reverse vesting condition was necessary to induce the sale of the Series A Preferred Shares and did not contain a compensatory element. However, on December 13, 2021 a termination agreement was reached between one of the co-founders and MoonLake AG to terminate the co-founder’s contractual relationship and, as a result, 57,756 Common Shares (the equivalent of 1,942,837 Class C Ordinary Shares) were purchased by MoonLake AG. Management concluded that this termination agreement was reflective of the intention of the parties and therefore the substance of the previous agreement. As a result, management concluded that its accounting for the Restricted Founder Shares should have instead reflected a service condition and should be accounted for as a share-based compensation arrangement.

Accounting for the Restricted Founder Shares as share-based compensation increased general and administrative expenses to reflect the recognition of the non-cash expense of the fair value of the Restricted Founder Shares at the grant date of April 28, 2021 over the two-year vesting period, and led to a corresponding increase in additional paid in capital. The previously unrecognized share-based compensation expense amounts to $1.8 million for three months ended September 30, 2021, and $3.1 for the period from inception to September 30, 2021, causing an increase in net loss, general and administrative expenses and additional paid-in capital of the same amount in the respective periods. Net loss per share was previously $(13.55) ((0.40), assuming the retroactive adjustment of the EPS denominator by multiplying MoonLake AG Common Shares by the Exchange Ratio) for the three months ended September 30, 2021, and $(70.56) ((2.10), assuming the retroactive adjustment of the EPS denominator by multiplying MoonLake AG Common Shares by the Exchange Ratio) for the period from inception to September 30, 2021. The increase in net loss, and exclusion of unvested Restricted Founder Shares in the denominator leads to corrected values of $(88.48) ((2.63), assuming the equivalent number of shares by applying the Exchange Ratio) for the three months ended September 30,
10

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD, except share and per share data)

(Unaudited)
2021, and $(136.52) ((4.06), assuming the retroactive adjustment of the EPS denominator by multiplying MoonLake AG Common Shares by the Exchange Ratio) for the period from inception to September 30, 2021.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses. The significant judgments, estimates and assumptions relevant to the Company relate to:
determining whether the in-process research and development expenditure (“IPR&D”) has an alternative future use;
estimating the fair value of the portion of the aggregate purchase price relating to its own shares in connection with the acquisition of the in-license agreement;
determining assumptions used in determining the fair value of share-based compensation; and
estimating the recoverability of the deferred tax asset.

The Company bases its judgments and estimates on various factors and information, which may include, but are not limited to, the Company’s forecasts and future plans, current economic conditions and observable market-based transactions of its own shares, the results of which form the basis for making judgments about the carrying value of assets and liabilities and recorded amounts of expenses that are not readily apparent from other sources. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future results of operation may be affected.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. As of September 30, 2022, the Company considers $19.9 million of short-term marketable debt securities in the form of eurocommercial papers and certificates of deposit to be cash equivalents. As of December 31, 2021, the Company did not have any cash equivalents.
Marketable securities and short-term investments
The Company invests in short term marketable securities in the form of debt securities. At the time of purchase, the Company will assess whether such debt security should be classified as held-to-maturity or available-for-sale debt securities.
Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity debt securities are carried at amortized cost, adjusted for accretion of discounts or amortization of premiums to maturity computed under the effective interest method. Such accretion or amortization is included in “Interest and dividend income.” Marketable debt securities not classified as held-to-maturity are classified as available-for-sale and reported at fair value.
Net unrealized gains and losses on available-for-sale debt securities are excluded from the determination of earnings and are instead recognized in the “Accumulated other comprehensive income (loss)” component of shareholder’ equity (deficit) until realized. Realized gains and losses on available-for-sale debt securities are computed based upon the historical cost of these securities, using the specific identification method.
A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and the cost of securities sold is determined using the specific-identification method.
11

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD, except share and per share data)

(Unaudited)
Marketable debt securities are classified as either “Cash and cash equivalents” or “Short‑term marketable debt securities” according to their maturity at the time of acquisition.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a large financial institution which, at times, may exceed the CHF 100,000 deposit protection limit. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. Further, the Company's investment strategy for cash (in excess of current business requirements) is set to invest in short-term securities. Management actively monitors credit risk in the investment portfolio. Credit risk exposures are controlled in accordance with policies approved by the board of directors to identify, measure, monitor and control credit risks.
Fair Value Measurements
The Company follows the guidance included in ASC 820, Fair Value Measurement. Fair value is defined as the price 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.
There are three levels of inputs to fair value measurements:
Level 1, meaning the use of quoted prices for identical instruments in active markets;
Level 2, meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable; and
Level 3, meaning the use of unobservable inputs. Observable market data is used when available.
Transfers between Levels 1, 2 or 3 within the fair value hierarchy are recognized at the end of the reporting period when the respective transaction occurred.
Segment Information
The Company operates as a single operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a stand-alone basis for the purposes of allocating resources, and assessing financial performance.
Property and Equipment
Property and equipment, net is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of three to five years. As of September 30, 2022, property and equipment, net relates to IT and office equipment.
Research and Development Contract Costs and Accruals
Research and development expenses include employee payroll, consulting, contract research and contract manufacturing costs attributable to research and development activities and are expensed as incurred.
Upfront payments and milestone payments made for the licensing of technology are expensed as research and development expenses in the period in which it is probable that a liability has been incurred. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.
The Company has entered into various research and development contracts with companies both inside and outside of the United States. These agreements are generally cancellable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in
12

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD, except share and per share data)

(Unaudited)
determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.
Share-based Transaction
Goods or services received in a share-based payment transaction are measured using a fair value-based measure.
The Company measures and recognizes compensation expense for all share-based awards made to employees and directors based on estimated fair values. The fair value of employee share options is estimated on the date of grant using the Black-Scholes option pricing model. Share-based compensation expense is adjusted for forfeitures as they occur.
Foreign Currency
The functional currency of the Company and its subsidiaries is the U.S. dollar. Balances and transactions denominated in foreign currencies are converted as follows: monetary assets and liabilities are translated using exchange rates in effect at the balance sheet dates and non-monetary assets and liabilities are translated at historical exchange rates. Revenue and expenses are translated at the daily exchange rate on the respective accounting date.
Gains or losses from foreign currency translation are included in the consolidated statement of operations. The Company recognized foreign currency transaction gain of $344,914 for the nine months ended September 30, 2022 (“the period ended September 30, 2022”), and a gain of $4,361 for the three months ended September 30, 2022. For the three and nine months ended September 30, 2021, MoonLake AG recognized a foreign currency transaction loss of $19,853 and $24,543 respectively.
Income Taxes
The Company accounts for income taxes by using the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded to the extent it is more likely than not that a deferred tax asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
Net Loss per Class A Ordinary Shares
Basic net loss per Class A Ordinary Share is calculated using the two-class method under which earnings are allocated to both Class A Ordinary Shares and participating securities. Basic net loss per share is calculated by dividing the net loss attributable to Class A Ordinary Shares by the weighted-average number of Class A Ordinary Shares outstanding for the period. The diluted net loss per Class A Ordinary Share is computed by dividing the net loss using the weighted-average number of Class A Ordinary Shares and, if dilutive, potential Class A Ordinary Shares outstanding during the period.
In periods in which the Company reports a net loss attributable to shareholders of Class A Ordinary Shares, diluted net loss per share attributable to shareholders of Class A Ordinary Shares is the same as basic net loss per share attributable to shareholders of Class A Ordinary Shares, since dilutive Class A Ordinary Shares are not assumed to be outstanding if their effect is anti-dilutive.

Acquisitions
The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first assessing whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The Company acquired the Sonelokimab program (the "SLK Program") during the period ended December 31, 2021 and determined that substantially all of the fair value of the gross assets acquired related to IPR&D of SLK. Therefore, this transaction was accounted for as an asset acquisition.

13

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Amounts in USD