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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, 2023

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 Islands98-1711963
(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 Capital Market

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 1, 2023, there were 59,940,529 Class A Ordinary Shares, $0.0001 par value (the "Class A Ordinary Shares"), and 2,505,476 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, 2023

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, 2023 (Unaudited)December 31, 2022
Current assets
Cash and cash equivalents$318,165,809$39,505,627
Short-term marketable debt securities177,812,89932,609,108
Other receivables720,755217,129
Prepaid expenses3,310,2814,179,468
Total current assets500,009,74476,511,332
Non-current assets
Operating lease right-of-use assets169,422282,580
Property and equipment, net39,52049,389
Total non-current assets208,942331,969
Total assets$500,218,686 $76,843,301
Current liabilities
Trade and other payables$3,404,728 $254,972 
Short-term portion of operating lease liabilities156,338153,629
Accrued expenses and other current liabilities6,746,9517,256,845
Total current liabilities10,308,0177,665,446
Non-current liabilities
Long-term portion of operating lease liabilities13,084128,951
Pension liability255,399282,206
Total non-current liabilities268,483411,157
Total liabilities10,576,5008,076,603
Commitments and contingencies (Note 15)
Equity (deficit)
Class A Ordinary Shares: $0.0001 par value; 500,000,000 shares authorized; 53,561,488 shares issued and outstanding as of September 30, 2023; 38,977,600 shares issued and outstanding as of December 31, 2022
5,3563,898
Class C Ordinary Shares: $0.0001 par value; 100,000,000 shares authorized; 8,884,517 shares issued and outstanding as of September 30, 2023; 13,723,511 shares issued and outstanding as of December 31, 2022
8891,373
Additional paid-in capital531,271,953129,192,291
Accumulated deficit(109,220,396)(80,650,212)
Accumulated other comprehensive income2,875,198350,946
Total shareholders’ equity 424,933,00048,898,296
Noncontrolling interests64,709,18619,868,402
Total equity489,642,18668,766,698
Total liabilities and equity

$500,218,686$76,843,301


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,
2023202220232022
Operating expenses
Research and development$(7,585,136)$(9,024,437)$(23,704,087)$(30,679,842)
General and administrative(5,391,607)(5,746,064)(15,390,117)(17,685,152)
Total operating expenses(12,976,743)(14,770,501)(39,094,204)(48,364,994)
Operating loss(12,976,743)(14,770,501)(39,094,204)(48,364,994)

Other income, net1,386,31337,5932,952,557352,227
Loss before income tax(11,590,430)(14,732,908)(36,141,647)(48,012,767)



Income tax expense(28,923)(8,740)(50,080)(25,354)
Net loss$(11,619,353)$(14,741,648)$(36,191,727)$(48,038,121)
Of which: net loss attributable to controlling interests shareholders(9,426,049)(10,110,452)(28,570,184)(32,865,429)
Of which: net loss attributable to noncontrolling interests shareholders(2,193,304)(4,631,196)(7,621,543)(15,172,692)



Net unrealized gain (loss) on marketable securities and short term investments3,437,29177,0063,046,53877,006
Foreign currency translation567
Actuarial gain (loss) on employee benefit plans39,15789,586(19,323)456,883
Other comprehensive income (loss)3,476,448166,5923,027,215534,456
Comprehensive loss$(8,142,905)$(14,575,056)$(33,164,512)$(47,503,665)
Comprehensive loss attributable to controlling interests shareholders(6,590,259)(9,998,892)(26,095,926)(32,507,526)
Comprehensive loss attributable to noncontrolling interests(1,552,646)(4,576,164)(7,068,586)(14,996,139)



Weighted-average number of Class A Ordinary Shares, basic and diluted53,517,65536,925,63945,485,65025,830,560
Basic and diluted net loss per share attributable to controlling interests shareholders$(0.18)$(0.27)$(0.63)$(1.27)


The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.    
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 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 Combination122,200,712 — 11,799,803 — (1,885,081)— — — — — — — —    
Balance at December 31, 202122,880,908 $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, 202222,880,908 $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 
Balance 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 
Balance 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 

1 As defined in Note 2 Business Combination Agreement with Helix and Recapitalization included in MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2022 included in MoonLake’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 20, 2023
4

MOONLAKE IMMUNOTHERAPEUTICS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Amounts in USD, except share data)
(Unaudited)
The accompanying Notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.






Class A Ordinary SharesClass C Ordinary SharesAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Shareholders' Equity (Deficit)Noncontrolling InterestsTotal Equity (Deficit)
SharesAmountSharesAmount
Balance at December 31, 202238,977,600 $3,898 13,723,511 $1,373 $129,192,291 $(80,650,212)$350,946 $48,898,296 $19,868,402 $68,766,698 
Share-based compensation under the equity incentive plan ESPP, ESOP, 2022 MoonLake Immunotherapeutics Equity Incentive Plan and reverse vesting of Restricted Founder Shares— — — — 1,875,992 — — 1,875,992 701,195 2,577,187 
Refund of stamp duty fees— — — — 3,517 — — 3,517 1,406 4,923 
Net loss for the three months ended March 31, 2023— — — — — (9,004,856)— (9,004,856)(3,214,131)(12,218,987)
Other comprehensive loss— — — — — — (12,625)(12,625)(5,047)(17,672)
Conversion of MoonLake Class C Ordinary Shares into Class A Ordinary Shares176,603 18 (176,603)(18)237,049 — 1,787 238,836 (238,836) 
Balance at March 31, 202339,154,203 $3,916 13,546,908 $1,355 $131,308,849 $(89,655,068)$340,108 $41,999,160 $17,112,989 $59,112,149 
Share-based compensation under the equity incentive plan ESPP, ESOP, 2022 MoonLake Immunotherapeutics Equity Incentive Plan and reverse vesting of Restricted Founder Shares— — — — $1,247,416 — — 1,247,416 250,245 1,497,661 
Issuance of Class A Ordinary Shares, net of transaction costs (Note 11)9,744,894 974 — — 451,284,119 — — 451,285,093  451,285,093 
Net loss for the three months ended June 30, 2023— — — — — (10,139,279)— (10,139,279)(2,214,108)(12,353,387)
Other comprehensive loss— — — — — — (348,906)(348,906)(82,655)(431,561)
Conversion of MoonLake Class C Ordinary Shares into Class A Ordinary Shares4,587,713 459 (4,587,713)(459)5,709,595 — 43,922 5,753,517 (5,753,517) 
Balance at June 30, 202353,486,810 $5,349 8,959,195 $896 $589,549,979 $(99,794,347)$35,124 $489,797,001 $9,312,954 $499,109,955 
Share-based compensation under the equity incentive plan ESPP, ESOP, and 2022 MoonLake Immunotherapeutics Equity Incentive Plan— — — — 1,238,144 — — 1,238,144 187,507 1,425,651 
Net loss for the three months ended September 30, 2023— — — — — (9,426,049)— (9,426,049)(2,193,304)(11,619,353)
Other comprehensive loss— — — — — — 2,835,790 2,835,790 640,658 3,476,448 
Conversion of MoonLake Class C Ordinary Shares into Class A Ordinary Shares74,678 7 (74,678)(7)545,591 — 3,149 548,740 (548,740) 
Capital injection from MoonLake to MoonLake AG (Note 11)— — — — (60,061,761)— 1,135 (60,060,626)57,310,111 (2,750,515)
Balance at September 30, 202353,561,488 $5,356 8,884,517 $889 $531,271,953 $(109,220,396)$2,875,198 $424,933,000 $64,709,186 $489,642,186 

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)

(Unaudited)




Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
Cash flow from operating activities
Net loss$(36,191,727)$(48,038,121)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation9,8699,069
Share-based payment5,500,4997,058,255
Net periodic pension benefit (gain) cost for the qualified pension plan(50,740)227,691
Other non-cash items(21,468)(5,504)
Changes in operating assets and liabilities:
Other receivables(503,626)(451,762)
Prepaid expenses869,187(3,030,098)
Trade and other payables3,149,756(513,037)
Accrued expenses and other current liabilities, excl. stamp tax(3,195,591)445,589
Net cash flow used in operating activities(30,433,841)(44,297,918)
Cash flow from investing activities
Purchase of short-term marketable debt securities(175,732,711)(42,226,022)
Proceeds from maturities of short-term marketable debt securities33,681,688
Purchase of property and equipment(16,008)
Net cash flow used in investing activities(142,051,023)(42,242,030)
Cash flow from financing activities
Issuance of Class A Ordinary Shares, net of transaction costs (Note 11)451,285,093
Proceeds from Business Combination134,646,009
Contribution for Par Value of Class V Shares42,935
Repayment of loan liability(15,000,000)
Net cash flow provided by financing activities451,285,093119,688,944
Effect of movements in exchange rates on cash held(140,047)16,826
Net change in cash and cash equivalents278,660,18233,165,822
Cash and cash equivalents, beginning of period39,505,6278,038,845
Cash and cash equivalents, end of period$318,165,809$41,204,667


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




6

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(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 included in MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2022 included in MoonLake’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission (“SEC”) on March 20, 2023 (the “Annual Report”)) consummated on April 5, 2022 (the “Closing Date”), together with its subsidiaries.


Note 2 — 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 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”), MoonLake Immunotherapeutics Ltd., a private limited company incorporated in the United Kingdom, and MNLK Immunotherapeutics, Unipessoal Lda ("MNLK PT"), a private limited company incorporated in Portugal, 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 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 material adjustments necessary for a fair presentation 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, 2023 and 2022 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, 2023 and 2022 have been prepared on the same basis as and should be read in conjunction with MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2022 included in the Annual Report.

All amounts are presented in U.S. Dollar (“$”), unless otherwise indicated. The term “Swiss franc” and “CHF” refer to the legal currency of Switzerland, "GBP" refers to the legal currency of the United Kingdom, and “€” refers to euros.
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:
7

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
determining whether the in-process research and development expenditure (“IPR&D”) has an alternative future use;
determining assumptions used in determining the fair value of share-based compensation;
estimating the recoverability of the deferred tax asset; and
estimating the amount of accruals in connection with the completion of clinical trial milestones.

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, 2023, the Company considers $119.7 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, 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.
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 shareholders’ 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.
Marketable debt securities are classified as either “Cash and cash equivalents” or “Short‑term marketable debt securities” according to their original maturity at the time of acquisition. Unrealized gains and losses pertaining to cash equivalent securities are added back into the statement of cash flows as those are excluded from the determination of earnings but impact the cash and cash equivalents position.
Concentration of Credit Risk
8

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in large financial institutions which, at times, may exceed the CHF 100,000 deposit protection limit in Switzerland, the $250,000 Federal Deposit Insurance Corporation deposit insurance coverage limit in the United States, the GBP 85,000 Financial Services Compensation Scheme deposit protection limit in the United Kingdom, or the €100,000 Fundo de Garantia de Depósitos deposit protection limit in Portugal. 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. Additionally, the Company ensures further protection against credit risk by diversifying its cash holdings across a variety of credit institutions, thereby minimizing the potential impact of any adverse events on a single institution. Further, the Company's investment strategy for cash (in excess of current business requirements) is set to invest in short-term marketable debt 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, 2023, property and equipment, net relates to information technology 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
9

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
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 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.
Stock-Based Compensation

The Company recognizes compensation expense based on estimated fair values for all stock-based payment awards made to eligible employees, members of the board of directors and independent contractors that are expected to vest.

The valuation of stock option awards is determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the Company to make assumptions and judgements about the inputs used in the calculations, such as the fair value of the common stock, expected term, expected volatility of the Company’s common stock, risk-free interest rate and expected dividend yield. The valuation of restricted stock awards is measured by the fair value of the Company’s common stock on the date of the grant.

For all stock options granted, the Company calculated the expected term as the period that share-based awards are expected to be outstanding. The estimate of expected volatility is based on comparative companies’ volatility within the Company's industry. The risk-free rate is based on the yield available on United States Treasury zero-coupon issues corresponding to the expected term of the award.

The fair value of the common stock granted under the ESPP (as defined below) has historically been estimated by management with reference to the market-based transaction with the other Series A Preferred Shares Investors, as there was no public market for the common stock.

Share-based payment arrangements are accounted for under the fair value method. Total compensation is measured at grant date, based on the fair value of the award at that date, and recorded in earnings over the period the employees are required to render service. The Company recognizes compensation cost only for those awards expected to meet the service conditions on a straight-line basis over the requisite service period of the award.

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 in "other income, net". The Company recognized foreign currency transaction loss of $557,144 and $276,491 for the three and nine months ended September 30, 2023 (“the period ended September 30, 2023”), respectively. For the three and nine months ended September 30, 2022, the Company recognized a foreign currency transaction gain of $4,361 and $344,914, 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 all or a portion of the Company's deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
10

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
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. On April 29, 2021, MoonLake AG entered into an in-licensing agreement (the “In-License Agreement”) with Merck Healthcare KGaA, Darmstadt, Germany (“MHKDG”) to acquire the Sonelokimab program (the “SLK Program”) 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.

IPR&D represents incomplete technologies that the Company acquires, which at the time of acquisition, are still under development and have no alternative future use. The fair value of such technologies is expensed upon acquisition. A technology is considered to have an alternative future use if it is probable that the Company will use the asset in its current, incomplete state as it existed at the acquisition date, in another research and development project that has not yet commenced, and economic benefit is anticipated from that use. If a technology is determined to have an alternative future use, then the fair value of the program would be recorded as an asset on the balance sheet rather than expensed.
Contingent consideration payments (for example milestone payments due upon the occurrence of a specific event) in asset acquisitions are recognized in the period in which it is probable that a liability has been incurred (unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the cost in the asset acquired). Upon recognition of the contingent consideration payment, the amount is expensed if it relates to IPR&D or capitalized if it relates to a developed product which is generally considered to be when clinical trials have been completed and regulatory approval obtained.
Future royalty payments due on net sales will be recognized in cost of goods sold when net sales are recognized.
Pension Benefits
11

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
The Company accounts for pension assets and liabilities in accordance with ASC 715, Compensation – Retirement Benefits, which requires the recognition of the funded status of pension plans in the Company’s consolidated balance sheet. The liability in respect to defined benefit pension plans is the projected benefit obligation calculated annually by independent actuaries using the projected unit credit method. The projected benefit obligation as of September 30, 2023 represents the actuarial present value of the estimated future payments required to settle the obligation that is attributable to employee services rendered before that date. Service costs for such pension plans, represented in the net periodic benefit cost, are included in the personnel expenses of the various functions where the employees are engaged. The other components of net benefit cost are included in the consolidated statement of operations separately from the service cost component, in “other income, net”. Plan assets are recorded at their fair value.
Gains or losses arising from plan curtailments or settlements are accounted for at the time they occur. Any net pension asset is limited to the present value of the future economic benefits available to the Company in the form of refunds from the plan or expected reductions in future contributions to the plan. Actuarial gains and losses arising from differences between the actual and the expected return on plan assets are recognized in accumulated other comprehensive income (loss).
Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases Topic 842 (“ASU 2016-02”). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities to elect a modified retrospective transition method where entities may continue to apply the existing lease guidance during the comparative periods and apply the new lease requirements through a cumulative effect adjustment in the period of adoptions rather than in the earliest period presented.

The Company determines if an arrangement is or contains a lease at contract inception. For these arrangements, it is evaluated if the arrangement involves an identified asset that is physically distinct or whether the Company has the right to substantially all of the capacity of an identified asset that is not physically distinct. In arrangements that involve an identified asset, there is also judgment in evaluating if the Company has the right to direct the use of that asset.

MoonLake does not have any finance leases. As of September 30, 2023, the Company had one operating lease related to the office space located in Dorfstrasse 29, 6300, Zug, Switzerland. The operating lease is recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property. Right-of-Use (“RoU”) assets and lease liabilities are measured at the lease commencement date based on the present value of the remaining lease payments over the lease term, determined using the discount rate for the lease at the commencement date. Because the rate implicit in the leases is not readily determinable, the Company uses the incremental borrowing rate as the discount rate, which approximates the interest rate at which the Company could borrow on a collateralized basis with similar terms and payments and in similar economic environments.

Leases with an initial term of 12 months or less that do not have the option to purchase the underlying asset are not recorded on the balance sheet, with lease expense for these leases recognized on a straight-line basis over the lease term commencing on the date the Company has the right to use the leased property.

Recently Issued Accounting Pronouncements not yet Adopted
The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. As such the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting and extended transition periods to comply with new or revised accounting standards for public business entities. The Company has elected to avail itself of this exemption and, therefore, will not be subject to the timeline for adopting new or revised accounting standards for public
12

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
business entities that are not emerging growth companies, and will follow the transition guidance applicable to private companies.

Based on the aggregate market value of the Company's Class A Ordinary Shares held by non-affiliates as of June 30, 2023, the Company will become a “large accelerated filer” and no longer qualify as an emerging growth company or smaller reporting company as of December 31, 2023. The Company will be required, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, to include in its Annual Report on Form 10-K for the year ending December 31, 2023 an attestation report as to the effectiveness of the Company's internal control over financial reporting that is issued by its independent registered public accounting firm. In addition, beginning with the Company's Quarterly Report on Form 10-Q for the quarter ending March 31, 2024, it will no longer be permitted to take advantage of the reduced reporting requirements applicable to smaller reporting companies.

Recently issued accounting pronouncements not yet adopted, that the Company plans to adopt, are not expected to have a material impact on the Company’s consolidated financial position, operating results, cash flows, or disclosures.



Note 3 – Risks and Liquidity
Going Concern, Liquidity and Capital Resources    
The Company incurred a loss of $36.2 million for the nine months ended September 30, 2023. As of September 30, 2023, the Company’s current assets exceeded its current liabilities by $489.7 million.

As of September 30, 2023, the Company had $318.2 million of cash and cash equivalents. Based on the Company's current operating plan, management believes that the Company has sufficient capital to fund its operations and capital expenditures until 2026.


Note 4 – Fair Value Measurements
The following table presents information about the Company's short-term marketable debt securities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement:
September 30, 2023December 31, 2022
Level 2TotalLevel 2Total
Eurocommercial Papers$237,817,164 $237,817,164 $42,552,608 $42,552,608 
Certificates of Deposit59,733,890 59,733,890 9,937,899 9,937,899 
Total$297,551,054 $297,551,054 $52,490,507 $52,490,507 

Cash, accounts payable and accrued liabilities approximate their fair values as of September 30, 2023 and December 31, 2022, due to their short-term nature. Pension plan assets fair value is determined based on Level 2 inputs.


Note 5 – Investments
The fair value and amortized cost of investments in short-term marketable debt securities by major security type as of September 30, 2023 are as follows:

Amortized costGross unrealized gainsGross unrealized lossesFair value
13

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
Eurocommercial Papers$235,063,323 $2,753,841 $ $237,817,164 
Certificates of Deposit59,050,440 683,450  59,733,890 
Total$294,113,763$3,437,291$$297,551,054
of which classified within cash and cash equivalents118,381,053 1,357,102  119,738,155 
of which classified within short-term marketable debt securities175,732,710 2,080,189  177,812,899 

The following table presents the changes in fair values of the Company’s short-term marketable debt securities, classified as Level 2 financial assets, and recognized in accumulated other comprehensive income:

Beginning balance, January 1, 2023$390,753 
Other comprehensive income before reclassifications4,652,408 
Amounts reclassified from accumulated other comprehensive income(1,605,870)
Net current-period other comprehensive income (loss)3,046,538 
Ending balance, September 30, 2023$3,437,291

As of September 30, 2023, the Company’s marketable debt securities maturities are all due within one year.


Note 6 — Prepaid Expenses
September 30, 2023December 31, 2022
Insurances$1,557,819$1,416,597
Non-clinical research and clinical development services1,394,8822,443,863
Other prepayments357,580319,008
Total$3,310,281$4,179,468
Prepaid expenses as of September 30, 2023 primarily relate to services expected to be received within the next 12 months.



Note 7 — Trade and Other Payables
September 30, 2023December 31, 2022
Research and development services and license fees$2,090,284$31,687
Supply and manufacturing fees payable824,07065,979
Other consulting and advisory services245,72351,658
Legal and intellectual property (“IP”) advisory fees payable45,29240,532
Other payables199,35965,116
Total$3,404,728$254,972
14

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)



Note 8 — Accrued Expenses and Other Current Liabilities
September 30, 2023December 31, 2022
Tax liabilities$2,713,797 $109,826 
Research and development services and license fees1,774,601 5,803,432 
Bonuses and related employees compensation expenses1,580,493 1,109,734 
Consultant and other fees678,060233,853
Total$6,746,951$7,256,845


Note 9 — Leases
In August 2021, the Company entered into an open-ended office lease agreement to lease approximately 2,300 square feet of space on the last two floors of the building located at Dorfstrasse 29, 6300 Zug, Switzerland (the “Office Lease") which was effective November 1, 2021. The Company estimated the effective duration of the Office Lease at inception and determined a period of 3 years, with expected expiration in November 2024.

Payments under the Office Lease are fixed. The annual discount rate applied is 0.8%.

The future minimum annual lease payments under these operating leases as of September 30, 2023 are as follows:

Three months ended September 30, 2023Amount
2023 (remaining 3 months)$39,277
2024130,924
Total lease payments170,201
Less imputed interest(779)
Total lease liability169,422
Less current portion of operating lease liability(156,338)
Long-term portion operating lease liability$13,084

The Company recorded lease expense related to its operating lease right of use asset of $117,832 for the period ended September 30, 2023.


Note 10 — Employee Benefit Plans
The Company operates a defined benefit pension plan in Switzerland (the "Plan”) and a defined contribution pension plan in the United Kingdom, in accordance with local regulations and practices. As of September 30, 2023 the Plan covers the Company’s employees in Switzerland with benefits in the event of death, disability, retirement, or termination of employment. As of September 30, 2023, there was no headcount attributable to MNLK PT and therefore no associated employee benefit plan cost.
Components of Net Periodic Benefit Cost under the Plan

15

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
Three months ended September 30, 2023Three months ended September 30, 2022Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
Service cost$31,175$112,222$91,596$338,173
Interest cost7,7841,25822,8723,791
Expected return on plan assets(9,280)(3,862)(27,265)(11,637)
Amortization of unrecognized loss4511,361
Total Net Periodic Benefit Cost$29,679$110,069$87,203$331,688
The components of net periodic benefit cost other than the service cost component are included in general and administrative expense in the Company's unaudited condensed consolidated statements of operations.
Employer Contributions under the Plan
For the nine months ended September 30, 2023, $138,349 (CHF 124,932) of contributions were made to the Plan. The Company presently anticipates contributing an additional estimated amount of $46,116 (CHF 41,644) to fund the Plan in 2023 for a total of $184,465 (CHF 166,576).

Note 11 — Shareholders’ Equity (Deficit)
Class A Ordinary Shares(1)
Class C Ordinary Shares(1)
Total Number of Ordinary Shares
AuthorizedIssuedAuthorizedIssuedAuthorizedIssued and Outstanding
Balance - January 1, 2023500,000,00038,977,600100,000,00013,723,511600,000,00052,701,111
Conversion of Class C Ordinary Shares into Class A Ordinary Shares176,603(176,603)
Balance - March 31, 2023500,000,00039,154,203100,000,00013,546,908600,000,00052,701,111
Conversion of Class C Ordinary Shares into Class A Ordinary Shares4,587,713(4,587,713)
Issuance of Class A Ordinary Shares9,744,8949,744,894
Balance - June 30, 2023500,000,00053,486,810100,000,0008,959,195600,000,00062,446,005
Conversion of Class C Ordinary Shares into Class A Ordinary Shares74,678(74,678)
Balance - September 30, 2023500,000,00053,561,488100,000,0008,884,517600,000,00062,446,005
(1) Fully paid-in registered shares with a par value of $0.0001
As of September 30, 2023, the Company had the following classes of shares:
16

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
Class A Ordinary Shares
On April 6, 2022, the Company's Class A Ordinary Shares began trading on The Nasdaq Capital Market ("Nasdaq") under the symbol “MLTX”. As of September 30, 2023, there were 53,561,488 Class A Ordinary Shares issued and outstanding. The Company is authorized to issue up to 500,000,000 Class A Ordinary Shares, par value $0.0001 per share. Holders of Class A Ordinary Shares are entitled to one vote per share.
Class C Ordinary Shares
As of September 30, 2023, there were 8,884,517 Class C Ordinary Shares issued and outstanding. The Company is authorized to issue up to 100,000,000 Class C Ordinary Shares, with a par value $0.0001 per share. Each Class C Ordinary Share entitles the holders thereof to one vote per share, but carries no economic rights.

At the closing of the Business Combination (the "Closing"), MoonLake, MoonLake AG and each ML Party entered into a Restated and Amended Shareholders' Agreement (the “A&R Shareholders' Agreement”). With the intent to approximate the rights, obligations and restrictions that an ML Party would enjoy if it were a holder of Class A Ordinary Shares, the A&R Shareholders’ Agreement (i) imposes certain transfer and other restrictions on the ML Parties (as defined in Note 2 — Business Combination Agreement with Helix and Recapitalization included in MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2022 included in the Annual Report), (ii) provides for the waiver of certain statutory rights and (iii) establishes certain mechanics whereby MoonLake and each of the ML Parties are able to effect the conversion of MoonLake AG Common Shares and Class C Ordinary Shares into a number of Class A Ordinary Shares equal to the Exchange Ratio (as defined in Note 3 — Basis of Presentation included in MoonLake’s audited financial statements and notes thereto for the year ended December 31, 2022 included in the Annual Report). On August 23, 2023, pursuant to the A&R Shareholders’ Agreement, certain ML Parties submitted exchange notices to the Company, pursuant to which such ML Parties effected, in the aggregate, the conversion of 2,220 MoonLake AG Common Shares and 74,678 Class C Ordinary Shares into 74,678 Class A Ordinary Shares using the Exchange Ratio. The foregoing description of the A&R Shareholders’ Agreement is not complete and is qualified in its entirety by reference to, and should be read in connection with, the full text of the A&R Shareholders’ Agreement filed as an exhibit on the Company's Current Report on Form 8-K filed with the SEC on April 11, 2022.

Equity Offerings
At-the-Market Offering
On May 11, 2023, the Company entered into a Sales Agreement (the “May 2023 Sales Agreement”) with Leerink Partners LLC (formerly known as SVB Securities LLC) (“Leerink Partners”), through which the Company could issue and sell up to $200,000,000 of its Class A Ordinary Shares (the “May 2023 ATM Shares”), through Leerink Partners as its sales agent. The May 2023 ATM Shares to be sold under the May 2023 Sales Agreement, if any, would be issued and sold pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-271546), which was declared effective by the SEC on May 9, 2023, and a prospectus supplement thereto filed with the SEC on May 11, 2023.

On June 27, 2023, the Company reduced the maximum aggregate offering amount of its Class A Ordinary Shares that could be issued and sold under the May 2023 Sales Agreement to $0 and no longer intends to sell Class A Ordinary Shares under the May 2023 Sales Agreement unless the Company files a further prospectus supplement indicating an amount of shares proposed to be sold.

On August 31, 2023, the Company entered into a Sales Agreement with Leerink Partners (the “August 2023 Sales Agreement”), through which the Company could issue and sell up to $350,000,000 of its Class A Ordinary Shares (the “August 2023 ATM Shares”), through Leerink Partners as its sales agent. The August 2023 ATM Shares to be sold under the August 2023 Sales Agreement, if any, would be issued and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-274286), which was declared effective by the SEC on September 11, 2023, and a prospectus supplement thereto filed with the SEC on August 31, 2023. For the three months ended September 30, 2023, no Class A Ordinary Shares were sold under the August 2023 Sales Agreement.


Public Offering of Class A Ordinary Shares
17

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
On June 27, 2023, the Company entered into an underwriting agreement with SVB Securities LLC and Guggenheim Securities LLC as the representatives of the underwriters named therein, to issue and sell 8,000,000 Class A Ordinary Shares at a public offering price of $50.00 per share (the “Offering”). In addition, the Company granted the underwriters an option for a period of 30 days to purchase up to an additional 1,200,000 Class A Ordinary Shares at the public offering price less the underwriting discounts and commissions (the “Option”), and such Option was exercised in full by the underwriters.

The Offering closed on June 30, 2023, and net proceeds from the Offering, including proceeds from the exercise in full by the underwriters of the Option, were $436.7 million, after deducting the underwriting discounts and commissions and the offering expenses in the amount of $23.3 million.

Following the completion of the Offering, the Company opted to direct a substantial portion of the net proceeds to MoonLake AG. This was executed as a two-step process: (1) the Company acquired the remaining 22,756 shares of MoonLake AG common stock held in treasury through a share purchase and assignment agreement formally executed on July 09, 2023 ($38.9 million) and (2) the Company contributed additional funds to MoonLake AG’s capital reserves through a cash contribution agreement formally executed on July 10, 2023 ($275 million).

Note 12 — Net Loss per Share
As a result of the Business Combination, the Company has retroactively restated the weighted average number of outstanding shares prior to April 5, 2022 to give effect to the Exchange Ratio.
The following table sets forth the loss per share calculations for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022:

Three Months Ended September 30, Nine Months Ended September 30,
2023202220232022
Numerator
Net loss attributable to controlling interests shareholders$(9,426,049)$(10,110,452)$(28,570,184)$(32,865,429)
Denominator
Total weighted average number of outstanding shares53,517,65536,925,63945,485,65025,830,560
Net loss per share – basic and diluted$(0.18)$(0.27)$(0.63)$(1.27)
The weighted average number of shares used to calculate the net loss per share – basic for the three and nine months ended September 30, 2023 excludes 8,884,517 Class C Ordinary Shares as they do not carry economic rights.
In the event that ML Parties (other than Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., and Biotechnology Value Trading Fund OS, L.P.) elected to convert their 264,116 MoonLake AG Common Shares into 8,884,517 Class A Ordinary Shares, the weighted average number of shares outstanding would have been 62,446,005 and 56,056,457 for the three and nine months ended September 30, 2023, resulting in a net loss per share of $(0.19) and $(0.65), respectively. Upon conversion, 8,884,517 Class C Ordinary Shares would be forfeited and there would no longer be any noncontrolling interests.
Upon conversion, the Company's number of Class A Ordinary Shares outstanding would be 62,446,005 as of November 14, 2023, the date the unaudited condensed consolidated financial statements were issued.


18

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
Note 13 — Share-based Compensation
As at September 30, 2023 the Company had the following share-based compensation arrangements:
a.Restricted Founder Shares – created in April 2021 by MoonLake AG (no longer active and fully vested as of April 2023);
b.The Employee Share Participation Plan (“ESPP”) – created in July 2021 by MoonLake AG;
c.The Employee Stock Option Plan (“ESOP”) – created in July 2021 by MoonLake AG;
d.MoonLake Immunotherapeutics 2022 Equity Incentive Plan – created in April 2022 by MoonLake Immunotherapeutics.

The purpose of the arrangements is to attract and retain the best available personnel and to provide participants with additional incentive to increase their efforts on behalf and in the best interest of the Company and its subsidiaries.
As a result of the Business Combination, the Company has adjusted the share numbers related to the Restricted Founder Shares and Common Shares (under the ESPP and ESOP) prior to the Business Combination by the Exchange Ratio. The reference to “Common Shares” refers to shares in MoonLake AG.
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 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 11 — Shareholders’ Equity (Deficit) - Class C Ordinary Shares).

For the three and nine months ended September 30, 2023, the Company has recognized an increase in equity in the condensed consolidated balance sheet, and share-based compensation expense in the condensed consolidated statement of operations of $1.4 million and $5.5 million, respectively. The share-based compensation expense was driven by the following share-based compensation plans and programs:
Compensation PlanThree months ended September 30, 2023Three months ended September 30, 2022Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
MoonLake AG Restricted Founder Shares$ $1,210,191 $1,574,299 $3,618,226 
ESPP762,309 1,080,441 2,590,5762,829,635
ESOP255,171 169,907 614,469 370,634
MoonLake Immunotherapeutics 2022 Equity Incentive Plan408,171 124,621 721,155239,760
Total share-based compensation expense$1,425,651 $2,585,160 $5,500,499 $7,058,255 
Of which: included in research and development expense262,717 161,987 1,150,815 380,917 
Of which: included in general and administrative expense1,162,934 2,423,173 4,349,684 6,677,338 

As of September 30, 2023, 11,079 Common Shares (the equivalent of 372,683 Class C Ordinary Shares) issuable from the authorized conditional capital shares remain available for future grants under the ESPP and the ESOP by MoonLake AG.

MoonLake AG - Restricted Founder Shares
19

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
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. If, before the end of the vesting period, the contractual relationship of the relevant co-founders was 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, would have had an option to purchase all or a pro rata portion of the shares of the leaver that were unvested on the day the termination became effective at nominal value of CHF 0.10 (equivalent of $0.0001) per share.
The assumptions used in the valuation of the Restricted Founder Shares awarded are summarized below:
Grant date4/28/2021
Estimated fair value per share of Restricted Founder Shares on the grant date ($) (1)
49
Estimated fair value of Restricted Founder Shares on the resignation date of one of the co-founders of MoonLake AG ($) (2)
336.39
Purchase price (CHF)0.10
(1) MoonLake AG estimated the fair value of the Restricted Founder Shares with reference to the market-based transaction with the other Series A Preferred Shares Investors (refer to Note 9 of 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
ProgramRestricted Founder Shares
Awards unvested as of January 1, 20224,440,309
Awards vested for the nine months ended September 30, 2022(2,497,673)
Awards unvested as of September 30, 20221,942,634
Awards unvested as of January 1, 20231,110,078
Awards vested for the nine months ended September 30, 2023(1,110,078)
Awards unvested as of September 30, 2023

Employee Share Participation Plan (ESPP) 2021-2025 - MoonLake AG
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.
20

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
ESPP 2021
Assumptions for the awards issued during the nine months ended September 30, 2022
Grant dates01/18/2022
Estimated fair value per share of Common Shares on the grant date ($) (1)
336.39
Purchase price (CHF)0.10
(1) MoonLake AG estimated the fair value of the Common Shares by dividing the Company Enterprise Value ($360,000,000) as defined by the Business Combination Agreement by the Company’s fully diluted shares (1,070,196).

Grants awarded
ProgramESPP
Awards issued as of January 1, 20221,060,561
Additional awards granted for the nine months ended September 30, 20221,177,354
Awards issued as of September 30, 20222,237,915
Of which vested as of September 30, 2022265,241
Awards issued as of January 1. 20232,237,915
Additional awards granted for the nine months ended September 30, 2023
Awards issued as of September 30, 20232,237,915
Of which vested as of September 30, 20231,525,582
As of September 30, 2023, MoonLake AG had $6.9 million of total unrecognized compensation expense related to the ESPP that will be recognized over the weighted average period of 2.30 years.

Employee Stock Option Plan (ESOP) 2021-2025 - MoonLake AG
The ESOP grants will vest 25% on each anniversary of the grant date. In the event of a termination of contractual relationship between the Company and the entitled employee, options can be deemed forfeited by MoonLake AG if certain conditions are met. Awards feature an accelerated vesting condition linked to a “Change of Control”, defined as any transfer of shares that results in the proposed acquirer holding more than 50% of the then issued share capital of MoonLake AG or the Company, as the case may be, where 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 nine months ended September 30, 2022
Grant dates05/01/2022, 06/22/2022
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 rate0%
(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.

21

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
Weighted average assumptions for the awards issued during the nine months ended September 30, 2023
Grant dates01/01/2023, 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 ($)25.53
Exercise price (USD)37.11
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 rate0%
(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
ProgramESOP
Awards issued as of January 1, 2022224,033
Additional awards granted for the nine months ended September 30, 2022242,737
Awards issued as of September 30, 2022466,770
Of which exercisable as of September 30, 202223,311
Awards issued as of January 1, 2023466,770
Additional awards granted for the nine months ended September 30, 2023133,444
Awards issued as of September 30, 2023600,214
Of which exercisable as of September 30, 2023186,593

As of September 30, 2023, MoonLake AG had $4.6 million of total unrecognized compensation expense related to the ESOP that will be recognized over the weighted average period of 2.94 years.

MoonLake Immunotherapeutics 2022 Equity Incentive Plan
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.

22

MOONLAKE IMMUNOTHERAPEUTICS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(Amounts in USD, except share and per share data)

(Unaudited)
Weighted average assumptions for the awards issued during the nine months ended September 30, 2022
Grant dates04/06/2022
Estimated fair value of the option on the grant date using Black-Scholes model ($)8.25
Exercise price (CHF)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-
(2) The expected term represents the period that share-based awards are expected to be outstanding.
(3) The expected volatility was derived from the historical stock volatilities of comparable peer public companies within the Company’s industry.
(4) The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the measurement date with maturities approximately equal to the expected term.


Weighted average assumptions for the awards issued during the nine months ended September 30, 2023
Grant dates06/08/23
Estimated fair value of the option on the grant date using Black-Scholes model ($)19.92
Exercise price (CHF)29.18