NLC - NLC Health Ventures

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview
The project owner is a healthtech venture builder. They spin-out technologies from research, academic and corporate institutes and build them into commercial ventures (commonly known as ‘companies’). The project owner founds every venture they build (100+ since 2015) and actively supports them in reaching the market as soon as possible. The project owner also acts as the fund manager of captive funds that invest in all the ventures that the project owner builds. The ultimate goal is to bring impactful technologies to patients that can improve, or save, their lives, as multiple of project owner’s ventures already did. Once the project owner has supported the ventures in becoming mature and established companies, the project owner sells them to big international corporations, financial buyers (e.g. a venture capital or private equity fund), or the project owner may decide to list the venture on a public stock-exchange (initial public offering or IPO).

Milestones

NLC International B.V. was incorporated in the Netherlands in September 2016.

Since then, we have:

• Serious impact: impacted the lives of >120k patients so far, targeting improving >500M lives by 2030
• At scale: founded >100 companies to date, meaning high diversification, lower risk
• Proven track record: already raised >€100M for our companies and generated profitable exits
• Strong team: dedicated team of 80+ (healthtech) professionals
• Inspiring network: 3,000+ investors, scientists, clinicians, universities and medical centers
• Strong partnerships: Medtronic, Mayo Clinic, Oxford, B.Braun, Charité, Stryker and more
• Attractive market: growing market due to an aging population and growth in chronic diseases

Historical Results of Operations

• Revenues & Gross Margin. For the period ended December 31, 2022, the Company had revenues of €1,374,679 compared to the year ended December 31, 2021, when the Company had revenues of -€757,083
• Assets. As of December 31, 2022, the Company had total assets of €9,835,741, including €4,255,982 in cash. As of December 31, 2021, the Company had €17,035,345 in total assets, including €12,204,886 in cash.
• Net Loss. The Company has had net losses of €7,888,947 and net losses of €4,657,207 for the fiscal years ended December 31, 2022 and December 31, 2021, respectively.
• Liabilities. The Company's liabilities totaled €1,065,962 for the fiscal year ended December 31, 2022 and €381,503 for the fiscal year ended December 31, 2021.

Liquidity & Capital Resources

To-date, the company has been financed with €18,896,889 in equity and €8,750,688 in convertibles.

After the conclusion of this Offering, should we hit our minimum funding target, our projected runway is 18 months before we need to raise further capital.

We plan to use the proceeds as set forth in the Key Investment Information Sheet under "Use of Funds". We don’t have any other sources of capital in the immediate future.

We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. We plan to raise capital in 18 months. Except as otherwise described in the Key Investment Information Sheet, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.

Runway & Short/Mid Term Expenses

NLC International B.V. cash in hand is €6,352,736, as of May 2023. Over the last three months, revenues have averaged €85,940/month, cost of goods sold has averaged €0/month, and operational expenses have averaged €800,000/month, for an average burn rate of €714,060 per month. Our intent is to be profitable in 48 months.

Since the date our financials cover, the most significant change in NLC's financial situation is that commitments of c.€6mn have already been secured from our existing investor base. In 2023Q1 NLC has been performing according to plan/expectation

The primary business of the NLC Group is that of a venture builder. In fact, NLC is the #1 Healthtech Venture Builder in Europe. It’s a platform with now >80 employees. More information on the NLC website or NLC's LI page. 

Healthtech innovation is growing and will keep growing. No doubt. NLC is a healthtech sector play.

On average, the valuations of US healthtech start-ups and scale-ups are 3-times higher than in Europe. So ‘buying’ (=getting invested) in Europe and then bridging them to the US can take advantage of the valuation gap . . . NLC is that arbitrage play. 

Through partnering with academic hospitals (e.g. Charité in Germany), universities (e.g. Oxford in England), research institutes (e.g. Inserm in Paris), and corporates (Philips, Smith&Nephew, Stryker, DSM), NLC establishes/incorporates new start-ups around breakthrough healthtech inventions/innovations that can positively impact the lives of patients and/or healthcare workers, and then helps bring them to the market. So far, NLC has been active mainly in the healthtech field, including biotech, but now also starting up in green health.

NLC is structured as a private limited liability company in The Netherlands. It has created >100 companies (all set up as direct subsidiaries of NLC) since its inception in 2015. 

NLC ‘mines’ and supports these companies for approx. €400k on average. Unit economics of 10x on an individual company level (off-set by failures).

So far we created total enterprise value of €325mn in our ventures (€128mn for NLC’s remaining ownership share), creating substantial value for the healthcare system, society and investors.

We run the platform data driven. Key value drivers: ventures created/built, value creation per venture, size of funds under management.

In addition to its venture building activities, NLC actively manages a number of captive investment funds which invest exclusively in the ventures created by NLC’s venture building arm (investing pre-seed starting capital to get them off the ground up to seed stage and series A-C).

To actively drive change, NLC’s Impact & ESG policy was launched in 2022 and recently NLC published its first Impact Report. NLC is also B-Corp certified and is focused on contributing positively to the following Sustainable Development Goals: SDG 3 (Good Health and Well-being), SDG 9 (Industry, Innovation, and Infrastructure), and SDG 17 (Partnership for the Goals). In addition, NLC’s captive investment funds qualify as SFDR-9 funds. Our first 2 funds are at TVPI of 8x (after 5 years) and 1.7x (after 3 years) respectively. Now raising fourth fund with target size of €100m to fund more ventures and double down on the winners. We continue our activities and are on path to deploy €500mn+ in the next 2 years

Some of NLC's ventures have already developed their respective invention into a commercial solution which is currently marketed and used in hospitals, benefiting patients and healthcare workers around the world. Examples include Nico.lab, ConCord Neonatal, Super Seton, Stokhos, and PEP Health. Some other ventures will reach the market in the next 12-24 months. Examples include MindAffect (a hearing and vision aid), Angiogenesis Analytics (ultrasound for prostate cancer diagnosis), PoroUS (ultrasound for osteoporosis diagnosis), ARNE (Augmented Reality in NEonatology), and FlowView Diagnostics (Intelligent decision support in flow cytometry). There are many example in our PF deck.

In summary, NLC’s Convertible Note is an opportunity to invest in a self funding GP model. NLC’s revenue stream are: (a) exits from its existing portfolio companies (created since inception in 2025 until today); (b) exits from to-be-created companies coming out of NLC’s venture building activities in the future; and (c) income from NLC’s fund management’s practice generating management fees (over total Assets under Management) and performance fees. Since inception in 2015, NLC has already generated over €5mn in exit proceeds, and has built a portfolio will an estimated value of €128mn (with less than €30mn in shareholder capital, in total raised since inception in 2015 until today), which is well poised to converted in value realised for NLC. NLC’s total operating expenses are c. €800k per month. We don't expect this to significantly change in the coming months.

No, NLC is not yet profitable. We expect to become cashflow positive somewhere between 2026-2030, depending on how fast we grow the business and how many exits we make. In our management case, we require an additional financing round of approx €35mn 2025Q1 (upon which this Convertible Note will convert into equity), which will see us through to breakeven and then to profitability (excess cash flow will be returned to shareholders in the form of dividends or share buy-backs)

We have already secured €6mn in commitments for this Convertible Note round. We also expect €14mn in partial exit proceeds in the next 12 months. All together that will be enough to get us to 2025Q1 when we will require our next and final financing round of approx. €35mn (upon which this convertible note will convert into equity).

All projections in the above narrative are forward-looking and not guaranteed.