Invest in the future of prescription sleep medicine for people with stress-related insomnia

Get in early on a potential blockbuster in p hase II clinical testing

Dear Investor,

I have spent 30 years working with marketing and invention in the field of pharmaceuticals and medical devices. I’ve been responsible for more than 70 pharmaceutical and medical device products, helping their producers generate new insights, define objectives more clearly, and communicate more effectively with doctors and patients.

At times, when I have identified an unmet need in the marketplace, I’ve switched hats from marketer to inventor. When I realized the potential in communicating online with hearing aid fitters, I created the Globase e-marketing solution, later acquired by AdPepper (AMP GY). When I saw that medical compliance among osteoporosis patients wasn’t what it should be, I invented a new dosing device, which was purchased by Roche Pharmaceuticals. I created i-butler, an application that makes it easier for mentally impaired people to communicate with healthcare professionals. And to meet new needs in market analysis, I invented a patented method for measuring emotional response, including break-through medical devices for tracking brain waves, heart rates, skin response and eye movements.

One day, though, my work took a more personal turn. My mother had been suffering from insomnia for some time, and it became clear that she needed more help than her doctors were able to provide. She had tried all the common drugs, but she always felt that the cure was worse than the disease—with dramatic side effects such as morning sedation, tolerance build-up and the pull of addiction taking a toll on her quality of life and threatening her safety.

After a lot of experimentation, it became clear that one drug was both helping her sleep better and liberating her from the unwanted side ef-fects. The drug was a third-generation beta blocker normally used to treat mild hypertension.

ZLX-1, now a patent-pending treatment for stress-related insomnia ready for Phase II clinical testing, is the result of this journey—and the invention I am most proud of. That is why it is such a pleasure for me to invite you to invest in clinical testing that will enable Zleepax to help potentially mil-lions of people with insomnia who, until now, had nowhere else to turn.

Sincerely yours,

Birger Jan OlsenFounder & Inventor

Birger Jan OlsenFounder & inventor, Zleepax Inc.

The Zleepax Story

A patent-pending treatment for stress-related insomnia ready for Phase II clinical testing.

Zleepax is a New York-based pharmaceutical company devoted to improving nighttime and daytime quality of life for people with insomnia. Our patent-pending compound, ZLX-1, has demonstrated efficacy with-out producing side effects identified as the No. 1 problem with current sleep medication.

Industry: Pharmaceuticals

Product: Prescription sleep medication

Product name: ZLX-1

Innovation: Based on advanced new

beta blockers (e.g., Nebivolol)

Patent applications: EP20080758258

US12/864,450

Phase II: 2014

Phase III: 2016

Projected launch: 2019

Estimated market size: $3.5 billion in US by 20191

Ownership: Publicly traded company

57% owned by founder

9.5% owned by CEO

32.5% owned by minority (<5%)

32

Zleepax in Brief

toms such as a pounding heart as what keep them awake at night5.

Where traditional hypnotics “force” people to sleep by de-pressing the central nervous system, Zleepax acts by diminish-ing the physical symptoms of stress that keep people awake at night.

The first sleep aid based on beta blockers

The Zleepax ZLX-1 formulation will be the first prescription sleep aid on the market with beta blockers as the major active ingredient. First generation beta blockers, such as Propranolol and Atenolol, inhib-ited natural melatonin secretion and, studies show, had a negative impact on sleep6. Certain newer beta blockers, however, do not have this side effect. A pioneering 2006 study showed that Nebivo-lol, Carvedilol and Bisoprolol had no effect on nocturnal release of melatonin7. And more recent publications have shown that Nebivolol actually improves qual-ity of sleep for patients with mild hypertension8.

Nebivolol has been widely used to treat hypertension since the early 1990s, is well tolerated in chronic use, has an attractive side-effect profile9, and should thus perform excellently applied as a sleep enhancer. Zleepax’s patent ap-plications10 cover the use of beta blockers such as Nebivolol—alone or in combination with other anti-insomnia drugs—for the treatment of stress-related insomnia.

Ready for Phase II clinical testing

Because it works via pharmaceuti-cal compounds whose safety9 and whose efficacy8 are documented in numerous clinical studies, Zleepax's ZLX-1 formulation is ready to enter Phase II clinical testing now. Phase II clinical testing will be financed by capital raised through the company’s current investment round.

Zleepax—Treating Insomnia with Fewer Side Effects

No more residual daytime sedation

According to patients, the No. 1 problem with traditional sleeping pills is residual daytime sedation. The potential for tolerance build-up and addiction are also major perceived disadvantages3. Based on beta blockers, the Zleepax ZLX-1 formulation dramatically reduces these and many other unwanted side effects. This means that, in stark contrast to existing hypnotics, Zleepax can give many patients a better night’s sleep with fewer of the side effects they do not want.

Specifically for stress-related insomnia

Stress is one of the most common causes of insomnia4. However, the relationship between insomnia and stress is complex—with the one often causing or exacerbat-ing the other. A divorce or finan-cial troubles, for example, can cause stress that leads to transient insomnia. This, in turn, can make the person less able to cope dur-ing the day, creating further stress. In a vicious circle, the further stress can eventually lead to intermittent or even chronic insomnia, where many patients name stress symp-

The main advantage is that ZLX-1 can achieve the overall goal of a better night’s sleep without the unwanted side effects associated with traditional hypnotics.

ZLX-1 employs latest-generation beta blockers to disrupt the “viscous circle” of stress leading to insomnia, and insomnia causing even more stress.2

4 5

Rapid sleep induction

No cognitiveimpairment Induction of physiological

sleep pattern

Rapidabsorption

No risidual sedation

No rebound insomnia withdrawal

Optimum half lifeNo interaction with

alcohol or prescription medication

No physical dependence

or abuse

No tolerancebuild-up

No respiratory depression

Characteristics of the ideal hypnotic drug that ZLX-1 expect to meet (Adapted from Estivill et al., 2003).

Zleepax offers a new way of treating stress-related insomnia. It works by reducing physical stress symptoms that inhibit sleep at night4, without producing the unwanted side effects typically associated with hypnotics. This gives Zleepax the potential to become any doctor’s first line therapy for treating ordinary stress-related insomnia.

Experienced stress

Physical symptoms

Mental awareness

Awareness exacerbates stress

ZLX-1stops symptoms before mental

awareness

Big Pharma Unable to Meet No. 1 Market Demand

Current prescription offerings

The prescription sleep medicines that dominate the market to-day are central nervous system (CNS) depressants, which reduce alertness and “force” you to fall asleep. Branded hypnotics such

as Rozerem, Lunesta and Ambien CR belong to this group of CNS de-pressants14, with Rozerem targeting melatonin receptors and Lunesta and Ambien CR acting on gam-ma-aminobutyric acid (GABA). The disadvantage with these drugs—and the generics that have been entering the market in recent years—is unwanted side effects (see chart on page 7).

75% dissatisfaction, mainly due to residual daytime sedation

Of the 50–70 million Americans suffering from insomnia15, 8.5 million are taking prescription medica-tions16. Yet studies show that 75% of these patients are dissatisfied with their current sleep medicine17, and a recent Datamonitor study has identified residual daytime sedation as the market’s No. 1 problem3. The FDA has also voiced concern, warning about sleep-walking, hallucinations, violent outbursts, nocturnal binge eating and even driving while asleep for some time18.

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The latest health report from leading pharma research company Data-monitor concludes that “Reduction of residual daytime sedation and lack of potential for tolerance and addiction remain key unmet needs.”

Major pharmaceutical companies hampered by development setbacks

Big pharma currently has a big problem with its sleep medication pipeline. Market leaders Glaxo-SmithKline, Merck and Lundbeck have all been forced to aban-don planned follow-ups to their current sleep medications, and we know of no other novel treat-ment in sight for at least five years. This has allowed the generics to move in, driving the value of the market down despite increasing demand.1

Zleepax meets No. 1 need for largest group of insomnia patients

By targeting only the most com-mon type of insomnia—stress related insomnia—and by ap-proaching the problem from a new angle—using beta blockers

to reduce stress that keeps people awake—Zleepax is able to meet the No. 1 key market need for the largest group of insomnia patients. We believe this makes Zleepax ideally suited for significant big pharma investment starting with Phase III clinical testing.

Big pharma currently has a big problem with its sleep medication pipeline, with no novel treatments in sight for at least five years1. This makes Zleepax ideally suited for big pharma investment starting from Phase III clinical testing.

Benzo-diazepines

•••••••••••••••••••••

Estazolam (ProSom®)

Flurazepam (Dalmane®)

Quazepam (Doral®)

Temazepam(Restoril®)

Triazolam (Halicon®)

Lorazepam(Ativan®)

Sleep medication side effects19

Cognitive impairmentResidual sedationRebound insomnia on withdrawalDependence or risk of abuseRisk of tolerance build-upRespiratory depressionInteraction with alcoholEfficacyAgent (brand name)

Non Benzo-diazepines

••••

•••••••

•••••

Zolpidem(Ambien®)

Zaleplon (Sonata®)

Eszopiclone (Lunesta®)

Melatonin

••

••

Melatonin(Circadin®)

Anti-depressants

••••••••

•

••••

Doxepin (Silenor®)

Disipramine (Norpramin®)

Amitriptyline (Elavil®)

Trazodone(Desyrel®)

Melatonin agonist

•

•Ramelton

(Rozerem®)

Tasimelteon (Hetlioz®)

Anti-psychotics

•••••••••

••••

Quetiapine (Seroquel®)

Olanzapine (Zyprexa®)

Risperidone (Risperol®)

Beta blockers9

•

••Nebivolol (Bystolic®)

ZLX-1(Zleepax)

The market for prescription sleep medicine holds great potential, but currently offers little satisfaction for patients or drug makers. Patients are dissatisfied because producers are not meeting their biggest demand: Fewer side effects3. Drug makers are dissatisfied because development setbacks have hampered their ability to deliver solutions. The only players who are happy are the generics—who are taking over the market with yesterday's drugs sold cheap.

ZLX-1

A message form the CEO

As chief executive officer at Zleepax, I am responsible for piloting our company safely towards the launch of our first formulation, ZLX-1.

My own background as a medical doctor with an additional diploma in psychology has enabled me to play a key scientific role in these initial stages, and will continue to serve us well as we proceed through Phase II clinical testing. To complete Phase II, Zleepax is issu-ing new shares to raise $3 million in

private seed capital. This amount is considerably lower than average for new chemical entities, because ZLX-1 is based on a well-known, safe agent that is already proven to enhance sleep8.

In addition to overseeing the new share issuance and preparations for clinical testing, I am currently transitioning our organization from its current structure to a more mature organizational form. This in-cludes establishing a fully fledged board of directors, appointing a science advisory board and hiring a project manager.

The ZLX-1 is expected to reach the market in 2019, via a licensing, sale to or partnership with a larger pharmaceutical company.

Miguel Santiago Bustos VergaraChief Executive Officer

Allocation of investment capital

Of the capital required to com-plete Phase II clinical testing, 66% will be allocated for the subcon-tractors conducting the clinical tri-als and for associated supplies. The remaining 34% will cover various fil-ing fees and all essential personnel costs (board of directors, clinical advisors, management).

Miguel Santiago Bustos Vergara is a Licentiate of Medicine with a post-graduate degree in psychol-ogy and extensive commercial and financial experience.

His medical expertise covers psychotropic drugs, cognitive processes, the biological funda-ments of cognition, the biochem-istry of neurotransmitters and other fields. His business experience encompases direct sales, sales via partnerships with distributors, and licensing negotiations.

Mr. Vergara received his medical degree from the University of Chile in 1986 and completed propae-deutic studies in psychology at the University of Geneva in 1991. He has extensive international experi-ence, having worked in Europe, the U.S. and his native Chile.

Miguel Santiago Bustos VergaraCEO, MD, Zleepax Inc.

$3 Million to Bring Zleepax to Phase III Clinical Testing 98

Zleepax is issuing new shares to raise $3 million in private seed capital. This amount is considerably lower than aver-age for new chemical entities, because Zleepax is based on a well-known, safe agent that is already proven to enhance sleep8.

The Zleepax ZLX-1 formulation is now ready to enter Phase II of clinical testing.

Budget 000 USD 2014 2015 Acumulated Acumulated

2nd Year %

Clinical development

Clinical study, II 900 750 1,650 56%

CMC 250 50 300 10%

Management, staff and IPR

Accounting 35 35 70 2.4%

Investor relations 60 60 120 4%

Legal 20 20 40 1.3%

IPR 50 50 100 3%

Rent and operation 15 30 45 2%

PR 20 40 60 2%

Personnel 200 250 450 15%

Travel 30 60 90 3%

SAB 30 10 40 1.3%

Total 1,610 1,355 2,965

Clinical development 1,150 800 1,950 66%

Management, staff, IPR 460 555 1,015 34%

Phase IPhase II

Phase IIIPhase IV

20–100participants

1 year

Studies safety

75–300participants

1–2 years

Studies efficacy

>300participants

1–4 years

Studies safety, efficacy and dosing

>1,000participants

+1 year

Studies long-term efficacy &

cost-effectiveness

ZLX-1

Three Main Reasons for Investing in Zleepax 1110

When ZLX-1 goes to market in 2019, Zleepax will have the potential to become a new first choice for treat-ment of the most common type of insomnia.

The main strength of Zleepax is that it applies a well-known, safe9 active ingredient to a new treatment area, where its efficacy8 is already documented, and where it eliminates the serious side effects patients do not want3.

Invest in the answer to patients’ No. 1 unmet need

75% of people interviewed are dissatisfied with their current prescrip-tion sleep medication17. Studies show that the No. 1 key market need is to eliminate unwanted side effects—chiefly residual daytime sedation, tolerance build-up and addiction3. By answering this need for the very large share of patients whose insomnia is linked to stress, Zleepax has the potential to be a global blockbuster.

Invest in an obvious candidate for big pharma acquisition

Due to a remarkable series of setbacks, GSK, Merck and Lundbeck have been forced to abandon planned follow-ups to their current sleep medications. This has led to a “nightmare” scenario, where big pharma is losing market share to generics, and generics are driving the value of the market down—even while demand for sleep medication continues to grow1. This makes novel sleep medications prime targets for acquisi-tion, with Zleepax uniquely positioned to fill the pipeline gap.

Invest early in a drug entering Phase II clinical testing

The beta blockers covered in the Zleepax patent applications10 are well known, safe9, and shown to improve sleep among patients with mild hy-pertension8. Because of this, Zleepax does not foresee significant obsta-cles to regulatory approval for broader use by people with stress-related insomnia—and expects to require just $3 million for completing Phase II clinical testing. For investors, this means an opportunity to get in early on a drug ready to enter Phase II clinical testing.

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References

1 Bionity.com. “Sleep Disorders Market to 2017 - Generic Substitution Coupled With a Weak Pipeline Will Negatively Impact the Market”. accessed March 19. 2014. http://www.bionity.com/en/studies/6282/sleep-disorders-market-to-2017-generic-substitu-tion-coupled-with-a-weak-pipeline-will-negatively-impact-the-market.html

2 Tyrer P., Prog. Neuro-Psychopharmacol. & Biol-Psychiat. 1992. Vol. 16. pp. 17-263 Datamonitor Healthcare. “Insomnia Treatment”. DMKC0075218, (2012):64 Stanford Hospital & Clinic. “Insomnia” accessed March 19. 2014. http://stanfordhos-

pital.org/clinicsmedServices/clinics/sleep/sleep_disorders/insomnia.html Valley Sleep Center. “Can’t Sleep? Maybe Your Brain Needs a Cold Shower”. accessed

March 19. 2014. html http://valleysleepcenter.com/blog/coldshower/5 Mayo Clinic. “Stress symptoms: Effects on your body and behavior”. accessed March

2014. http://www.mayoclinic.org/healthy-living/stress-management/in-depth/stress-symptoms/art-20050987

Mayo Clinic. “Stress and high blood pressure: What's the connection?”. accessed March 2014. http://www.mayoclinic.org/diseases-conditions/high-blood-pressure/in-depth/stress-and-high-blood-pressure/art-20044190

6 K. Stoschitzky et al, “Influence of beta blockers on melatonin release”, Eur J Clin Pharmacol, 1999;55:111-115.

7 Stoschitzky K, Stoschitzky G, Brussee H, et al; “Comparing betablocking effects of bisoprolol, carvedilol and nebivolol”, Cardiology, 2006;106:199–206.

8 Erdem et al; “Nebivolol is Different From Atenolol in Terms of Impact Onto Sleep”, AJCI 2007;1(1):25-29.

Yilmaz MB, Erdem A, Yalta K, et al; “Impact of beta blockers on sleep in patients with mild hypertension: a randomized trial between nebivolol and metoprolol”, Adv Ther. 2008;25:871–883.

9 Bystolic (Nebivolol) tablets. “A Patient’s Guide to BYSTOLIC” accessed March 19. 2014. http://www.bystolic.com/APatientsGuide.aspx

10 EP20080758258, US12/864,450.

14 PubMed Health. “Zolpidem (By mouth)”. accessed March 19. 2014. http://www.ncbi.nlm.nih.gov/pubmedhealth/PMHT0012721/

15 National Sleep Foundation. “Sleep Studies”. accessed March 19. 2014. http://www.sleepfoundation.org/article/sleep-topics/sleep-studies

16 Yinong Chong, Cheryl D. Fryar, Qiuping Gu. “Prescription Sleep Aid Use Among Adults: United States, 2005–2010”. NCHS Data Brief. N0. 127 (August 2013). http://www.cdc.gov/nchs/data/databriefs/db127.pdf (4% adults in US)

HealthDay. “Prescription Sleep Aids a Common Choice for American Insomnia”. accessed March 19. 2014. http://consumer.healthday.com/sleep-disorder-informa-tion-33/misc-sleep-problems-news-626/prescription-sleep-aids-a-common-choice-for-american-insomnia-679670.html

17 Valley Sleep Center. “Can’t Sleep? Maybe Your Brain Needs a Cold Shower”. accessed March 19. 2014. http://valleysleepcenter.com/blog/coldshower/

18 The New York Times. “F.D.A. Warns of Sleeping Pills’ Strange Effects”. accessed March 19. 2014. http://www.nytimes.com/2007/03/15/business/15drug.ready.html?pagewanted=all&_r=1&

19 Clinical Practice Guidelines in Spanish NHS. “Clinical Practice Guidelines for the Management of Patients with Insomnia in Primary Care.”. “7. Treatment of insomnia” accessed March 19. 2014. http://www.guiasalud.es/egpc/traduccion/ingles/insom-nio/completa/apartado07/tratamiento.html

Zleepax Inc. • 244 5th Avenue Suite A-154 . N.Y. • 10001 New York • USATelephone +1 (646) 513-2776 • www.zleepax.com • info@zleepax.com

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Disclaimer: This Communication, which does not purport to be comprehensive, has been provided by the Company and has not been independently verified. While the Communication has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the Company or by any of its respective of-ficers, employees or agents in relation to the accuracy or completeness of this Communication or any other written or oral information made available to any interested party or its advisers and any such liability is expressly disclaimed.

This Communication, including forecast financial information should not be considered as a recommendation in relation to subscribing, holding, purchasing or selling shares, securities or other instruments in or, in entities related to the Company or any other company. Due care and attention has been used in the preparation of forecast information. However, actual results may vary from forecasts and any variation may be materially positive or negative. Forecasts, by their very nature, are subject to uncertainty and contingencies many of which are outside the control of the Company.

Fall asleep. Stay asleep.

Zleepax is a New York-based pharmaceutical company devoted to improving nighttime and

daytime quality of life for people with insomnia. Our patent-pending10 compound, ZLX-1, has demonstrated efficacy8 without producing side effects identified as

the No. 1 problem with current sleep medication8.