Bulletin
Investor Alert

Nov. 15, 2021, 7:13 a.m. EST

10-Q: INDAPTUS THERAPEUTICS, INC.

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Unless the context indicates otherwise, in this Quarterly Report on Form 10-Q, the terms "Indaptus," "Company," "we," "us" and "our" refer to Indaptus Therapeutics, Inc. (formerly Intec Parent, Inc. the successor of Intec Pharma Ltd. following the domestication merger) and, where appropriate, its consolidated subsidiaries following the domestication merger and the reverse merger described below. References to "Intec Israel" refer to Intec Pharma Ltd., the predecessor of Indaptus prior to the domestication merger described below, and references to "Decoy" refer to Decoy Biosystems, Inc., the entity acquired by Indaptus in connection with the reverse merger described below.

The following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results of operations and financial condition for the periods described. This discussion should be read together with our condensed consolidated financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q. This information should also be read in conjunction with the information contained in Decoy's annual financial statements as of December 31, 2020, and their accompanying notes included in the Form S-4 filed with the SEC in connection with the reverse merger. We have prepared our condensed consolidated financial statements in accordance with U.S. GAAP.

This Quarterly Report on Form 10-Q of Indaptus Therapeutics, Inc. contains forward-looking statements about our expectations, beliefs and intentions. Forward-looking statements can be identified by the use of forward-looking words such as "believe", "expect", "intend", "plan", "may", "should", "could", "might", "seek", "target", "will", "project", "forecast", "continue" or "anticipate" or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements are based on assumptions and assessments made in light of management's experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate. Forward-looking statements in Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we undertake no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the following: our plans to develop and potentially commercialize our technology, the timing and cost of our planned investigational new drug application and any clinical trials, the completion and receiving favorable results in any clinical trials, our ability to obtain and maintain regulatory approval of any product candidate, our ability to protect and maintain our intellectual property and licensing arrangements, our ability to develop, manufacture and commercialize our product candidates, the risk of product liability claims, the availability of reimbursement, the influence of extensive and costly government regulation, and our estimates regarding future revenue, expenses capital requirements and the need for additional financing following the recently completed merger. These risks, as well as other risks are discussed in the proxy statement/prospectus that was included in the registration statement on Form S-4 filed with the SEC in connection with the merger.

Unless otherwise indicated, all information in this Quarterly Report on Form 10-Q gives effect to a 1-for-4 reverse share split of the ordinary shares of Intec Israel that became effective on July 26, 2021 prior to the domestication merger described below, and also gives effect to a 1-for-20 reverse share split of the ordinary shares of Intec Israel that became effective on October 30, 2020, and all references to ordinary shares outstanding and per share amounts give effect to these reverse share splits.

Overview

We are a pre-clinical biotechnology company developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. We have evolved from more than a century of immunotherapy advances. Our approach is based on the hypothesis that efficient activation of both innate and adaptive immune cells and associated anti-tumor and anti-viral immune responses will require a multi-targeted package of immune system activating signals that can be administered safely intravenously. Our patented technology is composed of single strains of attenuated and killed, non-pathogenic, Gram-negative bacteria, with reduced i.v. toxicity, but largely uncompromised ability to prime or activate many of the cellular components of innate and adaptive immunity. This approach has led to broad anti-tumor and anti-viral activity, including safe, durable anti-tumor response synergy with each of five different classes of existing agents, including checkpoint therapy, targeted antibody therapy and low-dose chemotherapy in pre-clinical models. Tumor eradication by our technology has demonstrated activation of both innate and adaptive immunological memory and, importantly, does not require provision of or targeting a tumor antigen in pre-clinical models. We have carried out successful GMP manufacturing of our lead clinical candidate, Decoy20, and are currently completing other IND-enabling studies. For a further description of Indaptus' business, see the section "Business of Decoy" in the registration statement on Form S-4, as amended (File No. 333-255389), filed with the Securities and Exchange Commission ("SEC") on May 12, 2021 (the "Registration Statement").

Merger

On August 3, 2021, Indaptus Therapeutics, Inc. (formerly Intec Parent, Inc.), a Delaware corporation ("Indaptus," "Company," "we," "us," or "our"), completed its merger with Decoy Biosystems, Inc., a Delaware corporation ("Decoy") following the satisfaction or waiver of the conditions set forth in the Agreement and Plan of Merger (the "Merger Agreement"), dated as of March 15, 2021 among the Company, Decoy, Intec Pharma Ltd., an Israeli company and wholly owned subsidiary of the Company ("Intec Israel"), Domestication Merger Sub Ltd., an Israeli company and a wholly-owned subsidiary of the Company ("Domestication Merger Sub"), and Dillon Merger Subsidiary Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Merger Sub") pursuant to which Merger Sub merged with and into Decoy, with Decoy surviving as a wholly owned subsidiary of the Company (the "Merger") and the business conducted by Decoy became the business conducted by the combined company.

Previously, on July 27, 2021, Intec Israel, Indaptus and Domestication Merger Sub completed the previously announced domestication merger pursuant to the terms and conditions of the Agreement and Plan of Merger and Reorganization, dated April 27, 2021 (the "Domestication Merger Agreement"), whereby Domestication Merger Sub merged with and into Intec Israel, with Intec Israel being the surviving entity and a wholly-owned subsidiary of Indaptus (the "Domestication Merger"). At the time of the Domestication Merger, Intec Israel continued to possess all of its assets, rights, powers and property as constituted immediately prior to the Domestication Merger and continued to be subject to all of its debts, liabilities and obligations as constituted immediately prior to the Domestication Merger.

Also, in connection with the Merger, we changed our name from "Intec Parent, Inc." to "Indaptus Therapeutics, Inc.".

At the effective time of the Merger, each outstanding share of Decoy common stock, par value $0.001 per share (the "Decoy Common Stock") (including shares issuable upon the conversion of Decoy SAFEs (Simple Agreements for Future Equity) and Decoy preferred stock, par value $0.001 per share, into Decoy Common Stock) converted into 2.654353395 shares of Indaptus common stock, par value $0.01 per share. In addition, at the effective time of the Merger, each outstanding and unexercised Decoy stock option converted into a stock option exercisable for that number of shares of common stock of Indaptus subject to such option and the exercise price being appropriately adjusted to reflect the exchange ratio. Immediately following closing of the Merger there were 5,405,970 shares of Indaptus common stock outstanding, with pre-merger Decoy shareholders owning approximately 65.6% and pre-merger Intec Israel shareholders owning approximately 34.4% of the Company. The figures above do not give effect to shares issuable upon the exercise of outstanding Indaptus warrants or options.

Following completion of the Merger, shares of Indaptus common stock commenced trading at market open on August 4, 2021, on the Nasdaq Capital Market under the name "Indaptus Therapeutics, Inc." and ticker symbol "INDP" and under the new CUSIP 45339J 105.

For accounting purposes, Decoy is considered to have acquired Indaptus based on the terms of the Merger and an analysis of the criteria outlined in Accounting Standards Codification 805. The Merger has been accounted for as an asset acquisition (reverse merger transaction) rather than a business combination, as the net assets acquired/assumed by Decoy do not meet the definition of a business under U.S. GAAP. Accordingly, the historical financial statements of Decoy became the historical financial statements of the combined company upon the consummation of the Merger and the net assets acquired in connection with the Merger were recorded at their estimated fair market value as of August 3, 2021, the date of completion of the Merger.

Winding Down of Accordion Pill Business

In connection with the completion of the Merger, on August 4, 2021, our board determined to wind down the Accordion Pill business of Intec Israel and as of September 30, 2021, we maintain an adequate number of employees in Israel until the completion of the wind down of the Accordion Pill business.

In connection with the winding down, we terminated our contracts with counterparties and the sale of our Accordion Pill related assets, including the termination of the Process Development Agreement dated as of December 17, 2018, between Intec Israel and LTS Lohmann Therapie Systeme AG ("LTS"), that provided for the manufacture of AP-CD/LD capsules, as a result of which we expect to pay approximately 2.0 million Euros (approximately $2.3 million) as a termination fee. In addition, on August 5, 2021, Intec Israel and its landlord agreed to terminate the Unprotected Lease Agreement with R.M.P.A. Assets Ltd. dated June 2, 2003, as amended, for the lease of offices located in Jerusalem, Israel, as a result of which Intec Israel agreed to the payment of a break-up fee of $600,000.

We expect that the winding down of the Accordion Pill business will be substantially complete by the end of 2021.

Private Placement

In connection with the Merger, on July 23, 2021 (the "Signing Date"), we entered into a securities purchase agreement (the "Purchase Agreement") with a certain institutional investor (the "Purchaser"), pursuant to which we agreed to sell and issue, in a private placement (the "Private Placement") a pre-funded warrant to purchase up to 2,727,273 shares of the Company's common stock (the "Pre-funded Warrant") and a warrant to purchase up to 2,727,273 of our common stock at a purchase price of $10.99 per Pre-funded Warrant and associated Warrant, for aggregate gross proceeds to us of approximately $30.0 million, before deducting the placement agent's fees and other offering expenses payable by the Company. The Warrant has a term of five and one-half years, is exercisable immediately following the issuance date and has an exercise price of $11.00 per share, subject to adjustment as set forth therein.

On August 3, 2021, the Private Placement closed and in September 2021, the Pre-Funded Warrants were fully exercised. In addition, we issued to the placement agent a warrant to purchase 136,364 shares of our common stock at an exercise price of $13.75.

In connection with the Purchase Agreement, we entered into a registration rights agreement (the "Registration Rights Agreement") with the Purchaser. Pursuant to the Registration Rights Agreement, we are required to file a resale registration statement (the "Resale Registration Statement") with the SEC to register for resale of the shares of our common stock issuable upon exercise of the Pre-Funded Warrant and Warrant, within 30 days of the Signing Date, and to have such Resale Registration Statement declared effective within 45 days after the Signing Date in the event the Resale Registration Statement is not reviewed by the SEC, or 75 days of the Signing Date in the event the Resale Registration Statement is reviewed by the SEC. We will be obligated to pay certain liquidated damages to the Purchaser if we fail to file the Resale Registration Statement when required, fail to cause the Resale Registration Statement to be declared effective by the SEC when required, of if we fail to maintain the effectiveness of the Resale Registration Statement. We subsequently filed a registration statement registering for resale the shares of our common stock issuable upon exercise of the Pre-Funded Warrant and Warrant which became effective on September 29, 2021.

Results of Operations

Three months ended September 30, 2021 compared to three months ended September 30, 2020

The following tables sets forth our results of operations for the three months ended September 30, 2021 and 2020 and the relative dollar and percentage change between the two quarters.







                                                   Three months ended                     Change
                                                      September 30,                   (2021 to 2020)
                                                  2021             2020             ($)              %
        Operating expenses:
        Research and development              $    697,674     $  1,349,835     $   (652,161 )          -48 %
        General and administrative               2,670,317          196,578        2,473,739           1258 %
        Total operating expenses                 3,367,991        1,546,413        1,821,578            118 %
        Loss from operations                    (3,367,991 )     (1,546,413 )     (1,821,578 )          118 %
        Other income, net                              827            3,680           (2,853 )          -78 %
        Net loss                              $ (3,367,164 )   $ (1,542,733 )   $ (1,824,431 )          118 %
        Net loss attributable to common
        stockholders per share, basic and
        diluted                               $      (0.81 )   $      (0.79 )   $      (0.01 )            2 %
        Weighted average number of shares
        used in calculating net loss per
        share, basic and diluted                 4,180,744        1,944,672        2,236,072            115 %
        


Research and Development Expenses

Research and development expenses consist primarily of fees paid to contract research organizations ("CROs") and contract manufacturing organizations ("CMOs") as well as compensation expenses for certain employees involved in the planning, managing, and analyzing the work of the CROs and CMOs. Research and development expenses decreased in the three months ended September 30, 2021 over 2020 primarily as a result of the manufacturing and characterization of Decoy20 during the three months ended September 30, 2020.

General and Administrative Expenses

General and administrative expenses include compensation, employee benefits, and stock-based compensation for executive management, finance administration and human resources, facility costs (including rent), professional service fees, and other general overhead costs, including depreciation, to support our operations. General and administrative expenses increased significantly in the three months ended September 30, 2021 over 2020 as a result of increased payroll and related expenses, stock-based compensation expense for stock options issued in August 2021 and professional fees associated with being a public company following the Merger.

Other Income

Other income for the three months ended September 30, 2021 and 2020 was comprised of interest earned on deposits. Interest income has not been significant due to low interest rates on balances.

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020







                                                    Nine months ended                     Change
                                                      September 30,                   (2021 to 2020)
                                                  2021             2020             ($)              %
        Operating expenses
        Research and development              $  1,578,513     $  2,302,883     $   (724,370 )          -31 %
        General and administrative               2,932,099          527,830        2,404,269            456 %
        Total operating expenses                 4,510,612        2,830,713        1,679,899             59 %
        Loss from operations                    (4,510,612 )     (2,830,713 )     (1,679,899 )           59 %
        Other income, net                           15,548           16,781           (1,233 )           -7 %
        Net loss                              $ (4,495,064 )   $ (2,813,932 )   $ (1,681,132 )           60 %
        Net loss attributable to common
        stockholders per share, basic and
        diluted                               $      (1.67 )   $      (1.45 )   $      (0.22 )           15 %
        Weighted average number of shares
        used in calculating net loss per
        share, basic and diluted                 2,692,770        1,944,672          748,098             38 %
        


Research and Development Expenses

Research and development expenses consist primarily of fees paid to CROs and CMOs as well as compensation expenses for certain employees involved in the planning, managing, and analyzing the work of the CROs and CMOs. Research and development expenses decreased in the nine months ended September 30, 2021 over 2020 as a result of the manufacturing and characterization of Decoy20 during the nine months ended September 30, 2020.

General and Administrative Expenses

General and administrative expenses include compensation, employee benefits, and stock-based compensation for executive management, finance administration and human resources, facility costs (including rent), professional service fees, and other general overhead costs, including depreciation, to support our operations. General and administrative expenses increased significantly in the nine months ended September 30, 2021 over 2020 primarily as a result of increased payroll and related expenses, stock-based compensation expense for stock options issued in August 2021 and professional fees associated with being a public company following the Merger.

Other Income

Other income for the nine months ended September 30, 2021 and 2020 was comprised of interest earned on deposits. Interest income has not been significant due to low interest rates on balances.

Liquidity and Resources

Since our inception, we funded our operations primarily through private offerings of our equity and debt securities. As of September 30, 2021, we had cash and cash equivalents of approximately $41.9 million. As of December 31, 2020, we had cash and cash equivalents of approximately $1.6 million.

In August 2021, we sold a Pre-funded Warrant to purchase 2,727,273 of our common stock and a Warrant to purchase 2,727,273 of our common stock in a private placement. The Warrant is exercisable at an exercise price of $11.00 per share. In September 2021, the Pre-funded Warrant was fully exercised at an exercise price of $0.01 per share. The Pre-funded Warrant and the Warrant were sold together at a combined price of $11.00, including the pre-funded exercise price. The total net proceeds were approximately $27.3 million, after deducting placement agent fees and offering expenses in the amount of approximately $2.7 million. In addition, we issued to the placement agent a warrant to purchase 136,364 shares of our common stock at an exercise price of $13.75.

Net cash used in operating activities was approximately $7.8 million for the nine months ended September 30, 2021, compared with net cash used in operating activities of approximately $2.4 million for the nine months ended September 30, 2020. This increase resulted primarily from an increase in general and administrative expenses and effects of the Merger and changes in operating assets and liabilities.

Net cash provided by financing activities for the nine months ended September 30, 2021, was approximately $48.0 million, which was provided by the proceeds received from the closing of the Private Placement in August 2021, proceeds from Merger and the sale of additional SAFEs during the nine months ended September 30, 2021.

Current Outlook

Following the Private Placement that closed in August 2021, we believe that we have adequate cash to fund our ongoing activities for more than one year from the date of this Quarterly Report on Form 10-Q.

We are closely monitoring ongoing developments in connection with the COVID-19 pandemic. As of the date of issuance of these consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results of operations is uncertain.

Developing drugs, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. We will require significant additional financing in the future to fund our operations, including if and when we progress into additional clinical trials, obtain regulatory approval for one or more of our product candidates, obtain commercial manufacturing capabilities and commercialize one or more of our product candidates. Our future capital requirements will depend on many factors, including, but not limited to:

? the progress and costs of our preparations for clinical trials and other research and development activities;

? the scope, prioritization and number of clinical trials and other research and development programs;

? the amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements with respect to our product candidates;

? the impact of the COVID-19 pandemic;

? the costs of the development and expansion of our operational infrastructure;

? the costs and timing of obtaining regulatory approval for one or more of our product candidates;

? the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements;

? the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

? the costs and timing of securing manufacturing arrangements for clinical or commercial production;

? the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;

? the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or technology;

? the magnitude of our general and administrative expenses;

? market conditions; and

? any cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates.

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through capital raising. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development programs and other operations and make necessary change to our operations to reduce the level of our expenditures in line with available resources.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates that affect the reported amounts of our assets, liabilities and expenses. Significant accounting policies employed by us, including the use of estimates, are presented in Decoy's annual financial statements for the year ended December 31, 2020, and their accompanying notes included in the Form S-4 filed with the SEC in connection with the reverse merger. We periodically evaluate our estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require our subjective or complex judgments, resulting in the need to make estimates about the effect of matters that are inherently uncertain. If actual performance should differ from historical experience or if the underlying assumptions were to change, our financial condition and results of operations may be materially impacted.

Our critical accounting policies and estimates are disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" in Decoy's financial statements for the year ended December 31, 2020, included in the Form S-4 filed in connection with the reverse merger. There have been no material changes to those policies during the nine months ended September 30, 2021. We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Accounting for Research and Development Costs

We record the costs associated with services provided by CROs and CMOs as they are incurred. Though the scope and timing of work are generally based on signed agreements, some judgement is involved in determining periodic expenses because payment flows do not always match the periods over which services and materials are provided to us. As a result, our management is required to make estimates of services received and efforts expended pursuant to agreements established with these third-parties at each period-end date. During the nine months ended September 30, 2021, we incurred $1.6 million of research and development expenses. As of September 30, 2021, we recorded an accrued liability of $0.2 million for expenses incurred, but not yet invoiced, and a prepaid expense of $0.1 million for payments made that relate to future periods. Over or under estimating the services received or efforts expended could cause us to overstate or understate research and development expenses incurred within a reporting period, and related accrued and prepaid expenses.

Stock-Based Compensation

We measure and record the expense related to stock-based payment awards based on the fair value of those awards on the date of grant. We use the Black-Scholes-Merton ("Black-Scholes") option pricing model to establish the . . .

Nov 15, 2021

COMTEX_396960648/2041/2021-11-15T07:13:05

Is there a problem with this press release? Contact the source provider Comtex at editorial@comtex.com. You can also contact MarketWatch Customer Service via our Customer Center.

(c) 1995-2021 Cybernet Data Systems, Inc. All Rights Reserved

This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.