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 SeptemberJune 30, 20212022
OR
☐ 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 001-40652
Indaptus Therapeutics, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware | 86-3158720 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3 Columbus Circle 15th Floor New York, New York | 10019 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: +(347)(646) 480 9760427-2727
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common stock, par value $0.01 per share | INDP | 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the 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 ☒
The number of shares of Registrant’s ordinary shares outstanding as of November 11, 2021:August 4, 2022: .
TABLE OF CONTENTS
2 |
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Balance Sheets
September 30, 2021 | December 31, 2020 | June 30, 2022 | December 31, 2021 | |||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 41,857,222 | $ | 1,637,499 | $ | 14,258,812 | $ | 39,132,165 | ||||||||
Marketable securities | 18,753,081 | - | ||||||||||||||
Assets held for sale | 600,000 | - | - | 148,400 | ||||||||||||
Prepaid expenses and other current assets | 1,397,669 | 94,500 | 260,884 | 1,106,653 | ||||||||||||
Total current assets | 43,854,891 | 1,731,999 | 33,272,777 | 40,387,218 | ||||||||||||
Non-current assets | ||||||||||||||||
Non-current assets: | ||||||||||||||||
Property and equipment, net | 4,335 | 1,349 | 2,732 | 3,800 | ||||||||||||
Right-of-use asset | 124,853 | 169,088 | ||||||||||||||
Other assets | - | 44,445 | 659,049 | 16,477 | ||||||||||||
Total non-current assets | 4,335 | 45,794 | 786,634 | 189,365 | ||||||||||||
�� | ||||||||||||||||
Total assets | $ | 43,859,226 | $ | 1,777,793 | $ | 34,059,411 | $ | 40,576,583 | ||||||||
Liabilities and stockholders’ equity | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable and other current liabilities | $ | 5,780,184 | $ | 598,365 | $ | 3,526,034 | $ | 4,507,676 | ||||||||
SAFE agreements | - | 1,417,129 | ||||||||||||||
Operating lease liability, current portion | 97,905 | 96,465 | ||||||||||||||
Total current liabilities | 5,780,184 | 2,015,494 | 3,623,939 | 4,604,141 | ||||||||||||
Commitments and contingent liabilities (Note 7) | - | - | ||||||||||||||
Non-current liabilities: | ||||||||||||||||
Operating lease liability, net of current portion | 27,907 | 72,862 | ||||||||||||||
Stockholders’ equity (deficit) | ||||||||||||||||
Preferred stock; Series Seed; $ | par value; and shares authorized as of September 30, 2021 and December 31, 2020, respectively, and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively- | 8,359 | ||||||||||||||
Common stock; $ | par value, and shares authorized as of September 30, 2021 and December 31, 2020, respectively; and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively81,332 | 19,447 | ||||||||||||||
Total non-current liabilities | 27,907 | 72,862 | ||||||||||||||
Total liabilities | 3,651,846 | 4,677,003 | ||||||||||||||
Commitments and contingent liabilities (Note 8) | - | |||||||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock: $ | par value, shares authorized as of June 30, 2022 and December 31, 2021; shares issued and outstanding as of June 30, 2022 and December 31, 202182,586 | 82,586 | ||||||||||||||
Additional paid in capital | 50,452,275 | 7,693,994 | 53,223,459 | 51,487,881 | ||||||||||||
Accumulated deficit | (12,454,565 | ) | (7,959,501 | ) | (22,871,543 | ) | (15,670,887 | ) | ||||||||
Accumulated other comprehensive loss | (26,937 | ) | - | |||||||||||||
Total stockholders’ equity (deficit) | 38,079,042 | (237,701 | ) | |||||||||||||
Total stockholders’ equity | 30,407,565 | 35,899,580 | ||||||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 43,859,226 | $ | 1,777,793 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 34,059,411 | $ | 40,576,583 |
See accompanying notes to the unaudited condensed consolidated financial statements
F-1 |
INDAPTUS THERAPEUTICS, INC.
Unaudited CondensedConsolidated Statements of Operations and Other Comprehensive Loss
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2s021 | |||||||||||||||||||||||||
Three months ended | Nine months ended | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
September 30, | September 30, | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Research and development | $ | 697,674 | $ | 1,349,835 | $ | 1,578,512 | $ | 2,302,883 | $ | 1,506,165 | $ | 391,118 | $ | 2,803,263 | $ | 880,839 | ||||||||||||||||
General and administrative | 2,670,317 | 196,578 | 2,932,100 | 527,830 | 2,363,095 | 137,527 | 4,468,070 | 261,782 | ||||||||||||||||||||||||
Total operating expenses | 3,367,991 | 1,546,413 | 4,510,612 | 2,830,713 | 3,869,260 | 528,645 | 7,271,333 | 1,142,621 | ||||||||||||||||||||||||
Loss from operations | (3,367,991 | ) | (1,546,413 | ) | (4,510,612 | ) | (2,830,713 | ) | (3,869,260 | ) | (528,645 | ) | (7,271,333 | ) | (1,142,621 | ) | ||||||||||||||||
Other income, net | 827 | 3,680 | 15,548 | 16,781 | 33,758 | 13,166 | 70,677 | 14,721 | ||||||||||||||||||||||||
Net loss | $ | (3,367,164 | ) | $ | (1,542,733 | ) | $ | (4,495,064 | ) | $ | (2,813,932 | ) | $ | (3,835,502 | ) | $ | (515,479 | ) | $ | (7,200,656 | ) | $ | (1,127,900 | ) | ||||||||
Net loss available to common stockholders per share of common stock, basic and diluted | $ | (0.81 | ) | $ | (0.79 | ) | $ | (1.67 | ) | $ | (1.45 | ) | $ | (0.46 | ) | $ | (0.27 | ) | $ | (0.87 | ) | $ | (0.58 | ) | ||||||||
Weighted average number of shares used in calculating net loss per share, basic and diluted | 4,180,744 | 1,944,672 | 2,692,770 | 1,944,672 | 8,258,597 | 1,944,672 | 8,258,597 | 1,944,672 | ||||||||||||||||||||||||
Net loss | $ | (3,835,502 | ) | $ | (515,479 | ) | $ | (7,200,656 | ) | $ | (1,127,900 | ) | ||||||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||||||||||
Unrealized loss on available-for-sale securities | (17,716 | ) | - | (26,937 | ) | - | ||||||||||||||||||||||||||
Comprehensive loss | $ | (3,853,218 | ) | $ | (515,479 | ) | $ | (7,227,593 | ) | $ | (1,127,900 | ) |
See accompanying notes to the unaudited condensed consolidated financial statements
F-2 |
INDAPTUS THERAPEUTICS, INC.
Unaudited CondensedConsolidated Statements of Stockholders’ Equity (Deficit)
Shares | Amount | Shares | Amount | capital | deficit | Total | ||||||||||||||||||||||
Series Seed Preferred | Common stock | Additional paid in | Accumulated | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | Total | ||||||||||||||||||||||
Balance, January 1, 2020 | 835,928 | $ | 8,359 | 1,944,672 | $ | 19,447 | $ | 7,557,991 | $ | (4,375,350 | ) | $ | 3,210,447 | |||||||||||||||
Proceeds of merger | ||||||||||||||||||||||||||||
Conversion of preferred stock | ||||||||||||||||||||||||||||
Conversion of preferred stock, shares | ||||||||||||||||||||||||||||
Conversion of SAFE agreements | ||||||||||||||||||||||||||||
Conversion of SAFE agreements, shares | ||||||||||||||||||||||||||||
Issuance of common stock upon merger, net of Decoy’s transaction costs | ||||||||||||||||||||||||||||
Issuance of common stock upon merger, net of Decoy’s transaction costs, shares | ||||||||||||||||||||||||||||
Issuance of pre-funded warrants and warrants | ||||||||||||||||||||||||||||
Issuance of pre-funded warrants and warrants, shares | ||||||||||||||||||||||||||||
Exercise of prepaid warrants | ||||||||||||||||||||||||||||
Exercise of prepaid warrants, shares | ||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 38,883 | - | 38,883 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (558,581 | ) | (558,581 | ) | |||||||||||||||||||
Balance, March 31, 2020 | 835,928 | 8,359 | 1,944,672 | 19,447 | 7,596,874 | (4,933,931 | ) | 2,690,749 | ||||||||||||||||||||
Stock-based compensation | - | - | - | - | 38,781 | - | 38,781 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (712,618 | ) | (712,618 | ) | |||||||||||||||||||
Balance, June 30, 2020 | 835,928 | 8,359 | 1,944,672 | 19,447 | 7,635,655 | (5,646,549 | ) | 2,016,912 | ||||||||||||||||||||
Stock-based compensation | - | - | - | - | 39,208 | - | 39,208 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (1,542,733 | ) | (1,542,733 | ) | |||||||||||||||||||
Balance, September 30, 2020 | 835,928 | $ | 8,359 | 1,944,672 | $ | 19,447 | $ | 7,674,863 | $ | (7,189,282 | ) | $ | 513,387 |
Shares | Amount | Shares | Amount | capital | deficit | Loss | Total | |||||||||||||||||||||||||
Series Seed Preferred | Common stock | Additional paid in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | Loss | Total | |||||||||||||||||||||||||
Balance, January 1, 2021 | 835,928 | $ | 8,359 | 1,944,672 | $ | 19,447 | $ | 7,693,994 | $ | (7,959,501 | ) | $ | - | $ | (237,701 | ) | ||||||||||||||||
Stock-based compensation | - | - | - | - | 20,445 | - | - | 20,445 | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | (612,421 | ) | - | (612,421 | ) | ||||||||||||||||||||||
Balance, March 31, 2021 | 835,928 | 8,359 | 1,944,672 | 19,447 | 7,714,439 | (8,571,922 | ) | - | (829,677 | ) | ||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 20,673 | - | - | 20,673 | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | (515,479 | ) | - | (515,479 | ) | ||||||||||||||||||||||
Balance, June 30, 2021 | 835,928 | $ | 8,359 | 1,944,672 | $ | 19,447 | $ | 7,735,112 | $ | (9,087,401 | ) | $ | - | $ | (1,324,483 | ) | ||||||||||||||||
Balance, January 1, 2022 | - | $ | - | 8,258,597 | $ | 82,586 | $ | 51,487,881 | $ | (15,670,887 | ) | $ | - | $ | 35,899,580 | |||||||||||||||||
Stock-based compensation | - | - | - | - | 831,183 | - | - | 831,183 | ||||||||||||||||||||||||
Other comprehensive loss | - | - | - | - | - | - | (9,221 | ) | (9,221 | ) | ||||||||||||||||||||||
Net loss | - | - | - | - | - | (3,365,154 | ) | - | (3,365,154 | ) | ||||||||||||||||||||||
Balance, March 31, 2022 | - | - | 8,258,597 | 82,586 | 52,319,064 | (19,036,041 | ) | (9,221 | ) | 33,356,388 | ||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 904,395 | - | - | 904,395 | ||||||||||||||||||||||||
Other comprehensive loss | - | - | - | - | - | - | (17,716 | ) | (17,716 | ) | ||||||||||||||||||||||
Net loss | - | - | - | - | - | (3,835,502 | ) | - | (3,835,502 | ) | ||||||||||||||||||||||
Balance June 30, 2022 | - | $ | - | 8,258,597 | $ | 82,586 | $ | 53,223,459 | $ | (22,871,543 | ) | $ | (26,937 | ) | $ | 30,407,565 |
See accompanying notes to the unaudited condensed consolidated financial statements
F-3 |
INDAPTUS THERAPEUTICS, INC.
Unaudited CondensedConsolidated Statements of Stockholders’ Equity (Deficit)Cash Flows
Series Seed Preferred | Common stock | Additional paid in | Accumulated | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | capital | deficit | Total | ||||||||||||||||||||||
Balance, January 1, 2021 | 835,928 | $ | 8,359 | 1,944,672 | $ | 19,447 | $ | 7,693,994 | $ | (7,959,501 | ) | $ | (237,701 | ) | ||||||||||||||
Stock-based compensation | - | - | - | - | 20,445 | - | 20,445 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (612,421 | ) | (612,421 | ) | |||||||||||||||||||
Balance, March 31, 2021 | 835,928 | 8,359 | 1,944,672 | 19,447 | 7,714,439 | (8,571,922 | ) | (829,677 | ) | |||||||||||||||||||
Stock-based compensation | - | - | - | - | 20,673 | - | 20,673 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (515,479 | ) | (515,479 | ) | |||||||||||||||||||
Balance, June 30, 2021 | 835,928 | 8,359 | 1,944,672 | 19,447 | 7,735,112 | (9,087,401 | ) | (1,324,483 | ) | |||||||||||||||||||
Conversion of preferred stock | (835,928 | ) | (8,359 | ) | 835,928 | 8,359 | - | - | - | |||||||||||||||||||
Conversion of SAFE agreements | - | - | 766,627 | 7,666 | 6,409,463 | - | 6,417,129 | |||||||||||||||||||||
Issuance of common stock upon merger, net of Decoy’s transaction costs in the amount of $665,627 | - | - | 1,858,743 | 18,587 | 8,246,233 | - | 8,264,820 | |||||||||||||||||||||
Issuance of pre-funded warrants and warrants, net of issuance costs in the amount of $2,706,598 | - | - | - | - | 27,266,129 | - | 27,266,129 | |||||||||||||||||||||
Exercise of pre-funded warrants | 2,727,273 | 27,273 | - | - | 27,273 | |||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 795,338 | - | 795,338 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (3,367,164 | ) | (3,367,164 | ) | |||||||||||||||||||
Balance, September 30, 2021 | - | $ | - | 8,133,243 | $ | 81,332 | $ | 50,452,275 | $ | (12,454,565 | ) | $ | 38,079,042 |
2022 | 2021 | |||||||
For the six months ended | ||||||||
June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (7,200,656 | ) | $ | (1,127,900 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 1,068 | 426 | ||||||
Stock-based compensation | 1,735,578 | 41,118 | ||||||
Realized gain on assets held for sale | (24,155 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 845,769 | (31,355 | ) | |||||
Accounts payable and other current liabilities | (981,642 | ) | (169,219 | ) | ||||
Deferred transaction costs | - | (873,836 | ) | |||||
Other assets | (642,572 | ) | 40,445 | |||||
Operating lease right-of-use asset and liability, net | 720 | - | ||||||
Net cash used in operating activities | (6,265,890 | ) | (2,120,321 | ) | ||||
Cash flows from investing activities: | ||||||||
Proceeds received for assets held for sale | 172,555 | - | ||||||
Purchases of property and equipment | - | (2,200 | ) | |||||
Purchase of marketable securities | (18,780,018 | ) | - | |||||
Net cash used in investing activities | (18,607,463 | ) | (2,200 | ) | ||||
Cash flows from financing activities: | ||||||||
Advances received from potential merger counterparty | - | 450,000 | ||||||
Proceeds from SAFEs, net | - | 5,000,000 | ||||||
Net cash provided by financing activities | - | 5,450,000 | ||||||
Net (decrease) increase in cash and cash equivalents | (24,873,353 | ) | 3,327,479 | |||||
Cash and cash equivalents at beginning of period | 39,132,165 | 1,637,499 | ||||||
Cash and cash equivalents at end of period | $ | 14,258,812 | $ | 4,964,978 | ||||
Supplemental cash flow disclosures | ||||||||
Cash paid for income taxes | $ | 2,400 | $ | 800 | ||||
Cash received for interest earned on deposits | $ | - | $ | 2,362 |
See accompanying notes to the unaudited condensed consolidated financial statements
F-4 |
Unaudited Condensed Consolidated Statements of Cash FlowsINDAPTUS THERAPEUTICS, INC.
Notes to the unaudited condensed consolidated financial statements
2021 | 2020 | |||||||
Nine months ended | ||||||||
September | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (4,495,064 | ) | $ | (2,813,932 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 868 | 639 | ||||||
Stock-based compensation | 836,456 | 116,872 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | (1,128,933 | ) | (19,418 | ) | ||||
Accounts payable and other current liabilities | (2,964,147 | ) | 348,241 | |||||
Net cash used in operating activities | (7,750,820 | ) | (2,367,598 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (3,854 | ) | - | |||||
Net cash used in investing activities | (3,854 | ) | - | |||||
Cash flows from financing activities: | ||||||||
Proceeds from merger | 16,346,622 | - | ||||||
Decoy’s transaction costs | (665,627 | ) | - | |||||
Issuance of pre-funded warrants and warrants | 29,972,727 | - | ||||||
Issuance costs of Private Placement | (2,706,598 | ) | - | |||||
Exercise of pre-funded warrants | 27,273 | - | ||||||
Proceeds from SAFEs | 5,000,000 | 1,167,129 | ||||||
Net cash provided by financing activities | 47,974,397 | 1,167,129 | ||||||
Net increase (decrease) in cash and cash equivalents | 40,219,723 | (1,200,469 | ) | |||||
Cash and cash equivalents at beginning of period | 1,637,499 | 3,798,955 | ||||||
Cash and cash equivalents at end of period | $ | 41,857,222 | $ | 2,598,486 | ||||
Noncash investing and financing activities | ||||||||
Conversion of preferred stock | $ | 8,359 | - | |||||
Conversion of SAFEs | $ | 6,417,129 | - | |||||
Liabilities assumed, net of non-cash assets received in reverse merger | $ | 7,616,175 | - | |||||
Release of deposit upon closing of Merger | $ | 200,000 | - | |||||
Supplemental cash flow disclosures | ||||||||
Cash paid for income taxes | $ | 800 | $ | 800 | ||||
Cash received for interest earned on deposits | $ | 2,362 | $ | 12,365 |
NOTE 1: GENERAL
a. | Indaptus Therapeutics, Inc. and its |
Indaptus Therapeutics, Inc. (“Indaptus”), formerly “Intec Parent Inc.”, was established and incorporated in Delaware on February 24, 2021, as a private Delaware corporation and wholly ownedwholly-owned subsidiary of Intec Pharma Ltd., (“Intec Israel”), a former publicly traded company.
b. | On August 3, 2021, Indaptus completed its merger with Decoy Biosystems, Inc., (“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 Indaptus, Decoy, Intec Israel, Domestication Merger Sub Ltd., an Israeli company and a wholly-owned subsidiary of Indaptus (“Domestication Merger Sub”), and Dillon Merger Subsidiary Inc., a Delaware corporation and |
Also, in connection with the Merger, Indaptus changed its name from “Intec Parent, Inc.” to “Indaptus Therapeutics, Inc.”. 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 under the symbol “INDP”.
In connection with the completion of the Merger, on August 4, 2021, the Company’s board determined to wind down the Accordion Pill business of Intec Israel. The Company expects that the winding down of the Accordion Pill business will be completed by the end of 2021.
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.
Risks and uncertainties The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operating losses (see below), competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, and dependence on key individuals.
The COVID-19 pandemic
Going concern and management’s plans The Company has incurred net losses and utilized cash in operations since inception, has an accumulated deficit as of
Management plans to raise additional capital through equity and/or debt financings, or other capital sources, including potential collaborations, licenses, and other similar arrangements. However, these plans are not entirely within its control and cannot be assessed as being probable of occurring. The Company’s ability to raise additional capital may be adversely impacted by potential worsening of global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide resulting from the developing conflict between Russia and Ukraine and the ongoing COVID-19 pandemic. If the Company is unable to raise capital when needed or on attractive terms, it would be forced to delay, reduce, or eliminate its research and development programs or other operations. If any of these events occur, the Company’s ability to achieve the development and commercialization goals would be adversely affected.
These unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The unaudited
These unaudited
The results for the
Principles of consolidation
The unaudited condensed consolidated financial statements include the accounts of Indaptus and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.
Use of estimates The preparation of the unaudited condensed consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting periods. The most significant estimates relate to the determination of the fair value of stock-based compensation and the determination of period-end obligations to certain contract research organizations. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the unaudited condensed consolidated financial statements; therefore, actual results could differ from those estimates.
Loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number of common stock outstanding during the period. Diluted loss per share is based upon the weighted average number of common stock and of common stock equivalents outstanding when dilutive. Common stock equivalents include outstanding stock options
SCHEDULE OF ANTI-DILUTIVE SECURITIES
Cash and cash equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of
The Company’s investment in marketable securities includes U.S. treasury bonds that are classified as available-for-sale securities pursuant to Accounting Standards Codification (“ASC”) 320 “Investments — Debt Securities”. These investments are recorded at fair value with unrealized gains and losses recorded in Accumulated Other Comprehensive Income (Loss), or AOCI, as a separate component of stockholders’ equity.
Property and equipment Property and equipment assets are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The Company uses an estimated useful life of three years for employee-related computers and other office equipment and five years for furniture. Leasehold improvements are amortized over the shorter of the lease-term or the estimated useful life of the related asset.
Patents The Company expenses patent costs, including related legal costs, as incurred and records such costs within general and administrative expense in the accompanying unaudited condensed consolidated statements of operations.
Research and development expenses include costs directly attributable to the conduct of research and development
The Company accrues for expenses resulting from obligations under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers for which payment flows do not match the periods over which services or materials are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. In the event advance payments are made to a CRO, CMO, or outside service provider, the payments will be recorded as a prepaid asset, which will be amortized or expensed as the contracted services are performed.
Income taxes
Income taxes are accounted for under the asset and liability method. 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 and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized in the foreseeable future. As of
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses.
The Company measures and records the expense related to stock-based payment awards based on the fair value of those awards as determined using the Black-Scholes-Merton (“Black-Scholes”) option pricing model as of the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period, on a straight-line basis.
The Black-Scholes model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock. The Company estimates the fair value of options granted by using the Black-Scholes model with the following assumptions:
Expected Volatility—The Company estimated volatility for option grants by evaluating the historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options’ expected term. Expected Term—The expected term of the Company’s options represents the period that the stock-based awards are expected to be outstanding. The expected term was estimated using the simplified method for employee stock options since the Company does not have adequate historical exercise data to estimate the expected term.
Risk-Free Interest Rate—The risk-free interest rate is based on the implied yield currently available on US Treasury zero-coupon issues with a term that is equal to the options’ expected term at the grant date.
Dividend Yield—The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero.
The Company has elected to recognize forfeitures as they occur.
Fair value measurements
Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company follows the established framework for measuring fair value and providing disclosures about fair value measurements.
The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:
The Company’s investment in marketable securities included U.S. treasury bonds with maturities of
The unrealized losses for the three and six-month periods ended June 30, 2022 amounted to $17,716 and $26,937 respectively.
NOTE Prepaid expenses and other current assets are comprised of the following: SCHEDULE OF PREPAID EXPENSE AND OTHER CURRENT ASSETS
NOTE Accounts payable and other current liabilities are comprised of the following: SCHEDULE OF ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
In June 2021, the Intec Israel shareholders voted to approve the Indaptus 2021 Stock Incentive Plan,
The 2021 Plan provides for the grant of non-qualified stock options, incentive stock options, restricted stock awards, restricted stock units, unrestricted stock awards, stock appreciation rights and other forms of stock-based compensation. The 2021 Plan permits the Company’s board to change the type, terms and conditions of awards as circumstances may change. This flexibility to adjust the type of compensation to be granted is particularly important given current economic and world events.
On January 26, 2022, Indaptus’ board of directors approved a grant of options to purchase shares of common stock to executives. The options are exercisable at $ per share, vest over three years, and expire after grant. On February 1, 2022, Indaptus’ board of directors approved a grant of options to purchase shares of common stock to a new employee. The options are exercisable at $ per share, vest over three years, and expire after grant. On February 25, 2022, Indaptus’ board of directors approved a grant of options to purchase shares of common stock to an executive. The options are exercisable at $ per share, vest over three years, and expire after grant.
On
after grant.
SCHEDULE OF SHARE
The
The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option. The weighted average inputs used to measure the value of the options granted
The following table presents the exercise price of outstanding stock options as of
NOTE
had
NOTE Litigation On July 13, 2022, LTS Lohmann Therapie-System AG (“LTS”) filed a Request for Arbitration with the International Chamber of Commerce, naming as respondent the Company’s subsidiary Intec Israel. The Request alleges that it is entitled to payment of Euro 2 million for reimbursement under a process development agreement following the Company’s discontinuation of the Accordion Pill business. As of From time to time, the Company could become involved in additional disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.
Leases
Future minimum annual lease payments under the Company’s noncancelable operating lease SUMMARY OF MINIMUM LEASE PAYMENTS
The Company recognized rent expense of $ NOTE
The Company evaluated subsequent events from
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
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,
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
Unlike many competitor products, our technology does not depend on targeting with or to a Decoy Merger
On August 3, 2021,
Previously, on July 27, 2021, we, Intec Israel
Also, in connection with the Merger, we changed our name from “Intec Parent, Inc.” to “Indaptus Therapeutics, Inc.”.
Following completion of the Merger, our shares of
Winding Down of Accordion Pill Business
In connection with the completion of the Merger, on August 4, 2021, our board of directors determined to wind down the Accordion Pill business of Intec Israel
In connection with the winding down, we laid off all our employees and we terminated our contracts with counterparties,
Private Placement
In connection with the Merger, on July 23, 2021,
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,
Research and Development Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of fees paid to contract research organizations, We expect our research and development expenses
General and Administrative
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. We expect our general and administrative expenses Other Income, Net Other income includes interest earned on deposits and other items of income, expense, gain and loss that are incidental to the core operations of the Company.
Results of Operations
Research and Development Expenses
General and Administrative Expenses
Other Income, net
Other income,
Six months ended June 30, 2022 compared to
The following tables sets forth our results of operations for the six months ended June 30, 2022 and 2021 and the relative dollar and percentage change between the two quarters.
Research and Development Expenses Our research and development expenses for the six months ended June 30, 2022 amounted to approximately $2.8 million, an increase of approximately $1.9 million compared to approximately $900,000 for the six months ended June 30, 2021. This increase was attributable primarily to (i) an increase of approximately $1 million for payroll and related expenses including approximately $370,000 of stock-based compensation, and (ii) an increase of approximately $900,000 for the preparation of the Phase 1 clinical trial and IND submission. We expect our research and development expenses to increase substantially for the remainder of the year as we plan to commence a Phase 1 clinical trial. General and Administrative Expenses Our general and administrative expenses for the six months ended June 30, 2022 amounted to approximately $4.5 million, an increase of approximately $4.2 million compared to approximately $260,000 for the six months ended June 30, 2021. This increase was attributable primarily to (i) an increase of approximately $2.3 million for payroll and related expenses, including approximately $1.3 million of stock-based compensation, resulting from increased headcount of our executive team following the Merger and (ii) an approximately $1.7 million increase in directors and officers’ insurance policy, professional fees and other expenses associated with being a public company following the Merger. We expect our general and administrative expenses to increase for the reminder of the year as we continue to support our increasing research and development activities. Other Income, net Other income, net, increased in the six months ended June 30, 2022 compared to the same period in 2021 primarily as a result of proceeds received in excess of the estimated fair value of assets held for sale and interest earned on deposits. Liquidity and Resources
Since our inception, we have funded our operations primarily through public and private offerings of our equity
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.
Net cash used in operating activities was approximately
Net cash used in investing activities was approximately $18.6 million for the six months ended June 30, 2022 which was primarily due to the purchase of marketable securities investments during that period. There was an immaterial amount in net cash used in investing activities in the six months ended June 30, 2021. There was no net cash provided by financing activities in the six months ended June 30, 2022. Net cash provided by financing activities was approximately $5.5 million for the
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 condensed consolidated financial statements, the
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:
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.
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
This discussion and analysis of our financial condition and results of operations is based on our condensed 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
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
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,
Recently Issued Accounting Pronouncements
None.
Not required for smaller reporting companies.
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
Changes in Internal Control over Financial Reporting
PART II. OTHER INFORMATION
From time to time, we may become involved in
On July 13, 2022, LTS filed a Request for Arbitration with the International Chamber of Commerce, naming as respondent the Company’s subsidiary Intec Israel. The Request alleges that it is entitled to payment of Euro 2 million for reimbursement under a process development agreement following our discontinuation of the Accordion Pill business. As of June 30, 2022, we accrued Euro 2 million (approximately $2.1 million) with respect to our potential obligation to LTS.
Not required for a smaller reporting company.
None.
None.
Not applicable.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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