| MERGER AGREEMENT | NOTE
6 - MERGER AGREEMENT : On
March 15, 2021, Intec Israel entered into a Merger Agreement with Intec Parent, Merger Sub, Domestication Merger Sub, and Decoy,
pursuant to which, following the Domestication Merger, and upon satisfaction of additional closing conditions, the Merger Sub will merge
with and into Decoy, with Decoy being the surviving entity and a wholly owned subsidiary of Intec Parent. If the Merger is completed,
then the business of Decoy will become the business of Intec Parent. Under
the exchange ratio formula in the Merger Agreement, without taking into consideration the effect of the respective levels of cash and
liabilities of each of the Company and Decoy, which will result in an adjustment to such exchange ratio, following the closing of the
Merger (the “Closing”), the former Decoy securityholders immediately before the Merger are expected to own approximately
75 %
of the aggregate number of the outstanding securities of Intec Parent (based on a valuation of $ 30
million), and the securityholders of the Company
immediately before the Domestication Merger are expected to own approximately 25 %
of the aggregate number of the outstanding securities of Intec Parent (based on a valuation of $ 10
million), calculated on a fully-diluted basis.
The actual allocation will be subject to adjustment based on, among other things, the respective net cash balances of Decoy
and the consolidated Intec entities (including, in the case of Intec Israel, any proceeds from any disposition of Intec
Israel’s Accordion Pill business), subject to certain exceptions. As further described below, the Closing is also conditioned
on completion of the Domestication Merger and on a financing by Intec Israel or Intec Parent, which will dilute securityholders
of both Intec Israel and Decoy on a pro-rata basis, subject to certain exceptions. The
Merger Agreement contains customary representations, warranties and covenants made by each of Intec Israel and Decoy, including
covenants relating to (i) the conduct of their respective businesses prior to the Closing, (ii) the preparation and filing of a registration
statement on Form S-4 registering the Merger Shares and the shares of Intec Parent Common Stock to be issued in connection with the Domestication
Merger (the “Registration Statement”) and the preparation and/or filing, as applicable, of a proxy statement/information
statement for the special meeting or approval by written consent, as applicable, of shareholders of each of Intec Israel and Decoy,
(iii) holding a meeting or approval by written consent, as applicable, of shareholders of each of Intec Israel and Decoy to obtain
their requisite approvals in connection with the Domestication Merger and Merger, as applicable, including, among other approvals, the
approval by Intec Israel’s shareholders of the issuance of the Merger Shares, and (iv) subject to certain exceptions, the
recommendation of the board of directors of each party to the Merger Agreement to its shareholders that such approvals be given. Consummation
of the Merger is subject to certain closing conditions, including, among other things, (i) consummation of the Domestication Merger,
(ii) approval of certain matters related to the Merger by the shareholders of Intec Israel and approval of the Merger by the stockholders
of Decoy, (iii) the effectiveness of the Registration Statement, (iv) the continued listing of Intec Israel’s ordinary shares
on the Nasdaq Capital Market (and following the Domestication Merger, the shares of Intec Parent Common Stock) and the authorization
for listing on the Nasdaq Capital Market of the Merger Shares, (v) the receipt of a tax ruling from the Israel Tax Authority with respect
to the Domestication Merger, (vi) disposition of Intec Israel’s Accordion Pill business, and (vii) a closing financing by
Intec Israel or Intec Parent such that upon Closing of the Merger (taking account of the proceeds to be received with respect
to such financing), the combined net cash of Intec Parent shall be not less than $ 30
million and not more than $ 50
million, and which represents an agreed minimum
valuation derived from the Exchange Ratio for Intec Parent following the Closing. The Merger Agreement requires Intec Israel to
convene a shareholders’ meeting for purposes of obtaining the necessary shareholder approvals required in connection with the Merger. The
Merger Agreement contains certain termination rights for both Intec Israel and Decoy, including, but not limited to, the right
of Intec Israel and Decoy to terminate the Merger Agreement by mutual written consent or if a court of competent jurisdiction
or other Governmental Body (as defined in the Merger Agreement) has issued a final and nonpeelable order, decree or ruling, or has taken
any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger. INTEC
PHARMA LTD. NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) NOTE
6 - MERGER AGREEMENT As
of March 31, 2021, Intec Israel has transferred $ 650
thousand to Decoy for transaction expenses, of
which $ 350 300
thousand was recorded as deposit under prepaid
expenses and other receivables. Either Intec Israel or Decoy may terminate the Merger Agreement if the Merger is not consummated
on or before the date that is 155 days after March 17, 2021. This date may be extended in certain circumstances. In connection with the
termination of the Merger Agreement, under specified circumstances, Decoy may be required to pay to Intec Israel a break-up fee
of $ 1.0
million, or Intec Israel may be required
to pay to Decoy a reverse break-up fee of $ 1.0
million, which was deposited with an escrow
agent and therefore recorded as restricted cash as of March 31, 2021, and forfeit an amount of $ 350
thousand that was transferred to Decoy to cover
transaction expenses. As
set forth in the Merger Agreement and pursuant to an Agreement and Plan of Merger dated as of April 27, 2021 between Intec Israel,
Intec Parent and Domestication Merger Sub, prior to the date of the closing date (the “Closing Date”), Intec Israel
shall domesticate as a wholly owned subsidiary of a Delaware corporation by merging with and into the Domestication Merger
Sub, with Intec Israel surviving the merger and becoming a wholly-owned subsidiary of Intec Parent. In connection with the Domestication
Merger, all Intec Israel’s ordinary shares, having no par value per share (the “Intec Israel Shares”), outstanding
immediately prior to the Domestication Merger, will convert, on a one-for-one basis, into shares of Intec Parent Common Stock and all
options and warrants to purchase Intec Israel Shares outstanding immediately prior to the Domestication Merger will be exchanged for
equivalent securities of Intec Parent. In
accordance with the terms of the Merger Agreement, the Company agreed that prior to the Closing Date it would use commercially
reasonable efforts to enter into one or more agreements providing for the sale, transfer or assignment of the Company’s
Accordion Pill business by way of Asset Disposition or Share Disposition or that it would otherwise take steps related to the
divestment or disposal of its assets and satisfaction of liabilities of the Accordion Pill business by way of Business Termination,
to be affected immediately after the Closing. Following the above, the depreciation of the property and equipment was accelerated
in accordance with the Company’s expectation for the Closing Date. As a result, the loss per share for the three-month
period ended March 31, 2021, increased by five cents from $ 0.91 0.96 526
thousand. |
