Indaptus Therapeutics, Inc. — Form 10-Q Summary
Business context and reporting period
This unaudited quarterly report covers the period ended June 30, 2021. The reported financial statements principally reflect the predecessor company, Intec Pharma Ltd., whose business focused on the Accordion Pill drug-delivery platform. After quarter-end, the company completed its merger with Decoy Biosystems on August 3, 2021, changed its name to Indaptus Therapeutics, Inc., and began trading under INDP on August 4. Indaptus is now a preclinical-stage biotechnology company developing immunotherapy candidates; the board also decided to wind down Intec Israel’s Accordion Pill business.
Unless otherwise indicated, financial amounts below are in U.S. dollars and thousands. The company reported no revenue.
Financial highlights
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 | Comparable 2020 period |
|---|---|---|---|
| Research and development expense | $1,807 | $3,964 | $1,275 quarterly; $3,299 six-month |
| General and administrative expense | $2,387 | $4,408 | $1,630 quarterly; $3,345 six-month |
| Long-lived asset impairment | $3,190 | $3,190 | None |
| Operating loss | $7,384 | $11,562 | $2,905 quarterly; $6,644 six-month |
| Net loss | $7,432 | $11,661 | $2,947 quarterly; $6,817 six-month |
| Basic and diluted loss per share | $5.53 | $9.46 | $3.66 quarterly; $9.65 six-month |
- Cash and liquidity: At June 30, cash and cash equivalents were $16,991 and restricted cash was $1,000, for total cash and restricted cash of $17,991. Current assets were $18,792 and current liabilities were $5,440.
- Debt and liabilities: Total liabilities were $6,156, including $5,440 current liabilities and $716 long-term liabilities. The filing does not disclose borrowings or conventional debt.
- Cash flow, six months: Operating cash used was $7,397, investing cash flow was zero, and financing cash provided was $10,856. Cash and restricted cash increased by $3,459 before a $139 adverse foreign-exchange effect.
- Equity: Total shareholders’ equity was $13,936, down from $14,533 at December 31, 2020; accumulated deficit was $215,212. The statements reflect reverse share splits.
- Margins: With no reported revenue, revenue-based margins are not meaningful.
Material changes versus the prior comparable period
- Quarterly net loss rose by about 155% year over year; the six-month net loss rose by about 72%. The increases reflected the $3,190 impairment charge and higher R&D and G&A costs.
- R&D expense increased about 38% for the quarter and 21% for the six months. Management attributed the increase primarily to accelerated depreciation related to the merger.
- G&A expense increased about 50% for the quarter and 33% for the six months, primarily from merger-related professional services.
- Six-month operating cash use increased from $6,817 in 2020 to $7,397 in 2021. Financing remained significant: 2021 proceeds included $9,900 from Aspire Capital share sales and $956 from warrant exercises.
Outlook, risks, contingencies and unusual items
- Post-quarter financing: An August 3 private placement generated approximately $27,200 in net proceeds after fees and expenses. It included pre-funded warrants for up to 2,727,273 shares and warrants for up to 2,727,273 shares, plus a placement-agent warrant for 136,364 shares. Management stated that, following the placement, cash should fund ongoing activities for more than 12 months from the filing date, while also warning that substantial additional financing will be needed to advance development.
- Business wind-down: The company expected the Accordion Pill wind-down to be substantially complete by the end of Q3 2021 and expected approximately $800 of salaries, severance and close-out costs. The LTS manufacturing agreement’s termination involved an approximately €2.0 million ($2,400) payment, recorded as a liability at June 30; a lease termination agreement also provided for a $600 break-up fee.
- Impairment: The company recorded a $3,190 impairment charge after concluding a business termination was probable. This included approximately $800 for Jerusalem office-related assets and $2,400 for LTS manufacturing equipment, whose estimated fair value relied on Level 3 valuation inputs.
- Merger and dilution: Immediately after the merger, former Decoy shareholders owned approximately 65.6% and former Intec shareholders approximately 34.4% of 5,405,963 outstanding shares. Full exercise of the private-placement pre-funded warrants would increase shares outstanding to 8,133,236, before considering other options and warrants. The merger is expected to be accounted for as a reverse merger/asset acquisition, with Decoy treated as accounting acquirer.
- Other contingencies: Four merger-related shareholder lawsuits were voluntarily dismissed after supplemental proxy disclosures; the company agreed to pay plaintiffs’ counsel $225,000, paid in July. A separate former-director settlement was paid in March. The filing reports no other pending material legal proceedings.
- Risks: Indaptus has no approved or commercialized products and expects continuing losses. Key risks include clinical and regulatory uncertainty, the planned Decoy20 IND filing and Phase 1 trial, manufacturing and third-party dependencies, access to future capital and potential dilution, intellectual-property protection, and possible COVID-19 disruption to development, supply and financing.
- Controls: Management concluded disclosure controls were effective at the reasonable-assurance level as of June 30, 2021; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Confirm the post-merger accounting presentation and which historical results will represent Indaptus in future filings.
- Review the fully diluted share count, including the private-placement warrants, merger-converted securities, employee options and the new equity incentive plan.
- Track actual cash use, the basis for management’s stated runway, and whether additional financing is needed sooner than expected.
- Verify the final costs and timing of the Accordion Pill wind-down, including the LTS payment, lease break fee and severance/close-out expenses.
- Monitor progress and timing of the Decoy20 IND filing and any Phase 1 trial; these were plans, not completed milestones at the reporting date.