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 March 31, 2022
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 |
10019 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: +(347) 480 9760
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. ☒ 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). ☒ 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 May 10, 2022: .
TABLE OF CONTENTS
2 |
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Balance Sheets
March 31, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 33,216,311 | $ | 39,132,165 | ||||
Marketable securities | 2,961,460 | - | ||||||
Assets held for sale | - | 148,400 | ||||||
Prepaid expenses and other current assets | 741,945 | 1,106,653 | ||||||
Total current assets | 36,919,716 | 40,387,218 | ||||||
Non-current assets: | ||||||||
Property and equipment, net | 3,266 | 3,800 | ||||||
Right-of-use asset | 147,102 | 169,088 | ||||||
Other assets | 16,477 | 16,477 | ||||||
Total non-current assets | 166,845 | 189,365 | ||||||
Total assets | $ | 37,086,561 | $ | 40,576,583 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and other current liabilities | $ | 3,582,472 | $ | 4,507,676 | ||||
Operating lease liability, current portion | 97,185 | 96,465 | ||||||
Total current liabilities | 3,679,657 | 4,604,141 | ||||||
Non-current liabilities: | ||||||||
Operating lease liability, net of current portion | 50,516 | 72,862 | ||||||
Total non-current liabilities | 50,516 | 72,862 | ||||||
Total liabilities | 3,730,173 | 4,677,003 | ||||||
Commitments and contingent liabilities (Note 8) | ||||||||
Stockholders’ equity: | ||||||||
Common stock: $ | par value, shares authorized as of March 31, 2022 and December 31, 2021; shares issued and outstanding as of March 31, 2022 and December 31, 202182,586 | 82,586 | ||||||
Additional paid in capital | 52,319,064 | 51,487,881 | ||||||
Accumulated deficit | (19,036,041 | ) | (15,670,887 | ) | ||||
Accumulated other comprehensive loss | (9,221 | ) | - | |||||
Total stockholders’ equity | 33,356,388 | 35,899,580 | ||||||
Total liabilities and stockholders’ equity | $ | 37,086,561 | $ | 40,576,583 |
See accompanying notes to the unaudited condensed consolidated financial statements
F-1 |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Operating expenses: | ||||||||
Research and development | $ | 1,297,098 | $ | 489,721 | ||||
General and administrative | 2,104,975 | 124,254 | ||||||
Total operating expenses | 3,402,073 | 613,975 | ||||||
Loss from operations | (3,402,073 | ) | (613,975 | ) | ||||
Other income, net | 36,919 | 1,554 | ||||||
Net loss | $ | (3,365,154 | ) | $ | (612,421 | ) | ||
Net loss available to common stockholders per share of common stock, basic and diluted | $ | (0.41 | ) | $ | (0.31 | ) | ||
Weighted average number of shares used in calculating net loss per share, basic and diluted | 8,258,597 | 1,944,672 | ||||||
Net loss | $ | (3,365,154 | ) | $ | (612,421 | ) | ||
Other comprehensive loss: | ||||||||
Unrealized loss on available-for-sale securities | (9,221 | ) | - | |||||
Comprehensive loss | $ | (3,374,375 | ) | $ | (612,421) |
See accompanying notes to the unaudited condensed consolidated financial statements
F-2 |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
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 | ) | ||||||||||||||||||||||
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 |
See accompanying notes to the unaudited condensed consolidated financial statements
F-3 |
INDAPTUS THERAPEUTICS, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (3,365,154 | ) | $ | (612,421 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 534 | 213 | ||||||
Stock-based compensation | 831,183 | 20,445 | ||||||
Realized gain on assets held for sale | (24,155 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 364,708 | (109,883 | ) | |||||
Accounts payable and other current liabilities | (925,204 | ) | 481,050 | |||||
Deferred transaction costs | - | (604,988 | ) | |||||
Operating lease right-of-use asset and liability, net | 360 | - | ||||||
Net cash used in operating activities | (3,117,728 | ) | (825,584 | ) | ||||
Cash flows from investing activities: | ||||||||
Proceeds received for assets held for sale | 172,555 | - | ||||||
Purchase of marketable securities | (2,970,681 | ) | - | |||||
Net cash used in investing activities | (2,798,126 | ) | - | |||||
Cash flows from financing activities: | ||||||||
Proceeds from SAFEs, net | - | 3,675,000 | ||||||
Net cash provided by financing activities | - | 3,675,000 | ||||||
Net (decrease) increase in cash and cash equivalents | (5,915,854 | ) | 2,849,416 | |||||
Cash and cash equivalents at beginning of period | 39,132,165 | 1,637,499 | ||||||
Cash and cash equivalents at end of period | $ | 33,216,311 | $ | 4,486,915 | ||||
Supplemental cash flow disclosures | ||||||||
Cash paid for income taxes | $ | $ | 800 | |||||
Cash received for interest earned on deposits | $ | 1,318 | $ | 506 |
See accompanying notes to the unaudited condensed consolidated financial statements
F-4 |
INDAPTUS THERAPEUTICS, INC.
Notes to the unaudited condensed consolidated financial statements
NOTE 1: GENERAL
a. | Indaptus Therapeutics, Inc. and its wholly-owned subsidiaries, Decoy Biosystems, Inc. and Intec Pharma Ltd., collectively (the “Company”), is a biotechnology company dedicated to enhancing and expanding curative cancer immunotherapy for patients with unresectable or metastatic solid tumors and lymphomas, which are responsible for more than 90% of all cancer deaths. The Company is developing a novel, multi-targeted product that activates both innate and adaptive anti-tumor and anti-viral immune responses. |
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-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 wholly-owned subsidiary of Indaptus (“the Merger Sub”), pursuant to which Merger Sub merged with and into Decoy, with Decoy surviving as a wholly-owned subsidiary of Indaptus (the “Merger”) and the business conducted by Decoy became the business conducted by Indaptus. Previously, on July 26, 2021, Intec Israel implemented a reverse share split of its outstanding ordinary shares, options and warrants and proportionate adjustments were made to its exercise prices. In addition, on July 27, 2021, Intec Israel, Indaptus and the Domestication Merger Sub, completed the domestication merger pursuant to the terms and conditions of the Agreement and Plan of Merger and Reorganization, dated April 27, 2021, whereby Domestication Merger Sub merged with and into Intec Israel, with Intec Israel being the surviving entity and a wholly-owned subsidiary of Indaptus. |
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”.
c. | In connection with the Merger, on July 23, 2021, Indaptus entered into a securities purchase agreement (the “Purchase Agreement”) with a certain institutional investor, pursuant to which Indaptus agreed to sell and issue, in a private placement (the “Private Placement”), pre-funded warrants and warrants for total net proceeds of approximately $27.3 million, after deducting the placement agent’s fees and other estimated offering expenses payable by Indaptus in the amount of approximately $2.7 million. In September 2021, the pre-funded warrant was fully exercised. Each warrant is exercisable at an exercise price of $11.00 per share and has a term of five and one-half years from the date of issuance. In addition, in connection with the Private Placement, Indaptus issued to the placement agent a warrant to purchase 136,364 shares of Indaptus’ common stock at an exercise price of $13.75. |
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.
F-5 |
The COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in the past year. The COVID-19 pandemic is affecting the United States and global economies and may affect the Company’s operations and those of third parties on which the Company relies, including by causing disruptions in the supply of its product candidates and the conduct of future clinical trials. For example, the pandemic has caused our good manufacturing practice (GMP) process to take longer than expected. In addition, the COVID-19 pandemic may affect the operations of the FDA and other health authorities, which could result in delays of reviews and approvals, including with respect to the Company’s product candidates. Additionally, while the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact its short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. While it is unknown how long these conditions will last and what the complete financial effect will be to the Company, capital raise efforts and additional development of the Company’s technologies may be negatively affected.
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 March 31, 2022, of $19.0 million, and expects to incur future additional losses as clinical testing and commercialization of the Company’s product candidates will require significant additional financing. The Company believes it has adequate cash to fund its operations for at least one year after the date of issuance of these condensed consolidated financial statements.
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 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 interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and S-X Article 10 for interim financial statements. Accordingly, they do not contain all information and notes required by US GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2022, the consolidated results of operations, changes in stockholders’ equity and cash flows for the three-month periods ended March 31, 2022, and 2021.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual financial statements for the year ended December 31, 2021, as filed in the 10-K on March 21, 2022. The condensed consolidated balance sheet data as of December 31, 2021, included in these unaudited condensed consolidated financial statements was derived from the audited financial statements for the year ended December 31, 2021, but does not include all disclosures required by US GAAP for annual financial statements.
The results for the three-month period ended March 31, 2022, are not necessarily indicative of the results expected for the year ending December 31, 2022.
Principles of consolidation
The 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 consolidated financial statements; therefore, actual results could differ from those estimates.
F-6 |
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 and warrants which are included under the treasury stock method when dilutive.
For the three months ended March 31, | ||||||||
2022 | 2021 | |||||||
Outstanding stock options | 1,580,623 | 206,079 | ||||||
Warrants | 3,090,787 | - |
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 March 31, 2022 and December 31, 2021, cash and cash equivalents consist primarily of checking and money market deposits. The Company’s cash balances exceed those that are federally insured; however, the Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and cash equivalents are held. To date, the Company has not recognized any losses caused by uninsured balances.
Marketable securities
The Company’s investment in marketable securities included 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 consolidated statements of operations.
F-7 |
Research and development expenses
Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including clinical trials and professional services. All costs associated with research and developments are expensed as incurred.
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 March 31, 2022 and December 31, 2021, the Company has recorded a full valuation allowance against its deferred tax assets.
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.
F-8 |
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:
Level 1: | Quoted prices in active markets for identical assets or liabilities. |
Level 2: | Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. |
Level 3: | Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. |
ASC 820, Fair Value Measurement, requires all entities to disclose the fair value of financial instruments, both assets and liabilities, for which it is practicable to estimate fair value, and defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2022 and December 31, 2021, the recorded values of cash and cash equivalents, marketable securities, assets held for sale, prepaid expenses, and accounts payable and other current liabilities approximate their fair values due to the short-term nature of these items.
F-9 |
NOTE 3: MARKETABLE SECURITIES
The Company’s investment in marketable securities included U.S. treasury bonds with maturities of less than one year. These investments are classified as available-for-sale and are recorded at fair value with unrealized gains and losses recorded in AOCI. These investments are categorized as Level 2.
As of March 31, 2022, the amount of the marketable securities is $2,961,460. As of December 31, 2021, the Company had marketable securities.
The unrealized losses for the three-month period ended March 31, 2022 amounted to $9,221.
NOTE 4: PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets are comprised of the following:
March 31, | December 31, | |||||||
2022 | 2021 | |||||||
Prepaid insurance | $ | 543,986 | $ | 945,023 | ||||
Prepaid research and development | 78,353 | 127,643 | ||||||
Other receivables | - | 21,056 | ||||||
Other prepaid expenses | 119,606 | 12,931 | ||||||
Total prepaid expenses and other current assets | $ | 741,945 | $ | 1,106,653 |
NOTE 5: ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities are comprised of the following:
March 31, | December 31, | |||||||
2022 | 2021 | |||||||
Accounts payable | $ | 2,834,683 | $ | 2,637,806 | ||||
Accrued employee costs | 276,285 | 1,371,136 | ||||||
Accrued professional fees | 71,186 | 139,871 | ||||||
Accrued research and development | 175,978 | 135,751 | ||||||
Accrued board fees | 116,000 | 125,333 | ||||||
Delaware franchise taxes payable | 50,000 | - | ||||||
Other accrued expenses | 58,340 | 97,778 | ||||||
Total accounts payable and other current liabilities | $ | 3,582,472 | $ | 4,507,676 |
In June 2021, the Intec Israel shareholders voted to approve the Indaptus 2021 Stock Incentive Plan, an equity incentive plan for grants to employees, officers, consultants, directors and other service providers, (the “2021 Plan”), that became effective upon the closing of the Merger. The 2021 Plan provides for up to shares of the Company’s common stock.
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.
F-10 |
On January 26, 2022, Indaptus’ board of directors approved 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.
Weighted average | ||||||||||||||||
Number of options | Exercise price | Remaining contractual life (in years) | Intrinsic value | |||||||||||||
Outstanding as of January 1, 2022 | 1,174,600 | $ | $ | 241,103 | ||||||||||||
Granted | 439,200 | $ | $ | - | ||||||||||||
Exercised | $ | - | - | $ | - | |||||||||||
Forfeited and cancelled | (33,237 | ) | $ | $ | - | |||||||||||
Outstanding as of March 31, 2022 | 1,580,623 | $ | $ | 96,870 | ||||||||||||
Exercisable as of March 31, 2022 | 127,749 | $ | $ | 96,870 | ||||||||||||
Vested and expected to vest March 31, 2022 | 1,580,623 | $ | $ | 96,870 |
The Company recognized stock-based compensation expense of $and $during the three months ended March 31, 2022 and 2021, respectively. The following table summarizes the total stock-based compensation expense included in the condensed consolidated statements of operations for the periods presented:
For the three months ended March 31, | ||||||||
2022 | 2021 | |||||||
Research and development | $ | 170,163 | $ | 8,189 | ||||
General and administrative | 661,020 | 12,256 | ||||||
Total stock-based compensation expense | $ | 831,183 | $ | 20,445 |
As of March 31, 2022, total compensation cost not yet recognized related to unvested stock options was approximately $ million, which is expected to be recognized over a weighted-average period of years.
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 during the three months ended March 31, 2022 are presented in the table below. The weighted average fair value of stock options issued during the three months ended March 31, 2022 was $3.89 per share.
2022 | ||||
Stock price | $ | 4.82 | ||
Exercise price | $ | 4.82 | ||
Expected term (in years) | ||||
Volatility | 105.5 | % | ||
Risk free rate | 1.7 | % | ||
Dividend yield | 0.0 | % |
F-11 |
The following table presents the exercise price of outstanding stock options as of March 31, 2022:
Exercise price | Options outstanding | |||
$ | - $539,925 | |||
$ | - $1,006,000 | |||
$ | or higher34,698 | |||
Total | 1,580,623 |
NOTE 7: CAPITALIZATION
a. | As of March 31, 2022 and December 31, 2021, the Company had shares of common stock authorized and shares of common stock issued and outstanding. | |
b. | As of March 31, 2022 and December 31, 2021, there were warrants outstanding to purchase an aggregate of . As of March 31, 2022, these warrants are shares of common stock of Indaptusexercisable at a weighted average price of $ and their weighted average remaining contractual term is years. |
NOTE 8: COMMITMENTS AND CONTINGENCIES
Litigation
As of the date of issuance of these consolidated financial statements there were no pending legal proceedings against the Company that are expected to have a material adverse effect on cash flows, financial condition or results of operations. From time to time, the Company could become involved in 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
On October 1, 2021, the Company entered into a noncancelable two-year operating lease agreement for approximately 2,000 square feet of office space in San Diego, California. The base rent is $7,999 per month with an increase of 3% after the first anniversary of the lease term commencement, which was November 1, 2021. The lease liability is measured at a discount rate of 7%.
Future minimum annual lease payments under the Company’s noncancelable operating lease as of March 31, 2022 are as follows:
2022 | $ | 72,469 | ||
2023 | 82,387 | |||
Total minimum lease payments | 154,856 | |||
Less: amount representing interest | (7,155 | ) | ||
Present value of operating lease liability | 147,701 | |||
Less: current portion | (97,185 | ) | ||
Operating lease liability, net of current portion | $ | 50,516 |
The Company recognized rent expense of $26,542 and $6,365 during the three months ended March 31, 2022 and 2021, respectively. Total cash payments for the operating lease totaled $26,182 and $6,365 during the three months ended March 31, 2022 and 2021, respectively.
NOTE 9: SUBSEQUENT EVENTS
The Company evaluated subsequent events from March 31, 2022, the date of these consolidated financial statements, through May 12, 2022, which represents the date the consolidated financial statements were issued, for events requiring recognition or disclosure in the condensed consolidated financial statements for the three-month period ended March 31, 2022. The Company concluded that no events have occurred that would require recognition or disclosure in the consolidated financial statements.
F-12 |
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 our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 21, 2022, including the consolidated annual financial statements as of December 31, 2021 and their accompanying notes included therein. We have prepared our condensed consolidated interim financial statements in accordance with U.S. GAAP and Article 10 of SEC Regulation S-X.
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, expenses capital requirements and the need for additional financing following the recently completed merger. More detailed information about the risks and uncertainties affecting us is contained under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K filed with the SEC on March 21, 2022, and in other filings that we have made and may make with the Securities and Exchange Commission in the future.
3 |
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 completed other IND-enabling studies.
Unlike many competitor products, our technology does not depend on targeting with or to a specific antigen, providing broad applicability across multiple indications. Our product candidates are designed to have a much shorter half-life and produce less systemic exposure than small molecule, antibody or human cell-based therapies, potentially reducing the risk of non-specific auto-immune reactions. Our technology produces single agent activity and/or combination therapy-based durable responses of lymphoma, hepatocellular, colorectal and pancreatic tumors and has also produced significant single agent activity against chronic hepatitis B virus (HBV) and chronic human immunodeficiency virus (HIV) infections in pre-clinical models. We have recently filed an Investigational New Drug, or an IND, application with the U.S. Food and Drug Administration and plan to commence a Phase 1 clinical trial in the second half of 2022 targeting solid tumors, after the IND application becomes effective. Target indications include, but not limited to, colorectal, hepatocellular (± HBV), bladder, cervical and pancreatic carcinoma.
Decoy Merger
On August 3, 2021, we completed our merger with Decoy following the satisfaction or waiver of the conditions set forth in the Merger Agreement, dated as of March 15, 2021 among the Company, Decoy, Intec Israel, Domestication Merger Sub Ltd., an Israeli company and a wholly-owned subsidiary of the Company, or Domestication Merger Sub, and Dillon Merger Subsidiary Inc., a Delaware corporation and wholly owned subsidiary of the Company, or Merger Sub, pursuant to which Merger Sub merged with and into Decoy, with Decoy surviving as a wholly owned subsidiary of the Company, or the Merger, and the business conducted by Decoy became the business conducted by the combined company.
Previously, on July 27, 2021, we, Intec Israel and Domestication Merger Sub completed the previously announced domestication merger pursuant to the terms and conditions of 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 ours. 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.”.
Following completion of the Merger, our shares of 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.
4 |
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 which was completed as of the date of issuance of these consolidated financial statements.
In connection with the winding down, we laid off all our employees and we terminated our contracts with counterparties, including the termination of the Process Development Agreement between Intec Israel and LTS Lohmann Therapie Systeme AG, and the termination of the unprotected lease agreement between Intec Israel and its landlord for the lease of offices located in Jerusalem, Israel.
Private Placement
In connection with the Merger, on July 23, 2021, or the Signing Date, we entered into a securities purchase agreement, or the Purchase Agreement, with a certain institutional investor, or the Purchaser, pursuant to which we agreed to sell and issue, in a private placement, or the Private Placement, a pre-funded warrant to purchase up to 2,727,273 shares of our common stock, or 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, or the Registration Rights Agreement, with the Purchaser requiring us to file a resale registration statement, or 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. 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.
Components of Operating Results
Operating Expenses
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, or CROs, and contract manufacturing organizations, or CMOs, as well as compensation expenses for certain employees involved in the planning, managing, and analyzing the work of the CROs and CMOs.
We expect our research and development expenses to increase substantially for the foreseeable future as we continue to ramp up our clinical development activities and incur expenses associated with hiring additional personnel to support our research and development efforts. Our expenditures on future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of pre-clinical studies and clinical trials and development of product candidates will depend on a variety of factors, including:
● | the timing and receipt of regulatory approvals; | |
● | the scope, rate of progress and expenses of pre-clinical studies and clinical trials and other research and development activities; | |
● | potential safety monitoring and other studies requested by regulatory agencies; | |
● | significant and changing government regulation. |
5 |
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 to increase substantially for the foreseeable future as we continue to increase our headcount to support our research and development activities and operations generally, the growth of our business and, if any of our product candidates receive marketing approval, commercialization activities. We also expect to continue to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, additional director and officer insurance expenses, investor relations activities and other administrative and professional services.
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
Three months ended March 31, 2022 compared to three months ended March 31, 2021
The following tables sets forth our results of operations for the three months ended March 31, 2022 and 2021 and the relative dollar and percentage change between the two quarters.
Three months ended | Change | |||||||||||||||
March 31, | (2022 to 2021) | |||||||||||||||
2022 | 2021 | ($) | % | |||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | $ | 1,297,098 | $ | 489,721 | $ | 807,377 | 165 | % | ||||||||
General and administrative | 2,104,975 | 124,254 | 1,980,721 | 1,594 | % | |||||||||||
Total operating expenses | 3,402,073 | 613,975 | 2,788,098 | 454 | % | |||||||||||
Loss from operations | (3,402,073 | ) | (613,975 | ) | (2,788,098 | ) | 454 | % | ||||||||
Other income, net | 36,919 | 1,554 | 35,365 | 2,275 | % | |||||||||||
Net loss | $ | (3,365,154 | ) | $ | (612,421 | ) | $ | (2,752,733 | ) | 450 | % | |||||
Net loss attributable to common stockholders per share, basic and diluted | $ | (0.41 | ) | $ | (0.31 | ) | $ | (0.10 | ) | 32 | % | |||||
Weighted average number of shares used in calculating net loss per share, basic and diluted | 8,258,597 | 1,944,672 |
Research and Development Expenses
Our research and development expenses for the three months ended March 31, 2022 amounted to approximately $1.3 million, an increase of approximately $800,000, or approximately 165%, compared to approximately $500,000 for the three months ended March 31, 2021. This increase was attributable primarily to (i) an increase of approximately $500,000 for payroll and related expenses including approximately $160,000 of stock-based compensation, and (ii) an increase of approximately $300,000 for the phase 1 clinical trial preparation and the preparation of the IND that was recently filed. We expect our research and development expenses to increase substantially for the reminder of the year as we plan to commence a Phase 1 clinical trial after the IND application becomes effective.
6 |
General and Administrative Expenses
Our general and administrative expenses for the three months ended March 31, 2022 amounted to approximately $2.1 million, an increase of approximately $2.0 million, or approximately 1,594%, compared to approximately $0.1 million for the three months ended March 31, 2021. This increase was attributable primarily to (i) an increase of approximately $1.1 million for payroll and related expenses, including approximately $650,000 of stock-based compensation, resulting from increased headcount of our executive team following the Merger and (ii) approximately $750,000 increase in directors and officers’ insurance policy and professional fees 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 research and development activities.
Other Income, net
Other income, net, increased in the three months ended March 31, 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.
Liquidity and Resources
Since our inception, we have funded our operations primarily through public and private offerings of our equity securities. As of March 31, 2022, we had cash and cash equivalents and marketable securities of approximately $36.2 million. As of December 31, 2021, we had cash and cash equivalents of approximately $39.1 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.
Net cash used in operating activities was approximately $3.1 million for the three months ended March 31, 2022, compared with net cash used in operating activities of approximately $0.8 million for the for the three months ended March 31, 2021. 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 used in investing activities was approximately $2.8 million for the three months ended March 31, 2022 which was primarily due to the purchase of marketable securities investments during that period. There was no net cash provided by or used in investing activities in the three months ended March 31, 2021.
There was no net cash provided by financing activities in the three months ended March 31, 2022. Net cash provided by financing activities was approximately $3.7 million for the three months ended March 31, 2021 following the issuance of a series of Simple Agreements for Future Equity (SAFEs) to accredited investors.
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 ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. While it is unknown how long these conditions will last and what the complete financial effect will be to us, capital raise efforts and additional development of our technologies may be negatively affected.
7 |
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.
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.
8 |
Critical Accounting Estimates
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 our annual financial statements for the year ended December 31, 2021, and their accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC. 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.
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 three months ended March 31, 2022, we incurred approximately $1.1 million of research and development expenses. As of March 31, 2022, 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, or Black-Scholes, option pricing model to establish the fair value. We recognize 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 that our management make certain estimates regarding the expected stock price volatility, expected term, risk–free interest rate, and dividend yield to derive an estimated fair value. The use of different assumptions would increase or decrease the related determination of fair value, increasing or decreasing the compensation expense related to a particular stock-based award.
Recently Issued Accounting Pronouncements
None.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Not required for smaller reporting companies.
9 |
Item 4. | Disclosure Controls and Procedures |
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 March 31, 2022. Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of March 31, 2022, these disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
10 |
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. There are currently no pending material legal proceedings, and we are currently not aware of any legal proceedings or claims against us or our property that we believe will have any significant effect on our business, financial position or operating results. None of our officers or directors is a party against us in any legal proceeding.
Item1A. | Risk Factors |
Not required for a smaller reporting company.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
None.
Item 6. | Exhibits |
* | Filed herewith |
# | Furnished herewith |
11 |
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.
Indaptus Therapeutics, Inc. | ||
Date: May 12, 2022 | By: | /s/ Jeffrey A. Meckler |
Jeffrey A. Meckler | ||
Chief
Executive Officer (Principal Executive Officer) | ||
Date: May 12, 2022 | By: | /s/ Nir Sassi |
Nir Sassi | ||
Chief
Financial Officer (Principal Financial and Accounting Officer) |
12 |
Exhibit 31.1
CERTIFICATIONS
I, Jeffrey A. Meckler, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Indaptus Therapeutics, Inc. (the “registrant”); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 12, 2022
/s/ Jeffrey A. Meckler | |
Jeffrey A. Meckler Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS
I, Nir Sassi, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Indaptus Therapeutics, Inc. (the “registrant”); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 12, 2022
/s/ Nir Sassi | |
Nir Sassi Chief Financial Officer |
Exhibit 32.1
Indaptus Therapeutics, Inc.
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Indaptus Therapeutics, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey A. Meckler, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(b) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Jeffrey A. Meckler | |
Jeffrey A. Meckler | |
Chief Executive Officer | |
Date: May 12, 2022 |
Exhibit 32.2
Indaptus Therapeutics, Inc.
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Indaptus Therapeutics, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nir Sassi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(a) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(b) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Nir Sassi | |
Nir Sassi | |
Chief Financial Officer | |
Date: May 12, 2022 |