Indaptus Therapeutics, Inc 8-K/A, filed Aug 16, 2021
Indaptus Therapeutics, Inc. (INDP)
About this 8-K/A
Indaptus Therapeutics, Inc filed this 8-K/A on August 16, 2021, reporting on events of August 12, 2021.
Items reported
- Item 2.05: Exit or restructuring costs
- Item 2.06: Material impairment
- Item 4.01: Change of auditor
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
(formerly Intec Parent, Inc.)
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) | |
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
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| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
Explanatory Note
The Company is filing this amendment to the Prior 8-Ks for the purpose of adding the disclosure contained in Items 2.05 and 2.06, supplementing the disclosure contained in Item 4.01 and including additional financial statements under Item 9.01.
| Item 2.05 | Costs Associated with Exit or Disposal Activities. |
The information provided in Item 2.06 of this Current Report on Form 8-K is incorporated by reference into this Item 2.05.
| Item 2.06 | Material Impairments. |
Under the Merger Agreement, Intec Israel agreed, among other things, that it would use commercially reasonable efforts to enter into one or more agreements providing for the sale, transfer or assignment of Intec Israel’s Accordion Pill business, to be effected immediately after the closing (the “Disposition”). It was anticipated that the Disposition would result in one of the following scenarios (i) a sale or disposition of substantially all the assets of Intec Israel followed by the liquidation of Intec Israel, (ii) a sale by Indaptus of all of the outstanding shares of Intec Israel or (iii) a termination of Intec Israel’s business as promptly as possible through winding down its operations, satisfying liabilities, and disposing of its remaining assets followed by a liquidation of Intec Israel (a “Business Termination”). 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 determined that it was probable that the Disposition will result in a Business Termination and since it is considered a triggering event, in connection with the approval of the Company’s financial statements for the period ended June 30, 2021, on August 12, 2021, the Company performed an impairment assessment on Intec Israel’s non-current assets as of June 30, 2021, which resulted in an impairment charge as follows:
| 1) | The operating lease right-of-use assets and property and equipment which are in the offices and operational spaces in Jerusalem were fully impaired following the lease termination agreement entered into on August 5, 2021. As of June 30, 2021, the Company recorded an impairment in the amount of approximately $800,000. | |
| 2) | As of June 30, 2021, the Company recorded an impairment charge of the equipment at Lohmann Therapie-Systeme AG (the “Equipment”) in the amount of approximately $2.4 million and the Equipment has been impaired to €1.1 million (as of June 30, 2021, approximately $1.3 million) to reflect its estimated fair value. For the impairment assessment, the Company’s management, with the assistance of a third-party valuation firm, estimated the fair value of the Equipment. Accordingly, the Company’s audit committee concluded that the impairment of $2.4 million was due to the recent changes in the economic environment of the used equipment market and the decision to wind down Intec Israel as promptly as possible (level 3). |
In total, this resulted in an impairment charge of approximately $3.2 million.
| Item 4.01 | Changes in Registrant’s Certifying Accountant. |
For accounting purposes, the Merger is treated as a reverse acquisition and, as such, the December 31, 2020 and 2019 financial statements of the accounting acquirer, Decoy, which have been audited by Haskell & White LLP (“H&W”), an independent registered public accounting firm, will become the historical financial statements of the Company. In a reverse acquisition, a change of accountants is presumed to have occurred unless the same accountant audited the pre-transaction financial statements of both the legal acquirer and the accounting acquirer, and such change is generally presumed to occur on the date the reverse acquisition is completed.
On August 12, 2021, the audit committee of the Company’s board of directors approved the dismissal of Kesselman & Kesselman, Certified Public Accountant (Isr.), a member firm of PricewaterhouseCoopers International Limited, an independent registered public accounting firm (“PWC”), as the Company’s independent registered public accounting firm, to be effective upon filing with the SEC of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and engaged H&W as the independent registered public accounting firm to audit the Company’s financial statements for the fiscal year ending December 31, 2021, which will reflect Decoy as the accounting acquirer.
The reports of PWC on the financial statements of Intec Israel (the predecessor of the Company) for each of the two fiscal years ended December 31, 2020 and December 31, 2019 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles other than in the years ended December 31, 2020 and 2019, which contains an explanatory paragraph relating to Intec Israel’s ability to continue as a going concern as described in Note 1(b) to the financial statements.
In connection with the audits of Intec Israel’s financial statements for each of the two fiscal years ended December 31, 2020 and December 31, 2019 and the subsequent interim period between December 31, 2020 and the date of this report, there were no “disagreements” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) between the Company or Intec Israel and PWC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of PWC, would have caused PWC thereto in their reports for such years.
In connection with the audits of Intec Israel’s financial statements for each of the two fiscal years ended December 31, 2020 and December 31, 2019 and the subsequent interim period between December 31, 2020 and the date of this report, there were no “reportable events” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K and related instructions).
The Company has provided PWC with a copy of the disclosures made by the Company in response to this Item 4.01 and has requested that PWC furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the Company in response to this Item 4.01 and, if not, stating the respects in which it does not agree. A letter from PWC, dated August 16, 2021, is attached hereto as Exhibit 16.1.
During the Company’s two fiscal years ended December 31, 2020 and 2019, and the subsequent interim period through the date of this report, neither the Company nor anyone acting on its behalf has consulted with H&W regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that H&W concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
| Item 9.01 | Financial Statement and Exhibits. |
(b) Pro forma Financial Information.
The pro forma financial information required by Item 9.01(b) of Form 8-K is included as Exhibit 99.1 to this Form 8-K/A and incorporated herein by reference. The pro forma financial information consists of the unaudited pro forma condensed combined balance sheet data as of March 31, 2021, giving effect to the Merger as if it took place on March 31, 2021, and the statement of operations for three-month period ended March 31, 2021, giving effect to the Merger as if it took place on January 1, 2021.
(d) Exhibits.
| Exhibit No. | Description | |
| 16.1 | Letter from Kesselman & Kesselman, dated August 16, 2021 | |
| 99.1 | Unaudited pro forma condensed combined financial information |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 16, 2021
| INDAPTUS THERAPEUTICS, INC. | ||
| By: | /s/ Nir Sassi | |
| Nir Sassi | ||
| Chief Financial Officer | ||
Exhibit 16.1
August 16, 2021
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Commissioners:
We have read the statements made by Indaptus Therapeutics, Inc. (copy attached), which we understand will be filed with the Securities and Exchange Commission, pursuant to Item 4.01 of Form 8-K/A of Indaptus Therapeutics, Inc. dated August 12, 2021. We agree with the statements concerning our Firm contained therein.
Very truly yours,
| Tel-Aviv, Israel | /s/ Kesselman & Kesselman |
| August 16, 2021 | Certified Public Accountants (Isr.) |
| A member firm of PricewaterhouseCoopers International Limited |
Kesselman & Kesselman, 146 Derech Menachem Begin, Tel-Aviv 6492103, Israel,
P.O Box 7187 Tel-Aviv 6107120, Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On August 3, 2021, (the “Closing Date”) Indaptus Therapeutics, Inc. (formerly Intec Parent, Inc.), a Delaware corporation (the “Company”), completed its merger with Decoy Biosystems, Inc., a Delaware corporation (“Decoy”) following the satisfaction or waiver of the conditions set forth in the Agreement and Plan of Merger (the “Merger Agreement”), dated as of March 15, 2021 among the Company, Intec Pharma Ltd., an Israeli company and wholly owned subsidiary of the Company (“Intec Israel”), and Dillon Merger Subsidiary Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”) pursuant to which Merger Sub merged with and into Decoy, with Decoy surviving as a wholly owned subsidiary of the Company (the “Merger”).
Previously, on July 27, 2021, the Company, Intec Israel and Domestication Merger Sub Ltd., an Israeli company and a wholly-owned subsidiary of Indaptus (the “Domestication Merger Sub”), completed a domestication merger pursuant to the terms and conditions of the Agreement and Plan of Merger and Reorganization, dated April 27, 2021 (the “Domestication Merger Agreement”), whereby Domestication Merger Sub merged with and into Intec Israel, with Intec Israel being the surviving entity and a wholly-owned subsidiary of Indaptus (the “Domestication Merger”). At the time of the Domestication Merger, Intec Israel continued to possess all of its assets, rights, powers and property as constituted immediately prior to the Domestication Merger and continued to be subject to all of its debts, liabilities and obligations as constituted immediately prior to the Domestication Merger.
In connection with the Merger and for the purpose of meeting Nasdaq’s initial listing requirements, Intec Israel implemented a 1-for-4 reverse share split of its outstanding ordinary shares that was effective after the close of trading on July 26, 2021, and prior to the effectiveness of the Domestication Merger. All share and per share amounts in these condensed combined financial statements have been retroactively adjusted to reflect the reverse share split.
Further, in connection with the Merger, on July 23, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a certain institutional investor for the sale and issue by the Company in a private placement (the “Private Placement”) of approximately $29.9 million (or approximately $30 million assuming the full exercise of the pre-funded warrant) of a pre-funded warrant and accompanying warrant. The closing of the Private Placement was completed on August 3, 2021.
Following the completion of the Merger, on August 4, 2021, the Company’s board resolved to effect a business termination of Intec Israel through the winding down of Intec Israel’s operations, satisfying liabilities, and disposing its assets (“Business Termination”). The Company expects that the winding down of the Accordion Pill business will be substantially complete by the end of the third quarter of 2021.
The Merger will be accounted for as a “reverse merger” since immediately upon the completion of the Merger, the Decoy shareholders prior to the Merger held a majority of the voting interest of the Company. However, the board of directors of the Company include a majority of Intec Israel’s board members prior to the Merger and the Company’s senior management are primarily comprised of Intec Israel’s senior management prior to the Merger. For accounting purposes, Decoy will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a reverse merger. Accordingly, Decoy’s assets, liabilities and results of operations will become the historical financial statements of the combined company, and the net cash remaining following Intec Israel’s Business Termination, will be included in the Company’s assets effective as of the Closing Date. No step-up in basis or goodwill will be recorded in this transaction.
The unaudited pro forma condensed combined balance sheet data as of March 31, 2021, gives effect to the Merger as if it took place on March 31, 2021. The unaudited pro forma condensed combined statement of operations for three-month period ended March 31, 2021, gives effect to the Merger as if it took place on January 1, 2021. The historical financial statements of Intec Israel and Decoy have been adjusted to give pro forma effect to events that reflect the U.S. GAAP accounting for the transaction to illustrate the effects of the reverse merger to the Company’s historical financial statements. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Merger.
The unaudited pro forma condensed combined financial information is based on the assumptions and adjustments that are described in the accompanying notes. The unaudited pro forma condensed combined financial information reflects Intec Israel’s Business Termination, initiated after the Closing Date. In addition, the unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the Merger. The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had Intec Israel and Decoy been a combined company during the specified periods. The actual results reported in periods following the Merger may differ significantly from those reflected in the unaudited pro forma condensed combined financial information presented herein for a number of reasons, including, but not limited to, differences in the assumptions used to prepare this pro forma financial information.
The unaudited pro forma condensed combined financial information, including the notes thereto, should be read in conjunction with (i) the unaudited financial statements for the three-month period ended March 31, 2021 and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Intec Israel’s quarterly report on Form 10-Q for the three-month period ended March 31, 2021, filed with the United States Securities and Exchange Commission on May 17, 2021, and (ii) the historical unaudited financial statements of Decoy for the three-month period ended March 31, 2021 included in the Company’s Form 8-K, filed with the United States Securities and Exchange Commission on August 6, 2021.
Accounting rules require evaluation of certain assumptions, estimates, or determination of financial statement classifications. The accounting policies of Intec Israel may materially vary from those of Decoy. During preparation of the unaudited pro forma condensed combined financial information, management has performed a preliminary analysis and is not aware of any material differences, and accordingly, this unaudited pro forma condensed combined financial information assumes no material differences in accounting policies. Following the Merger, the Company’s management will conduct a final review of the Company’s accounting policies in order to determine if differences in accounting policies require adjustment or reclassification of Intec Israel’s results of operations or reclassification of assets or liabilities to conform to Decoy’s accounting policies and classifications. As a result of this review, the Company’s management may identify differences that, when conformed, could have a material impact on these unaudited pro forma condensed combined financial statements.
Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2021
(in thousands)
| Decoy | Intec Israel | Business Termination of Intec Israel (*) | Pro Forma Adjustments | Notes | Pro Forma Combined (**) | |||||||||||||||||
| Assets | ||||||||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 4,487 | $ | 10,135 | $ | (10,135 | ) | $ | 40,478 | C | $ | 44,965 | ||||||||||
| Restricted cash | — | 1,000 | (1,000 | ) | — | — | ||||||||||||||||
| Deferred transaction costs | 605 | — | — | (605 | ) | D | — | |||||||||||||||
| Prepaid expenses and other | 204 | 1,024 | (1,024 | ) | 204 | |||||||||||||||||
| TOTAL CURRENT ASSETS | 5,296 | 12,159 | (12,159 | ) | 39,873 | 45,169 | ||||||||||||||||
| NON-CURRENT ASSETS: | ||||||||||||||||||||||
| Property and equipment, net | 1 | 869 | (869 | ) | — | 1 | ||||||||||||||||
| Operating lease right-of-use assets | — | 685 | (685 | ) | — | — | ||||||||||||||||
| Other assets | 44 | 3,717 | (3,717 | ) | — | 44 | ||||||||||||||||
| TOTAL NON-CURRENT ASSETS | 45 | 5,271 | (5,271 | ) | — | 45 | ||||||||||||||||
| TOTAL ASSETS | $ | 5,341 | $ | 17,430 | $ | (17,430 | ) | $ | 39,873 | $ | 45,214 | |||||||||||
| Liabilities and shareholders’ equity | ||||||||||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||||||||||
| Accounts payable and accruals: | ||||||||||||||||||||||
| Trade | $ | 429 | $ | 183 | (183 | ) | $ | — | $ | 429 | ||||||||||||
| Other | 650 | 5,020 | (5,020 | ) | 2,825 | B | 3,475 | |||||||||||||||
| SAFE agreements | 5,092 | — | — | (5,092 | ) | E | — | |||||||||||||||
| TOTAL CURRENT LIABILITIES | 6,171 | 5,203 | (5,203 | ) | (2,267 | ) | 3,904 | |||||||||||||||
| LONG-TERM LIABILITIES: | ||||||||||||||||||||||
| Operating lease liabilities | — | 178 | (178 | ) | — | — | ||||||||||||||||
| Other liabilities | — | 705 | (705 | ) | — | — | ||||||||||||||||
| TOTAL LONG-TERM LIABILITIES | — | 883 | (883 | ) | — | — | ||||||||||||||||
| TOTAL LIABILITIES | 6,171 | 6,086 | (6,086 | ) | (2,267 | ) | 3,904 | |||||||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||||||||||||||
| Common stock | 1 | 727 | (727 | ) | 80 | F | 81 | |||||||||||||||
| Preferred Stock; Series seed; $0.001 par value; 366,317 shares authorized, 314,928 shares issued and outstanding as of March 31, 2021 | (*** | ) | — | — | (*** | ) | A | — | ||||||||||||||
| Additional paid-in capital | 7,741 | 218,397 | (218,397 | ) | 42,060 | F | 49,801 | |||||||||||||||
| Accumulated deficit | (8,572 | ) | (207,780 | ) | 207,780 | — | F | (8,572 | ) | |||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY | (830 | ) | 11,344 | (11,344 | ) | 42,140 | 41,310 | |||||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 5,341 | $ | 17,430 | $ | (17,430 | ) | $ | 39,873 | $ | 45,214 | |||||||||||
| (*) | Represents the cancellation of Intec Israel assets and liabilities resulting from the Business Termination initiated after the Closing Date. The estimated net cash from the Business Termination in the amount of $11.9 million was recorded under the Pro Forma Adjustments column. The net cash includes proceeds of $9.9 million following the issuance of 717,076 ordinary shares by Intec Israel to Aspire Capital during the second quarter 2021. |
| (**) | Represents the combined company balance sheet immediately upon the completion of the Merger. |
| (***) | Represents an amount less than $1,000. |
The accompanying notes are an integral part of this unaudited pro forma condensed combined financial information.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the three-month period ended March 31, 2021
(in thousands, except per share amounts)
| Decoy | Intec Israel | Business Termination of Intec Israel (*) | Pro Forma Adjustments | Notes | Pro Forma Combined | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Research and development | $ | (490 | ) | $ | (2,157 | ) | $ | 2,157 | $ | — | $ | (490 | ) | |||||||||
| General and administrative | (124 | ) | (2,021 | ) | 2,021 | (650 | ) | G | (774 | ) | ||||||||||||
| Total operating expenses | (614 | ) | (4,178 | ) | 4,178 | (650 | ) | (1,264 | ) | |||||||||||||
| Other income, net | 2 | — | — | — | 2 | |||||||||||||||||
| Finance expense | — | (31 | ) | 31 | — | — | ||||||||||||||||
| Loss before income taxes | (612 | ) | (4,209 | ) | 4,209 | (650 | ) | (1,262 | ) | |||||||||||||
| Income tax | — | (20 | ) | 20 | — | — | ||||||||||||||||
| Net loss | $ | (612 | ) | $ | (4,229 | ) | $ | 4,229 | $ | (650 | ) | $ | (1,262 | ) | ||||||||
| Basic and diluted loss per common share | $ | (0.84 | ) | $ | H | $ | (0.17 | ) | ||||||||||||||
| Weighted average common shares outstanding, basic and diluted | 732,635 | 7,395,210 | ||||||||||||||||||||
| (*) | To cancel Intec Israel’s operations resulting from the Business Termination. |
The accompanying notes are an integral part of this unaudited pro forma condensed combined financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Description of Transaction
On August 3, 2021, pursuant to the Merger Agreement the Company completed the Merger with Decoy. Previously, on July 23, 2021, the Company entered into a Purchase Agreement with a certain institutional investor pursuant to which the Company agreed to sell and issue, in the Private Placement, a pre-funded warrant to purchase up to 2,727,273 shares of the Company’s common stock (the “Pre-funded Warrant”) and a warrant to purchase up to 2,727,273 of the Company’s common stock (the “Warrant”) at a purchase price of $10.99 per Pre-funded Warrant and associated Warrant, for total net proceeds of approximately $27.2 million (or approximately $27.3 million assuming the full exercise of the Pre-funded Warrant), after deducting the placement agent’s fees and other estimated offering expenses payable by the Company in the amount of approximately $2.7 million. In addition, the Company agreed to issue to the placement agent a warrant to purchase 136,364 shares of the Company’s common stock. The closing of the Private Placement was completed on August 3, 2021.
On July 27, 2021, the Company, Intec Israel, and Domestication Merger Sub completed the Domestication Merger pursuant to the terms 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 Intec Parent. In connection with the Domestication Merger, all Intec Israel ordinary shares, outstanding after the reverse share split (as described below) and immediately prior to the Domestication Merger were converted, on a one-for-one basis, into shares of the Company common stock, par value $0.01 per share (the “Company Common Stock”), and all options and warrants to purchase Intec Israel ordinary shares outstanding after the reverse share split and immediately prior to the Domestication Merger were exchanged for equivalent securities of the Company.
In connection with the Merger and for the purpose of meeting Nasdaq’s initial listing requirements, Intec Israel implemented a 1-for-4 reverse share split of its outstanding ordinary shares that was effective after the close of trading on July 26, 2021, and prior to the effectiveness of the Domestication Merger (the “Reverse Split”). As a result of the Reverse Split, every four outstanding ordinary shares was combined into one ordinary share.
Immediately prior to the Merger, each share of Decoy preferred stock issued and outstanding immediately prior to the Merger automatically converted into Decoy common stock (the “Preferred Stock Conversion”) and each Decoy SAFE (Simple Agreements for Future Equity) outstanding immediately prior to the Merger was treated in accordance with the terms of the relevant agreements governing the Decoy SAFEs and automatically converted into Decoy common stock (the “SAFE Conversion”).
At the Closing Date of the Merger:
| ● | each outstanding share of Decoy common stock (after giving effect to the Preferred Stock Conversion and SAFE Conversion) automatically converted into shares of the Company’s Common Stock, based on the exchange ratio as described in the Merger Agreement, and | |
| ● | each outstanding and unexercised Decoy stock option, whether vested or unvested, automatically converted into a stock option exercisable for that number of shares of the Company’s Common Stock, with the number of the Company’s Common Stock subject to such option and the exercise price being appropriately adjusted to reflect the exchange ratio. |
Under the exchange ratio formula described in the Merger Agreement, immediately following the Merger (but without giving effect to the exercise of the Pre-Funded Warrant sold in the Private Placement), pre-merger Decoy securityholders owned approximately 63.65% of the Company’s share capital (on a fully diluted basis) and pre-merger Intec Israel securityholders owned approximately 36.35% of the Company’s share capital (on a fully diluted basis).
The exchange ratio was calculated using a formula intended to allocate a percentage of the combined company to existing Decoy securityholders. The exchange ratio is based on a $30.0 million valuation plus $3.8 million net cash for Decoy net of the deposit amount as defined in the Merger Agreement and a $10.0 million valuation plus $9.3 million net cash including the deposit amount as defined in the Merger Agreement for Intec Israel at the effective time of the Merger. Based on the formulation described above, the exchange ratio was equal to 2.654353395 shares of the Company’s Common Stock for each share of Decoy common stock (after giving effect to the Reverse Split).
2. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial information has been prepared in accordance with SEC Regulation S-X Article 11. The unaudited pro forma condensed combined balance sheet data as of March 31, 2021, gives effect to the Merger as if it took place on March 31, 2021. The unaudited pro forma condensed combined statement of operations for the three-month period ended March 31, 2021, gives effect to the Merger as if it had been consummated on January 1, 2021, and gives effect to the Reverse Split.
Based on the Company’s preliminary review of Intec Israel’s and Decoy’s summary of significant accounting policies, the nature and amount of any adjustments to the historical financial statements of Intec Israel to conform its accounting policies to those of Decoy are not expected to be material. Following completion of the Merger, further review of Intec Israel’s accounting policies may result in additional revisions to Intec Israel’s accounting policies and classifications to conform to those of Decoy.
The unaudited pro forma condensed combined balance sheet data as of March 31, 2021, reflects the assumption of the estimated net cash remaining following Intec Israel’s Business Termination.
The unaudited pro forma condensed combined financial information was prepared under U.S. GAAP. For accounting purposes, Decoy will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a reverse merger of Decoy. The net acquired assets, which is the estimated net cash of Intec Israel following the Business Termination at the effective time of the Merger is approximately $9.3 million. Further, given the nature of the transaction, no step-up in basis or goodwill will be recorded as a result of the Merger.
To the extent there are significant changes to the business of Intec Israel or Decoy following completion of the Merger, the assumptions and estimates set forth in the unaudited pro forma condensed combined financial statements could change significantly. Accordingly, the pro forma adjustments are subject to further adjustments as additional information becomes available and as additional analyses are conducted following the completion of the Merger. There can be no assurance that these additional analyses will not result in material changes to the estimates of value.
The historical financial information has been adjusted to give effect to matters that reflect the U.S. GAAP accounting for the transaction to illustrate the effects of the reverse merger to the Company’s historical financial statements.
3. Company Common Stock and Options to Purchase Company Common Stock Issued to Decoy Securityholders upon Closing of the Merger
Pursuant to the Merger Agreement, at the Closing Date of the Merger, the Company issued to Decoy securityholders a number of shares of Indaptus and options to purchase Indaptus Common Stock representing approximately 63.65% of the outstanding shares of Company Common Stock at the time of the Merger (on a fully diluted basis).
Prior to the Merger, all outstanding Decoy SAFEs (Simple Agreements for Future Equity) and preferred shares were converted into shares of Decoy common stock, which were exchanged for Company Common Stock as described above. The number of shares of Company Common Stock to be issued to Decoy securityholders, for purposes of these pro forma financial statements as of March 31, 2021, is calculated pursuant to the terms of the Merger Agreement, using the exchange ratio and assuming the conversion of the Decoy SAFEs and preferred shares into shares of Decoy common stock all had occurred on March 31, 2021, as follows (giving effect to the Reverse Split):
| Fully-diluted ordinary shares of Intec Israel(i) | 2,143,594 | |||
| Divided by the assumed Intec Israel ownership percentage of combined company | 36.35 | % | ||
| Estimated fully-diluted adjusted total shares of common stock of combined company | 5,896,893 | |||
| Less: fully-dilutes ordinary shares of Intec Israel | -2,143,594 | |||
| Total fully-diluted shares of combined company to be allocated to Decoy securityholders* | 3,753,299 | |||
| *Includes: | ||||
| Total outstanding shares of combined company to be allocated to Decoy securityholders in exchange of 1,336,386 outstanding shares of Decoy common stock as of March 31, 2021(ii) | 3,547,220 | |||
| Total stock options of combined company to be allocated to Decoy securityholders in exchange of 77,639 outstanding Decoy stock options as of March 31, 2021 | 206,079 |
(i) Includes all outstanding ordinary shares, warrants and options to employees that are outstanding as of the date of this report.
(ii) Includes all outstanding shares of Decoy common stock, assuming the conversion of the preferred shares and Decoy SAFEs agreements (including the additional Decoy SAFEs that were signed in April 2021) into shares of Decoy common stock.
4. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2021
The unaudited pro forma condensed combined balance sheet includes pro forma adjustments that reflect the U.S. GAAP accounting for the Merger to illustrate the effects of the reverse merger to Decoy’s historical financial statements. Based on the Company’s management’s review of Intec Israel’s summary of significant accounting policies, the nature and amount of any adjustments to the historical financial statements of Intec Israel to conform to the accounting policies of Decoy are not expected to be significant. The pro forma adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
A. To convert Decoy’s 314,928 Series seed preferred shares into shares of Decoy common stock immediately prior to the Merger.
B. To record: (i) Intec Israel’s estimated transaction costs of approximately $3.2 million that were not accrued as of March 31, 2021 and include advisory fees and legal expenses; (ii) Decoy’s estimated transaction costs of approximately $275 thousand that were not accrued as of March 31, 2021, and include legal and accounting expenses; and (iii) to cancel a liability related to Decoy’s deposit as of March 31, 2021, in the amount of $650 thousand (the “Deposit Amount”). Intec Israel transferred an amount of $650 thousand to Decoy to cover the transaction expenses which was recorded as a liability in Decoy’s balance sheet. In the combined balance sheet, the liability was cancelled, and this amount was recorded in additional paid-in capital.
C. To reflect: (i) $30.0 million in proceeds received by Indaptus, net of $2.7 million in estimated transaction costs, in connection with the consummation of the private placement, assuming a full exercise of the pre-funded warrants; (ii) $1.3 million in proceeds from additional Decoy SAFEs that were entered in April 2021 and (iii) $11.9 million in net cash remaining following Intec Israel’s Business Termination effective as of the Closing Date.
D. To cancel Decoy’s deferred transaction costs as of March 31, 2021, in the amount of $605 thousand. In the combined balance sheet, the deferred transaction costs were cancelled, and this amount was recorded in additional paid-in capital.
E. To reflect the conversion of approximately $5.1 million of Decoy SAFEs outstanding as of March 31, 2021, into shares of Decoy common stock immediately prior to the Merger.
F. To reflect:
(i) The conversion of Decoy’s outstanding Series seed preferred shares into 314,928 shares of Decoy common stock.
(ii) The conversion of Decoy SAFEs into 288,823 shares of Decoy common stock.
(iii) The recognition of deferred transaction costs and payment of transaction costs associated with the Merger.
(iv) The exchange of 1,141,667 Intec Israel ordinary shares that are outstanding as of March 31, 2021, into 1,141,667 shares of Company Common Stock, and 717,076 Intec Israel ordinary shares that were issued to Aspire Capital during the second quarter 2021, into 717,076 shares of Indaptus common stock.
(v) The exchange of outstanding shares of Decoy common stock into 3,547,220 shares of Company Common Stock based on the exchange ratio.
(vi) The allocation of equity for the closing of the Private Placement, assuming a full exercise of the pre-funded warrants.
| Additional | ||||||||||||||||||||||||||||||||
| Intec Israel | Decoy | Indaptus | paid in | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | capital | Total | |||||||||||||||||||||||||
| (i) Conversion of outstanding Decoy’s Series seed preferred shares into common stock | — | — | 314,928 | (*) | — | — | — | — | ||||||||||||||||||||||||
| (ii) Conversion of SAFE into common stock | — | — | 288,823 | (*) | — | — | 6,417 | 6,417 | ||||||||||||||||||||||||
| (iii) Recognition of deferred transaction costs and payment of transaction costs | — | — | — | — | — | — | (4,080 | ) | (4,080 | ) | ||||||||||||||||||||||
| (iv) Exchange of outstanding Intec Israel ordinary shares into Company Common Stock | (1,858,743 | ) | — | — | 1,858,743 | 19 | 12,484 | 12,503 | ||||||||||||||||||||||||
| (v) Exchange of outstanding Decoy common stock into Company Common Stock based on the assumed Exchange Ratio | — | — | (1,336,386 | ) | (1 | ) | 3,547,220 | 35 | (34 | ) | — | |||||||||||||||||||||
| (vi) Indaptus Private Placement, assuming a full exercise of the pre-funded warrants (net of fees) | — | — | — | — | 2,727,273 | 27 | 27,273 | 27,300 | ||||||||||||||||||||||||
| Pro forma adjustments | (1,858,743 | ) | (732,635 | ) | $ | (1 | ) | 8,133,236 | $ | 81 | $ | 42,060 | $ | 42,140 | ||||||||||||||||||
5. Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2021
The unaudited pro forma condensed combined statement of operations include pro forma adjustments that reflect the U.S. GAAP accounting for the Merger to illustrate the effects of the reverse merger to Intec Israel’s and Decoy’s historical financial statements. Based on the Company’s management’s review of Intec Israel’s summary of significant accounting policies, the nature and amount of any adjustments to the historical financial statements of Intec Israel to conform to the accounting policies of Decoy are not expected to be significant. The pro forma adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
G. Costs associated with operating a public company.
H. The pro forma combined basic and diluted loss per share have been adjusted to reflect the pro forma net loss for the three-month period ended March 31, 2021. In addition, the number of shares used in calculating the pro forma combined basic and diluted net loss per share has been adjusted to include the number of shares of Company Common Stock issued to Decoy securityholders as of the Closing Date, based on the exchange ratio and as a result of the Private Placement. The following table sets forth the calculation of the pro forma weighted average number of shares outstanding — basic and diluted and giving effect to the Reverse Split:
| Three months ended March 31, 2021 | ||||
| Historical Intec Israel weighted average ordinary shares outstanding | 1,120,717 | |||
| Company common stock to be issued to Decoy shareholders and to a certain institutional investor under the Private Placement | 6,274,493 | |||
| Total weighted-average shares outstanding | 7,395,210 | |||