(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, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q 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 jur ...

Part I [Business Overview](index=7&type=section&id=Item%201.%20Business) Indaptus Therapeutics is a clinical-stage biotechnology company developing a novel, patented systemic anti-cancer and antiviral immunotherapy based on attenuated and inactivated Gram-negative bacteria, with its lead candidate Decoy20 initiating Phase I clinical trials in December 2022 - The company focuses on developing a novel, patented systemic anti-cancer and antiviral immunotherapy based on attenuated and inactivated Gram-negative bacteria[22](index=22&type=chunk)[27](index=27&type=chunk) - The technology has demonstrated broad anti-tumor and antiviral activity in preclinical models, including synergistic effects with five different existing drugs such as checkpoint therapies, targeted antibody therapies, and low-dose chemotherapy[22](index=22&type=chunk)[33](index=33&type=chunk) - In May 2022, the U.S. FDA approved the IND application for its lead clinical candidate Decoy20's Phase I clinical trial, which commenced in December 2022 for patients with advanced solid tumors[23](index=23&type=chunk)[38](index=38&type=chunk) - The company holds an extensive patent portfolio with **34 granted patents** and **16 pending applications** as of March 1, 2023, with patent terms expected between 2033 and 2039[24](index=24&type=chunk)[85](index=85&type=chunk) Overview Background Our Approach Results Business Strategy Competitive Advantages Governmental Regulation U.S. Regulation of Drugs and Biologics Expedited Development and Review Programs Post-Approval Requirements Drug Product Marketing Exclusivity Biosimilars and Reference Product Exclusivity Other Healthcare Laws Coverage and Reimbursement Healthcare Reform Data Privacy and Security Laws Competition Intellectual Property Patents Trade Secrets and Confidential Information Environmental Matters Human Capital Management Historical Background and Corporate Structure Available Information [Risk Factors](index=25&type=page&id=Item%201A.%20Risk%20Factors) The company faces significant risks including lack of profitability, substantial future funding needs, uncertain clinical trial outcomes, potential adverse side effects, reliance on third parties, market acceptance challenges, intellectual property protection, and regulatory compliance - The company is a clinical-stage entity, not yet profitable, and anticipates continued losses, with accumulated deficit of approximately **$30 million** as of December 31, 2022[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - The company lacks cash flow and requires additional capital, otherwise it may be forced to delay, limit, or cancel some or all of its research, development, and commercialization efforts[107](index=107&type=chunk)[108](index=108&type=chunk) - The clinical and preclinical development process is lengthy, expensive, and uncertain, where any difficulties or delays could increase costs and impact revenue generation capabilities[115](index=115&type=chunk)[117](index=117&type=chunk) - Product candidates may cause adverse side effects, which could delay or prevent regulatory approval or commercialization, or otherwise have a significant adverse impact on the business[128](index=128&type=chunk)[130](index=130&type=chunk) - The company relies on third parties for preclinical studies, clinical trials, and product manufacturing, and failure of these third parties to perform their duties could hinder regulatory approval or commercialization[157](index=157&type=chunk)[162](index=162&type=chunk) - The commercial success of Decoy20 or any future product candidates depends on their market acceptance among physicians, patients, healthcare payers, and the medical community[154](index=154&type=chunk) - The company faces intense competition from rivals with greater financial resources and expertise, which could harm its product commercialization opportunities[190](index=190&type=chunk)[191](index=191&type=chunk) - The company relies on intellectual property protection, such as patents and trade secrets, for its proprietary technology, but may not be able to adequately protect it or may face risks of infringing on others' intellectual property[199](index=199&type=chunk)[200](index=200&type=chunk)[208](index=208&type=chunk) - The company is subject to U.S. federal, state, and foreign healthcare laws and regulations, and non-compliance could lead to increased compliance costs and harm operating results and financial condition[225](index=225&type=chunk)[226](index=226&type=chunk) - The COVID-19 pandemic and unfavorable global economic conditions may significantly adversely affect the company's business and operations, including supply chain disruptions, clinical trial delays, and limited financing capabilities[232](index=232&type=chunk)[257](index=257&type=chunk) - The market price of the company's common stock is highly volatile, and investors may suffer a complete loss of their investment[240](index=240&type=chunk)[241](index=241&type=chunk) Risks Related to Our Financial Position and Capital Requirements Risks Related to the Discovery and Development of Our Product Candidates Risks Related to Our Dependence on Third Parties Risks Related to Commercialization Risks Related to Competition, Retaining Key Employees and Managing Growth Risks Related to Our Intellectual Property Risks Related to Healthcare Laws and Other Legal Compliance Matters Other Risks Related to Our Business Risks Related to Our Common Stock General Risk Factors [Unresolved Staff Comments](index=61&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) The company has not received any unresolved comments from the U.S. Securities and Exchange Commission staff - The company has not received any unresolved comments from the SEC staff[260](index=260&type=chunk) [Properties](index=61&type=section&id=Item%202.%20Properties.) The company maintains its principal executive offices in New York City and leases approximately 2,000 square feet of office space in San Diego, deemed sufficient for current needs - The company's principal executive offices are located at 3 Columbus Circle, New York, New York, and it leases approximately 2,000 square feet of office space in San Diego, California, with a lease term until October 31, 2023[261](index=261&type=chunk) [Legal Proceedings](index=61&type=section&id=Item%203.%20Legal%20Proceedings.) The company resolved an arbitration claim from LTS Lohmann Therapie Systeme AG for 2 million Euros related to the former Accordion Pill business, settling for 800,000 Euros (approximately $860,000) in February 2023, with no other material legal proceedings pending - In July 2022, LTS Lohmann Therapie Systeme AG initiated arbitration against the company's subsidiary Intec Israel, demanding payment of **2 million Euros**[263](index=263&type=chunk) - Intec Israel has paid approximately **1 million Euros** and settled the dispute with LTS on February 7, 2023, for **800,000 Euros (approximately $860,000)**[263](index=263&type=chunk)[382](index=382&type=chunk) - As of March 17, 2023, the company has no other material pending legal proceedings or claims[264](index=264&type=chunk) [Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable - This item is not applicable[265](index=265&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's common stock began trading on Nasdaq Capital Market under 'INDP' on August 4, 2021, with 7 registered holders as of March 17, 2023, and no cash dividends have been declared or paid - The company's common stock was listed on the Nasdaq Capital Market on August 4, 2021, under the ticker symbol **'INDP'**[268](index=268&type=chunk) - As of March 17, 2023, the company had **7 registered holders** of common stock[269](index=269&type=chunk) - The company has never declared or paid cash dividends and plans to reinvest future earnings into business development[270](index=270&type=chunk) - The company did not repurchase any equity securities in 2022[273](index=273&type=chunk) Market Information Holders Dividend Policy Securities Authorized for Issuance under Equity Compensation Plans Recent Sales of Unregistered Securities Purchases of Equity Securities by the Issuer and Affiliated Purchasers [Reserved](index=62&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) As a clinical-stage biotech, the company saw increased operating and net losses in 2022 driven by R&D and G&A expenses, holding $26.4 million in cash and marketable securities by year-end, projected to fund operations until Q2 2024, while facing ongoing financing needs and macroeconomic uncertainties - The company is a clinical-stage biotechnology company focused on developing novel anti-cancer and antiviral immunotherapies[276](index=276&type=chunk) - The COVID-19 pandemic and macroeconomic conditions, such as supply chain constraints, inflation, and rising interest rates, may adversely affect the company's operations, financing capabilities, and clinical trial progress[277](index=277&type=chunk) - On August 3, 2021, the company completed its merger with Decoy Biosystems, Inc., and was renamed Indaptus Therapeutics, Inc., with its common stock listed on the Nasdaq Capital Market[278](index=278&type=chunk)[280](index=280&type=chunk) - In December 2022, the company entered into an equity purchase agreement with Lincoln Park Capital Fund, LLC, granting it the right to sell up to **$20 million** of its common stock over 36 months[281](index=281&type=chunk) Comparison of Operating Results for 2022 and 2021 | Metric | Year Ended December 31, 2022 ($) | Year Ended December 31, 2021 ($) | Change ($) | Change (%) | | :----------------------------------- | :------------------- | :------------------- | :---------- | :------- | | Research and development expenses | $6,324,657 | $2,523,153 | $3,801,504 | 150% | | General and administrative expenses | $8,586,249 | $5,205,955 | $3,380,294 | 65% | | Total operating expenses | $14,910,906 | $7,729,108 | $7,181,798 | 93% | | Operating loss | $(14,910,906) | $(7,729,108) | $(7,181,798) | 93% | | Other income, net | $588,108 | $17,722 | $570,386 | 3,218% | | Net loss | $(14,322,798) | $(7,711,386) | $(6,611,412) | 86% | | Net loss per share, basic and diluted ($) | $(1.73) | $(1.89) | $0.16 | (8.5)% | | Weighted average shares outstanding | 8,262,119 | 4,090,599 | | | - Research and development expenses increased by **150%** to approximately **$6.3 million** in 2022, primarily due to increased costs for Phase I clinical trials and manufacturing processes, as well as higher salaries and related expenses[292](index=292&type=chunk) - General and administrative expenses increased by **65%** to approximately **$8.6 million** in 2022, mainly due to higher salaries and related expenses from increased executive team personnel, and increased insurance and professional service fees incurred as a public company[294](index=294&type=chunk) - As of December 31, 2022, the company held approximately **$26.4 million** in cash, cash equivalents, and marketable securities, projected to support operations until the second quarter of 2024[300](index=300&type=chunk)[305](index=305&type=chunk) Comparison of Cash Flows for 2022 and 2021 | Cash Flow Category | 2022 ($) | 2021 ($) | | :------------- | :------------------- | :------------------- | | Net cash used in operating activities | $(13,078,347) | $(11,290,535) | | Net cash (used in) provided by investing activities | $(16,427,018) | $447,746 | | Net cash provided by financing activities | $0 | $48,337,455 | | Net (decrease) increase in cash and cash equivalents | $(29,505,365) | $37,494,666 | | Cash and cash equivalents at end of period | $9,626,800 | $39,132,165 | Overview Impact of the COVID-19 Pandemic and Macroeconomic Conditions on our Operations Decoy Merger Recent Events Lincoln Park Committed Equity Facility Components of Operating Results Research and Development Expenses General and Administrative Expenses Other Income, Net Results of Operations Year Ended December 31, 2022 compared to Year Ended December 31, 2021 Liquidity and Resources Cash Flows Operating Activities Investing Activities Financing Activities Funding Requirements Contractual Obligations Critical Accounting Policies Accounting for Research and Development Costs Stock-Based Compensation Recently Issued Accounting Pronouncements [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, the company is exempt from providing the information required by this item under SEC rules - As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk[316](index=316&type=chunk) [Financial Statements and Supplementary Data](index=70&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section presents the company's audited consolidated financial statements for the years ended December 31, 2022 and 2021, including balance sheets, statements of operations, stockholders' equity, and cash flows, with an unqualified opinion from Haskell & White LLP - Independent registered public accounting firm Haskell & White LLP issued an unqualified opinion on the company's consolidated financial statements for the years ended December 31, 2022 and 2021[320](index=320&type=chunk) Consolidated Balance Sheet Summary (As of December 31) | Metric | 2022 ($) | 2021 ($) | | :----------------------- | :---------- | :---------- | | **Assets** | | | | Cash and cash equivalents | $9,626,800 | $39,132,165 | | Marketable securities | $16,806,009 | - | | Total assets | $28,063,806 | $40,576,583 | | **Liabilities and Stockholders' Equity** | | | | Total liabilities | $3,433,341 | $4,677,003 | | Total stockholders' equity | $24,630,465 | $35,899,580 | | Accumulated deficit | $(29,993,685) | $(15,670,887) | Consolidated Statements of Operations and Comprehensive Loss Summary (As of December 31) | Metric | 2022 ($) | 2021 ($) | | :----------------------- | :---------- | :---------- | | Research and development expenses | $6,324,657 | $2,523,153 | | General and administrative expenses | $8,586,249 | $5,205,955 | | Operating loss | $(14,910,906) | $(7,729,108) | | Net loss | $(14,322,798) | $(7,711,386) | | Net loss per share, basic and diluted ($) | $(1.73) | $(1.89) | | Comprehensive loss | $(14,226,364) | $(7,711,386) | Consolidated Cash Flow Statement Summary (As of December 31) | Cash Flow Category | 2022 ($) | 2021 ($) | | :------------- | :---------- | :---------- | | Net cash used in operating activities | $(13,078,347) | $(11,290,535) | | Net cash (used in) provided by investing activities | $(16,427,018) | $447,746 | | Net cash provided by financing activities | $0 | $48,337,455 | | Cash and cash equivalents at end of period | $9,626,800 | $39,132,165 | - The company's accumulated deficit was approximately **$30 million** as of December 31, 2022, with anticipated future losses requiring additional financing[338](index=338&type=chunk) - As of December 31, 2022, the company had U.S. federal and state net operating loss (NOL) carryforwards of **$19.9 million** and **$7.5 million**, respectively, and an Israeli NOL carryforward of **$198 million**[392](index=392&type=chunk) Report of Independent Registered Public Accounting Firm Consolidated Financial Statements Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements NOTE 1: GENERAL NOTE 2: SIGNIFICANT ACCOUNTING POLICIES NOTE 3: MARKETABLE SECURITIES NOTE 4: PREPAID EXPENSES AND OTHER CURRENT ASSETS NOTE 5: ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES NOTE 6: STOCK-BASED COMPENSATION NOTE 7: CAPITALIZATION NOTE 8: COMMITMENTS AND CONTINGENCIES NOTE 9: INCOME TAXES NOTE 10: SUBSEQUENT EVENTS [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=87&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) The company states there have been no changes in accountants or disagreements with accountants on accounting and financial disclosure - The company states there have been no changes in accountants or disagreements with accountants on accounting or financial disclosure[398](index=398&type=chunk) [Controls and Procedures](index=87&type=section&id=Item%209A.%20Controls%20and%20Procedures.) Management assessed disclosure controls and internal control over financial reporting as effective at a reasonable assurance level as of December 31, 2022, with no independent auditor attestation report included due to the company's smaller reporting company status - As of December 31, 2022, the company's management assessed and determined its disclosure controls and procedures were effective at a reasonable assurance level[400](index=400&type=chunk) - Management also concluded that the company's internal control over financial reporting was effective as of December 31, 2022[402](index=402&type=chunk) - This annual report does not include an attestation report from the independent registered public accounting firm regarding the effectiveness of internal control, as the company qualifies for the smaller reporting company exemption[403](index=403&type=chunk) - No significant changes in internal control occurred during the quarter ended December 31, 2022[404](index=404&type=chunk) [Other Information](index=87&type=section&id=Item%209B.%20Other%20Information.) No other information is disclosed under this item - No other information is disclosed under this item[405](index=405&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=87&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) This item is not applicable - This item is not applicable[406](index=406&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=88&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance.) This section provides information on the company's executive officers and directors as of March 17, 2023, including key leadership roles and the board composition, alongside the established Code of Business Conduct and Ethics applicable to all personnel Executive Officers and Directors (As of March 17, 2023) | Name | Age | Position | | :---------------------- | :--- | :-------------------------------- | | **Executive Officers** | | | | Jeffrey A. Meckler | 56 | Chief Executive Officer and Director | | Michael J. Newman, Ph.D. | 67 | Chief Scientific Officer and Director | | Nir Sassi | 47 | Chief Financial Officer | | Walt A. Linscott, Esq. | 62 | Chief Business Officer | | **Non-Executive Directors** | | | | Dr. Roger J. Pomerantz | 66 | Chairman of the Board | | Hila Karah | 54 | Director | | Anthony J. Maddaluna | 70 | Director | | William B. Hayes | 57 | Director | | Mark J. Gilbert, M.D. | 62 | Director | | Brian O'Callaghan | 63 | Director | | Robert E. Martell, M.D., Ph.D. | 60 | Director | - The company has adopted a Code of Business Conduct and Ethics applicable to all directors, executive officers, and employees, which is publicly available on its website[423](index=423&type=chunk) Executive Officers Non-Employee Directors Code of Business Conduct and Ethics [Executive Compensation](index=92&type=section&id=Item%2011.%20Executive%20Compensation.) The information required by this item will be included by reference in the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - Executive compensation information will be included in the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders[425](index=425&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=92&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) As of December 31, 2022, the company had 1,672,873 options, warrants, and rights exercisable under the 2021 Equity Incentive Plan with a weighted-average exercise price of $13.01, which includes an evergreen provision for annual share increases Securities Authorized for Issuance under Equity Compensation Plans (As of December 31, 2022) | Plan Category | Number of Securities Underlying Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Equity compensation plans approved by security holders | 1,672,873 | $13.01 | 314,494 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 1,672,873 | $13.01 | 314,494 | - The 2021 Plan includes an evergreen provision allowing for an annual increase in the number of shares available for issuance, equal to **3%** of the total common stock outstanding at the end of the prior fiscal year or a lesser amount determined by the Board[426](index=426&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=92&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence.) The information required by this item will be included by reference in the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - Information on certain relationships and related transactions, and director independence will be included in the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders[428](index=428&type=chunk) [Principal Accountant Fees and Services](index=92&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services.) The information required by this item will be included by reference in the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders - Information on principal accountant fees and services will be included in the company's definitive proxy statement for its 2023 Annual Meeting of Stockholders[429](index=429&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=93&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules.) This section lists the financial statements and exhibits included in this annual report, with financial statements detailed in Item 8 and schedules omitted due to inapplicability or prior presentation, and an exhibit list detailing corporate documents - Financial statements are presented in 'Item 8. Financial Statements and Supplementary Data'[430](index=430&type=chunk) - Financial statement schedules are omitted as they are not applicable or the required information is presented in the financial statements[431](index=431&type=chunk) - The exhibit list includes important documents such as the company's certificate of incorporation, merger agreement, equity incentive plans, employment agreements, and securities purchase agreements[432](index=432&type=chunk)[435](index=435&type=chunk) Financial Statements Financial Statement Schedules Exhibits [Form 10-K Summary](index=95&type=section&id=Item%2016.%20Form%2010-K%20Summary) This annual report does not include a Form 10-K summary - This annual report does not include a Form 10-K summary[436](index=436&type=chunk)

Financial Performance - The net loss for Q3 2022 was $3.47 million, compared to a net loss of $3.37 million in Q3 2021, representing an increase of $99,201[96]. - The net loss attributable to common stockholders per share for Q3 2022 was $0.42, an improvement from $0.81 in Q3 2021[96]. - Net loss for the nine months ended September 30, 2022, was approximately $10.7 million, compared to a net loss of approximately $4.5 million for the same period in 2021, representing an increase of approximately $6.2 million (approximately 138%) in net loss[101]. Expenses - Research and development expenses for Q3 2022 were approximately $1.6 million, an increase of about $900,000 from $700,000 in Q3 2021[97]. - General and administrative expenses for Q3 2022 amounted to approximately $2 million, a decrease of about $700,000 from $2.7 million in Q3 2021[98]. - Total operating expenses for Q3 2022 were $3.55 million, compared to $3.37 million in Q3 2021, reflecting an increase of $184,558[96]. - Research and development expenses for the nine months ended September 30, 2022, were approximately $4.4 million, an increase of approximately $2.8 million (approximately 175%) compared to $1.6 million for the same period in 2021[102]. - General and administrative expenses for the nine months ended September 30, 2022, amounted to approximately $6.4 million, an increase of approximately $3.5 million (approximately 120%) compared to $2.9 million for the same period in 2021[104]. Cash Flow - Net cash used in operating activities was approximately $10.9 million for the nine months ended September 30, 2022, compared to approximately $7.8 million for the same period in 2021, indicating an increase of approximately $3.1 million (approximately 40%) in cash used[108]. - Net cash used in investing activities was approximately $21.5 million for the nine months ended September 30, 2022, primarily due to the purchase of marketable securities investments[109]. - As of September 30, 2022, the company had cash and cash equivalents and marketable securities of approximately $28.5 million, down from approximately $39.1 million as of December 31, 2021[106]. Future Plans - The company plans to commence a Phase 1 clinical trial targeting solid tumors before the end of 2022[80]. - The company expects substantial increases in research and development expenses as it ramps up clinical development activities[91]. - The company plans to commence the Phase 1 clinical trial, expecting a substantial increase in research and development expenses for the remainder of the year[102]. - The company anticipates needing significant additional financing in the future to fund operations, including progressing into additional clinical trials and obtaining regulatory approvals[113]. Mergers and Acquisitions - The company completed a merger with Decoy on August 3, 2021, which resulted in the business of Decoy becoming the business of the combined company[81]. Market Conditions - The company is closely monitoring the impact of the COVID-19 pandemic, which may negatively affect capital raise efforts and technology development[112].

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Indaptus Therapeutics, Inc., including the balance sheets, statements of operations and other comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's financial position, performance, and accounting policies for the periods ended June 30, 2022 and 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) **Condensed Consolidated Balance Sheets (June 30, 2022 vs. December 31, 2021):** | Item | June 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $14,258,812 | $39,132,165 | | Marketable securities | $18,753,081 | - | | Total current assets | $33,272,777 | $40,387,218 | | Total assets | $34,059,411 | $40,576,583 | | Total current liabilities | $3,623,939 | $4,604,141 | | Total liabilities | $3,651,846 | $4,677,003 | | Total stockholders' equity | $30,407,565 | $35,899,580 | [Condensed Consolidated Statements of Operations and Other Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Loss) **Condensed Consolidated Statements of Operations (Three Months Ended June 30):** | Item | 2022 | 2021 | | :----------------------------------- | :----------- | :---------- | | Research and development | $1,506,165 | $391,118 | | General and administrative | $2,363,095 | $137,527 | | Total operating expenses | $3,869,260 | $528,645 | | Net loss | $(3,835,502) | $(515,479) | | Net loss per share (basic and diluted) | $(0.46) | $(0.27) | **Condensed Consolidated Statements of Operations (Six Months Ended June 30):** | Item | 2022 | 2021 | | :----------------------------------- | :----------- | :---------- | | Research and development | $2,803,263 | $880,839 | | General and administrative | $4,468,070 | $261,782 | | Total operating expenses | $7,271,333 | $1,142,621 | | Net loss | $(7,200,656) | $(1,127,900) | | Net loss per share (basic and diluted) | $(0.87) | $(0.58) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) **Changes in Stockholders' Equity (January 1, 2022 to June 30, 2022):** | Item | Amount | | :-------------------------- | :------------- | | Balance, January 1, 2022 | $35,899,580 | | Stock-based compensation | $1,735,578 | | Other comprehensive loss | $(26,937) | | Net loss | $(7,200,656) | | Balance, June 30, 2022 | $30,407,565 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) **Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30):** | Activity | 2022 | 2021 | | :-------------------------------- | :------------- | :----------- | | Net cash used in operating activities | $(6,265,890) | $(2,120,321) | | Net cash used in investing activities | $(18,607,463) | $(2,200) | | Net cash provided by financing activities | - | $5,450,000 | | Net (decrease) increase in cash | $(24,873,353) | $3,327,479 | | Cash and cash equivalents at end of period | $14,258,812 | $4,964,978 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1: GENERAL](index=8&type=section&id=NOTE%201%3A%20GENERAL) - Indaptus Therapeutics, Inc. is a biotechnology company focused on developing a novel, multi-targeted product for enhancing cancer immunotherapy for unresectable or metastatic solid tumors and lymphomas[21](index=21&type=chunk) - The company completed a merger with Decoy Biosystems, Inc. on August 3, 2021, and subsequently changed its name to Indaptus Therapeutics, Inc., with shares commencing trading on Nasdaq Capital Market under 'INDP' on August 4, 2021[21](index=21&type=chunk) - In connection with the merger, Indaptus raised approximately **$27.3 million** in net proceeds from a private placement of pre-funded warrants and warrants in July 2021[21](index=21&type=chunk) - The company has an accumulated deficit of **$22.9 million** as of June 30, 2022, and expects to incur additional losses, requiring future financing. Management believes it has adequate cash for at least one year but plans to raise additional capital[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 2: SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%202%3A%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The financial statements are prepared in accordance with US GAAP and S-X Article 10 for interim financial statements, reflecting all necessary adjustments for a fair statement[28](index=28&type=chunk) - The company uses estimates and assumptions, particularly for stock-based compensation fair value and period-end obligations to contract research organizations[32](index=32&type=chunk) **Anti-Dilutive Securities Excluded from EPS Calculation (June 30):** | Item | 2022 | 2021 | | :---------------------- | :--------- | :------- | | Outstanding stock options | 1,605,623 | 206,079 | | Warrants | 3,090,787 | - | [NOTE 3: MARKETABLE SECURITIES](index=12&type=section&id=NOTE%203%3A%20MARKETABLE%20SECURITIES) - The company's marketable securities consist of U.S. treasury bonds classified as available-for-sale, recorded at fair value with unrealized gains/losses in AOCI[36](index=36&type=chunk)[52](index=52&type=chunk) **Marketable Securities Data:** | Item | June 30, 2022 | December 31, 2021 | | :-------------------------- | :------------ | :---------------- | | Fair value | $18,753,081 | - | | Unrealized loss (3 months) | $(17,716) | - | | Unrealized loss (6 months) | $(26,937) | - | [NOTE 4: PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=13&type=section&id=NOTE%204%3A%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) **Prepaid Expenses and Other Current Assets:** | Item | June 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------ | :---------------- | | Prepaid insurance | $142,588 | $945,023 | | Prepaid research and development | $69,226 | $127,643 | | Other receivables | - | $21,056 | | Other prepaid expenses | $49,070 | $12,931 | | Total | $260,884 | $1,106,653 | [NOTE 5: ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES](index=13&type=section&id=NOTE%205%3A%20ACCOUNTS%20PAYABLE%20AND%20OTHER%20CURRENT%20LIABILITIES) **Accounts Payable and Other Current Liabilities:** | Item | June 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------ | :---------------- | | Accounts payable | $2,432,739 | $2,637,806 | | Accrued employee costs | $505,973 | $1,371,136 | | Accrued professional fees | $200,128 | $139,871 | | Accrued research and development | $169,308 | $135,751 | | Accrued board fees | $116,000 | $125,333 | | Delaware franchise taxes payable | $64,465 | - | | Other accrued expenses | $37,421 | $97,779 | | Total | $3,526,034 | $4,507,676 | [NOTE 6: STOCK-BASED COMPENSATION](index=13&type=section&id=NOTE%206%3A%20STOCK-BASED%20COMPENSATION) - The Indaptus 2021 Stock Incentive Plan, approved in June 2021, provides for up to **1,864,963 shares** of common stock for various equity awards[56](index=56&type=chunk) **Stock Option Activity (Six Months Ended June 30, 2022):** | Item | Number of options | Weighted average exercise price | | :-------------------------- | :---------------- | :---------------------------- | | Outstanding as of Jan 1, 2022 | 1,174,660 | $17.10 | | Granted | 464,200 | $4.67 | | Forfeited and cancelled | (33,237) | $11.46 | | Outstanding as of Jun 30, 2022 | 1,605,623 | $13.62 | | Exercisable as of Jun 30, 2022 | 137,797 | $77.01 | **Total Stock-Based Compensation Expense:** | Item | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $214,254 | $8,280 | $384,690 | $16,470 | | General and administrative | $690,141 | $12,393 | $1,350,888 | $24,648 | | Total | $904,395 | $20,673 | $1,735,578 | $41,118 | As of June 30, 2022, unrecognized compensation cost for unvested options was approximately $5.9 million, to be recognized over 2.0 years [NOTE 7: CAPITALIZATION](index=15&type=section&id=NOTE%207%3A%20CAPITALIZATION) - As of June 30, 2022, and December 31, 2021, the company had **200,000,000 shares** of common stock authorized and **8,258,597 shares** issued and outstanding[68](index=68&type=chunk) - There were warrants outstanding to purchase **3,090,787 shares** of common stock as of June 30, 2022, with a weighted average exercise price of **$12.50** and a remaining contractual term of **4.5 years**[68](index=68&type=chunk) [NOTE 8: COMMITMENTS AND CONTINGENCIES](index=15&type=section&id=NOTE%208%3A%20COMMITMENTS%20AND%20CONTINGENCIES) - LTS Lohmann Therapie-System AG filed a Request for Arbitration on July 13, 2022, seeking **€2 million** (approximately **$2.1 million**) from the company's subsidiary Intec Israel for reimbursement related to the discontinuation of the Accordion Pill business. The company accrued this amount as of June 30, 2022[65](index=65&type=chunk) **Future Minimum Annual Lease Payments (as of June 30, 2022):** | Year | Amount | | :--- | :------- | | 2022 | $48,472 | | 2023 | $82,388 | | Total | $130,860 | | Present value of operating lease liability | $125,812 | [NOTE 9: SUBSEQUENT EVENTS](index=15&type=section&id=NOTE%209%3A%20SUBSEQUENT%20EVENTS) - The company evaluated subsequent events through August 8, 2022, and concluded that no events requiring recognition or disclosure occurred, except for the LTS arbitration disclosed in Note 8[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business, a detailed analysis of operating expenses and net loss for the three and six months ended June 30, 2022, and a discussion of liquidity, capital resources, and critical accounting estimates [Overview](index=16&type=section&id=Overview) - Indaptus Therapeutics is a pre-clinical biotechnology company developing a novel, patented systemically-administered anti-cancer and anti-viral immunotherapy based on attenuated and killed Gram-negative bacteria[72](index=72&type=chunk) - The company's lead clinical candidate, Decoy20, has completed GMP manufacturing and IND-enabling studies. In May 2022, the U.S. FDA cleared its IND application for a Phase 1 clinical trial in advanced solid tumors, planned for the second half of 2022[72](index=72&type=chunk)[73](index=73&type=chunk) - The company completed a merger with Decoy Biosystems, Inc. on August 3, 2021, and subsequently wound down the Accordion Pill business of Intec Israel[74](index=74&type=chunk)[77](index=77&type=chunk) - A private placement in July 2021 generated approximately **$27.3 million** in net proceeds from the sale of pre-funded warrants and warrants[79](index=79&type=chunk)[99](index=99&type=chunk) [Components of Operating Results](index=18&type=section&id=Components%20of%20Operating%20Results) - Research and development expenses, primarily fees to CROs and CMOs and compensation, are expected to increase substantially due to ramp-up in clinical development activities[82](index=82&type=chunk)[83](index=83&type=chunk) - General and administrative expenses, including compensation, benefits, facility costs, and professional fees, are also expected to increase significantly due to headcount growth, public company operating costs, and potential commercialization activities[84](index=84&type=chunk)[85](index=85&type=chunk) - Other income, net, includes interest earned on deposits and other incidental income/expense items[86](index=86&type=chunk) [Results of Operations - Three Months Ended June 30, 2022 compared to Three Months Ended June 30, 2021](index=19&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202022%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202021) **Operating Results (Three Months Ended June 30, 2022 vs. 2021):** | Item | 2022 | 2021 | Change ($) | | :------------------------- | :----------- | :---------- | :----------- | | Research and development | $1,506,165 | $391,118 | $1,115,047 | | General and administrative | $2,363,095 | $137,527 | $2,225,568 | | Total operating expenses | $3,869,260 | $528,645 | $3,340,615 | | Net loss | $(3,835,502) | $(515,479) | $(3,320,023) | | Net loss per share | $(0.46) | $(0.27) | $(0.19) | - The increase in R&D expenses was primarily due to a **$520,000** increase in payroll and related expenses (including **$210,000** stock-based compensation) and a **$570,000** increase for Phase 1 clinical trial preparation and IND submission[90](index=90&type=chunk) - The increase in G&A expenses was mainly driven by a **$1.2 million** increase in payroll and related expenses (including **$700,000** stock-based compensation) due to increased executive headcount post-Merger, and a **$900,000** increase in D&O insurance and professional fees as a public company[91](index=91&type=chunk) [Results of Operations - Six Months Ended June 30, 2022 compared to Six Months Ended June 30, 2021](index=20&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202022%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202021) **Operating Results (Six Months Ended June 30, 2022 vs. 2021):** | Item | 2022 | 2021 | Change ($) | | :------------------------- | :----------- | :---------- | :----------- | | Research and development | $2,803,263 | $880,839 | $1,922,424 | | General and administrative | $4,468,070 | $261,782 | $4,206,288 | | Total operating expenses | $7,271,333 | $1,142,621 | $6,128,712 | | Net loss | $(7,200,656) | $(1,127,900) | $(6,072,756) | | Net loss per share | $(0.87) | $(0.58) | $(0.29) | - The increase in R&D expenses was primarily due to a **$1 million** increase in payroll and related expenses (including **$370,000** stock-based compensation) and a **$900,000** increase for Phase 1 clinical trial preparation and IND submission[95](index=95&type=chunk) - The increase in G&A expenses was mainly due to a **$2.3 million** increase in payroll and related expenses (including **$1.3 million** stock-based compensation) from increased executive headcount post-Merger, and a **$1.7 million** increase in D&O insurance and professional fees as a public company[96](index=96&type=chunk) [Liquidity and Resources](index=20&type=section&id=Liquidity%20and%20Resources) **Cash and Cash Equivalents & Marketable Securities:** | Item | June 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $14,258,812 | $39,132,165 | | Marketable securities | $18,753,081 | - | | Total | $33,011,893 | $39,132,165 | **Net Cash Flow Activities (Six Months Ended June 30):** | Activity | 2022 | 2021 | | :-------------------------------- | :------------- | :----------- | | Net cash used in operating activities | $(6,265,890) | $(2,120,321) | | Net cash used in investing activities | $(18,607,463) | $(2,200) | | Net cash provided by financing activities | - | $5,450,000 | [Current Outlook](index=21&type=section&id=Current%20Outlook) - The company believes it has adequate cash to fund operations for more than one year from the report date, following the August 2021 private placement[103](index=103&type=chunk) - Developing drugs and conducting clinical trials are expensive, and significant additional financing will be required to fund future operations, including clinical trials, regulatory approvals, and commercialization[105](index=105&type=chunk) - Future capital requirements depend on factors like clinical trial progress, regulatory approvals, manufacturing costs, and intellectual property protection. The COVID-19 pandemic and global economic conditions may adversely impact the ability to raise capital[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) [Critical Accounting Estimates](index=22&type=section&id=Critical%20Accounting%20Estimates) - Accounting for Research and Development Costs: Management makes estimates for services received and efforts expended from CROs and CMOs, which can impact reported R&D expenses and related accruals/prepayments[111](index=111&type=chunk) - Stock-Based Compensation: Fair value of awards is determined using the Black-Scholes-Merton model, requiring subjective estimates for expected stock price volatility, expected term, risk-free interest rate, and dividend yield[113](index=113&type=chunk) [Recently Issued Accounting Pronouncements](index=23&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) - There are no recently issued accounting pronouncements that have a material impact on the company[114](index=114&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not required for smaller reporting companies - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[115](index=115&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2022, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting were identified during the quarter - As of June 30, 2022, the company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level by the principal executive officer and principal financial officer[117](index=117&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[118](index=118&type=chunk) [PART II — OTHER INFORMATION](index=23&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=23&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in an arbitration request filed by LTS Lohmann Therapie-System AG seeking €2 million from its subsidiary Intec Israel related to the discontinuation of the Accordion Pill business. This amount has been accrued as of June 30, 2022 - LTS Lohmann Therapie-System AG filed a Request for Arbitration on July 13, 2022, against Intec Israel, alleging entitlement to **€2 million** for reimbursement following the discontinuation of the Accordion Pill business[121](index=121&type=chunk) - As of June 30, 2022, the company accrued **€2 million** (approximately **$2.1 million**) for this potential obligation[121](index=121&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) This item is not required for a smaller reporting company - As a smaller reporting company, Indaptus Therapeutics, Inc. is not required to provide a separate section for Risk Factors in this Form 10-Q[122](index=122&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - The company reported no unregistered sales of equity securities or use of proceeds for the period[123](index=123&type=chunk) [Item 3. Defaults upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - The company reported no defaults upon senior securities for the period[124](index=124&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company's operations[124](index=124&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) No other information is required to be disclosed in this section - There is no other information to report under this item[125](index=125&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents, certifications from executive officers, and XBRL-related documents - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2), and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[126](index=126&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐ 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) (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For t ...

Product Development and Clinical Trials - The company has developed a patented systemically-administered anti-cancer and anti-viral immunotherapy, demonstrating broad anti-tumor and anti-viral activity in pre-clinical models [19]. - The company plans to file an IND in the first half of 2022 and initiate a Phase 1 clinical trial targeting tumors with low durable response rates to current immunotherapy [20]. - The target indications for the clinical trial include colorectal, hepatocellular, bladder, cervical, and pancreatic carcinoma, which account for 23% of yearly cancer cases and over 28% of yearly cancer deaths worldwide according to GLOBOCAN 2020 [20]. - The lead clinical candidate, Decoy20, has successfully completed GMP manufacturing and IND-enabling studies, with plans for a Phase 1 clinical trial in 2022 [36]. - The technology has shown significant single-agent anti-tumor activity and durable responses in pre-clinical models for non-Hodgkin's lymphoma, colorectal, hepatocellular, and pancreatic carcinoma [34]. - The company aims to enhance curative cancer immunotherapy for patients with unresectable or metastatic solid tumors and lymphomas, which are responsible for approximately 90% of all cancer deaths [41]. - The commencement of a Phase 1 clinical trial for Decoy20 is contingent upon the successful filing of an Investigational New Drug (IND) application with the FDA in the first half of 2022 [104]. - No clinical trials have been completed to prove the efficacy or safety of any product candidates, which may lead to significant delays or abandonment of development [105]. - The company does not expect any product candidates to receive regulatory approval for commercialization for several years, if at all [106]. - The development process is costly and uncertain, with potential delays due to various unforeseen events [107]. - The company may seek collaborative agreements to assist in the development and commercialization of its product candidates due to limited resources [110]. Financial Performance and Capital Needs - For the years ended December 31, 2021, and 2020, the company reported net losses of approximately $7.7 million and $3.6 million, respectively, with an accumulated deficit of approximately $15.7 million as of December 31, 2021 [97]. - The company does not expect to become profitable in the near future and may never achieve profitability [90]. - The company anticipates significant research and development expenses, which may hinder its ability to attain profitability [90]. - The company will need to raise additional capital due to a lack of current cash flow, which may not be available or could cause dilution [99]. - The company has incurred significant operating losses in every reporting period since its inception [97]. - The company may be required to delay, limit, or eliminate the development of business opportunities if additional financing is not available on satisfactory terms [102]. - The potential market opportunity for the company's product candidates is difficult to estimate and may be smaller than anticipated, impacting revenue and profitability [138]. - The healthcare industry is facing increased limitations on reimbursement and pricing controls, which could adversely affect the company's products [141]. - The company does not anticipate paying any cash dividends in the foreseeable future, focusing instead on retaining funds for business development [205]. - The company may seek additional capital through various means, which could dilute existing shareholders' ownership interests [216]. Regulatory Environment and Compliance - The company operates in a highly regulated industry, subject to significant federal, state, local, and foreign regulations, impacting product development and approval processes [43]. - The company must comply with stringent FDA regulations throughout the drug development process, including preclinical and clinical testing [46]. - The FDA has a 60-day period to determine if an NDA or BLA is accepted for filing, with most applications reviewed within ten months [55]. - Post-approval, the FDA requires adverse event reporting and may mandate Phase IV testing to monitor product effects [62]. - Regulatory approval is not guaranteed, and delays or denials can occur for various reasons, including safety and efficacy concerns [126]. - The company may face significant restrictions on product marketing and ongoing requirements for costly post-approval studies even after receiving regulatory approval [129]. - The company is subject to extensive regulation under the FDA and comparable foreign authorities, which can be costly and time-consuming [90]. - Changes in government funding for the FDA could hinder the company's ability to develop and commercialize product candidates [146]. Intellectual Property and Competition - The company has a broad patent portfolio with 33 granted patents and 16 pending patent applications, supporting its innovative technology [21]. - The company owns 33 granted patents and 16 pending patent applications related to cancer and infectious diseases, with expiration dates between 2033 and 2039 [67]. - The company depends on its ability to protect proprietary technology through patents and other means, and failure to do so could adversely affect its business [173]. - The company may face significant costs related to patent enforcement and protection, which could materially impact its financial condition and results of operations [175]. - The complexity and uncertainty of patent positions may diminish the value of the company's intellectual property, affecting competitive advantage [181]. - Competitors may circumvent patents by developing similar technologies, which could limit the effectiveness of the company's patent protections [182]. - The company faces competition from larger biopharmaceutical companies with greater resources, particularly in cancer immunotherapies [63]. - The company is heavily reliant on the success of its lead product candidate, Decoy20, with significant investments in its development [104]. Management and Operational Risks - The company has five full-time employees and competes for talent with other biotechnology and pharmaceutical firms [73]. - The company is highly dependent on its current senior management, including CEO Jeffrey A. Meckler, CSO Michael J. Newman, and CMO Boyan Litchev, which poses a risk to its ability to develop or commercialize product candidates if key personnel are lost [154]. - The company faces significant competition for qualified personnel, and failure to attract or retain key employees could materially affect its business and operational goals [155]. - The company is a pre-clinical-stage biotechnology firm and will need to expand its organization and improve management systems to support future growth, which may significantly increase expenses [157]. - The company relies on third parties for conducting preclinical studies and clinical trials, and any failure on their part could substantially harm the company's business [93]. - The company does not have internal manufacturing capabilities and relies on third-party manufacturers, which could lead to delays in clinical trials if there are disruptions in supply [168]. - The company may encounter difficulties in enforcing intellectual property rights in foreign jurisdictions, impacting global competitiveness [196]. Market and Economic Factors - The ongoing military conflict between Russia and Ukraine has created economic uncertainty and market volatility, impacting the company's ability to secure additional funding [199]. - The market price of the company's common stock has been volatile, influenced by various factors including clinical trial approvals and regulatory announcements [200]. - The company is subject to risks related to the volatility of the biotechnology market, which may not correlate with its actual operating performance [203]. - The company may face increased legal and financial compliance costs due to public company regulations, which could affect net income [212]. - Sales of a substantial number of shares by existing shareholders could depress the market price of the company's securities [215]. - Intec Israel is classified as a smaller reporting company with a public float market value of less than $250 million, which may make its shares less attractive to investors [218].

PART I — FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited Q3 2021 financial statements reflect the company's post-merger financial position, detailing significant increases in cash and total assets, alongside higher operating expenses and net loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | September 30, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $41,857,222 | $1,637,499 | | Total current assets | $43,854,891 | $1,731,999 | | Total assets | $43,859,226 | $1,777,793 | | **Liabilities & Equity** | | | | Total current liabilities | $5,780,184 | $2,015,494 | | Total stockholders' equity (deficit) | $38,079,042 | $(237,701) | | Total liabilities and stockholders' equity (deficit) | $43,859,226 | $1,777,793 | - The company's financial position strengthened significantly, with cash increasing from **$1.6 million** to **$41.9 million** and total assets growing from **$1.8 million** to **$43.9 million**, primarily due to financing activities related to the merger[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations Highlights (Unaudited) | Operating Item | Three Months Ended Sep 30, 2021 ($) | Three Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2021 ($) | Nine Months Ended Sep 30, 2020 ($) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $697,674 | $1,349,835 | $1,578,512 | $2,302,883 | | General and administrative | $2,670,317 | $196,578 | $2,932,100 | $527,830 | | **Total operating expenses** | **$3,367,991** | **$1,546,413** | **$4,510,612** | **$2,830,713** | | **Net loss** | **$(3,367,164)** | **$(1,542,733)** | **$(4,495,064)** | **$(2,813,932)** | | Net loss per share, basic and diluted | $(0.81) | $(0.79) | $(1.67) | $(1.45) | - Net loss for the third quarter of 2021 more than doubled to **$3.4 million** compared to **$1.5 million** in the same period of 2020, driven by a significant increase in general and administrative expenses, while research and development costs decreased[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) - Total stockholders' equity shifted from a deficit of **$(237,701)** at the beginning of 2021 to a positive **$38.1 million** by September 30, 2021[19](index=19&type=chunk) - Major equity changes in Q3 2021 included the conversion of all preferred stock and SAFE agreements, issuance of common stock for the merger, and capital raised from pre-funded warrants, net of issuance costs[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, Nine Months Ended) | Cash Flow Activity | September 30, 2021 ($) | September 30, 2020 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,750,820) | $(2,367,598) | | Net cash used in investing activities | $(3,854) | $0 | | Net cash provided by financing activities | $47,974,397 | $1,167,129 | | **Net increase (decrease) in cash** | **$40,219,723** | **$(1,200,469)** | - Financing activities provided approximately **$48.0 million** in cash for the nine months ended September 30, 2021, primarily from merger proceeds (**$16.3 million**), issuance of warrants (**$30.0 million**), and SAFE proceeds (**$5.0 million**)[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - On August 3, 2021, the company completed its merger with Decoy Biosystems, Inc., with Decoy considered the accounting acquirer in a reverse merger transaction[23](index=23&type=chunk)[25](index=25&type=chunk) - In connection with the merger, the company decided to wind down the Accordion Pill business of its subsidiary Intec Pharma Ltd., expected to be completed by the end of 2021[24](index=24&type=chunk) - The company raised approximately **$27.3 million** in net proceeds from a private placement of pre-funded warrants and warrants, which closed in August 2021[31](index=31&type=chunk) - Management believes the company has adequate cash to fund operations for at least one year but acknowledges the need to raise additional capital in the future to advance its research and development programs[34](index=34&type=chunk)[36](index=36&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's post-merger financial condition, highlighting improved liquidity, decreased R&D, and increased G&A expenses [Overview, Merger, and Private Placement](index=20&type=section&id=Overview%2C%20Merger%2C%20and%20Private%20Placement) - The company is a pre-clinical biotechnology firm developing a systemically-administered anti-cancer and anti-viral immunotherapy based on attenuated and killed, non-pathogenic, Gram-negative bacteria[95](index=95&type=chunk) - On August 3, 2021, Indaptus completed a reverse merger with Decoy Biosystems, with Decoy's business becoming the combined company and treated as the accounting acquirer[96](index=96&type=chunk)[103](index=103&type=chunk) - In connection with the merger, the company is winding down the legacy Accordion Pill business, expected to be substantially complete by the end of 2021[104](index=104&type=chunk)[106](index=106&type=chunk) - A private placement of pre-funded warrants and warrants was completed, raising aggregate gross proceeds of approximately **$30.0 million**[107](index=107&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Comparison of Operating Results (Three Months Ended Sep 30) | Expense Category | 2021 ($) | 2020 ($) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $697,674 | $1,349,835 | $(652,161) | -48% | | General and administrative | $2,670,317 | $196,578 | $2,473,739 | 1258% | | **Net loss** | **$(3,367,164)** | **$(1,542,733)** | **$(1,824,431)** | **118%** | - R&D expenses decreased for the three and nine months ended September 30, 2021, compared to 2020, primarily due to the timing of manufacturing and characterization of the Decoy20 candidate[112](index=112&type=chunk)[116](index=116&type=chunk) - G&A expenses increased significantly in 2021 due to higher payroll, stock-based compensation from options issued in August 2021, and professional fees associated with being a public company after the merger[113](index=113&type=chunk)[117](index=117&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2021, the company had cash and cash equivalents of approximately **$41.9 million**, a substantial increase from **$1.6 million** at the end of 2020[119](index=119&type=chunk) - Net cash used in operating activities was approximately **$7.8 million** for the first nine months of 2021, compared to **$2.4 million** for the same period in 2020[121](index=121&type=chunk) - The company believes it has adequate cash to fund ongoing activities for more than one year but will need to raise substantial additional funds to achieve its strategic objectives, including advancing clinical trials[123](index=123&type=chunk)[125](index=125&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required for smaller reporting companies, and therefore no disclosure is provided - Disclosure is not required as the company qualifies as a smaller reporting company[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls as of September 30, 2021, with post-merger internal control changes including an audit committee and CFO hire - Management concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[136](index=136&type=chunk) - In connection with the merger, changes in internal control over financial reporting included establishing an audit committee, hiring a Chief Financial Officer, and integrating financial reporting processes[137](index=137&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that there are currently no pending material legal proceedings against it that are expected to have a significant effect on its business, financial position, or operating results - There are currently no pending material legal proceedings against the company[140](index=140&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section is not required for a smaller reporting company, and therefore no disclosure is provided - Disclosure of risk factors is not required as the company is a smaller reporting company[141](index=141&type=chunk) [Other Items (2, 3, 4, 5)](index=29&type=section&id=Other%20Items%20(2%2C%203%2C%204%2C%205)) The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no other material information, with mine safety disclosures being not applicable - Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 5 (Other Information) all report 'None'[142](index=142&type=chunk)[143](index=143&type=chunk) - Item 4 (Mine Safety Disclosures) is 'Not applicable'[142](index=142&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the company's amended and restated certificate of incorporation and bylaws, officer certifications, and XBRL data files - The report includes exhibits such as corporate governance documents (3.1, 3.2, 3.3), officer certifications (31.1, 31.2, 32.1, 32.2), and Inline XBRL documents[144](index=144&type=chunk)[145](index=145&type=chunk)

PART I — FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Unaudited financial statements show a **$11.7 million net loss** for H1 2021, driven by asset impairment and merger expenses [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$20.1 million** as of June 30, 2021, due to non-current asset impairment, despite increased cash Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $16,991 | $14,671 | | Total Current Assets | $18,792 | $14,968 | | Total Non-Current Assets | $1,300 | $5,928 | | **Total Assets** | **$20,092** | **$20,896** | | **Liabilities & Equity** | | | | Total Current Liabilities | $5,440 | $5,334 | | Total Liabilities | $6,156 | $6,363 | | Total Shareholders' Equity | $13,936 | $14,533 | | **Total Liabilities & Equity** | **$20,092** | **$20,896** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net loss increased to **$11.7 million** for H1 2021, driven by a **$3.2 million** asset impairment and higher merger expenses Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Research and Development Expenses | $(1,807) | $(1,275) | $(3,964) | $(3,299) | | General and Administrative Expenses | $(2,387) | $(1,630) | $(4,408) | $(3,345) | | Impairment of Long-Lived Assets | $(3,190) | - | $(3,190) | - | | **Operating Loss** | **$(7,384)** | **$(2,905)** | **$(11,562)** | **$(6,644)** | | **Net Loss** | **$(7,432)** | **$(2,947)** | **$(11,661)** | **$(6,817)** | | Loss Per Share (Basic and Diluted) | $(5.53) | $(3.66) | $(9.46) | $(9.65) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was **$7.4 million** for H1 2021, with **$10.9 million** from financing, increasing cash to **$18.0 million** Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,397) | $(6,817) | | Net cash provided by investing activities | - | $769 | | Net cash provided by financing activities | $10,856 | $10,604 | | **Increase in Cash and Restricted Cash** | **$3,459** | **$4,556** | | **Ending Cash and Restricted Cash** | **$17,991** | **$13,799** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the Decoy Biosystems merger, Accordion Pill wind-down, **$3.2 million** asset impairment, and merger-related lawsuit settlements - The company completed a reverse merger with Decoy Biosystems, Inc. on August 3, 2021, and changed its name to Indaptus Therapeutics Inc. For accounting purposes, Decoy is considered the acquirer[35](index=35&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) - A decision was made to terminate the legacy Accordion Pill business, which was deemed a triggering event for an impairment assessment. This resulted in an impairment charge of approximately **$3.2 million** on non-current assets as of June 30, 2021[37](index=37&type=chunk)[59](index=59&type=chunk) - In connection with the merger, the company completed a private placement for net proceeds of approximately **$27.2 million** and implemented a 1-for-4 reverse share split in July 2021[37](index=37&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) - Lawsuits filed in connection with the merger were voluntarily dismissed by plaintiffs after supplemental disclosures were made. The company agreed to pay plaintiffs' counsel a fee of **$225,000** to resolve the matter[55](index=55&type=chunk)[57](index=57&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses business transformation post-merger, Accordion Pill wind-down, **$11.7 million** net loss, and **$27.2 million** in new financing [Completion of the Merger and Business Transformation](index=21&type=section&id=Completion%20of%20the%20Merger%20and%20Business%20Transformation) The company completed a reverse merger with Decoy Biosystems, transforming into a pre-clinical biotech and winding down the legacy Accordion Pill business - The company completed a reverse merger with Decoy Biosystems, Inc. on August 3, 2021, and changed its name to Indaptus Therapeutics, Inc[83](index=83&type=chunk)[85](index=85&type=chunk) - The board determined to wind down the legacy Accordion Pill business, expecting to incur approximately **$800,000** in salaries, severance, and close-out expenses[89](index=89&type=chunk) - Termination of key contracts related to the old business includes a ~€2.0 million (~**$2.4 million**) termination fee to LTS and a **$600,000** break-up fee for its office lease[90](index=90&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Net loss for H1 2021 increased **72%** to **$11.7 million**, driven by **$3.2 million** asset impairment and higher operating expenses Comparison of Operating Results (in thousands) | Expense/Loss | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | R&D Expenses, Net | $(3,964) | $(3,299) | **20.2%** | | G&A Expenses | $(4,408) | $(3,345) | **31.8%** | | Impairment of long-lived assets | $(3,190) | - | N/A | | **Operating Loss** | **$(11,562)** | **$(6,644)** | **74.0%** | | **Net Loss** | **$(11,661)** | **$(6,817)** | **71.1%** | - The increase in operating loss was mainly driven by the **$3.2 million** impairment charge and increased professional services expenses related to the Merger Agreement[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) Cash totaled **$18.0 million** as of June 30, 2021, with **$27.2 million** raised post-quarter, providing over twelve months of funding - The company had cash, cash equivalents, and restricted cash of approximately **$18.0 million** as of June 30, 2021[108](index=108&type=chunk) - In August 2021, the company raised approximately **$27.2 million** in net proceeds from a private placement of pre-funded warrants and warrants[109](index=109&type=chunk) - Net cash provided by financing activities for the six months ended June 30, 2021, was approximately **$10.9 million**, primarily from sales of ordinary shares under the Aspire Capital agreement[112](index=112&type=chunk) - Management believes that current cash is adequate to fund ongoing activities for more than twelve months from the report date[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, this disclosure on market risk is not required - The company is a smaller reporting company and is not required to provide this disclosure[136](index=136&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2021, with no material changes to internal controls during the quarter - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective at the reasonable assurance level[139](index=139&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[140](index=140&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Four lawsuits related to merger disclosures were dismissed after supplemental disclosures, with the company paying **$225,000** in legal fees - Four lawsuits were filed in May 2021 alleging failure to disclose material information in connection with the Merger[144](index=144&type=chunk) - The company made supplemental disclosures, and plaintiffs subsequently voluntarily dismissed the actions. The company agreed to pay plaintiffs' counsel a fee of **$225,000** to fully resolve the matter[144](index=144&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks as a pre-clinical biotech, including financial instability, reliance on Decoy20, regulatory hurdles, competition, and IP challenges [Risks Related to Financial Position and Capital Requirements](index=34&type=section&id=Risks%20Related%20to%20Indaptus%27%20Financial%20Position%20and%20Capital%20Requirements) As a pre-clinical company with a history of losses, Indaptus requires substantial additional capital, with no guarantee of available financing - Indaptus is a pre-clinical-stage company with a limited operating history and has incurred significant operating losses since inception, with an accumulated deficit of **$7.96 million** as of December 31, 2020[146](index=146&type=chunk)[147](index=147&type=chunk) - The company will need to seek additional equity or debt financing to fund its operations, and failure to do so may require it to delay, limit, or eliminate business opportunities[149](index=149&type=chunk)[151](index=151&type=chunk) [Risks Related to Indaptus' Business, Industry and Regulatory Requirements](index=36&type=section&id=Risks%20Related%20to%20Indaptus%27%20Business%2C%20Industry%20and%20Regulatory%20Requirements) Success depends on Decoy20, which faces long, costly, and uncertain development, regulatory hurdles, COVID-19 impacts, and intense competition - The company's business is largely dependent on the success of its lead product candidate, Decoy20, and plans to file an Investigational New Drug (IND) application with the FDA in the second half of 2021[153](index=153&type=chunk) - The COVID-19 pandemic may adversely affect operations, including causing disruptions in the supply of product candidates, conduct of clinical trials, and the company's ability to access capital[175](index=175&type=chunk) - The company faces intense competition from enterprises with significantly greater financial resources and expertise in R&D, manufacturing, and marketing[186](index=186&type=chunk)[187](index=187&type=chunk) [Risks Relating to Indaptus' Reliance on Third Parties](index=51&type=section&id=Risks%20Relating%20to%20Indaptus%27%20Reliance%20on%20Third%20Parties) Indaptus relies entirely on third parties for manufacturing and clinical trials, posing risks to supply, quality, and development timelines - The company does not have internal manufacturing capabilities and relies completely on third parties for preclinical and clinical supplies[217](index=217&type=chunk) - The company intends to rely on third-party CROs to conduct clinical trials, and any failure by these CROs to perform their duties could delay or terminate trials[176](index=176&type=chunk)[177](index=177&type=chunk) [Risks Relating to Indaptus' Intellectual Property](index=53&type=section&id=Risks%20Relating%20to%20Indaptus%27%20Intellectual%20Property) Success depends on protecting intellectual property, but patents face challenges, invalidation, infringement risks, and global enforcement difficulties - The company's success depends on its ability to obtain and maintain patent protection for its technology, but patents may be challenged, narrowed, or invalidated[223](index=223&type=chunk)[224](index=224&type=chunk) - The company may infringe on third-party intellectual property rights, which could lead to costly lawsuits, prevent product commercialization, or require expensive licensing agreements[233](index=233&type=chunk)[235](index=235&type=chunk) [Risks Related to Ownership of Indaptus's Common Stock](index=59&type=section&id=Risks%20Related%20to%20Ownership%20of%20Indaptus%27s%20Common%20Stock) Common stock ownership risks include no dividends, costly public company requirements, potential dilution from future sales, and delisting risks - The company does not anticipate paying any cash dividends in the foreseeable future, so capital appreciation is the sole potential source of gain for shareholders[246](index=246&type=chunk) - Future sales of common stock to raise capital are expected, which could result in substantial dilution to existing shareholders[258](index=258&type=chunk)[260](index=260&type=chunk) - Failure to maintain effective internal controls over financial reporting could adversely affect investor confidence and the company's share price[254](index=254&type=chunk)[255](index=255&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported during the period - None[264](index=264&type=chunk) [Item 3. Defaults upon Senior Securities](index=63&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) No defaults upon senior securities were reported - None[265](index=265&type=chunk) [Item 4. Mine Safety Disclosures](index=63&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[265](index=265&type=chunk) [Item 5. Other Information](index=63&type=section&id=Item%205.%20Other%20Information) No other information was reported - None[265](index=265&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate documents and officer certifications - Lists various corporate documents and certifications filed as exhibits to the report[266](index=266&type=chunk)

PART I — FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Intec Pharma Ltd. for the quarter ended March 31, 2021, including balance sheets, statements of operations, changes in shareholders' equity, and cash flows, along with detailed notes explaining the company's operations, significant accounting policies, commitments, share capital changes, and the proposed merger with Decoy Biosystems [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates Condensed Consolidated Balance Sheets | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Total Current Assets | $12,159 | $14,968 | | Total Non-Current Assets | $5,271 | $5,928 | | **Total Assets** | **$17,430** | **$20,896** | | Total Current Liabilities | $5,203 | $5,334 | | Total Long-Term Liabilities | $883 | $1,029 | | **Total Liabilities** | **$6,086** | **$6,363** | | Total Shareholders' Equity | $11,344 | $14,533 | | **Total Liabilities and Shareholders' Equity** | **$17,430** | **$20,896** | - Cash and cash equivalents decreased from **$14,671 thousand** at December 31, 2020, to **$10,135 thousand** at March 31, 2021, with restricted cash of **$1,000 thousand** added at March 31, 2021[23](index=23&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section details the company's financial performance over specific periods, outlining revenues, expenses, and the resulting net loss Condensed Consolidated Statements of Comprehensive Loss | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Research and Development Expenses | $(2,157) | $(2,024) | | General and Administrative Expenses | $(2,021) | $(1,715) | | Operating Loss | $(4,178) | $(3,739) | | Financial Expenses, net | $(31) | $(70) | | Loss Before Income Tax | $(4,209) | $(3,809) | | Income Tax | $(20) | $(61) | | **Net Loss** | **$(4,229)** | **$(3,870)** | | Loss Per Ordinary Share - Basic and Diluted | $(0.96) | $(1.65) | | Weighted Average Number of Shares Outstanding (in thousands) | 4,419 | 2,346 | - Net loss increased by approximately **$359 thousand** (**8%**) from **$3,870 thousand** in Q1 2020 to **$4,229 thousand** in Q1 2021[25](index=25&type=chunk) [Condensed Consolidated Statement of Changes in Shareholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Shareholders'%20Equity) This section tracks changes in the company's shareholders' equity, reflecting net income, share issuances, and other equity transactions over the period Condensed Consolidated Statement of Changes in Shareholders' Equity | Metric | January 1, 2021 (in thousands) | March 31, 2021 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Ordinary Shares (Amounts) | $727 | $727 | | Additional Paid-in Capital | $217,357 | $218,397 | | Accumulated Deficit | $(203,551) | $(207,780) | | **Total Shareholders' Equity** | **$14,533** | **$11,344** | - Shareholders' equity decreased by **$3,189 thousand**, primarily due to a net loss of **$4,229 thousand**, partially offset by **$956 thousand** from warrant exercises and **$84 thousand** from share-based compensation[29](index=29&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the sources and uses of cash, categorized into operating, investing, and financing activities for the period Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(4,311) | $(5,147) | | Net cash provided by (used in) investing activities | $(1) | $769 | | Net cash provided by financing activities | $956 | $6,113 | | **Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash** | **$(3,356)** | **$1,735** | - The company experienced a net decrease in cash and cash equivalents and restricted cash of **$3,356 thousand** in Q1 2021, a significant change from the **$1,735 thousand** increase in Q1 2020[32](index=32&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION](index=12&type=section&id=NOTE%201%20-%20NATURE%20OF%20OPERATIONS%20AND%20BASIS%20OF%20PRESENTATION) This note describes the company's business, ongoing merger, and the basis for financial statement preparation, including going concern considerations - Intec Pharma Ltd. is a clinical-stage biopharmaceutical company focused on developing drugs using its proprietary Accordion Pill platform technology, but has not yet generated revenues from operations[34](index=34&type=chunk)[35](index=35&type=chunk) - The company is undergoing a merger and reorganization with Intec Parent, Inc. and Decoy Biosystems, Inc., which is expected to be completed in **Q3 2021**, with Intec Parent becoming the successor entity and Decoy's business becoming Intec Parent's business[6](index=6&type=chunk)[7](index=7&type=chunk)[35](index=35&type=chunk) - Due to cumulative losses of approximately **$207.8 million** as of March 31, 2021, and expected continued losses and negative cash flows, there is substantial doubt about the company's ability to continue as a going concern within one year[35](index=35&type=chunk)[39](index=39&type=chunk) - The COVID-19 pandemic has disrupted partnering efforts and its full impact on the company's financial condition, liquidity, or results of operations remains uncertain[38](index=38&type=chunk) [NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES](index=14&type=section&id=NOTE%202%20-%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods applied in preparing the consolidated financial statements - The consolidated financial statements include Intec Israel and its subsidiaries, with intercompany balances and transactions eliminated[44](index=44&type=chunk) - Fair value measurements are categorized into a **three-level hierarchy** based on input observability, prioritizing **Level 1** (quoted prices in active markets) and minimizing **Level 3** (unobservable inputs)[45](index=45&type=chunk)[48](index=48&type=chunk) - Diluted loss per share calculation excludes outstanding stock options and warrants (totaling **1,244,666** in Q1 2021) because their effect would be anti-dilutive[47](index=47&type=chunk)[50](index=50&type=chunk) [NOTE 3 - COMMITMENTS AND CONTINGENT LIABILITIES](index=15&type=section&id=NOTE%203%20-%20COMMITMENTS%20AND%20CONTINGENT%20LIABILITIES) This note details the company's contractual obligations, potential future liabilities, and legal proceedings - The company has recognized approximately **$3.7 million** in non-current other assets for production equipment under a Process Development Agreement with LTS, which was impaired by **$4.1 million** in 2019[51](index=51&type=chunk)[52](index=52&type=chunk) - A lawsuit filed by two former directors was settled in February 2021 for **NIS 400 thousand** (approximately **$125 thousand**) per plaintiff, recorded as general and administrative expenses[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - The company has entered into cooperation agreements with multinational companies for Accordion Pill development, with expenses reimbursed based on milestones, and is negotiating a non-binding term sheet for the sale or license of the AP-CD/LD program[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) [NOTE 4 - SHARE CAPITAL](index=16&type=section&id=NOTE%204%20-%20SHARE%20CAPITAL) This note provides details on the company's share capital, including changes from warrant exercises and share-based compensation - In February 2021, warrants to purchase **182,500** ordinary shares were exercised, generating approximately **$956 thousand**[61](index=61&type=chunk) - Share-based compensation expense for the three months ended March 31, 2021, was **$84 thousand**, a decrease from **$442 thousand** in the prior year period[66](index=66&type=chunk) [NOTE 5 - ACCOUNTS PAYBLE AND ACCRUALS - OTHER](index=17&type=section&id=NOTE%205%20-%20ACCOUNTS%20PAYBLE%20AND%20ACCRUALS%20-%20OTHER) This note details the composition of the company's accounts payable and other accrued liabilities Accounts Payable and Accruals - Other | Category | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Expenses payable | $3,217 | $2,859 | | Salary and related expenses | $876 | $1,057 | | Current operating lease liabilities | $581 | $596 | | Accrual for vacation days and recreation pay for employees | $193 | $180 | | Other | $153 | $274 | | **Total** | **$5,020** | **$4,966** | [NOTE 6 - MERGER AGREEMENT](index=18&type=section&id=NOTE%206%20-%20MERGER%20AGREEMENT) This note outlines the terms and conditions of the proposed merger with Decoy Biosystems, including ownership structure and closing conditions - Intec Israel entered into a Merger Agreement with Intec Parent and Decoy Biosystems, where Decoy's business will become Intec Parent's business after the merger, with Decoy securityholders expected to own approximately **75%** and Intec Israel securityholders **25%** of Intec Parent post-merger, subject to adjustments[69](index=69&type=chunk)[70](index=70&type=chunk) - Closing conditions for the merger include consummation of the Domestication Merger, shareholder approvals, effectiveness of the Registration Statement, disposition of Intec Israel's Accordion Pill business, and a closing financing of **$30 million** to **$50 million**[72](index=72&type=chunk) - Intec Israel transferred **$650 thousand** to Decoy for transaction expenses, and a reverse break-up fee of **$1.0 million** was deposited as restricted cash, which Intec Israel may forfeit if the merger agreement is terminated under specified circumstances[75](index=75&type=chunk) - The company agreed to dispose of its Accordion Pill business immediately after the merger closing, leading to accelerated depreciation of property and equipment and increasing loss per share by **five cents**[77](index=77&type=chunk) [NOTE 7 - EVENTS SUBSEQUENT TO MARCH 31, 2021](index=19&type=section&id=NOTE%207%20-%20EVENTS%20SUBSEQUENT%20TO%20MARCH%2031%2C%202021) This note reports significant events occurring after the balance sheet date, impacting the company's financial position or operations - In April 2021, Intec Pharma sold **319,393** ordinary shares to Aspire Capital Fund LLC for approximately **$1.2 million**[80](index=80&type=chunk) - An amendment to the Purchase Agreement with Aspire Capital in May 2021 updated the Exchange Cap to an additional **963,912** ordinary shares (**19.99%** of outstanding shares), unless shareholder approval is obtained or the average purchase price is at least **$3.44** per share[80](index=80&type=chunk) - Four lawsuits were filed against the company and its board in May 2021, alleging federal securities law violations related to the merger, though two have since been voluntarily dismissed[79](index=79&type=chunk)[80](index=80&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the proposed merger with Decoy Biosystems, recent clinical trial developments, detailed analysis of operating expenses and net loss, and an assessment of liquidity and capital resources, including the Aspire Capital financing arrangement and the company's going concern outlook [Overview](index=21&type=section&id=Overview) This section provides a general introduction to the company's business, proprietary technology, and primary product candidates - Intec Pharma Ltd. is a clinical-stage biopharmaceutical company developing drugs based on its proprietary Accordion Pill (AP) platform technology, designed to improve drug efficacy and safety through gastric retention and specific release mechanisms[86](index=86&type=chunk) - The company's most advanced product candidate, AP-CD/LD, was being developed for Parkinson's disease symptoms[86](index=86&type=chunk) [Proposed Merger with Decoy Biosystems](index=21&type=section&id=Proposed%20Merger%20with%20Decoy%20Biosystems) This section details the strategic rationale and structural components of the proposed merger with Decoy Biosystems - Intec Israel, Intec Parent, and Decoy Biosystems entered into a Merger Agreement on March 15, 2021, aiming for Intec Parent to become the successor to Intec Israel, with Decoy's business becoming Intec Parent's business[87](index=87&type=chunk) - The merger involves a domestication of Intec Israel into a wholly-owned subsidiary of Intec Parent, followed by Merger Sub merging into Decoy, making Decoy a wholly-owned subsidiary of Intec Parent[89](index=89&type=chunk)[90](index=90&type=chunk) - Post-merger, Decoy securityholders are expected to own approximately **75%** and Intec Israel securityholders **25%** of Intec Parent's outstanding securities on a fully diluted basis, subject to net cash balance adjustments[91](index=91&type=chunk) [The Domestication Merger](index=23&type=section&id=The%20Domestication%20Merger) This section describes the process by which Intec Israel will become a wholly-owned subsidiary of a Delaware corporation - Prior to the closing date, Intec Israel will domesticate as a wholly-owned subsidiary of a Delaware corporation by merging with Domestication Merger Sub, with Intec Israel surviving and becoming a subsidiary of Intec Parent[89](index=89&type=chunk) - All outstanding Intec Israel ordinary shares will convert on a one-for-one basis into Intec Parent Common Stock, and all options and warrants will be exchanged for equivalent Intec Parent securities[89](index=89&type=chunk) [The Merger](index=23&type=section&id=The%20Merger) This section outlines the merger of Merger Sub into Decoy, making Decoy a wholly-owned subsidiary of Intec Parent - After the Domestication Merger and subject to closing conditions, Merger Sub will merge into Decoy, making Decoy a wholly-owned subsidiary of Intec Parent[90](index=90&type=chunk) - Decoy common stock will convert into Intec Parent Common Stock based on an exchange ratio, and Decoy stock options will convert into Intec Parent stock options[94](index=94&type=chunk) [Disposition of Accordion Pill Business](index=23&type=section&id=Disposition%20of%20Accordion%20Pill%20Business) This section details the company's commitment to divest its Accordion Pill business immediately following the merger's closing - Intec Israel agreed to use commercially reasonable efforts to sell, transfer, or assign its Accordion Pill business, or otherwise divest its assets and satisfy liabilities, immediately after the merger's closing[92](index=92&type=chunk) [The Closing Financing](index=23&type=section&id=The%20Closing%20Financing) This section outlines the financing condition required for the merger, ensuring the combined entity's net cash balance - The merger is conditioned on a closing financing by Intec Israel or Intec Parent to ensure the combined net cash of Decoy and Intec entities is between **$30 million** and **$50 million** immediately after closing[93](index=93&type=chunk) [Recent Developments](index=25&type=section&id=Recent%20Developments) This section highlights key operational and clinical milestones achieved by the company in the recent period - In December 2020, the company initiated a clinical trial in Israel for an optimized AP-THC, which demonstrated a better controlled release profile with prolonged exposure and shorter lag time compared to Marinol[96](index=96&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, including key expense categories and net loss [Research and Development Expenses](index=25&type=section&id=Research%20and%20Development%20Expenses) This section analyzes changes in research and development expenditures and their primary drivers Research and Development Expenses | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Research and Development Expenses | $(2,157) | $(2,024) | $(133) | 6.57% | - The increase in R&D expenses was primarily due to accelerated depreciation for property and equipment following the proposed merger[99](index=99&type=chunk) [General and Administrative Expenses](index=25&type=section&id=General%20and%20Administrative%20Expenses) This section examines the trends and factors influencing general and administrative expenditures General and Administrative Expenses | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | General and Administrative Expenses | $(2,021) | $(1,715) | $(306) | 17.84% | - The increase in G&A expenses was primarily related to professional services expenses associated with the Merger Agreement[100](index=100&type=chunk) [Operating Loss](index=25&type=section&id=Operating%20Loss) This section analyzes the company's operating loss, identifying the main contributors to its change Operating Loss | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Operating Loss | $(4,178) | $(3,739) | $(439) | 11.74% | - The operating loss increased by approximately **$400 thousand**, mainly due to the rise in general and administrative expenses[101](index=101&type=chunk) [Financial Expenses, Net](index=25&type=section&id=Financial%20Expenses%2C%20Net) This section reviews the company's net financial expenses, including interest and foreign currency exchange impacts Financial Expenses, Net | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Financial Expenses, net | $(31) | $(70) | - Net financial expenses decreased from **$70 thousand** in Q1 2020 to **$31 thousand** in Q1 2021, primarily due to lower foreign currency exchange expenses[102](index=102&type=chunk)[103](index=103&type=chunk) [Income tax](index=25&type=section&id=Income%20tax) This section discusses the company's income tax expenses and their contributing factors Income tax | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Income Tax | $(20) | $(61) | - Income tax expenses decreased from **$61 thousand** in Q1 2020 to **$20 thousand** in Q1 2021, incurred in Intec Pharma Inc. despite no taxable income in Israel[104](index=104&type=chunk) [Net Loss](index=26&type=section&id=Net%20Loss) This section summarizes the overall net loss for the period and its primary drivers Net Loss | Metric | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Net Loss | $(4,229) | $(3,870) | $(359) | 9.28% | - Net loss increased by approximately **$300 thousand**, primarily due to the increase in general and administrative expenses[106](index=106&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet short-term obligations and fund future operations, including financing arrangements - The company's operations have been funded primarily through equity offerings, grants, and payments from feasibility and related agreements[107](index=107&type=chunk) Cash and cash equivalents and restricted cash | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents and restricted cash | $11,135 | $14,671 | Cash Flow Activity | Cash Flow Activity | Three months ended March 31, 2021 (in thousands) | Three months ended March 31, 2020 (in thousands) | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(4,311) | $(5,147) | | Net cash provided by (used in) investing activities | $(1) | $769 | | Net cash provided by financing activities | $956 | $6,113 | [Aspire Capital Financing Arrangement](index=27&type=section&id=Aspire%20Capital%20Financing%20Arrangement) This section details the company's equity purchase agreement with Aspire Capital, outlining terms and recent transactions - The company has a purchase agreement with Aspire Capital Fund LLC, amended in May 2021, allowing Aspire Capital to purchase up to **$10.0 million** of ordinary shares over **30 months**[112](index=112&type=chunk) - In April 2021, **319,393** ordinary shares were sold to Aspire Capital for approximately **$1.2 million** at **$3.7767** per share[119](index=119&type=chunk) - Sales under the agreement are limited to **963,912** ordinary shares (**19.99%** of outstanding shares) unless shareholder approval is obtained or the average purchase price is at least **$3.44**[120](index=120&type=chunk) [Current Outlook](index=29&type=section&id=Current%20Outlook) This section provides management's perspective on future liquidity, funding needs, and the company's going concern status - The company believes it has adequate cash to fund operations through the completion of the merger and into **Q1 2022**, but acknowledges uncertainties that could accelerate cash consumption[121](index=121&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern within **one year**, due to the uncertainty of merger completion, the need to dispose of the Accordion Pill business, and the impact of the COVID-19 pandemic[121](index=121&type=chunk)[122](index=122&type=chunk) - Significant additional financing will be required to fund future operations, including clinical trials, regulatory approvals, manufacturing, and commercialization, with availability and terms uncertain[123](index=123&type=chunk)[125](index=125&type=chunk) [Off-Balance Sheet Arrangements](index=31&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any material off-balance sheet arrangements impacting the company's financial condition - The company has no off-balance sheet arrangements that are material to its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources[126](index=126&type=chunk) [Critical Accounting Policies](index=31&type=section&id=Critical%20Accounting%20Policies) This section discusses significant accounting policies and estimates requiring management's judgment that can materially affect financial reporting - The company's financial statements are prepared in accordance with U.S. GAAP, requiring estimates that affect reported amounts of assets, liabilities, and expenses[127](index=127&type=chunk) - There have been no material changes to the critical accounting policies and estimates disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, during the three months ended March 31, 2021[128](index=128&type=chunk) [Recently Issued Accounting Pronouncements](index=31&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section reports on any new accounting standards or pronouncements recently issued and their potential impact - There are no recently issued accounting pronouncements to report[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not required for smaller reporting companies - Quantitative and Qualitative Disclosures About Market Risk are not required for smaller reporting companies[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2021, concluding they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting identified during the quarter - Management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, and concluded they were effective at the reasonable assurance level[133](index=133&type=chunk)[134](index=134&type=chunk) - No changes in internal control over financial reporting were identified during the quarter ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[135](index=135&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits and legal proceedings in the ordinary course of business. Four lawsuits were filed in May 2021 alleging federal securities law violations related to the merger, though two have been voluntarily dismissed. The company believes these lawsuits are without merit and intends to defend against them vigorously - Four lawsuits were filed against the company and its board in May 2021, alleging federal securities law violations related to the merger, with two voluntarily dismissed as moot[139](index=139&type=chunk) - The company believes these lawsuits are without merit and intends to defend vigorously against them, with the probable outcome and potential loss currently inestimable[139](index=139&type=chunk) - A settlement agreement for a lawsuit with former directors was resolved in March 2021, as detailed in Note 3b to the financial statements[140](index=140&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This item is not required for a smaller reporting company - Risk Factors are not required for a smaller reporting company[141](index=141&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities and use of proceeds to report[142](index=142&type=chunk) [Item 3. Defaults upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities to report - There were no defaults upon senior securities to report[143](index=143&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[144](index=144&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) This section discloses an amendment to the Ordinary Shares Purchase Agreement with Aspire Capital, which updates the Exchange Cap for share issuance - On May 16, 2021, the company entered into a First Amendment to Ordinary Shares Purchase Agreement with Aspire Capital, updating the Exchange Cap[145](index=145&type=chunk) - The amendment allows for the issuance of up to an additional **963,912** ordinary shares (**19.99%** of outstanding shares) unless shareholder approval or a Nasdaq rule exception is obtained, or if the average purchase price is at least **$3.44** per share[145](index=145&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the Articles of Association, the First Amendment to Ordinary Shares Purchase Agreement, certifications of principal officers, and XBRL documents - Key exhibits include the First Amendment to Ordinary Shares Purchase Agreement, certifications of the Principal Executive Officer and Principal Financial Officer, and various XBRL documents[147](index=147&type=chunk)