Indaptus Therapeutics(INDP) - 2021 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (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 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 $43.9 million, primarily due to financing activities related to the merger[15] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights (Unaudited) | Operating Item | Three Months Ended Sep 30, 2021 ($) | 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] Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity shifted from a deficit of $(237,701) at the beginning of 2021 to a positive $38.1 million by September 30, 2021[19] - Major equity changes in Q3 2021 included the conversion of all preferred stock and SAFE agreements, issuance of common stock for the merger, and capital raised from pre-funded warrants, net of issuance costs[19] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, Nine Months Ended) | Cash Flow Activity | September 30, 2021 ($) | 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] Notes to Condensed Consolidated Financial Statements - 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][25] - 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] - 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] - 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][36] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 - 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] - 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][103] - 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][106] - A private placement of pre-funded warrants and warrants was completed, raising aggregate gross proceeds of approximately $30.0 million[107] Results of Operations Comparison of Operating Results (Three Months Ended Sep 30) | Expense Category | 2021 ($) | 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][116] - 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][117] Liquidity and Capital Resources - 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] - 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] - 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][125] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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] PART II — OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Other Items (2, 3, 4, 5) 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][143] - Item 4 (Mine Safety Disclosures) is 'Not applicable'[142] Item 6. Exhibits 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][145]