Item
1.
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Financial
Statements
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INTEC
PHARMA LTD.
UNAUDITED
CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS
MARCH
31, 2021
TABLE
OF CONTENTS
INTEC
PHARMA LTD.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
The
accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
INTEC
PHARMA LTD.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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U.S.
dollars
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LOSS
PER ORDINARY SHARE - BASIC AND DILUTED
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$
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(0.96
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)
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$
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(1.65
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)
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WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER ORDINARY SHARE IN THOUSANDS
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4,419
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2,346
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The
accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
INTEC
PHARMA LTD.
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
The
accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
INTEC
PHARMA LTD.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION:
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a.
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Intec
Pharma Ltd. (“Intec Israel”) is engaged in the development of proprietary technology which enables the gastric retention
of certain drugs. The technology is intended to significantly improve the efficiency of the drugs and substantially reduce their
side-effects or the effective doses.
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Intec
Israel is a limited liability public company incorporated in Israel.
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Intec
Israel ordinary shares are traded on the NASDAQ Capital Market (“NASDAQ”).
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In
September 2017, Intec Israel incorporated a wholly-owned subsidiary in the United States of America in the State of Delaware - Intec
Pharma Inc. (the “Subsidiary”, together with Intec Israel - “the Company”). The Subsidiary was incorporated
mainly to provide Intec Israel executive and management services, including business development, medical affairs and investor relationship
activities outside of Israel.
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b.
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On
March 15, 2021, Intec Israel entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”)
with Intec Parent, Inc., a Delaware corporation and a wholly-owned subsidiary of Intec Israel (“Intec Parent”)
that was incorporated in March 2021, Dillon Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of Intec
Parent (“Merger Sub”) that was incorporated in March 2021, Domestication Merger Sub Ltd., an Israeli company and a wholly-owned
subsidiary of Intec Parent (the “Domestication Merger Sub”) that was incorporated in March 2021 and Decoy Biosystems,
Inc., a Delaware corporation (“Decoy”). Under the terms of the Merger Agreement, following the merger of the Domestication
Merger Sub with and into Intec Israel, with Intec Israel being the surviving entity and a wholly-owned subsidiary of
Intec Parent (the “Domestication Merger”), and subject to satisfaction of additional closing conditions, the Merger Sub
will merge with and into Decoy, with Decoy being the surviving entity and a wholly-owned subsidiary of Intec Parent (the “Merger”).
If the Merger is completed, then the business of Decoy will become the business of Intec Parent.
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For
more details on the Merger Agreement, see note 6.
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c.
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The
Company engages in research and development activities and has not yet generated revenues from operations. On July 22, 2019, the
Company announced top-line results according to which its Phase III clinical trial for AP-CD/LD did not achieve its primary and secondary
endpoints. Accordingly, there is no assurance that the Company’s operations will generate positive cash flows. As of March
31, 2021, the cumulative losses of the Company were approximately $207.8
million. Management expects that the
Company will continue to incur losses from its operations, which will result in negative cash flows from operating activities.
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The
Company believes that it has adequate cash to fund its ongoing activities through the completion of the Merger and into the first
quarter of 2022. However, changes may occur that would cause the Company to consume its existing cash prior to that time, including
the costs to consummate the Merger. Prior to closing of the Merger, the Company agreed, among other things, that it would use commercially
reasonable efforts to enter into one or more agreements providing for the sale, transfer or assignment or that it would otherwise
take steps related to the divestment or disposal and satisfaction of liabilities of the Company’s Accordion Pill business,
to be effected immediately after the closing (the “Disposition”). It is anticipated that the Disposition will result
in one of the following scenarios (i) a sale or disposition by Intec Israel of substantially all the assets of Intec Israel followed
by the liquidation of Intec Israel (an “Asset Disposition”), (ii) a sale by Intec Parent of all of the outstanding shares
of Intec Israel ordinary shares (a “Share Disposition”) or (iii) a termination of the Intec Israel business as
promptly as possible through winding down its operations, satisfying liabilities, and disposing of its remaining assets followed
by a liquidation of Intec Israel (a “Business Termination”).
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INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued):
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Although
the Company has entered into the Merger Agreement and intends to consummate the Merger, there is no assurance that it will be able
to successfully complete the Merger on a timely basis, or at all. If, for any reason, the Merger is not consummated and the Company
is unable to continue to operate its ongoing activities or identify and complete an alternative strategic transaction like the Merger,
the Company may be required to dissolve and liquidate its assets. In such case, the Company would be required to pay all of its debts
and contractual obligations, and to set aside certain reserves for potential future claims, and there can be no assurances as to
the amount or timing of available cash left to distribute to its shareholders after paying its debts and other obligations and setting
aside funds for reserves.
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In
addition, the COVID-19 pandemic, that has spread globally, has resulted in significant financial market volatility and uncertainty
in the past year. Many countries around the world, including in Israel and the United States, have implemented significant governmental
measures to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement
of people, and other material limitations on the conduct of business. The Company has implemented remote working and workplace protocols
for its employees in accordance with government requirements. The implementation of measures to prevent the spread of COVID-19 pandemic
have resulted in disruptions to the Company’s partnering efforts which depend, in part, on attendance at in-person meetings,
industry conferences and other events. It is not possible at this time to estimate the full impact that COVID-19 could have on the
Company’s operation, as the impact will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, including the duration and severity of the outbreak, and the actions that may be required to contain COVID-19 or treat
its impact. As of the date of issuance of these consolidated financial statements, the extent to which the COVID-19 pandemic may
materially impact the Company’s financial condition, liquidity, or results of operations is uncertain.
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As
a result of the above, there is substantial doubt about the Company’s ability to continue as a going concern within one year
after the issuance date of these financial statements.
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These
financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments
that might result from the outcome of this uncertainty.
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d.
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On October 30, 2020, the Company implemented a 1-for-20
reverse share split of its outstanding ordinary shares. All share and per share amounts in these unaudited financial statements
have been retroactively adjusted to reflect the reverse share split.
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e.
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The Company’s effective “shelf” registration
statement on Form S-3 is under General Instruction I.B.6 to Form S-3, or the Baby Shelf Rule. The amount of funds the Company can
raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited
to one-third of the aggregate market value of the ordinary shares held by non-affiliates of the Company.
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f.
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Basis
of presentation
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The
unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America (“US GAAP”) and S-X Article 10 for interim financial statements. Accordingly,
they do not contain all information and notes required by US GAAP for annual financial statements. In the opinion of management,
these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments,
necessary for a fair statement of the Company’s consolidated financial position as of March 31, 2021, the consolidated results
of operations, changes in equity and cash flows for the three-month periods ended March 31, 2021 and 2020.
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INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued):
These
unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company’s annual financial statements for the year ended December 31, 2020, as filed in the 10-K
on March 16, 2021. The condensed balance sheet data as of December 31, 2020 included in these unaudited condensed consolidated financial
statements was derived from the audited financial statements for the year ended December 31, 2020 but does not include all disclosures
required by US GAAP for annual financial statements.
The
results for the three-month period ended March 31, 2021 are not necessarily indicative of the results expected for the year ending December
31, 2021.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES:
a.
Principles of consolidation
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The
consolidated financial statements include the accounts of Intec Israel and its Subsidiaries. Intercompany balances and transactions
have been eliminated upon consolidation.
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b.
Fair value measurement
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Fair
value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an
orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair
value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure
fair value into three broad levels, which are described as follows:
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Level
1:
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Quoted
prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
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Level
2:
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Observable
prices that are based on inputs not quoted on active markets but corroborated by market data.
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Level
3:
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Unobservable
inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
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In
determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use
of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.
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c.
Loss per share
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Loss
per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number of ordinary
shares outstanding during the period. Diluted loss per share is based upon the weighted average number of ordinary shares and of
ordinary shares equivalents outstanding when dilutive. Ordinary share equivalents include outstanding stock options and warrants
which are included under the treasury stock method when dilutive.
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INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
The
following share options and warrants were excluded from the calculation of diluted loss per ordinary share because their effect would
have been anti-dilutive for the periods presented (share data):
SCHEDULE OF ANTI-DILUTIVE SECURITIES
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Three
months ended
March
31
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2021
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2020
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Outstanding stock options
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251,992
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212,798
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Warrants
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992,674
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514,583
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NOTE
3 - COMMITMENTS AND CONTINGENT LIABILITIES:
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a.
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LTS
Process Development Agreement
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In
December 2018, the Company entered into a Process Development Agreement for Manufacturing Services with Lohmann Therapie-Systeme AG (“LTS”)
for the manufacture of AP-CD/LD (the “Agreement”). Under the Agreement, the Company will bear the costs incurred by LTS to
acquire the production equipment for AP-CD/LD (“Equipment”) which amounted to approximately €6.8
million (approximately $7.8 million), and this
amount will later be reimbursed to the Company by LTS in the form of a reduction in the purchase price of the AP-CD/LD product. The Company
paid in full all the consideration and has recognized the Equipment as non-current other assets.
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Following
an impairment assessment that was performed in 2019, the Company recorded an impairment charge of the Equipment in the amount of
approximately $4.1 million and the Equipment has been impaired to approximately $3.7 million to reflect its fair value. As of December
31, 2020, the Company performed an impairment assessment on the Equipment which determined that there is no need to record an additional
impairment charge of the Equipment.
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The
Agreement also contains several termination rights, including, among others, in the cases of bankruptcy, breach by either
party, change of control of either of the parties, or the sale or licensing by the Company of the Accordion Pill to
a third party. As of March 31, 2021, the Company has a liability in the amount of €2.0
million (approximately $2.3
million) for LTS’s facility
upgrading costs. This liability will be paid to LTS only if the Company decides not to continue with the project or commercialization
of AP-CD/LD.
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b.
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Lawsuit
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In
December 2019, two former directors and officers (the “plaintiffs”) filed a statement of claim with the Jerusalem District
Labor Court alleging breach of contract related to a purported vesting of certain options issued to the plaintiffs pursuant to the
execution of the LTS Agreement and further alleging payments due for unredeemed vacation days.
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The
plaintiffs sought pecuniary damages of NIS 2.4 million (as of December 31, 2020 approximately $750 thousand) plus interest and linkage
to the Israeli CPI.
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On
February 17, 2021, the Company entered into a settlement agreement (the “Settlement Agreement”) with each of the
plaintiffs, pursuant to which the Company agreed to pay to each plaintiff NIS 400
thousand (approximately $125
thousand) in cash (the “Settlement Amount”) in return for the complete settlement of all past and future claims by each
plaintiff. On February 18, 2021, the Jerusalem District Labor Court agreed to dismiss the case. The Settlement Amount was
recorded in the statement of operation as general and administrative expenses for the year ended December 31, 2020 and was paid
to each of the plaintiffs in March 2021.
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INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
3 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):
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c.
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Cooperation
agreements
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As
part of its operations, the Company entered into feasibility agreements with multinational companies for the development of products
that combine the Company’s proprietary Accordion Pill platform technology with certain drugs for the treatment of various indications.
These agreements sometimes include a mutual possibility of entering into negotiations for the acquisition of a future license for the
commercial use of the products that are being developed by the multinational companies under the feasibility agreements. In addition,
the multinational companies agreed to reimburse the Company for its expenses, based on milestones that are detailed in the feasibility
agreements.
This
funding is recognized in the statements of operations as a deduction from research and development expenses, as they are incurred.
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1)
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In
March 2021, the Company entered into a feasibility agreement with a pharmaceutical company to develop
a custom-designed Accordion Pill for a rare disease indication.
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2)
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In
December 2020, the Company entered into cannabinoid research collaboration agreement with
GW Research Limited to explore using the Accordion Pill platform for an undisclosed research
program.
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3)
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In
May 2019, the Company entered into a research collaboration agreement with Merck Sharp &
Dohme (“Merck”) for the development of a custom-designed Accordion Pill for one
of Merck’s proprietary compounds. Under the agreement, the Company’s activities
will be funded by Merck subject to the achievement of agreed milestones. In October 2020,
the Company entered into a new research collaboration agreement with Merck for another compound.
In May 2021, based on decisions Merck made for its pipeline and resource allocation, Merck
terminated the collaboration with the Company.
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d.
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AP-CD/LD
non-binding term sheet
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In
February 2021, the Company entered into a non-binding term sheet for the sale or license of the AP-CD/LD program to an undisclosed
third party and are currently negotiating the terms of a definitive agreement. There is no assurance that this will result in a definitive
agreement.
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NOTE
4 - SHARE CAPITAL:
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a.
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Changes
in share capital
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In
February 2021, warrants to purchase 182,500 ordinary shares were exercised for consideration of approximately $956 thousand.
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b.
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Share-based
compensation:
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1)
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In
January 2016, the Company’s board of directors approved an option plan (the “Plan”). Originally, the maximum number
of ordinary shares reserved for issuance under the Plan was 35,000 ordinary shares for grants to directors, employees and consultants.
In July 2016, an increase of 35,000 ordinary shares was approved by the board of directors.
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In
December 2017, June 2018 and December 2020, an increase of 105,000, 50,000 and 50,000 ordinary shares, respectively, was approved
by the Company’s shareholders at a general meeting of shareholders. In July 2020, the Company’s shareholders approved
a further increase of 175,000 ordinary shares.
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As
of March 31, 2021, 200,145 shares remain available for grant under the Plan.
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INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
4 - SHARE CAPITAL (continued):
In
the three months ended March 31, 2020, the Company granted options as follows:
SCHEDULE OF OPTIONS GRANTED TO EMPLOYEES
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Three
months ended March 31, 2020
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Number
of options granted
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Exercise
price range
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Vesting
period range
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Expiration
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Employees
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32,250
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$
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8.57
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3 years
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7 years
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The
fair value of options granted to employees during the three months ended March 31, 2020 was $127 thousand.
The
fair value of options granted to employees on the date of grant was computed using the Black-Scholes model. The underlying data used
for computing the fair value of the options are as follows:
UNDERLYING
DATA USED FOR COMPUTING THE FAIR VALUE OF THE OPTIONS
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Three
months ended March 31
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2020
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Value of ordinary share
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$
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5.6
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Dividend yield
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0
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%
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Expected volatility
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102.58
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%
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Risk-free interest rate
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1.42
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%
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Expected term
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5
years
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2)
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The
following table illustrates the effect of share-based compensation on the statements of operations:
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SCHEDULE OF EFFECT OF SHARE-BASED COMPENSATION
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Three
months ended March 31
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2021
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2020
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U.S.
dollars in thousands
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Research and development expenses,
net
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$
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(37
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)
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$
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184
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General and administrative
expenses
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121
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258
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$
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84
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$
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442
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NOTE
5 - ACCOUNTS PAYBLE AND ACCRUALS - OTHER:
SCHEDULE
OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER
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March 31,
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December 31,
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2021
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2020
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U.S.
dollars in thousands
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Expenses payable
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$
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3,217
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$
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2,859
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Salary and related expenses
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876
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1,057
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Current operating lease liabilities
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581
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596
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Accrual for vacation days and recreation pay
for employees
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193
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180
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Other
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153
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274
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Accounts payable and accruals - other
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$
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5,020
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$
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4,966
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INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
6 - MERGER AGREEMENT:
On
March 15, 2021, Intec Israel entered into a Merger Agreement with Intec Parent, Merger Sub, Domestication Merger Sub, and Decoy,
pursuant to which, following the Domestication Merger, and upon satisfaction of additional closing conditions, the Merger Sub will merge
with and into Decoy, with Decoy being the surviving entity and a wholly owned subsidiary of Intec Parent. If the Merger is completed,
then the business of Decoy will become the business of Intec Parent.
Under
the exchange ratio formula in the Merger Agreement, without taking into consideration the effect of the respective levels of cash and
liabilities of each of the Company and Decoy, which will result in an adjustment to such exchange ratio, following the closing of the
Merger (the “Closing”), the former Decoy securityholders immediately before the Merger are expected to own approximately
75%
of the aggregate number of the outstanding securities of Intec Parent (based on a valuation of $30
million), and the securityholders of the Company
immediately before the Domestication Merger are expected to own approximately 25%
of the aggregate number of the outstanding securities of Intec Parent (based on a valuation of $10
million), calculated on a fully-diluted basis.
The actual allocation will be subject to adjustment based on, among other things, the respective net cash balances of Decoy
and the consolidated Intec entities (including, in the case of Intec Israel, any proceeds from any disposition of Intec
Israel’s Accordion Pill business), subject to certain exceptions. As further described below, the Closing is also conditioned
on completion of the Domestication Merger and on a financing by Intec Israel or Intec Parent, which will dilute securityholders
of both Intec Israel and Decoy on a pro-rata basis, subject to certain exceptions.
The
Merger Agreement contains customary representations, warranties and covenants made by each of Intec Israel and Decoy, including
covenants relating to (i) the conduct of their respective businesses prior to the Closing, (ii) the preparation and filing of a registration
statement on Form S-4 registering the Merger Shares and the shares of Intec Parent Common Stock to be issued in connection with the Domestication
Merger (the “Registration Statement”) and the preparation and/or filing, as applicable, of a proxy statement/information
statement for the special meeting or approval by written consent, as applicable, of shareholders of each of Intec Israel and Decoy,
(iii) holding a meeting or approval by written consent, as applicable, of shareholders of each of Intec Israel and Decoy to obtain
their requisite approvals in connection with the Domestication Merger and Merger, as applicable, including, among other approvals, the
approval by Intec Israel’s shareholders of the issuance of the Merger Shares, and (iv) subject to certain exceptions, the
recommendation of the board of directors of each party to the Merger Agreement to its shareholders that such approvals be given.
Consummation
of the Merger is subject to certain closing conditions, including, among other things, (i) consummation of the Domestication Merger,
(ii) approval of certain matters related to the Merger by the shareholders of Intec Israel and approval of the Merger by the stockholders
of Decoy, (iii) the effectiveness of the Registration Statement, (iv) the continued listing of Intec Israel’s ordinary shares
on the Nasdaq Capital Market (and following the Domestication Merger, the shares of Intec Parent Common Stock) and the authorization
for listing on the Nasdaq Capital Market of the Merger Shares, (v) the receipt of a tax ruling from the Israel Tax Authority with respect
to the Domestication Merger, (vi) disposition of Intec Israel’s Accordion Pill business, and (vii) a closing financing by
Intec Israel or Intec Parent such that upon Closing of the Merger (taking account of the proceeds to be received with respect
to such financing), the combined net cash of Intec Parent shall be not less than $30
million and not more than $50
million, and which represents an agreed minimum
valuation derived from the Exchange Ratio for Intec Parent following the Closing. The Merger Agreement requires Intec Israel to
convene a shareholders’ meeting for purposes of obtaining the necessary shareholder approvals required in connection with the Merger.
The
Merger Agreement contains certain termination rights for both Intec Israel and Decoy, including, but not limited to, the right
of Intec Israel and Decoy to terminate the Merger Agreement by mutual written consent or if a court of competent jurisdiction
or other Governmental Body (as defined in the Merger Agreement) has issued a final and nonpeelable order, decree or ruling, or has taken
any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger.
INTEC
PHARMA LTD.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE
6 - MERGER AGREEMENT (continued):
As
of March 31, 2021, Intec Israel has transferred $650
thousand to Decoy for transaction expenses, of
which $350 thousand was recorded in the statement of operation as general and administrative expenses and $300
thousand was recorded as deposit under prepaid
expenses and other receivables. Either Intec Israel or Decoy may terminate the Merger Agreement if the Merger is not consummated
on or before the date that is 155 days after March 17, 2021. This date may be extended in certain circumstances. In connection with the
termination of the Merger Agreement, under specified circumstances, Decoy may be required to pay to Intec Israel a break-up fee
of $1.0
million, or Intec Israel may be required
to pay to Decoy a reverse break-up fee of $1.0
million, which was deposited with an escrow
agent and therefore recorded as restricted cash as of March 31, 2021, and forfeit an amount of $350
thousand that was transferred to Decoy to cover
transaction expenses.
As
set forth in the Merger Agreement and pursuant to an Agreement and Plan of Merger dated as of April 27, 2021 between Intec Israel,
Intec Parent and Domestication Merger Sub, prior to the date of the closing date (the “Closing Date”), Intec Israel
shall domesticate as a wholly owned subsidiary of a Delaware corporation by merging with and into the Domestication Merger
Sub, with Intec Israel surviving the merger and becoming a wholly-owned subsidiary of Intec Parent. In connection with the Domestication
Merger, all Intec Israel’s ordinary shares, having no par value per share (the “Intec Israel Shares”), outstanding
immediately prior to the Domestication Merger, will convert, on a one-for-one basis, into shares of Intec Parent Common Stock and all
options and warrants to purchase Intec Israel Shares outstanding immediately prior to the Domestication Merger will be exchanged for
equivalent securities of Intec Parent.
In
accordance with the terms of the Merger Agreement, the Company agreed that prior to the Closing Date it would use commercially
reasonable efforts to enter into one or more agreements providing for the sale, transfer or assignment of the Company’s
Accordion Pill business by way of Asset Disposition or Share Disposition or that it would otherwise take steps related to the
divestment or disposal of its assets and satisfaction of liabilities of the Accordion Pill business by way of Business Termination,
to be affected immediately after the Closing. Following the above, the depreciation of the property and equipment was accelerated
in accordance with the Company’s expectation for the Closing Date. As a result, the loss per share for the three-month
period ended March 31, 2021, increased by five cents from $0.91 to $0.96. For the three-month period ended March 31, 2021,
the Company recorded depreciation expenses of approximately $526
thousand.
NOTE
7 - EVENTS SUBSEQUENT TO MARCH 31, 2021
|
a.
|
In
April 2021, the Company sold to Aspire Capital Fund LLC (“Aspire Capital”) 319,393
ordinary shares for total consideration
of approximately $1.2
million under the ordinary shares
purchase agreement (the “Purchase Agreement”) entered into with Aspire Capital in December 2019.
|
|
|
|
|
b.
|
On
May 16, 2021, the Company entered into a First Amendment to Ordinary Shares Purchase Agreement (“the Amendment”),
with Aspire Capital, amending the Purchase Agreement, which provides for among other things, (i) for an updated Exchange Cap,
pursuant to which the Company may issue up to an additional 963,912
ordinary shares which constitutes
19.99%
of its ordinary shares outstanding as of the date of entry into the Amendment, unless shareholder approval or an exception pursuant
to the rules of the Nasdaq Capital Market is obtained to issue more than 19.99%, and (ii) if shareholder approval is not obtained,
such limitation will not apply after the Exchange Cap is reached if at all times thereafter the average purchase price paid
for all shares issued under the Purchase Agreement is equal to or greater than $3.44
per share.
|
|
|
|
|
c.
|
In
May 2021, four
lawsuits were filed against the
Company and its board of directors in federal court: Marc St-Hilarie v. Intec Pharma Ltd,, et al., 1:21-cv-04000-JSR
(filed May 5, 2021, Southern District of New York); Minh Tran v. Intec Pharma Ltd., et al., 1:21-cv-04026-JSP (filed May
5, 2021, Southern District of New York); Craig Davidson v. Intec Pharma Ltd., et al., 1:21-cv-00673-LPS (filed May 7,
2021, District of Delaware); and Jordan Sanchez Figueroa v. Intec Pharma Ltd., et al., 1:21-cv-02621-WFK-RML (filed May
11, 2021, Eastern District of New York). The Davidson lawsuit also names Decoy and certain entities involved in the Merger
as defendants.
|
|
|
|
|
|
All four complaints allege that the Company and its board violated
federal securities laws by allegedly failing to disclose all material information in connection with the Merger. Since the filing
of these lawsuits, Marc St-Hilarie and Minh Tran have filed notices of voluntary dismissal of their claims as moot. It is still
too early to assess and predict the probable outcome of these complaints and the Company believes that these lawsuits are without
merit and, if any are prosecuted, intends to defend vigorously against them. Any loss or range of loss, if any, cannot be estimated
at this time.
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
The
following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results
of operations and financial condition for the periods described. This discussion should be read together with our condensed consolidated
interim financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q. This
information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December
31, 2020, filed with the Securities and Exchange Commission on March 16, 2021, including the consolidated annual financial statements
as of December 31, 2020 and their accompanying notes included therein. We have prepared our condensed consolidated interim financial
statements in accordance with U.S. GAAP.
This
Quarterly Report on Form 10-Q of Intec Pharma Ltd. contains forward-looking statements about our expectations, beliefs and intentions.
Forward-looking statements can be identified by the use of forward-looking words such as “believe”, “expect”,
“intend”, “plan”, “may”, “should”, “could”, “might”, “seek”,
“target”, “will”, “project”, “forecast”, “continue” or “anticipate”
or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly
to historical matters. These forward-looking statements are based on assumptions and assessments made in light of management’s
experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate.
Forward-looking statements in Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we undertake
no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking
statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control.
Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking
statements, including, but not limited to, the following: risks related to the proposed merger, our limited operating history and history
of operating losses, our ability to continue as a going concern, our ability to obtain additional financing, the impact of the outbreak
of coronavirus on our operations, our ability to successfully operate our business or execute our business plan, the timing and cost
of our clinical trials, the completion and receiving favorable results in our clinical trials, our ability to obtain and maintain regulatory
approval of our product candidates, our ability to protect and maintain our intellectual property and licensing arrangements, our ability
to develop, manufacture and commercialize our product candidates, the risk of product liability claims, the availability of reimbursement,
and the influence of extensive and costly government regulation. More detailed information about the risks and uncertainties affecting
us is contained under the heading “Risk Factors” included in our most recent Annual Report on Form 10-K filed with the SEC
on March 16, 2021, and in other filings that we have made and may make with the Securities and Exchange Commission in the future.
All
references to “we,” “us,” “our,” “Intec”, “Intec Israel”, “the Company”
and “our company”, in this Quarterly Report on Form 10-Q, are to Intec Pharma Ltd. and its subsidiaries Intec Pharma Inc.
and Intec Parent, Inc., Dillon Merger Sub, Inc. and Domestication Merger Sub Ltd., unless the context otherwise requires. All references
to Intec Parent are to Intec Parent, Inc., a newly formed Delaware wholly owned subsidiary of Intec Israel that is intended to be the
successor to Intec Israel following the domestication of Intec Israel to Delaware as further described in this Quarterly Report on Form
10-Q.” All references to “ordinary shares” and “share capital” refer to ordinary shares and share capital
of Intec Israel. All references to “Israel” are to the State of Israel. Our historical results do not necessarily indicate
our expected results for any future periods.
Unless
otherwise indicated, all information in this Quarterly Report on Form 10-Q gives effect to a 1-for-20 reverse share split of our ordinary
shares that became effective on October 30, 2020, and all references to ordinary shares outstanding and per share amounts give effect
to the reverse share split.
Overview
We
are a clinical stage biopharmaceutical company focused on developing drugs based on our proprietary Accordion Pill platform technology,
which we refer to as the Accordion Pill, or AP. Our Accordion Pill is an oral drug delivery system that is designed to improve the efficacy
and safety of existing drugs and drugs in development by utilizing an efficient gastric retention, or, GR and specific release mechanism.
Our product pipeline currently includes several product candidates in various stages. Our most advanced product candidate, Accordion
Pill Carbidopa/Levodopa, or, AP-CD/LD, was being developed for the indication of treatment of Parkinson’s disease symptoms in advanced
Parkinson’s disease patients.
Proposed
Merger with Decoy Biosystems
On
March 15, 2021, Intec Israel, Intec Parent, Inc., a Delaware corporation, and a wholly owned subsidiary of Intec Pharma, or Intec Parent,
Dillon Merger Subsidiary Inc., a Delaware corporation and a wholly owned subsidiary of Intec Parent, or the Merger Sub, Domestication
Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of Intec Parent, or the Domestication Merger Sub, and Decoy Biosystems,
Inc., a Delaware corporation, or Decoy, entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, pursuant
to which, following the merger of the Domestication Merger Sub with and into us, with us being the surviving entity and a wholly-owned
subsidiary of Intec Parent, or the Domestication Merger, and upon satisfaction of additional closing conditions, the Merger Sub will
merge with and into Decoy, with Decoy being the surviving entity and a wholly-owned subsidiary of Intec Parent, or the Merger. The Merger
is expected to be completed in the third calendar quarter of 2021 and if it is completed then the business of Decoy will become the business
of Intec Parent.
Under
the Merger Agreement, the following will occur:
The
Domestication Merger
As
set forth in the Merger Agreement, prior to the date of the closing, or the Closing Date”, Intec Israel will domesticate as a wholly
owned subsidiary of a Delaware corporation by merging with and into the Domestication Merger Sub pursuant to an Agreement and Plan of
Merger, dated as of April 27, 2021, among Intec Israel, Domestication Merger Sub and Intec Parent, or the Domestication Merger Agreement,
with Intec Israel surviving the merger and becoming a wholly owned subsidiary of Intec Parent. In connection with the Domestication Merger,
all Intec Israel ordinary shares, having no par value per share, or the Intec Israel Shares, outstanding immediately prior to the Domestication
Merger will convert, on a one-for-one basis, into shares of common stock of Intec Parent, par value $0.01 per share, or the Intec Parent
Common Stock, and all options and warrants to purchase Intec Israel Shares outstanding immediately prior to the Domestication Merger
will be exchanged for equivalent securities of Intec Parent.
The
Merger
As
set forth in the Merger Agreement, after completion of the Domestication Merger and subject to the satisfaction of the other closing
conditions of the Merger, on the Closing Date, the Merger Sub will merge with and into Decoy, with Decoy being the surviving entity.
As a result of the Merger, Decoy will become a wholly owned subsidiary of Intec Parent.
Subject
to the terms and conditions of the Merger Agreement, at the effective time of the Merger, which will occur on the Closing Date, or the
Effective Time:
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●
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each
outstanding share of Decoy common stock, par value $0.001 per share, or the Decoy Common Stock (other than any shares held as treasury
stock (which will be cancelled) and any dissenting shares and after giving effect to the conversion of Decoy SAFEs (Simple Agreements
for Future Equity) and Decoy preferred stock, par value $0.001 per share, into Decoy Common Stock) will be converted into shares
of Intec Parent Common Stock, based on the exchange ratio as described below, and
|
|
|
|
|
●
|
each
outstanding and unexercised Decoy stock option, whether vested or unvested, will be converted into a stock option exercisable for
that whole number of shares of Intec Parent Common Stock equal to the product, rounded down, of (x) the aggregate number of shares
of Decoy Common Stock for which such stock option was exercisable and (y) the exchange ratio.
|
The
shares of Intec Parent Common Stock issuable in exchange for shares of Decoy Common Stock as described above are referred to as the “Merger
Shares.”
Under
the exchange ratio formula in the Merger Agreement, without taking into consideration the effect of the respective levels of cash and
liabilities of each of Intec Israel, each Intec Israel subsidiary, Merger Sub, Domestication Merger Stub and Intec Parent, or the Intec
entities, and Decoy, which will result in an adjustment to such exchange ratio, following the closing of the Merger, or the Closing,
the former Decoy securityholders immediately before the Merger are expected to own approximately 75% of the aggregate number of the outstanding
securities of Intec Parent, and the securityholders of Intec Israel immediately before the Domestication Merger are expected to own approximately
25% of the aggregate number of the outstanding securities of Intec Parent, calculated on a fully diluted basis. The actual allocation
will be subject to adjustment based on, among other things, the respective net cash balances of Decoy and the consolidated Intec entities
net cash balance (including, in the case of Intec Israel, any proceeds from the Disposition, described below), subject to certain exceptions.
As further described below, the Closing is also conditioned on completion of the Domestication Merger, the Disposition, and on a Closing
Financing, as described herein, by Intec Israel or Intec Parent, which will dilute securityholders of both Intec Israel and Decoy on
a pro-rata basis, subject to certain exceptions.
Disposition
of Accordion Pill Business
In
accordance with the terms of the Merger Agreement, Intec Israel agreed that prior to the Closing Date it would use commercially reasonable
efforts to enter into one or more agreements providing for the sale, transfer or assignment of Intec Israel’s Accordion Pill business
by way of an asset sale or a sale of the entire issued share capital of Intec Israel or that it would otherwise take steps related to
the divestment or disposal and satisfaction of liabilities related to the same, to be effected immediately after the Closing, or the
Disposition.
The
Closing Financing
The
Closing is conditioned on one or more closing or pre-closing financing transactions by Intec Israel or Intec such that immediately following
the Closing of the Merger (taking into account the proceeds to be received with respect to such financing(s)), the combined net cash
of Decoy and the Intec entities will be not less than $30 million and not more than $50 million and which incorporates an agreed minimum
valuation for Intec Parent following the Closing.
Recent
Developments
In
December 2020, we initiated a clinical trial in Israel evaluating the safety, tolerability and PK of an optimized AP-THC. Initial results
demonstrated that the optimized AP-THC was able to achieve better controlled release profile with prolonged exposure and shorter lag
time compared with Marinol which is a prescription medicine in the United States. The active ingredient in Marinol is Dronabinol, which
is synthetic THC.
Results
of Operations
The
table below provides our results of operations for the periods indicated.
|
|
Three months ended
March 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(dollars 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
|
)
|
Three
Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
Research
and Development Expenses
Our
research and development expenses for the three months ended March 31, 2021 amounted to approximately $2.1 million, an increase of $100,000,
or approximately 5%, compared to approximately $2.0 million for the three months ended March 31, 2020. The increase was primarily related
to the accelerated depreciation for property and equipment following the proposed Merger.
General
and Administrative Expenses
Our
general and administrative expenses for the three months ended March 31, 2021 amounted to approximately $2.0 million, an increase of
$300,000, or approximately 18%, compared to approximately $1.7 million for the three months ended March 31, 2020. The increase was primarily
related to professional services expenses related to the Merger Agreement that was recorded in the three-month ended March 31, 2021.
Operating
Loss
Because
of the foregoing, for the three months ended March 31, 2021 our operating loss was approximately $4.1 million, an increase of $400,000,
or approximately 11%, compared to our operating loss for the three months ended March 31, 2020 of approximately $3.7 million. The increase
was mainly due to an increase in general and administrative expenses, as detailed above.
Financial
Expenses, Net
For
the three months ended March 31, 2021, we had financial expenses from foreign currency exchange expenses in the amount of approximately
$28,000 and bank fees.
For
the three months ended March 31, 2020, we had financial expenses from foreign currency exchange expenses in the amount of approximately
$79,000 and bank fees, offset by financial income from interest on cash and cash equivalents in the amount of approximately $10,000 and
financial income from change in fair value of marketable securities in the amount of approximately $2,000.
Income
tax
For
the three months ended March 31, 2021 and 2020, we have not generated taxable income in Israel. However, for the three months ended March
31, 2021 and 2020 we incurred tax expenses in Intec Pharma Inc. in the amount of $20,000 and $61,000, respectively.
Net
Loss
Because
of the foregoing, for the three months ended March 31, 2021 our net loss was approximately $4.2 million, an increase of $300,000, or
approximately 8%, compared to our net loss for the three months ended March 31, 2020 of approximately $3.9 million. The increase was
mainly due to an increase in general and administrative expenses, as detailed above.
Liquidity
and Capital Resources
Since
our inception, we have funded our operations primarily through public and private offerings (in Israel and in the U.S.) of our equity
securities, grants from the IIA and other grants from organizations such as the Michael J. Fox Foundation, and payments received under
the feasibility and related agreements we have entered into with multinational pharmaceutical companies, pursuant to which we are entitled
to full coverage of our development costs with regard to the projects specified in those agreements.
As
of March 31, 2021, we had cash and cash equivalents and restricted cash of approximately $11.1 million. As of December 31, 2020, we had
cash and cash equivalents of approximately $14.7 million.
Net
cash used in operating activities was approximately $4.3 million for the three months ended March 31, 2021 compared with net cash used
in operating activities of approximately $5.1 million for the three months ended March 31, 2020. This decrease resulted primarily from
the changes in operating asset and liability items of approximately $1.3 million, offset by an increase in our general and administrative
expenses in the amount of approximately $300,000.
We
had negative cash flow from investing activities of approximately $1,000 for the three months ended March 31, 2021 compared to positive
cash flow from investing activities of approximately $769,000 for the three months ended March 31, 2020. This change resulted primarily
from proceeds from disposal of marketable securities in the three-month ended March 31, 2020.
Net
cash provided by financing activities for the three months ended March 31, 2021 was approximately $956,000, which was provided by the
proceeds from exercise of warrants in February 2021. Net cash provided by financing activities for the three months ended March 31, 2020
was approximately $6.1 million, which was provided by the proceeds from our underwritten public offering in February 2020 that resulted
in net proceeds of approximately $5.7 million and by the funds received from the sale of our ordinary shares under our “at-the-market”
equity offering program that resulted in net proceeds of approximately $421,000.
Aspire
Capital Financing Arrangement
On
December 2, 2019, we entered into a purchase agreement with Aspire Capital Fund LLC, or Aspire Capital, which
was subsequently amended on May 16, 2021, or the Purchase Agreement,which provides that, upon the terms and conditions set forth therein, Aspire Capital is committed
to purchase up to an aggregate of $10.0 million of our ordinary shares over the 30-month term of the Purchase Agreement.
Concurrently
with entering into the Purchase Agreement, we also entered into a registration rights agreement with Aspire Capital, or the Registration
Rights Agreement, in which we agreed to file with the SEC one or more registration statements, as necessary, and to the extent permissible
and subject to certain exceptions, to register for sale under the Securities Act for the sale of our ordinary shares that have been and
may be issued to Aspire Capital under the Purchase Agreement.
We
filed with the SEC a prospectus supplement to our effective shelf registration statement on Form S-3 (File No. 333-230016) registering
all of the ordinary shares that may be offered to Aspire Capital from time to time. Under the Purchase Agreement, on any trading day
selected by us, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice, each, a Purchase Notice,
directing Aspire Capital (as principal) to purchase up to 10,000 of our ordinary shares in an amount no greater than $500,000 per business
day, up to $10.0 million of our ordinary shares in the aggregate at a per share price, or the Purchase Price, equal to the lesser of:
|
●
|
the lowest sale price of
our ordinary shares on the purchase date; or
|
|
|
|
|
●
|
the arithmetic average
of the three (3) lowest closing sale prices for our ordinary shares during the ten (10) consecutive trading days ending on the trading
day immediately preceding the purchase date.
|
We
and Aspire Capital also may mutually agree to increase the dollar amount to greater than $500,000 and the number of ordinary shares that
may be sold to as much as an additional 2,000,000 ordinary shares per business day, respectively.
In
addition, on any date on which we submit a Purchase Notice to Aspire Capital in an amount equal to at least 10,000 ordinary shares, we
also have the right, in our sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice, each, a
VWAP Purchase Notice, directing Aspire Capital to purchase an amount of ordinary shares equal to up to 30% of the aggregate of our ordinary
shares traded on our principal market on the next trading day, or the VWAP Purchase Date, subject to a maximum number of 12,500 ordinary
shares, unless we and Aspire Capital mutually agree otherwise. The purchase price per share pursuant to such VWAP Purchase Notice is
generally 97% of the volume-weighted average price for our ordinary shares traded on our principal market on the VWAP Purchase Date.
The
Purchase Price will be adjusted for any reorganization, recapitalization, non-cash dividend, share split, or other similar transaction
occurring during the period(s) used to compute the Purchase Price. We may deliver multiple Purchase Notices and VWAP Purchase Notices
to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed.
The
Purchase Agreement provides that we and Aspire Capital shall not effect any sales under the Purchase Agreement on any purchase date where
the closing sale price of our ordinary shares is less than $0.25. There are no trading volume requirements or restrictions under the
Purchase Agreement, and we will control the timing and amount of sales of our ordinary shares to Aspire Capital. Aspire Capital has no
right to require any sales by us, but is obligated to make purchases from us as directed by us in accordance with the Purchase Agreement.
There are no limitations on use of proceeds, financial or business covenants, restrictions on future funding, rights of first refusal,
participation rights, penalties or liquidated damages in the Purchase Agreement. In consideration for entering into the Purchase Agreement,
concurrently with the execution of the Purchase Agreement, we issued to Aspire Capital the Commitment Shares. The Purchase Agreement
may be terminated by us at any time, at its discretion, without any cost to us. Aspire Capital has agreed that neither we nor any of
our agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of our ordinary shares during
any time prior to the termination of the Purchase Agreement. Any proceeds from us received under the Purchase Agreement are expected
to be used to fund our research and development activities, for working capital and for general corporate purposes.
In
April 2021, we sold 319,393 ordinary shares under the Purchase Agreement at a purchase price of $3.7767 per share, for a total consideration
of approximately $1.2 million.
The
Purchase Agreement currently provides that the number of ordinary shares that may be sold pursuant to the Purchase Agreement will be
limited to 963,912 ordinary shares, or the Exchange Cap, which represents 19.99% of our outstanding ordinary shares on May 16, 2021,
unless shareholder approval or an exception pursuant to the rules of the Nasdaq Capital Market is obtained to issue more than 19.99%.
This limitation will not apply if, at any time the Exchange Cap is reached and at all times thereafter, the average price paid for all
ordinary shares issued under the Purchase Agreement is equal to or greater than $3.44, which is the price equal to the closing sale
price of our ordinary shares immediately preceding the execution of the amendment to the Purchase Agreement. We are not required or permitted to issue
any ordinary shares under the Purchase Agreement if such issuance would breach its obligations under the rules or regulations of the
Nasdaq Capital Market or other applicable law (including, without limitation, the Israeli Companies Law – 1999, as amended, or
the Israeli Companies Law). We may, in our sole discretion, determine whether to obtain shareholder approval to issue more than 19.99%
of our outstanding ordinary shares hereunder if such issuance would require shareholder approval under the rules or regulations of the
Nasdaq Capital Market or the Israeli Companies Law.
Current
Outlook
We
believe that we have adequate cash to fund our ongoing activities through the completion of the Merger and into the first quarter of
2022. However, changes may occur that would cause us to consume our existing cash prior to that time, including the costs to consummate
the Merger. Prior to closing of the Merger we agreed, among other things, that we would use commercially reasonable efforts to enter
into one or more agreements providing for the sale, transfer or assignment or that we would otherwise take steps related to the divestment
or disposal and satisfaction of liabilities of our Accordion Pill business, to be effected immediately after Closing. Although we have
entered into the Merger Agreement and intend to consummate the Merger, there is no assurance that it will be able to successfully complete
the Merger on a timely basis, or at all. If, for any reason, the Merger is not consummated and we are unable to continue to operate the
Accordion Pill business or identify and complete an alternative strategic transaction like the Merger, we may be required to dissolve
and liquidate our assets. In such case, we would be required to pay all of our debts and contractual obligations, and to set aside certain
reserves for potential future claims, and there can be no assurances as to the amount or timing of available cash left to distribute
to our shareholders after paying our debts and other obligations and setting aside funds for reserves.
We
are also closely monitoring ongoing developments in connection with the COVID-19 pandemic, which has resulted in disruptions to our partnering
efforts and may negatively impact our commercial prospects and our ability to raise capital. As of the date of issuance of these consolidated
financial statements, the extent to which the COVID-19 pandemic may materially impact our financial condition, liquidity, or results
of operations is uncertain. As a result of these uncertainties, there is substantial doubt about our ability to continue as a going concern
within one year after the issuance date of these financial statements. For more information, see note 1(c) in our condensed consolidated
financial statements for the three months ended March 31, 2021.
Developing
drugs, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and we will
need to raise substantial additional funds to achieve our strategic objectives. We will require significant additional financing in the
future to fund our operations, including if and when we progress into additional clinical trials, obtain regulatory approval for one
or more of our product candidates, obtain commercial manufacturing capabilities and commercialize one or more of our product candidates.
Our future capital requirements will depend on many factors, including, but not limited to:
|
●
|
the
timing of and our ability to complete the Merger;
|
|
●
|
the
progress and costs of our clinical trials and other research and development activities;
|
|
●
|
the
scope, prioritization and number of our clinical trials and other research and development programs;
|
|
●
|
the
amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements
with respect to our product candidates;
|
|
●
|
the
impact of the COVID-19 pandemic;
|
|
●
|
the
costs of the development and expansion of our operational infrastructure;
|
|
●
|
the
costs and timing of obtaining regulatory approval for one or more of our product candidates;
|
|
●
|
the
ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under
our potential future licensing agreements;
|
|
●
|
the
costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
|
|
●
|
the
costs and timing of securing manufacturing arrangements for clinical or commercial production;
|
|
●
|
the
costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;
|
|
●
|
the
costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or technology;
|
|
●
|
the
magnitude of our general and administrative expenses;
|
|
●
|
any
cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates.
|
Until
we can generate significant recurring revenues, we expect to satisfy our future cash needs through capital raising. We cannot be certain
that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay,
reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more of our
product candidates and make necessary change to our operations to reduce the level of our expenditures in line with available resources.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
Critical
Accounting Policies
This
discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates
that affect the reported amounts of our assets, liabilities and expenses. Significant accounting policies employed by us, including the
use of estimates, are presented in the notes to the consolidated financial statements included elsewhere in our Annual Report on Form
10-K for the year ended December 31, 2020. We periodically evaluate our estimates, which are based on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances. Critical accounting policies are those that are most important
to the portrayal of our financial condition and results of operations and require our subjective or complex judgments, resulting in the
need to make estimates about the effect of matters that are inherently uncertain. If actual performance should differ from historical
experience or if the underlying assumptions were to change, our financial condition and results of operations may be materially impacted.
Our
critical accounting policies and estimates are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. There
have been no material changes to those policies during the three months ended March 31, 2021.
Recently
Issued Accounting Pronouncements
None.