UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 001-37521
INTEC PHARMA LTD.
(Exact name of Registrant as specified in its Charter)
Israel | Not Applicable | |
(State or other jurisdiction of
| (I.R.S. Employer
| |
12 Hartom Street Har Hotzvim | 9777512 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: +972-2+972-2 - 586-4657
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Ordinary Shares, no par value | NTEC | The NasdaqCapital Market |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | |
Non-accelerated filer | Smaller reporting company | ☒ | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The number of shares of Registrant’s ordinary shares outstanding as of August 5, 2020: 71,839,492May 13, 2021: .
TABLE OF CONTENTS
i
2 |
PART I. FINANCIAL INFORMATION
Item 1.
Item 1. | Financial Statements |
INTEC PHARMA LTD.
UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF JUNE 30, 2020MARCH 31, 2021
1
INTEC PHARMA LTD.
UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page | |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: | |
Consolidated Balance Sheets | F-2 |
Consolidated Statements of Operations | F-3 |
Consolidated Statements of Changes in Shareholders’ Equity | F-4 |
Consolidated Statements of Cash Flows | |
Notes to Consolidated Financial Statements |
F-1
F-1 |
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
U.S. dollars in thousands | ||||||||
Assets | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 10,135 | $ | 14,671 | ||||
Restricted cash (Note 6) | 1,000 | - | ||||||
Prepaid expenses and other receivables | 1,024 | 297 | ||||||
TOTAL CURRENT ASSETS | 12,159 | 14,968 | ||||||
NON-CURRENT ASSETS: | ||||||||
Property and equipment, net | 869 | 1,394 | ||||||
Operating lease right-of-use assets | 685 | 817 | ||||||
Other assets (Note 3a) | 3,717 | 3,717 | ||||||
TOTAL NON-CURRENT ASSETS | 5,271 | 5,928 | ||||||
TOTAL ASSETS | $ | 17,430 | $ | 20,896 | ||||
Liabilities and shareholders’ equity | ||||||||
CURRENT LIABILITIES - | ||||||||
Accounts payable and accruals: | ||||||||
Trade | $ | 183 | $ | 368 | ||||
Other (Note 5) | 5,020 | 4,966 | ||||||
TOTAL CURRENT LIABILITIES | 5,203 | 5,334 | ||||||
LONG-TERM LIABILITIES - | ||||||||
Operating lease liabilities | 178 | 338 | ||||||
Other liabilities | 705 | 691 | ||||||
TOTAL LONG-TERM LIABILITIES | 883 | 1,029 | ||||||
TOTAL LIABILITIES | 6,086 | 6,363 | ||||||
COMMITMENTS AND CONTINGENT LIABILITIES (Note 3) | - | |||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Ordinary shares, with par value - authorized: Ordinary Shares as of March 31, 2021 and December 31, 2020; issued and outstanding: and Ordinary Shares as of March 31, 2021 and December 31, 2020, respectively | 727 | 727 | ||||||
Additional paid-in capital | 218,397 | 217,357 | ||||||
Accumulated deficit | (207,780 | ) | (203,551 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 11,344 | 14,533 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 17,430 | $ | 20,896 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2 |
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
2021 | 2020 | |||||||
Three months ended March 31 | ||||||||
2021 | 2020 | |||||||
U.S. dollars in thousands | ||||||||
OPERATING EXPENSES: | ||||||||
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 | ) |
U.S. dollars | ||||||||
LOSS PER ORDINARY SHARE - BASIC AND DILUTED | $ | (0.96 | ) | $ | (1.65 | ) | ||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER ORDINARY SHARE IN THOUSANDS | 4,419 | 2,346 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3 |
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
June 30, | December 31, | |||||||
2020 | 2019 | |||||||
U.S. dollars in thousands | ||||||||
Assets | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 13,799 | $ | 9,292 | ||||
Investment in marketable securities (Note 3) | - | 770 | ||||||
Prepaid expenses and other receivables | 1,307 | 3,683 | ||||||
TOTAL CURRENT ASSETS | 15,106 | 13,745 | ||||||
NON-CURRENT ASSETS: | ||||||||
Property and equipment, net | 1,967 | 2,575 | ||||||
Operating lease right-of-use assets | 993 | 1,243 | ||||||
Other assets (Note 4a) | 3,717 | 3,717 | ||||||
TOTAL NON-CURRENT ASSETS | 6,677 | 7,535 | ||||||
TOTAL ASSETS | $ | 21,783 | $ | 21,280 | ||||
Liabilities and shareholders’ equity | ||||||||
CURRENT LIABILITIES - | ||||||||
Accounts payable and accruals: | ||||||||
Trade | $ | 382 | $ | 3,507 | ||||
Other (Note 6) | 3,997 | 4,835 | ||||||
TOTAL CURRENT LIABILITIES | 4,379 | 8,342 | ||||||
LONG-TERM LIABILITIES - | ||||||||
Non-current operating lease liabilities | 536 | 799 | ||||||
Other liabilities | 690 | 604 | ||||||
TOTAL LONG-TERM LIABILITIES | 1,226 | 1,403 | ||||||
TOTAL LIABILITIES | 5,605 | 9,745 | ||||||
COMMITMENTS AND CONTINGENT LIABILITIES (Note 4) | ||||||||
SHAREHOLDERS’ EQUITY: | ||||||||
Ordinary shares, with no par value - authorized: 100,000,000 Ordinary Shares as of June 30, 2020 and December 31, 2019; issued and outstanding: 69,428,032 and 35,892,209 Ordinary Shares as of June 30, 2020 and December 31, 2019, respectively | 727 | 727 | ||||||
Additional paid-in capital | 211,691 | 200,231 | ||||||
Accumulated deficit | (196,240 | ) | (189,423 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 16,178 | 11,535 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 21,783 | $ | 21,280 |
Shares | Amounts | Amounts | Deficit | Total | ||||||||||||||||
Ordinary Shares | Additional paid-in capital | Accumulated Deficit | Total | |||||||||||||||||
Number of shares | Amounts | Amounts | ||||||||||||||||||
U.S. dollars in thousands | ||||||||||||||||||||
BALANCE AT JANUARY 1, 2020 | 1,811,431 | $ | 727 | $ | 200,231 | (189,423 | ) | $ | 11,535 | |||||||||||
CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2020: | ||||||||||||||||||||
Issuance of ordinary shares, net of issuance costs | 41,569 | - | 421 | - | 421 | |||||||||||||||
Issuance of ordinary shares and warrants, net of issuance costs | 812,500 | - | 5,692 | - | 5,692 | |||||||||||||||
Waiver of ordinary shares by a shareholder | ||||||||||||||||||||
Waiver of ordinary shares by a shareholder, shares | ||||||||||||||||||||
Exercise of warrants (Note 4a) | ||||||||||||||||||||
Exercise of warrants (Note 4a), shares | ||||||||||||||||||||
Share-based compensation (Note 4b) | - | - | 442 | - | 442 | |||||||||||||||
Net loss | - | - | - | (3,870 | ) | (3,870 | ) | |||||||||||||
BALANCE AT MARCH 31, 2020 | 2,665,500 | $ | 727 | $ | 206,786 | $ | (193,293 | ) | $ | 14,220 | ||||||||||
BALANCE AT JANUARY 1, 2021 | 4,321,296 | $ | 727 | $ | 217,357 | (203,551 | ) | $ | 14,533 | |||||||||||
CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2021: | ||||||||||||||||||||
Waiver of ordinary shares by a shareholder | (1,218 | ) | - | - | - | - | ||||||||||||||
Exercise of warrants (Note 4a) | 182,500 | - | 956 | - | 956 | |||||||||||||||
Share-based compensation (Note 4b) | - | - | 84 | - | 84 | |||||||||||||||
Net loss | - | - | - | (4,229 | ) | (4,229 | ) | |||||||||||||
BALANCE AT MARCH 31, 2021 | 4,502,578 | $ | 727 | $ | 218,397 | $ | (207,780 | ) | $ | 11,344 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4 |
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
2021 | 2020 | |||||||
Three months ended March 31 | ||||||||
2021 | 2020 | |||||||
U.S. dollars in thousands | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (4,229 | ) | $ | (3,870 | ) | ||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 526 | 306 | ||||||
Exchange differences on cash and cash equivalents and restricted cash | 180 | 135 | ||||||
Change in operating right of use asset | 132 | 126 | ||||||
Change in operating lease liabilities | (175 | ) | (152 | ) | ||||
Gains on marketable securities | - | (2 | ) | |||||
Share-based compensation | 84 | 442 | ||||||
Changes in operating assets and liabilities: | ||||||||
Decrease (increase) in prepaid expenses and other receivables | (727 | ) | 1,045 | |||||
Decrease in accounts payable and accruals | (116 | ) | (3,225 | ) | ||||
Increase in other liabilities | 14 | 48 | ||||||
Net cash used in operating activities | (4,311 | ) | (5,147 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (1 | ) | (3 | ) | ||||
Proceeds from disposal of marketable securities, net | - | 772 | ||||||
Net cash provided by (used in) investing activities | (1 | ) | 769 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of ordinary shares, net of issuance costs | - | 421 | ||||||
Proceeds from issuance of ordinary shares and warrants, net of issuance costs | - | 5,692 | ||||||
Exercise of warrants | 956 | - | ||||||
Net cash provided by financing activities | 956 | 6,113 | ||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | (3,356 | ) | 1,735 | |||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF THE PERIOD | 14,671 | 9,292 | ||||||
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | (180 | ) | (135 | ) | ||||
TOTAL CASH AND CASH EQUIVALENTS AND RESTRICTED CASH SHOWN AT THE END OF THE PERIOD | $ | 11,135 | $ | 10,892 | ||||
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION - | ||||||||
Taxes paid | $ | 10 | - | |||||
Interest received | - | $ | 9 | |||||
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH REPORTED IN THE STATEMENT OF FINANCIAL POSITION: | ||||||||
Cash and cash equivalents | $ | 10,135 | $ | 10,892 | ||||
Restricted cash | 1,000 | - | ||||||
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 11,135 | $ | 10,892 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
U.S. dollars in thousands | U.S. dollars in thousands | |||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||
RESEARCH AND DEVELOPMENT EXPENSES, net | $ | (1,275 | ) | $ | (7,860 | ) | $ | (3,299 | ) | $ | (16,402 | ) | ||||
GENERAL AND ADMINISTRATIVE EXPENSES | (1,630 | ) | (2,144 | ) | (3,345 | ) | (4,334 | ) | ||||||||
OPERATING LOSS | (2,905 | ) | (10,004 | ) | (6,644 | ) | (20,736 | ) | ||||||||
FINANCIAL INCOME (EXPENSES), net | 4 | 33 | (66 | ) | 143 | |||||||||||
LOSS BEFORE INCOME TAX | (2,901 | ) | (9,971 | ) | (6,710 | ) | (20,593 | ) | ||||||||
INCOME TAX | (46 | ) | (38 | ) | (107 | ) | (72 | ) | ||||||||
NET LOSS | $ | (2,947 | ) | $ | (10,009 | ) | $ | (6,817 | ) | $ | (20,665 | ) |
U.S. dollars | ||||||||||||||||
LOSS PER SHARE BASIC AND DILUTED | $ | (0.05 | ) | $ | (0.30 | ) | $ | (0.12 | ) | $ | (0.62 | ) | ||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER ORDINARY SHARE IN THOUSANDS | 62,820 | 33,300 | 54,913 |
33,274 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
(Continued) - 1
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
Ordinary Shares | Additional paid-in capital | Accumulated Deficit | Total | |||||||||||||||||
Number of shares | Amounts | Amounts | ||||||||||||||||||
U.S. dollars in thousands | ||||||||||||||||||||
BALANCE AT JANUARY 1, 2019 | 33,232,988 | $ | 727 | $ | 194,642 | (141,824 | ) | $ | 53,545 | |||||||||||
CHANGES IN THE SIX-MONTH PERIOD ENDED JUNE 30, 2019: | ||||||||||||||||||||
Exercise of options | 69,812 | - | 268 | - | 268 | |||||||||||||||
Share-based compensation (Note 5) | - | 1,961 | - | 1,961 | ||||||||||||||||
Net loss | - | - | - | (20,665 | ) | (20,665 | ) | |||||||||||||
BALANCE AT JUNE 30, 2019 | 33,302,800 | $ | 727 | $ | 196,871 | $ | (162,489 | ) | $ | 35,109 | ||||||||||
BALANCE AT JANUARY 1, 2020 | 35,892,209 | $ | 727 | $ | 200,231 | $ | (189,423 | ) | $ | 11,535 | ||||||||||
CHANGES IN THE SIX-MONTH PERIOD ENDED JUNE 30, 2020: | ||||||||||||||||||||
Issuance of ordinary shares, net of issuance costs (Note 5a(1)) | 831,371 | - | 421 | - | 421 | |||||||||||||||
Issuance of ordinary shares and warrants, net of issuance costs (Note 5a(2)) | 16,250,000 | - | 5,692 | - | 5,692 | |||||||||||||||
Issuance of ordinary shares and warrants, net of issuance costs (Note 5a(3)) | 16,291,952 | - | 4,426 | - | 4,426 | |||||||||||||||
Exercise of warrants (Note 5a(2)) | 162,500 | 65 | 65 | |||||||||||||||||
Share-based compensation (Note 5) | - | - | 856 | - | 856 | |||||||||||||||
Net loss | - | - | - | (6,817 | ) | (6,817 | ) | |||||||||||||
BALANCE AT JUNE 30, 2020 | 69,428,032 | $ | 727 | $ | 211,691 | $ | (196,240 | ) | $ | 16,178 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
(Continued) - 2
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
Ordinary Shares | Additional paid-in capital | Accumulated Deficit | Total | |||||||||||||||||
Number of shares | Amounts | Amounts | ||||||||||||||||||
U.S. dollars in thousands | ||||||||||||||||||||
BALANCE AT APRIL 1, 2019 | 33,297,371 | $ | 727 | $ | 195,842 | (152,480 | ) | $ | 44,089 | |||||||||||
CHANGES IN THE THREE-MONTH PERIOD ENDED JUNE 30, 2019: | ||||||||||||||||||||
Exercise of options | 5,429 | - | 11 | - | 11 | |||||||||||||||
Share-based compensation | - | - | 1,018 | - | 1,018 | |||||||||||||||
Net loss | - | - | - | (10,009 | ) | (10,009 | ) | |||||||||||||
BALANCE AT JUNE 30, 2019 | 33,302,800 | $ | 727 | $ | 196,871 | $ | (162,489 | ) | $ | 35,109 | ||||||||||
BALANCE AT APRIL 1, 2020 | 52,973,580 | $ | 727 | $ | 206,786 | $ | (193,293 | ) | $ | 14,220 | ||||||||||
CHANGES IN THE THREE-MONTH PERIOD ENDED JUNE 30, 2020: | ||||||||||||||||||||
Issuance of ordinary shares and warrants, net of issuance costs (Note 5a(3)) | 16,291,952 | - | 4,426 | - | 4,426 | |||||||||||||||
Exercise of warrants (Note 5a(2)) | 162,500 | - | 65 | - | 65 | |||||||||||||||
Share-based compensation | - | - | 414 | - | 414 | |||||||||||||||
Net loss | - | - | - | (2,947 | ) | (2,947 | ) | |||||||||||||
BALANCE AT JUNE 30, 2020 | 69,428,032 | $ | 727 | $ | 211,691 | $ | (196,240 | ) | $ | 16,178 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
F-5 |
INTEC PHARMA LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30 | ||||||||
2020 | 2019 | |||||||
U.S. dollars in thousands | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (6,817 | ) | $ | (20,665 | ) | ||
Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 611 | 431 | ||||||
Exchange differences on cash and cash equivalents | 49 | (19 | ) | |||||
Change in right of use asset | 250 | 351 | ||||||
Change in lease liabilities | (263 | ) | (243 | ) | ||||
Gains on marketable securities | (2 | ) | (5 | ) | ||||
Share-based compensation | 856 | 1,961 | ||||||
Changes in operating assets and liabilities: | ||||||||
Decrease (increase) in prepaid expenses and other receivables | 2,376 | (136 | ) | |||||
Increase in deferred tax assets | - | (148 | ) | |||||
Increase (decrease) in accounts payable and accruals | (3,963 | ) | 583 | |||||
Increase in other liabilities | 86 | 163 | ||||||
Net cash used in operating activities | (6,817 | ) | (17,727 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (3 | ) | (151 | ) | ||||
Investment in other assets | - | (1,435 | ) | |||||
Proceeds from disposal of marketable securities, net | 772 | 576 | ||||||
Net cash provided by (used in) investing activities | 769 | (1,010 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of ordinary shares, net of issuance costs (Note 5a(1)) | 421 | - | ||||||
Proceeds from issuance of ordinary shares and warrants, net of issuance costs (Note 5a(2)) | 5,692 | - | ||||||
Proceeds from issuance of ordinary shares and warrants, net of issuance costs (Note 5a(3)) | 4,426 | - | ||||||
Proceeds from exercise of warrants | 65 | - | ||||||
Proceeds from exercise of options | - | 268 | ||||||
Net cash provided by financing activities | 10,604 | 268 | ||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 4,556 | (18,469 | ) | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | 9,292 | 39,246 | ||||||
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS | (49 | ) | 19 | |||||
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ | 13,799 | $ | 20,796 | ||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Liability with respect to property and equipment | $ | - | $ | 502 | ||||
Liability with respect to other assets (see note 4a) | $ | - | $ | 1,114 | ||||
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION - | ||||||||
Taxes paid | $ | - | $ | 50 | ||||
Interest received | $ | 27 | $ | 263 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-6
INTEC PHARMA LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION:PRESENTATION:
a. |
Intec Pharma Ltd. (“ |
Intec is a limited liability public company incorporated in Israel.
Intec’s ordinary shares are traded on the NASDAQ Capital Market (“NASDAQ”).
In September 2017, Intec incorporated a wholly-owned subsidiary in the United States of America in the State of Delaware - Intec Pharma Inc. (the “Subsidiary”, together with Intec - “the Company”). The Subsidiary was incorporated mainly to provide Intec executive and management services, including business development, medical affairs and investor relationship activities outside of Israel.
Intec Israel is a limited liability public company incorporated in Israel. | ||
Intec Israel ordinary shares are traded on the NASDAQ Capital Market (“NASDAQ”). | ||
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. | ||
b. | 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. | |
For more details on the Merger Agreement, see note 6. | ||
c. | 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 | |
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”). |
The Company believes that it has adequate cash to fund its ongoing activities into the third quarter of 2021. Its ability to execute its operating plan beyond the third quarter of 2021 is dependent on its ability to obtain additional capital principally through entering into collaborations, strategic alliances, or license agreements with third parties and/or raising capital from the public and/or private investors and/or institutional investors. The negative outcome of the Phase III clinical trial that was announced on July 22, 2019 and uncertainty regarding the Company’s development programs is expected to adversely affect its ability to obtain funding and there is no assurance that it will be successful in obtaining the level of financing needed for its activities. If the Company is unsuccessful in securing sufficient financing, it may need to curtail or cease operations. In addition, the COVID-19 pandemic ,also known as “coronavirus”, that was reported in Wuhan, China in late 2019 and that has spread globally, has resulted in significant financial market volatility and uncertainty in recent months. 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 work place protocols for its employees in accordance with government requirements. The implementation of measures to prevent the spread of coronavirus 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 still too early to assess the full impact of the coronavirus outbreak and the extent to which the coronavirus impacts the Company’s operations 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 the coronavirus or treat its impact. As of the date of issuance of these condensed 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.
F-7
F-6 |
INTEC PHARMA LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued):
Furthermore, the estimation process required to prepare the Company’s consolidated financial statements required assumptions to be made about future event and conditions and the impact of COVID-19 in the Company’s financial results, and while Company’s management believe such assumptions are reasonable, they are inherently subjective and uncertain. The Company’s actual results could differ materially from those estimates. As a result of these uncertainties, 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.
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.
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 | |||
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 |
On February 3, 2020, the Company completed an underwritten public offering and raised a total of approximately $5.7 million (net of underwriting discounts, commissions and other offering expenses in the amount of approximately $800 thousand). For more details see note 5a(2).
In addition, on May 6, 2020, the Company completed a registered direct offering and concurrent private placement raising a total of approximately $4.5 million (net of placement agent and other offering expenses in the amount of approximately $500 thousand). For more details see note 5a(3).
As a result of | |||
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. | |||
d. | On October 30, 2020, the Company | ||
e. | 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 | ||
f. | Basis of presentation | ||
The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and S-X Article 10 for interim financial statements. Accordingly, they do not contain all information and notes required by US GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a |
F-8
F-7 |
INTEC PHARMA LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued):
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 June 30, 2020, the consolidated results of operations, changes in equity for the three and six-month periods ended June 30, 2020 and 2019 and cash flows for the six-month periods ended June 30, 2020 and 2019.
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, 2019,2020, as filed in the 10-K on March 13, 2020.16, 2021. The condensed balance sheet data as of December 31, 20192020 included in these unaudited condensed consolidated financial statements was derived from the audited financial statements for the year ended December 31, 20192020 but does not include all disclosures required by US GAAP for annual financial statements.
The results for the six-monththree-month period ended June 30, 2020March 31, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2020.
F-9
INTEC PHARMA LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
2021.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:POLICIES:
a. Principles of consolidation
The consolidated financial statements include the accounts of |
b. Fair value measurement
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: |
Level 1: | 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. | |
Level 2: | Observable prices that are based on inputs not quoted on active markets but corroborated by market data. | |
Level 3: | Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. | |
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. |
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:
Level 1: 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.
Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
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.
F-10
INTEC PHARMA LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
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.
F-8 |
INTEC PHARMA LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
SCHEDULE OF ANTI-DILUTIVE SECURITIES
Three months ended March 31 | ||||||||
2021 | 2020 | |||||||
Outstanding stock options | 251,992 | 212,798 | ||||||
Warrants | 992,674 | 514,583 |
Three months ended June 30 | Six months ended June 30 | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Outstanding stock options | 4,657,554 | 4,401,151 | 4,333,363 | 4,296,573 | |||||||||||||
Warrants | 21,128,749 | - | 15,740,145 | - |
Research and development expenses, net for the six-month period ended June 30, 2019, include participation in research and development expenses in the amount of approximately $815 thousand. For the six-month period ended June 30, 2020, the Company had 0 participation in research and development expenses.
NOTE 3 - MARKETABLE SECURITIESCOMMITMENTS AND CONTINGENT LIABILITIES:
The Company’s marketable securities included bonds issued by the State of Israel and corporate bonds with a minimum of A rating by global rating agencies. These assets are recorded as fair value with changes recorded in the statement of operations as “financial income (expenses), net”, as the Company chose to apply the fair value option. These assets are categorized as Level 1.
As of June 30, 2020, the Company had 0 marketable securities. As of December 31, 2019, the amount of the marketable securities is approximately $770 thousand.
The gain, net from changes in marketable securities for the six-month periods ended June 30, 2020 and 2019 amounted to approximately $2 thousand and $5 thousand, respectively.
NOTE 4 - COMMITMENTS AND CONTINGENT LIABILITIES:
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE
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.
NOTE 4 - SHARE
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTEC PHARMA LTD. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
In the SCHEDULE OF OPTIONS GRANTED TO EMPLOYEES
three months ended March 31, 2020 was $ thousand.
UNDERLYING DATA USED FOR COMPUTING THE FAIR VALUE OF THE OPTIONS
NOTE SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUALS - OTHER
INTEC PHARMA LTD. NOTES TO (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 % of the aggregate number of the outstanding securities of Intec Parent (based on a valuation of $million), and the securityholders of the Company immediately before the Domestication Merger are expected to own approximately % of the aggregate number of the outstanding securities of Intec Parent (based on a valuation of $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 $526 to $ . For the three-month period ended March 31, 2021, the Company recorded depreciation expenses of approximately $thousand. NOTE 7 - EVENTS SUBSEQUENT TO MARCH 31, 2021
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, 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 All references to “we,” “us,” “our,” “Intec”, “Intec Israel”, “the Company” and “our 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
The Domestication Merger As set forth in the 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:
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 Disposition of Accordion Pill Business In accordance with the 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
Results of Operations
The table below provides our results of operations for the periods indicated.
Three
Research and Development Expenses
Our research and development expenses
General and Administrative Expenses
Our general and administrative expenses for the three months ended
Operating Loss
Financial
For the three months ended
For the
Income tax For the three
Net Loss
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 Net cash used in operating activities was approximately 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 Net cash provided by financing activities for the
Aspire Capital Financing Arrangement On December 2, 2019, we entered into a 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
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 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 Current Outlook
We are also closely monitoring ongoing developments in connection with the 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,
Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through capital 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, Our critical accounting policies and estimates are disclosed in our Annual Report on Form 10-K for the year ended December 31, Recently Issued Accounting Pronouncements None.
Not required for smaller reporting companies.
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended
PART II. OTHER INFORMATION
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
In
Not required for a
None.
None.
Not applicable.
The following disclosure would have otherwise been filed on Form 8-K under the heading “Item 1.01 Entry into a Material Definitive Agreement”: On May 16, 2021, we entered into a First Amendment to Ordinary Shares Purchase Agreement, or the Amendment, with Aspire Capital, amending the Purchase Agreement, which provides for among other things, (i) for an updated Exchange Cap, pursuant to which we may issue up to an additional 963,912 ordinary shares which constitutes 19.99% of our 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. For a detailed description of the terms of the Purchase Agreement, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Aspire Capital Financing Arrangement.”
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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