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As filed with the U.S. Securities and Exchange Commission on May 12, 2021

 

Registration No. 333-255389

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1

to

 

 

FORM S-4

 

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

 

INTEC PARENT, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   2834

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

12 Hartom Street

Har Hotzvim, Jerusalem 9777512

+972-2-586-4657

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

MWE Corporate Services, LLC

1007 N. Orange Street, 10th Floor

Wilmington, Delaware 19801

(302) 485-3907

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:

 

Gary Emmanuel, Esq.

Ze’-ev D. Eiger, Esq.

McDermott Will & Emery LLP
340 Madison Avenue
New York, NY 10173

Tel: (212) 547-5400

Dr. Shachar Hadar, Adv.

Jonathan Atha, Adv.

Meitar | Law Offices

16 Abba Hillel Silver Rd.

Ramat Gan 52506, Israel

Tel: +972-3-610-3100

Michael Umansky, Esq.

James A. Mercer III, Esq.

Sheppard, Mullin, Richter & Hampton LLP

12275 El Camino Real, Suite 200

San Diego, CA 92130

Tel: (619) 338-6500

 

* Intec Pharma Ltd., an Israeli company, is to be merged with and into Domestication Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of Intec Parent, Inc., a Delaware corporation, and therefore be domesticated in the State of Delaware before the issuance of the merger securities registered pursuant to this registration statement on Form S-4.

 

Approximate date of commencement of proposed sale to the public: With respect to the securities to be issued in connection with the domestication merger as described in this registration statement, as soon as practicable after the effective date of this registration statement but prior to the satisfaction or waiver of all other conditions under the merger agreement described in this registration statement, and with respect to the securities to be issued in connection with the merger as described in this registration statement, as soon as practicable after the effective date of this registration statement and the satisfaction or waiver of all other conditions under the merger agreement described in this registration statement.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

 

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 Securities Exchange Act of 1934, as amended (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 7(a)(2)(B) of the Securities Act. ☐

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of
Securities to be Registered
  Amount to be Registered   Proposed Maximum Offering Price Per Security   Proposed Maximum Aggregate Offering Price   Amount of Registration Fee(5) 
Common stock, par value $0.01 per share   42,272,500(1)      $95,851,294(3)  $10,458
Options and warrants   1,140,938(2)           (4)

 

(1) Relates to the shares of common stock of Intec Parent, Inc., a Delaware corporation (“Intec Parent”), issuable to (i) holders of ordinary shares of Intec Pharma Ltd., an Israeli company (“Intec Israel”), in connection with the merger of Intec Israel with and into Domestication Merger Sub Ltd., an Israeli company and wholly owned subsidiary of Intec Parent, Inc., with Intec Israel being the surviving entity and a wholly owned subsidiary of Intec Parent (the “Domestication Merger”), including holders of Intec Israel ordinary shares in connection with one or more closing or pre-closing financing transactions of Intec Israel relating to the Merger (as defined below) and (ii) holders of common stock of Decoy Biosystems, Inc., a Delaware corporation (“Decoy”), in connection with the merger of Dillon Merger Subsidiary Inc., a Delaware corporation and a wholly owned subsidiary of Intec Parent, with and into Decoy, with Decoy being the surviving entity and a wholly owned subsidiary of Intec Parent (the “Merger”). The number of shares of Intec Parent common stock to be registered is based on (i) (A) the estimated number of shares of Intec Parent common stock expected to be issued and underlying options and warrants to purchase Intec Parent common stock expected to be issued pursuant to the Domestication Merger, without giving effect to any reverse split of Intec Israel ordinary shares, and (B) the estimated number of shares of Intec Parent common stock expected to be issued in connection with one or more closing or pre-closing financing transactions of Intec Israel relating to the Merger, and (ii) the estimated number of shares of Intec Parent common stock expected to be issued pursuant to the Merger, assuming an exchange ratio of 11.18 shares of Intec Parent common stock for each share of Decoy common stock and each share of Decoy common stock issuable upon exercise of outstanding Decoy options, without giving effect to any reverse split of Intec Israel ordinary shares. The estimated exchange ratio is based on (i) the capitalization of Intec Israel and Decoy at the date hereof, and (ii) pursuant to the Merger Agreement, the estimated amount of net cash of Decoy (less the Deposit Amount of $650,000) and the Intec entities (plus the Deposit Amount of $650,000) prior to the closing of the Merger.
   
(2) Represents options and warrants of Intec Israel which will be converted on a one-for-one basis for options and warrants of Intec Parent in connection with the Domestication Merger.
   
(3) With respect to the shares of Intec Parent common stock issued pursuant to the Domestication Merger, calculated pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities Act of 1933, as amended (the “Securities Act”), based on the average of the high and low prices for ordinary shares of Intec Israel as reported on the Nasdaq Capital Market on May 7, 2021 ($3.62 per share). With respect to the shares of Intec Parent common stock issued pursuant to the Merger, calculated pursuant to Rule 457(f) under the Securities Act, based on an amount equal to one-third of the par value of the Decoy common stock to be exchanged in the Merger (par value $0.01 per share). Decoy is a private company, no market exists for its securities and Decoy has an accumulated capital deficit. In accordance with Rule 416 under the Securities Act, this Registration Statement also covers an indeterminate number of additional shares of Intec Parent common stock as may be issuable as a result of stock splits, stock dividends or similar transactions.
   
(4) No separate registration fee required pursuant to Rule 457(g) under the Securities Act.
   
(5) Calculated pursuant to Section 6(b) of the Securities Act by calculating the product of (i) the proposed maximum aggregate offering price and (ii) by 0.0001091. Intec Parent previously paid $2,370.

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

The information in this proxy statement/prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED MAY 12, 2021

 

 

PROPOSED MERGER

 

YOUR VOTE IS VERY IMPORTANT

 

To the Shareholders of Intec Pharma Ltd.:

 

On March 15, 2021, Intec Pharma Ltd. (“Intec Israel”), Intec Parent, Inc., a Delaware corporation and a wholly owned subsidiary of Intec Israel (“Intec Parent”), Dillon Merger Subsidiary Inc., a Delaware corporation and a wholly owned subsidiary of Intec Parent (“Merger Sub”), Domestication Merger Sub Ltd., an Israeli company and a wholly owned subsidiary of Intec Parent (“Domestication Merger Sub”), and Decoy Biosystems, Inc., a Delaware corporation (“Decoy”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which, 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 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 (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. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus and incorporated herein by reference.

 

The Transactions

 

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 (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 (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 (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 (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. A copy of the Domestication Merger Agreement is attached as Annex B to this proxy statement/prospectus and incorporated herein by reference.

 

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 (the “Effective Time”):

 

  each outstanding share of Decoy common stock, par value $0.001 per share (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 (the “Intec entities”) and Decoy, which will result in an adjustment to such exchange ratio (and without giving effect to the reverse split of Intec Israel shares described below), 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, 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 below, 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 (the “Disposition”).

 

Effect of the Transactions

 

After giving effect to the Disposition, the Domestication Merger and the Merger (collectively, the “Transactions”), the former Decoy stockholders will hold approximately 75% of the outstanding securities of Intec Parent, and the shareholders of Intec Israel will retain ownership of approximately 25% of the outstanding securities of Intec Parent (on a non-diluted basis and before taking account of Decoy’s and Intec Israel’s net cash balance as described in this proxy statement/prospectus). For a more complete description of the merger consideration, see the section titled “The Merger Agreement — Merger Consideration” in this proxy statement/prospectus.

 

The Closing Financing

 

The Closing is conditioned on one or more closing or pre-closing financing transactions by Intec Israel or Intec Parent (the “Closing Financing”) 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. For further details about the Closing Financing, please see “Agreements Related to the Merger—Closing Financing” in this proxy statement/prospectus.

 

The Proposals

 

In connection with the proposed Transactions, Intec Israel will hold a special meeting of shareholders which is referred to herein as the “Meeting” to vote on proposals to approve and adopt the Merger Agreement, and the Transactions contemplated therein. At the Meeting, Intec Israel’s shareholders will be asked to vote on:

 

Proposal 1: a proposal to approve and adopt the Merger Agreement (including the certificate of merger);

 

Proposal 2: a proposal to approve the Domestication Merger, including the Domestication Merger Agreement, and certain matters related thereto, including the approval of Intec Parent’s amended and restated certificate of incorporation;

 

Proposal 3: a proposal to grant discretionary authority to the board of directors of Intec Israel to amend the articles of association of Intec Israel to effect a reverse share split of Intec Israel ordinary shares at a ratio within the range between 1-for-2 and 1-for-4 to be effective at the ratio and on a date to be determined by the board of directors of Intec Israel, in its sole discretion, prior to the effectiveness of the Domestication Merger;

 

Proposal 4: a proposal for the election, effective at the closing of the Merger, of the following directors to Intec Parent: Michael J. Newman, Ph.D., Hoonmo Lee and Brian O’Callaghan, as designated by Decoy, and certain current members of the board of directors of Intec Israel, Jeffrey Meckler, Hila Karah, Anthony J. Maddaluna, William B. Hayes and Dr. Roger J. Pomerantz to serve staggered terms until the first, second and third annual meeting;

 

 

 

 

Proposal 5: a proposal to approve and adopt the Intec Parent Option Plan (the “2021 Plan”);

 

Proposal 6: a proposal to approve, for, among other things, the purposes of Listing Rule 5635 of The Nasdaq Stock Market LLC (“Nasdaq”), the issuance of such number of Intec Israel ordinary shares or shares of Intec Parent Common Stock in one or more closing or pre-closing financing transactions, as described in this proxy statement/prospectus, as would yield aggregate gross proceeds to Intec Israel or Intec Parent, as applicable, such that 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; and

 

Proposal 7: a proposal to adjourn the Meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposals listed above.

 

The board of directors of Intec Israel has unanimously determined that the Merger Agreement and the Transactions contemplated thereby, including the Merger and the Domestication Merger, are fair to, and in the best interests of, Intec Israel and its shareholders. The board of directors of Intec Israel has unanimously approved all the proposals described above, which is referred to as “Proposals” and recommends that the shareholders of Intec Israel vote “FOR” all these Proposals.

 

The board of directors of Decoy unanimously: (a) has determined that the Merger Agreement, the Merger, in accordance with the terms of the Merger Agreement, and the other Transactions contemplated thereby are advisable, fair to, and in the best interests of Decoy and its stockholders; (b) has approved and adopted the Merger Agreement and approved the Merger and the Transactions contemplated thereby; and (c) will solicit consents from its stockholders to approve and adopt the Merger Agreement.

 

Your vote is important. The Transactions cannot be completed unless Decoy stockholders approve and adopt the Merger Agreement, and Intec Israel shareholders approve and adopt Proposals 1 through 6 at the Meeting. The obligations of Intec Israel and Decoy to complete the Merger are also subject to the satisfaction or waiver of certain conditions.

 

Votes from the holders of a majority of shares of Intec Israel present and entitled to vote at a meeting at which a quorum is present are required to approve and adopt the Proposals. Presently, the percentage of outstanding shares entitled to vote by directors, executive officers and their affiliates is approximately 0.5%.

 

More information about Intec Israel, Intec Parent, Merger Sub, Domestication Merger Sub and Decoy and the proposed Transactions are contained in this proxy statement/prospectus. Intec Israel and Decoy urge you to read this proxy statement/prospectus carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 21.

 

Intec Israel’s ordinary shares are listed on the Nasdaq Capital Market under the symbol “NTEC” and the closing price of Intec Israel’s ordinary shares on May 11, 2021 was $4.35 per share. Upon completion of the Domestication Merger and as a condition to the Merger, the shares of Intec Parent Common Stock will be listed on the Nasdaq Capital Market, subject to official notice of issuance. Decoy is a privately-held company and there is currently no public market for its securities.

 

Intec Israel and Decoy are excited about the opportunities the Merger brings to both Intec Israel and Decoy stockholders, and thank you for your consideration and continued support.

 

  /s/ Jeffrey Meckler
  Chief Executive Officer
  Intec Pharma Ltd.

 

Neither the Securities and Exchange Commission, which is referred to as the “SEC,” nor any state securities commission has approved or disapproved of the Domestication Merger, the Merger or the securities to be issued under this proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosures in this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

 

 

 

This proxy statement/prospectus is dated May 12, 2021, and is first being mailed to Intec Israel shareholders on or about May 28, 2021.

 

Intec Pharma LTD.
12 Hartom Street

Har Hotzvim, Jerusalem 9777512

+972-2-586-4657

 

NOTICE OF

 

SPECIAL MEETING OF SHAREHOLDERS

 

To Be Held On June 21, 2021

 

Dear Shareholders of Intec Pharma Ltd.:

 

We are pleased to invite you to attend a special meeting of shareholders (the “Meeting”) of Intec Pharma Ltd., an Israeli company, which we refer to as “Intec Israel,” which will be held at the offices of Meitar | Law Offices, 16 Abba Hillel Road, Ramat Gan 52506, Israel, on June 21, 2021 at 5:00 p.m. Israel time (10:00 a.m. Eastern time), for the following purposes:

 

1. To consider and vote upon a proposal to approve and adopt the Merger Agreement (including the certificate of merger), dated as of March 15, 2021, as it may be amended from time to time, which is referred to as the “Merger Agreement,” by and among Intec Israel, Intec Parent, Inc., a Delaware corporation and wholly owned subsidiary of Intec Israel (“Intec Parent”), Dillon Merger Subsidiary, Inc. (“Merger Sub”) and Domestication Merger Sub Ltd. (“Domestication Merger Sub”), two wholly owned subsidiaries of Intec Parent, and Decoy Biosystems, Inc., a Delaware corporation (“Decoy”), a copy of which is attached as Annex A to this proxy statement/prospectus (the “Merger Proposal”);
   
2. To consider and vote upon a proposal to approve the domestication of Intec Israel from Israel to the State of Delaware by Domestication Merger Sub merging with and into Intec Israel pursuant to an Agreement and Plan of Merger, dated as of April 27, 2021, among Intec Israel, Domestication Merger Sub and Intec Parent, which is referred to as the “Domestication Merger Agreement”, a copy of which is attached as Annex B to this proxy statement prospectus, with Intec Israel surviving the merger and becoming a wholly owned subsidiary of Intec Parent, which is referred to as the “Domestication Merger”, and certain matters related thereto, including the approval of the amended and restated certificate of incorporation of Intec Parent (the “Domestication Merger Proposal”);
   
3. To consider and vote upon a proposal to approve an amendment to the articles of association of Intec Israel to effect a reverse share split of ordinary shares of Intec Israel (the “Reverse Split”) at a ratio within the range between 1-for-2 and 1-for-4 to be effective at the ratio and on a date to be determined by the board of directors of Intec Israel in its sole discretion (the “Reverse Split Proposal”);
   
4. To consider and vote upon a proposal to elect, effective as of the closing of the Merger, Michael J. Newman, Ph.D., Hoonmo Lee and Brian O’Callaghan, as designated by Decoy, and certain current members of the board of directors of Intec Israel, Jeffrey Meckler, Hila Karah, Anthony J. Maddaluna, William B. Hayes and Dr. Roger J. Pomerantz, to the board of directors of Intec Parent to serve staggered terms until the first, second and third annual meeting (the “Directors Proposal”);
   
5. To consider and vote upon a proposal to approve the Intec Parent Option Plan (the “2021 Plan”), and to authorize for issuance of up to 7,459,852 shares of Intec Parent Common Stock thereunder (the “Option Plan Proposal”);
   
6. To consider and vote on a proposal to approve, for, among other things, the purposes of Nasdaq Listing Rule 5635(d), the issuance of such number of Intec Israel ordinary shares or shares of Intec Parent common stock in one or more closing or pre-closing financing transactions, as described in this proxy statement/prospectus, as would yield aggregate gross proceeds to Intec Israel or Intec Parent, as applicable, such that 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 (the “Closing Financing Proposal”); and
   
7. To consider and vote on any proposal to authorize the Intec Israel board of directors, in its discretion, to adjourn the Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the proposals listed above at the time of the Meeting (the “Adjournment Proposal”).

 

The foregoing items of business are more fully described in the proxy statement/prospectus that accompanies this notice. We do not expect to transact any other business at the Meeting. The Intec Israel board of directors has fixed the close of business on May 20, 2021 as the record date for the determination of shareholders entitled to notice of and to vote at this Meeting and at any adjournment or postponement thereof. Accordingly, only Intec Israel shareholders of record at the close of business on that date are entitled to notice of, and to vote at, the Meeting. At the close of business on May 11, 2021, Intec Israel had 4,821,971 ordinary shares issued and outstanding and entitled to vote.

 

The Intec Israel board of directors recommends that Intec Israel shareholders vote “FOR” each of the Proposals to be voted on at the Meeting. Because of their mutual dependence, if any of the Proposals, save for the Adjournment Proposal, is not approved, then the Merger will not proceed.

 

We cordially invite you to attend the meeting. However, to ensure your representation at the Meeting, please complete and promptly mail your proxy card in the return envelope enclosed, or authorize the individuals named on your proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with your proxy card or voting instruction card. This will not prevent you from voting in person, but will help to secure a quorum and avoid added solicitation costs. If your shares are held in “street name” by your broker or other nominee, only that holder can vote your shares and the vote cannot be cast unless you provide instructions to your broker. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Your proxy may be revoked at any time before it is voted. Please review the proxy statement/prospectus accompanying this notice for more complete information regarding the matters to be voted on at the meeting.

 

  By Order of the Board of Directors,
   
  Dr. John W. Kozarich
  Chairman of the Board
   
  May 12, 2021

 

IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE ASK YOU TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED OR TO VOTE BY TELEPHONE OR ON THE INTERNET USING THE INSTRUCTIONS ON THE PROXY CARD.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 21, 2021

 

The proxy statement and proxy card are available at https://ir.intecpharma.com/financial-information/sec-filings.

 

 

 

 

REFERENCES TO ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about Intec Israel that is filed with the SEC but not included or delivered herewith. Such information can be obtained from Intec Israel at no charge to Intec Israel shareholders upon written or oral request. The SEC maintains a website that contains the documents that Intec Israel files electronically with the SEC. The address of the SEC’s website is http://www.sec.gov. In addition, Intec Israel will provide to each person to whom a proxy statement/prospectus is delivered, without charge upon written or oral request, a copy of any or all of the documents that Intec Israel files with the SEC. Requests should be directed to:

 

Intec Pharma Ltd.
12 Hartom Street
Har Hotzvim, Jerusalem 9777512
+972-2-586-4657
Attention: Nir Sassi, Chief Financial Officer

 

You may also request information from Kingsdale Advisors, Intec Israel’s proxy solicitor, at the following address and telephone number:

 

 

Strategic Shareholder Advisor and Proxy Solicitation Agent

745 Fifth Avenue, 5th Floor, New York, NY 10151

 

North American Toll Free Phone:

1-866-851-2638

Email: contactus@kingsdaleadvisors.com

Call Collect Outside North America: 416-867-2272

 

To obtain timely delivery of such information, you must request the information no later than five business days before the Meeting. Accordingly, if you would like to request any information, please do so no later than June 16, 2021 (five days prior to the Meeting).

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

 

This proxy statement/prospectus which forms part of a registration statement on Form S-4 filed with the SEC by Intec Parent (File No. 333-255389), constitutes a prospectus of Intec Parent under Section 5 of the Securities Act of 1933, as amended, or the Securities Act, with respect to the shares of common stock, $0.01 par value per share, of Intec Parent, Inc., to be issued pursuant to the Merger Agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to the Meeting, at which Intec Israel shareholders will be asked to consider and vote on, among other matters, a proposal to approve the issuance of shares of Intec Parent Common Stock pursuant to the Merger Agreement.

 

No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated May 12, 2021. The information contained in this proxy statement/prospectus is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies.

 

Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus does not give effect to a Reverse Split Proposal described in Proposal No. 3, beginning on page 121 of this proxy statement/prospectus.

 

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

 

The information concerning Intec Israel contained in this proxy statement/prospectus or incorporated by reference has been provided by Intec Israel and the information concerning Decoy contained in this proxy statement/prospectus has been provided by Decoy.

 

 

 

 

TABLE OF CONTENTS

 

  Page
QUESTIONS AND ANSWERS ABOUT THE DISPOSITION, DOMESTICATION MERGER, THE MERGER AND OTHER PROPOSALS 1
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS 9
SUMMARY SELECTED FINANCIAL DATA OF INTEC ISRAEL 15
SUMMARY SELECTED FINANCIAL DATA OF DECOY 16
SUMMARY SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 17
MARKET PRICE AND DIVIDEND INFORMATION 20
RISK FACTORS 21
FORWARD-LOOKING STATEMENTS 83
THE SPECIAL MEETING OF INTEC ISRAEL’S SHAREHOLDERS 84
THE DOMESTICATION MERGER 87
THE MERGER 88
THE MERGER AGREEMENT 108
AGREEMENTS RELATED TO THE MERGER 112
MATTERS BEING SUBMITTED TO A VOTE OF INTEC ISRAEL SHAREHOLDERS 113
PROPOSAL NO. 1 - THE MERGER PROPOSAL 113
PROPOSAL NO. 2 - THE DOMESTICATION MERGER PROPOSAL 115
PROPOSAL NO. 3 – THE REVERSE SPLIT PROPOSAL 121
PROPOSAL NO. 4 - THE DIRECTORS PROPOSAL 126
PROPOSAL NO. 5 - THE OPTION PLAN PROPOSAL 129
PROPOSAL NO. 6 - THE CLOSING FINANCING PROPOSAL 133
PROPOSAL NO. 7 - THE ADJOURNMENT PROPOSAL 134
BUSINESS OF INTEC ISRAEL 135
INTEC ISRAEL’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 166
BUSINESS OF DECOY 174
DECOY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 181
DIRECTORS AND OFFICERS OF COMBINED COMPANY FOLLOWING THE MERGER 185
RELATED PARTY TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY 197
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS 198
DESCRIPTION OF SECURITIES 204
PRINCIPAL STOCKHOLDERS OF DECOY 223
PRINCIPAL STOCKHOLDERS OF INTEC ISRAEL 224
PRINCIPAL STOCKHOLDERS OF THE COMBINED COMPANY 225
LEGAL MATTERS 226
EXPERTS 227
WHERE YOU CAN FIND MORE INFORMATION 228
OTHER MATTERS 229
TRANSACTION OF OTHER BUSINESS 230
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS F-1
Annex A - Merger Agreement dated March 15, 2021  
Annex B – Domestication Merger Agreement dated April 27, 2021  
Annex C –Amended and Restated Certificate of Incorporation  
Annex D –Amended and Restated Bylaws  
Annex E – Intec Parent, Inc. Option Plan  

 

 

 

 

QUESTIONS AND ANSWERS ABOUT THE DOMESTICATION MERGER, THE MERGER AND OTHER PROPOSALS

 

The following are brief answers to some questions that you may have regarding the Domestication Merger, the Merger, the other Transactions and the Meeting. The questions and answers in this section may not address all questions that might be important to you as a shareholder. For more detailed information, and for a description of the legal terms governing the Transactions, Intec Israel and Intec Parent urge you to read carefully and in its entirety this proxy statement/prospectus, including the Annexes hereto, as well as the registration statement to which this proxy statement/prospectus relates, including the exhibits to the registration statement. For more information, please see the section titled “Where You Can Find More Information.”

 

The following section provides answers to frequently asked questions about the Transactions contemplated by the Merger Agreement. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections.

 

Q: What is the Domestication Merger and who votes on it?

 

A: For the reasons set forth below in detail under the section titled “The Domestication Merger,” beginning on page 87, the Intec Israel board of directors believes that it is in the best interests of Intec Israel and its shareholders for the ultimate parent company of Intec Israel and its affiliates to be a corporation incorporated under the laws of the State of Delaware, which is referred to in this proxy statement/prospectus as the “Domestication Merger.” To effect the Domestication Merger, Intec Israel will merge with and into Domestication Merger Sub pursuant to an Agreement and Plan of Merger among Intec Israel, Domestication Merger Sub and Intec Parent (the “Domestication Merger Agreement”), with Intec Israel surviving the merger and becoming a wholly owned subsidiary of Intec Parent (the “Domestication Merger”).

 

In connection with the Domestication Merger, all Intec Israel 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, having a par value of $0.01 per share (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, subject to adjustment to account for the Reverse Split of Intec Israel ordinary shares, at a Reverse Split ratio of between 1-for-2 and 1-for-4 to be effective at the ratio and on a date to be determined by the board of directors of Intec Israel in its sole discretion, prior to the effectiveness of the Domestication Merger. Shareholders are urged to read carefully that section of this proxy statement/prospectus, including the related annexes attached hereto, before voting.

 

The Domestication Merger Proposal will also include the approval of the amended and restated certificate of incorporation of Intec Parent.

 

As discussed below, the principal reasons for the domestication are the greater flexibility of Delaware corporate law and the substantial body of case law interpreting that law. Intec Israel believes that its shareholders will benefit from the well-established principles of corporate governance that Delaware law affords. Also, Decoy requires the domestication as a condition to the closing of the Merger (the “Closing”). The amended and restated certificate of incorporation and the amended and restated bylaws of Intec Parent are attached hereto as Annexes C and D, respectively.

 

Please read the section “Differences in Shareholder Rights,” beginning on page 203 for a description of the material differences between Intec Israel’s pre-domestication articles of association and Intec Parent’s post-domestication amended and restated certificate of incorporation and amended and restated bylaws.

 

If the Domestication Merger Proposal is approved, it is anticipated that the Domestication Merger will become effective after at least 50 days have elapsed after the filing of the Domestication Merger Proposal with the Israeli Companies’ Registrar and at least 30 days have elapsed after the approval of the Domestication Merger by Intec Israel shareholders and approval of the Domestication Merger by the shareholder of the Domestication Merger Sub have been obtained.

 

Q: What is the Disposition?

 

A: 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 sale of the entire issued share capital of Intec Israel or that it would otherwise take steps related to the divestment of assets or disposal and satisfaction of liabilities related to the same, to be effected immediately after the Closing (the “Disposition”). For a discussion of Intec Israel’s current ownership structure please see “Business of Intec Israel – Our Corporate Structure” on page 130.

 

Q: How will holders of Intec Israel Shares be impacted by the Domestication Merger?

 

A: Pursuant to the Domestication Merger, each ordinary share of Intec Israel will be converted into one share of Intec Parent Common Stock as part of the Domestication Merger.

 

Q: What are the material U.S. federal income tax consequences of the Domestication Merger to holders of Intec Israel Shares?

 

A: It is intended that the Domestication Merger, taken together with the Merger, qualify as an “exchange” described in Section 351(a) (a “Section 351(a) Exchange”) of the Internal Revenue Code of 1986, as amended, referred to as the “Code,” and Intec Israel and Intec Parent intend to report the Domestication Merger consistent with such qualification. Such qualification depends, in part, upon the conclusion that the Disposition does not disqualify the Domestication Merger as a Section 351(a) Exchange. Intec Israel intends to take the position that the Disposition does not prevent the Domestication Merger and the Merger together from qualifying as a Section 351(a) Exchange. The matter is not, however, free from doubt, and there is no controlling authority on the question. If the Internal Revenue Service (the “IRS”) were to successfully assert that the Disposition disqualifies the Domestication Merger as part of a Section 351(a) Exchange, the Domestication Merger would generally be treated as a taxable transaction in which U.S. holders of Intec Israel Shares would recognize gain or loss for U.S. federal income tax purposes. Intec Israel and Intec Parent have not sought, and will not seek, any ruling from the IRS regarding any matters related to the transactions, and as a result, there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth herein.

 

Although the Domestication Merger and the Merger, taken together, are intended to qualify as a Section 351(a) Exchange, which generally provides for tax-deferred treatment, the Domestication Merger is likely to be a taxable event for certain U.S. holders of Intec Israel Shares under the passive foreign investment company (“PFIC”) rules of the Code as a result of the likelihood that Intec Israel is classified as a PFIC.

 

You are strongly urged to consult with your own tax advisor for a full understanding of the tax consequences of the Merger to you, including the consequences under any applicable, state, local, foreign or other tax laws. For a more detailed description of the material U.S. federal income tax consequences of the Merger, see the section entitled “The Merger —  Material U.S. Federal Income Tax Consequences of the Domestication Merger and the Merger.”

 

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Q: What are the material Israeli income tax consequences of the Domestication Merger to Intec Israel shareholders?

 

A: Intec Israel shareholders will be treated as having sold their Intec Israel Shares as a result of the Domestication Merger, and in general, be subject to capital gains tax in Israel. However, shareholders who are not residents of Israel should generally be exempt from Israeli tax on the sale of the Intec Israel Shares subject to the receipt of a valid certification from the Israel Tax Authority (the “ITA”). Moreover, Intec Israel expects to obtain tax rulings from the ITA (i) with respect to holders of Intec Israel Shares that are non-Israeli residents (as defined in the Israeli Income Tax Ordinance [New Version], 1961 (the “ITO”)) or as will be determined by the ITA, (A) exempting Intec Parent, Intec Israel and their respective agents from any obligation to withhold Israeli tax from any consideration payable or otherwise deliverable pursuant to the Domestication Merger or clarifying that no such obligation exists, or (B) instructing Intec Parent, Intec Israel and their respective agents on how such withholding is to be executed, the rate or rates of withholding to be applied and how to identify any such non-Israeli residents; and (ii) with respect to holders of Intec Israel ordinary shares that are Israeli residents (as defined in the ITO or as will be determined by the ITA) (other than Intec ordinary shares subject to Section 102 of the ITO) (x) exempting Intec Parent, Intec Israel and their respective agents from any obligation to withhold Israeli tax from any consideration payable or otherwise deliverable pursuant to the Domestication Merger, or clarifying that no such obligation exists, or (y) instructing Intec Parent, Intec Israel and their respective agents on how such withholding is to be executed, the rate or rates of withholding to be applied.

 

You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the Domestication Merger to you, including the consequences under any applicable, state, local, foreign or other tax laws.

 

For a more detailed description of the material Israeli tax consequences of the Domestication Merger, see the section entitled “MATERIAL ISRAELI TAX CONSEQUENCES OF THE DOMESTICATION MERGER”.

 

Q: If effected, how will the Reverse Split and the Merger affect outstanding options and warrants to acquire Intec Parent’s Common Stock?

 

A: As of the effective time of the Reverse Split, Intec Israel will adjust and proportionately decrease the number of shares of Intec Israel reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all outstanding options and warrants to acquire Intec Israel’s shares at the Reverse Split ratio approved by its board of directors.

 

Q: What are the material U.S. federal income tax consequences of the Reverse Split to U.S. Holders of Intec Israel Shares?

 

A: Intec Israel intends for the Reverse Split to qualify as a “recapitalization” within the meaning of Section 368(a) of the Code. If the Reverse Split so qualifies, U.S. holders of Intec Israel Shares outstanding immediately before the Reverse Split generally should not recognize gain or loss upon the Reverse Split except to the extent of cash received in lieu of fractional Intec Israel Shares, if any. A U.S. holder’s aggregate tax basis in the Intec Israel Shares received pursuant to the Reverse Split should equal the aggregate tax basis of the Intec Israel Shares surrendered (excluding any portion of such basis that is allocated to any fractional Intec Israel Shares), and such U.S. holder’s holding period in the Intec Israel Shares received should include the holding period in the shares of Intec Israel Shares surrendered. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of the Intec Israel Shares surrendered to the Intec Israel Shares received in a “recapitalization”. U.S. holders of shares of Intec Parent Common Stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

 

You are strongly urged to consult with your own tax advisor for a full understanding of the tax consequences of the Reverse Split to you, including the consequences under any applicable, state, local, foreign or other tax laws. For a more detailed description of the material U.S. federal income tax consequences of the Reverse Split, see the section entitled “Proposal No. 3 the Reverse Split Proposal— Material U.S. Federal Income Tax Consequences of the Reverse Split.”

 

Q: What are the material Israeli income tax consequences of the Reverse Split to the shareholders of Intec Israel Shares?

 

A: The Reverse Split is not expected to be a taxable event for shareholders under Israeli tax laws but there is no assurance that the ITA will not challenge this tax treatment.

 

You are strongly urged to consult with your own tax advisor for a full understanding of the tax consequences of the Reverse Split to you.

 

Q: What is the Merger?

 

A: Following the Domestication Merger, Merger Sub will merge with and into Decoy with Decoy as the surviving entity in the Merger and as a wholly owned subsidiary of Intec Parent subject to satisfaction or waiver of the closing conditions under the Merger Agreement.

 

Q. What is the rationale for the Merger?

 

A. The Merger will result in Intec Parent, post-Merger (the “Combined Company”) pursuing the development of a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. Intec Israel’s board of directors considered a number of factors that supported its decision to approve the Merger Agreement. In the course of its deliberations, Intec Israel’s board of directors also considered a variety of risks and other countervailing factors related to entering into the Merger Agreement. For a more complete discussion of Intec Israel and Decoy’s reasons for the Merger, please see the sections titled “The Merger—Intec Israel’s Reasons for the Merger” and “The Merger—Decoy’s Reasons for the Merger.”

 

Q: What is the Closing Financing?

 

A: The Closing is conditioned on one or more closing or pre-closing financing transactions by Intec Israel or Intec Parent (the “Closing Financing”) such that upon Closing of the Merger (taking into account the proceeds to be received with respect to such financing), 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. For further details about the Closing Financing, please see “Agreements Related to the Merger—Closing Financing” in this proxy statement/prospectus on page 112.

 

Q: What will happen to Intec Israel if, for any reason, the Transactions are not completed?

 

A: If, for any reason, the Transactions are not completed, Intec Israel will reconsider its strategic alternatives and expects that it would either continue to advance the existing Accordion Pill business either on its own or in partnership with a strategic partner or it may seek to complete a potential merger, reorganization or other business combination transaction with another company similar to the Merger. If, for any reason, the Merger is not consummated and Intec Israel is unable to continue to operate the Accordion Pill business or identify and complete an alternative strategic transaction like the Merger, it may be required to dissolve and liquidate its assets. In such case, Intec Israel 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. Additionally, 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 $1,000,000, or Intec Israel may be required to pay to Decoy a reverse break-up fee of $1,000,000 and forfeit a deposit in the amount of $350,000 in favor of Decoy to cover transaction expenses.

 

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Q: Why am I receiving this proxy statement/prospectus?

 

A: You are receiving this proxy statement/prospectus because you are a shareholder of Intec Israel as of the record date, and you are entitled to vote at the Meeting to approve the Proposals. This document serves as:

 

  a proxy statement of Intec Israel used to solicit proxies for its Meeting; and
  a prospectus of Intec Parent used to issue shares of Intec Parent Common Stock in exchange for shares of Decoy Common Stock held by Decoy stockholders including holders of SAFEs and Decoy preferred stock that convert into Decoy Common Stock and shares of Decoy Common Stock issuable upon exercise of Decoy options.

 

Q: What is required to complete the Merger?

 

A: To complete the Merger, among other things, Intec Israel shareholders must approve the Proposals. The vote required for approval of the Proposals by Intec Israel shareholders is as follows:

 

Proposal
Number
  Proposal Description   Vote Required for Approval   Effect of
Abstentions
  Effect of
Broker
Non-Votes
1   Merger Proposal   FOR votes from the holders of a majority of shares present, in person or by proxy, at a meeting at which a quorum is present   None   None
                 
2.   Domestication Merger Proposal   FOR votes from the holders of a majority of shares present, in person or by proxy, at a meeting at which a quorum is present   None   None
                 
3   Reverse Split Proposal   FOR votes from the holders of a majority of shares present, in person or by proxy, at a meeting at which a quorum is present   None   None
                 
4   Directors Proposal   FOR votes from holders of a majority of shares present, in person or by proxy, at a meeting at which a quorum is present   None   None
                 
5   Option Plan Proposal  

FOR votes from the holders of a majority of shares present, in person or by proxy, at a meeting at which a quorum is present

 

  None   None
6.   Closing Financing Proposal   FOR votes from the holders of a majority of shares present, in person or by proxy, at a meeting at which a quorum is present    None   None
                 
7.   Adjournment   FOR votes from the holders of a majority of shares present, in person or by proxy, at a meeting at which a quorum is present   None   None

 

If Intec Israel is to complete the Merger with Decoy, shareholders must approve Proposal 1, Proposal 2, Proposal 4, Proposal 5 and Proposal 6. However, Proposal 2 and Proposal 3 are not conditioned upon the completion of the Merger, and as such, the Domestication Merger and the Reverse Split may be implemented by the Intec Israel board even if the Merger does not take place.

 

Decoy stockholders must also adopt the Merger Agreement and approve the Merger and the Transactions contemplated by the Merger Agreement. In connection with the execution of the Merger Agreement, certain shareholders of Decoy entered into support agreements with Intec Israel, Intec Parent and Merger Sub covering approximately 74% of the outstanding shares of Decoy relating to the Merger (the “Decoy Stockholder Support Agreements”). The Decoy Stockholder Support Agreements provide, among other things, that the stockholders party to the Decoy Stockholder Support Agreements will vote all of the shares of Decoy held by them: (i) in favor of the adoption of the Merger Agreement, the approval of the Merger and the other transactions contemplated by the Merger Agreement, provided that, with respect to the approval of the Merger Agreement and the Merger, they will vote such shares in the same manner as the vote of the holders of a majority of the outstanding shares of Decoy’s capital stock who do not sign a Decoy Stockholder Support Agreement, and (ii) against any adverse proposal, for up to eighteen (18) months following the date of the Decoy Stockholder Support Agreements (depending on the manner of termination of the Merger Agreement). In order to request that its stockholders adopt the Merger Agreement and approve the Merger and the Transactions contemplated by the Merger Agreement, Decoy plans to distribute a stockholder consent solicitation and notice of appraisal/dissenters’ rights to its stockholders. A form of such consent solicitation is attached as an exhibit to the registration statement of which this proxy statement/prospectus forms a part.

 

In addition to the requirement of obtaining the shareholder approvals described above, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived including the consummation of the Domestication Merger, the Disposition and the Closing Financing. For a more complete description of the closing conditions under the Merger Agreement, please see the section titled “The Merger Agreement—Conditions to the Closing of the Merger.”

 

Q: What will Decoy stockholders receive in the Merger?

 

A: Pursuant to the Merger Agreement, each share of Decoy common stock issued and outstanding immediately prior to the effective time of the Merger (“the Effective Time”) will be canceled and automatically converted into the right to receive, such number of shares of Intec Parent Common Stock as determined by the Exchange Ratio described below and subject to adjustment to account for the Reverse Split of Intec Israel ordinary shares, at a Reverse Split ratio of between 1-for-2 and 1-for- to be effective at the ratio and on a date to be determined by the board of directors of Intec Israel in its sole discretion, prior to the effectiveness of the Domestication Merger.

 

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Decoy, as well as Intec, Intec Parent and Merger Sub, are required to take all actions necessary so as to ensure that at the Effective Time, the Decoy Biosystems, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), and any certificate, option agreement or instrument issued to evidence any options granted under the 2018 Plan will be terminated and all Decoy options not exercised prior to the Effective Time will be assumed by Intec Parent and converted into the right to receive an equivalent number of options, as adjusted in accordance with the Exchange Ratio to take into effect the Merger, to purchase shares of Intec Parent Common Stock.

 

Under the Exchange Ratio formula in the Merger Agreement (the “Exchange Ratio”), without taking into consideration the effect of the respective levels of cash and liabilities of each of the Intec entities and Decoy, which will result in an adjustment to such Exchange Ratio (and without giving effect to the Reverse Split), following 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 (which reflects an imputed valuation of $30 million), 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 (which reflects an imputed valuation of $10 million), calculated in each case 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 the Disposition), subject to certain exceptions.

 

For illustrative purposes only, assuming Intec Israel’s net cash was determined to be $2.55 million and Decoy’s net cash was determined to be $5.65 million, then the Exchange Ratio would be 11.18 and former Decoy securityholders immediately before the Merger would hold 72.6% of the outstanding securities of Intec Parent and the former Intec Israel securityholders immediately before the Domestication Merger would hold 27.4% of the outstanding securities of Intec Parent, each on a fully diluted basis.

 

As further described below, the Closing is also conditioned on completion of a Closing 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.

 

For a more complete description of what the Decoy stockholders will receive in the Merger, please see the section titled “The Merger Agreement—Merger Consideration.”

 

Q: What will Intec Israel shareholders receive in the Merger?

 

A: Intec Israel shareholders will not receive any new securities in the Merger and will instead retain ownership of their Intec Parent Common Stock after the Domestication Merger, but their percentage ownership will decrease due to the number of shares being issued in the Merger and the Closing Financing. For a more complete description of what Intec Israel shareholders will receive in the Domestication Merger, please see the section titled “The Domestication Merger”.

 

Q: Who will be the directors of the Combined Company following the Merger?

 

A: Upon the Closing of the Merger, the Combined Company’s board of directors is expected to be composed of eight directors, three of which will be current directors of Decoy or designees of Decoy, and five of which will be designated by Intec Parent.

 

The table below provides the names and principal affiliation of the individuals currently identified to serve as directors of the Combined Company following the consummation of the Merger.

 

Name   Current Principal Affiliation
Jeffrey Meckler   Director and Chief Executive Officer of Intec Israel

Hila Karah

Anthony J. Maddaluna

 

Director of Intec Israel

Director of Intec Israel

William B. Hayes   Director of Intec Israel
Dr. Roger J. Pomerantz   Director of Intec Israel

Michael J. Newman, Ph.D

Hoonmo Lee

Brian O’Callaghan

 

Director and Chief Executive Officer of Decoy

Director of Decoy

Director of Decoy

 

Q: Who will be the executive officers of Combined Company immediately following the Merger?

 

A: Upon the closing of the Merger, the executive management team of the Combined Company is expected to be composed of the following persons:

 

Name   Combined Company Position(s)   Current Position(s)
Jeffrey Meckler   Chief Executive Officer   Chief Executive Officer of Intec Israel
Michael J. Newman, Ph.D.   Chief Scientific Officer   Chief Executive Officer of Decoy
Nir Sassi   Chief Financial Officer   Chief Financial Officer and President of Intec Israel
Walt Linscott   Chief Business Officer   Chief Business Officer of Intec Israel

 

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Q: What are the material U.S. tax consequences of the Merger to U.S. Holders of Decoy securities?

 

A: It is intended that the Merger and the Domestication Merger, taken together, qualify as a Section 351(a) Exchange and/or that the Merger, taken alone, qualify as a “reorganization” within the meaning of Section 368(a) of the Code (a “Section 368(a) Reorganization”). If the Merger, taken together with the Domestication Merger, qualifies as a Section 351(a) Exchange, and/or, if the Merger taken alone, qualifies as a Section 368(a) Reorganization, a holder of Decoy Common Stock generally would not recognize any gain or loss for U.S. federal income tax purposes upon the Merger.

 

You are strongly urged to consult with your own tax advisor for a full understanding of the tax consequences of the Merger to you, including the consequences under any applicable, state, local, foreign or other tax laws. For a more detailed description of the material U.S. federal income tax consequences of the Merger, see the section entitled “The Merger —  Material U.S. Federal Income Tax Consequences of the Domestication Merger and the Merger.

 

Q: What are the material Israeli income tax consequences of the Merger?

 

A: The Merger should not have any material Israeli tax consequences for the Intec Israel shareholders or the U.S. holders of Decoy securities. Any shareholders of Decoy deemed an Israeli resident for tax purposes should consult with a tax advisor for a full understanding of the Israeli tax consequences of the Merger.

 

Q: As an Intec Israel shareholder, how does the Intec Israel board of directors recommend that I vote?

 

A: After careful consideration, the Intec Israel board of directors unanimously recommends that the Intec Israel shareholders vote:

 

  FOR” the Merger Proposal;
  FOR” the Domestication Proposal;
  FOR” the Reverse Split Proposal;
  FOR” the Directors Proposal;
  FOR” the Option Plan Proposal;
  FOR” the Closing Financing Proposal;
  “FOR” the Adjournment Proposal.

 

If on the date of the Meeting, or a date preceding the date on which the Meeting is scheduled, Intec Israel reasonably believes that (i) it will not receive proxies sufficient to obtain the required vote to approve all the foregoing proposals (the “Proposals”) whether or not a quorum would be present or (ii) it will not have sufficient ordinary shares of Intec Israel represented (whether in person or by proxy) to constitute a quorum necessary to conduct the business of the Meeting, Intec Israel may postpone or adjourn, or make one or more successive postponements or adjournments of, the Meeting as long as the date of the Meeting is not postponed or adjourned more than an aggregate of 30 calendar days in connection with any postponements or adjournments.

 

Q: What risks should I consider in deciding whether to vote to approve the Merger Agreement and the Transactions contemplated thereby?

 

A: You should carefully review this proxy statement/prospectus, including the section titled “Risk Factors,” which sets forth certain risks and uncertainties related to the merger, risks and uncertainties to which the Combined Company’s business will be subject, and risks and uncertainties to which Intec Israel, as an independent company, is subject.

 

Q: When do you expect the Merger to be completed?

 

A: If the Proposals are approved, it is anticipated that the Merger will become effective after at least 50 days have elapsed after the filing of the Merger Proposal with the Israeli Companies’ Registrar and at least 30 days have elapsed after the approval of the Merger by Intec Israel shareholders and approval of the Merger by the shareholder of the Dillon Merger Subsidiary have been obtained. However, Intec Israel cannot predict the exact timing. For more information, please see the section titled “The Merger Agreement—Conditions to the Closing of the Merger.”

 

Q: Who is entitled to vote?

 

A: The record date for the Meeting is May 20, 2021. Only shareholders of record of Intec Israel at the close of business on that date are entitled to vote at the Meeting. The total number of outstanding ordinary shares, no par value, as of May 11, 2021, was 4,821,971.

 

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Q: How do I vote?

 

A: Intec Israel shareholders can vote either in person at the Meeting or by authorizing another person as your proxy, whether or not you attend the Meeting. Intec Israel shareholders may vote in any of the manners below:

 

By mail—If you are an Intec Israel shareholder of record, you can submit a proxy by completing, dating, signing and returning your proxy card or voting instruction card in the postage-paid envelope provided. You should sign your name exactly as it appears on the enclosed proxy card or voting instruction card. If you are signing in a representative capacity (for example, as a guardian, executor, trustee, custodian, attorney or officer of a corporation), please indicate your name and title or capacity. If you are a beneficial owner, you have the right to direct your brokerage firm, bank or other similar organization on how to vote your shares, and the brokerage firm, bank or other similar organization is required to vote your shares in accordance with your instructions. To provide instructions to your brokerage firm, bank or other similar organization by mail, please complete, date, sign and return your proxy card or voting instruction card in the postage-paid envelope provided by your brokerage firm, bank or other similar organization;
   
By telephone—If you are an Intec Israel shareholder of record, you can submit a proxy by telephone by calling the toll-free number listed on the enclosed proxy card or voting instruction card, entering your control number located on the enclosed proxy card or voting instruction card and following the prompts. If you are a beneficial owner and if the brokerage firm, bank or other similar organization that holds your shares offers telephone voting, you will receive instructions from the brokerage firm, bank or other similar organization that you must follow in order to submit a proxy by telephone; or
   
By Internet—If you are an Intec Israel shareholder of record, you can submit a proxy over the Internet by logging on to the website listed on the enclosed proxy card or voting instruction card, entering your control number located on the enclosed proxy card or voting instruction card and submitting a proxy by following the on-screen prompts. If you are a beneficial owner, and if the brokerage firm, bank or other similar nominee that holds your shares offers Internet voting, you will receive instructions from the brokerage firm, bank or other similar organization that you must follow in order to submit your proxy over the Internet.

 

Q: What is the difference between being a “record holder” and holding shares in “street name”?

 

A: A record holder holds shares in his or her name. Shares held in “street name” means shares that are held in the name of a bank, broker or other nominee on a person’s behalf.

 

Q: Am I entitled to vote if my shares are held in “street name”?

 

A: If your shares are held by a bank, a brokerage firm or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If your shares are held in street name, the proxy materials are being forwarded to you by your bank, brokerage firm or other nominee, or the record holder, along with a voting instruction card. As the beneficial owner, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions. If you do not give instructions to the record holder, and the broker, bank or other nominee is not entitled to exercise its voting discretion on the matter, the shares will be treated as “broker non-votes.” See “How will broker non-votes be treated” below. You are also invited to attend the Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the Meeting unless you request and obtain a valid proxy from the record holder.

 

Q: Am I entitled to dissenters’ rights?

 

No, Intec Israel’s shareholders are not entitled to dissenters’ rights in connection with the Proposals.

 

Q: What is the quorum requirement?

 

A: A quorum is necessary to hold a valid meeting. According to Intec Israel’s articles of association, the quorum required for a special meeting of shareholders consists of two or more shareholders present, in person or by proxy, who hold shares, in the aggregate, conferring at least 331/3% of the voting rights in Intec Israel. If such quorum is not present within half an hour from the time scheduled for the Meeting, the Meeting will be adjourned for one week to the same day, time and place. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Meeting. Proxies with only broker non-votes are not counted towards the quorum. However, if a proxy is returned with a vote on at least one proposal, even if broker non-votes are returned with respect to the other proposals, the proxy shall count toward the quorum. See “How will broker non-votes be treated” below. Abstentions will also be counted towards the quorum requirement.

 

Q: Who can attend the Meeting?

 

A: All Intec Israel shareholders of record as of the close of business on May 20, 2021 may attend the Meeting.

 

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Q: How many votes do I have?

 

A: On each matter to be voted upon, you have one vote for each ordinary share you own as of the record date of the Meeting.

 

Q: Can I change my vote after I submit my proxy?

 

A: If you are a record holder of ordinary shares, you may revoke your proxy and change your vote at any time before your proxy is actually voted:

 

  by signing and delivering another proxy with a later date;
  by providing us a written notice of such revocation prior to or at the Meeting; or
  by voting in person at the Meeting so long as you provide us a written notice of the revocation before your proxy is voted or before you vote in person at the Meeting.

 

If you are a beneficial owner of shares, you may submit new voting instructions by contacting the record holder, or, if you have obtained a legal proxy from the record holder giving you the right to vote your shares, by attending the Meeting and voting in person.

 

Q: How are votes counted?

 

A: Votes will be counted by the inspector of election appointed for the Meeting, who will separately count “For” and “Against” votes, abstentions, and broker non-votes.

 

Q: What if I do not specify how my shares are to be voted?

 

A: If you submit a proxy but do not indicate any voting instructions, the proxy holders will vote in accordance with the recommendations of Intec Israel’s board of directors. If you are a beneficial owner of shares held in street name and do not provide the broker, bank or other nominee that holds your shares with specific voting instructions, the broker, bank or other nominee may generally vote in its discretion on “discretionary” matters. However, if the broker, bank or other nominee that holds your shares does not receive instructions from you on how to vote your shares on a “non-discretionary” matter, it will be unable to vote your shares on that matter. When this occurs, it is generally referred to as a “broker non-vote.”

 

Q: What is an abstention and how will abstentions be treated?

 

A: An “abstention” represents a shareholder’s affirmative choice to decline to vote on a proposal. Abstained shares are treated as shares present for quorum purposes but will have no effect on the Proposals.

 

Q: How will broker non-votes be treated?

 

A: If beneficial owners do not instruct their broker, bank, or other nominee how to vote, the broker may exercise its voting discretion with regard to the shares only on “routine” proposals and not on “non-routine” proposals. Proposals 3, 6 and 7 are considered “routine” proposals.

 

Banks, brokers, or other nominees are not permitted to exercise discretionary voting on “non-routine” matters and therefore submit no vote – or a “broker non-vote” – on non-routine proxy items for which beneficial owners do not provide their voting instructions. A broker non-vote occurs when banks, brokers or other nominees who hold shares in street name for a client return a proxy but provide no instructions as to how shares should be voted on a particular matter.

 

A broker non-vote on a non-routine proposal on the ballot does not count as a vote for or against such proposal and shall therefore have no effect on the outcome of the vote on that proposal.

 

Q: Will any other business be conducted at the Meeting?

 

A: As of the date of this proxy statement, Intec Israel knows of no other business that will be presented at the Meeting. If any other matter arises and is presented properly to the shareholders for a vote at the Meeting, the proxy holders will vote your shares in accordance with their best judgment, subject to the rules applicable to broker discretionary voting.

 

In accordance with the Israeli Companies Law 5759-1999, and regulations promulgated thereunder (the “Companies Law”), any shareholder of Intec Israel holding at least one percent of the outstanding voting rights of Intec Israel for the meeting may submit to Intec Israel a proposed additional agenda item for the meeting, to our offices, c/o Nir Sassi, at 12 Hartom Street, Har Hotzvim, Jerusalem 9777512, Israel, no later than May 21, 2021. To the extent that there are any additional agenda items that our board of directors determines to add as a result of any such submission, Intec Israel will publish an updated agenda and proxy card with respect to the meeting, no later than May 28, 2021, which will be furnished to the SEC, on Form DEFA 14A, and will be made available to the public on the Commission’s website at www.sec.gov.

 

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Q: Who is paying for this proxy solicitation?

 

A: Intec Israel will bear the cost of soliciting proxies. In addition to these proxy materials, Intec Israel’s directors, officers and employees, and Intec Israel’s proxy solicitor, Kingsdale Advisors, may also solicit proxies in person, by telephone, or by other means of communication. Directors, officers and employees will not be paid any additional compensation for soliciting proxies, Kingsdale Advisors will be paid its customary fee of approximately $10,500, plus out-of-pocket expenses if it solicits proxies. Intec Israel may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

 

Q: Who can help answer my questions?

 

A: If you are an Intec Israel shareholder and would like additional copies, without charge, of this proxy statement/prospectus or if you have questions about the Merger and the other Transactions, including the procedures for voting your shares, you should contact Kingsdale Advisors, Intec Israel’s proxy solicitor, at the following address and phone number, or Chief Financial Officer of Intec Israel, at the following address and phone number:

 

 

 

Strategic Shareholder Advisor and Proxy Solicitation Agent

745 Fifth Avenue, 5th Floor, New York, NY 10151

 

North American Toll Free Phone:

1-866-851-2638

Email: contactus@kingsdaleadvisors.com

Call Collect Outside North America: 416-867-2272

 

Intec Pharma Ltd.
12 Hartom Street
Har Hotzvim, Jerusalem 9777512
+972-2-586-4657
Attention: Nir Sassi, Chief Financial Officer

 

If you are an Intec Israel shareholder and would like additional copies, without charge, of this proxy statement/prospectus or if you have questions about the Transactions, including the procedures for voting your shares, you should contact:

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

 

This summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is important to you. To better understand the Transactions and the Proposals being considered at the Meeting, you should read this entire proxy statement/prospectus carefully, including the Merger Agreement and the other annexes to which you are referred to herein. For more information, please see the section titled “Where You Can Find More Information.”

 

In this proxy statement/prospectus, except where the context otherwise requires and for purposes of this proxy statement/prospectus only:

 

  “we,” “us,” “our Company,” “our,” “Intec Israel,” or “NTEC” refers to Intec Pharma Ltd.
     
  “Amended and Restated Certificate of Incorporation” refers to the proposed amended and restated certificate of incorporation of the Combined Company after the Merger.
     
  “DGCL” refers to the Delaware General Corporation Law.
     
  “ordinary shares” refers to Intec Israel’s ordinary shares, no par value per share.
     
  “Trading Day” refers to a day on which any of the following markets or exchanges on which the Combined Company Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Capital Market, the Nasdaq Global Select Market, the New York Stock Exchange (or any successors to any of the foregoing).
     
  “U.S. GAAP” refers to generally accepted accounting principles in the United States.
     
  “$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States.
     
  all discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

 

Unless otherwise indicated, all information in this proxy statement/prospectus gives effect to the 1-for-20 reverse share split of our ordinary shares that became effective on October 30, 2020, and all references to ordinary shares outstanding of Intec Israel and per share amounts give effect to such reverse share split.

 

Summary of the Merger

 

The Companies

 

Intec Israel

 

Intec Israel is a clinical stage biopharmaceutical company focused on developing drugs based on its proprietary Accordion Pill platform technology (“Accordion Pill” or “AP”). Intec Israel’s 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. Intec Israel’s product pipeline currently includes several product candidates in various stages. Intec Israel’s 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.

 

Decoy

 

Decoy is a privately-held, San Diego, California-based, pre-clinical biotechnology company developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. Decoy’s approach utilizes attenuated and killed, non-pathogenic bacteria, which safely activate anti-tumor and anti-viral immune responses by briefly tricking the body into thinking that an infection is present. Decoy is dedicated to enhancing and expanding curative cancer immunotherapy for patients with unresectable or metastatic solid tumors and lymphomas.

 

Reasons for the Merger

 

The Merger will result in the Combined Company pursuing the development of a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. Intec Israel’s and Decoy’s board of directors considered a number of factors that supported its decision to approve the Merger Agreement. In the course of its deliberations, Intec Israel’s and Decoy’s board of directors also considered a variety of risks and other countervailing factors related to entering into the Merger Agreement. For a more complete discussion of Intec Israel and Decoy’s reasons for the Merger, please see the sections titled “The Merger—Intec Israel’s Reasons for the Merger” and “The Merger—Decoy’s Reasons for the Merger.”

 

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Overview of the Merger Agreement

 

The Transactions

 

Subject to the approval of Nasdaq, following the closing of the Merger, the Combined Company’s common stock will be listed on the Nasdaq Capital Market and will trade under the name “Indaptus Therapeutics, Inc.” and trading symbol “INDP.” The Combined Company will engage in the business of advancing a pipeline of immunotherapy product candidates to battle a variety of cancer tumor types and chronic viruses.

 

On March 15, 2021, Intec Israel, Intec Parent, Merger Sub, Domestication Merger Sub and Decoy entered into the Merger Agreement pursuant to which, following the Domestication Merger, and upon satisfaction of additional closing conditions, the Merger would be consummated. 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:

 

Disposition of Accordion Pill Business

 

In accordance with the terms of the Merger Agreement, as a condition to Closing, 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 or that it would otherwise take steps related to the divestment of assets or disposal and satisfaction of liabilities of Intec Israel’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”) and (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 Domestication Merger

 

Prior to the date of 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 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 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.

 

Immediately following the Domestication Merger, Intec Israel will be a wholly owned subsidiary of Intec Parent, and (i) Intec Israel will continue to possess all of Intec Israel’s assets, rights, powers and property as constituted immediately prior to the Domestication Merger; (ii) Intec Israel will continue to be subject to all of Intec Israel’s debts, liabilities and obligations as constituted immediately prior to the Domestication Merger; and (iii) each issued and outstanding ordinary share of Intec Israel will be deemed converted into one share of fully paid and non-assessable share of Intec Parent Common Stock.

 

Subject to the approval of Nasdaq, following the closing of the Domestication Merger, Intec Parent’s common stock will be listed on the Nasdaq Capital Market and will trade under Intec Parent’s name and trading symbol “NTEC.”

 

For a more complete description of the Domestication Merger, please see the section titled “The Domestication Merger” on page 87.

 

The Merger

 

As set forth in the Merger Agreement, after completion of the Domestication Merger and subject to 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.

 

Merger Consideration

 

Subject to the terms and conditions of the Merger Agreement, at the Effective Time:

 

  each outstanding share of 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 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.

 

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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 the Intec entities and Decoy, which will result in an adjustment to such Exchange Ratio (and without giving effect to the Reverse Split), following 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 (which reflects an imputed valuation of $30 million), 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 (which reflects an imputed valuation of $10 million), calculated in each case 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 the Disposition), 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.

 

No certificates or scrip representing fractional shares of Intec Parent Common Stock will be issued pursuant to the Merger. Decoy stockholders who would be entitled to a fractional share after applying the Exchange Ratio will, in lieu of such fractional share and upon surrender of a letter of transmittal, be paid in cash the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the closing price of a share of Intec Parent Common Stock on The Nasdaq Capital Market (or such other Nasdaq market on which the Intec Parent Common Stock then trades) on the date that is the third trading day prior to the Closing Date.

 

Intec Parent’s Post-Closing Board of Directors

 

In connection with the Merger, the post-closing board of directors of Intec Parent is expected to consist of the following eight directors, of which certain current members of the board of directors of Intec Israel – Roger Pomerantz (Chairman), Jeffrey Meckler, Hila Karah, Anthony J. Maddaluna, and William B. Hayes, will be designated by Intec Parent and all of the current members of the board of directors of Decoy - Michael J. Newman, Ph.D., Hoonmo Lee, and Brian O’Callaghan will be designated by Intec Parent. Jeffrey Meckler is expected to serve as Intec Parent’s Chief Executive Officer, Michael J. Newman, Ph.D., is expected to serve as Intec Parent’s Chief Scientific Officer, Nir Sassi is expected to serve as Intec Parent’s Chief Financial Officer, and Walt Linscott is expected to serve as Intec Parent’s Chief Business Officer.

 

Representations and Warranties

 

In the Merger Agreement, Decoy made certain representations and warranties (with certain exceptions set forth in Decoy’s disclosure schedules to the Merger Agreement) relating to, among other things: (a) proper corporate organization of Decoy and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction documents; (c) non-contravention; (d) capital structure; (e) accuracy of charter and governing documents; (f) ownership of intellectual property; (g) required consents and approvals; (h) financial information; (i) absence of certain changes or events; (j) title to assets and properties; (k) material contracts; (l) insurance; (m) licenses and permits; (n) compliance with laws; (o) no pending litigation; (p) employment and labor matters; (q) taxes and audits; (r) environmental matters; (s) brokers and finders; and (t) other customary representations and warranties.

 

In the Merger Agreement, the Intec entities have made certain representations and warranties (with certain exceptions set forth in Intec Israel’s disclosure schedules to the Merger Agreement) relating to, among other things: (a) proper corporate organization of Intec Israel and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction documents; (c) non-contravention; (d) capital structure; (e) accuracy of charter and governing documents; (f) ownership of intellectual property; (g) required consents and approvals; (h) financial information; (i) absence of certain changes or events; (j) title of assets and properties; (k) material contracts; (l) insurance; (m) licenses and permits; (n) compliance and laws; (o) no pending litigation; (p) employment and labor matters; (q) taxes and audits; (r) environmental matters; (s) brokers and finders; (t) government grants; (u) SEC filings; and (v) other customary representations and warranties.

 

Conduct Prior to Closing; Covenants

 

The Merger Agreement contains certain customary covenants of Decoy and Intec Israel, including, among others, the following:

 

  Each party has agreed to operate its business in the ordinary course prior to the closing of the Merger (with certain exceptions) and not to take certain specified actions without the prior written consent of the other party.
     
  Decoy, Intec Israel, and each of their subsidiaries (if any) have agreed to not solicit, initiate, respond or take any action to encourage any inquiries or communications relating to any proposals with respect to, or engaging in discussions with, or providing confidential information to, any person concerning a merger, consolidation or other similar transaction.

 

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Conditions to Closing

 

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, of which this proxy statement/prospectus forms a part, (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 tax rulings from the Israel Tax Authority with respect to the Domestication Merger, (vi) prior to the Closing Date, Intec Israel entering into one or more agreements providing for the sale, transfer or assignment or otherwise taking steps related to the divestment of assets or disposal and satisfaction of liabilities of the Accordion Pill business, to be effected immediately after the Closing, as further described below, and (vii) a Closing Financing by Intec Israel or Intec Parent such that upon Closing of the Merger (taking into account of the proceeds to be received with respect to such financing), 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. 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.

 

For more details on parties’ conditions to Closing, please see sections titled “The Merger – Intec Israel’s Conditions to Closing” and “The Merger – Decoy’s Conditions to Closing.”

 

Indemnification of Officers and Directors

 

From the Effective Time through the sixth anniversary of the Closing, Intec Parent and Decoy have agreed, subject to certain exceptions, to indemnify and hold harmless any existing director or officer of Intec Israel, Intec Parent or Decoy (“D&O Indemnified Party”) against any claims or losses actually incurred in connection with any claim arising out of the fact that the D&O Indemnified Party is or was a director or officer of Intec Israel, Intec Parent or Decoy prior to the Effective Time, which is claimed after the Effective Time.

 

Termination

 

The Merger Agreement contains certain termination rights for both Intec Israel and Decoy, including, among other things, the right to terminate the Merger Agreement by:

 

  either Intec Israel or Decoy if the Merger is not consummated on or before the date that is 155 days following the delivery of the Decoy audited financial statements for the fiscal years ended December 31, 2020 and 2019 which date may be extended in certain circumstances; or
     
  mutual consent of Intec Israel and Decoy; or
     
  a court of competent jurisdiction or other Governmental Body (as defined in the Merger Agreement) if such court or other Governmental Body has issued a final and nonappealable order, decree or ruling, or has taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger.

 

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 $1,000,000, or Intec Israel may be required to pay to Decoy a reverse break-up fee of $1,000,000 and forfeit a deposit in the amount of $350,000 in favor of Decoy to cover transaction.

 

Merger-Related Transactions and Agreements

 

Closing Financing

 

The Closing is conditioned on the Closing Financing by Intec Israel or Intec Parent such that upon Closing of the Merger (taking into account of the proceeds to be received with respect to such financing), 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.

 

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Support Agreements

 

In connection with the execution of the Merger Agreement, certain shareholders of Decoy entered into support agreements with Intec Israel, Intec Parent and Merger Sub covering approximately 74% of the outstanding shares of Decoy relating to the Merger (the “Decoy Stockholder Support Agreements”). The Decoy Stockholder Support Agreements provide, among other things, that the stockholders party to the Decoy Stockholder Support Agreements will vote all of the shares of Decoy held by them: (i) in favor of the adoption of the Merger Agreement, the approval of the Merger and the other transactions contemplated by the Merger Agreement, provided that, with respect to the approval of the Merger Agreement and the Merger, they will vote such shares in the same manner as the vote of the holders of a majority of the outstanding shares of Decoy’s capital stock who do not sign a Decoy Stockholder Support Agreement, and (ii) against any adverse proposal, for up to eighteen (18) months following the date of the Decoy Stockholder Support Agreements (depending on the manner of termination of the Merger Agreement).

 

In accordance with the terms of the Merger Agreement, the officers and directors of Intec Israel have each entered into support agreements with Decoy relating to the Merger (the “Intec Shareholder Support Agreements”). The Intec Shareholder Support Agreements provide, among other things, that the officers and directors party to the Intec Shareholder Support Agreements will vote all of the ordinary shares of Intec Israel held by them: (i) in favor of the adoption of the Merger Agreement, the approval of the Merger Agreement and other transactions contemplated by the Merger Agreement, and (ii) against any adverse proposal.

 

Lock-Up Agreements

 

In accordance with the terms of the Merger Agreement, certain stockholders of Decoy and the officers and directors of Intec Israel have each entered into a lock-up agreement with Intec Israel, Intec Parent and Decoy (the “Lock-Up Agreements”). The Lock-Up Agreements place certain restrictions on the transfer of shares of common stock of Intec Parent held by the respective signatories thereto for 180 days after the Closing Date.

 

Interests of the Intec Israel and Decoy Directors and Executive Officers in the Merger

 

In considering the recommendation of Intec Israel’s board of directors with respect to the issuance of Intec Parent Common Stock in connection with the Merger and the other matters to be acted upon by Intec Israel’s shareholders at the Meeting, Intec Israel’s shareholders should be aware that certain members of the board of directors and executive officers of Intec Israel have interests in the Merger that may be different from, or in addition to, your interests.

 

Certain officers and directors of Intec Israel and Decoy participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, the continued service as an officer or director of the Combined Company. In addition, and for example, Decoy’s Chairman and Chief Executive Officer, Dr. Michael Newman is expected to become a director and the Chief Scientific Officer of Intec Parent upon the closing of the Merger, and Intec Israel’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. These interests, among others, may influence the officers and directors of Intec Israel and Decoy to support or approve the Merger.

 

As of May 11, 2021, all directors and executive officers of Intec Israel, together with their affiliates, beneficially owned approximately 0.4% of the outstanding Intec Israel ordinary shares. The affirmative vote of a simple majority of all votes entitled to vote in person or by proxy at the Meeting (not counting “abstentions” or “broker non-votes” as votes cast) is required for approval of each of Proposals Nos. 1 through 6.

 

Certain Material Israeli Income Tax Consequences of the Merger

 

The Merger should not have any material Israeli tax consequences for the Intec Israel shareholders or the U.S. holders of Decoy securities. Any shareholders of Decoy deemed an Israeli resident for tax purposes should consult with a tax advisor for a full understanding of the Israeli tax consequences of the Merger.

 

For more information, please see the section entitled “The Merger — Certain Material Israeli Income Tax Consequences of the Merger” of this proxy statement/prospectus.

 

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Risk Factors

 

Both Intec Israel and Decoy are subject to various risks associated with their businesses and their industries. In addition, the Merger poses a number of risks to each company and its respective stockholders, including, but not limited to, the following risks:

 

  There is no assurance that the Merger will be completed in a timely manner or at all. If the Merger is not consummated, Intec Israel’s business could suffer materially and its stock price could decline;
     
  The issuance of shares of common stock of Intec Parent to Decoy stockholders in the Merger will significantly dilute the voting power of Intec Israel’s current shareholders; and
     
  Intec Israel and Decoy stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.
     

These risks and other risks are discussed in greater detail under the section titled “Risk Factors” and in the documents incorporated by reference in this proxy statement/prospectus. Intec Israel and Decoy both encourage you to read and consider all of these risks carefully.

 

Regulatory Approvals

 

In the U.S., Intec Israel and Intec Parent must comply with applicable federal and state securities laws and the rules and regulations of Nasdaq in connection with the issuance of shares of Intec Parent Common Stock pursuant to the Merger Agreement and the Domestication Merger, the issuance of shares Intec Israel or Intec Parent in connection with the Closing Financing and the filing of this proxy statement/prospectus with the SEC. As of the date hereof, the registration statement, of which this proxy statement/prospectus is a part, has not become effective. In Israel, Intec Israel is required to receive tax rulings from the Israel Tax Authority with respect to the Domestication Merger as a condition to the closing of the Merger and under the Encouragement of Research, Development and Technological Innovation in the Industry Law, 5744-1984, and the regulations, guidelines, rules, procedures, and benefit tracks thereunder, (collectively, “the Innovation Law”), to which Intec Israel is subject due to its receipt of grants from the Israeli National Authority for Technological Innovation, or the Israeli Innovation Authority (the “IIA”), a recipient of IIA grants such as Intec must report to the IIA regarding any change in the holding of means of control of the company which transforms any non-Israeli citizen or resident into an “interested party,” as defined in the Israeli Securities Law (e.g., a non-Israeli entity that acquires more than 5% of the capital of Intec as a result of the Merger), and such non-Israeli citizen or resident shall execute an undertaking in favor of IIA, in a form prescribed by IIA. Further, 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, or that it would otherwise take steps related to the divestment or disposal and satisfaction of liabilities of, Intec Israel’s Accordion Pill business (which was partially funded by IIA grants), to be effected immediately after the Closing, and the consummation of any such sale, transfer or assignment, may also require the approval of the IIA and also payment of a redemption fee to the IIA calculated according to a formula provided under the Innovation Law.

 

Nasdaq Listing

 

The approval by Nasdaq of (i) the initial listing of the Intec Parent Common Stock to be issued in connection with the Domestication Merger on the Nasdaq Capital Market following the Effective Time, and (ii) the listing of the shares of Intec Parent Common Stock being issued in connection with the Merger on the Nasdaq Capital Market at or prior to the Effective Time are conditions to the closing of the Merger. Decoy has agreed to cooperate with Intec Parent to furnish to Intec Parent all information concerning Decoy and its stockholders that may be required or reasonably requested in connection with the Nasdaq listing. Subject to the approval of Nasdaq, following the closing of the Domestication Merger, Intec Parent’s common stock will be listed on the Nasdaq Capital Market and will trade under Intec Parent’s name and trading symbol “NTEC.” In addition, subject to the approval of Nasdaq, following the closing of the Merger, the Combined Company’s common stock will be listed on the Nasdaq Capital Market and will trade under the name “Indaptus Therapeutics, Inc.” and trading symbol “INDP.”

 

Anticipated Accounting Treatment

 

The transaction is expected to be accounted for as a “reverse merger” since immediately upon the completion of the Merger, the Decoy stockholders prior to the Merger will hold a majority of the voting interest of the Combined Company. However, the board of directors of the Combined Company will include a majority of Intec Israel members and the Combined Company’s senior management will be primarily comprised of Intec Israel’s senior management. Based on an evaluation of these factors, among others, management believes that, for accounting purposes, Decoy will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a reverse merger. Accordingly, Decoy’s assets, liabilities and results of operations will become the historical financial statements of the Combined Company, and any proceeds that are related to the sale, transfer or assignment of Intec Israel’s Accordion Pill business by way of an Asset Disposition or Share Disposition or the divestment or disposal of assets and satisfaction of liabilities of the Accordion Pill business by way of Business Termination, will be included in the Combined Company’s assets effective as of the Closing Date. No step-up in basis or goodwill will be recorded in this transaction. The determination of the accounting acquirer in a merger transaction involves significant judgement and there is no assurance that management’s conclusion in this regard will not change.

 

Appraisal Rights and Dissenters’ Rights

 

Intec Israel shareholders are not entitled to appraisal rights in connection with the Proposals. Decoy stockholders are entitled to appraisal rights in connection with the Merger under the DGCL.

 

Comparison of Intec Parent Stockholder Rights and Intec Israel Shareholder Rights

 

Intec Israel was incorporated under the laws of Israel, and Intec Parent was incorporated under the laws of the State of Delaware. In connection with the Domestication Merger, all 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. Therefore, if the Domestication Merger is completed, Intec Israel shareholders will become stockholders of Intec Parent, and their rights will be governed by the DGCL, the amended and restated bylaws of Intec Parent (the “Amended and Restated Bylaws”) and, the Amended and Restated Certificate of Incorporation of Intec Parent.

 

The rights of Intec Israel shareholders contained in the articles of association of Intec Israel differ from the rights under the DGCL as more fully described under the section titled “Differences in Shareholder Rights.”

 

 14 

 

 

SUMMARY SELECTED FINANCIAL DATA of Intec Israel

 

The following table summarizes Intec Israel’s financial data. Intec Israel has derived the following statements of operations data and balance sheets data for the years ended December 31, 2020 and 2019 from its audited financial statements. Intec Israel’s historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with “Intec Israel’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and its audited financial statements and related notes included elsewhere in this proxy statement/prospectus.

 

STATEMENTS OF OPERATIONS DATA:

.

   Year Ended
December 31,
 
   2020   2019 
         
   U.S. dollars in thousands 
Research and development expenses, net  $(6,740)  $(26,659)
General and administrative expenses  (7,089)  (8,287)
Impairment of long-lived assets   -    (13,663)
Other income   -    1,500 
Operating loss   (13,829)   (47,109)
Financial income (expenses), net   (175)   148 
Loss before income tax   (14,004)   (46,961)
Income tax   (124)   (638)
Net loss  $(14,128)  $(47,599)
           
   U.S. dollars 
Loss per ordinary share attributable to Intec Israel – basic and diluted  $(4.08)  $(28.18)
Weighted average number of shares outstanding used in computation of basic and diluted loss per ordinary share in thousands   3,461    1,689 

 

BALANCE SHEET DATA:

 

   As of December 31, 
   2020   2019 
         
  

U.S. dollars in thousands

 
Current assets  $14,968   $13,745 
Non-current assets   5,928    7,535 
Total assets   20,896    21,280 
Current liabilities   5,334    8,342 
Long term liabilities   1,029    1,403 
Total liabilities   6,363    9,745 
Shareholders’ equity  14,533   11,535 
Total liabilities and stockholders’ equity  $

20,896

  

$

21,280

 

 

 15 

 

 

SUMMARY SELECTED FINANCIAL DATA of Decoy

 

The following table summarizes Decoy’s financial data. Decoy has derived the following statements of operations data and balance sheets data for the years ended December 31, 2020 and 2019 from its audited financial statements. Decoy’s historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with “Decoy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and its audited financial statements and related notes included elsewhere in this proxy statement/prospectus.

 

STATEMENTS OF OPERATIONS DATA:

 

   Year Ended
December 31,
 
   2020   2019 
    U.S. dollars 
Research and development expenses  $2,655,017   $2,089,150 
General and administrative expenses   944,248    542,556 
Total operating expenses   (3,599,265)   (2,631,706)
Other income, net   15,114    66,499 
Net loss  $(3,584,151)  $(2,565,207)
           
Net loss per share of common stock – basic and diluted  $(4.89)  $(3.50)
Weighted average shares of common stock outstanding   732,635    732,635 

 

BALANCE SHEET DATA:

 

   As of December 31, 
   2020   2019 
         
  

U.S. dollars

 
Current assets  $1,731,999   $3,896,266 
Non-current assets   

45,794

    

48,646

 
Total assets   1,777,793   3,944,912 
Current liabilities   2,015,494   734,465 
Long term liabilities   -   - 
Stockholders’ equity   (237,701)  3,210,447 
Total liabilities and stockholders’ equity  $1,777,793   $3,944,912 

 

 16 

 

 

SUMMARY SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following selected unaudited pro forma condensed combined financial information gives effect to the Merger but does not give effect to the proposed Reverse Split because the proposed Reverse Split is a range and is not final. The selected unaudited pro forma condensed combined financial statements were prepared using the reverse merger method of accounting under U.S. GAAP. For accounting purposes, Decoy is considered to be acquiring Intec Israel in the Merger. Decoy was determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors. Decoy stockholders prior to the Merger will hold a majority of the voting interest of the Combined Company following closing of the Merger. Accordingly, Decoy’s assets, liabilities and results of operations will become the historical financial statements of Intec Parent, and any net proceeds that are related to the sale, transfer or assignment of Intec Israel’s Accordion Pill business by way of an Asset Disposition or a Share Disposition or to the divestment or disposal of assets and satisfaction of liabilities of the Accordion Pill business by way of Business Termination, will be included in the Combined Company’s assets effective as of the Closing Date. No step-up in basis or goodwill will be recorded as a result of the Merger. The determination of the accounting acquirer in a merger transaction involves significant judgment and there is no assurance that management’s conclusion in this regard will not change.

 

The selected unaudited pro forma combined condensed balance sheet data as of December 31, 2020 gives effect to the Merger as if it took place on December 31, 2020. The unaudited pro forma combined condensed statements of operations for the year ended December 31, 2020 gives effect to the Merger as if it took place on January 1, 2020. The historical financial statements of Intec Israel and Decoy have been adjusted to give pro forma effect to events that reflect the U.S. GAAP accounting for the Merger to illustrate the effects of the reverse merger to the Combined Company’s historical financial statements. The adjustments and the notes presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the Combined Company upon consummation of the Merger.

 

The selected unaudited pro forma condensed combined financial information is based on the assumptions and adjustments that are described in the accompanying notes. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates and the final accounting, expected to be completed after the closing of the Merger, will occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial information and the Combined Company’s future results of operations and financial position. In addition, differences between the preliminary and final amounts will likely occur as a result of changes in Exchange Ratio contingent upon the Intec Israel’s and Decoy’s net cash balance (including, in the case of Intec Israel, any proceeds from the Disposition).

 

The selected unaudited pro forma condensed combined financial information does not give effect to the potential impact of the sale, transfer or assignment of the Accordion Pill business by way of an Asset Disposition or Share Disposition, to be effected immediately after Closing as it is too early to assess the probability of this sale, transfer or assignment and the potential proceeds. However, the selected unaudited pro forma condensed combined financial information reflects an assumed divestment or disposition of the Accordion Pill business assets by way of Business Termination, to be effected immediately after Closing. In addition, the unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the Merger. The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had Intec Israel and Decoy been a combined company during the specified period.

 

The selected unaudited pro forma condensed combined financial information, including the notes thereto, should be read in conjunction with the separate historical financial statements for the year ended December 31, 2020 of Intec Israel and Decoy, and each company’s respective Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this proxy statement/prospectus.

 

Accounting rules require evaluation of certain assumptions, estimates, or determination of financial statement classifications. The accounting policies of Intec Israel may materially vary from those of Decoy. During the preparation of the unaudited pro forma condensed combined financial information, Intec Israel’s management has performed a preliminary analysis and is not aware of any material differences, and accordingly, this unaudited pro forma condensed combined financial information assumes no material differences in accounting policies. Following the Merger, the Combined Company’s management will conduct a final review of the Combined Company’s accounting policies in order to determine if differences in accounting policies require adjustment or reclassification of Intec Israel’s results of operations or reclassification of assets or liabilities to conform to Decoy’s accounting policies and classifications. As a result of this review, the Combined Company’s management may identify differences that, when conformed, could have a material impact on these unaudited pro forma condensed combined financial statements.

 

 17 

 

 

Selected Unaudited Pro Forma Condensed Combined Balance Sheet
December 31, 2020
(in thousands)

 

   Decoy   Intec Israel   Business Termination
of Intec Israel Assets (1)
   Pro Forma Adjustments  

Notes

(3) 

 

Pro Forma Combined

 (2)

 
Assets                       
CURRENT ASSETS:                            
Cash and cash equivalents  $1,637   $14,671   $(14,671)  $

36,100

   C  $

37,737

 
Prepaid expenses and other   95    297    (297)           95 
TOTAL CURRENT ASSETS   1,732    14,968    (14,968)   

36,100

       

37,832

 
NON-CURRENT ASSETS:                            
Property and equipment, net   1    1,394    (1,394)          1 
Operating lease right-of-use assets   -    817    (817)           
Other assets   44    3,717    (3,717)          44 
TOTAL NON-CURRENT ASSETS   45    5,928    (5,928)          45 
TOTAL ASSETS  $1,777   $20,896    (20,896)  $

36,100

      $

37,877

 
Liabilities and shareholders’ equity                            
CURRENT LIABILITIES -                            
Accounts payable and accruals:                            
Trade  $156   $368    (368)  $      $156 
Other   442    4,966    (4,966)   3,800   B   4,242 
SAFE agreements   1,417            (1,417)  D    
TOTAL CURRENT LIABILITIES   2,015    5,334    (5,334)   2,383       4,398 
LONG-TERM LIABILITIES:                            
Operating lease liabilities       338    (338)           
Other liabilities       691    (691)           
TOTAL LONG-TERM LIABILITIES       1,029    (1,029)           
TOTAL LIABILITIES   2,015    6,363    (6,363)   2,383       4,398 
SHAREHOLDERS’ EQUITY:                            
Common stock   1    727    (727)   

320

   E   

321

 
Preferred Stock; Series seed; $0.001 par value; 366,317 shares authorized, 314,928 shares issued and outstanding as of December 31, 2020   (*)           (*)  A    
Additional paid-in capital   7,721    217,357    (217,357)   

33,397

   E   

41,118

 
Accumulated deficit   (7,960)   (203,551)   203,551       E   (7,960)
TOTAL SHAREHOLDERS’ EQUITY   (238)   14,533    (14,533)   

33,717

       

33,479

 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $1,777   $20,896    (20,896)  $

36,100

      $

37,877

 

 

(1) Represents the cancellation of Intec Israel assets and liabilities resulting from an assumed Business Termination, to be effected immediately after Closing. The estimated net cash from the Business Termination in the amount of $3.2 million was recorded under the Pro Forma Adjustments column. The net cash includes proceeds of approximately $1.2 million following the issuance of 319,393 ordinary shares to Aspire Capital in April 2021.
   
(2) Represents the Combined Company balance sheet immediately upon the completion of the Merger.
   
(3) These adjustments and notes are included in the section titled “Unaudited Pro Forma Combined Financial Statements”.
   
(*) Represents an amount less than $1,000.

 

Selected Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2020

(in thousands, except per share amounts)

 

   Decoy   Intec Israel   Business Termination of Intec Israel (1)   Pro Forma Adjustments   Notes(2) Pro Forma Combined 
Operating expenses:                            
Research and development  $(2,655)  $(6,740)  $6,740   $      $(2,655)
General and administrative   (944)   (7,089)   7,089           (944)
Total operating expenses   (3,599)   (13,829)   13,829    (1,500)  F   (5,099)
Other income, net   15    -    -            15 
Finance (income) expense, net   -    (175)   175           - 
Loss before income taxes   (3,584)   (14,004)   14,004    (1,500)      (5,084)
Income tax       (124)   124            
Net loss  $(3,584)  $(14,128)  $14,128   $(1,500)     $(5,084)
Basic and diluted loss per common share  $(4.89)  $-            G  $(0.17)
Weighted average common shares outstanding, basic and diluted   732,635    -                 

34,163,404

 

 

  (1) To cancel Intec Israel’s operations resulting from the Business Termination.
     
  (2)

These adjustments and notes are included in the section titled “Unaudited Pro Forma Combined Financial Statements”.

 

 18 

 

 

Comparative Historical and Unaudited Pro Forma Per Share Data

 

The information below reflects the historical per share information for Intec Israel and Decoy and the unaudited pro forma per share information of the Combined Company as if Intec Israel and Decoy had been combined as of or for the periods presented.

 

The pro forma amounts in the tables below have been derived from the unaudited pro forma combined financial information included in the section titled “Unaudited Pro Forma Combined Financial Statements” of this proxy statement/prospectus. The pro forma amounts are presented for illustrative purposes only and are not necessarily indicative of what the financial position, results of operations or per share information of the combined company would have been had Intec Israel and Decoy been combined as of or for the periods presented.

 

The tables below should be read in conjunction with the consolidated financial statements and the related notes of Intec Israel appearing elsewhere in this proxy statement/prospectus and the financial statements and the related notes of Decoy appearing elsewhere in this proxy statement/prospectus.

 

   Year ended December 31, 2020 
Intec Israel Historical Per Common Share Data:     
Basic and diluted net loss per share  $4.08 
Book value per share(1)  $3.63 
Combined Unaudited Pro Forma Per Common Share Data:     
Basic and diluted net loss per share  $0.17 
Book value per share(2)  $

1.04

 
Decoy Pro Forma Equivalent Per Common Share Data:(3)     
Basic and diluted net loss per share  $1.90 
Book value per share  $11.63 

 

(1) Historical book value per share is calculated by dividing total shareholders’ equity by total outstanding ordinary shares.

 

(2) Combined pro forma book value per share is calculated by dividing pro forma combined total shareholders’ equity by pro forma combined total outstanding shares of common stock.

 

(3) Decoy pro forma equivalent data per common stock is calculated by applying the Exchange Ratio of 11.18 to the unaudited pro forma per share data.

 

 19 

 

 

MARKET PRICE AND DIVIDEND INFORMATION

 

Intec Israel Shares have been listed on the Nasdaq Capital Market under the symbol “NTEC” since August 2015. Prior to that date, there was no public trading market for Intec Israel’s ordinary shares in the United States.

 

Decoy is a privately held company and its common stock is not publicly traded.

 

On March 12, 2021, the last full trading day immediately preceding the public announcement of the Merger, the closing price per share of the ordinary shares of Intec Israel on Nasdaq was $4.59. On May 11, 2021, the last reported sale price of the ordinary shares of Intec Israel on the Nasdaq Capital Market was $4.35 per share.

 

Subject to the approval of Nasdaq, following the closing of the Domestication Merger, Intec Parent’s common stock will be listed on the Nasdaq Capital Market and will trade under Intec Parent’s name and trading symbol “NTEC.” In addition, subject to the approval of Nasdaq, following the closing of the Merger, the Combined Company’s common stock will be listed on the Nasdaq Capital Market and will trade under the name “Indaptus Therapeutics, Inc.” and trading symbol “INDP.”

 

As of May 11, 2021, there was one stockholders of record. The number of record holders was determined from the records of Intec Israel’s transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. Intec Israel’s transfer agent is VStock Transfer, LLC.

 

Dividend Policy

 

Intec Israel

 

Intec Israel has never declared or paid cash dividends to its shareholders and it does not intend to pay cash dividends in the foreseeable future. Intec Israel intends to reinvest any earnings in developing and expanding its business.

 

Under the Israeli Companies Law – 1999, as amended, or the Companies Law, Intec Israel may declare and pay dividends only if, upon the determination of its board of directors, there is no reasonable concern that the distribution will prevent it from being able to meet the terms of its existing and foreseeable obligations as they become due. Under the Companies Law, the distribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distribution according to Intec Israel’s then last reviewed or audited consolidated financial statements, provided that the date of the consolidated financial statements is not more than six months prior to the date of distribution. In the event that Intec Israel does not have retained earnings or earnings generated over the two most recent years legally available for distribution, Intec Israel may seek the approval of the court in order to distribute a dividend. The court may approve Intec Israel’s request if it is convinced that there is no reasonable concern that the payment of a dividend will prevent it from satisfying its existing and foreseeable obligations as they become due.

 

Decoy

 

Decoy has never paid or declared any cash dividends on the Decoy capital stock. If the Merger does not occur, Decoy does not anticipate paying any cash dividends on the Decoy capital stock in the foreseeable future, and Decoy intends to retain all available funds and any future earnings to fund the development and expansion of its business.

 

Any future determination relating to the Combined Company’s dividend policy will be at the discretion of the Combined Company’s board of directors and will depend on a number of factors, including future earnings, financial condition, operating results, contractual restrictions, capital requirements, business prospects, strategic goals and plans to expand the business, applicable law and other factors that the Combined Company’s board of directors may deem relevant.

 

 20 

 

 

RISK FACTORS

 

If the Merger is completed, which is expected to occur in the third quarter of 2021, the business of Decoy will become the business of Intec Parent. You should carefully consider the factors described below, together with all of the other information contained in this proxy statement/prospectus, before making a decision about voting on the proposals submitted for your consideration. If any of the risks discussed below actually occur, Intec Israel’s and Decoy’s business, financial condition, operating results and cash flows could be materially adversely affected. The risks described below are not the only risks facing Intec Israel and Decoy. Additional risks and uncertainties not presently known to Intec Israel or Decoy or that Intec Israel or Decoy currently deem immaterial also may impair their business operations.

 

Summary Risk Factors

 

Risks Related to the Proposed Merger

 

  There is no assurance that the Merger will be completed in a timely manner or at all. If the Merger is not consummated, Intec Israel’s business could suffer materially and its stock price could decline.
     
  The issuance of shares of common stock of Intec Parent to Decoy stockholders in the Merger will significantly dilute the voting power of Intec Israel’s current shareholders.
     
  Intec Israel and Decoy stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

 

Risks Related to the Reverse Split

 

  The Reverse Split may not increase Intec Israel’s share price over the long-term.
     
  The Reverse Split may decrease the liquidity of Intec Israel’s securities.
     
  The Reverse Split may lead to a decrease in Intec Israel’s overall market capitalization.

 

Intec Israel

 

The principal factors and uncertainties that could materially adversely affect Intec Israel’s business, financial condition and results of operations, include, among others:

 

Risks Related to Intec Israel’s Financial Position and Capital Requirements

 

  Intec Israel is a clinical stage biopharmaceutical company with a history of operating losses, is not currently profitable, does not expect to become profitable in the near future and may never become profitable.
     
  Intec Israel’s independent registered public accounting firm has expressed substantial doubt regarding its ability to continue as a going concern.
     
  Intec Israel’s business is subject to risks arising from the COVID-19 pandemic which has impacted and continues to impact its business.

 

Risks Related to Intec Israel Business and Operations

 

  Intec Israel seeks to partner with third-party collaborators with respect to the development and commercialization of AP-CD/LD and for new custom-designed APs, and it may not succeed in establishing and maintaining collaborative relationships, which may significantly limit its ability to develop and commercialize its product candidates successfully, if at all.

 

Risks Related to the Clinical Development, Manufacturing and Regulatory Approval of Intec Israel’s Product Candidates

 

  Intec Israel’s product candidates are at various stages of development and may never be commercialized.
     
  Intec Israel’s product candidates are subject to extensive regulation and are at various stages of regulatory development and may never obtain regulatory approval.
     
  Intec Israel’s product candidates and future product candidates will remain subject to ongoing regulatory requirements even if they receive marketing approval, and if Intec Israel fails to comply with these requirements, it may not obtain such approvals or could lose those approvals that have been obtained, and the sales of any approved commercial products could be suspended.

 

Risks Related to Intec Israel’s Intellectual Property

 

  If Intec Israel fails to comply with its obligations in the agreements under which it licenses intellectual property rights from third parties or these agreements are terminated or it otherwise experiences disruptions to its business relationships with its licensors, it could lose intellectual property rights that are important to its business.
     
  If Intec Israel fails to adequately protect, enforce or secure rights to the patents which were licensed to it or any patents it owns or may own in the future, the value of its intellectual property rights would diminish and its business and competitive position would suffer.

 

 21 

 

 

Decoy

 

The principal factors and uncertainties that could materially adversely affect Decoy’s business, financial condition and results of operations, include, among others:

 

Risks Related to Decoy’s Financial Position and Capital Resources

 

  Decoy is a pre-clinical-stage company, has a limited operating history, is not currently profitable, does not expect to become profitable in the near future and may never become profitable.
     
  Decoy’s independent registered public accounting firm has expressed substantial doubt regarding its ability to continue as a going concern.
     
  Given Decoy’s lack of current cash flow, Decoy will need to raise additional capital; however, it may be unavailable to Decoy or, even if capital is obtained, may cause dilution or place significant restrictions on Decoy’s ability to operate its business.

 

Risks Related to Decoy’s Business, Industry and Regulatory Requirements

 

  Decoy is dependent on the success of one or more of Decoy’s current product candidates and Decoy cannot be certain that any of them will receive regulatory approval or be commercialized.
     
  If development of Decoy’s product candidates does not produce favorable results, Decoy and its collaborators, if any, may be unable to commercialize these products.
     
  Decoy’s efforts to discover product candidates beyond Decoy’s current product candidates may not succeed, and any product candidates Decoy recommends for clinical development may not actually begin clinical trials.
     
  Decoy’s product candidates are subject to extensive regulation under the FDA, the EMA or comparable foreign authorities, which can be costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize Decoy’s product candidates.

 

Risks Relating to Decoy’s Reliance on Third Parties

 

  Decoy relies completely on third parties to manufacture Decoy’s preclinical and clinical supplies, and Decoy’s business, financial condition and results of operations could be harmed if those third parties fail to provide Decoy with sufficient quantities of product, or fail to do so at acceptable quality levels or prices.
     
  If Decoy is unable to develop its own commercial organization or enter into agreements with third parties to sell and market Decoy’s product candidates, Decoy may be unable to generate significant revenues.

 

Risks Relating to Decoy’s Intellectual Property

 

  Decoy may not be able to protect its proprietary or licensed technology in the marketplace.
     
  Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and Decoy’s patent protection for licensed patents, pending patent applications and potential future patent applications and patents could be reduced or eliminated for non-compliance with these requirements.
     
  Decoy may infringe the intellectual property rights of others, which may prevent or delay its product development efforts and prevent Decoy from commercializing or increase the costs of commercializing Decoy’s products.

 

 22 

 

 

Risks Related to the Merger

 

There can be no assurance that the Merger will be completed in a timely manner or at all. If the Merger is not consummated, Intec Israel’s business could suffer materially and its stock price could decline.

 

The Closing is subject to the satisfaction or waiver of a number of closing conditions, as described in the Merger Agreement, 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 tax rulings from the Israel Tax Authority with respect to the Domestication Merger, (vi) prior to the Closing Date, Intec Israel entering into one or more agreements providing for the sale, transfer or assignment or otherwise taking steps related to the divestment of assets or disposal and satisfaction of liabilities of the Accordion Pill business, to be effected immediately after the Closing, and (vii) a Closing Financing by Intec Israel or Intec Parent such that upon Closing (taking into account of the proceeds to be received with respect to such financing), the combined net cash of Intec Parent 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. If the conditions are not satisfied or waived, the Merger may be materially delayed or abandoned. If the Merger is not consummated, our ongoing business may be adversely affected and, without realizing any of the benefits of having consummated the Merger, Intec Israel will be subject to a number of risks, including, but not limited to, the following:

 

  Intec Israel has incurred and expected to continue to incur significant expenses related to the Merger even if the Merger is not consummated;
     
  Intec Israel could be obligated to pay Decoy a break-up fee of up to $1,000,000 under certain circumstances set forth in the Merger Agreement; and forfeit a deposit in the amount of $350,000 in favor of Decoy to cover transactions expenses;
     
  Intec Israel’s collaborators and other business partners and investors in general may view the failure to consummate the Merger as a poor reflection on our business or prospects;
     
  the price of the Combined Company’s stock may decline;
     
  the Combined Company may not be able to meet Nasdaq’s continued listing standards, which may lead to delisting procedures by Nasdaq; and
     
  Intec Israel also could be subject to litigation related to any failure to consummate the Merger or to perform its obligations under the Merger Agreement.

 

If the Merger is not consummated, these risks may materialize and may adversely affect Intec Israel’s business, financial condition and the market price of Intec Israel’s common stock.

 

If the Merger is not completed, Intec Israel may be unsuccessful in completing an alternative transaction on terms that are as favorable as the terms of the Merger with Decoy, or at all.

 

While Intec Israel entered into the Merger Agreement with Decoy, the closing of the Merger may be delayed or may not occur at all and there can be no assurance that the Merger will deliver the anticipated benefits Intec Israel expects or enhances shareholder value. If Intec Israel is unable to consummate the Merger, its Board may elect to pursue an alternative strategy, one of which may be a strategic transaction similar to the Merger. Attempting to complete an alternative transaction like the Merger will be costly and time consuming, and Intec Israel can give no assurances that such an alternative transaction would occur at all. Alternatively, its board of directors may elect to continue advancing the preclinical and clinical development of the Accordion Pill platform, which would require that Intec Israel obtain additional funding, and to continue its efforts to seek potential collaborative, partnering or other strategic arrangements for our programs, including a sale or other divestiture of its program assets, or its board of directors could instead decide to pursue a dissolution and liquidation of its company. In such an event, the amount of cash available for distribution to its shareholders will depend heavily on the timing of such decision, and with the passage of time the amount of cash available for distribution will be reduced as Intec Israel continue to fund its operations. In addition, if its board of directors were to approve and recommend, and its shareholders were to approve, a dissolution and liquidation of its company, Intec Israel would be required to pay its outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to its shareholders. Intec Israel’s commitments and contingent liabilities may include severance obligations, liabilities to the Israel Innovation Authority, and fees and expenses related to the Merger. As a result of this requirement, a portion of its assets may need to be reserved pending the resolution of such obligations. In addition, Intec Israel may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, its board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of its ordinary shares could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of Intec Israel.

 

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The issuance of shares of common stock of Intec Parent to Decoy’s stockholders in the Merger will significantly dilute the voting power of its current shareholders.

 

If the Merger is completed, each outstanding share of Decoy common stock will be converted into the right to receive a number of shares of its common stock of Intec Parent equal to the Exchange Ratio set forth in the Merger Agreement. 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 and Decoy, following the Closing, the former Decoy stockholders immediately before the Merger are expected to own approximately 75% of the aggregate number of the outstanding securities of Intec Parent, and the shareholders of Intec Israel immediately before the Merger are expected to own approximately 25% of the aggregate number of the outstanding securities of Intec Israel, calculated on a fully-diluted basis. The actual allocation will be subject to adjustment based on, among other things, Decoy’s and Intec Israel’s net cash balance (including, in the case of Intec Israel, any proceeds from any disposition of the Accordion Pill business), subject to certain exceptions. The Closing is conditioned on completion of a Closing Financing, which will dilute securityholders of both Intec Israel and Decoy on a pro-rata basis, subject to certain exceptions. The issuance of shares of Intec Parent common stock to Decoy’s stockholders in the Merger will significantly reduce the relative voting power of each share of its common stock held by Intec Israel’s current shareholders. Consequently, Intec Israel’s shareholders as a group will have significantly less influence over the management and policies of the Combined Company after the Merger than prior to the Merger.

 

The Exchange Ratio is not adjustable based on the market price of Intec Israel Shares, so the merger consideration at the Closing may have a greater or lesser value than at the time the Merger Agreement was signed.

 

The Merger Agreement has set an Exchange Ratio formula that is based on the fully-diluted outstanding share capital of Intec Israel and capital stock of Decoy, after taking into account each company’s outstanding options and warrants, irrespective of the exercise prices of such options and warrants, and Intec Israel’s and Decoy’s net cash balances, and not taking into account the Reverse Split, in each case a few days prior to the Closing. Any changes in the market price of Intec Israel’s ordinary shares before the completion of the Merger will not affect the number of shares of Intec Parent common stock issuable to Decoy’s stockholders pursuant to the Merger Agreement. Therefore, if before the completion of the Merger, the market price of Intec Israel Shares declines from the market price on the date of the Merger Agreement, then Decoy’s stockholders could receive merger consideration with substantially lower value than the value of such merger consideration on the date of the Merger Agreement. Similarly, if before the completion of the Merger the market price of Intec Israel Shares increases from the market price of Intec Israel Shares on the date of the Merger Agreement, then Decoy’s stockholders could receive merger consideration with substantially greater value than the value of such merger consideration on the date of the Merger Agreement. The Merger Agreement does not include a price-based termination right. Because the Exchange Ratio does not adjust as a result of changes in the market price of Intec Israel Shares, for each one percentage point change in the market price of Intec Israel Shares, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration payable to Decoy’s stockholders pursuant to the Merger Agreement.

 

The net cash balances of Intec Israel and Decoy at the Closing could result in their respective securityholders owning a smaller or larger percentage of Intec Parent.

 

The estimates of the respective ownership percentages of the securityholders of Intec Israel and Decoy contained in this proxy statement/prospectus are subject to adjustment prior to the Closing, based on, among other things, the final net cash positions of the companies at the Closing. Each of the companies’ net cash positions depend on several factors including, among other things, the amount of permitted pre-closing financing raised, the proceeds, if any, that Intec Israel receives from the Disposition, and the cash burn rate from signing of the Merger Agreement through to the Closing Date. In particular, since one of the conditions to Closing in connection with the Merger is, prior to the Closing Date, Intec Israel entering into one or more agreements providing for the sale, transfer or assignment or otherwise taking steps related to the divestment of assets or disposal and satisfaction of liabilities of the Accordion Pill business, to be effected immediately after the Closing, Intec Israel may not realize the full value of the Accordion Pill business which would have the effect of reducing Intec Israel’s net cash.

 

Uncertainty about the Merger may adversely affect the relationship of Intec Israel with Intec Israel’s third party collaborators and manufacturer which could have a materially adverse effect on Intec Israel’s business, financial condition and results of operation.

 

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 or that it would otherwise take steps related to the divestment of assets or disposal and satisfaction of liabilities of Intec Israel’s Accordion Pill business, to be effected immediately after the Closing. In response to the announcement of the Merger, Intec Israel’s third party collaborators and manufacturer may seek to change the terms or otherwise terminate their relationship with Intec Israel. Any such change in terms or termination could adversely impact Intec Israel’s ability to enter into any such agreement to sell or otherwise dispose of the Accordion Pill business and/or reduce the value at which the According Pill business is sold, which in turn could result in the Exchange Ratio being less beneficial to Intec Israel shareholders. If Intec Israel is unable to enter into an agreement to sell or otherwise dispose of the Accordion Pill business, then Intec Israel may be forced to initiate steps towards the liquidation of the Accordion Pill business. If the Merger is not completed, any change in terms or termination of the relationship with a third party collaborator or manufacturer may have a material adverse effect on the ongoing viability of the Accordion Pill business, which would have a material adverse effect on Intec Israel’s business, financial condition and results of operations.

 

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Failure to complete the Merger may result in Intec Israel or Decoy paying a termination fee or, in the case of Intec Israel, forfeit a deposit to Decoy and could significantly harm the market price of Intec Israel’s ordinary shares and negatively affect the future business and operations of each company.

 

If the Merger is not completed and the Merger Agreement is terminated under certain circumstances, Intec Israel and Decoy may be required to pay the other party a termination fee of $1,000,000 and, in the case of Intec Israel, forfeit a deposit in the amount of $350,000 in favor of Decoy to cover transaction expenses. Even if a termination fee is not payable or the deposit is not forfeited in connection with a termination of the Merger Agreement, each of Intec Israel and Decoy will have incurred significant fees and expenses, such as legal and accounting fees, which must be paid whether or not the Merger is completed. Further, if the Merger is not completed, it could significantly harm the market price of Intec Israel’s ordinary shares. In addition, if the Merger Agreement is terminated and the board of directors of Intec Israel determines to seek another business combination, there can be no assurance that Intec Israel will be able to find a partner and close an alternative transaction on terms that are as favorable or more favorable than the terms set forth in the Merger Agreement.

 

The Merger may be completed even though certain events occur prior to the Closing that materially and adversely affect Intec Israel or Decoy.

 

The Merger Agreement provides that either Intec Israel or Decoy can refuse to complete the Merger if there is a material adverse change affecting the other party between March 15, 2021, the date of the Merger Agreement, and the Closing. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on Intec Israel or Decoy, including:

 

  conditions generally affecting the industries in which Intec Israel or Decoy participate or the United States, Israel, or global economy or capital markets as a whole;
     
  any failure of Intec Israel or Decoy to meet internal projections or forecasts or any change in the price or trading volume of Intec Israel’s ordinary shares;
     
  the execution, delivery, announcement or performance of the obligations under the Merger Agreement or the announcement, pendency or anticipated consummation of the Merger;
     
  any natural disaster or any acts of terrorism, sabotage, military action or war or any escalation or worsening thereof, or any pandemics (including the COVID-19 pandemic), man-made disasters, natural disasters, acts of God or other force majeure event, or any escalation or worsening thereof;
     
  any change in accounting requirements or principles or any change in applicable laws, rules, or regulations; or
     
  any change in net cash balances of Intec Israel or Decoy that result from operations in the ordinary course.

 

If adverse changes occur and Intec Israel and Decoy still complete the Merger, the market price of the Intec Parent’s common stock may suffer. This in turn may reduce the value of the Merger to the shareholders of Intec Israel, Decoy or both.

 

Even if the Merger is completed, Intec Parent will need to raise additional capital by issuing securities or debt or through licensing or similar arrangements, which may cause significant dilution to Intec Parent’s stockholders, restrict Intec Parent’s operations or require Intec Parent to relinquish proprietary rights. Future issuances of Intec Parent’s common stock pursuant to options and warrants outstanding following the Merger and its equity incentive plans could result in additional dilution.

 

Following the completion of the Merger, Intec Israel expects Intec Parent will need to raise additional capital in the future to funds its operations. Additional financing may not be available to Intec Parent when it needs it or may not be available on favorable terms. To the extent that Intec Parent raises additional capital by issuing equity securities, the terms of such an issuance may cause more significant dilution to the Combined Company’s stockholders’ ownership, and the terms of any new equity securities may have preferences over the Combined Company’s common stock. Any debt financing of the Combined Company may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the Combined Company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if Intec Parent raises additional funds through licensing or similar arrangements, it may be necessary to relinquish potentially valuable rights to current product candidates and potential products or proprietary technologies, or grant licenses on terms that are not favorable to the Combined Company. In addition, the exercise of some or all of Intec Parent’s outstanding options or warrants could result in additional dilution in the percentage ownership interest of Intec Israel or Decoy stockholders.

 

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The market price of Intec Israel’s ordinary shares following the Merger may decline as a result of the Merger.

 

The market price of Intec Israel’s ordinary shares, or Intec Parent’s shares of common stock after the Domestication Merger, may decline as a result of the Merger for a number of reasons including if:

 

  investors react negatively to the prospects of the Combined Company’s product candidates, business and financial condition following the Merger;
     
  the effect of the Merger on the Combined Company’s business and prospects is not consistent with the expectations of financial or industry analysts; or
     
  the Combined Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts.

 

Intec Israel shareholders and Decoy stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

 

If the Combined Company is unable to realize the strategic and financial benefits currently anticipated from the Merger, Intec Israel’s and Decoy’s shareholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving the expected commensurate benefit, or only receiving part of the commensurate benefit to the extent the Combined Company is able to realize only part of the expected strategic and financial benefits currently anticipated from the Merger.

 

During the pendency of the Merger, Intec Israel and Decoy may not be able to enter into a business combination with another party at a favorable price, if at all, because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

 

Covenants in the Merger Agreement impede the ability of Intec Israel and Decoy to make acquisitions, subject to certain exceptions relating to fiduciary duties or to complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during such period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets (other than the sale or other disposition of the Accordion Pill business, in the case of Intec Israel), or other business combination outside the ordinary course of business with any third party, subject to certain exceptions relating to fiduciary duties. Any such transactions could be favorable to such party’s shareholders.

 

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

 

The terms of the Merger Agreement prohibit each of Intec Israel and Decoy from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances when such party’s board of directors determines in good faith that an unsolicited alternative takeover proposal constitutes superior takeover proposal and that failure to cooperate with the proponent of the proposal would constitute a breach of the board of directors’ fiduciary duties.

 

Because the lack of a public market for Decoy’s capital stock makes it difficult to evaluate its, the stockholders of Decoy may receive shares of Intec Parent common stock in the Merger that have a value that is less than, or greater than, the fair market value of Decoy’s capital stock.

 

The outstanding capital stock of Decoy is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Decoy. Because the percentage of Intec Parent common stock to be issued to Decoy’s stockholders was determined based on negotiations between the parties, it is possible that the value of Intec Parent’s common stock to be received by Decoy’s stockholders will be less than the fair market value of Decoy, or Intec Parent may pay more than the aggregate fair market value for Decoy.

 

Lawsuits may be filed against Intec Israel and the members of its board of directors arising out of the Merger, which may delay or prevent the Merger.

 

Putative securityholder complaints, including securityholder class action complaints, and other complaints may be filed against us, our board of directors, Decoy, Decoy’s board of directors and others in connection with the transactions contemplated by the Merger Agreement. The outcome of litigation is uncertain, and Intec Israel may not be successful in defending against any such future claims. Lawsuits that may be filed against us, its board of directors, Decoy, or Decoy’s board of directors could delay or prevent the Merger, divert the attention of its management and employees from its day-to-day business and otherwise adversely affect us financially.

 

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The Combined Company may become involved in securities class action litigation that could divert management’s attention and harm the Combined Company’s business and insurance coverage may not be sufficient to cover all costs and damages.

 

In the past, securities class action or shareholder derivative litigation often follows certain significant business transactions, such as the sale of a business division or announcement of a merger. The Combined Company may become involved in this type of litigation in the future. Litigation is often expensive and diverts management’s attention and resources, which could adversely affect the Combined Company’s business.

 

Intec Israel is substantially dependent on its remaining employees to facilitate the consummation of the Merger.

 

As of May 11, 2021, Intec Israel had 44 employees, 36 of whom are full-time employees. Intec Israel’s ability to successfully complete the Merger depends in large part on its ability to retain certain remaining personnel. Despite its efforts to retain these employees, one or more may terminate their employment with the company on short notice. The loss of the services of certain employees could potentially harm its ability to run its day-to-day business operations, as well as to fulfill its reporting obligations as a public company.

 

Intec Israel shareholders’ rights as a shareholder will change as a result of the Domestication Merger.

 

In accordance with the Merger Agreement, Intec Israel has agreed to domesticate Intec Israel from the State of Israel to the State of Delaware. Due to the differences between Delaware law and Israeli law and the differences between the governing documents of Intec Israel and Intec Parent, Intec Israel is unable to adopt governing documents for Intec Parent that are identical to the governing documents for Intec Israel. Intec Israel has sought to preserve in the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of Intec Parent a similar allocation of rights and powers between the shareholders and its board of directors that exists under Intec Israel’s articles of association and Israeli law. Nevertheless, Intec Parent’s proposed Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws differ from Intec Israel’s articles of association, both in form and substance, and Intec Israel shareholders’ rights as a shareholder will change.

 

The Amended and Restated Certificate of Incorporation of Intec Parent when filed with the Delaware Secretary of State, will provide that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between Intec Parent and its stockholders, which could limit Intec Parent’s stockholders’ ability to obtain a favorable judicial forum for disputes with Intec Parent or its directors, officers or team members.

 

The Amended and Restated Certificate of Incorporation of Intec Parent, when filed with the Delaware Secretary of State immediately prior to the effective time, provides that, unless Intec Parent consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for any derivative action or proceeding brought on its behalf, any action asserting a claim for breach of a fiduciary duty owed by any of its directors and officers to it or its stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, its Amended and Restated Certificate of Incorporation, its Amended and Restated Bylaws, or any action asserting a claim governed by the internal affairs doctrine. This exclusive forum provision, however, is not intended to apply to any actions brought under the Securities Act or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. There is uncertainty as to whether a court would enforce this provision with respect to claims under the Securities Act. In addition, the Amended and Restated Certificate of Incorporation does not relieve Intec Parent of its duties to comply with federal securities laws and the rules and regulations thereunder, and Intec Parent stockholders will not be deemed to have waived Intec Parent’s compliance with these laws, rules and regulations. The Amended and Restated Certificate of Incorporation also provide that any person or entity purchasing or otherwise acquiring any interest in shares of Intec Parent capital stock will be deemed to have notice of and consented to this exclusive forum provision.

 

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, Intec Parent’s Amended and Restated Certificate of Incorporation, when filed with the Delaware Secretary of State, will contain a federal forum provision which provides that unless Intec Parent consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of Intec Parent are deemed to have notice of and consented to this provision. The Supreme Court of Delaware has held that this type of exclusive federal forum provision is enforceable. There may be uncertainty, however, as to whether courts of other jurisdictions would enforce such a provision, if applicable.

 

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or its directors, officers or other team members, which may discourage such lawsuits against Intec Parent and its directors, officers and other team members. Alternatively, if a court were to find these choice of forum provisions contained in Intec Parent’s Amended and Restated Certificate of Incorporation to be inapplicable or unenforceable in an action, Intec Parent may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect its business and financial condition.

 

If any of the events described in “Risks Related to Decoy’s Financial Position and Capital Resource,” “Risks Relating to Decoy’s Intellectual Property,” “Risks Related to Decoy’s Business, Industry and Regulatory Approvals,” “Risks Related to Decoy’s Reliance on Third Parties,” or “Risks Related to the Combined Company” occur, those events could cause the potential benefits of the Merger not to be realized.

 

Decoy’s business is expected to constitute the business of the Combined Company following the Merger. As a result, the risks described below in the sections entitled “Risks Related to Decoy’s Financial Position and Capital Resource” beginning on page 22, “Risks Related to Decoy’s Intellectual Property” beginning on page 22, “Risks Related to Decoy’s Business, Industry and Regulatory Approvals” beginning on page 22, “Risks Related to Decoy’s Reliance on Third Parties” beginning on page 22, and “Risks Related to the Combined Company” beginning on page 80 are among the most significant risks to the Combined Company if the Merger is completed. To the extent any of the events in the risks described in the sections referenced in the previous sentence occur, those events could cause the potential benefits of the Merger not to be realized and the market price of the Combined Company’s shares to decline.

 

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Risks Related to Intec Israel

 

Risks Related to Intec Israel’s Financial Position and Capital Requirements

 

Intec Israel is a clinical stage biopharmaceutical company with a history of operating losses, is not currently profitable, does not expect to become profitable in the near future and may never become profitable.

 

Intec Israel is a clinical stage biopharmaceutical company that was incorporated in 2000. Since its incorporation, Intec Israel has primarily focused its efforts on research and development and clinical trials. Intec Israel is not profitable and has incurred losses since inception, principally as a result of research and development, clinical trials and general administrative expenses in support of its operations. Intec Israel has not generated any revenue, expects to incur substantial losses for the foreseeable future and may never become profitable. Regardless of whether the Merger is completed, Intec Israel also expects to incur significant operating and capital expenditures and anticipates that its expenses and losses may increase substantially in the foreseeable future if Intec Israel:

 

  initiates, either alone or with a partner, further clinical trials for its current and any new product candidates;
     
  prepares new drug applications (“NDAs”), for its product candidates, assuming that the clinical trial data support an NDA;
     
  seeks regulatory approvals for its current product candidates, or future product candidates, if any;
     
  implements internal systems and infrastructure;
     
  seeks to in-license additional technologies for development, if any;
     
  hires additional management and other personnel; and
     
  moves towards commercialization of its product candidates and future product candidates, if any.

 

Intec Israel may out-license its ability to generate revenue from one or more of its product candidates, depending on a number of factors, including its ability to:

 

  obtain favorable results from and progress the clinical development of its product candidates;
     
  develop and obtain regulatory approvals in the countries and for the uses it intends to pursue for its product candidates;
     
  subject to successful completion of registration, clinical trials and perhaps additional clinical trials of any product candidate, apply for and obtain marketing approval in the countries it intends to pursue for such product candidate; and
     
  contract for the manufacture of commercial quantities of its product candidates at acceptable cost levels, subject to the receipt of marketing approval.

 

For the years ended December 31, 2019 and 2020, Intec Israel had net losses of $47.6 million and $14.1 million, respectively, and it expects such losses to continue for the foreseeable future. As a result, Intec Israel will ultimately need to generate significant revenues in order to achieve and maintain profitability. Intec Israel may not be able to generate these revenues or achieve profitability in the future. If Intec Israel’s product candidates do not advance to further clinical trials, fail in clinical trials or do not gain regulatory clearance or approval, or if its product candidates do not achieve market acceptance, Intec Israel may never become profitable. Intec Israel’s failure to achieve or maintain profitability, or substantial delays in achieving profitability, could negatively impact the value of its ordinary shares and its ability to raise additional financing. A substantial decline in the value of its ordinary shares would also affect the price at which Intec Israel could sell shares to secure future funding, which could dilute the ownership interest of current shareholders.

 

Even if Intec Israel achieves profitability in the future, Intec Israel may not be able to sustain profitability in subsequent periods. Accordingly, it is difficult to evaluate its business prospects. Moreover, Intec Israel’s prospects must be considered in light of the Merger, the negative outcome of the ACCORDANCE study, the discontinuation of the Novartis program, and the general uncertainty regarding its development programs and the risks and uncertainties encountered by an early-stage company in highly regulated and competitive markets, such as the biopharmaceutical market, where regulatory approval and market acceptance of its products are uncertain. There can be no assurance that Intec Israel’s efforts will ultimately be successful or result in revenues or profits. As a result, Intec Israel’s 2020 annual consolidated financial statements note that there is a substantial doubt about its ability to continue as a going concern.

 

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Intec Israel’s independent registered public accounting firm has expressed substantial doubt regarding its ability to continue as a going concern.

 

Intec Israel 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 us to consume its existing cash prior to that time, including the costs to consummate the Merger. Prior to closing of the Merger Intec Israel agreed, among other things, that Intec Israel would use commercially reasonable efforts to enter into one or more agreements providing for the sale, transfer or assignment or that Intec Israel would otherwise take steps related to the divestment of assets or disposal and satisfaction of liabilities of its Accordion Pill business, to be effected immediately after Closing. Although Intec Israel 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 Intec Israel is unable to continue to operate the Accordion Pill business or identify and complete an alternative strategic transaction like the Merger, Intec Israel may be required to dissolve and liquidate its assets. In such case, Intec Israel 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. Intec Israel is also closely monitoring ongoing developments in connection with the COVID-19 pandemic, which has resulted in disruptions to its partnering efforts and may negatively impact its commercial prospects and its ability to raise capital. As of the date of this proxy statement/prospectus, the extent to which the COVID-19 pandemic may materially impact its financial condition, liquidity, or results of operations is uncertain. Intec Israel’s independent registered public accounting firm has issued its report on its consolidated financial statements for the year ended December 31, 2020 and included an explanatory paragraph stating that Intec Israel has suffered recurring losses from operations and negative cash outflows from operating activities. As a result, there is substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The perception that Intec Israel might be unable to continue as a going concern may make it more difficult for us to obtain financing for the continuation of its operations and could result in the loss of confidence by investors, suppliers and employees. If Intec Israel cannot successfully continue as a going concern, its shareholders may lose their entire investment in its ordinary shares.

 

Intec Israel’s business is subject to risks arising from the COVID-19 pandemic which has impacted and continues to impact its business.

 

Public health epidemics or outbreaks could adversely impact its business. In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it has now spread to countries across the globe, including in Israel and the United States. 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. Intec Israel implemented remote working and work place protocols for its employees in accordance with government requirements. The implementation of measures to prevent the spread of COVID-19 have resulted in disruptions to its 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 the COVID-19 pandemic could have on its operations, 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. In particular, the continued spread of COVID-19 globally could materially adversely impact its operations and workforce, including its research and development, partnering efforts, and its ability to raise capital, each of which in turn could have a material adverse impact on its business, financial condition and results of operation.

 

Intec Israel will need substantial, additional capital in the future. If additional capital is not available, Intec Israel will have to delay, reduce or cease operations.

 

Intec Israel will need to raise substantial, additional capital to complete the research and development of all of its product candidates and for working capital and for general corporate purposes. In addition, Intec Israel may choose to expand its current research and development focus, or other clinical operations. There is no assurance, however, that Intec Israel will be successful in obtaining the level of financing needed for its operations and the research and development of its product candidates. As of December 31, 2020, Intec Israel had cash and cash equivalents of $14.7 million.

 

In addition, its future capital requirements may be substantial and will depend on many factors including:

 

  its ability to enter into collaborative, licensing, and other commercial relationships;
     
  adhering to patient recruitment in any clinical trials;

 

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  clinical trial results;
     
  developing the Accordion Pill for the treatment of other conditions or indications beyond those currently being explored;
     
  the cost of filing and prosecuting patent applications and the cost of defending its patents;
     
  the cost of prosecuting infringement actions against third parties;
     
  the cost, timing and outcomes of seeking marketing approval of its product candidates;
     
  the costs associated with commercializing its products if Intec Israel receive marketing approval, and choose to commercialize its product candidates ourselves, including the cost and timing of establishing external, and potentially in the future, internal, sales and marketing capabilities to market and sell its product candidates;
     
  subject to receipt of marketing approval, revenue received from sales of approved products, if any, in the future;
     
  the costs associated with any product liability or other lawsuits related to its future product candidates or products, if any;
     
  the costs associated with post-market compliance with regulatory requirements, and of addressing any allegations of non-compliance by regulatory authorities in countries where Intec Israel plans to market and sell its products;
     
  the demand for its products;
     
  the costs associated with developing and/or in-licensing other research and development programs;
     
  the expenses needed to attract and retain skilled personnel; and
     
  the costs associated with being a public company.

 

Under General Instruction I.B.6 to Form S-3, or the Baby Shelf Rule, the amount of funds Intec Israel 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 Intec Israel. As of March 5, 2021, its public float was approximately $17.8 million, based on 4,481,501 ordinary shares held by non-affiliates and a price of $3.97 per share, which was the last reported sale price of its ordinary shares on the Nasdaq Capital Market on March 5, 2021. Intec Israel therefore is limited by the Baby Shelf Rule as of the date of this proxy statement/prospectus, until such time as its public float exceeds $75 million. If Intec Israel is required to file a new registration statement on another form, Intec Israel may incur additional costs and be subject to delays due to review by the SEC Staff.

 

Additional funds may not be available when Intec Israel needs them, on terms that are acceptable to it, or at all. If adequate funds are not available to it on a timely basis, Intec Israel may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for one or more of its product candidates or delay, limit, reduce or terminate its establishment of sales and marketing capabilities or other activities that may be necessary to commercialize its product candidates.

 

Intec Israel may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. Intec Israel may also be required to recognize non-cash expenses in connection with certain securities Intec Israel issue, such as convertible notes and warrants, which may adversely impact its financial condition.

 

Because of its limited operating history, Intec Israel may not be able to successfully operate its business or execute its business plan.

 

Intec Israel has a limited operating history upon which to evaluate its proposed business and prospects. Intec Israel’s proposed business operations will be subject to numerous risks, uncertainties, expenses and difficulties associated with early-stage enterprises. Such risks include, but are not limited to, the following:

 

  the absence of a lengthy operating history;
     
  insufficient capital to fully realize its operating plan;
     
  its ability to obtain U.S. Food and Drug Administration (“FDA”) approvals in a timely manner, if ever, or that the approved label indications are sufficiently broad to make sale of the products commercially feasible;

 

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  expected continual losses for the foreseeable future;
     
  operating in an environment that is highly regulated by a number of agencies;
     
  social and political unrest;
     
  operating in multiple currencies;
     
  Its ability to anticipate and adapt to a developing market(s);
     
  acceptance of its Accordion Pill by the medical community and consumers;
     
  limited marketing experience;
     
  a competitive environment characterized by well-established and well-capitalized competitors;
     
  the ability to identify, attract and retain qualified personnel; and
     
  reliance on key personnel.

 

Because Intec Israel is subject to these risks, evaluating its business may be difficult, its business strategy may be unsuccessful and Intec Israel may be unable to address such risks in a cost-effective manner, if at all. If Intec Israel is unable to successfully address these risks its business could be harmed.

 

Intec Israel has incurred and could incur further impairment charges of its long-lived assets that could negatively affect its results of operations.

 

Intec Israel periodically evaluates whether events and circumstances have occurred that require an impairment assessment. In July 2019, Intec Israel announced top-line results from its ACCORDANCE study which did not meet its target endpoints. Intec Israel determined that the clinical trial results constituted a triggering event that required it to undertake an impairment test and as a result it recorded an impairment charge of approximately $13.7 million with respect to its production line and related production equipment for commercial scale manufacturing of AP-CD/LD. In the third quarter ended September 30, 2019, Intec Israel recorded for the first time an impairment charge of approximately $9.8 million which was updated in the fourth quarter by approximately $3.9 million following a new impairment assessment performed at December 31, 2019 following changes in management assumptions. As of December 31, 2020, Intec Israel performed an additional impairment test which determined that there is no need to record an additional impairment charge. Although no impairment charge was recorded in 2020, Intec Israel could incur further impairment charges if Intec Israel determine that the carrying value of its long-lived assets is reduced. In addition, any changes in the actual market conditions versus the assumptions used in the model to determine impairment charges could result in further impairment charges in the future. In the event that Intec Israel determine that its long-lived assets are impaired, Intec Israel may be required to record a non-cash charge that could adversely affect its results of operations.

 

Risks Related to Intec Israel Business and Operations

 

Intec Israel has not yet commercialized any products or technologies, and it may never become profitable.

 

Intec Israel has not yet commercialized any products or technologies, and it may never be able to do so. Intec Israel does not know when or if it will complete any of its product development efforts, obtain regulatory approval for any product candidates incorporating its technologies or successfully commercialize any approved products. Due to the negative outcome of the ACCORDANCE study, the discontinuation of the Novartis program, and the general uncertainty regarding its development programs, Intec Israel does not anticipate commercializing any products or technologies in the near future. Even if Intec Israel is successful in developing products that are approved for marketing, the company will not be successful unless these products gain market acceptance for appropriate indications at favorable reimbursement rates. The degree of market acceptance of these products will depend on a number of factors, including, but not limited to:

 

  the timing of regulatory approvals in the countries, and for the uses, Intec Israel intends to pursue with respect to the commercialization of its product candidates;
     
  the competitive environment;

 

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  the establishment and demonstration in, and acceptance by, the medical community of the safety and clinical efficacy of its products and their potential advantages over other therapeutic products;
     
  Its ability to enter into strategic agreements with a commercial-scale manufacturer and with pharmaceutical and biotechnology companies with strong marketing and sales capabilities;
     
  the adequacy and success of distribution, sales and marketing efforts;
     
  the establishment of external, and potentially, internal, sales and marketing capabilities to effectively market and sell its product candidates in the United States and other countries; and
     
  the pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations and other plan administrators.

 

Physicians, patients, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend, and in the case of third-party payors, cover payment for, any of its current or future products or products incorporating its technologies. As a result, Intec Israel is unable to predict the extent of future losses or the time required to achieve profitability, if at all. Even if Intec Israel successfully develop one or more products that incorporate its technologies, Intec Israel may not become profitable.

 

Intec Israel seeks to partner with third-party collaborators with respect to the development and commercialization of AP-CD/LD and for new custom-designed APs, and Intec Israel may not succeed in establishing and maintaining collaborative relationships, which may significantly limit its ability to develop and commercialize its product candidates successfully, if at all.

 

Intec Israel’s business strategy relies on partnering with pharmaceutical companies to complement its internal development efforts. In July 2019, Intec Israel announced top-line results from its ACCORDANCE study in which the ACCORDANCE study did not meet its target endpoints. Intec Israel has completed the analysis of the full data set and Intec Israel is currently seeking to partner AP-CD/LD as the basis for the strategy for AP-CD/LD moving forward. In addition, Intec Israel entered into a cannabinoid research collaboration agreement with GW to explore using the AP platform for an undisclosed research program. Intec Israel is seeking partners for the development of new custom-designed APs. Intec Israel will be competing with many other companies as Intec Israel seeks partners for AP-CD/LD and for any new custom-designed APs and Intec Israel may not be able to compete successfully against those companies. If Intec Israel is not able to enter into collaboration arrangements for AP-CD/LD or for any new custom-designed APs, Intec Israel may be required to undertake and fund further development, clinical trials, manufacturing and commercialization activities solely at our own expense and risk. If Intec Israel is unable to finance and/or successfully execute those expensive activities, or Intec Israel delays such activities due to capital availability, its business could be materially and adversely affected, and potential future product launch could be materially delayed, be less successful, or Intec Israel may be forced to discontinue clinical development of these product candidates. Furthermore, if Intec Israel is unable to enter into a commercial agreement for the development and commercialization of the custom-designed AP for GW’s program, then this could have a material adverse effect on its business, financial condition or results of operations.

 

The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty, including:

 

  a collaboration partner may shift its priorities and resources away from its product candidates due to a change in business strategies, or a merger, acquisition, sale or downsizing;
     
  a collaboration partner may seek to renegotiate or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy, a change of control or other reasons;
     
  a collaboration partner may cease development in therapeutic areas which are the subject of our strategic collaboration;
     
  a collaboration partner may not devote sufficient capital or resources towards its product candidates;
     
  a collaboration partner may change the success criteria for a drug candidate thereby delaying or ceasing development of such candidate;
     
  a significant delay in initiation of certain development activities by a collaboration partner will also delay payment of milestones tied to such activities, thereby impacting our ability to fund our own activities;
     
  a collaboration partner could develop a product that competes, either directly or indirectly, with our drug candidate;

 

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  a collaboration partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product;
     
  a collaboration partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements;
     
  a partner may exercise a contractual right to terminate a strategic alliance;
     
  a dispute may arise between us and a partner concerning the research, development or commercialization of a drug candidate resulting in a delay in milestones, royalty payments or termination of an alliance and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and
     
  a partner may use its products or technology in such a way as to invite litigation from a third party.

 

Any collaborative partners Intec Israel enters into agreements within the future may shift their priorities and resources away from our product candidates or seek to renegotiate or terminate their relationships with Intec Israel. For example, in December 2019, Intec Israel discontinued the development of a custom designed AP for a Novartis proprietary compound following an internal and revised commercial strategic assessment, in which Novartis advised us that this program no longer meets Novartis’ mid to long-term strategic goals. If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing or commercialization efforts related to that collaboration could be delayed or terminated, or it may be necessary for it to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If Intec Israel is unable to establish and maintain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements, Intec Israel may have to delay or discontinue further development of one or more of our product candidates, undertake development and commercialization activities at its own expense or find alternative sources of capital.

 

If Intec Israel is unable to establish sales, marketing and distribution capabilities or enter into successful relationships with third parties to perform these services, Intec Israel may not be successful in commercializing its product candidates if and when they are approved.

 

Intec Israel does not have a sales or marketing infrastructure and has no experience in the sale, marketing or distribution of products. To achieve commercial success for any product for which Intec Israel has obtained marketing approval, Intec Israel will need to establish a sales and marketing infrastructure or to out-license the product.

 

In the future, Intec Israel may consider building a focused sales and marketing infrastructure to market AP-CD/LD and potentially other product candidates in the United States, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force could be expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which Intec Israel recruits a sales force and establish marketing capabilities is delayed or does not occur for any reason, Intec Israel would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and its investment would be lost if Intec Israel cannot retain or reposition our sales and marketing personnel.

 

Factors that may inhibit our efforts to commercialize its products on our own include:

 

  its inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
     
  the inability of sales personnel to obtain access to physicians;
     
  the lack of adequate numbers of physicians to prescribe any future products;
     
  the lack of complementary products to be offered by sales personnel, which may put it at a competitive disadvantage relative to companies with more extensive product lines; and
     
  unforeseen costs and expenses associated with creating an independent sales and marketing organization.

 

If Intec Israel is unable to establish its own sales, marketing and distribution capabilities or enter into successful arrangements with third parties to perform these services, its product revenues and its profitability, may be materially adversely affected.

 

In addition, Intec Israel may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates inside or outside of the United States or may be unable to do so on terms that are favorable to it. Intec Israel likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If Intec Israel does not establish sales, marketing and distribution capabilities successfully, either on its own or in collaboration with third parties, Intec Israel will not be successful in commercializing its product candidates.

 

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The members of our management team are important to the efficient and effective operation of its business, and Intec Israel may need to add and retain additional leading experts. Failure to retain its management team and add additional leading experts could have a material adverse effect on its business, financial condition or results of operations.

 

Intec Israel’s executive officers and our management team are important to the efficient and effective operation of its business. Intec Israel’s failure to retain its management personnel, who have developed much of the technology Intec Israel utilizes today, or any other key management personnel, could have a material adverse effect on its future operations. Its success is also dependent on its ability to attract, retain and motivate highly-trained technical and management personnel, among others, to continue the development and commercialization of its current and future products.

 

As such, its future success highly depends on its ability to attract, retain and motivate personnel required for the development, maintenance and expansion of its activities. There can be no assurance that Intec Israel will be able to retain its existing personnel or attract additional qualified personnel. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on its business, financial condition and results of operation.

 

Intec Israel expects to face significant competition. If Intec Israel cannot successfully compete with new or existing products, its marketing and sales will suffer and Intec Israel may never be profitable.

 

If any of its product candidates are approved, Intec Israel expect to compete against fully-integrated pharmaceutical and biotechnology companies and smaller companies that are collaborating with pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than Intec Israel does, and have substantially greater financial resources than Intec Israel does, as well as significantly greater experience in:

 

  developing drugs;
     
  undertaking preclinical testing and human clinical trials;
     
  obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals of drugs;
     
  formulating and manufacturing drugs; and
     
  launching, marketing and selling drugs.

 

Intec Israel’s competitors are likely to include companies with marketed products and/or an advanced research and development pipeline. The development of different formulations or new chemical entities may remove any competitive advantage a product formulated with the Accordion Pill platform technology may present. Other companies are engaged in research and development of gastric retention technologies that may become competitive to or even superior to the capabilities of the Accordion Pill platform Technology.

 

There is a substantial risk of product liability claims in its business. Intec Israel currently does not maintain product liability insurance and a product liability claim against it could adversely affect its business.

 

Intec Israel may incur substantial liabilities and may be required to limit commercialization of its products in response to product liability lawsuits, which may result in substantial losses.

 

Any of its product candidates could cause adverse events, including injury, disease or adverse side effects. These adverse events may or may not be observed in clinical trials, but may nonetheless occur in the future. If any of these adverse events occur, they may render its product candidates ineffective or harmful in some patients, and its sales would suffer, materially adversely affecting its business, financial condition and results of operations.

 

In addition, potential adverse events caused by our product candidates could lead to product liability lawsuits. If product liability lawsuits are successfully brought against it, Intec Israel may incur substantial liabilities and may be required to limit the marketing and commercialization of its product candidates. Intec Israel’s business exposes it to potential product liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. Intec Israel may not be able to avoid product liability claims. Product liability insurance for the pharmaceutical and biotechnology industries is generally expensive, if available at all. Intec Israel does not have product liability insurance (and currently have insurance coverage for each specific clinical trial, which covers a certain number of trial participants and which varies based on the particular clinical trial) and if Intec Israel is unable to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, Intec Israel may be unable to clinically test, market or commercialize our product candidates. A successful product liability claim brought against us in excess of our insurance coverage, if any, may cause it to incur substantial liabilities, and, as a result, its business, liquidity and results of operations would be materially adversely affected. In addition, the existence of a product liability claim could affect the market price of its ordinary shares.

 

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Intec Israel faces continuous technological change, and developments by competitors may render its products or technologies obsolete or non-competitive. If its new or existing product candidates are rendered obsolete or non-competitive, its marketing and sales will suffer and Intec Israel may never be profitable.

 

If Intec Israel’s competitors develop and commercialize products faster than Intec Israel does, or develop and commercialize products that are superior to its product candidates, its commercial opportunities could be reduced or eliminated. The extent to which any of its product candidates achieve market acceptance will depend on competitive factors, many of which are beyond its control. Competition in the biotechnology and biopharmaceutical industry is intense and has been accentuated by the rapid pace of technology development. Intec Israel’s potential competitors include large integrated pharmaceutical companies, biotechnology companies that currently have drug and target discovery efforts, universities, and public and private research institutions. Almost all of these entities have substantially greater research and development capabilities and financial, scientific, manufacturing, marketing and sales resources than Intec Israel does. These organizations also compete with Intec Israel too:

 

  attract parties for acquisitions, joint ventures or other collaborations;
     
  license proprietary technology that is competitive with the technology Intec Israel is developing;
     
  attract funding; and
     
  attract and hire scientific talent and other qualified personnel.

 

Intec Israel’s competitors may succeed in developing and commercializing products earlier and obtaining regulatory approvals from the FDA more rapidly than Intec Israel does. Its competitors may also develop products or technologies that are superior to those Intec Israel is developing, and render its product candidates or technologies obsolete or non-competitive. If Intec Israel cannot successfully compete with new or existing products, our marketing and sales could suffer and Intec Israel may never be profitable.

 

Intec Israel has reduced the size of our organization, and Intec Israel may encounter difficulties in managing its business as a result of this reduction, or the attrition that may occur following this reduction, which could disrupt its operations. In addition, Intec Israel may not achieve anticipated benefits and savings from the reduction.

 

Following the negative outcome of the ACCORDANCE study, Intec Israel reduced the size of our headcount by approximately 50%, designed to focus our cash resources mainly on research and development and business development activities. The restructuring, and the attrition thereafter, resulted in the loss of longer-term employees, the loss of institutional knowledge and expertise and the reallocation and combination of certain roles and responsibilities across the organization, all of which could adversely affect our operations. The restructuring and possible additional cost containment measures may yield unintended consequences, such as attrition beyond our intended reduction in headcount and reduced employee morale. In addition, the restructuring may result in employees who were not affected by the reduction in headcount seeking alternate employment, which would result in us seeking contract support at unplanned additional expense. In addition, Intec Israel may not achieve anticipated benefits from the restructuring. Due to its limited resources, Intec Israel may not be able to effectively manage our operations or recruit and retain qualified personnel, which may result in weaknesses in its infrastructure and operations, risks that Intec Israel may not be able to comply with legal and regulatory requirements, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Intec Israel may also determine to take additional measures to reduce costs, which could result in further disruptions to its operations and present additional challenges to the effective management of its company. If its management is unable to effectively manage this transition and restructuring and additional cost containment measures, its expenses may be more than expected, and Intec Israel may not be able to implement its business strategy.

 

If Intec Israel is unable to obtain adequate insurance, its financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. It’s ability to effectively recruit and retain qualified officers and directors could also be adversely affected if Intec Israel experiences difficulty in obtaining adequate directors’ and officers’ liability insurance.

 

Intec Israel may not be able to obtain insurance policies on terms affordable to it that would adequately insure its business and property against damage, loss or claims by third parties. To the extent its business or property suffers any damages, losses or claims by third parties, which are not covered or adequately covered by insurance, its financial condition may be materially adversely affected.

 

Intec Israel may be unable to maintain sufficient insurance as a public company to cover liability claims made against its officers and directors. If Intec Israel is unable to adequately insure its officers and directors, Intec Israel may not be able to retain or recruit qualified officers and directors to manage the Combined Company.

 

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If Intec Israel acquire or license additional technologies or product candidates, Intec Israel may incur a number of additional costs, have integration difficulties and/or experience other risks that could harm its business and results of operations.

 

Intec Israel may acquire and in-license additional product candidates and technologies. Any product candidate or technologies Intec Israel in-license or acquire will likely require additional development efforts prior to commercial sale, including extensive preclinical or clinical testing, or both, and approval by the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone to risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate or product developed based on in-licensed technology will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, Intec Israel cannot assure you that any product candidate that Intec Israel develops based on acquired or licensed technology that is granted regulatory approval will be manufactured or produced economically, successfully commercialized or widely accepted or competitive in the marketplace. Moreover, integrating any newly acquired or in-licensed product candidates could be expensive and time-consuming. If Intec Israel cannot effectively manage these aspects of our business strategy, our business may not succeed.

 

A security breach or disruption or failure in a computer or communications systems could adversely affect Intec Israel.

 

Despite the implementation of security measures, Intec Israel’s internal computer systems, and those of its CROs and other third parties on which Intec Israel relies, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and electrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from ongoing or planned clinical trials could result in delays in its regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, access to its clinical data, or disruption of the manufacturing process, Intec Israel could incur liability and the further development of our Accordion Pill could be delayed. Intec Israel may also be vulnerable to cyber-attacks by hackers or other malfeasance. This type of breach of our cybersecurity may compromise our confidential information and/or its financial information and adversely affect our business or result in legal proceedings. Further, these cybersecurity breaches may inflict reputational harm upon it that may result in decreased market value and erode public trust.

 

Global economic, capital market and political conditions could affect its ability to raise capital and could disrupt or delay the performance of its third-party contractors and suppliers.

 

Intec Israel’s ability to raise capital may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, levels of consumer and business confidence, exchange rates, levels of government spending and deficits, trade policies, political conditions, actual or anticipated default on sovereign debt, emergence of a pandemic, or other widespread health emergencies (or concerns over the possibility of such an emergency, including for example, the recent COVID-19 pandemic), and other challenges that could affect the global economy. These economic conditions affect businesses such as Intec Israel’s in a number of ways. Tightening of credit in financial markets could adversely affect our ability to obtain financing. Similarly, such tightening of credit may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy. Intec Israel’s global business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending.

 

Intec Israel or the third parties upon whom Intec Israel depends may be adversely affected by natural disasters and/or health epidemics, and its business continuity and disaster recovery plans may not adequately protect it from a serious disaster.

 

Natural disasters could severely disrupt our operations and have a material adverse effect on its business, results of operations, financial condition and prospects. If a natural disaster, power outage, health epidemic or other event occurred that prevented Intec Israel from using all or a significant portion of its office, manufacturing and/or lab spaces, that damaged critical infrastructure, such as the manufacturing facilities of its third-party contract manufacturers, CROs, clinical sites, third parties ongoing activities and schedules or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for it to continue its plans and business for a substantial period of time.

 

The disaster recovery and business continuity plan Intec Israel has in place may prove inadequate in the event of a serious disaster or similar event. Intec Israel may incur substantial expenses as a result of the limited nature of its disaster recovery and business continuity plans, which could have a material adverse effect on its business.

 

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Risks Related to the Clinical Development, Manufacturing and Regulatory Approval of Intec Israel’s Product Candidates

 

Intec Israel’s product candidates are at various stages of development and may never be commercialized.

 

The progress and results of any future preclinical testing or future clinical trials are uncertain, and the failure of its product candidates and additional product candidates which Intec Israel may license, acquire or develop in the future to receive regulatory approvals could have a material adverse effect on our business, operating results and financial condition to the extent Intec Israel is unable to commercialize any such products. For example, the negative outcome of Intec Israel’s ACCORDANCE study had a material adverse effect on its business, operating results and financial condition. None of its product candidates have received regulatory approval for commercial sale. In addition, Intec Israel faces the risks of failure inherent in developing therapeutic products. All its product candidates are not expected to be commercially available for several years, if at all.

 

Intec Israel’s product candidates are subject to extensive regulation and are at various stages of regulatory development and may never obtain regulatory approval.

 

Intec Israel’s product candidates must satisfy certain standards of safety and efficacy for a specific indication before they can be approved for commercial use by the FDA or foreign regulatory authorities. The FDA and foreign regulatory authorities have full discretion over this approval process. Intec Israel will need to conduct significant additional research, including testing in animals and in humans, before Intec Israel can file applications for product approval. Typically, in the pharmaceutical industry, there is a high rate of attrition for product candidates in preclinical testing and clinical trials. Also, even though Intec Israel believes that some of our product candidates may be eligible for FDA review under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (the “FDCA”), the FDA may not agree with that assessment, and may require Intec Israel to submit the application under Section 505(b)(1) which usually requires more comprehensive clinical data than applications submitted under Section 505(b)(2). Even under Section 505(b)(2), satisfying FDA’s requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. For example, a number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. In addition, delays or rejections may be encountered based upon additional government regulation, including any changes in legislation or FDA policy, during the process of product development, clinical trials and regulatory reviews. After clinical trials are completed, the FDA has substantial discretion in the drug approval process and may require Intec Israel to conduct additional preclinical and clinical testing or to perform post-marketing studies.

 

In order to receive FDA approval or approval from foreign regulatory authorities to market a product candidate or to distribute our products, Intec Israel must demonstrate through preclinical testing and through human clinical trials that the product candidate is safe and effective for its intended uses (e.g., treatment of a specific condition in a specific way subject to contradictions and other limitations). Intec Israel anticipates that some foreign regulatory agencies will have different testing and approval requirements from those of the FDA. Even if Intec Israel complies with all FDA requests, the FDA may ultimately reject or decline to approve one or more of our new drug applications, or it may grant approval for a narrowly intended use that is not commercially feasible. Intec Israel might not obtain regulatory approval for our product candidates in a timely manner, if at all. Failure to obtain FDA approval of any of our product candidates in a timely manner or at all could severely undermine its business by delaying or halting commercialization of its products, imposing costly procedures, diminishing competitive advantages and reducing the number of saleable products and, therefore, corresponding product revenues.

 

If the FDA does not conclude that a given product candidate using Intec Israel’s Accordion Pill technology satisfies the requirements for approval under the Section 505(b)(2) regulatory approval pathway, or if the requirements for approval of our product candidates under Section 505(b)(2) are not as Intec Israel expects, the approval pathway will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in any case may not be successful.

 

Intec Israel intends to seek FDA approval for our product candidates implementing our Accordion Pill technology through the Section 505(b)(2) regulatory pathway. Pursuant to Section 505(b)(2) of the FDCA, an NDA under Section 505(b)(2) is permitted to reference safety and effectiveness data submitted by the sponsor of a previously approved drug as part of its NDA, or rely on FDA’s prior conclusions regarding the safety and effectiveness of that previously approved drug, or rely in part on data in the public domain. Reliance on data collected by others may expedite the development program for our product candidates by potentially decreasing the amount of clinical data that Intec Israel would need to generate in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, Intec Israel may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for product approval. If this were to occur, the time and financial resources required to obtain FDA approval, and complications and risks associated with regulatory approval of our product candidates, would likely substantially increase. Moreover, its inability to pursue the Section 505(b)(2) regulatory pathway may result in new competitive products reaching the market more quickly than its product, which would likely materially adversely impact its competitive position and prospects. Even if Intec Israel is able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this will ultimately lead to accelerated product development or earlier approval. A 505(b)(2) applicant may rely on the FDA’s finding of safety and effectiveness for a previously approved drug only to the extent that the proposed product in the Section 505(b)(2) application shares characteristics (e.g., active ingredient, dosage form, route of administration, strength, indication, conditions of use) in common with the previously approved drug. To the extent that the previously approved drug and the drug proposed in the Section 505(b)(2) application differ (e.g., a product with a different dosage form or route of administration), the Section 505(b)(2) application must include sufficient data to support those differences.

 

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In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that may be referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of its NDA for up to 30 months or longer depending on the outcome of any litigation. Further, it is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of a new product. Even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. Amendments to the FDCA attempt to limit the delay that can be caused by a citizen petition to 150 days, although court action by a dissatisfied petitioner is a possibility and this could, in theory, adversely affect the approval process.

 

Moreover, even if product candidates implementing Intec Israel’s Accordion Pill technology are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

 

Intec Israel might be unable to develop any of its product candidates to achieve commercial success in a timely and cost-effective manner, or ever.

 

Even if regulatory authorities approve any of our product candidates, they may not be commercially successful. Intec Israel’s product candidates may not be commercially successful because government agencies or other third-party payors may not provide reimbursement for the costs of the product or the reimbursement may be too low to be commercially successful. In addition, physicians and others may not use or recommend its products candidates, even following regulatory approval. A product approval, even if issued, may limit the uses for which such product may be distributed, which could adversely affect the commercial viability of the product. Moreover, third parties may develop superior products or have proprietary rights that preclude us from marketing our products. Intec Israel also expects that our product candidates, if approved, will generally be more expensive than the non-Accordion Pill version of the same medication available to patients. Physician and patient acceptance of, and demand for, any product candidates for which Intec Israel obtains regulatory approval or license will depend largely on many factors, including, but not limited to, the extent, if any, of reimbursement of costs by government agencies and other third-party payors, pricing, competition, the effectiveness of our marketing and distribution efforts, the safety and effectiveness of alternative products, and the prevalence and severity of side effects associated with such products. If physicians, government agencies and other third-party payors do not accept the use or efficacy of our products, Intec Israel will not be able to generate significant revenue, if any.

 

Intec Israel’s product candidates and future product candidates will remain subject to ongoing regulatory requirements even if they receive marketing approval, and if Intec Israel fails to comply with these requirements, Intec Israel may not obtain such approvals or could lose those approvals that have been obtained, and the sales of any approved commercial products could be suspended.

 

Even if Intec Israel receives regulatory approval to market a particular product candidate, any such product will remain subject to extensive regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and record keeping. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the uses for which the product may be marketed or the conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product, which could negatively impact Intec Israel or our collaboration partners by reducing revenues or increasing expenses, and cause the approved product candidate not to be commercially viable. In addition, as clinical experience with a drug expands after approval, typically because it is used by a greater number and more diverse group of patients after approval than during clinical trials, side effects and other problems may be observed over time after approval that were not seen or anticipated during pre-approval clinical trials or other studies. Any adverse effects observed after the approval and marketing of a product candidate could result in limitations on the use of or withdrawal of FDA approval of any approved products from the marketplace. Absence of long-term safety data may also limit the approved uses of its products, if any. If Intec Israel fails to comply with the regulatory requirements of the FDA and other applicab