UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-40652

Indaptus Therapeutics, Inc.

(Exact name of Registrant as specified in its Charter)

Delaware		86-3158720
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3 Columbus Circle 15th Floor New York, New York		10019
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) +(646) 427-2727

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		INDP		Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The number of shares of the Registrant’s common stock outstanding as of August 9, 2024 was 10,196,884.

TABLE OF CONTENTS

		Page

Part I. FINANCIAL INFORMATION		F-1

Item 1.	Financial Statements	F-1
	Unaudited Condensed Consolidated Balance Sheets	F-1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	F-2
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	F-3
	Unaudited Condensed Consolidated Statements of Cash Flows	F-4
	Notes to Unaudited Condensed Consolidated Financial Statements	F-5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	8
Item 4.	Controls and Procedures	8

Part II. OTHER INFORMATION		9

Item 1.	Legal Proceedings	9
Item 1A.	Risk Factors	9
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	44

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains, and management may make, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, forward-looking statements can be identified by the use of terms such as “believe,” “expect,” “intend,” “plan,” “may,” “should,” “anticipate,” “could,” “might,” “seek,” “target,” “will,” “project,” “forecast,” “continue” or their negatives or variations of these words or other comparable words. These statements include, without limitation, our statements about: our product candidates’ development, including the timing and design of the Phase 1 clinical trial of Decoy20; our expectations regarding the recommended Phase 2 dose for subsequent multi-dosing and combination studies and related timing; the anticipated effects of our product candidates; our plans to develop and commercialize our product candidates; the market potential and treatment potential of our product candidates, including Decoy20; our commercialization, marketing and manufacturing capabilities and strategy; our expectations about the willingness of healthcare professionals to use our product candidates; our general business strategy and the plans and objectives of management for future operations; our research and development activities and costs; our future results of operations and condition; the sufficiency of our cash and cash equivalents to fund our ongoing activities and our ability to continue as a going concern; the impact of current macroeconomic conditions on our operations, ability to access capital, and liquidity.

The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections in this Quarterly Report entitled “Summary Risk Factors,” Part II. Item 1A. “Risk Factors” and Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Summary Risk Factors

The principal factors and uncertainties that make investing in our common stock risky, include, among others:

	●	We are a clinical-stage company with a limited operating history. We are not currently profitable, do not expect to become profitable in the near future and may never become profitable.

	●	We have identified conditions and events that raise substantial doubt regarding our ability to continue as going concern.

	●	Given our lack of current cash flow, we will need to raise additional capital. If we are unable to raise a sufficient amount of capital when needed on acceptable terms or at all, we may be forced to delay, limit or eliminate some or all of our research programs, product development activities and commercialization efforts.

	●	Raising additional capital would cause dilution to our existing shareholders and may restrict our operations or require us to relinquish rights to our technologies or product candidates.

	●	Clinical and preclinical development involves lengthy and expensive processes with uncertain outcomes. Any difficulties or delays in the commencement or completion, or the termination or suspension, of our current or planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue or adversely affect our commercial prospects.

	●	We expect to continue to incur significant research and development expenses and other operating expenses, which may make it difficult for us to attain profitability.

	●	We may expend our limited resources to pursue a limited number of research programs, product candidates and specific indications and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

	●	Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization or have other significant adverse implications on our business, financial condition and results of operations.

	●	The commercial success of our product candidates depends upon their market acceptance among physicians, patients, healthcare payors and the medical community.

	●	We rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business, financial condition and results of operations could be substantially harmed.

	●	We currently rely on third parties for the manufacture of our product candidates during clinical development, and expect to continue to rely on third parties for the foreseeable future. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates, or such quantities at an acceptable cost, which could delay, prevent or impair our development or potential commercialization efforts.

	●	The successful commercialization of Decoy20 or any future product candidates, if approved, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our products could limit our ability to market those products and decrease our ability to generate revenue.

	●	Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize Decoy20 and any future product candidates and may affect the prices we may set.

	●	If our competitors have product candidates that are approved faster, marketed more effectively, are better tolerated, have a more favorable safety profile or are demonstrated to be more effective than our product candidates, our commercial opportunity may be adversely affected.

	●	Any product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.

	●	We may not be able to adequately protect our proprietary or licensed technology in the marketplace.

	●	We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

	●	We are subject to various U.S. federal, state and foreign healthcare laws and regulations, which could increase compliance costs, and our failure to comply with these laws and regulations could harm our results of operations and financial condition.

	●	Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.

	●	A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.

	●	Our business and operations may suffer in the event of information technology system failures, cyberattacks or deficiencies in our cybersecurity.

	●	Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

	●	Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

	●	The market price of our common stock is volatile and you may sustain a complete loss of your investment.

iii

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

INDAPTUS THERAPEUTICS, INC.

Unaudited Condensed Consolidated Balance Sheets


	June 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	7,301,751		$	13,362,053
Prepaid expenses and other current assets		186,726			633,156

Total current assets		7,488,477			13,995,209

Non-current assets:
Property and equipment, net		-			735
Right-of-use asset		128,630			173,206
Other assets		504,728			754,728

Total non-current assets		633,358			928,669

Total assets	$	8,121,835		$	14,923,878

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities	$	1,824,825		$	2,672,327
Operating lease liability, current portion		103,223			101,705

Total current liabilities		1,928,048			2,774,032

Non-current liabilities:
Operating lease liability, net of current portion		27,579			73,348

Total non-current liabilities		27,579			73,348

Total liabilities		1,955,627			2,847,380

Commitments and contingencies (Note 7)		-			-

Stockholders’ equity:
Common stock: $0.01 par value, 200,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 8,553,047 shares issued and outstanding as of June 30, 2024 and 8,401,047 shares issued and outstanding as of December 31, 2023		85,531			84,011
Additional paid in capital		59,319,777			57,409,643
Accumulated deficit		(53,239,100	)		(45,417,156	)

Total stockholders’ equity		6,166,208			12,076,498

Total liabilities and stockholders’ equity	$	8,121,835		$	14,923,878

See accompanying notes to the unaudited condensed consolidated financial statements

F-1

INDAPTUS THERAPEUTICS, INC.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Operating expenses:
Research and development	$	1,713,973		$	1,480,485		$	3,305,115		$	3,360,385
General and administrative		2,394,912			2,014,777			4,747,009			4,590,043

Total operating expenses		4,108,885			3,495,262			8,052,124			7,950,428

Loss from operations		(4,108,885	)		(3,495,262	)		(8,052,124	)		(7,950,428	)

Other income, net		93,618			250,197			230,180			452,125

Net loss	$	(4,015,267	)	$	(3,245,065	)	$	(7,821,944	)	$	(7,498,303	)

Net loss available to common stockholders per share of common stock, basic and diluted	$	(0.47	)	$	(0.39	)	$	(0.92	)	$	(0.89	)

Weighted average number of shares used in calculating net loss per share, basic and diluted		8,543,919			8,401,047			8,493,394			8,401,047
Net loss	$	(4,015,267	)	$	(3,245,065	)	$	(7,821,944	)	$	(7,498,303	)
Other comprehensive income (loss):
Reclassification adjustment for interest earned on marketable securities included in net loss		-			(161,197	)		-			(290,426	)
Change in unrealized gain on marketable securities		-			117,895			-			328,147
Comprehensive loss	$	(4,015,267	)	$	(3,288,367	)	$	(7,821,944	)	$	(7,460,582	)

See accompanying notes to the unaudited condensed consolidated financial statements

F-2

INDAPTUS THERAPEUTICS, INC.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity


	Common stock				Additional Paid In		Accumulated			Other Comprehensive
	Shares		Amount		Capital		Deficit			Income (Loss)			Total

Balance, January 1, 2023		8,401,047	$	84,011	$	54,443,705	$	(29,993,685	)	$	96,434		$	24,630,465
Stock-based compensation		-		-		727,144		-			-			727,144
Reclassification adjustment for interest earned on marketable securities included in net loss		-		-		-		-			(129,229	)		(129,229	)
Change in unrealized gain on marketable securities		-		-		-		-			210,252			210,252
Net loss		-		-		-		(4,253,238	)		-			(4,253,238	)

Balance, March 31, 2023		8,401,047		84,011		55,170,849		(34,246,923	)		177,457			21,185,394
Stock-based compensation		-		-		728,466		-			-			728,466
Reclassification adjustment for interest earned on marketable securities included in net loss		-		-		-		-			(161,197	)		(161,197	)
Change in unrealized gain on marketable securities		-		-		-		-			117,895			117,895
Net loss		-		-		-		(3,245,065	)		-			(3,245,065	)
Balance June 30, 2023		8,401,047	$	84,011	$	55,899,315	$	(37,491,988	)	$	134,155		$	18,625,493

Balance, January 1, 2024		8,401,047	$	84,011	$	57,409,643	$	(45,417,156	)	$	-		$	12,076,498
Stock-based compensation		-		-		774,691		-			-			774,691
Issuance of shares of common stock, net of issuance costs (Note 6)		137,836		1,378		314,669		-			-			316,047
Net loss		-		-		-		(3,806,677	)		-			(3,806,677	)

Balance, March 31, 2024		8,538,883		85,389		58,499,003		(49,223,833	)		-			9,360,559
Balance		8,538,883	$	85,389	$	58,499,003	$	(49,223,833	)	$	-		$	9,360,559
Stock-based compensation		-		-		782,852		-			-			782,852
Issuance of shares of common stock, net of issuance costs (Note 6)		14,164		142		37,922		-			-			38,064
Net loss		-		-		-		(4,015,267	)		-			(4,015,267	)
Balance, June 30, 2024		8,553,047	$	85,531	$	59,319,777	$	(53,239,100	)	$	-		$	6,166,208
Balance		8,553,047	$	85,531	$	59,319,777	$	(53,239,100	)	$	-		$	6,166,208

See accompanying notes to the unaudited condensed consolidated financial statements

F-3

INDAPTUS THERAPEUTICS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows


	For the Six Months Ended
	June 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(7,821,944	)	$	(7,498,303	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		735			643
Stock-based compensation		1,557,543			1,455,610
Interest earned on marketable securities		-			(290,426	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		696,430			614,172
Accounts payable and other current liabilities		(847,502	)		(1,350,222	)
Operating lease right-of-use asset and liability, net		325			(455	)
Net cash used in operating activities		(6,414,413	)		(7,068,981	)

Cash flows from investing activities:
Maturity of marketable securities		-			17,000,000
Purchase of marketable securities		-			(6,859,432	)
Net cash provided by investing activities		-			10,140,568

Cash flows from financing activities:
Issuance of shares of common stock		375,588			-
Issuance costs		(21,477	)		-
Net cash provided by financing activities		354,111			-

Net (decrease) increase in cash and cash equivalents		(6,060,302	)		3,071,587

Cash and cash equivalents at beginning of period		13,362,053			9,626,800

Cash and cash equivalents at end of period	$	7,301,751		$	12,698,387

Noncash investing and financing activities
Change in unrealized gain/loss on marketable securities	$	-		$	37,721
ASC 842 lease renewal option exercise	$	-		$	236,506
Reclassification of security deposit	$	-		$	16,477

See accompanying notes to the unaudited condensed consolidated financial statements

F-4

INDAPTUS THERAPEUTICS, INC.

Notes to the unaudited condensed consolidated financial statements

NOTE 1: GENERAL

Indaptus Therapeutics, Inc. and its wholly-owned subsidiaries, Decoy Biosystems, Inc. and Intec Pharma Ltd., (collectively the “Company”), is a biotechnology company dedicated to enhancing and expanding curative cancer immunotherapy for patients with unresectable or metastatic solid tumors and lymphomas, which are responsible for more than 90% of all cancer deaths. The Company is developing a novel, multi-targeted product that activates both innate and adaptive anti-tumor and anti-viral immune responses.

Risks and uncertainties

The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operations (see below), competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, and dependence on key individuals.

Going concern and management’s plans

The Company has incurred net losses and utilized cash in operations since inception. For the six-month period ended June 30, 2024, the Company incurred a net loss of approximately $7.8 million, and as of June 30, 2024, the Company had an accumulated deficit of approximately $53.2 million. In addition, during the six-month period ended June 30, 2024, the Company used approximately $6.4 million of cash in operations and expects to continue to incur significant cash outflows and incur future additional losses as clinical trials and commercialization of the Company’s product candidates will require significant additional financing. The Company believes that, as of the date of the issuance of these unaudited condensed consolidated financial statements, it has adequate cash to fund its ongoing activities into the first quarter of 2025 based on its current operating plan. The Company plans to execute its operating plan by obtaining additional capital, principally through entering into collaborations, strategic alliances, or license agreements with third parties and/or additional public or private debt and equity financing, such as through the registered direct offering and concurrent private placement that the Company completed in August 2024 (the “August 2024 Offering”), raising a total of approximately $2.5 million, net of placement agent and other offering expenses in the amount of approximately $0.5 million. For more details see Note 6(c). However, there is no assurance that additional capital and/or financing will be available to the Company, and even if available, whether it will be on terms acceptable to the Company or in the amounts required. If the Company is unsuccessful in securing sufficient financing, it may need to delay, reduce, or eliminate its research and development programs, which could adversely affect its business prospects, or cease operations.

As a result of these uncertainties, there is substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and SEC Regulation S-X Article 10 for interim financial statements. Accordingly, they do not contain all the information and notes required by US GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of June 30, 2024, and the consolidated results of operations and comprehensive loss and changes in stockholders’ equity for the three- and six-month periods ended June 30, 2024 and 2023 and cash flows for the six-month periods ended June 30, 2024 and 2023.

F-5

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on March 13, 2024. The condensed consolidated balance sheet data as of December 31, 2023, included in these unaudited condensed consolidated financial statements was derived from the audited financial statements for the year ended December 31, 2023, but does not include all disclosures required by US GAAP for annual financial statements.

The results for the six-month period ended June 30, 2024, are not necessarily indicative of the results expected for the year ending December 31, 2024.

Principles of consolidation

The unaudited condensed consolidated financial statements include the accounts of Indaptus Therapeutics, Inc. and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.

Use of estimates

The preparation of the unaudited condensed consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting periods. The most significant estimates relate to the determination of the fair value of stock-based compensation and the determination of period-end obligations to certain contract research organizations. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and adjusts when facts and circumstances dictate. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates.

Loss per share

Loss per share, basic and diluted, is computed on the basis of the net loss for the period divided by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is based upon the weighted average number of shares of common stock and of common stock equivalents outstanding when dilutive. Common stock equivalents include outstanding stock options and warrants which are included under the treasury stock method when dilutive.

The following number of stock options and warrants were excluded from the calculation of diluted loss per share because their effect would have been anti-dilutive for the periods presented (share data):

SCHEDULE OF ANTI-DILUTIVE SECURITIES

	Weighted average
	Three months ended				Six months ended
	June 30				June 30
	2024		2023		2024		2023
Outstanding stock options		2,420,614		1,955,123		2,368,098		1,914,830
Warrants		3,090,787		3,090,787		3,090,787		3,090,787

Research and development expenses

Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, share-based compensation expenses, payroll taxes and other employee benefits, subcontractors and materials used for research and development activities, including clinical trials and professional services. All costs associated with research and development are expensed as incurred.

The Company accrues for expenses resulting from obligations under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers for which payment flows do not match the periods over which services or materials are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. In the event advance payments are made to a CRO, CMO, or outside service provider, the payments will be recorded as a prepaid expense, which will be amortized or expensed as the contracted services are performed.

F-6

Recently issued accounting standards

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which sets forth improvements to the current segment disclosure requirements in accordance with Topic 280 “Segment Reporting,” including clarifying that entities with a single reportable segment are subject to both new and existing segment reporting requirements. ASU 2023-07 will be effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Adoption of this ASU is currently being evaluated by the Company.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

NOTE 3: PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets are comprised of the following:

	June 30,		December 31,
	2024		2023
Prepaid insurance	$	93,047	$	554,097
Prepaid research and development		6,288		17,309
Other prepaid expenses		87,391		61,750
Total prepaid expenses and other current assets	$	186,726	$	633,156
Prepaid expenses and other current assets	$	186,726	$	633,156

NOTE 4: ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

Accounts payable and other current liabilities are comprised of the following:

	June 30,		December 31,
	2024		2023
Accounts payable	$	416,555	$	806,004
Accrued employee costs		679,345		1,213,054
Accrued professional fees		140,356		39,165
Accrued research and development		418,308		439,024
Accrued board fees		117,750		117,750
Delaware franchise taxes payable		20,000		40,000
Other accrued expenses		32,511		17,330
Total accounts payable and other current liabilities	$	1,824,825	$	2,672,327

NOTE 5: STOCK-BASED COMPENSATION

The Company has an equity incentive plan for grants to employees, officers, consultants, directors, and other service providers that was approved in 2021 (the “2021 Plan”). The 2021 Plan provides for the grant of non-qualified stock options, incentive stock options, restricted stock awards, restricted stock units, unrestricted stock awards, stock appreciation rights and other forms of stock-based compensation. The 2021 Plan permits the Company’s board to change the type, terms and conditions of awards as circumstances may change. This flexibility to adjust the type of compensation to be granted is particularly important given current economic and world events.

F-7

A summary of the stock option activity during the six months ended June 30, 2024, is presented in the table below:

SCHEDULE OF STOCK OPTION ACTIVITY

			Weighted average
	Number of options		Exercise price		Remaining contractual life (in years)		Intrinsic value
Outstanding as of January 1, 2024		2,050,197	$	10.90		7.9	$	36,363
Granted		438,250	$	1.93		9.6	$	-
Outstanding as of June 30, 2024		2,488,447	$	9.30		7.8	$	309,618
Exercisable as of June 30, 2024		1,589,772	$	12.83		7.2	$	82,383
Vested and expected to vest as of June 30, 2024		2,488,447	$	9.30		7.8	$	309,618

The following table summarizes the total stock-based compensation expense included in the condensed consolidated statements of operations for the periods presented:

	2024		2023		2024		2023
	For the three months ended June 30,				For the six months ended June 30,
	2024		2023		2024		2023
Research and development	$	221,661	$	193,686	$	439,480	$	386,230
General and administrative		561,191		534,780		1,118,063		1,069,380
Total stock-based compensation expense	$	782,852	$	728,466	$	1,557,543	$	1,455,610

As of June 30, 2024, total compensation cost not yet recognized related to unvested stock options was approximately $1.4 million and such amount is expected to be recognized over a weighted average period of 1.5 years.

The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option. The weighted average inputs used to measure the value of the options granted during the six months ended June 30, 2024 are presented in the table below. The weighted average fair value of stock options issued during the six months ended June 30, 2024 was $1.67 per share.

	2024
Exercise price	$	1.97
Expected term (in years)		5.8
Volatility		114.8	%
Risk free rate		4.1	%
Dividend yield		0	%

The following table presents the exercise price of outstanding stock options as of June 30, 2024:

Exercise price	Options outstanding
$0.01 - $8.00		1,461,499
$0.01 - $8.00		1,461,499
$8.01 - $16.00		992,250
$16.00 or higher		34,698
Total		2,488,447

F-8

NOTE 6: CAPITALIZATION

	a.	As of June 30, 2024 and December 31, 2023, the Company had 200,000,000 shares of common stock authorized and 8,553,047 and 8,401,047 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, there were warrants outstanding to purchase an aggregate of 3,090,787 shares of common stock. As of June 30, 2024, these warrants are exercisable at a weighted average price of $12.50 and their weighted average remaining contractual term is 2.5 years.

	b.	On June 1, 2022, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) which was amended on September 1, 2022 with a sales agent, pursuant to which the Company may offer and sell, from time to time through the sales agent, shares of the Company’s common stock, par value $0.01 per share. The issuance and sale of common stock by the Company under the ATM Agreement is being made pursuant to the Company’s effective “shelf” registration statement on Form S-3 filed with the SEC on September 1, 2022 and declared effective on September 9, 2022. In 2024, the Company sold 152,000 shares of the Company’s common stock for aggregate gross proceeds of approximately $0.4 million. The Company’s ability to issue shares under the shelf registration statement on Form S-3 is limited by General Instruction I.B.6 to Form S-3. On August 6, 2024, the Company filed a prospectus supplement to reduce the amount of shares registered under the prospectus for the ATM to $0.00 and to suspend the ATM program, but the ATM Agreement remains in full force and effect.

	c.	On August 8, 2024, the Company completed a registered direct offering, pursuant to which the Company sold and issued to certain investors, including an officer of the Company 1,643,837 shares of the Company’s common stock at a purchase price per share of $1.825. In addition, in a concurrent private placement, the Company also issued to the purchasers in the August 2024 Offering unregistered warrants to purchase 1,643,837 shares of the Company’s common stock (the “PIPE Warrants”). The PIPE Warrants are immediately exercisable at an exercise price of $1.70 per share and expire five years from the date of issuance. The total net proceeds were approximately $2.5 million, after deducting placement agent and other offering expenses in the amount of approximately $0.5 million.

NOTE 7: COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, the Company reviews the status of significant matters, if any exist, and assesses its potential financial exposure. If the potential loss from any claim or legal claim is considered probable and the amount of such potential loss can be estimated, the Company accrues liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation.

Leases

Future minimum annual lease payments and a reconciliation to the Company’s operating lease liability under the Company’s noncancelable operating lease as of June 30, 2024 are as follows:

SUMMARY OF MINIMUM LEASE PAYMENTS


2024 (remaining)	$	51,106
2025 (lease ends October 31, 2025)		86,862
Total minimum lease payments		137,968
Less: amount representing interest		(7,166	)
Present value of operating lease liability		130,802
Less: current portion		(103,223	)
Operating lease liability, net of current portion	$	27,579

The Company recognized rent expense of $50,924 and $49,818 during the six months ended June 30, 2024 and 2023, respectively. The Company recognized rent expense of $25,462 during each of the three months ended June 30, 2024 and 2023, respectively. Total cash payments for the operating lease totalled $50,600 and $49,432 during the six months ended June 30, 2024 and 2023, respectively.

NOTE 8: SUBSEQUENT EVENTS

The Company evaluated subsequent events from June 30, 2024, the date of these unaudited condensed consolidated financial statements, through August 12, 2024, which represents the date the condensed consolidated financial statements were issued, for events requiring recognition or disclosure in the condensed consolidated financial statements for the six months ended June 30, 2024. The Company concluded that no events have occurred that would require recognition or disclosure in the condensed consolidated financial statements, except for the August 2024 Offering that was completed on August 8, 2024, as described in Note 6(c).

F-9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context indicates otherwise, in this Quarterly Report, the terms “Indaptus,” “the Company,” “we,” “us” and “our” refer to Indaptus Therapeutics, Inc. (formerly Intec Parent, Inc., the successor of Intec Pharma Ltd. following the domestication merger) and, where appropriate, its consolidated subsidiaries following the domestication merger and the reverse merger described in our previous periodic reports. References to “Intec Israel” refer to Intec Pharma Ltd., the predecessor of Indaptus prior to the domestication merger, and references to “Decoy” refer to Decoy Biosystems, Inc., the entity acquired by Indaptus in connection with the reverse merger.

You should read the following discussion and analysis of our financial condition and results of operations along with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on March 13, 2024 (the “2023 Annual Report on Form 10-K”). The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions. You should review the sections titled “Summary Risk Factors” and Part II. Item 1A. Risk Factors in this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described below. Please also see the “Cautionary Note Regarding Forward-Looking Statements” section in the forepart of this Quarterly Report.

Overview

We are a clinical biotechnology company developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. We have evolved from more than a century of immunotherapy advances. Our approach is based on the hypothesis that efficient activation of both innate and adaptive immune cells and associated anti-tumor and anti-viral immune responses will require a multi-targeted package of immune system activating signals that can be administered safely intravenously. Our patented technology is composed of single strains of attenuated and killed, non-pathogenic, Gram-negative bacteria, designed to have reduced i.v. toxicity, but largely uncompromised ability to prime or activate many of the cellular components of innate and adaptive immunity. This approach has led to broad anti-tumor and anti-viral activity in preclinical models, including durable anti-tumor response synergy observed with each of four different classes of existing agents, including NSAIDs, checkpoint therapy, targeted antibody therapy and low-dose chemotherapy. Tumor eradication by our technology was associated with induction of both innate and adaptive immunological memory and, importantly, did not require provision of or targeting a tumor antigen in preclinical models. We have carried out successful current Good Manufacturing Practice (cGMP) manufacturing of our lead clinical candidate, Decoy20.

In May 2022, the U.S. Food and Drug Administration, or the FDA, allowed us to proceed under our IND for a Phase 1 clinical trial in patients with advanced solid tumors where currently approved therapies have failed. In December 2022, we initiated an open label, multi-center, dose escalation and expansion, single arm (monotherapy) Phase 1 study conducted in 2 parts. The Phase 1 study began with single dose administration and has now been followed with continuous weekly dosing of Decoy20 in tumor-specific expansion cohorts. The study is enrolling patients with any one of six advanced/metastatic solid tumors, who have exhausted approved treatment options. The study’s objectives are to assess the safety and tolerability of Decoy20, to determine the maximum tolerated dose, the optimal biologically active and recommended Phase 2 dose, as well as to assess Decoy20 pharmacokinetics (PK), pharmacodynamics and clinical activity. The primary endpoints of the study are incidence, relatedness and severity of adverse events and treatment-emergent adverse events and determining the number of subjects per cohort with dose limiting toxicity-based adverse events. Secondary endpoints include the incidence of anti-drug antibodies and neutralizing antibodies pre- and post-treatment, change in Decoy20 PK parameters over time, objective response rate and duration of response.

In August 2023, we evaluated the first four patients who received a single dose of 7 x 10^7 Decoy20 in Part 1 of the Phase 1 clinical trial. All four patients who enrolled were evaluable in the first cohort. These patients experienced generally anticipated transient adverse events including hemodynamic changes such as changes in pulse or blood pressure that resolved within 30 minutes and laboratory abnormalities such as grade 1-3 elevations in transaminases (liver function tests) and grade 4 reductions in lymphocytes that generally resolved within three days. One patient had a dose-limiting toxicity of grade 3 bradycardia (slow heart rate) and grade 2 hypotension (low blood pressure) which resolved within approximately 90 minutes with i.v. fluids. Patients also experienced transient induction of over 50 different biomarkers associated with innate and adaptive anti-tumor immune responses. After the end of infusion, Decoy20 was cleared from the blood within 30 to 120 minutes. Peak cytokine and chemokine induction occurred within ~4 to 24 hours and most cytokine/chemokines returned to the patient’s respective baseline by 24-72 hours. This rapid clearance and associated transient cytokine/chemokine induction are desired to avoid prolonged toxicity, often associated with longer term cytokine exposure.

In September 2023, we began the second cohort of the Phase 1 clinical trial after receiving authorization from the Safety Review Committee. The second cohort dose was a reduction from 7 x 10^7 Decoy20 dose to 3 x 10^7 Decoy20 based on the significant pharmacodynamic effect seen with the first four patients in the first cohort. In March 2024, we completed the second cohort of patients who received a single dose of 3 x 10^7 Decoy20 in Part 1 of the clinical trial and, following authorization from the Safety Review Committee, advanced into the weekly dosing part of the trial. In May 2024, we dosed the first patient in the weekly dosing part and as of the date of the issuance of this Quarterly Report we completed one month of the weekly dosing part in the first three patients at the 3 x 10^7 Decoy20 dose.

In May and June 2024, we enrolled two additional patients in the first cohort who received a single dose of 7 x 10^7 Decoy20, and we intend to initiate the weekly dosing with 7 x 10^7 Decoy20 later this year.

Impact of Macroeconomic Conditions on our Operations

Economic developments such as supply chain constraints and rising inflation and interest rates have negatively affected the global financial markets and may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity. The ultimate impact of current economic conditions is highly uncertain and subject to change. While it is unknown how long these conditions will last and what the complete financial effect will be to us, capital raise efforts and additional development of our technologies may be negatively affected. In addition, our business operations expose us to risks associated with public health crises and epidemics/pandemics.

Components of Operating Results

Operating Expenses

Research and Development

Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of fees paid to contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, as well as compensation expenses for certain employees involved in the planning, managing, and analyzing the work of the CROs and CMOs and materials used for research and development activities. We expense research and development costs as incurred.

We accrue expenses for manufacturing, preclinical studies and clinical trial activities performed by third parties based on estimates of services received and efforts expended pursuant to agreements with CROs, CMOs, and other outside service providers. We determine these estimates based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. In the event advance payments are made to a CRO, CMO, or outside service provider, we record the payments as a prepaid asset, which will be amortized or expensed as the contracted services are performed. However, actual costs and timing of these activities are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to ramp up our clinical development activities and incur expenses associated with hiring additional personnel to support our research and development efforts. Our expenditures on future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of preclinical studies and clinical trials and development of product candidates will depend on a variety of factors, including:

	●	the timing and receipt of regulatory approvals;

	●	the scope, rate of progress and expenses of preclinical studies and clinical trials and other research and development activities;

	●	potential safety monitoring and other studies requested by regulatory agencies; and

	●	significant and changing government regulation.

The process of conducting the necessary clinical research to obtain FDA and other regulatory approval is costly and time consuming and the successful development of product candidates is highly uncertain. These risks and uncertainties associated with our research and development projects are discussed more fully in Part II. Item 1A. “Risk Factors - We expect to continue to incur significant research and development expenses and other operating expenses, which may make it difficult for us to attain profitability.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses include compensation, employee benefits, and stock-based compensation for executive management, finance administration and human resources, facility costs (including rent), professional service fees, and other general overhead costs, including depreciation, to support our operations.

We expect our general and administrative expenses to increase substantially for the foreseeable future as we continue to increase our headcount to support our research and development activities and operations generally, the growth of our business and, if any of our product candidates receive marketing approval, commercialization activities. We also expect to continue to incur expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, additional director and officer insurance expenses, investor relations activities, and other administrative and professional services.

Other Income, Net

Other income, net includes interest earned on deposits and investments and other items of income, expense, gain and loss that are incidental to the core operations of the Company.

Results of Operations

Three months ended June 30, 2024 compared to three months ended June 30, 2023

The following tables set forth our results of operations for the three months ended June 30, 2024 and 2023 and the relative dollar change between the two periods.

	Three months ended
	June 30,						Change
	2024			2023			($)			%
Operating expenses:
Research and development	$	1,713,973		$	1,480,485		$	233,488			16	%
General and administrative		2,394,912			2,014,777			380,135			19	%

Total operating expenses		4,108,885			3,495,262			613,623			18	%

Loss from operations		(4,108,885	)		(3,495,262	)		(613,623	)		18	%

Other income, net		93,618			250,197			(156,579	)		(63	)%

Net loss	$	(4,015,267	)	$	(3,245,065	)	$	(770,202	)		24	%
Net loss attributable to common stockholders per share, basic and diluted	$	(0.47	)	$	(0.39	)	$	(0.08	)		21	%
Weighted average number of shares used in calculating net loss per share, basic and diluted		8,543,919			8,401,047

Research and Development Expenses

During the three months ended June 30, 2024, our research and development expenses were approximately $1.7 million, which represented an increase of approximately $0.2 million, or approximately 16%, compared to approximately $1.5 million for the three months ended June 30, 2023. This increase was attributable primarily to payroll and related expenses, including stock-based compensation. We expect our research and development expenses to increase for the remainder of the year as our Phase 1 clinical trial progresses.

General and Administrative Expenses

Our general and administrative expenses for the three months ended June 30, 2024 amounted to approximately $2.4 million, an increase of approximately $0.4 million, or approximately 19%, compared to approximately $2.0 million for the three months ended June 30, 2023. This increase was attributable primarily to payroll and related expenses, legal fees and investor relations expenses.

Other Income, Net

During the three months ended June 30, 2024, our other income, net was approximately $0.1 million, which represented a decrease of approximately $0.16 million as compared to the three months ended June 30, 2023. The other income generated in the period consists primarily of income earned on the Company’s cash and cash equivalent accounts.

Six months ended June 30, 2024 compared to six months ended June 30, 2023

The following tables set forth our results of operations for the six months ended June 30, 2024 and 2023 and the relative dollar change between the two periods.

	Six months ended
	June 30,						Change
	2024			2023			($)			%
Operating expenses:
Research and development	$	3,305,115		$	3,360,385		$	(55,270	)		(2	)%
General and administrative		4,747,009			4,590,043			156,966			3	%

Total operating expenses		8,052,124			7,950,428			101,696			1	%

Loss from operations		(8,052,124	)		(7,950,428	)		(101,696	)		1	%

Other income, net		230,180			452,125			(221,945	)		(49	)%

Net loss	$	(7,821,944	)	$	(7,498,303	)	$	(323,641	)		4	%
Net loss attributable to common stockholders per share, basic and diluted	$	(0.92	)	$	(0.89	)	$	(0.03	)		3	%
Weighted average number of shares used in calculating net loss per share, basic and diluted		8,493,394			8,401,047

Research and Development Expenses

During the six months ended June 30, 2024, our research and development expenses were approximately $3.3 million, which represented a decrease of approximately $0.1 million, or approximately 2%, compared to approximately $3.4 million for the six months ended June 30, 2023. This decrease was attributable primarily to a decrease of approximately $0.5 million in our manufacturing processes of Decoy20 that were conducted in 2023 and was offset by an increase of approximately $0.4 million in our Phase 1 clinical trial and in payroll and related expenses. We expect our research and development expenses to increase for the remainder of the year as our Phase 1 clinical trial progresses.

General and Administrative Expenses

Our general and administrative expenses for the six months ended June 30, 2024 amounted to approximately $4.7 million, an increase of approximately $0.1 million, or approximately 3%, compared to approximately $4.6 million for the six months ended June 30, 2023. This increase was attributable primarily to payroll and related expenses, including stock-based compensation.

Other Income, Net

During the six months ended June 30, 2024, our other income, net was approximately $0.2 million, which represented a decrease of approximately $0.2 million as compared to the six months ended June 30, 2023. The other income generated in the period consists primarily of income earned on the Company’s cash and cash equivalent accounts.

Liquidity and Resources

We do not currently have any approved products and have never generated any revenue from product sales. Since our inception, we have funded our operations primarily through public and private offerings of our equity securities.

On August 8, 2024, we completed a registered direct offering, pursuant to which we sold and issued to certain investors, including an officer of Indaptus, 1,643,837 shares of our common stock at a purchase price per share of $1.825. In addition, in a concurrent private placement, we also issued to the purchasers in August 2024 Offering unregistered warrants to purchase 1,643,837 shares of our common stock (the “PIPE Warrants”). The PIPE Warrants are immediately exercisable at an exercise price of $1.70 per share and expire five years from the date of issuance. The total net proceeds were approximately $2.5 million, after deducting placement agent and other offering expenses in the amount of approximately $0.5 million.

In June 2022, we entered into an At The Market Offering Agreement (the “ATM Agreement”) which was amended on September 1, 2022 with H.C. Wainwright & Co., LLC, as sales agent (“Wainwright”), pursuant to which based on the prospectus supplement that was filed with the SEC on March 13, 2024, we may offer and sell, from time to time through Wainwright, shares of our common stock, par value $0.01 per share, for aggregate gross proceeds of up to $5.2 million. The issuance and sale of common stock by us under the ATM Agreement is being made pursuant to our effective “shelf” registration statement on Form S-3 filed with the SEC on September 1, 2022 and declared effective on September 9, 2022. In 2024, we sold 152,000 shares of our common stock for aggregate gross proceeds of approximately $0.4 million. On August 6, 2024, we filed a prospectus supplement to reduce the amount of shares registered under the prospectus for the ATM to $0.00 and to suspend the ATM program, but the ATM Agreement remains in full force and effect.

In December 2022, we entered into a purchase agreement and a registration rights agreement with Lincoln Park pursuant to which we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $20.0 million of our common stock (subject to certain limitations) from time to time over the term of the purchase agreement. We also filed a registration statement on Form S-1 to cover the resale of shares of our common stock issuable under the purchase agreement.

Upon execution of the purchase agreement, we issued to Lincoln Park 142,450 initial commitment shares and are obligated to issue additional shares of common stock to Lincoln Park with a value of $125,000, calculated in accordance with the purchase agreement, on the date we have sold over $10.0 million in shares of common stock under the purchase agreement, up to a maximum of 76,220 shares of common stock (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction), in each case as consideration for Lincoln Park’s irrevocable commitment to purchase shares of our common stock at our direction under the purchase agreement. Additionally, we have reserved up to 3,781,330 shares of our common stock for issuance and sale to Lincoln Park under the purchase agreement from time to time, if and when we determine to sell additional shares to Lincoln Park. No shares of common stock have been sold under the program.

We believe that the cash and cash equivalents of approximately $7.3 million that we had as of June 30, 2024, and the net proceeds of approximately $2.5 million received from the August 2024 Offering will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2025. While we intend to finance our cash needs principally through collaborations, strategic alliances, or license agreements with third parties and/or debt or equity financings, we cannot provide any assurance that new financing will be available to us on commercially acceptable terms or in the amounts required, if at all. These conditions raise substantial doubt regarding our ability to continue as a going concern within one year after the date of the filing of this Quarterly Report. For additional information, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

We have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years.

Cash Flows

Operating Activities

Net cash used in operating activities was approximately $6.4 million for the six months ended June 30, 2024, compared with net cash used in operating activities of approximately $7.1 million for the six months ended June 30, 2023. The decrease in net cash used was primarily attributable to a settlement fee that was paid in February 2023.

Investing Activities

There was no net cash provided by or used in investing activities in the six months ended June 30, 2024. Net cash provided by investing activities was approximately $10.1 million for the six months ended June 30, 2023, which was related to the maturity of $17.0 million in marketable securities, offset by net investment of approximately $6.9 million in marketable securities.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2024 was approximately $0.4 million, which was provided by issuance and sale of our common stock under the ATM Agreement. There was no net cash provided by or used in financing activities in the six months ended June 30, 2023.

Funding Requirements

Our operating expenses are expected to continue to increase in the future in connection with our ongoing activities, particularly as we expect to continue to ramp up our clinical development activities and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to continue to incur significant costs associated with operating as a public company.

We believe that our existing cash and cash equivalents as of the date of the issuance of this Quarterly Report are adequate to fund our ongoing activities into the first quarter of 2025.

Our future capital requirements will depend on many factors, including, but not limited to:

	●	the scope, progress, results and costs of preclinical studies and clinical trials;

	●	the scope, prioritization and number of our clinical trials and other research and development programs;

	●	the amount of revenues we receive under future licensing, collaboration, development and commercialization arrangements with respect to our product candidates;

	●	the impact of any pandemic, epidemic or other future health crisis on our business and operations;

	●	the costs of the development and expansion of our operational infrastructure;

	●	the costs, timing and outcome of regulatory review of our product candidates;

	●	the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements;

	●	the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

	●	the costs and timing of securing manufacturing arrangements for clinical or commercial production;

	●	the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;

	●	the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or technology;

	●	the costs associated with being a public company; and

	●	any cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for the next couple of years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of current macroeconomic conditions and market volatility. As a result, we may face difficulties raising capital through sales of our common stock on acceptable terms, if at all. If we are unsuccessful in securing sufficient financing, we may need to delay, reduce, or eliminate our research and development programs, which could adversely affect our business prospects, or cease operations. For additional information, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report and “Risk Factors” in Part II. Item 1A of this Quarterly Report.

Contractual Obligations

Operating lease liabilities represent our commitment for future rent made under a non-cancelable lease for our offices in San Diego, CA. The total future payments for our operating lease obligation on June 30, 2024 were approximately $0.15 million, of which approximately $0.1 million is due in the next twelve months and the remaining payments are due through October 2025. For additional details regarding our lease, see Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under the SEC rules.

Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates that affect the reported amounts of our assets, liabilities and expenses. Significant accounting policies employed, including the use of estimates, are presented in the notes to our annual financial statements included in our 2023 Annual Report on Form 10-K. We periodically evaluate our estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require our subjective or complex judgments, resulting in the need to make estimates about the effect of matters that are inherently uncertain. If actual performance should differ from historical experience or if the underlying assumptions were to change, our financial condition and results of operations may be materially impacted.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our 2023 Annual Report on Form 10-K. During the six months ended June 30, 2024, there were no material changes to our critical accounting policies from those discussed in our 2023 Annual Report on Form 10-K.

Recently Issued Accounting Standard

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information otherwise required under this Item 3.

Item 4. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of June 30, 2024, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

There are currently no pending material legal proceedings, and we are currently not aware of any legal proceedings or claims against us or our property that we believe will have any significant effect on our business, financial position or operating results. None of our officers or directors is a party against us in any legal proceeding.

Item 1A. Risk Factors

You should carefully consider the factors described below, together with all of the other information contained in this Quarterly Report, including the unaudited condensed consolidated financial statements and the related notes included in this Quarterly Report beginning on page F-1, before deciding whether to invest in our common stock. If any of the risks discussed below actually occur, our business, financial condition, operating results and cash flows could be materially adversely affected. This could cause the trading price of our common stock to decline, and you may lose all or part of your investment.

Risks Related to Our Financial Position and Capital Requirements

We are a clinical-stage company with a limited operating history. We are not currently profitable, do not expect to become profitable in the near future and may never become profitable.

We are a clinical-stage biotechnology company focused primarily on developing a novel and patented systemically-administered anti-cancer and anti-viral immunotherapy. All of our product candidates are in the preclinical or early clinical development stage, and none of our product candidates have been approved for marketing or are being marketed or commercialized.

As a result, we have no meaningful historical operations upon which to evaluate our business and prospects and have not yet demonstrated an ability to obtain marketing approval for any of our product candidates or successfully overcome the risks and uncertainties frequently encountered by companies in the biopharmaceutical industry. As a result, we have not been profitable and have incurred significant operating losses in every reporting period since our inception. For the six-month period ended June 30, 2024, we reported a net loss of approximately $7.8 million and as of June 30, 2024, we had an accumulated deficit of approximately $53.2 million.

For the foreseeable future, we expect to continue to incur losses, which will increase significantly from historical levels as we expand our development activities, seek regulatory approvals for our product candidates, and begin to commercialize them if they are approved by the FDA, the European Medicines Agency, or the EMA, or comparable foreign authorities. Further, the net losses we incur may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Even if we succeed in developing and commercializing one or more product candidates, we may never become profitable, or even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We have identified conditions and events that raise substantial doubt regarding our ability to continue as a going concern.

We have incurred net losses and utilized cash in operations since inception as described above. In addition, as of June 30, 2024, we had approximately $7.3 million in cash and cash equivalents, and during the six-month period ended June 30, 2024, we used $6.4 million of cash in operations and expect to continue to incur significant cash outflows and incur future additional losses to execute our operating plan. While we intend to finance our cash needs principally through collaborations, strategic alliances, or license agreements with third parties and/or debt or equity financings, we cannot provide any assurance that new financing will be available to us on commercially acceptable terms or in the amounts required, if at all. Due to the uncertainty in securing additional funding, and as existing cash resources are not sufficient to fund planned operations for at least 12 months from the filing of this Quarterly Report, we have concluded that substantial doubt exists about our ability to continue as a going concern. If we are unsuccessful in securing sufficient financing, we may need to delay, reduce, or eliminate our research and development programs, which could adversely affect our business prospects, or cease operations.

Our unaudited condensed consolidated financial statements included in this Quarterly Report have been prepared on a going concern basis under which an entity is able to realize its assets and satisfy its liabilities in the ordinary course of business. The unaudited condensed consolidated financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should we be unable to continue as a going concern within one year after the date that the financial statements are issued.

Our future operations are dependent upon the successful entry into collaborations, strategic alliances, or license agreements with third parties and/or on the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful in completing these collaborations or alliances, equity or debt financing or in achieving profitability. As such, there can be no assurance that we will be able to continue as a going concern.

Substantial doubt about our ability to continue as a going concern may materially and adversely affect the price per share of our common stock, and it may be more difficult for us to obtain financing. If potential collaborators decline to do business with us or potential investors decline to participate in any future financing due to such concerns, our ability to increase our cash position may be limited. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations. If we are unable to continue as a going concern, you could lose all or part of your investment in our Company.

Given our lack of current cash flow, we will need to raise additional capital. If we are unable to raise a sufficient amount of capital when needed in required amounts and on acceptable terms or at all, we may be forced to delay, limit or eliminate some or all of our research programs, product development activities and commercialization efforts.

Since we will be unable to generate sufficient, if any, cash flow to fund our operations for the foreseeable future, we will need to seek additional equity or debt financing to provide the capital required to maintain or expand our operations.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, we may be required to delay, limit or eliminate some or all of our research programs, product development activities and commercialization efforts, and our ability to achieve our business objectives, our competitiveness, and our business, financial condition and results of operations may be materially adversely affected. In addition, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our inability to fund our business could lead to the loss of your investment.

Our future capital requirements will depend on many factors, including, but not limited to:

	●	the scope, progress, results and costs of preclinical studies and clinical trials;

	●	the scope, prioritization and number of our clinical trials and other research and development programs;

	●	the amount of revenues we receive under future licensing, collaboration, development and commercialization arrangements with respect to our product candidates;

	●	the impact of any pandemic, epidemic or other future health crisis on our business and operations;

	●	the costs of the development and expansion of our operational infrastructure;

	●	the costs, timing and outcome of regulatory review of our product candidates;

	●	the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements;

	●	the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

	●	the costs and timing of securing manufacturing arrangements for clinical or commercial production;

	●	the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;

	●	the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or technology;

	●	the costs associated with being a public company; and

	●	any cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates.

Even if we believe we have sufficient funds for our current or future operating plans, we may continue to seek additional capital if market conditions are favorable or in light of specific strategic considerations. Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to obtain sufficient funding on a timely basis, in required amounts or on favorable terms, we may be required to significantly delay, reduce or eliminate one or more of our research or product development programs and/or commercialization efforts. We may also be unable to expand our operations or otherwise capitalize on business opportunities as desired. Any of these events could materially adversely affect our financial condition and business prospects.

Raising additional capital would cause dilution to our shareholders and may restrict our operations or require us to relinquish rights to our technologies or product candidates.

SEC Form 10-Q filed by Indaptus Therapeutics Inc.