The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of the condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30,
2019
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Chardan Healthcare
Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on November 1, 2017. The Company
was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization
or other similar business transaction with one or more businesses or entities (a “Business Combination”). Although
the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the
Company intends to focus on businesses operating in North America in the healthcare industry.
At September 30, 2019,
the Company had not yet commenced operations. All activity through September 30, 2019 relates to the Company’s formation,
its initial public offering (“Initial Public Offering”), identifying a target for a Business Combination and activities
in connection with the proposed acquisition of BiomX Ltd. (“BiomX”) (see Note 7).
The Company has one
subsidiary, CHAC Merger Sub Ltd., a wholly owned subsidiary of the Company incorporated under the laws of the State of Israel,
which was formed solely to effectuate the Merger described in Note 7.
The registration statement
for the Initial Public Offering was declared effective on December 13, 2018. On December 18, 2018 the Company consummated the Initial
Public Offering of 7,000,000 units (“Units” and, with respect to the common stock included in the Units sold, the “Public
Shares”) at $10.00 per Unit, generating total gross proceeds of $70,000,000, which is described in Note 4.
Simultaneously with
the closing of the Initial Public Offering, the Company consummated the sale of an aggregate of 2,900,000 warrants (the “Private
Placement Warrants”) at a price of $0.40 per warrant in a private placement to Mountain Wood, LLC, an affiliate of Chardan
Investments, LLC (the “Sponsor”), generating total gross proceeds of $1,160,000, which is described in Note 5.
Transaction costs
amounted to $783,566, consisting of $500,000 of underwriting fees and $283,566 of offering costs. In addition, $896,729 of cash
was held outside of the Trust Account (defined below) and was available for working capital purposes.
Following the closing
of the Initial Public Offering on December 18, 2018, an amount of $70,000,000 ($10.00 per Unit) from the net proceeds of the sale
of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (“Trust
Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended
investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of
the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination
or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial
Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be
with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust
Account (excluding taxes payable on income earned on the Trust Account) at the time of the signing of an agreement to enter
into a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company
owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of
1940, as amended, or the Investment Company Act. There is no assurance that the Company will be able to successfully effect a
Business Combination.
The Company will provide
its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination
either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer.
The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will
be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion
of the amount then on deposit in the Trust Account ($10.00 per share, plus any pro rata interest earned on the funds held in the
Trust Account and not previously released to the Company to pay its franchise and income tax obligations). There will be no redemption
rights upon the completion of a Business Combination with respect to the Company’s warrants.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30,
2019
(Unaudited)
The Company will
proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a
Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in
favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a
stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of
Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission
(“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however,
stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for
business or other legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules. Additionally, each public stockholder may elect to redeem their
Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder
approval in connection with a Business Combination, the Company’s Sponsor and other initial stockholders (collectively,
the “Initial Stockholders”) have agreed to (a) vote their Founder Shares (as defined in Note 6) and any
Public Shares held by them in favor of a Business Combination and (b) not to convert any shares (including Founder Shares) in
connection with a stockholder vote to approve a Business Combination or sell any such shares to the Company in a tender offer
in connection with a Business Combination.
Notwithstanding the
foregoing, if the Company seeks stockholder approval of a Business Combination and the Company does not conduct redemptions pursuant
to the tender offer rules, a stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder
is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), will be restricted from redeeming their shares with respect to more than an aggregate of 20%
of the Public Shares.
The Company will have
until December 18, 2020 to consummate a Business Combination (the “Combination Period”). If the Company is unable to
complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose
of winding up, (ii) as promptly as reasonably possible but no more than five business days thereafter, redeem 100% of the outstanding
Public Shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including
interest earned (net of taxes payable), divided by the number of then outstanding Public Shares, which redemption will completely
extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby
a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements
of applicable law. The proceeds deposited in the Trust Account could, however, become subject to claims of creditors. Therefore,
the actual per-share redemption amount could be less than $10.00 per Unit.
The Initial Stockholders
have agreed to (i) waive their redemption rights with respect to Founder Shares and any Public Shares they may acquire during or
after the Initial Public Offering in connection with the consummation of a Business Combination, (ii) to waive their rights to
liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to consummate a Business
Combination within the Combination Period and (iii) not to propose an amendment to the Company’s Amended and Restated Certificate
of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares
if the Company does not complete a Business Combination, unless the Company provides the public stockholders an opportunity to
redeem their Public Shares in conjunction with any such amendment. However, the Initial Stockholders will be entitled to liquidating
distributions with respect to any Public Shares acquired if the Company fails to consummate a Business Combination or liquidates
within the Combination Period.
In order to protect
the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a
vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below $10.00 per share, except as to
any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in
the Trust Account or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against
certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover,
in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to
the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will
have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right,
title, interest or claim of any kind in or to monies held in the Trust Account.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30,
2019
(Unaudited)
NOTE 2. LIQUIDITY
As of September 30,
2019, the Company had $97,238 in its operating bank accounts, $71,083,267 in marketable securities held in the Trust Account to
be used for a Business Combination or to repurchase or redeem stock in connection therewith and a working capital deficit of $539,917,
which excludes franchise and income taxes payable of $87,713, of which such amounts will be paid from interest earned on the Trust
Account. As of September 30, 2019, approximately $1,083,000 of the amount on deposit in the Trust Account represented interest
income, which is available to pay the Company’s tax obligations. During the three months ended September 30, 2019, the Company
withdrew $170,264 of interest from the Trust Account in order to pay its income tax obligations.
Until the consummation
of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting target
businesses to acquire, and structuring, negotiating and consummating the Business Combination.
In August 2019, the
Sponsor committed to provide an aggregate of $500,000 in loans to the Company to finance transaction costs in connection with a
Business Combination. In October 2019, the $500,000 commitment was replaced by a $875,000 commitment. Such loans, to the extent
advanced, will be evidenced by a promissory note, will be non-interest bearing, unsecured and will only be repaid upon the completion
of a Business Combination. Up to $500,000 of such loans may also be convertible into private warrants at a purchase price of $0.40
per private warrant. The private warrants would be identical to the Private Placement Warrants.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial
reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial
position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation
of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited
condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for
the year ended June 30, 2019 as filed with the SEC on August 21, 2019, which contains the Company’s audited financial
statements and notes thereto. The financial information as of June 30, 2019 is derived from the audited financial statements
presented in the Company’s Annual Report on Form 10-K for the year ended June 30, 2019.The interim results for the three
months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ended June 30, 2020 or
for any future interim periods.
Principles of Consolidation
The accompanying condensed
consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
Emerging growth company
The Company is an
“emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(Unaudited)
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt
out of such extended transition period which means that when a standard is issued or revised and it has different application dates
for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with
another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using
the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of estimates
The preparation of
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition,
situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could
differ significantly from those estimates.
Cash and cash equivalents
The Company considers
all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents
consist of mutual funds. As of September 30, 2019 and June 30, 2019, cash equivalents amounted to $58,127 and $605,974.
Marketable securities held in Trust Account
At September 30, 2019
and June 30, 2019, substantially all of the assets held in the Trust Account were held in U.S. Treasury Bills.
Common stock subject to possible redemption
The Company accounts
for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a
liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events
not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside
of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible
redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s
condensed consolidated balance sheets.
Income taxes
The Company complies
with the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts,
based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company's effective tax rate for the three months ended September 30, 2019 was approximately (20%), which differs from
the statutory tax rate mainly due to the effect of Business Combination expenses which are not currently deductible.
ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken
or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. As of September 30, 2019 and June 30, 2019, there were no unrecognized tax benefits and no
amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in
significant payments, accruals or material deviation from its position.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER
30, 2019
(Unaudited)
The Company may be
subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations
may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax
benefits will materially change over the next twelve months.
Net loss per common share
Net loss per common
share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company
applies the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at September
30, 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic
loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company
has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 6,400,000 shares
of common stock in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence
of future events. As a result, diluted loss per common share is the same as basic loss per common share for the periods.
Reconciliation of net loss per common
share
The Company’s
net loss is adjusted for the portion of income that is attributable to common stock subject to possible redemption, as these shares
only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic and diluted
loss per common share is calculated as follows:
|
|
Three Months Ended
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Net loss
|
|
$
|
(292,179
|
)
|
|
$
|
(650
|
)
|
Less: Income attributable to common stock subject to possible redemption
|
|
|
(275,958
|
)
|
|
|
—
|
|
Adjusted net loss
|
|
$
|
(568,137
|
)
|
|
$
|
(650
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
2,239,757
|
|
|
|
1,750,000
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.25
|
)
|
|
$
|
(0.00
|
)
|
Concentration of credit risk
Financial instruments
that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution, which,
at times may exceed the Federal Depository Insurance Coverage of $250,000. At September 30, 2019 and June 30, 2019, the Company
had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of financial instruments
The fair value of
the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements
and Disclosures,” approximates the carrying amounts represented in the accompanying condensed consolidated balance sheets,
primarily due to their short-term nature.
Recently issued accounting standards
Management does not
believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material
effect on the Company’s condensed consolidated financial statements.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30,
2019
(Unaudited)
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold 7,000,000 Units at a purchase price of $10.00 per Unit. Each Unit consists of one share of common
stock and one warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one-half of one share
of common stock at an exercise price of $11.50 per whole share (see Note 8).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with
the closing of the Initial Public Offering, Mountain Wood, LLC purchased an aggregate of 2,900,000 Private Placement Warrants at
a purchase price of $0.40 per Private Placement Warrant, or $1,160,000 in the aggregate). Each Private Placement Warrant is exercisable
to purchase one share of common stock at an exercise price of $11.50. The proceeds from the sale of the Private Placement Warrants
were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business
Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the
redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire
worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Private Placement
Warrants.
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
In March 2018, the
Company issued an aggregate of 1,437,500 shares of common stock to the Sponsor (“Founder Shares”) for an aggregate
purchase price of $25,000. On September 14, 2018, the Company effectuated a 1.4-for-1 stock dividend resulting in an aggregate
of 2,012,500 Founder Shares outstanding. The Founder Shares included an aggregate of up to 262,500 shares subject to forfeiture
by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Sponsor
would own 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor did
not purchase any Public Shares in the Initial Public Offering). All share and per-share amounts have been retroactively restated
to reflect the stock dividend. The underwriters’ over-allotment option expired unexercised on February 4, 2019. As such,
262,500 Founder Shares were forfeited resulting in 1,750,000 Founder Shares issued and outstanding.
The Initial Stockholders
have agreed that, subject to certain limited exceptions, 50% of the Founder Shares will not be transferred, assigned, sold or released
from escrow until the earlier of (i) 6 months after the date of the consummation of a Business Combination or (ii) the date on
which the closing price of the Company’s shares of common stock equals or exceeds $12.50 per share (as adjusted for stock
splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing
after a Business Combination and the remaining 50% of the Founder Shares will not be transferred, assigned, sold or released from
escrow until 6 months after the date of the consummation of a Business Combination, or earlier, in either case, if, subsequent
to a Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction
which results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other
property.
Promissory Notes – Related Party
The Company issued
unsecured promissory notes (the “Promissory Notes”) to the Sponsor, pursuant to which the Company borrowed an aggregate
of $105,500, of which $65,500 was borrowed during the year ended June 30, 2019. The Promissory Notes were non-interest bearing
and payable on the closing of the Initial Public Offering. The Promissory Notes were repaid upon the consummation of the Initial
Public Offering on December 18, 2018.
On December
18, 2018, the Company issued a $500,000 promissory note to the Sponsor (the “Sponsor Promissory Note”) in
exchange for $500,000 in cash that was used to pay the underwriting discount at the consummation of the Initial Public
Offering. The Sponsor Promissory Note was non-interest bearing, unsecured and due upon the consummation of a Business
Combination. The Sponsor Promissory Note was repaid in July 2019.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30,
2019
(Unaudited)
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Company’s initial stockholders, officers and directors or
their affiliates may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required (“Working
Capital Loans”). Each Working Capital Loan would be evidenced by a promissory note. The Working Capital Loans would either
be paid upon consummation of a Business Combination, without interest, or, at the holder’s discretion, up to $500,000 of
the Working Capital Loans may be converted into private warrants at a price of $0.40 per private warrant. The private warrants
would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may
use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust
Account would be used to repay the Working Capital Loans.
In August 2019, the
Sponsor committed to provide us an aggregate of $500,000 in loans to finance transaction costs in connection with a Business Combination.
In October 2019, the $500,000 commitment was replaced by a $875,000 commitment (see Note 10). Such loans, to the extent advanced,
will be evidenced by a promissory note, will be non-interest bearing, unsecured and will only be repaid upon the completion of
a Business Combination.
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on December 13, 2018, the holders of the Founder Shares, Private Placement Warrants (and their underlying
securities) and any securities that may be issued upon conversion of the Working Capital Loans are entitled to registration rights.
The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities.
The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three
months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the
Private Placement Warrants (and their underlying securities) or securities issued in payment of Working Capital Loans made to the
Company (in each case, including the underlying securities) can elect to exercise these registration rights at any time after the
Company consummates a Business Combination. In addition, the holders will have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the
expenses incurred in connection with the filing of any such registration statements.
Merger Agreement
On July 16, 2019,
the Company entered into a merger agreement (the “Merger Agreement”) with BiomX and CHAC Merger Sub Ltd. (“Merger
Sub”), pursuant to which Merger Sub will merge with and into BiomX, with BiomX surviving as the Company’s wholly owned
subsidiary (the “Merger”).
As a result of the
Merger, subject to reduction for indemnification claims as described in the Merger Agreement, an aggregate of 16,625,000 shares
of the Company’s common stock will be issued (or reserved for issuance pursuant to currently exercisable options or warrants)
in respect of shares of BiomX capital stock that are issued and outstanding as of immediately prior to the effective time of the
Merger and options and warrants to purchase shares of BiomX capital stock, in each case, that are issued, outstanding and vested
as of immediately prior to the effective time of the Merger. Additional shares of the Company’s common stock will be reserved
for issuance in respect of options to purchase shares of BiomX capital stock that are issued, outstanding and unvested as of immediately
prior to the effective time of the Merger.
The Merger will be
consummated subject to the deliverables and provisions as further described in the Merger Agreement.
More information about the Merger is included in the definitive proxy statement/prospectus that the Company filed with the
SEC on September 24, 2019. The definitive proxy statement/prospectus contains the notice of special meeting of shareholders
of the Company to vote on and adopt the Merger Agreement, as amended on October 11, 2019, and to vote on certain related proposals.
The special meeting is scheduled for October 23, 2019. There is no guarantee that the Company will be able to hold its special
meeting on the scheduled day or at all, or that the conditions to the closing of the Merger will be satisfied prior to, or
following such meeting.
NOTE 8. STOCKHOLDER’S EQUITY
Preferred Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with
such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. At September
30, 2019 and June 30, 2019, there were no shares of preferred stock issued or outstanding.
Common Stock
— The Company is authorized to issue 30,000,000 shares of common stock with a par value of $0.0001 per share. Holders of
the Company’s common stock are entitled to one vote for each share. At September 30, 2019 and June 30, 2019, there were 2,296,223
and 2,239,757 shares of common stock issued and outstanding (excluding 6,453,777 and 6,510,243 shares of common stock subject to
possible redemption), respectively.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30,
2019
(Unaudited)
Warrants
— No fractional shares will be issued upon exercise of the Public Warrants. Therefore, Public Warrants must be exercised
in multiples of two warrants. The Public Warrants will become exercisable on the consummation of a Business Combination; provided
in that the Company has an effective and current registration statement covering the shares of common stock issuable upon the exercise
of the Public Warrants and a current prospectus relating to such shares of common stock. The Company has agreed that as soon as
practicable, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the
Securities Act, of the shares of common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts
to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus
relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding
the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public warrants is
not effective within 120 days from the closing of a Business Combination, warrant holders may, until such time as there is an effective
registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise
warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from
registration is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will
expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company may redeem
the Public Warrants:
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in whole and not in part;
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at a price of $0.01 per warrant;
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at any time during the exercise period;
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upon a minimum of 30 days’ prior written notice of redemption;
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if, and only if, the last sale price of the Company’s common stock equals or exceeds $16.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders; and
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if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.
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If the Company calls
the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants
to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common
stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend,
or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common
stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants.
If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds
held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they
receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly,
the warrants may expire worthless.
The Private Placement
Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering except that the Private
Placement Warrants are exercisable for cash (even if a registration statement covering the shares of common stock issuable upon
exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable by
the Company, in each case, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will
be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
CHARDAN HEALTHCARE ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30,
2019
(Unaudited)
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows
the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting
period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of
the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have
received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction
between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities,
the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the
use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following
fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in
order to value the assets and liabilities:
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Level 1:
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Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
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Level 2:
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Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
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Level 3:
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Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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The following table
presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2019
and June 30, 2019, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
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Level
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September 30,
2019
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June 30,
2019
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Assets:
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Marketable securities held in Trust Account
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1
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$
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71,083,267
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$
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70,881,151
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NOTE 10. SUBSEQUENT EVENTS
The Company evaluated
subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial
statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required
adjustment or disclosure in the condensed consolidated financial statements.
In October 2019,
the Sponsor committed to provide an aggregate of $875,000 in loans to the Company to finance transaction costs in connection
with a Business Combination. This commitment replaced the previous commitment of $500,000 entered into in August 2019. Such
loans, to the extent advanced, will be evidenced by a promissory note, will be non-interest bearing, unsecured and will only
be repaid upon the completion of a Business Combination. Up to $500,000 of such loans may also be convertible into private
warrants at a purchase price of $0.40 per private warrant. The private warrants would be identical to the Private Placement
Warrants.