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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-Q
(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30,
2022
OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
Commission File Number:
001-39271
Renovacor, Inc.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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83-3169838
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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201 Broadway,
Suite 310
Cambridge,
Massachusetts
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02139
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(610)
424-2650
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.0001 per share
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RCOR
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NYSE American LLC
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Warrants to purchase common stock at an exercise price of $11.50
per share
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RCOR.WS
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NYSE American LLC
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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,
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.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☒
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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
☒
As of November 10, 2022, the registrant had
17,269,415
shares of common stock, $0.0001 par value per share,
outstanding.
Renovacor, Inc.
Form 10-Q
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
All statements, other than statements of historical fact, included
or incorporated in this Quarterly Report on Form 10-Q regarding our
strategy, future operations, clinical trials, collaborations,
intellectual property, cash resources, financial position, future
revenues, projected costs, prospects, plans and objectives of
management are forward-looking statements. These forward-looking
statements can generally be identified by the use of
forward-looking terminology, including the terms “believes,”
“estimates,” “anticipates,” “expects,” “seeks,” “projects,”
“intends,” “plans,” “may,” “will, "could," “should,” "potential,"
"likely," "projects," "target," "continue," "will," "schedule,"
"would" or, in each case, their negative or other variations or
comparable terminology, although not all forward-looking statements
contain these identifying words. We cannot guarantee that we will
actually achieve the plans, intentions or expectations disclosed in
our forward-looking statements and you should not place undue
reliance on our forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties, and
other factors, which may be beyond our control, and which may cause
our actual results, performance, or achievements to be materially
different from future results, performance, or achievements
expressed or implied by such forward-looking statements.
Factors that may impact such forward-looking statements
include:
•
the occurrence of any change, event, series of events or
circumstances that could give rise to the termination of the
Agreement and Plan of Merger, or the Rocket Merger Agreement, by
and among us, Rocket Pharmaceuticals, Inc., or Rocket, Zebrafish
Merger Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of Rocket, or Merger Sub I, and Zebrafish Merger Sub II,
LLC, a Delaware limited liability company and a wholly owned
subsidiary of Rocket, or Merger Sub II, and together with Merger
Sub I, the Merger Subs, that provides for the acquisition of
Renovacor by Rocket, or the merger, including a termination of the
Rocket Merger Agreement under circumstances that could require
Renovacor or Rocket to pay a termination fee to the other
party;
•
the possibility that we are unable to complete the merger due to
the failure of our stockholders to adopt the Rocket Merger
Agreement, or the failure to satisfy any of the other conditions to
the completion of the mergers, or unexpected delays in satisfying
any conditions; risks that the pendency or completion of the merger
and the other transactions contemplated by the Rocket Merger
Agreement disrupt current plans and operations, which may adversely
impact our business;
•
the risk of legal proceedings that may be instituted against us,
our directors and/or others relating to the merger;
•
our ability to raise additional capital to fund our operations and
continue the development of our current and future product
candidates;
•
the accuracy of our projections and estimates regarding our
expenses, capital requirements, cash utilization, and need for
additional financing;
•
the initiation, progress, success, cost, and timing of our
development activities, preclinical studies and future clinical
trials;
•
the timing, scope and likelihood of regulatory filings and
approvals, including final regulatory approval of our product
candidates;
•
the preclinical nature of our business and our ability to
successfully advance current and future product candidates through
development activities, preclinical studies, and clinical
trials;
•
the timing of our future Investigational New Drug, or IND,
applications and the likelihood of, and our ability to obtain and
maintain, regulatory clearance of such IND applications for our
product candidates;
•
the novelty of our approach to the treatment of BAG3
mutation-associated dilated cardiomyopathy, or DCM, utilizing
adeno-associated virus, or AAV, BAG3-based gene therapies to target
BAG3 mutations, and the challenges we will face due to the novel
nature of such technology;
•
our dependence on the success of our product candidates, in
particular REN-001;
•
the potential scope and value of our intellectual property and
proprietary rights;
•
our ability, and the ability of our licensors, to obtain, maintain,
defend, and enforce intellectual property and proprietary rights
protecting our product candidates, and our ability to develop and
commercialize our product candidates without infringing,
misappropriating, or otherwise violating the intellectual property
or proprietary rights of third parties;
•
the success of competing therapies that are or become
available;
•
regulatory developments and approval pathways in the United States
and foreign countries for our product candidates;
i
•
the performance of third parties in connection with the development
of our product candidates, including third parties conducting our
future clinical trials as well as third-party suppliers and
manufacturers;
•
our ability to attract and retain strategic collaborators with
development, regulatory, and commercialization
expertise;
•
the extent to which health epidemics and other outbreaks of
communicable diseases, including the COVID-19 pandemic,
geopolitical turmoil, including the ongoing invasion of Ukraine by
Russia or increased trade restrictions between the United States,
Russia, China, and other countries, social unrest, political
instability, terrorism, or other acts of war could ultimately
impact our business, including supply chain, labor, development
activities, preclinical studies, and future clinical
trials;
•
the public opinion and scrutiny of AAV/BAG3-based gene therapies
for the treatment of heart failure and our potential impact on
public perception of our products and product
candidates;
•
our ability to successfully commercialize our product candidates
and develop sales and marketing capabilities, if our product
candidates are approved;
•
our ability to generate revenue from future product sales and our
ability to achieve and maintain profitability;
•
the size and growth of the potential markets for our product
candidates and our ability to serve those markets;
•
changes in applicable laws or regulations;
•
our ability to recruit and retain key members of management and
other clinical and scientific personnel;
•
the volatility of capital markets and other macroeconomic factors,
including due to geopolitical tensions or the outbreak of
hostilities or war;
•
the possibility that we may be adversely impacted by other
economic, business, and/or competitive factors, including
inflation; and
•
other risks and uncertainties, including those listed under the
caption “Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2021 (our “2021 Form 10-K”), our Quarterly
Reports on Form 10-Q and the other documents we file with the
Securities and Exchange Commission (the “SEC”).
There are a number of important factors that could cause our actual
results to differ materially from those indicated or implied by
forward-looking statements. These important factors include those
set forth under Part I, Item 1A "Risk Factors" in our 2021 Form
10-K, which was filed with the SEC on March 24, 2022, and in our
other disclosures and filings with the SEC. These factors and the
other cautionary statements made in this Quarterly Report on Form
10-Q should be read as being applicable to all related
forward-looking statements whenever they appear in this Quarterly
Report on Form 10-Q.
In addition, any forward-looking statements represent our estimates
only as of the date that this Quarterly Report on Form 10-Q is
filed with the SEC and should not be relied upon as representing
our estimates as of any subsequent date. All forward-looking
statements included in this Quarterly Report on Form 10-Q are made
as of the date hereof, and are expressly qualified in their
entirety by this cautionary notice. We disclaim any intention or
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as may be required by law.
ii
PART I—FINANCIAL
INFORMATION
Item 1.
Financial Statements.
Renovacor, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
(In thousands, except share and per share amounts)
|
|
2022
|
|
|
2021*
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
53,713
|
|
|
$
|
78,790
|
|
|
Prepaid expenses and other current assets
|
|
|
1,941
|
|
|
|
1,763
|
|
|
Total current assets
|
|
|
55,654
|
|
|
|
80,553
|
|
|
Property and equipment, net
|
|
|
1,441
|
|
|
|
379
|
|
|
Operating lease right-of-use assets
|
|
|
484
|
|
|
|
—
|
|
|
Other assets
|
|
|
163
|
|
|
|
67
|
|
|
Total assets
|
|
$
|
57,742
|
|
|
$
|
80,999
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
3,228
|
|
|
$
|
1,536
|
|
|
Accrued expenses
|
|
|
3,945
|
|
|
|
2,498
|
|
|
Operating lease liability
|
|
|
241
|
|
|
|
—
|
|
|
Other current liability
|
|
|
1,019
|
|
|
|
—
|
|
|
Total current liabilities
|
|
|
8,433
|
|
|
|
4,034
|
|
|
Warrant liability
|
|
|
1,369
|
|
|
|
11,165
|
|
|
Share earnout liability (includes
500,000 shares
of Common stock, $0.0001 par
value per share, subject to forfeiture, issued and outstanding at
September 30, 2022 and December 31, 2021
–– Note
3)
|
|
|
4,967
|
|
|
|
12,256
|
|
|
Operating lease liability, net of current portion
|
|
|
265
|
|
|
|
—
|
|
|
Total liabilities
|
|
|
15,034
|
|
|
|
27,455
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note
8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par
value per share;
1,000,000 shares
authorized;
none issued
or outstanding at September 30, 2022 and December 31,
2021
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, $0.0001 par
value per share;
100,000,000 shares
authorized;
16,769,415 and
16,756,042 shares
issued and outstanding at September 30, 2022 and December 31, 2021,
respectively
|
|
|
2
|
|
|
|
2
|
|
|
Additional paid-in capital
|
|
|
74,361
|
|
|
|
72,540
|
|
|
Accumulated deficit
|
|
|
(31,655
|
)
|
|
|
(18,998
|
)
|
|
Total stockholders’ equity
|
|
|
42,708
|
|
|
|
53,544
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
57,742
|
|
|
$
|
80,999
|
|
———————
*
The condensed balance sheet at December 31, 2021 has been derived
from the audited financial statements at that
date.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
1
Renovacor, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
(In thousands, except share and per share amounts)
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
7,423
|
|
|
$
|
2,925
|
|
|
$
|
19,642
|
|
|
$
|
7,413
|
|
|
General and administrative
|
|
|
4,682
|
|
|
|
2,315
|
|
|
|
10,445
|
|
|
|
3,227
|
|
|
Loss from operations
|
|
|
(12,105
|
)
|
|
|
(5,240
|
)
|
|
|
(30,087
|
)
|
|
|
(10,640
|
)
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
298
|
|
|
|
—
|
|
|
|
347
|
|
|
|
—
|
|
|
Interest expense
|
|
|
(4
|
)
|
|
|
(147
|
)
|
|
|
(4
|
)
|
|
|
(147
|
)
|
|
Change in fair value of derivative liability
|
|
|
—
|
|
|
|
80
|
|
|
|
—
|
|
|
|
80
|
|
|
Change in fair value of warrant liability
|
|
|
(389
|
)
|
|
|
(1,435
|
)
|
|
|
9,796
|
|
|
|
(1,435
|
)
|
|
Change in fair value of share earnout liability
|
|
|
(3,029
|
)
|
|
|
(1,427
|
)
|
|
|
7,289
|
|
|
|
(1,427
|
)
|
|
Other income (expense), net
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
Net loss
|
|
$
|
(15,227
|
)
|
|
$
|
(8,169
|
)
|
|
$
|
(12,657
|
)
|
|
$
|
(13,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share –– basic and diluted
|
|
$
|
(0.87
|
)
|
|
$
|
(0.83
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(1.82
|
)
|
|
Weighted-average number of common shares used in computing net loss
per share –– basic and diluted
|
|
|
17,482,933
|
|
|
|
9,794,348
|
|
|
|
17,477,445
|
|
|
|
7,460,719
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
Renovacor, Inc.
Condensed Consolidated Statements
of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
(In thousands)
|
|
2022
|
|
|
2021
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(12,657
|
)
|
|
$
|
(13,569
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
1,815
|
|
|
|
710
|
|
|
Change in fair value of derivative liability
|
|
|
—
|
|
|
|
(80
|
)
|
|
Change in fair value of warrant liability
|
|
|
(9,796
|
)
|
|
|
1,435
|
|
|
Change in fair value of share earnout liability
|
|
|
(7,289
|
)
|
|
|
1,427
|
|
|
Amortization of debt discount
|
|
|
—
|
|
|
|
136
|
|
|
Depreciation expense
|
|
|
55
|
|
|
|
1
|
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
841
|
|
|
|
(2,528
|
)
|
|
Accounts payable
|
|
|
1,605
|
|
|
|
1,289
|
|
|
Accrued expenses
|
|
|
1,781
|
|
|
|
1,879
|
|
|
Other
|
|
|
(74
|
)
|
|
|
—
|
|
|
Net cash used in operating activities
|
|
|
(23,719
|
)
|
|
|
(9,300
|
)
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
|
(1,311
|
)
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
|
(1,311
|
)
|
|
|
—
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Merger-related costs
|
|
|
(53
|
)
|
|
|
—
|
|
|
Proceeds from issuance of convertible promissory note, net of
issuance costs
|
|
|
—
|
|
|
|
2,445
|
|
|
Effect of Merger, net of transaction costs (Note 3)
|
|
|
—
|
|
|
|
86,792
|
|
|
Proceeds from issuance of common stock upon exercise of stock
options
|
|
|
6
|
|
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(47
|
)
|
|
|
89,237
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(25,077
|
)
|
|
|
79,937
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
78,790
|
|
|
|
5,384
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
53,713
|
|
|
$
|
85,321
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
|
|
|
|
|
|
|
|
Deferred merger costs in accounts payable
|
|
$
|
—
|
|
|
$
|
304
|
|
|
Property and equipment in accounts payable and accrued
expenses
|
|
$
|
166
|
|
|
$
|
20
|
|
|
Non-cash insurance premium financing
|
|
$
|
1,019
|
|
|
$
|
—
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFO:
|
|
|
|
|
|
|
|
Cash paid for amounts included in measurement of lease
liabilities
|
|
$
|
118
|
|
|
$
|
—
|
|
|
Cash paid during the period for interest
|
|
$
|
—
|
|
|
$
|
12
|
|
|
Right-of-use assets obtained in exchange for new operating lease
obligations
|
|
$
|
575
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
Renovacor, Inc.
Condensed Consolidated Statements of
Stockholders’ Equity (Deficit)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-in-
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
(In thousands, except share amounts)
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
|
Balance, December 31, 2021
|
|
|
16,756,042
|
|
|
$
|
2
|
|
|
$
|
72,540
|
|
|
$
|
(18,998
|
)
|
|
$
|
53,544
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
601
|
|
|
|
—
|
|
|
|
601
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,594
|
|
|
|
6,594
|
|
|
Balance, March 31, 2022
|
|
|
16,756,042
|
|
|
$
|
2
|
|
|
$
|
73,141
|
|
|
$
|
(12,404
|
)
|
|
$
|
60,739
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
11,648
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
632
|
|
|
|
—
|
|
|
|
632
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,024
|
)
|
|
|
(4,024
|
)
|
|
Balance, June 30, 2022
|
|
|
16,767,690
|
|
|
$
|
2
|
|
|
$
|
73,778
|
|
|
$
|
(16,428
|
)
|
|
$
|
57,352
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
1,725
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
582
|
|
|
|
—
|
|
|
|
582
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,227
|
)
|
|
|
(15,227
|
)
|
|
Balance, September 30, 2022
|
|
|
16,769,415
|
|
|
$
|
2
|
|
|
$
|
74,361
|
|
|
$
|
(31,655
|
)
|
|
$
|
42,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Stockholders'
|
|
|
|
|
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Paid-in-
|
|
|
Accumulated
|
|
|
Equity
|
|
|
(In thousands, except share amounts)
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Deficit)
|
|
|
Balance, December 31, 2020
|
|
|
2,578,518
|
|
|
$
|
10,074
|
|
|
|
|
1,953,368
|
|
|
$
|
—
|
|
|
$
|
121
|
|
|
$
|
(4,897
|
)
|
|
$
|
(4,776
|
)
|
|
Retroactive application of reverse recapitalization (Note
3)
|
|
|
(2,578,518
|
)
|
|
|
(10,074
|
)
|
|
|
|
4,321,198
|
|
|
|
1
|
|
|
|
10,073
|
|
|
|
—
|
|
|
|
10,074
|
|
|
Balance, December 31, 2020, effect of Merger
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
6,274,566
|
|
|
$
|
1
|
|
|
$
|
10,194
|
|
|
$
|
(4,897
|
)
|
|
$
|
5,298
|
|
|
Issuance of restricted common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
|
30,495
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
7
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,681
|
)
|
|
|
(1,681
|
)
|
|
Balance, March 31, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
6,305,061
|
|
|
$
|
1
|
|
|
$
|
10,201
|
|
|
$
|
(6,578
|
)
|
|
$
|
3,624
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
185
|
|
|
|
—
|
|
|
|
185
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,719
|
)
|
|
|
(3,719
|
)
|
|
Balance, June 30, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
6,305,061
|
|
|
$
|
1
|
|
|
$
|
10,386
|
|
|
$
|
(10,297
|
)
|
|
$
|
90
|
|
|
Issuance of restricted common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Effect of Merger and recapitalization (refer to Note 3)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
8,166,205
|
|
|
|
1
|
|
|
|
31,269
|
|
|
|
—
|
|
|
|
31,270
|
|
|
Common stock and pre-funded warrants issued pursuant to PIPE
financing
|
|
|
—
|
|
|
|
—
|
|
|
|
|
2,284,776
|
|
|
|
—
|
|
|
|
29,704
|
|
|
|
—
|
|
|
|
29,704
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
518
|
|
|
|
—
|
|
|
|
518
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,169
|
)
|
|
|
(8,169
|
)
|
|
Balance, September 30, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
16,756,042
|
|
|
$
|
2
|
|
|
$
|
71,877
|
|
|
$
|
(18,466
|
)
|
|
$
|
53,413
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
Renovacor, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Business and Organization
Business Overview
Renovacor, Inc. (the “Company,” or “Renovacor”) (f/k/a Chardan
Healthcare Acquisition 2 Corp. ("Chardan")), a Delaware
corporation, is a biotechnology company focused on delivering
innovative precision therapies to improve the lives of patients and
families battling genetically-driven cardiovascular and
mechanistically-related diseases. The Company’s initial focus is on
the treatment of BCL2-associated athanogene 3 (BAG3)
mutation-associated
dilated cardiomyopathy ("DCM") ("BAG3 DCM"). BAG3 DCM is a
heritable rare disease that leads to early onset, rapidly
progressing heart failure and significant mortality and morbidity.
The Company’s lead product candidate, REN-001, is a recombinant
adeno-associated virus ("AAV") 9-based gene therapy designed to
deliver a fully functional
BAG3
gene to augment BAG3 protein levels in cardiomyocytes and slow or
halt progression of BAG3 DCM. The Company has entered into and may
explore future collaborative alliances to support research,
development, and commercialization of any of its product
candidates.
The Company is subject to risks common to companies in the
biopharmaceutical industry, including, but not limited to, risks
related to the successful development and commercialization of
product candidates, fluctuations in operating results and financial
risks, the ability to successfully raise additional funds when
needed, protection of proprietary rights and patent risks, patent
litigation, compliance with government regulations, dependence on
key personnel and prospective collaborative partners, and
competition from competing products in the marketplace.
Rocket Merger Agreement
On September 19, 2022, the Company entered into an Agreement and
Plan of Merger (the “Rocket Merger Agreement”) with Rocket
Pharmaceuticals, Inc., a Delaware corporation (“Rocket”), Zebrafish
Merger Sub, Inc., a Delaware corporation and a direct wholly owned
subsidiary of Rocket (“Merger Sub I”), and Zebrafish Merger Sub II,
LLC, a Delaware limited liability company and a direct wholly owned
subsidiary of Rocket (“Merger Sub II,” and together with Merger Sub
I, the “Merger Subs”) pursuant to which, among other matters, and
subject to the satisfaction or waiver of the conditions set forth
in the Rocket Merger Agreement, (i) Merger Sub I will merge with
and into the Company (the “First Merger”) and (ii) the Company, as
the surviving company of the First Merger, will merge with and into
Merger Sub II (the “Second Merger” and together with the First
Merger, the “Mergers”), with Merger Sub II as the surviving company
in the Second Merger and as a wholly owned subsidiary of Rocket
(the “Surviving Company”).
Among other things and subject to the terms and conditions of the
Rocket Merger Agreement, at the effective time of the First Merger
(the “First Effective Time”), each share of the Company's common
stock, par value $0.0001
per share (collectively, the “Renovacor Shares”), issued and
outstanding immediately prior to the First Effective Time will be
converted into the right to receive a number of shares of common
stock of Rocket, par value $0.01
per share (collectively, the “Rocket Shares”), determined on the
basis of an exchange formula set forth in the Rocket Merger
Agreement (the “Rocket Exchange Ratio”). The Rocket Exchange Ratio
will initially be equal to approximately
0.1676
Rocket Shares for each Renovacor Share (subject to adjustment as
described in this paragraph). Under certain circumstances further
described in the Rocket Merger Agreement, the Rocket Exchange Ratio
may be adjusted upward or downward based on the level of Company's
net cash at the closing of the First Merger and certain other
adjustments, as determined in accordance with the Rocket Merger
Agreement. There can be no assurances as to Company's level of net
cash between now and the closing of the transactions contemplated
by the Merger Agreement. Immediately following the completion of
the mergers, former Renovacor stockholders are expected to own
approximately
4.1%
of the of the outstanding shares of Rocket.
Each of the board of directors of Rocket and the board of directors
of Renovacor have approved the Rocket Merger Agreement and the
transactions contemplated thereby. The transaction is subject to
approval by the stockholders of both companies, as well as
regulatory approvals and satisfaction of other customary closing
conditions. Contemporaneously with the execution of the Rocket
Merger Agreement, Renovacor and certain stockholders of Rocket,
holding approximately
35%
of Rocket’s outstanding shares, and Rocket and certain stockholders
of Renovacor, holding approximately
9.4%
of Renovacor’s outstanding shares, entered into a voting and
support agreement and have agreed to vote in favor of the
transaction. The special meetings of shareholders of both Rocket
and Renovacor to approve the Rocket Merger Agreement and the
transactions contemplated thereby is scheduled to be held on
November 30, 2022. However, there is no assurance that Rocket
and/or Renovacor shareholders will approve the proposals required
to complete the Mergers successfully.
5
The foregoing description of the Rocket Merger Agreement is not a
complete description of all the parties’ rights and obligations
under the Rocket Merger Agreement and is qualified in its entirety
by reference to the Rocket Merger Agreement, which was filed as
Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with
the SEC on September 20, 2022, and is filed herewith.
SPAC Merger Agreement
Prior to September 2, 2021, the Company was a special purpose
acquisition company 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. On September
2, 2021 (the "SPAC Merger Closing Date"), the Company consummated
the business combination contemplated by that certain Agreement and
Plan of Merger, dated March 22, 2021 (the “SPAC Merger Agreement”),
by and among the Company, CHAQ2 Merger Sub, Inc., a wholly owned
subsidiary of the Company (“SPAC Merger Sub”), and Renovacor
Holdings, Inc. (f/k/a Renovacor, Inc. ("Old Renovacor")). Pursuant
to the SPAC Merger Agreement, (i) SPAC Merger Sub merged with and
into Old Renovacor, with Old Renovacor as the surviving company in
the merger and, after giving effect to such merger, continuing as a
wholly owned subsidiary of the Company (the “SPAC Merger”) and (ii)
the Company’s name was changed from Chardan Healthcare Acquisition
2 Corp. to Renovacor, Inc. (the “SPAC Merger” and, together with
the other transactions contemplated by the SPAC Merger Agreement,
the “SPAC Business Combination”).
Liquidity Considerations
The Company has evaluated whether there are conditions and events,
considered in the aggregate, that raise substantial doubt about its
ability to continue as a going concern within one year after the
date the financial statements are issued. As of September 30, 2022,
the Company had an accumulated deficit of
$31.7
million
and a cash and cash equivalents balance of
$53.7
million.
The Company has incurred losses and negative cash flows from
operations since inception. The Company expects to continue to
incur substantial operating losses and negative cash flows for the
foreseeable future and will require additional capital as it
continues to advance REN-001 and/or any future product candidates
through development.
The Company follows the provisions of Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 205-40,
Presentation of Financial Statements—Going
Concern,
which requires management to assess the Company’s ability to
continue as a going concern within one year after the date the
financial statements are issued. Management currently anticipates
that the Company’s balance of cash and cash equivalents, as of
September 30, 2022, is sufficient to enable the Company to continue
as a going concern through the one-year period subsequent to the
filing date of this Quarterly Report on Form 10-Q. Management’s
operating plan, which underlies the analysis of the Company’s
ability to continue as a going concern, involves the estimation of
the amount and timing of future cash inflows and outflows. Actual
results could vary from the operating plan.
The Company has and, assuming the Mergers are not completed, will
continue to evaluate available alternatives to extend its
operations beyond this date, which include financing its operations
through a combination of equity offerings, debt financings,
collaborations, strategic alliances and licensing arrangements.
However, the Company may be unable to raise additional funds or
enter into such other agreements or arrangements when needed on
favorable terms, or at all. If the Company fails to raise capital
or enter into such agreements or arrangements as, and when, needed,
it may have to significantly delay, scale back or discontinue the
development and commercialization of one or more of its product
candidates.
6
Note 2. Summary of Significant Accounting Policies
The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations
of the United States Securities and Exchange Commission (“SEC”) for
interim financial reporting. Accordingly, they do not include all
of the information and disclosures required by U.S. GAAP for
complete financial statements as certain footnotes or other
financial information that are normally required by U.S. GAAP can
be condensed or omitted. These condensed consolidated statements
are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring adjustments and
accruals) necessary to fairly present the results of the interim
periods. The results of operations and cash flows for the three and
nine months ended September 30, 2022 are not necessarily indicative
of the results that may be expected for the fiscal year ended
December 31, 2022 or any other future period.
As further described in Note 1, in September 2022, the Company
entered into the Rocket Merger Agreement. However, as the Mergers
have not yet been completed, the Company has prepared these
financial statements as if the Company will remain an independent
reporting company, and accordingly, these financial statements do
not include any of the potential accounting impacts that may result
from the completion of the Rocket Merger Agreement.
Reverse Recapitalization
The SPAC Business Combination was accounted for as a reverse
recapitalization in accordance with U.S. GAAP (the “Reverse
Recapitalization”). Under this method of accounting, the Company is
treated as the “acquired” company and Old Renovacor is treated as
the acquirer for financial reporting purposes. As a result, the
consolidated assets, liabilities and results of operations prior to
the SPAC Business Combination are those of Old Renovacor.
Additionally, the shares and corresponding capital amounts and
losses per share, prior to the SPAC Business Combination, have been
retroactively restated based on shares reflecting the applicable
exchange ratio resulting from the Common Per Share Merger
Consideration and/or the Preferred Per Share Merger Consideration
(each as defined by the SPAC Merger Agreement).
Emerging Growth Company Status
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”). Under the JOBS Act,
the Company 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 independent
registered public accounting firm 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. 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 statement 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 U.S.
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, expense, and
related disclosures. The Company bases estimates and assumptions on
historical experience when available and on various factors that it
believes to be reasonable under the circumstances. The Company
evaluates its estimates and assumptions on an ongoing basis.
Estimates relied upon in preparing these financial statements
relate to, but are not limited to, the fair value of financial
instruments, stock-based compensation assumptions and accrued
expenses (including accrued and prepaid clinical costs). Actual
results may differ from these estimates under different assumptions
or conditions.
7
Financial Instruments
The fair value of the Company’s financial instruments is determined
and disclosed in accordance with the three-tier fair value
hierarchy specified in Note 4,
Fair Value Measurements.
The Company is required to disclose the estimated fair values of
its financial instruments. As of September 30, 2022 and December
31, 2021, the Company’s financial instruments consisted of cash
equivalents, receivables, a note payable, and warrant and share
earnout liabilities. As of September 30, 2022, the Company did not
have any other derivatives, hedging instruments or other similar
financial instruments.
Concentration of Credit Risk
Financial instruments that subject the Company to significant
concentrations of credit risk consist primarily of cash primarily
held at one financial institution, which, at times, may exceed
federally insured limits, and cash equivalents consisting of
investments in money market funds managed by a variety of financial
institutions. The Company's credit risk is managed by investing in
only highly rated money market instruments. As a result, no
significant additional credit risk is believed by management to be
inherent in the Company’s assets and the Company has not
experienced any losses in such accounts and believes it is not
exposed to any significant risk on such accounts.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities
of 90 days or less when purchased to be “cash equivalents.” Cash
and cash equivalents at September 30, 2022 consisted of cash and
money market funds.
Property and Equipment, net
Property and equipment is carried at acquisition cost less
accumulated depreciation and amortization, subject to review for
impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable in
accordance with ASC 360-10-35,
Impairment or Disposal of Long-Lived Assets.
The cost of normal, recurring, or periodic repairs and maintenance
activities related to property and equipment, if any, are expensed
as incurred. The cost for planned major maintenance activities,
including the related acquisition or construction of assets, is
capitalized if the repair will result in future economic
benefits.
Depreciation and amortization are computed using the straight-line
method based on the estimated useful lives of the related assets.
Equipment and other long-lived assets are depreciated over
three
to
five years.
Leasehold improvements are amortized over the remaining lease term
or the related useful life, if shorter. When an asset is disposed
of, the associated cost and accumulated depreciation or
amortization is removed from the related accounts on the Company's
balance sheet with any resulting gain or loss included in the
Company's condensed consolidated statement of
operations.
Operating Lease Right-of-use Assets and Lease
Liabilities
The Company accounts for leases under ASC 842,
Leases
("ASC 842"). The Company determines if an arrangement is or
contains a lease at inception, which is the date on which the terms
of the contract are agreed to, and the agreement creates
enforceable rights and obligations. Under ASC 842, a contract is or
contains a lease when (i) explicitly or implicitly identified
assets have been deployed in the contract and (ii) the customer
obtains substantially all of the economic benefits from the use of
that underlying asset and directs how and for what purpose the
asset is used during the term of the contract. The Company also
considers whether its service arrangements include the right to
control the use of an asset.
Operating leases are included in “Operating lease right-of-use
assets” within the Company’s balance sheets and represent the
Company’s right to use an underlying asset for the lease term. The
Company’s related obligation to make lease payments are included in
“Operating lease liability” and “Operating lease liability, net of
current portion” within the Company’s balance sheets. Operating
lease right-of-use (“ROU”) assets and liabilities are recognized at
commencement date based on the present value of lease payments over
the lease term. As none of the Company’s leases provide an implicit
rate, the Company uses its incremental borrowing rates, which are
the rates incurred to borrow on a collateralized basis over a
similar term, an amount equal to the lease payments in a similar
economic environment. Lease expense for lease payments is
recognized on a straight-line basis over the lease term. The ROU
assets are tested for impairment according to ASC 360,
Property, Plant, and Equipment
(“ASC 360”). Leases with an initial term of 12 months or less are
not recorded on the balance sheet and are recognized as lease
expense on a straight-line basis over the lease term.
As of September 30, 2022, the Company’s operating lease ROU assets
and corresponding short-term and long-term lease liabilities
primarily relate to its Cambridge, Massachusetts facility operating
lease, as more fully described in Note 8.
8
Other Current Liability
In September 2022, the Company entered into a short-term financing
arrangement with a third-party vendor to finance insurance
premiums. The aggregate amount financed under this agreement was
$1.0
million. As of September 30, 2022, the balance of
$1.0
million, which is included in “Other current liability’ in the
Company’s balance sheets, is scheduled to be paid in monthly
installments through May 2023.
Warrant Liability
The Company accounts for stock warrants as either equity
instruments, liabilities or derivative liabilities in accordance
with ASC Topic 480,
Distinguishing Liabilities from Equity
("ASC 480") and/or ASC Topic 815,
Derivatives and Hedging
("ASC 815"), depending on the specific terms of the warrant
agreement. Liability-classified warrants are recorded at their
estimated fair values at each reporting period until they are
exercised, terminated, reclassified or otherwise settled. Changes
in the estimated fair value of liability-classified warrants are
recorded in Change in Fair Value of Warrant Liability in the
Company’s condensed consolidated statements of operations.
Equity-classified warrants are recorded within additional paid-in
capital at the time of issuance and not subject to
remeasurement.
Share Earnout Liability
The Company accounts for share earnout arrangements that represent
equity-linked instruments as either liabilities or equity
instruments in accordance with ASC 815, unless such arrangements
are within the scope of ASC Topic 718,
Compensation–Stock Compensation
("ASC 718"), depending on the specific terms of the contract.
Contracts classified as liabilities are recorded at their estimated
fair values at each reporting period until they are no longer
outstanding. Changes in the estimated fair value of
liability-classified share earnout arrangements are recorded in
Change in Fair Value of Share Earnout Liability in the Company’s
condensed consolidated statements of operations.
Research and Development Expense
The Company expenses research and development expenses as incurred.
The Company’s research and development expenses consist primarily
of personnel-related expenses such as salaries, stock-based
compensation, and benefits, and external costs of outside vendors
engaged to conduct preclinical development activities, including
manufacturing of preclinical and clinical drug supply. The Company
accrues for expenses related to development activities performed by
third parties based on an evaluation of services received and
efforts expended pursuant to the terms of the contractual
arrangements. There may be instances in which payments made to the
Company’s vendors will exceed the level of services provided and
result in a prepayment of expenses. In accruing service fees, the
Company estimates the time period over which services will be
performed and the level of effort to be expended in each period. If
the actual timing of the performance of services or the level of
effort varies from the estimate, the Company will adjust the
accrual or prepaid expense accordingly.
Stock-Based Compensation
The Company expenses stock-based compensation to employees and
non-employees over the requisite service period, generally the
vesting period, based on the estimated grant-date fair value of the
awards. The Company accounts for forfeitures as they occur.
Stock-based awards with graded-vesting schedules are recognized on
a straight-line basis over the requisite service period for each
separately vesting portion of the award. The Company estimates the
fair value of stock option grants using the Black-Scholes option
pricing model, and the assumptions used in calculating the fair
value of stock-based awards represent management’s best estimates
and involve inherent uncertainties and the application of
management’s judgment. All stock-based compensation costs are
recorded in general and administrative or research and development
costs in the condensed consolidated statements of operations based
upon the underlying individual’s role at the Company.
Income Taxes
In accordance with ASC 270,
Interim Reporting,
and ASC 740,
Income Taxes,
the Company is required at the end of each interim period to
determine the best estimate of its annual effective tax rate and
then apply that rate in providing for income taxes on a current
year-to-date (interim period) basis. For the three and nine months
ended September 30, 2022 and 2021, the Company recorded
no
tax expense or benefit due to the expected current year loss and
its historical losses. The Company has
not
recorded its net deferred tax asset as of either September 30, 2022
or December 31, 2021 because it maintained a full valuation
allowance against all deferred tax assets as of these dates as
management has determined that it is not more likely than not that
the Company will realize these future tax benefits. As of September
30, 2022 and December 31, 2021, the Company had
no
uncertain tax positions.
9
Net Loss per Share of Common Stock
Basic and diluted net loss per share of common stock is computed by
dividing net loss by the weighted-average number of shares of
common stock outstanding during each period, which includes shares
of common stock underlying the Pre-funded Warrant (as defined
herein), as such warrant is exercisable, in whole or in part, for
nominal cash consideration with no expiration date. Shares of
common stock outstanding but subject to forfeiture and cancellation
by the Company (e.g., Sponsor Earnout Shares, as defined in the
SPAC Merger Agreement) are excluded from the weighted-average
shares until the period in which such shares are no longer subject
to forfeiture. The diluted net loss per share calculation gives
effect to, if any, the potential exercise or conversion of
securities, such as stock options, Public Warrants and Private
Placement Warrants, and Sponsor Earnout Shares and Old
Renovacor
Earnout Shares (each as defined herein), which would result in the
issuance of incremental shares of common stock, unless their effect
would be anti-dilutive. See Note 13 for additional
details.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the
FASB and rules are issued by the SEC that the Company has or will
adopt as of a specified date. Unless otherwise noted, management
does not believe that any other recently issued accounting
pronouncements issued by the FASB or guidance issued by the SEC
had, or is expected to have, a material impact on the Company’s
present or future consolidated financial statements.
Accounting Pronouncements Recently Adopted
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
("ASU 2016-02"). ASU 2016-02 (amended by ASU 2019-10 and ASU
2020-05) is effective for non-public entities and emerging growth
companies for fiscal years beginning after December 15, 2021 and
interim periods within fiscal years beginning after December 15,
2022. The new standard establishes a ROU model that requires a
lessee to record a ROU asset and a lease liability on the balance
sheet for all leases with terms longer than 12 months. Leases will
be classified as either finance or operating, with classification
affecting the pattern of expense recognition in the statement of
operations. A modified retrospective transition approach is
required at the beginning of the earliest comparative
period
presented in the financial statements, with certain practical
expedients available. The Company
adopted
this standard effective
January 1, 2022.
The adoption did
not
have a material impact on the Company’s consolidated condensed
financial statements as of the adoption date. However, in the
second quarter of 2022, the Company entered into two real estate
leases which resulted in the recognition of the required right-of
use asset and corresponding lease liability for such lease
obligations. See Note 8 for additional details. Should the Company
enter into new or amend its current leases in the future, the
carrying values of the Company's right-of use assets and lease
liabilities could be materially impacted.
10
Note 3. Merger and Recapitalization
SPAC Merger Agreement
As discussed in Note 1, on the SPAC Merger Closing Date, the
Company closed the SPAC Business Combination with Old Renovacor, as
a result of which Old Renovacor became a wholly-owned subsidiary of
the Company. While the Company was the legal acquirer of Old
Renovacor in the business combination, for accounting purposes, the
SPAC Merger is treated as a reverse recapitalization, whereby Old
Renovacor is deemed to be the accounting acquirer, and the
historical financial statements of Old Renovacor became the
historical consolidated financial statements of the Company upon
the closing of the SPAC Merger. Under this method of accounting,
the Company was treated as the “acquired” company and Old Renovacor
is treated as the acquirer for financial reporting purposes.
Accordingly, for accounting purposes, the SPAC Merger was treated
as the equivalent of Old Renovacor issuing stock for the net assets
of the Company, accompanied by a recapitalization. The net assets
of the Company were stated at historical cost, with
no
goodwill or other intangible assets recorded. Operations prior to
the SPAC Merger are presented as those of Old Renovacor.
At the consummation of the SPAC Merger Agreement upon filing of a
certificate of merger, which occurred on the SPAC Closing Date (the
"SPAC Effective Time"), an aggregate of
6,305,061
shares of the Company’s common stock, par value
$0.0001
per share, plus
194,926
Exchanged Options (defined below) (the "Aggregate SPAC Merger
Consideration") was issued to equityholders of Old Renovacor as of
immediately prior to the SPAC Effective Time. Out of the Aggregate
SPAC Merger Consideration, each holder of preferred stock of Old
Renovacor, par value $0.0001
per share (the "Old Renovacor Preferred Stock") was entitled to
receive a number of shares of the Company's common stock equal to
the Preferred Per Share Merger Consideration (as defined in the
SPAC Merger Agreement) with respect to such holder’s shares of Old
Renovacor Preferred Stock. Each holder of common stock of Old
Renovacor, par value $0.0001
per share (the "Old Renovacor Common Stock," and together with Old
Renovacor’s preferred stock, (the "Old Renovacor Capital Stock"),
was entitled to receive a number of shares of the Company’s common
stock equal to the Common Per Share Merger Consideration (as
defined in the SPAC Merger Agreement) with respect to such holder’s
shares of Old Renovacor Common Stock. In addition, pursuant to the
Company's 2021 Investor Incentive Plan, a portion of the Aggregate
SPAC Merger Consideration was allocated among certain Old Renovacor
equityholders or their affiliates who elected to participate in the
PIPE Investment on a pro rata basis based on their respective
investment amounts.
Each option to purchase shares of Old Renovacor Common Stock ("Old
Renovacor Option") outstanding as of immediately prior to the SPAC
Effective Time was converted into an option to purchase a number of
shares of the Company’s common stock (rounded down to the nearest
whole number) equal to the product of the number of shares of Old
Renovacor Common Stock subject to such Old Renovacor option and the
Common Per Share Merger Consideration (as defined in the SPAC
Merger Agreement) (an "Exchanged Option"), which Exchanged Option
is subject to the same vesting terms applicable to the Old
Renovacor Option as of immediately prior to the Effective
Time.
The shares and corresponding capital amounts and loss per share
related to Old Renovacor Common Stock prior to the SPAC Business
Combination Transaction were retroactively restated to reflect the
Common Per Share Merger Consideration and the Preferred Per Share
Merger Consideration (each as defined in the SPAC Merger
Agreement), as applicable.
Holders of Old Renovacor Capital Stock are entitled to receive up
to an additional
1,922,816
shares of the Company’s common stock (the “Old Renovacor Earnout
Shares”) as follows:
•
576,845
Old Renovacor Earnout Shares, in the aggregate, if at any time
during the period beginning on the date of the SPAC Merger Closing
Date and ending on
December 31, 2023
(the “First Earnout Period”), the volume-weighted average price
("VWAP") (as defined in the SPAC Merger Agreement) of the Company’s
common stock over any twenty (20)
Trading Days (as defined in the SPAC Merger Agreement) (which may
or may not be consecutive) within any thirty (30)
consecutive Trading Day period is greater than or equal to
$17.50
per share of the Company’s common stock (the “First
Milestone”).
•
An additional
576,845
Old Renovacor Earnout Shares, in the aggregate, if at any time
during the period beginning on the SPAC Merger Closing Date and
ending on
December 31, 2025
(the “Second Earnout Period”), the VWAP of the Company’s common
stock over any twenty (20)
Trading Days (which may or may not be consecutive) within any
thirty (30)
consecutive Trading Day period is greater than or equal to
$25.00
per share of the Company’s common stock (the “Second
Milestone”).
•
An additional
769,126
Old Renovacor Earnout Shares, in the aggregate, if at any time
during the period beginning on the SPAC Merger Closing Date and
ending on
December 31, 2027
(the “Third Earnout Period” and together with the First Earnout
Period and the Second Earnout Period, each, an “Earnout Period” and
collectively, the “Earnout Periods”), the VWAP of the Company’s
common stock over any twenty (20)
Trading Days (which may or may not be consecutive) within any
thirty (30)
11
consecutive
Trading Day period is greater than or equal to $35.00
per share of the Company’s common stock (the “Third Milestone” and
together with the First Milestone and the Second Milestone, the
“Earnout Milestones”).
•
Upon the consummation of any Change in Control (as defined in the
SPAC Merger Agreement) during any Earnout Period, any Earnout
Milestone with respect to such Earnout Period that has not yet been
achieved shall automatically be deemed to have been achieved
regardless of the valuation of the Company’s common stock in such
Change in Control transaction and the Company will take all actions
necessary to provide for the issuance of the shares of the
Company’s common stock comprising the applicable Old Renovacor
Earnout Shares issuable in respect of such Earnout Milestone(s)
prior to the consummation of such Change in Control.
Each holder of Old Renovacor's Capital Stock was entitled to such
holder’s aggregate Per Share Earnout Consideration (as defined in
the SPAC Merger Agreement) in respect of such shares of Old
Renovacor's Capital Stock as described above. In addition, at the
SPAC Effective Time, holders of Old Renovacor Options received the
right to be granted an Earnout RSU Award (as defined in the SPAC
Merger Agreement) in respect of such holder’s Old Renovacor
Options, which entitle such holder to an aggregate number of shares
of the Company's common stock equal to the aggregate Per Share
Earnout Consideration in respect of the shares of Old Renovacor
Capital Stock underlying such Old Renovacor Options, if any,
subject to the satisfaction of the applicable vesting conditions
with respect to the Exchanged Options issued in respect of such
Renovacor Options at the SPAC Merger closing. See Note 11 for
further details.
Further, under the terms of the SPAC Business Combination (as
provided for in the Sponsor Support Agreement), certain Sponsor
Shares totaling
500,000
were placed into escrow and subject to forfeiture (the "Sponsor
Earnout Shares"). Such Sponsor Earnout Shares will be released from
escrow if the weighted average sale price of the Company's common
stock equals or exceeds the applicable Target Price (as set forth
in the table below) for any 20 trading days within a 30-day trading
period from the SPAC Effective Time until the applicable end date.
Upon consummation of any Change in Control (as defined in the SPAC
Merger Agreement) during any Earnout Period, any Earnout Milestone
with respect to such Earnout Period that has not yet been achieved
shall automatically be deemed to have been achieved regardless of
the valuation of the per share common stock price in such Change in
Control transaction. Any Sponsor Earnout Shares that remain
unvested as of the expiration of the applicable earnout period
shall be forfeited and canceled.
The Old Renovacor Earnout Shares and Sponsor Earnout Shares
(collectively, the "Earnout Shares") are summarized, as set forth
in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old Renovacor
|
|
|
Sponsor
|
|
|
|
|
|
|
|
Target Price
|
|
|
Earnout Shares
|
|
|
Earnout Shares
|
|
|
Total
|
|
|
December 31, 2023
|
|
$
|
17.50
|
|
|
|
576,845
|
|
|
|
150,000
|
|
|
|
726,845
|
|
|
December 31, 2025
|
|
$
|
25.00
|
|
|
|
576,845
|
|
|
|
150,000
|
|
|
|
726,845
|
|
|
December 31, 2027
|
|
$
|
35.00
|
|
|
|
769,126
|
|
|
|
200,000
|
|
|
|
969,126
|
|
|
|
|
|
|
|
|
1,922,816
|
|
|
|
500,000
|
|
|
|
2,422,816
|
|
PIPE Investment (Private Placement)
Concurrently with the execution of the SPAC Merger Agreement, the
Company entered into subscription agreements (the "Subscription
Agreements"), with certain investors ("PIPE Investors"), including
Chardan Healthcare, certain stockholders of Old Renovacor and
certain other institutional and accredited investors, pursuant to
which, on the SPAC Closing Date, and concurrently with the closing
of the SPAC Business Combination, the PIPE Investors purchased an
aggregate of
2,284,776
shares the Company's common stock, at a price of
$10.00
per share, and a pre-funded warrant entitling the holder thereof to
purchase
715,224
shares of the Company's common stock (the "Pre-Funded Warrant") at
an initial purchase price of $9.99
per share underlying the Pre-Funded Warrant, for aggregate gross
proceeds of approximately $30.0
million (the "PIPE Investment"). The Pre-Funded Warrant is
immediately exercisable at an exercise price of
$0.01
and is exercisable indefinitely, provided that the holder of the
Pre-Funded Warrant is prohibited from exercising such Pre-Funded
Warrant in an amount that would cause such holder’s beneficial
ownership of our Common Stock to exceed
9.99%,
which limitation may be increased up to
19.99%
at the option of the holder from time to time.
12
The following table summarizes the elements of the net proceeds
from the SPAC Merger as of September 30, 2022:
|
|
|
|
|
|
(In thousands)
|
|
Amount
|
|
|
Cash – CHAQ trust and cash, net of redemptions
|
|
$
|
65,127
|
|
|
Cash – PIPE financing
|
|
|
29,993
|
|
|
Less: CHAQ and Old Renovacor transaction costs paid
|
|
|
(5,828
|
)
|
|
Less: Settlement of convertible note at closing
|
|
|
(2,500
|
)
|
|
Effect of SPAC Merger, net of redemptions and
transaction costs
|
|
$ |