Filed Pursuant to Rule 424(b)(4)
Registration No. 333-251802
PROSPECTUS
REVIVA
PHARMACEUTICALS HOLDINGS, INC.
Up to 2,887,104
Shares of Common Stock
6,881,313 Shares
of Common Stock Issuable Upon Exercise of Warrants
556,313 Warrants
to Purchase Common Stock
This prospectus relates to the issuance
by us of up to an aggregate of up to 6,325,000 shares of our common stock, $0.0001 par value per share (the “Common Stock”)
that are issuable upon the exercise of 6,325,000 warrants (the “Public Warrants”) originally issued in the initial
public offering, or the “IPO” of Tenzing (as defined herein), at an exercise price of $11.50 per share of Common Stock.
This prospectus also relates to the offer
and sale by the Selling Securityholders identified in this prospectus, or their permitted transferees, of:
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(i)
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up
to 3,443,417 shares of Common Stock, including:
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(a)
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556,313
shares of Common Stock issuable upon conversion of the Private Warrants;
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(b)
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300,000
shares of Common Stock that were issued pursuant to the Side Letter (as defined herein);
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(c)
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55,050
shares of Common Stock that were issued pursuant to the Non-Redemption Agreement (as
defined herein);
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(d)
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1,581,250
founder shares of Common Stock (the “Founder Shares”), 1,437,500 of which
were issued to Sponsor (as defined herein) in June of 2018 and the remainder of which
were issued to Sponsor in August of 2018;
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(e)
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358,813
shares of Common Stock that were issued as part of the private placement of units (the
“Private Placement Units”) that took place simultaneously with the
closing of Tenzing’s IPO, 343,000 of which were issued to Sponsor (“Sponsor’s
Private Placement Shares”);
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(f)
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41,263
shares of Common Stock held by the Backstop Investors (as defined herein);
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(g)
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353,228
shares of Common Stock held by the holders of the former Reviva Notes (as defined here
in) and
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(h)
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197,500
shares of Common Stock (the “Working Capital Shares”) issued upon
conversion of the Working Capital Notes (as defined herein).
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(ii)
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up
to 556,313 outstanding warrants (the “Private Warrants”, and together with
the Public Warrants, the “Warrants”), each entitling the holder thereof to
purchase one share of Common Stock at an exercise price of $11.50 per share, subject
to certain adjustments, including (a) 358,813 outstanding warrants that were issued
as part of the private placement of units that took place simultaneously with the
closing of Tenzing’s IPO (the “Private Placement Warrants”), and (b)
197,500 outstanding Working Capital Warrants (as defined herein).
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We will not receive any proceeds from the
sale of shares of Common Stock or Private Warrants by the Selling Securityholders pursuant to this prospectus, except with
respect to amounts received by us upon exercise of the Public Warrants or the Private Warrants to the extent such Public Warrants
or Private Warrants, as applicable, are exercised with cash. However, we will pay the expenses, other than underwriting discounts
and commissions and certain expenses incurred by the Selling Securityholders in disposing of the securities, associated with the
sale of securities pursuant to this prospectus.
We are registering the offer and sale of
the securities described above to satisfy certain registration rights we have granted. Our registration of the securities covered
by this prospectus does not mean that either we or the Selling Securityholders will issue, offer or sell, as applicable, any of
the securities. The Selling Securityholders and any of their permitted transferees may offer and sell the securities covered by
this prospectus in a number of different ways and at varying prices. Additional information on the Selling Securityholders, and
the times and manner in which they may offer and sell the securities under this prospectus, is provided under “Selling
Securityholders” and “Plan of Distribution” in this prospectus.
We are an “emerging growth company,”
as that term is defined under the federal securities laws and, as such, are subject to certain reduced public company reporting
requirements.
Our Common Stock and warrants are listed
on the Nasdaq Capital Market, or Nasdaq, under the symbols “RVPH” and “RVPHW”, respectively. On January
11, 2021, the closing price of our common stock was $9.2899 per share and the closing price of our warrants was $0.76 per warrant.
Investing in our securities involves
a high degree of risk. See “Risk Factors” beginning on page 8 of this prospectus. You should carefully
consider these risk factors, as well as the information contained in this prospectus, before you invest.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of
this prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus is January 11,
2021
TABLE OF CONTENTS
INTRODUCTORY NOTE
Closing of Merger
On December 14, 2020 (the “Closing
Date”), Reviva Pharmaceuticals Holdings, Inc., a Delaware corporation and the successor by re-domiciliation to Tenzing
Acquisition Corp., a British Virgin Islands exempted company (“Tenzing”), Tenzing Merger Subsidiary Inc., a Delaware
corporation and wholly-owned subsidiary of Tenzing (“Merger Sub”), and Reviva Pharmaceuticals, Inc., a Delaware
corporation (together with its consolidated subsidiaries, “Old Reviva”), consummated a business combination (the “Business
Combination”) through the proposed merger (the “Closing”) of Merger Sub with and into Reviva (the “Merger”),
contemplated by the previously announced Agreement and Plan of Merger, dated as of July 20, 2020 (as amended, the “Merger
Agreement”), by and among Tenzing, Merger Sub, Old Reviva, and the other parties thereto. Pursuant to the Merger Agreement,
at the effective time of the Merger (the “Effective Time”), Merger Sub merged with and into Old Reviva, with Old Reviva
as the surviving company in the Merger and, after giving effect to such Merger, Old Reviva becoming a wholly-owned subsidiary
of Reviva Pharmaceuticals Holdings, Inc. (together with its consolidated subsidiaries after the Closing Date, “New
Reviva”)
On December 11, 2020, in advance of
and in connection with the Closing, and pursuant to the terms of the Merger Agreement, Tenzing changed its jurisdiction of organization
by continuing out of the British Virgin Islands and re-domiciling to a corporation incorporated under the laws of the State of
Delaware (the “Domestication”).
In accordance with the terms and subject
to the conditions of the Merger Agreement, at the Effective Time, (i) all shares of Old Reviva common stock and Old Reviva
preferred stock (together, “Reviva Stock”) issued and outstanding immediately prior to the Effective Time (other than
those properly exercising any applicable dissenters rights under Delaware law) converted into the right to receive shares of common
stock of New Reviva, par value $0.0001 per share (the “Common Stock”); (ii) each issued and outstanding warrant
to acquire shares of Old Reviva common stock were assumed by New Reviva and automatically converted into a warrant for Common
Stock, with its price and number of shares equitably adjusted based on the terms of the Merger Agreement (the “Assumed Warrants”);
and (iii) each outstanding option to acquire Old Reviva common stock (whether vested or unvested) were assumed by New Reviva
and automatically converted into an option to acquire shares of Common Stock, with its price and number of shares equitably adjusted
based on the terms of the Merger Agreement.
Unless the context otherwise requires,
references in this prospectus to “Reviva”, the “Company”, “us”, “we”, “our”
and any related terms prior to the closing of the Business Combination are intended to mean Reviva Pharmaceuticals, Inc.,
a Delaware corporation, and its consolidated subsidiaries, and after the closing of the Business Combination, Reviva Pharmaceuticals
Holdings, Inc., a Delaware corporation and its consolidated subsidiaries.
Escrow Agreement
In connection with the Business Combination,
on December 14, 2020, the Company entered into an escrow agreement (the “Escrow Agreement”) with Sponsor, Dr. Bhat
and Continental Stock Transfer & Trust Company, as escrow agent (the “Escrow Agent”). Pursuant to the Escrow
Agreement and the Merger Agreement, at the Closing, 573,666 shares of Common Stock, representing ten percent (10%) of the merger
consideration provided for in the Merger Agreement (the “Escrow Shares”) otherwise issuable to the holders of Reviva
Stock (the “Reviva Securityholders”) (allocated pro rata among the Reviva Securityholders based on the merger consideration
otherwise issuable to them at the Closing (“Pro Rata Consideration”)) were deposited into a segregated escrow account
with the Escrow Agent, and such shares are held in escrow together with any dividends, distributions or other income on the Escrow
Shares (the “Escrow Property”) in accordance with the Escrow Agreement. The Escrow Property will be held in the escrow
account for a period of twelve (12) months after the Closing as the sole and exclusive source of payment for any post-Closing
indemnification claims (subject to certain exceptions as set forth in the Escrow Agreement). The Reviva Securityholders will have
the right to vote the Escrow Shares while they are held in escrow.
Earnout
In addition to the merger consideration
set forth above, the Reviva Securityholders also have a contingent right to receive up to an additional 1,000,000 shares of Common
Stock (the “Earnout Shares”) after the Closing based on the stock price performance of the Common Stock and the achievement
by Reviva of certain clinical trial milestones during the three (3) year period following the Closing (the “Earnout
Period”). In order to receive the Earnout Shares, during the Earnout Period, both:
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the
closing price of Reviva’s common stock has to be equal to or greater than $15.00
per share for any 20 trading days within any 30 trading day period; and
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Reviva
must receive positive data from (i) its first phase 3 trial in Acute Schizophrenia
and (ii) either a phase 2 clinical trial in pulmonary arterial hypertension or idiopathic
pulmonary fibrosis.
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If there is a final determination that
the Reviva Securityholders are entitled to receive Earnout Shares, then such Earnout Shares will be allocated such that (i) one-half
(1/2) of the Earnout Shares will be allocated to Old Reviva preferred stockholders (pro rata amongst them based on the number
of shares of Old Reviva preferred stock owned) and (ii) the remaining one-half (1/2) of the Earnout Shares will be allocated
to all of the Reviva Securityholders pro rata, treating the Old Reviva preferred stock on an as-converted to common stock
basis (a one-for-one basis).
Maxim Side Letter
Pursuant to that certain underwriting agreement,
dated as of August 20, 2018 (the “Underwriting Agreement”), by and between Tenzing and Maxim Group LLC (“Maxim
Group,” the underwriter of Tenzing’s initial public offering (the “IPO”)), Maxim Group was entitled to
an aggregate cash payment of $2,213,750 (the “Deferred Underwriting Commission”) payable upon the Closing. In connection
with the Closing, on December 14, 2020, Tenzing entered into a letter agreement (the “Side Letter”) with Maxim
Group, which Side Letter provided that in lieu of the payment of $2,113,750 of the Deferred Underwriting Commission in cash, Tenzing
shall, at the Closing, issue to Maxim Group’s affiliate, Maxim Partners, LLC (“Maxim Partners,” and together
with Maxim Group, “Maxim”), an aggregate of 300,000 shares of Common Stock (the “Side Letter Shares”),
with the remaining $100,000 of the Deferred Underwriting Commission being paid in cash upon the Closing. Maxim was also given
certain registration rights in the Side Letter.
Backstop Agreements
On October 21, 2020, Tenzing entered
into backstop agreements (the “Initial Backstop Agreements”) with Reviva and certain investors (the “Initial
Backstop Investors”) in connection with the Business Combination. Pursuant to the Backstop Agreements, the Backstop Investors
agreed to (i) purchase in the aggregate, among all Backstop Investors, a total of 417,518 of Tenzing’s ordinary shares
in open market or private transactions (the “Backstop Shares”), (ii) hold and not transfer, grant any proxies
or powers of attorney, or incur any liens with respect to, such Backstop Shares through the closing of the Business Combination,
and (iii) not redeem any Backstop Shares in connection with the Business Combination or any future extension of the Tenzing’s
deadline to consummate its initial business combination prior to the closing of the Business Combination. In exchange, Tenzing
agreed to issue to the Backstop Investors for each ten (10) Backstop Shares that they purchase on or prior to a certain deadline
set forth in the Initial Backstop Agreements and hold without transfer, do not redeem and otherwise act in material compliance
with the terms of the Backstop Agreement one (1) share (each, an “October 21 Additional Share”) of common
stock of Tenzing after giving effect to the conversion of Tenzing from a British Virgin Islands company to a Delaware corporation,
as contemplated by the Merger Agreement, such issuance to be completed by Tenzing within 10 business days after the closing of
the Business Combination. The Backstop Investors were also given registration rights in the Backstop Agreements pursuant to which
the Company agreed to file a resale registration statement for the Additional Shares within 90 days after the closing of
the Business Combination and to use its commercially reasonable efforts to have the registration statement declared effective
as soon as practicable after the filing thereof.
On October 22, 2020, Tenzing entered
into an additional backstop agreement (the “Additional Backstop Agreement”, and together with the Initial Backstop
Agreements, the “Backstop Agreements”) with Reviva, and an additional investor (the “Additional Backstop Investor,
and together with the Initial Backstop Investors, the “Backstop Investors”) in connection with the Business Combination,
pursuant to which such investor agreed to purchase 23,148 of Tenzing’s ordinary shares in open market or private transactions,
and Tenzing agreed to issue up to 2,314 ordinary shares of Tenzing in connection therewith (the “October 22 Additional
Shares,” and together with the October 21 Additional Shares, the “Additional Shares”). The Additional Backstop
Agreements are on the same form and subject to the same terms and conditions as the Initial Backstop Agreements.
Working Capital Loans
In order to finance transaction costs in
connection with a business combination, Sponsor made working capital loans to Tenzing prior to the consummating of the Business
Transaction (the “Working Capital Loans”). Such working capital loans were evidenced by promissory notes. On December 14,
2020, in connection with the consummation of the Business Combination, Sponsor elected to have the Working Capital Loans converted,
pursuant to the terms of the Working Capital Loans, into private units of Tenzing, resulting in the issuance of an aggregate of
197,500 shares of Common Stock (the “Working Capital Shares”) and warrants to purchase 197,500 shares of the Common
Stock (the “Working Capital Warrants,” together with the Working Capital Shares, the “Conversion Securities”).
Upon issuance of the Conversion Securities all of the existing obligations of the Company under the Working Capital Loans were
satisfied in full and irrevocably discharged, terminated and released, and Sponsor retained no rights with respect to such Working
Capital Loans, other than the registration rights provided pursuant to such Working Capital Loans.
On December 28, 2020, Sponsor conducted
a liquidating distribution of all of the shares of Company Common Stock that it held on such date, including the Founder Shares,
Sponsor’s Private Placement Shares, and Working Capital Shares, to its members (as permitted transferees pursuant to a liquidating
distribution) and assigned its registration rights in connection with the distribution. As a result, each of the members of Sponsor
have the same registration rights and transfer restrictions with respect to the shares of Company Common Stock, including the
Founder Shares, Sponsor’s Private Placement Shares, and Working Capital Shares, received by such member pursuant to the
liquidating distribution.
Non-Redemption Agreement
In connection with Tenzing’s shareholder
approval of the Merger Agreement, on December 8, 2020, Tenzing entered into a Non-Redemption Agreement (the “Non-Redemption
Agreement”) with Sponsor and a certain shareholder of the Company (the “Shareholder”). Pursuant to the Non-Redemption
Agreement, on December 14, 2020 the Company and the Shareholder entered into a registration rights agreement (the “Registration
Rights Agreement”), pursuant to which the Shareholder was given certain registration rights with respect to (a) fifty-five
thousand fifty (55,050) shares (the “Shareholder Additional Shares”) of Common Stock that were issued to the Shareholder
at the Closing pursuant to the Non-Redemption Agreement, (b) three hundred forty-three thousand (343,000) Private Placement
Warrants to acquire shares of Common Stock of the Company that were acquired by Sponsor as part of the private placement units
issued to Sponsor in connection with Tenzing’s IPO, which Sponsor transferred to Shareholder on December 15, 2020 pursuant
to the terms of the Non-Redemption Agreement, (c) the Working Capital Warrants, which Sponsor transferred to Shareholder
on December 15, 2020 pursuant to the terms of the Non-Redemption Agreement (d) all shares of Common Stock issuable upon
exercise of the Private Placement Warrants, (e) all shares of Common Stock issuable upon exercise of the Working Capital
Warrants, and (f) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.
The Reviva Notes
Prior to the Closing, Reviva issued an
aggregate principal amount of up to $500,000 in unsecured convertible promissory notes to certain investors (the “Reviva
Interim Period Notes”) to finance its ordinary course administrative costs and expenses and other expenses incurred in connection
with the consummation of the Merger and the other transactions contemplated by the Merger Agreement. The Reviva Interim Period
Notes automatically converted, immediately prior to consummation of the Merger, and accordingly shared in the merger consideration,
into a number of shares of Common Stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the
sum of all then outstanding principal under the Reviva Interim Period Notes on a date that was no more than five (5) days
prior to Closing by (B) a conversion price equal to $0.831063.
In addition, prior to the Closing, Reviva
issued an aggregate principal amount of up to $2,000,000 in unsecured convertible promissory notes to certain investors (the “Reviva
Contingent Interim Period Notes”, and together with the Reviva Interim Period Notes, the “Reviva Notes”) to
payoff and satisfy the a judgment against Reviva issued by the District Court of Harris County, Texas and to finance its ordinary
course administrative costs and expenses and other expenses incurred in connection with the consummation of the Merger and the
other transactions contemplated by the Merger Agreement. The Reviva Contingent Interim Period Notes automatically converted immediately
prior to consummation of the Merger, and accordingly shared in the merger consideration, into a number of shares of Common Stock
equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding
principal under the Reviva Contingent Interim Period Notes on a date that was no more than five (5) days prior to Closing
by (B) a conversion price equal to $1.163953.
The holders of shares of Common Stock issued
upon conversion of the Reviva Notes hold certain registration rights, pursuant to which the Company agreed to file a resale registration
statement for such shares of Common Stock within 90 days after the closing of the Business Combination and to use its commercially
reasonable efforts to have the registration statement declared effective as soon as practicable after the filing thereof.
ABOUT THIS PROSPECTUS
This prospectus
is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the
“SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Securityholders
may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from
the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also
relates to the issuance by us of the shares of Common Stock issuable upon the exercise of the Public Warrants. We will receive
proceeds from any exercise of the Public Warrants or the Private Warrants for cash.
Neither we nor
the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than
those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on
behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide
no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders
will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
For investors
outside the United States: neither we nor the Selling Securityholders have done anything that would permit this offering or possession
or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States.
Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions
relating to, the offering of our securities and the distribution of this prospectus outside the United States.
This prospectus
contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual
documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some
of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where
You Can Find More Information.”
We may also provide
a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information
contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective
amendment to the registration statement together with the additional information to which we refer you in the sections of this
prospectus entitled “Where You Can Find More Information.”
Solely for convenience,
trademarks and tradenames referred to in this prospectus may appear without the ® or ™ symbols, but such references
are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights, or that
the applicable owner will not assert its rights, to these trademarks and tradenames.
PROSPECTUS
SUMMARY
This summary highlights selected information from this prospectus
and does not contain all of the information that is important to you in making an investment decision. This summary is qualified
in its entirety by the more detailed information included elsewhere in this prospectus. Before making your investment decision
with respect to our securities, you should carefully read this entire prospectus, including the information under “Risk
Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited
Pro Forma Condensed Combined Financial Information” and the financial statements included elsewhere in this prospectus.
Our Business
We are a clinical-stage biopharmaceutical
company that discovers, develops and seeks to commercialize next-generation therapeutics for diseases representing significant
unmet medical needs and burdens to society, patients, and their families. Our current pipeline focuses on the central nervous
system, respiratory, and metabolic diseases. We use a chemical genomics driven technology platform and proprietary chemistry to
develop new medicines. Our pipeline currently has two drug candidates, RP5063 (Brilaroxazine) and RP1208. Both are new chemical
entities discovered in-house. We have been granted composition of matter patents for both RP5063 and R1208 in the United States
(U.S.), Europe, and several other countries.
Our lead drug candidate, RP5063, is ready
for continued clinical development for multiple neuropsychiatric indications. These include schizophrenia, bipolar disorder (BD),
major depressive disorder (MDD), behavioral and psychotic symptoms, dementia or Alzheimer’s disease (BPSD), Parkinson’s
disease psychosis (PDP), and attention deficit hyperactivity disorder (ADHD). Furthermore, RP5063 is also ready for clinical development
for two respiratory indications — pulmonary arterial hypertension (PAH) and idiopathic pulmonary fibrosis
(IPF). The U.S. Food and Drug Administration (FDA) has granted Orphan Drug designation to RP5063 for the treatment of PAH in November 2016
and IPF in April 2018.
Our primary focus is to complete the clinical
development of RP5063 for the treatment of acute and maintenance schizophrenia.
Subject to the receipt of additional financing,
we may also continue the clinical development of RP5063 for the treatment of BD, MDD, BPSD, PDP, ADHD, PAH and IPF. Moreover,
subject to the receipt of additional financing, we may also advance the development of our second drug candidate, RP1208, for
the treatment of depression and obesity.
The development status of our product pipeline
is presented below:
Business Combination and Domestication
On December 14, 2020, our predecessor
company, formerly known as Tenzing Acquisition Corp., a British Virgin Islands exempted company (“Tenzing”), and Reviva
Pharmaceuticals, Inc., a Delaware corporation (together with its consolidated subsidiaries, “Old Reviva”), consummated
the transactions contemplated by the Agreement and Plan of Merger, dated as of July 20, 2020 (as amended, the “Merger
Agreement”), by and among Tenzing, Tenzing Merger Subsidiary Inc., a Delaware corporation and wholly-owned subsidiary of
Tenzing (“Merger Sub”), Old Reviva, and the other parties thereto. Pursuant to the Merger Agreement, Merger Sub merged
with and into Old Reviva, with Old Reviva surviving as our wholly owned subsidiary. We refer to this transaction as the Business
Combination. In connection with and one day prior to the completion of the Business Combination, Tenzing re-domiciled out of the
British Virgin Islands and continued as a company incorporated in the State of Delaware, and changed its name to Reviva Pharmaceuticals
Holdings, Inc. Prior to the completion of the Business Combination, the Company was a shell company. Following the Business
Combination, the business of Old Reviva is the business of the Company.
Old Reviva was incorporated in the state
of Delaware on May 1, 2006 and its subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated on December 23,
2014. Tenzing was formed pursuant to the laws of the British Virgin Islands on March 20, 2018.
About RP5063
Our RP5063 drug candidate is a novel, multimodal
serotonin (5HT), dopamine (DA), and nicotinic receptors modulator. Our compound displays a high affinity for 5HT2A/2B//7 and
DA2/3/4 receptors and a moderate affinity for nicotinic (nACh-α4β2) receptors (Rajagopal et al., 2017). The binding
affinity of RP5063 to dopamine and serotonin sub-receptors in radioligand binding assays is the following (Ki, nM): dopamine D2S (0.28),
D2L (0.45), D3 (3.7), and D4.4 (6.0); Serotonin 5HT1A (1.5), 5-HT2A (2.5), 5-HT2B (0.19), 5-HT2C (39),
5-HT6 (51), and 5-HT7 (2.7). RP5063 displayed moderate binding affinity to nicotine- nAChR, α4β2 (Ki
= 36.3 nM).
Radioactive and non-radioactive studies
in rat and dog show that the gastrointestinal tract completely absorbs orally administered RP5063-related material, with acceptable
bioavailability in rat (22%) and dog (85%) animal models. Exposure to RP5063 increased in a dose-dependent manner. Once absorbed,
RP5063 rapidly and extensively distributes into various tissues. Noteworthy is the brain with a brain:plasma ratio of ~3.5, despite
high plasma protein binding (>99%) characteristics. Rat and dog hepatocytes rapidly metabolize RP5063; however, human hepatocytes
metabolize this compound slower. This finding suggests that this compound will show a low clearance in humans. We believe the
risk of RP5063 inducing or inhibiting cytochrome P450 (CYP) at anticipated pharmacologically relevant concentrations in humans
is low. Hepatic metabolism via the cytochrome P450s is the primary route of elimination with CYP3A4/5, undertaking most of the
metabolism (69%), a small contribution from CYP2D6 (17%) and minor contributions by other cytochromes including extra-hepatic
CYP2J2. Two metabolites in human plasma and urine display no pharmacological activity. We believe there is a low risk of inhibition
and induction of human cytochromes by RP5063 at expected plasma concentrations clinically.
A
full battery of regulatory compliant toxicology and safety pharmacology studies are complete.
We believe the results from these tests support the chronic administration of RP5063
in clinical trials. We believe the completed safety pharmacology and toxicology studies
report several significant safety findings. These include (1) RP5063 is neither
genotoxic nor clastogenic, (2) does not affect the function of cardiovascular (Q.T.
or blood pressure) or respiratory systems, and (3) is not phototoxic in the 3T3 in
vitro assay.
Implications of Being an Emerging Growth Company
We are an “emerging growth company”
as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”). As such, we are eligible for and intend to take advantage of certain exemptions from various reporting
requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging
growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency
and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements.
We will remain an emerging growth company
until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of Tenzing’s
initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which
we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), which would occur if the market value of our common equity held by non-affiliates exceeds $700.0 million as of the
last business day of our most recently completed second fiscal quarter; or (ii) the date on which we have issued more than
$1.0 billion in non-convertible debt securities during the prior three-year period.
In addition, the JOBS Act provides that
an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.
This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we will adopt
new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies
instead of the dates required for other public companies.
Corporate Information
Our principal offices are located at 19925
Stevens Creek Blvd., Suite 100, Cupertino, CA 95014, and our telephone number is (408) 501-888. Our website address is http://revivapharma.com.
Our website and the information contained on, or that can be accessed through, our website shall not be deemed to be incorporated
by reference in, and are not considered part of, this prospectus. You should not rely on any such information in making your decision
whether to purchase our common stock.
the
Offering
The following summary of the offering contains basic information
about the offering and our common stock and is not intended to be complete. It does not contain all the information that may be
important to you. For a more complete understanding of our common stock, please refer to the section titled “Description
of Capital Stock.”
We are registering the issuance by us of 6,325,000 shares of
Common Stock that may be issued from time to time upon exercise of the Public Warrants. We are also registering the resale by
the selling securityholders named in this prospectus or their permitted transferees of (i) up to 3,443,417 shares of Common
Stock (including up to 556,313 shares of Common Stock that may be issued upon exercise of the Private Warrants) and (ii)
556,313 Private Warrants.
Issuance
of Common Stock Underlying Public
Warrants
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6,325,000
shares of Common Stock
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|
|
Common
Stock Offered by Selling Securityholders
|
3,443,417
shares of Common Stock (including up to
556,313
shares of Common Stock that may be issued
upon
exercise of the Private Warrants).
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|
|
Warrants
Offered by the Selling Securityholders
|
556,313
Private Warrants
|
|
|
Common
Stock Outstanding
|
9,231,737
shares of Common Stock as of December
28, 2020.
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|
|
Use
of Proceeds
|
All
of the shares of Common Stock and Private
Warrants offered by the Selling Securityholders
pursuant to this prospectus will be sold by the Selling
Securityholders for their respective accounts. We will
not receive any of the proceeds from these sales,
except with respect to amounts received by us upon
exercise of the Public Warrants or the Private
Warrants to the extent such Public Warrants or Private Warrants,
as applicable, are exercised with cash.
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Risk
Factors
|
You
should read the section entitled “Risk Factors” in
this
prospectus for a discussion of the factors to
consider
carefully before deciding to invest in shares
of
our common stock.
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|
Trading
Market and Ticker Symbol
|
Our
common stock and warrants are listed on Nasdaq
Capital
Market under the symbols “RVPH” and
“RVPHW”,
respectively.
|
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus may
constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements
include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions
or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations
of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,”
“believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,”
“intends,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “will,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking statements in this prospectus may include, for example, statements about:
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our ability
to maintain the listing of the Common Stock and Warrants on Nasdaq;
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our ability
to grow and manage growth economically;
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·
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our ability
to retain key executives and medical and science personnel;
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the possibility
that our products in development succeed in or fail clinical trials or are not approved
by the U.S. Food and Drug Administration or other applicable authorities;
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the possibility
that we could be forced to delay, reduce or eliminate its planned clinical trials or
development programs;
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our ability
to obtain approval from regulatory agents in different jurisdictions for our current
or future product candidates;
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changes
in applicable laws or regulations;
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·
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changes
to our relationships within the pharmaceutical ecosystem;
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·
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our current
and future capital requirements to support our development and commercialization efforts
and our ability to satisfy our capital needs;
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the accuracy
of our estimates regarding expenses and capital requirements.
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our limited
operating history;
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our history
of operating losses in each year since inception and expectation that we will continue
to incur operating losses for the foreseeable future;
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changes
in the markets that we target;
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our ability
to maintain or protect the validity of our patents and other intellectual property;
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our exposure
to any liability, protracted and costly litigation or reputational damage relating to
data security;
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our ability
to develop and maintain effective internal controls; and
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the possibility
that we may be adversely affected by other economic, business, and/or competitive factors.
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The foregoing does not represent an exhaustive
list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with
that may cause our actual results to differ from those anticipated in such forward-looking statements.
All forward-looking statements are expressly
qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements,
which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have
no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether
as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good
faith and believes they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will
result or be achieved or accomplished.
MARKET AND INDUSTRY
DATA
Information contained in this prospectus
concerning the market and the industry in which we compete, including our market position, general expectations of market opportunity
and market size, is based on information from various third-party sources, on assumptions made by us based on such sources and
our knowledge of the markets for our services and solutions. Any estimates provided herein involve numerous assumptions and limitations,
and you are cautioned not to give undue weight to such information. Third-party sources generally state that the information contained
in such source has been obtained from sources believed to be reliable but that there can be no assurance as to the accuracy or
completeness of such information. Notwithstanding the foregoing, we are liable for the information provided in this prospectus.
The industry in which we operate is subject to a high degree of uncertainty and risk. As a result, the estimates and market and
industry information provided in this prospectus are subject to change based on various factors, including those described in
the section entitled “Risk Factors” and elsewhere in this prospectus.
RISK FACTORS
Investing in our securities involves a high degree of risk.
You should carefully consider the risks and uncertainties described below, together with the other information in this prospectus,
including our consolidated financial statements and the related notes appearing at the end of this prospectus and in the section
titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding
whether to invest in our securities. The occurrence of one or more of the events or circumstances described in these risk factors,
alone or in combination with other events or circumstances, may have a material adverse effect on the our business, reputation,
revenue, financial condition, results of operations and future prospects, in which event the market price of our common stock
could decline, and you could lose part or all of your investment. Unless otherwise indicated, reference in this section and elsewhere
in this prospectus to our business being adversely affected, negatively impacted or harmed will include an adverse effect on,
or a negative impact or harm to, the business, reputation, financial condition, results of operations, revenue and our future
prospects. The material and other risks and uncertainties summarized above and described below are not intended to be exhaustive
and are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial
may also impair our business operations. This prospectus also contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of
factors, including the risks described below. See the section titled “Cautionary Note Regarding Forward-Looking Statements.”
Summary of Risk Factors
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We have
never generated any product revenues.
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We expect
to incur significant losses for the foreseeable future and may never achieve or maintain
profitability.
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We are
heavily dependent on the success of RP5063, our only advanced product candidate, which
is still under clinical development, and if RP5063 does not receive regulatory approval
or is not successfully commercialized, our business will be harmed.
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The COVID-19
outbreak and global pandemic could adversely impact our business, including our clinical
trials.
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We will
require additional capital to fund our operations, and if we fail to obtain necessary
financing, we may not be able to complete the development and commercialization of RP5063
or RP1208.
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Clinical
trials are very expensive, time-consuming, difficult to design and implement and involve
an uncertain outcome.
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We face
significant competition from other biotechnology and pharmaceutical companies, and our
operating results will suffer if we fail to compete effectively.
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We do
not have our own manufacturing capabilities and will rely on third parties to produce
clinical and commercial supplies of RP5063, RP1208 and any future product candidate.
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We intend
to rely on third parties to conduct, supervise and monitor our clinical trials, and if
those third parties perform in an unsatisfactory manner, it may harm our business.
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If we
are unable to obtain and maintain patent protection for our technology and products or
if the scope of the patent protection obtained is not sufficiently broad, we may not
be able to compete effectively in our markets.
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We are
an emerging growth company within the meaning of the Securities Act and have taken advantage
of certain exemptions from disclosure requirements available to emerging growth companies;
this could make our securities less attractive to investors and may make it more difficult
to compare our performance with other public companies.
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We do
not currently intend to pay dividends on our Common Stock in the foreseeable future,
and consequently, any gains from an investment in our Common Stock will likely depend
on appreciation in the price of our Common Stock.
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Risks Related to Our Business, Financial Position and Capital
Requirements
We have never generated any product revenues.
We are a clinical-stage biopharmaceutical
company. Although we were formed in May 2006, to date, we have not generated any product revenues from our product candidates
currently in development. We have not yet demonstrated an ability to successfully complete a large-scale, pivotal clinical trial,
obtain marketing approval, manufacture a commercial scale product, or arrange for a third-party to do so on our behalf, or conduct
sales and marketing activities necessary for successful product commercialization.
Consequently, we have no meaningful operations
upon which to evaluate our business and predictions about our future success or viability may not be as accurate as they could
be if we had a history of successfully developing and commercializing pharmaceutical products.
Our ability to generate revenue and become
profitable depends upon our ability to successfully complete the development of our product candidates, RP5063 for the treatment
of schizophrenia, respiratory/pulmonary diseases such as Pulmonary Arterial Hypertension, or PAH, and Idiopathic Pulmonary Fibrosis,
or IPF, and for other neuropsychiatric diseases, such as bipolar disorder, or BD, major depressive disorder, or MDD, Alzheimer’s
psychosis/agitation, or AD, Parkinson’s psychosis, or PD, and attention deficit hyperactivity disorder, or ADHD/ADD, and
RP1208 for the treatment of depression and obesity, and obtain the necessary regulatory approvals for their commercialization.
We have never been profitable, have no products approved for commercial sale and to date have not generated any revenue from product
sales.
Even if we receive regulatory approval
for the commercialization of RP5063, we do not know when this product candidate will generate revenue, if at all. RP1208 is in
pre-clinical development. our ability to generate product revenue depends on a number of factors, including our ability to:
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successfully
complete clinical trials and obtain regulatory approval for the marketing of our product
candidates;
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set an
acceptable price for our product candidates and obtain coverage and adequate reimbursement
from third-party payors;
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establish
sales, marketing and distribution systems for our product candidates;
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add operational,
financial and management information systems and personnel, including personnel to support
our clinical, manufacturing and planned future commercialization efforts and operations;
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initiate
and continue relationships with third-party manufacturers and have commercial quantities
of our product candidates manufactured at acceptable cost levels;
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attract
and retain an experienced management and advisory team;
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achieve
broad market acceptance of our products in the medical community and with third party
payors and consumers;
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launch
commercial sales of our products, whether alone or in collaboration with others; and
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maintain,
expand and protect our intellectual property portfolio.
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Because of the numerous risks and uncertainties
associated with product development, we are unable to predict the timing or amount of increased expenses, or when, or if, we will
be able to achieve or maintain profitability. Our expenses could increase beyond expectations if we are required by the U.S. Food
and Drug Administration, or the FDA, and comparable non-U.S. regulatory authorities, to perform studies or clinical trials in
addition to those that we currently anticipate. Even if our product candidates are approved for commercial sale, we anticipate
incurring significant costs associated with the commercial launch of these products. If we cannot successfully execute any one
of the foregoing, our business, prospects and results of operations may be adversely affected.
We expect to incur significant losses for the foreseeable
future and may never achieve or maintain profitability.
Investment in pharmaceutical product development
is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate
will fail to gain regulatory approval or become commercially viable. We have never generated any revenues and cannot estimate
with precision the extent of our future losses. We do not currently have any products that are available for commercial sale and
we may never generate revenue from selling products or achieve profitability. We expect to continue to incur substantial and increasing
losses through the projected commercialization of RP5063 and RP1208. For the nine months ended September 30, 2020, we
reported a loss of $2,259,483, and a negative cash flow from operations of $1,131,035. We had an accumulated deficit of $56,786,188
and had cash and cash equivalents of $353,258 as of September 30, 2020.
RP5063 has not been approved for marketing
in the United States and may never receive such approval. Although RP1208 may be in IND enabling studies for depression and may
be in animal efficacy studies for obesity within a short time frame following the receipt of adequate additional financing, it
is not currently in an IND-enabling study or animal efficacy study, respectively, and may never meet the requirements for filing
an IND. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain
it. Our ability to produce revenue and achieve profitability is dependent on our ability to complete the development of our product
candidates, obtain necessary regulatory approvals, and have our product candidates manufactured and successfully marketed. We
cannot assure you that we will be profitable even if we successfully commercializes our product candidates. If we do not successfully
obtain regulatory approval to market our product candidates, our revenues will be dependent, in part, upon, among other things,
the size of the markets in the territories for which we gain regulatory approval, the number of competitors in such markets, the
accepted price for our product candidates and whether we own the commercial rights for that territory. If the indication approved
by regulatory authorities is narrower than we expects, or the treatment population is narrowed by competition, physician choice
or treatment guidelines, we may not generate significant revenue from sales of our product candidates, even if approved. Even
if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure
to become and remain profitable may adversely affect the timing of our clinical results and our ability to raise capital and continue
operations.
We expect our research and development
expenses to be significant in connection with the following planned research:
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phase
3 studies for RP5063 for the treatment of schizophrenia;
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phase
2 studies for the treatment of PAH, IPF, BD, MDD, AD, PD, ADHD/ADD;
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pre-clinical
studies and clinical studies for RP1208 for the treatment of depression and obesity.
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Further, we will require additional capital
to proceed with the planned research described above. See “Risks Related to Our Business and Industry — Risks
Related to Our Business, Financial Position and Capital Requirements — We will require additional capital
to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization
of RP5063.”
In addition, if we obtain regulatory approval
for RP5063, we expect to incur increased sales and marketing expenses. As a result, we expect to continue to incur significant
and increasing operating losses and negative cash flows for the foreseeable future. These losses have had and will continue to
have an adverse effect on our financial position and working capital.
We are heavily dependent on the success of RP5063, our
only advanced product candidate, which is still under clinical development, and if RP5063 does not receive regulatory approval
or is not successfully commercialized, our business will be harmed.
We currently have no products that are
approved for commercial sale and may never be able to develop marketable drug products. We expect that a substantial portion of
our efforts and expenditures in the foreseeable future will be devoted to RP5063. Our only other product candidate is RP1208,
which is in the pre-clinical phase. We do not expect to allocate a significant portion of our efforts or resources to the clinical
trials or development of this product candidate in the foreseeable future. Accordingly, our business currently depends heavily
on the successful development, regulatory approval and commercialization of RP5063. We cannot be certain that RP5063 will receive
regulatory approval or be successfully commercialized even if we receive regulatory approval. The research, testing, manufacturing,
labeling, approval, sale, marketing and distribution of drug products are and will remain subject to extensive regulation by the
FDA and other regulatory authorities in the United States and other countries that each have differing regulations. We are not
permitted to market RP5063 in the United States until we receive approval of a new drug application, or NDA, from the FDA, or
in any foreign countries until we receives the requisite approval from such countries. We have not submitted an NDA to the FDA
or comparable applications to other regulatory authorities and do not expect to be in a position to do so for the foreseeable
future. Obtaining approval of an NDA is an extensive, lengthy, expensive and inherently uncertain process, and the FDA may delay,
limit or deny approval of RP5063 for many reasons, including:
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We may
not be able to demonstrate that RP5063 is safe and effective as a treatment for our targeted
indications to the FDA’s satisfaction;
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the FDA
may require additional phase 3 trials of RP5063 in schizophrenia, which would increase
our costs and prolong its development;
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the results
of our clinical trials may not meet the level of statistical or clinical significance
required by the FDA for marketing approval;
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the FDA
may disagree with the number, design, size, conduct or implementation of our clinical
trials;
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the contract
research organizations, or CROs, that we retain to conduct clinical trials may take actions
outside of our control that materially adversely impact our clinical trials;
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the FDA
may not find the data from preclinical studies and clinical trials sufficient to demonstrate
that the clinical and other benefits of RP5063 outweigh its safety risks;
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the FDA
may disagree with our interpretation of data from our preclinical studies and clinical
trials or may require that we conduct additional studies;
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the FDA
may not accept data generated at our clinical trial sites;
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if our
NDA is reviewed by an advisory committee, the FDA may have difficulties scheduling an
advisory committee meeting in a timely manner or the advisory committee may recommend
against approval of our application or may recommend that the FDA require, as a condition
of approval, additional preclinical studies or clinical trials, limitations on approved
labeling or distribution and use restrictions;
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the FDA
may require development of a risk evaluation and mitigation strategy, or REMS, as a condition
of approval;
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the FDA
may identify deficiencies in the manufacturing processes or facilities of our third party
manufacturers; or
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the FDA
may change its approval policies or adopt new regulations.
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The COVID-19 outbreak and global pandemic could adversely
impact our business, including our clinical trials.
Public health crises such as pandemics
or similar outbreaks could adversely impact our business. In December 2019, a novel strain of coronavirus, or COVID-19, surfaced
in Wuhan, China. Since then, COVID-19 has spread globally. As a result of the COVID-19 outbreak, or similar pandemics, and government
response to pandemics, we have and may in the future experience disruptions that could severely impact our business and clinical
trials, including:
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delays
or difficulties in enrolling patients in our clinical trials;
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interruption
of key clinical trial activities, such as clinical trial site data monitoring and efficacy,
safety and translational data collection, processing and analyses, due to limitations
on travel imposed or recommended by federal, state or local governments, employers and
others or interruption of clinical trial subject visits, which may impact the collection
and integrity of subject data and clinical study endpoints;
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delays
or difficulties in initiating or expanding clinical trials, including delays or difficulties
with clinical site initiation and recruiting clinical site investigators and clinical
site staff;
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increased
rates of patients withdrawing from our clinical trials following enrollment as a result
of contracting COVID-19 or being forced to quarantine;
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diversion
of healthcare resources away from the conduct of clinical trials, including the diversion
of hospitals serving as our clinical trial sites and hospital staff supporting the conduct
of our clinical trials;
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delays
or disruptions in preclinical experiments and investigational new drug application-enabling
studies due to restrictions of on-site staff and unforeseen circumstances at contract
research organizations and vendors;
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interruption
or delays in the operations of the FDA and comparable foreign regulatory agencies; and
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interruption
of, or delays in receiving, supplies of our product candidates from our contract manufacturing
organizations due to staffing shortages, production slowdowns or stoppages and disruptions
in delivery systems.
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The COVID-19 outbreak continues to rapidly
evolve. The extent to which the outbreak may impact our business and clinical trials will depend on future developments, which
are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration
of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines
or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions
taken in the United States and other countries to contain and treat the disease.
We will require additional capital to fund our operations,
and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of RP5063 or
RP1208.
We expect to spend substantial amounts
to complete the development of, seek regulatory approvals for, and commercialize RP5063 and RP 1208. With the proceeds from the
Business Combination we intend to proceed with the development and potential commercialization of RP5063 for the treatment of
schizophrenia. However, we will require additional capital to complete the development and potential commercialization of RP5063
for the treatment of schizophrenia and to continue the development of RP5063 for PAH, IPF, BD, MDD, AD, PD, ADHD/ADD and
other potential indications, and to continue the development of RP1208 for the treatment of depression and obesity. No assurance
can be given that such additional capital will be available on terms acceptable to us, if at all. If we are unable to raise capital
when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our planned development programs or any future
commercialization efforts. In addition, attempting to secure additional financing may divert the time and attention of our management
from day-to-day activities and harm our product candidate development efforts. Because the length of time and activities associated
with successful development of RP5063 and RP1208 is highly uncertain, we are unable to estimate the actual funds we will require
for development and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term,
will depend on many factors, including, but not limited to:
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the initiation,
progress, timing, costs and results of our planned clinical trials for RP5063 and pre-clinical
research for RP1208;
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the outcome,
timing and cost of meeting regulatory requirements established by the FDA, the European
Medicines Agency, or EMA, and other comparable foreign regulatory authorities;
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the cost
of filing, prosecuting, defending and enforcing our patent claims and other intellectual
property rights;
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the cost
of defending potential intellectual property disputes, including patent infringement
actions brought by third parties against us with respect to RP5063, RP1208 or any future
product candidates;
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the effect
of competing technological and market developments;
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the cost
and timing of completion of commercial-scale manufacturing activities;
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the cost
of establishing sales, marketing and distribution capabilities for RP5063, RP1208 or
any future product candidates, in regions where we choose to commercialize our products
on our own; and
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the initiation,
progress, timing and results of our commercialization of RP5063, RP1208 or any future
product candidates, if approved for commercial sale.
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We cannot be certain that such funding
will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms
acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of RP5063
or RP1208 or potentially discontinue operations.
Raising additional funds by issuing securities may cause
dilution to existing shareholders, and raising funds through lending and licensing arrangements may restrict our operations or
require us to relinquish proprietary rights.
We expect that significant additional capital
will be needed in the future to continue our planned operations. Until such time, if ever, as we can generate substantial product
revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, strategic alliances
and license and development agreements in connection with any collaborations. We do not have any committed external source of
funds. To the extent that we raises additional capital by issuing equity securities, our existing shareholders’ ownership
may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely
affect then-existing stockholders’ interests. Debt financing and equity financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends.
If we raise additional funds through collaborations,
strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may
not be favorable to us. Any debt financing we enter into may involve covenants that restrict our operations. These restrictive
covenants may include limitations on additional borrowing and specific restrictions on the use of our assets as well as prohibitions
on our ability to create liens, pay dividends, redeem our shares or make investments. If we are unable to raise additional funds
through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development
or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise develop and
market ourselves.
We will need to expand our organization, and we may experience
difficulties in managing this growth, which could disrupt our operations.
As of December 28, 2020, we had 5
employees, and we are highly dependent on our management personnel, especially our Chief Executive Officer, Laxminarayan Bhat
and Narayan Prabhu as our Chief Financial Officer. We expect to hire a significant number of additional employees for our managerial,
clinical, scientific, operational, sales and marketing teams. We may have operational difficulties in connection with identifying,
hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our management, including
the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management
has no prior experience in managing these growth activities, and may need to divert a disproportionate amount of our attention
away from our day-to-day activities and devote a substantial amount of time to such activities. We may not be able to effectively
manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes,
loss of business opportunities, loss of employees and reduced productivity among remaining employees. our expected growth could
require significant capital expenditures and may divert financial resources from other projects, such as the development of product
candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability
to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial
performance and our ability to commercialize RP5063 and RP1208 and compete effectively will depend, in part, on our ability to
effectively manage any future growth.
Many of the other pharmaceutical companies
that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles
and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career
advancement. Some of these characteristics may be more appealing to high-quality candidates and consultants than what we have
to offer. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which
we can discover and develop product candidates and our business will be limited.
Our employees, independent contractors, principal investigators,
consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
We are exposed to the risk that our employees
and contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors
may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent
conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies,
including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing
standards; federal and state healthcare fraud and abuse and health regulatory laws and other similar foreign fraudulent misconduct
laws; or laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these
laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could
result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter third-party
misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged
risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be
in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a significant impact on our business and financial results, including
the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation
in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits and future earnings, and curtailment
of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
If we seek to enter into strategic alliances for the
development of RP5063 or RP1208 but fail to enter into and maintain successful strategic alliances, our development costs may
increase and our ability to develop RP5063 or RP1208 may be significantly delayed.
We may seek to enter
into strategic alliances or collaborative arrangements with pharmaceutical companies or other industry participants in order to
advance our development of RP5063 or, in the future, RP1208 or other product candidates, and to reduce our costs of development.
If we seek such alliances or collaborative arrangements, we may not be able to negotiate such alliances or collaborative arrangements
on acceptable terms, if at all. We face significant competition from other biopharmaceutical companies for appropriate partners
in such alliances or arrangements. Furthermore, if we are successful in entering strategic alliances or collaborative arrangements,
we may not be able to maintain such alliances or arrangements for a sufficient amount of time to commercialize RP5063, RP1208
or other product candidates, or such alliances or arrangements may not result in successful development of our products. If we
seek suitable alliances or arrangements but then fail to create or to maintain these, we may have to limit the size or scope of,
or delay, our development of RP5063, RP1208 or other future product candidates. If we elect to fund our development or research
programs on our own, we will have to increase our expenditures and will need to obtain additional funding, which may be unavailable
or available only on unfavorable terms. See “Risks Related to Our Business and Industry — Risks Related
to Our Business, Financial Position and Capital Requirements — We will require additional capital to fund
our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization
of RP5063.”
To the extent we are able to enter into collaborative
arrangements or strategic alliances, we will be exposed to risks related to those collaborations and alliances.
Biotechnology companies
at our stage of development may become dependent upon collaborative arrangements or strategic alliances to complete the development
and commercialization of drug candidates, particularly after the phase 2 stage of clinical testing. If we elect to enter into
collaborative arrangements or strategic alliances, these arrangements may place the development of RP5063, RP1208 or other future
product candidates outside our control, may require that we relinquish important rights or may otherwise be entered on terms unfavorable
to us.
Dependence on collaborative arrangements
or strategic alliances will subject us to a number of risks, including the risk that:
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We
may not be able to control the amount and timing of resources that our collaborators
may devote to RP5063 and RP1208;
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our
collaborators may experience financial difficulties;
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we
may be required to relinquish important rights, such as marketing and distribution rights;
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business
combinations or significant changes in a collaborator’s business strategy may also
adversely affect a collaborator’s willingness or ability to complete our obligations
under any arrangement;
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a
collaborator could independently move forward with a competing drug candidate developed
either independently or in collaboration with others, including our competitors; and
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collaborative
arrangements are often terminated or allowed to expire, which would delay the development
and may increase the cost of developing our drug candidates.
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Our business and operations would suffer in the event
our computer systems and networks fail.
Our business depends
on the proper functioning and availability of our computer systems and networks. Our computer systems, as well as those of our
CROs and other contractors and consultants, are vulnerable to damage from computer viruses, unauthorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations,
it could result in a material disruption of our drug development programs. For example, the loss of preclinical or clinical trial
data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase
our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or
damage to our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could
incur liability and the further development of RP5063, RP1208 or any future product candidate could be delayed. Any successful
cyber security attack or other unauthorized attempt to access our systems also could result in negative publicity which could
damage our reputation or brand with our patients, referral sources, payors or other third parties and could subject us to substantial
penalties under HIPAA and other federal and state privacy laws, in addition to private litigation with those affected.
Potential product liability lawsuits against us could
cause us to incur substantial liabilities and limit commercialization of any products that we may develop.
The use of RP5063 and
RP1208 in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product
liability claims. Product liability claims might be brought against us by consumers, health care providers, pharmaceutical companies
or others selling or otherwise coming into contact with our products. On occasion, large judgments have been awarded in class
action lawsuits based on drugs that had unanticipated adverse effects. If we cannot successfully defend against product liability
claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability
claims may result in:
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impairment
of our business reputation and significant negative media attention;
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withdrawal
of participants from our clinical trials;
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significant
costs to defend the related litigation;
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distraction
of management’s attention from our primary business;
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substantial
monetary awards to patients or other claimants;
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inability
to commercialize RP5063, RP1208 or any future product candidate;
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product
recalls, withdrawals or labeling, marketing or promotional restrictions;
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decreased
demand for RP5063, RP1208 or any future product candidate, if approved for commercial
sale; and
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Any product liability insurance coverage
we acquire in the future may not be sufficient to reimburse us for any expenses or losses it may suffer. Moreover, insurance coverage
is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or
in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for RP5063 or RP1208, we
intend to acquire insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability
insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought
against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our
results of operations and business, including preventing or limiting the commercialization of any product candidates we develop.
Risks Related to Clinical Development, Regulatory Approval
and Commercialization
Clinical trials are very expensive, time-consuming, difficult
to design and implement and involve an uncertain outcome.
Our only advanced product
candidate, RP5063, is still in development and will require extensive clinical testing before we are prepared to submit an NDA
for regulatory approval. We cannot predict with any certainty if or when we might submit an NDA for regulatory approval for RP5063
or whether any such NDA will be approved by the FDA. Human clinical trials are very expensive and difficult to design and implement,
in part because they are subject to rigorous regulatory requirements. The clinical trial process is also time-consuming. We estimate
that the phase 3 clinical trials of RP5063 for schizophrenia indication will take at least four years to complete. Furthermore,
failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials.
Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed
through preclinical studies and initial clinical trials, and the results of early clinical trials of RP5063 therefore may not
be predictive of the results of our planned phase 3 clinical study.
The commencement and
completion of clinical trials may be delayed by one or more factors, including:
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failure
to obtain regulatory approval to commence a trial, including in other countries in the
global portion of our planned phase 3 clinical study;
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unforeseen
safety issues;
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determination
of dosing issues;
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lack
of effectiveness during clinical trials;
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inability
to reach agreement on acceptable terms with prospective CROs and clinical trial sites;
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slower
than expected rates of patient recruitment or failure to recruit suitable patients to
participate in a trial;
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failure
to manufacture sufficient quantities of a drug candidate for use in clinical trials;
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inability
to monitor patients adequately during or after treatment; and
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inability
or unwillingness of medical investigators to follow our clinical protocols.
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In addition, our management
has limited prior experience in managing and completing late-stage clinical trials, and may not be able to successfully design
and implement these trials or respond to adverse factors that may arise in the course of conducting these trials.
Further, we, the FDA
or an institutional review board, or IRB, at a clinical trial site may suspend our clinical trials at any time if it appears that
we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s current
Good Clinical Practice, or GCP, regulations, that we are exposing participants to unacceptable health risks, or if the FDA finds
deficiencies in our investigational new drug, or IND, submissions or the conduct of these trials.
Therefore, we cannot
predict with any certainty the schedule for commencement and completion of future clinical trials. If we experience delays in
the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial
prospects of RP5063 could be harmed, and our ability to generate revenues from RP5063 may be delayed. In addition, any delays
in our clinical trials could increase our costs, slow down the approval process and jeopardize our ability to commence product
sales and generate revenues. Any of these occurrences may harm our business, financial condition and results of operations.
Moreover, while we are
not currently intending to engage any principal investigators as advisors or consultants, it is conceivable that principal investigators
for our clinical trials may serve as scientific advisors or consultants from time to time and receive compensation in connection
with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA. The FDA
may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise
affected interpretation of the study. FDA may therefore question the integrity of the data generated at the applicable clinical
trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection,
of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of one or more of our product
candidates.
The results of our clinical trials may not support our
RP5063, RP1208 and any future product candidate claims.
Even if our clinical
trials are completed as planned, we cannot be certain that our results will support the safety and effectiveness of RP5063 for
the treatment of schizophrenia or any other potential indication, including but not limited to PAH, IPF, BD, MDD, AD, PD,
ADHD/ADD, or any of other product candidates, including RP1208. Success in preclinical testing and early clinical trials does
not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will
replicate the results of prior clinical trials and preclinical testing. A failure of a clinical trial to meet its predetermined
endpoints would likely cause us to abandon a product candidate and may delay development of any other product candidates. Any
delay in, or termination of, our clinical trials will delay the submission of our NDAs with the FDA and, ultimately, our ability
to commercialize RP5063, RP1208 or any future product candidate, and generate product revenues.
Enrollment and retention of patients in clinical trials
is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside
of our control.
We may encounter delays
in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled
we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in
clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the existing
body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical
trials of competing drugs for the same indication, the proximity of patients to clinical sites and the eligibility criteria for
the study. Furthermore, any negative results we may report in clinical trials of our product candidate may make it difficult or
impossible to recruit and retain patients in other clinical trials of that same product candidate. Delays or failures in planned
patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our
ability to develop RP5063, RP1208 or any future product candidate, or could render further development impossible. In addition,
we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while
we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance.
The continued spread
of COVID-19 globally could adversely impact our clinical trial operations, including our ability to recruit and retain patients
and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak
occurs in their geography. Disruptions or restrictions on the ability of patients enrolled in our clinical studies to travel,
or the ability of staff at study sites to travel, as well as temporary closures of our facilities or the facilities of our clinical
trials partners and their contract manufacturers, would negatively impact our clinical trial activities.
We face significant competition from other biotechnology
and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
Drug development is highly
competitive and subject to rapid and significant technological advancements. As a significant unmet medical need exists for the
treatment of schizophrenia, there are several large and small pharmaceutical companies focused on delivering therapeutics for
the treatment of schizophrenia. Further, it is likely that additional drugs will become available in the future for the treatment
of schizophrenia.
We are aware of other
companies that are working to develop drugs that would compete against RP5063 for schizophrenia treatment. Many of our existing
or potential competitors have substantially greater financial, technical and human resources than we do and significantly greater
experience in the discovery and development of product candidates, as well as in obtaining regulatory approvals of those product
candidates in the United States and in foreign countries. Our current and potential future competitors also have significantly
more experience commercializing drugs that have been approved for marketing.
Mergers and acquisitions
in the pharmaceutical and biotechnology industries could result in even more resources being concentrated among a small number
of our competitors.
Competition may increase
further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment
in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drugs that are
more effective or less costly than any product candidate that we may develop.
We will face competition
from other drugs currently approved or that will be approved in the future for the treatment of schizophrenia. Therefore, our
ability to compete successfully will depend largely on our ability to:
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develop
and commercialize medicines that are superior to other products in the market;
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demonstrate
through our clinical trials that RP5063 is differentiated from existing and future therapies;
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attract
qualified scientific, product development and commercial personnel;
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obtain
patent or other proprietary protection for our medicines;
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obtain
required regulatory approvals;
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obtain
coverage and adequate reimbursement from, and negotiate competitive pricing with, third-
party payors; and
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successfully
collaborate with pharmaceutical companies in the discovery, development and commercialization
of new medicines.
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The availability of our
competitors’ products could limit the demand, and the price we are able to charge, for any product candidate it develops.
The inability to compete with existing or subsequently introduced drugs would have an adverse impact on our business, financial
condition and prospects.
Established pharmaceutical
companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that
could make RP5063 less competitive. In addition, any new product that competes with an approved product must demonstrate compelling
advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful.
Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA approval for or commercializing medicines
before we do, which would have an adverse impact on our business and results of operations.
If we are not able to obtain required regulatory approvals,
we will not be able to commercialize RP5063, RP1208 or any other product candidates, and our ability to generate revenue will
be materially impaired.
RP5063 and the activities associated with
its development and commercialization, including its design, research, testing, manufacture, safety, efficacy, recordkeeping,
labeling, packaging, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation
by the FDA and other regulatory agencies in the United States and by the EMA and similar regulatory authorities outside the United
States. Failure to obtain marketing approval for RP5063 will prevent us from commercializing it.
We have not received
approval from regulatory authorities to market any product candidate in any jurisdiction, and it is possible that none of RP5063,
RP1208 nor any other product candidates we may seek to develop in the future will ever obtain the appropriate regulatory approvals
necessary for us to commence product sales.
Prior to submitting an
NDA to the FDA, a marketing authorization application, or MAA, to the EMA, or an equivalent application to other foreign regulatory
authorities for approval of RP5063, we will need to complete its phase 3 clinical study.
We expect to rely on
third-party CROs and consultants to assist us in filing and supporting the applications necessary to gain marketing approvals.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory
authorities for each therapeutic indication to establish RP5063’s safety and efficacy for that indication. Securing marketing
approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing
facilities by, the regulatory authorities.
We may not be able to obtain or maintain orphan drug
designation or exclusivity for our product candidate.
We have been granted
orphan drug designation in the United States for RP5063 for the treatment of IPF and PAH. Upon receipt of regulatory approval,
orphan drug status will provide us with seven years of market exclusivity in the United States under the Orphan Drug Act.
However, there is no guarantee that the FDA will grant orphan drug designation for any of our drug candidates for any future indication,
which would make us ineligible for the additional exclusivity and other benefits of orphan drug designation. Moreover, there can
be no assurance that another company also holding orphan drug designation for the same indication or which may receive orphan
drug designation in the future will not receive approval prior to when we do, in which case our competitor would have the benefit
of the seven years of market exclusivity, and we would be unable to commercialize our product candidate for the same indication
until the expiration of such seven-year period. Even if we are the first to obtain approval for the orphan drug indication, there
are circumstances under which a competing product may be approved for the same indication during our seven-year period of exclusivity.
Under the Orphan Drug
Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease
or condition that affects fewer than 200,000 individuals in the United States and for which there is no reasonable expectation
that the cost of developing and making a drug available in the Unites States for this type of disease or condition will be recovered
from sales of the product. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug
designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan designation
does not convey any advantage in or shorten the duration of regulatory review and approval process. In addition to the potential
period of exclusivity, orphan designation makes a company eligible for grant funding of up to $400,000 per year for four years
to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application
user fee.
If a product that has
orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation,
the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same
drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation
is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of
another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient
quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product.
If a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may
not be entitled to orphan drug exclusivity. There can be no assurance that we will receive orphan drug designation for RP5063
for any additional indications or for RP1208, if we elect to seek such designation.
RP5063, RP1208 and any future product candidate may cause
adverse effects or have other properties that could delay or prevent its regulatory approval or limit the scope of any approved
label or market acceptance.
Adverse events caused
by RP5063, RP1208 and any future product candidate could cause us, other reviewing entities, clinical trial sites or regulatory
authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval. If an unacceptable
frequency or severity of adverse events are reported in our clinical trials for RP5063, RP1208 or any future product candidates,
our ability to obtain regulatory approval for such product candidates may be negatively impacted.
Furthermore, if any of
our product candidates are approved and then cause serious or unexpected side effects, a number of potentially significant negative
consequences could result, including:
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regulatory
authorities may withdraw their approval of the product or require a REMS to impose restrictions
on its distribution or other risk management measures;
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regulatory
authorities may require the addition of labeling statements, such as warnings or contraindications;
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we
may be required to change the way the product is administered or to conduct additional
clinical trials;
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we
could be sued and held liable for harm caused to patients;
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we
could elect to discontinue the sale of our products; and
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our
reputation may suffer.
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Any of these events could
prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase
the costs of commercializing RP5063, RP1208 and any future product candidate.
Because the results of pre-clinical testing are not necessarily
predictive of future results, RP1208 may not have favorable results in our planned clinical trials.
Any positive results
from our pre-clinical testing of RP1208 may not necessarily be predictive of the results from our planned clinical trials. Many
companies in the pharmaceutical industry have suffered significant setbacks in clinical trials after achieving positive results
in pre-clinical development, and we cannot be certain that we will not face similar setbacks. The pre-clinical data we have obtained
for RP1208 may not predict results from studies in larger numbers of subjects drawn from more diverse populations or in a commercial
setting, and also may not predict the ability of RP1208 to achieve its intended goals, or to do so safely.
Moreover, pre-clinical
and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product
candidates performed satisfactorily in pre-clinical studies and clinical trials nonetheless failed to obtain FDA or EMA approval.
If we fail to produce positive results in our clinical trials, the development timeline and regulatory approval and commercialization
prospects for our products and, correspondingly, our business and financial prospects, would be materially adversely affected.
Even if we obtain FDA approval for RP5063, RP1208 or
any future product candidate in the United States, we may never obtain approval for or commercialize it in any other jurisdiction,
which would limit our ability to realize our full market potential.
In order to market any
products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country
basis regarding safety and efficacy. Approval by FDA in the United States does not ensure approval by regulatory authorities in
other countries or jurisdictions. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities
in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval
processes vary among countries and can involve additional product testing and validation and additional administrative review
periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical
studies or clinical trials which could be costly and time consuming. Regulatory requirements can vary widely from country to country
and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved
for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval
in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain
required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our
ability to realize the full market potential of any product we develop will be unrealized.
Even if we obtain regulatory approval for RP5063, RP1208
or any future product candidate, we will still face extensive regulatory requirements and our products may face future development
and regulatory difficulties.
Any product candidate
for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging,
distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such
product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory
authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment
registration and drug listing requirements, continued compliance with current Good Manufacturing Practice, or cGMP, requirements
relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements
regarding the distribution of samples to physicians and recordkeeping and current GCP requirements for any clinical trials that
we conduct post-approval. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations
on the indicated uses for which the product may be marketed or to the conditions of approval, including any requirement to implement
a REMS. If RP5063, RP1208 or any future product candidate receives marketing approval, the accompanying label may limit the approved
use of our drug candidate, which could limit sales of the product.
The FDA may also impose
requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product.
The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved
indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’
communications regarding off-label use and if we do not market our products for their approved indications, we may be subject
to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion
of prescription drugs may lead to FDA enforcement actions and investigations alleging violations of federal and state health care
fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery
of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure
to comply with regulatory requirements, may yield various results, including:
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restrictions
on manufacturing such products;
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restrictions
on the labeling or marketing of a product;
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restrictions
on product distribution or use;
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requirements
to conduct post-marketing studies or clinical trials;
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withdrawal
of the products from the market;
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refusal
to approve pending applications or supplements to approved applications that we submit;
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fines,
restitution or disgorgement of profits or revenues;
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suspension
or withdrawal of marketing approvals;
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refusal
to permit the import or export of our products;
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injunctions
or the imposition of civil or criminal penalties.
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The FDA’s policies
may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of RP5063,
RP1208 or any future product candidate. If we are slow or unable to adapt to changes in existing requirements or the adoption
of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that
we may have obtained.
Even if RP5063, RP1208 or any future product candidate
receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in
the medical community necessary for commercial success.
If RP5063, RP1208 or
any future product candidate receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians,
patients, third-party payors and others in the medical community. If it does not achieve an adequate level of acceptance, we may
not generate significant product revenues and become profitable. The degree of market acceptance of RP5063, RP1208 or any future
product candidate, if approved for commercial sale, will depend on a number of factors, including, but not limited to:
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the
efficacy and potential advantages compared to alternative treatments;
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effectiveness
of sales and marketing efforts;
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the
cost of treatment in relation to alternative treatments, including any similar generic
treatments;
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our
ability to offer our products for sale at competitive prices;
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the
convenience and ease of administration compared to alternative treatments;
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the
willingness of the target patient population to try new therapies and of physicians to
prescribe these therapies;
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the
strength of marketing and distribution support;
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the
availability of third-party coverage and adequate reimbursement;
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the
prevalence and severity of any side effects; and
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any
restrictions on the use of our product together with other medications.
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Because we expects sale
of RP5063, RP1208 or any future product candidate, if approved, to generate substantially all of our product revenues for the
foreseeable future, the failure of this product to find market acceptance would harm our business and require us to seek additional
financing.
If we are unable to establish sales, marketing and distribution
capabilities either on our own or in collaboration with third-parties, we may not be successful in commercializing RP5063, RP1208
or any future product candidate, if approved.
We do not have any infrastructure
for the sales, marketing or distribution of our products, and the cost of establishing and maintaining such an organization may
exceed the cost-effectiveness of doing so. In order to market any product that may be approved, we must build our sales, distribution,
marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services.
To achieve commercial success for any product for which we have obtained marketing approval, we will need a sales and marketing
organization.
We expect to build a
focused sales, distribution and marketing infrastructure to market RP5063, RP1208 or any future product candidate in the United
States, if approved. There are significant expenses and risks involved with establishing our own sales, marketing and distribution
capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales
leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and
marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could delay
any product launch, which would adversely impact the commercialization of RP5063, RP1208 or any future product candidate. For
example, if the commercial launch of RP5063, RP1208 or any future product candidate for which we recruit a sales force and establish
marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these
commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and
marketing personnel.
Factors that may inhibit
our efforts to commercialize our products on our own include:
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our
inability to recruit, train and retain adequate numbers of effective sales and marketing
personnel;
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the
inability of sales personnel to obtain access to physicians or attain adequate numbers
of physicians to prescribe any drugs; and
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unforeseen
costs and expenses associated with creating an independent sales and marketing organization.
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We do not anticipate
having the resources in the foreseeable future to allocate to the sales and marketing of RP5063 in markets outside of the United
States. Therefore, our future success will depend, in part, on our ability to enter into and maintain collaborative relationships
for such capabilities, the collaborator’s strategic interest in the product and such collaborator’s ability to successfully
market and sell the product. We intends to pursue collaborative arrangements regarding the sale and marketing of RP5063, RP1208
or any future product candidate, if approved, for markets outside of the United States; however, we cannot assure you that we
will be able to establish or maintain such collaborative arrangements, or if able to do so, that they will have effective sales
forces. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon
the efforts of such third parties, and there can be no assurance that such efforts will be successful.
If we are unable to build
our own sales force or negotiate a collaborative relationship for the commercialization of RP5063, RP1208 or any future product
candidate we may be forced to delay the potential commercialization of RP5063, RP1208 or any future product candidate or reduce
the scope of our sales or marketing activities for RP5063, RP1208 or any future product candidate. If we elect to increase our
expenditures to fund commercialization activities itself, we will need to obtain additional capital, which may not be available
to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring RP5063, RP1208 or any future
product candidate to market or generate product revenue. We could enter into arrangements with collaborative partners or otherwise
at an earlier stage than otherwise would be ideal and we may be required to relinquish rights to RP5063, RP1208 or any future
product candidate or otherwise agree to terms unfavorable to it, any of which may have an adverse effect on our business, operating
results and prospects.
If we are unable to establish
adequate sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not
be successful in commercializing RP5063, RP1208 or any future product candidate and may not become profitable. We will be competing
with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or
the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these
more established companies.
If we obtain approval to commercialize any products outside
of the United States, a variety of risks associated with international operations could materially adversely affect our business.
If RP5063, RP1208 or
any future product candidate is approved for commercialization, we intend to enter into agreements with third parties to market
it in certain jurisdictions outside the United States. We expect that it will be subject to additional risks related to international
operations or entering into international business relationships, including:
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different
regulatory requirements for drug approvals and rules governing drug commercialization
in foreign countries;
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reduced
protection for intellectual property rights;
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unexpected
changes in tariffs, trade barriers and regulatory requirements;
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economic
weakness, including inflation, or political instability in particular foreign economies
and markets;
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compliance
with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign
reimbursement, pricing and insurance regimes;
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foreign
currency fluctuations, which could result in increased operating expenses and reduced
revenues, and other obligations incident to doing business in another country;
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workforce
uncertainty in countries where labor unrest is more common than in the United States;
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potential
noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010
and similar anti-bribery and anticorruption laws in other jurisdictions;
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production
shortages resulting from any events affecting raw material supply or manufacturing capabilities
abroad; ands
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business
interruptions resulting from geopolitical actions, including war and terrorism, or natural
disasters including earthquakes, typhoons, floods and fires.
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We have no prior experience
in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European
Union and many of the individual countries in Europe with which we will need to comply.
Our subsidiary may not be in compliance with the laws
of foreign countries, and it may face penalties and fines imposed by the Indian government.
We have not retained
local counsel to assess whether our subsidiary, Reviva Pharmaceuticals India Private Limited, is in compliance with applicable
local law. There can be no assurance that we will be able to initially meet such requirements or maintain compliance with the
laws and regulations of each foreign country in which our subsidiary operates. As a result, we, Reviva Pharmaceuticals India Private
Limited and our other subsidiary may be subject to adverse legal consequences, including but not limited to penalties and fines,
which could adversely affect our business, financial condition or results of operations.
We are subject to U.S. foreign investment regulations,
which may impose additional burdens on or may limit certain investors’ ability to purchase our common stock in amounts deemed
by the U.S. government to confer control, potentially making our common stock less attractive to investors, and may also impact
our ability to generate revenues outside of the U.S.
In 2018, Congress passed
the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which expanded the jurisdiction of the Committee
on Foreign Investment in the United States (“CFIUS”) to review direct or indirect foreign investments in U.S. companies.
Among other things, FIRRMA empowers CFIUS to require certain foreign investors to make mandatory filings, permits CFIUS, to charge
filing fees related to such filings, and empowers CFIUS to self-initiate national security reviews of foreign direct and indirect
investments in U.S. companies. In the case that CFIUS determines an investment to be a threat to national security, CFIUS has
the power to unwind or place restrictions on the investment. Any such restrictions on the ability to purchase shares of our common
stock may have the effect of delaying or deterring any particular investment and could also affect the price that some investors
are willing to pay for our common stock. In addition, such restrictions could also limit the opportunity for our stockholders
to receive a premium for their shares of our common stock in relation to any potential change in control.
Our current and future relationships with foreign actors
such as, health care and administrative professionals at foreign state owned hospitals or foreign government healthcare regulators
will be subject to applicable anti-corruption laws regulatory laws, which could expose us to penalties.
Our business operations
and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and customers,
may expose us to broadly applicable anti-corruption and anti-bribery laws and regulations. These laws may constrain the business
or financial arrangements and relationships through which we conduct our operations, including how we market, sell and distribute
our products. Such laws include the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) prohibits any offer,
payment, promise to pay or authorization to pay any money, gift or thing of value to any Foreign Official, political party, or
candidate for office for the purpose of influencing any act or failure to act by the recipient, in his or her official capacity,
in order to obtain or retain business, or inducing the recipient to use influence to affect a decision of a foreign government
or agency in order to obtain or retain business for anyone. The FCPA also imposes recordkeeping requirements and internal controls
provisions, which, among other things, require the issuer to keep accurate books, records, and accounts.
Our current and future relationships with investigators,
health care professionals, consultants, third-party payors, and customers will be subject to applicable healthcare regulatory
laws, which could expose us to penalties.
Our business operations
and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and customers,
may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the business
or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell and
distribute our products for which we obtain marketing approval. Such laws include:
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the
federal Anti-Kickback Statute prohibits, among other things, persons and entities from
knowingly and willfully soliciting, offering, receiving or providing remuneration, directly
or indirectly, in cash or in kind, to induce or reward, or in return for, either the
referral of an individual for, or the purchase, order or recommendation of, any good
or service, for which payment may be made under a federal healthcare program, such as
Medicare and Medicaid. A person or entity does not need to have actual knowledge of the
federal Anti-Kickback Statute or specific intent to violate it to have committed a violation;
in addition, the government may assert that a claim including items or services resulting
from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent
claim for purposes of the civil False Claims Act;
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the
federal false claims laws, including the civil False Claims Act, impose criminal and
civil penalties, including civil whistleblower or qui tam actions, against individuals
or entities for knowingly presenting, or causing to be presented, to the federal government,
claims for payment that are false or fraudulent or making a false statement to avoid,
decrease or conceal an obligation to pay money to the federal government;
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the
federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes
criminal and civil liability for, among other things, executing a scheme to defraud any
healthcare benefit program or making false statements relating to healthcare matters.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have
actual knowledge of the statute or specific intent to violate it to have committed a
violation;
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act
and its implementing regulations, also imposes obligations, including mandatory contractual
terms, with respect to safeguarding the privacy, security and transmission of individually
identifiable health information;
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the
federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs,
devices, biologics and medical supplies for which payment is available under Medicare,
Medicaid or the Children’s Health Insurance Program (with certain exceptions) to
report annually to the government information related to payments or other “transfers
of value” made to physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers
and group purchasing organizations to report annually to the government ownership and
investment interests held by the physicians described above and their immediate family
members and payments or other “transfers of value” to such physician owners
(covered manufacturers are required to submit reports to the government by the 90th day
of each calendar year); and
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analogous
state and foreign laws and regulations, such as state anti-kickback and false claims
laws, may apply to sales or marketing arrangements and claims involving healthcare items
or services reimbursed by non-governmental third party payors, including private insurers;
state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the
federal government; state laws that require drug manufacturers to report information
related to payments and other transfers of value to physicians and other healthcare providers
or marketing expenditures; and state and foreign laws governing the privacy and security
of health information in some circumstances, many of which differ from each other in
significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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Efforts to ensure that
our current and future business arrangements with third parties will comply with applicable healthcare laws and regulations will
involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply
with current or future statutes, regulations, agency guidance or case law involving applicable healthcare laws. If our operations
are found to be in violation of any of these or any other health regulatory laws that may apply to it, we may be subject to significant
penalties, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement,
individual imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual
damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely
affect our ability to operate our business and our results of operations. Defending against any such actions can be costly, time-consuming
and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such
actions that may be brought against us, our business may be impaired.
Current and future legislation may increase the difficulty
and cost for us to obtain marketing approval of and commercialize RP5063, RP1208 or any future product candidate and affect the
prices we may obtain.
In the United States
and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding
the healthcare system and efforts to control health care costs, including drug prices, that could have a significant negative
impact on our business, including preventing, limiting or delaying regulatory approval of our drug candidates and reducing the
sales and profits derived from our products once they are approved.
For example, in the United
States, the Patient Protection and Affordable Care Act of 2010 (“ACA”) substantially changed the way health care is
financed by both governmental and private insurers and significantly affects the pharmaceutical industry. Many provisions of ACA
impact the biopharmaceutical industry, including that in order for a biopharmaceutical product to receive federal reimbursement
under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must
extend discounts to entities eligible to participate in the drug pricing program under the Public Health Services Act, or PHS.
Since its enactment, there have been judicial and Congressional challenges and amendments to certain aspects of ACA. There is
continued uncertainty about the implementation of ACA, including the potential for further amendments to the ACA and legal challenges
to or efforts to repeal the ACA.
We cannot be sure whether
additional legislative changes will be enacted, or whether government regulations, guidance or interpretations will be changed,
or what the impact of such changes would be on the marketing approvals, sales, pricing, or reimbursement of our drug candidates
or products, if any, may be.
Coverage and adequate reimbursement may not be available
for RP5063, RP1208 or any future product candidate, which could make it difficult for us to sell our products profitably.
Market acceptance and
sales of any product candidates that we develop, will depend in part on the extent to which reimbursement for these products and
related treatments will be available from third-party payors, including government health administration authorities and private
health insurers. Third-party payors decide which drugs they will pay for and establish reimbursement levels. Third-party payors
often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However,
decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop
will be made on a plan-by-plan basis. One payer’s determination to provide coverage for a product does not assure that other
payors will also provide coverage, and adequate reimbursement, for the product. Additionally, a third-party payor’s decision
to provide coverage for a drug does not imply that an adequate reimbursement rate will be approved. Each plan determines whether
or not it will provide coverage for a drug, what amount it will pay the manufacturer for the drug, and on what tier of its formulary
the drug will be placed. The position of a drug on a formulary generally determines the co-payment that a patient will need to
make to obtain the drug and can strongly influence the adoption of a drug by patients and physicians. Patients who are prescribed
treatments for their conditions and providers prescribing such services generally rely on third-party payors to reimburse all
or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement
is adequate to cover a significant portion of the cost of our products.
A primary trend in the
U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by limiting coverage
and the amount of reimbursement for particular medications. We cannot be sure that coverage and reimbursement will be available
for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Inadequate
coverage and reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. If
coverage and adequate reimbursement are not available, or are available only to limited levels, we may not be able to successfully
commercialize any product candidates that we develop.
Additionally, there have
been a number of legislative and regulatory proposals to change the healthcare system in the United States and in some foreign
jurisdictions that could affect our ability to sell any future drugs profitably. These legislative and regulatory changes may
negatively impact the reimbursement for any future drugs, following approval.
Risks Related to Our Dependence on Third Parties
We do not have our own manufacturing capabilities and
will rely on third parties to produce clinical and commercial supplies of RP5063, RP1208 and any future product candidate.
We does not have experience
in drug formulation or manufacturing and does not own or operate, and does not expect to own or operate, facilities for product
manufacturing, storage and distribution, or testing. We also will rely on third-party manufacturers to supply us with sufficient
quantities of RP5063 to be used, if approved, for the commercialization of RP5063. If we are unable to initiate or continue our
relationship with one or more of these third-party contractors, we could experience delays in our development efforts as we locate
and qualify new manufacturers.
Further, our reliance
on third-party manufacturers entails risks to which we would not be subject if we manufactured our product candidates, including:
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inability
to meet our product specifications and quality requirements consistently;
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delay
or inability to procure or expand sufficient manufacturing capacity;
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manufacturing
and product quality issues related to scale-up of manufacturing;
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costs
and validation of new equipment and facilities required for scale-up;
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failure
to comply with cGMP and similar foreign standards;
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inability
to negotiate manufacturing agreements with third parties under commercially reasonable
terms;
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termination
or nonrenewal of manufacturing agreements with third parties in a manner or at a time
that is costly or damaging to us;
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reliance
on a limited number of sources, and in some cases, single sources for product components,
such that if we are unable to secure a sufficient supply of these product components,
we will be unable to manufacture and sell RP5063, RP1208 or any future product candidate
in a timely fashion, in sufficient quantities or under acceptable terms;
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lack
of qualified backup suppliers for those components that are currently purchased from
a sole or single source supplier;
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operations
of our third-party manufacturers or suppliers could be disrupted by conditions unrelated
to our business or operations, including the bankruptcy of the manufacturer or supplier;
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carrier
disruptions or increased costs that are beyond our control; and
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failure
to deliver our products under specified storage conditions and in a timely manner.
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Any of these events could
lead to clinical trial delays, failure to obtain regulatory approval or impact our ability to successfully commercialize our products.
Some of these events could be the basis for FDA action, including injunction, recall, seizure, or total or partial suspension
of production.
We intend to rely on third parties to conduct, supervise
and monitor our clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.
We intend to rely on
CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limited influence
over their actual performance.
We intend to rely upon
CROs to monitor and manage data for our clinical programs, as well as the execution of future nonclinical studies. We expects
to control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of
our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance
on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs will
be required to comply with the Good Laboratory Practices and GCPs, which are regulations and guidelines enforced by the FDA and
are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory
authorities in the form of International Conference on Harmonization guidelines for any of our product candidates that are in
preclinical and clinical development. The Regulatory authorities enforce GCPs through periodic inspections of trial sponsors,
principal investigators and clinical trial sites. If we or our CROs fail to comply with GCPs, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. Accordingly, if our CROs fail to comply with these regulations or
fail to recruit a sufficient number of subjects, we may be required to repeat clinical trials, which would delay the regulatory
approval process.
Our CROs will be independent
contractors and not our employees, and we will not control whether or not they devote sufficient time and resources to our future
clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors,
for whom they may also be conducting clinical trials, or other drug development activities which could harm our competitive position.
We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce
our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs
do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy
of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements
or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory
approval for, or successfully commercialize any product candidate that we develop. As a result, our financial results and the
commercial prospects for any product candidate that we develop would be harmed, our costs could increase, and our ability to generate
revenues could be delayed.
If our relationship with
these CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable
terms. Switching or adding additional CROs involves substantial cost and requires management time and focus. In addition, there
is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability
to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our CROs, there
can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not
have an adverse impact on our business, financial condition and prospects.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection
for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, we may not be able
to compete effectively in our markets.
We rely upon a combination
of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our drug development
programs and product candidates. Our success depends in large part on our ability to obtain and maintain patent protection in
the United States and other countries with respect to RP5063, RP1208 and any future product candidates. We seek to protect our
proprietary position by filing patent applications in the United States and abroad related to our development programs and product
candidates. The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary
or desirable patent applications at a reasonable cost or in a timely manner.
It is also possible that
we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
The patent applications that we own may fail to result in issued patents with claims that cover RP5063, RP1208 or any future product
candidate in the United States or in other foreign countries. There is no assurance that all of the potentially relevant prior
art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing
from a pending patent application. Even if patents do successfully issue and even if such patents cover RP5063, RP1208 or any
future product candidate, third parties may challenge their validity, enforceability or scope, which may result in such patents
being narrowed, invalidated, or held unenforceable. Any successful opposition to these patents or any other patents that we own
could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further,
if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent
protection could be reduced.
If the patent applications
we hold with respect to our development programs and product candidates fail to issue, if their breadth or strength of protection
is threatened, or if they fail to provide meaningful exclusivity for RP5063, RP1208 or any future product candidate, it could
dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize future
drugs. Any such outcome could have a material adverse effect on our business.
The patent position of
biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has
in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights
to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of
treatment of the human body more than United States law does. Publications of discoveries in scientific literature often lag behind
the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until
18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to
make the inventions claimed in our owned patents or pending patent applications, or that we were the first to file for patent
protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights
are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology
or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products.
Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the
value of our patents or narrow the scope of our patent protection. Moreover, we may be subject to a third party pre-issuance submission
of prior art to the U.S. Patent and Trademark Office, or USPTO, or become involved in opposition, derivation, reexamination, inter
partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An
adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights,
allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result
in our inability to manufacture or commercialize products without infringing third party patent rights. In addition, if the breadth
or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating
with us to license, develop or commercialize current or future product candidates.
Various extensions may
be available; however the life of a patent, and the protection it affords, is limited. Without patent protection for our current
or future product candidates, we may be open to competition from generic versions of such products. Given the amount of time required
for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire
before or shortly after such candidates are commercialized. As a result, our owned patent portfolio may not provide us with sufficient
rights to exclude others from commercializing products similar or identical to ours.
Obtaining and maintaining our patent protection depends
on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance
fees on any issued patent are due to be paid to the USPTO and other foreign patent agencies in several stages over the lifetime
of the patent. The USPTO and various foreign national or international patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse may in
many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in
which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss
of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights
include, but are not limited to, failure to timely file national and regional stage patent applications based on our international
patent application, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly
legalize and submit formal documents. If we fail to maintain the patents and patent applications covering RP5063, RP1208 or any
future product candidate, Our competitors might be able to enter the market, which would have an adverse effect on our business.
Third party claims or litigation alleging infringement
of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, may delay or prevent the
development and commercialization of RP5063, RP1208 and any future product candidate.
Our commercial success
depends in part on avoiding infringement and other violations of the patents and proprietary rights of third parties. There is
a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property
rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, derivation and
administrative law proceedings, inter party review, and post-grant review before the USPTO, as well as oppositions and similar
processes in foreign jurisdictions. Numerous U.S. and foreign issued patents and pending patent applications, which are owned
by third parties, exist in the fields in which we and our collaborators are developing product candidates. As the biotechnology
and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure, the risk
increases that our product candidates or other business activities may be subject to claims of infringement of the patent and
other proprietary rights of third parties. Third parties may assert that we are infringing their patents or employing their proprietary
technology without authorization. Based on our general knowledge in this field of technology and based on the patent prosecution
of RP5063 conducted in the United States and in foreign countries, we does not believe that there are valid patents which contain
granted claims that could be asserted with respect to RP5063, however, we may be incorrect.
There may be third-party
patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related
to the use or manufacture of our product candidates.
Because patent applications
can take many years to issue, there may be currently pending patent applications which may later result in issued patents
that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our
technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover
the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final
product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless
we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patent were held
by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including
combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable
product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available
on commercially reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual
property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our
employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us,
disputes may arise as to the rights in related or resulting know-how and inventions.
Parties making claims
against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize
one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation
expense and would be a substantial diversion of employee resources from our business. In the event of a successful infringement
or other intellectual property claim against us, We may have to pay substantial damages, including treble damages and attorneys’
fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected products,
which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would
be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation,
We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates,
and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms,
if at all. In that event, we would be unable to further develop and commercialize one or more of our product candidates, which
could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced
against our future drugs or product candidates, resulting in either an injunction prohibiting our sales, or, with respect to our
sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
We may be involved in lawsuits to protect or enforce
our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming
and unsuccessful.
Competitors may infringe
or otherwise violate our patents or our other intellectual property rights. To counter infringement or unauthorized use, we may
be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court
may decide that one of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology
at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense
proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent
applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter
claims against us, such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United
States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
Grounds for a patent
invalidity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness,
non-enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone
connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading
statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings
such as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the
United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of
invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and
the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability,
we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates. Such
a loss of patent protection could harm our business.
We may not be able to
prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights
as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license
on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and
even if successful, may result in substantial costs and distract our management and other employees.
Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some
of our confidential information could be compromised by disclosure during this type of litigation. There could also be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors
perceive these results to be negative, it could have an adverse effect on the price of securities that may be issued by us.
We may not be able to protect our intellectual property
rights throughout the world, which could impair our business.
Filing, prosecuting and
defending patents covering RP5063, RP1208 and any future product candidate throughout the world would be prohibitively expensive.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products
and, further, may export otherwise infringing products to territories where we may obtain patent protection, but where patent
enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where
Revive does not have any issued patents and any future patent claims or other intellectual property rights may not be effective
or sufficient to prevent them from so competing.
Our reliance on third parties requires us to share our
trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated
or disclosed.
Because we expect to
rely on third parties to manufacture RP5063, RP1208 and any future product candidates, and we expect to collaborate with third
parties on the development of RP5063, RP1208 and any future product candidates, we must, at times, share trade secrets with them.
We also conducts joint research and development programs that may require us to share trade secrets under the terms of our research
and development partnerships or similar agreements. We seek to protect our proprietary technology in part by entering into confidentiality
agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors,
employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements
typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets.
Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential
information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the
technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based,
in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure
would impair our competitive position and may have an adverse effect on our business and results of operations.
In addition, these agreements
typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially
relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our efforts to
protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third
parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery
of our trade secrets would impair our competitive position and have an adverse impact on our business.
Risks Related to Our Securities
An active trading market for our Common Stock or warrants
may not be sustained.
An active trading market
for our Common Stock or warrants may not develop or continue or, if developed, may not be sustained The lack of an active market
for our Common Stock or warrants may impair investors’ ability to sell their Common Stock or warrants at the time they wish
to sell them or at a price that they consider reasonable, may reduce the fair market value of their shares of Common Stock or
warrants and may impair our ability to raise capital to continue to fund operations by selling securities and may impair our ability
to acquire additional intellectual property assets by using our securities as consideration
A sale of a substantial number of shares of our Common
Stock or warrants in the public market could cause the market price of our Common Stock or warrants to drop significantly, even
if our business is doing well.
The price of our Common
Stock or warrants could decline as a result of sales of a large number of shares of our Common Stock or warrants or the perception
that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for
us to sell equity securities in the future at a time and at a price that we deem appropriate.
In addition, in the future,
we may issue additional shares of Common Stock, warrants or other equity or debt securities convertible into Common Stock in connection
with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial
dilution to our existing stockholders and could cause the price of our common stock or warrants to decline.
If equity research analysts do not publish research or
reports about our business or if they issue unfavorable commentary or downgrade our Common Stock or warrants, the price of our
Common Stock or warrants could decline.
The trading market for our Common Stock
and warrants relies in part on the research and reports that equity research analysts publish about us and our business. We do
not control these analysts. The price of our Common Stock could decline if one or more equity analysts downgrade our Common Stock
or warrants or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.
The price of our Common Stock or Warrants may be volatile,
which could subject us to securities class action litigation and our stockholders could incur substantial losses.
The market price for our Common Stock or
warrants may be volatile and subject to wide fluctuations in response to factors including the following:
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actual
or anticipated fluctuations in our quarterly or annual operating results;
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actual
or anticipated changes in our growth rate relative to our competitors;
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failure
to meet or exceed financial estimates and projections of the investment community or
that we provide to the public;
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issuance
of new or updated research or reports by securities analysts;
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share
price and volume fluctuations attributable to inconsistent trading volume levels of our
securities; additions or departures of key management or other personnel;
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disputes
or other developments related to proprietary rights, including patents, litigation matters,
and our ability to obtain patent protection for our products;
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announcement
or expectation of additional debt or equity financing efforts;
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sales
of our securities by us, our insiders or our other stockholders; and
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general
economic, market or political conditions in the United States or elsewhere.
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In particular, the market prices of pharmaceutical
companies like the ours have been highly volatile due to factors, including, but not limited to:
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any delay
or failure to conduct a clinical trial for a company’s product or to receive approval
from the FDA and other regulatory agents;
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developments
or disputes concerning a company’s intellectual property rights;
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technological
innovations of such companies or their competitors;
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changes
in market valuations of similar companies;
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announcements
by such companies or their competitors of significant contracts, acquisitions, strategic
partnerships, joint ventures, capital commitments, new technologies, or patents;
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failure
to complete significant transactions or collaborate with vendors in manufacturing a product;
and
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proposals
for legislation that would place restrictions on the price of pharmaceutical products.
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These and other market and industry factors
may cause the market price and demand for our Common Stock and warrants to fluctuate substantially, regardless of our actual operating
performance, which may limit or prevent investors from readily selling their shares of Common Stock or warrants and may otherwise
negatively affect the liquidity of our Common Stock or warrants. In addition, the stock market in general, and Nasdaq and emerging
growth companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that
stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders
brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time
and attention of our management.
We are an emerging growth company within the meaning
of the Securities Act and have taken advantage of certain exemptions from disclosure requirements available to emerging growth
companies; this could make our securities less attractive to investors and may make it more difficult to compare our performance
with other public companies.
We are an “emerging growth company”
within the meaning of the Securities Act, as modified by the JOBS Act and have taken 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 our periodic reports and proxy statements and exemptions from
the requirements of holding a nonbinding advisory vote on certain executive compensation matters. As a result, our shareholders
may not have access to certain information they may deem important. We may be an emerging growth company for up to five years
from the IPO of Tenzing, although circumstances could cause the loss of that status earlier, including if the market value of
our common stock held by non-affiliates exceeds $700 million as of the last business day in any August before that time,
in which case we would no longer be an emerging growth company as of the end of that fiscal year. We cannot predict whether investors
will find our securities less attractive because we rely on these exemptions. If some investors find the securities less attractive
as a result of reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there
may be a less active trading market for our securities and the trading prices of the securities may be more volatile.
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 an emerging growth 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 an election to opt out is irrevocable. We have
elected not to opt out of such extended transition period. Accordingly, when a standard is issued or revised and it has different
application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard at
the time private companies adopt the new or revised standard, unless early adoption is permitted by the standard, and we elect
early adoption. This may make comparison of our 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.
We will incur significantly increased costs and devote
substantial management time as a result of operating as a public company particularly after we are no longer an “emerging
growth company.”
As a newly public company, we will incur
significant legal, accounting and other expenses that we did not incur as a private company. For example, we are required to comply
with certain of the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act,
as amended, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance
of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these
requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly.
In addition, we expect that our management and other personnel will need to divert attention from operational and other business
matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses
and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley
Act. In addition, after we no longer qualify as an emerging growth company, we expect to incur additional management time and
cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large
accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
We have not yet completed the process of compiling the system and processing documentation needed to comply with such requirements.
We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. In that regard, we currently
do not have an internal audit function, and we will need to hire or contract for additional accounting and financial staff with
appropriate public company experience and technical accounting knowledge.
We cannot predict or estimate the amount
of additional costs we may incur as a result of becoming a public company or the timing of such costs.
There may be limitations on the effectiveness of our
internal controls, and a failure of our control systems to prevent error or fraud may materially harm us.
Proper systems of internal controls over
financial accounting and disclosure controls and procedures are critical to the operation of a public company. We have limited
operating history and limited personnel in our finance and accounting functions, which may result in a lack of segregation of
duties and we are at the very early stages of establishing, and we may be unable to effectively establish such systems, especially
in light of the fact that we now have to operate as a publicly reporting company. This would leave us without the ability to reliably
assimilate and compile financial information and significantly impair our ability to prevent error and detect fraud, all of which
would have a negative impact on our internal controls over financial reporting.
Moreover, we do not expect that disclosure
controls or internal controls over financial reporting, even if established, will prevent all error and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and
the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Failure of our control systems to prevent error or fraud could materially adversely impact us.
We do not currently intend to pay dividends on our Common
Stock in the foreseeable future, and consequently, any gains from an investment in our Common Stock will likely depend on appreciation
in the price of our Common Stock.
We have never declared or paid cash dividends
on our Common Stock and do not anticipate paying any cash dividends to holders of our Common Stock in the foreseeable future.
Consequently, investors must rely on sales of their Common Stock and warrants after price appreciation, which may never occur,
as the only way to realize any future gains on their investments. There is no guarantee that shares of our Common Stock or warrants
will appreciate in value or even maintain the price at which the stockholders have purchased their shares or warrants.
Upon our dissolution, the stockholders may not recoup
all or any portion of their investment.
In the event of our liquidation, dissolution
or winding-up, whether voluntary or involuntary, the proceeds and/or assets of remaining after giving effect to such transaction,
and the payment of all debts and liabilities and distributions required to be made to holders of any outstanding preferred stock
will then be distributed to the stockholders of Common Stock on a pro rata basis. There can be no assurance that we will have
available assets to pay to the holders of our Common Stock, or any amounts, upon such a liquidation, dissolution or winding-up.
Our amended and restated certificate of incorporation
allows for our board of directors to create new series of preferred stock without further approval by the stockholders, which
could adversely affect the rights of the holders of our Common Stock.
Our board of directors has the authority
to fix and determine the relative rights and preferences of preferred stock. Our board of directors has the authority to issue
up to 10 million shares of preferred stock without further stockholder approval. As a result, our board of directors could authorize
the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation and
the right to receive dividend payments before dividends are distributed to the holders of our Common Stock. In addition, our board
of directors could authorize the issuance of a series of preferred stock that has greater voting power than the Common Stock or
that is convertible into our Common Stock, which could decrease the relative voting power of our Common Stock or result in dilution
to existing stockholders.
Delaware law and our certificate of incorporation, as
amended, and our bylaws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders
to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our certificate of incorporation, as amended,
and our bylaws, and the Delaware General Corporation Law, as amended (the “DGCL”), contain provisions that could have
the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and
therefore depress the trading price of our Common Stock. These provisions could also make it difficult for stockholders to take
certain actions, including electing directors who are not nominated by the current members of our board of directors or taking
other corporate actions, including effecting changes in management. Among other things, our certificate of incorporation, as amended,
and our bylaws include provisions regarding:
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the ability
of our board of directors to issue shares of preferred stock, including “blank
check” preferred stock and to determine the price and other terms of those shares,
including preferences and voting rights, without stockholder approval, which could be
used to significantly dilute the ownership of a hostile acquirer;
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the limitation
of the liability of, and the indemnification of, our directors and officers;
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the right
of our board of directors to elect a director to fill a vacancy created by the expansion
of our board of directors or the resignation, death or removal of a director, which prevents
stockholders from being able to fill vacancies on our board of directors;
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a prohibition
on stockholder action by written consent (except as required for holders of future series
of preferred stock), which forces stockholder action to be taken at an annual or special
meeting of stockholders and could delay the ability of stockholders to force consideration
of a stockholder proposal or to take action, including the removal of directors;
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the requirement
that a special meeting of stockholders may be called only by our board of directors,
which could delay the ability of stockholders to force consideration of a proposal or
to take action, including the removal of directors;
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controlling
the procedures for the conduct and scheduling of our board of directors and stockholder
meetings;
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the requirement
for the affirmative vote of holders of at least a majority of the voting power of all
of the voting power of the then outstanding shares of the voting stock, voting as a single
class, to amend, alter, change or repeal any provision of our bylaws and certain provisions
in our certificate of incorporation, as amended,, respectively, which could preclude
stockholders from bringing matters before annual or special meetings of stockholders
and delay changes in our board of directors and also may inhibit the ability of an acquirer
to effect such amendments to facilitate an unsolicited takeover attempt;
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the ability
of our board of directors to amend our bylaws by an affirmative vote of a majority of
our board of directors, which may allow our board of directors to take additional actions
to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our
bylaws to facilitate an unsolicited takeover attempt; and
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advance
notice procedures with which stockholders must comply to nominate candidates to our board
of directors or to propose matters to be acted upon at a stockholders’ meeting,
which could preclude stockholders from bringing matters before annual or special meetings
of stockholders and delay changes in our board of directors and also may discourage or
deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s
own slate of directors or otherwise attempting to obtain control of us.
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These provisions, alone or together, could
delay or prevent hostile takeovers and changes in control or changes in our board of directors or management. In addition, as
a Delaware corporation, we will generally be subject to provisions of Delaware law, including Section 203 of the DGCL.
Any provision of our certificate of incorporation,
as amended,, our bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity
for stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors
are willing to pay for our common stock.
Our certificate of incorporation, as amended, designates
a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us
and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our
directors, officers, or employees.
Our certificate of incorporation, as amended,
provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware,
or if such court does not have subject matter jurisdiction, any other court located in the State of Delaware with subject matter
jurisdiction, will be the sole and exclusive forum for (i) any derivative action or proceeding brought on the Company’s
behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer,
other employee or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action asserting
a claim against the Company or our officers or directors arising pursuant to any provision of the Delaware General Corporate Law
or our certificate of incorporation, as amended, or our bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery
of the State of Delaware, or (iv) any action asserting a claim against the Company or any director or officer of the Company
governed by the internal affairs doctrine of the law of the State of Delaware; provided, that, if and only if the Court of Chancery
of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another
state court sitting in the State of Delaware. Additionally, our certificate of incorporation, as amended, provides that, unless
the Company consents to the selection of an alternative forum, the federal district courts of the United States of America shall,
to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause
of action arising under the Securities Act of 1933, as amended; provided, however, that such provision will not apply to suits
brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which
the federal courts have exclusive jurisdiction.
Any person or entity purchasing or otherwise
acquiring any interest in any of our securities will be deemed to have notice of and consented to these provisions. These exclusive-forum
provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or
our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
If a court were to find these exclusive-forum provisions to be inapplicable or unenforceable in an action, we may incur additional
costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
Risks Related to the Business Combination and Integration
of Businesses
Management’s focus and
resources may be diverted from operational matters and other strategic opportunities as a result of the Business Combination.
The Business Combination may place a significant
burden on our management and other internal resources. The diversion of management’s attention and any difficulties encountered
in the transition process could harm our financial condition, results of operations and prospects. In addition, uncertainty about
the effect of the Business Combination on our systems, employees, customers, partners, and other third parties, including regulators,
may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel for
a period of time after the completion of the Business Combination.
The unaudited pro forma financial
information included elsewhere in this prospectus may not be indicative of what our actual financial position or results of operations
would have been.
The unaudited pro forma financial information
in this prospectus is presented for illustrative purposes only and has been prepared based on a number of assumptions. Accordingly,
such pro forma financial information may not be indicative of our future operating or financial performance and our actual financial
condition and results of operations may vary materially from our pro forma results of operations and balance sheet contained elsewhere
in this prospectus, including as a result of such assumptions not being accurate. Additionally, the final acquisition accounting
adjustments could differ materially from the unaudited pro forma adjustments presented in this prospectus. The unaudited pro forma
condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings
that may be associated with the Business Combination. See “Unaudited Pro Forma Condensed Combined Financial Information.”
USE OF PROCEEDS
All of the shares of Common Stock and Private
Warrants offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their
respective accounts. We will not receive any of the proceeds from these sales, except with respect to amounts received by us upon
exercise of the Public Warrants or the Private Warrants to the extent such Public Warrants or Private Warrants, as applicable,
are exercised with cash.
DIVIDEND POLICY
We have never declared or paid any dividends
on our Common Stock and do not anticipate paying any in the foreseeable future. Any future determination relating to our dividend
policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings,
capital requirements, financial conditions, future prospects, contractual restrictions and covenants and other factors that our
board of directors may deem relevant.
UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
The Company is providing the following
unaudited pro forma combined financial information to aid you in your analysis of the financial aspects of the Business Combination.
The unaudited pro forma combined
balance sheet as of August 31, 2020 gives pro forma effect to the Business Combination as if it had been consummated
as of that date. The unaudited pro forma combined statements of operations for the nine months ended August 31,
2020 and for the year ended February 29, 2020 give pro forma effect to the Business Combination as if it had occurred
as of the earliest period presented. This information should be read together with Reviva’s and Tenzing’s respective
audited and unaudited financial statements and related notes, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and other financial information included elsewhere in this Prospectus.
The unaudited pro forma combined
balance sheet as of August 31, 2020 has been prepared using the following:
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Reviva’s unaudited historical condensed consolidated balance sheet as of September 30,
2020, as included elsewhere in this prospectus; and
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Tenzing’s unaudited historical condensed balance sheet as of August 31, 2020, as
included in this prospectus.
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The unaudited pro forma combined
statement of operations for the nine months ended August 31, 2020 has been prepared using the following:
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Reviva’s unaudited historical condensed consolidated statement of operations for the nine months
ended September 30, 2020, as included elsewhere in this prospectus; and
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Tenzing’s unaudited historical condensed statement of operations for the six months
ended August 31, 2020, as included elsewhere in this prospectus.
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The unaudited pro forma combined
statement of operations for the year ended February 29, 2020 has been prepared using the following:
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Reviva’s audited historical consolidated statement of operations for the year ended
December 31, 2019, as included elsewhere in this prospectus; and
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Tenzing’s audited historical statement of operations for the year ended February 29,
2020, as included elsewhere in this prospectus.
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Description of the Transactions
On July 20, 2020, Tenzing entered
into the Merger Agreement. Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior
to the Closing, Tenzing consummated the Domestication, and (ii) upon the Closing, Merger Sub merged with and into Reviva,
with Reviva continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of Tenzing (after its domestication
to Delaware).
The aggregate merger consideration paid
pursuant to the Merger Agreement to Reviva shareholders was an amount equal to the Merger Consideration, plus the additional contingent
right to receive the Earnout Shares after the Closing, as described below. The Merger Consideration paid to Reviva stockholders
was paid solely by the delivery of new shares of the Company’s common stock, each valued at the Redemption Price.
In addition to the Merger Consideration
set forth above, the Reviva Stockholders also have a contingent right to receive the Earnout Shares after the Closing based on
the stock price performance of the Company’s common stock and the achievement by Reviva of certain clinical trial milestones
during the Earnout Period.
Accounting for the Business Combination
The Business Combination was accounted
for as a reverse merger in accordance with U.S. GAAP. Under this method of accounting, Tenzing is treated as the “acquired”
company for financial reporting purposes. This determination was primarily based on the holders of Reviva having a majority of
the voting power of the post-combination company, Reviva senior management comprising substantially all of the senior management
of the post-combination company, the relative size of Reviva compared to Tenzing, and Reviva operations comprising the ongoing
operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination was treated as the
equivalent of Reviva issuing stock for the net assets of Tenzing, accompanied by a recapitalization. The net assets of Tenzing
are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination
are those of Reviva.
Basis of Pro Forma Presentation
The historical financial information has
been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination,
are factually supportable, and as it relates to the unaudited pro forma combined statement of operations, are expected to
have a continuing impact on the results of the post-combination company. The adjustments presented on the unaudited pro forma
combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding
of the post-combination company upon consummation of the Business Combination.
The unaudited pro forma
combined financial information is for illustrative purposes only. The financial results may have been different had the companies
always been combined. You should not rely on the unaudited pro forma combined financial information as being indicative of
the historical financial position and results that would have been achieved had the companies always been combined or the future
financial position and results that the post-combination company will experience. Reviva and Tenzing have not had any historical
relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities
between the companies.
There is no historical
activity with respect to Merger Sub, and accordingly, no adjustments were required with respect to this entity in the pro forma
combined financial statements.
Included in the shares
outstanding and weighted average shares outstanding as presented in the pro forma combined financial statements are 5,734,621
shares of common stock issued to Reviva stockholders in connection with the Merger Agreement.
As the issuance of the additional 1,000,000
shares of common stock is contingent on the future performance of the trading price of the common stock and the achievement by
Reviva of certain clinical trial milestones, such shares have been classified as a contingent equity arrangement and therefore
have not been recorded in the unaudited pro forma combined financial statements.
PRO FORMA COMBINED BALANCE SHEET
AS OF AUGUST 31, 2020
(UNAUDITED)
|
|
(A)
Reviva
|
|
|
(B)
Tenzing
|
|
|
Pro Forma Adjustments
|
|
|
|
|
Pro Forma Balance
Sheet
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
353,258
|
|
|
$
|
15,539
|
|
|
$
|
234,748
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,755,185
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,105,303
|
)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,168,667
|
)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
522,923
|
|
|
(6)
|
|
$
|
9,607,683
|
|
Prepaid expenses and other current
assets
|
|
|
-
|
|
|
|
22,568
|
|
|
|
-
|
|
|
|
|
|
22,568
|
|
Total Current Assets
|
|
|
353,258
|
|
|
|
38,107
|
|
|
|
9,238,886
|
|
|
|
|
|
9,630,251
|
|
Marketable securities held in Trust Account
|
|
|
-
|
|
|
|
34,439,933
|
|
|
|
315,252
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,755,185
|
)
|
|
(2)
|
|
|
-
|
|
Property and equipment, net
|
|
|
107
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
107
|
|
Deferred cost
|
|
|
1,680,954
|
|
|
|
-
|
|
|
|
(1,680,954
|
)
|
|
(7)
|
|
|
-
|
|
Non-current assets
|
|
|
1,816
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
1,816
|
|
Total Assets
|
|
$
|
2,036,135
|
|
|
$
|
34,478,040
|
|
|
$
|
(26,882,001
|
)
|
|
|
|
$
|
9,632,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
4,631,147
|
|
|
$
|
736,437
|
|
|
$
|
(508,314
|
)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,527,077
|
)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,529,017
|
)
|
|
(7)
|
|
$
|
1,803,176
|
|
Contingent warrant, net
|
|
|
1,226,714
|
|
|
|
-
|
|
|
|
(1,226,714
|
)
|
|
(7)
|
|
|
-
|
|
Convertible promissory notes, net
|
|
|
4,825,087
|
|
|
|
-
|
|
|
|
2,050,000
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,875,087
|
)
|
|
(7)
|
|
|
-
|
|
Total Current Liabilities
|
|
|
10,682,948
|
|
|
|
736,437
|
|
|
|
(9,616,209
|
)
|
|
|
|
|
1,803,176
|
|
Convertible promissory notes - related party
|
|
|
-
|
|
|
|
1,425,000
|
|
|
|
550,000
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,975,000
|
)
|
|
(3)
|
|
|
-
|
|
Deferred underwriting fees
|
|
|
-
|
|
|
|
2,213,750
|
|
|
|
(2,213,750
|
)
|
|
(4)
|
|
|
-
|
|
Total Liabilities
|
|
|
10,682,948
|
|
|
|
4,375,187
|
|
|
|
(13,254,959
|
)
|
|
|
|
|
1,803,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares subject to redemption
|
|
|
-
|
|
|
|
25,102,851
|
|
|
|
(25,102,851
|
)
|
|
(5)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
|
-
|
|
|
|
4,479,766
|
|
|
|
1,975,000
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,113,750
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
934,184
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,609,475
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66,112,175
|
)
|
|
(10)
|
|
|
-
|
|
Preferred stock
|
|
|
29,069,974
|
|
|
|
-
|
|
|
|
(29,069,974
|
)
|
|
(7)
|
|
|
-
|
|
Common stock
|
|
|
643
|
|
|
|
-
|
|
|
|
(643
|
)
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
913
|
|
|
(10)
|
|
|
923
|
|
Additional paid-in capital
|
|
|
19,068,758
|
|
|
|
-
|
|
|
|
(19,068,758
|
)
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,111,262
|
|
|
(10)
|
|
|
66,111,252
|
|
Retained earnings (Accumulated deficit)
|
|
|
(56,786,188
|
)
|
|
|
520,236
|
|
|
|
(1,496,989
|
)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(520,236
|
)
|
|
(7)
|
|
|
(58,283,177
|
)
|
Total Stockholders'
Equity (Deficit)
|
|
|
(8,646,813
|
)
|
|
|
5,000,002
|
|
|
|
11,475,809
|
|
|
|
|
|
7,828,998
|
|
Total Liabilities
and Stockholders’ Equity (Deficit)
|
|
$
|
2,036,135
|
|
|
$
|
34,478,040
|
|
|
$
|
(26,882,001
|
)
|
|
|
|
$
|
9,632,174
|
|
Pro Forma Adjustments to the Unaudited
Combined Balance Sheet
|
(A)
|
Derived from the unaudited condensed consolidated balance sheet of Reviva as of September 30,
2020. See Reviva’s financial statements and the related notes appearing elsewhere in this prospectus.
|
|
(B)
|
Derived from the unaudited condensed balance sheet of Tenzing as of August 31, 2020.
See Tenzing’s financial statements and the related notes appearing elsewhere in this prospectus.
|
|
(1)
|
Reflects the additional funding from Sponsor of $315,252 received to extend the time by which
the Company had to consummate a Business Combination to December 28, 2020 and working capital loans in the amount of
$234,748.
|
|
(2)
|
Reflects the release of cash from marketable securities held in the trust account.
|
|
(3)
|
Reflects the conversion of promissory notes in the aggregate amount of $1,975,000 due to the
Sponsor into 197,500 Private Placement Units at $10.00 per unit.
|
|
(4)
|
Reflects the payment of fees and expenses related to the Business Combination, including $508,314
of accounts payable and accrued expenses directly attributable to the Business Combination, the deferred underwriting fee
of $2,213,750 and legal, financial advisory, accounting and other professional fees of $1,496,989. The deferred underwriting
fee of $2,213,750 was partially paid in cash in the amount of $100,000, with the balance settled through the issuance of 300,000
shares of common stock valued at $2,113,750. The direct, incremental costs of the Business Combination related to the legal,
financial advisory, accounting and other professional fees of approximately $1,496,989 is reflected as an adjustment to accumulated
deficit and is not shown as an adjustment to the statement of operations since it is a nonrecurring charge resulting directly
from the Business Combination.
|
|
(5)
|
Reflects the cancellation of 2,221,128 shares of Common Stock for shareholders who elected
cash conversion for payment of $24,168,667 with the remaining $934,184 transferred to permanent equity.
|
|
(6)
|
Reflects the issuance of convertible notes in the amount of $2,050,000 in connection with
the Business Combination, for which such proceeds were used for working capital purposes and the settlement of previously
recorded accrued expenses.
|
|
(7)
|
Reflects the recapitalization of Tenzing through (a) the contribution of all the share
capital in Reviva to Tenzing in the amount of $48,139,375, (b) the conversion of convertible promissory notes into common
stock in the amount of $6,875,087, (c) the settlement of the contingent warrant liability into equity in the amount of
$1,226,714, (d) the conversion of previously recorded accrued expenses into common stock in the amount of $1,529,017,
(e) the recording of deferred costs directly attributable to the Business Combination to equity in the amount of $1,680,954
(f) the issuance of 5,734,621 newly issued shares of common stock in connection with the Business Combination and (g) the
elimination of the historical retained earnings of Tenzing, the legal acquiree, in the amount of $520,236.
|
|
(8)
|
In connection with the Backstop Agreements, the Company issued 41,263 shares of common stock
to the Backstop Investors.
|
|
(9)
|
In connection with the Non-Redemption Agreement, the Company issued 55,050 shares of common
stock to the Shareholder.
|
|
(10)
|
Reflects the conversion of ordinary shares into shares of common stock upon the re-domestication
of Tenzing from the British Virgin Islands to the State of Delaware.
|
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED AUGUST 31, 2020
(UNAUDITED)
|
|
(A)
Reviva
|
|
|
(B)
Tenzing
|
|
|
Pro Forma Adjustments
|
|
|
|
|
Pro
Forma
Income
Statement
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
295,150
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
$
|
295,150
|
|
General and administrative
|
|
|
1,612,803
|
|
|
|
1,184,338
|
|
|
|
(1,042,433
|
)
|
|
(1)
|
|
|
1,754,708
|
|
Operating loss
|
|
|
(1,907,953
|
)
|
|
|
(1,184,338
|
)
|
|
|
1,042,433
|
|
|
|
|
|
(2,049,858
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
25,004
|
|
|
|
368,814
|
|
|
|
(368,814
|
)
|
|
(2)
|
|
|
25,004
|
|
Unrealized gain on marketable securities
|
|
|
-
|
|
|
|
12,075
|
|
|
|
(12,075
|
)
|
|
(2)
|
|
|
-
|
|
Interest expense
|
|
|
(375,187
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
(375,187
|
)
|
Loss before income taxes
|
|
|
(2,258,136
|
)
|
|
|
(803,449
|
)
|
|
|
661,544
|
|
|
|
|
|
(2,400,041
|
)
|
Provision for income taxes
|
|
|
1,347
|
|
|
|
-
|
|
|
|
-
|
|
|
(3)
|
|
|
1,347
|
|
Net loss
|
|
$
|
(2,259,483
|
)
|
|
$
|
(803,449
|
)
|
|
$
|
661,544
|
|
|
|
|
$
|
(2,401,388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
|
|
|
|
2,723,761
|
|
|
|
6,507,976
|
|
|
(4)
|
|
|
9,231,737
|
|
Basic and diluted net loss per
share
|
|
|
|
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
$
|
(0.26
|
)
|
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 29, 2020
(UNAUDITED)
|
|
(C)
Reviva
|
|
|
(D)
Tenzing
|
|
|
Pro Forma Adjustments
|
|
|
|
|
Pro
Forma
Income
Statement
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
195,744
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
$
|
195,744
|
|
General and administrative
|
|
|
181,116
|
|
|
|
724,740
|
|
|
|
-
|
|
|
|
|
|
905,856
|
|
Operating loss
|
|
|
(376,860
|
)
|
|
|
(724,740
|
)
|
|
|
-
|
|
|
|
|
|
(1,101,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
201
|
|
|
|
1,323,935
|
|
|
|
(1,323,935
|
)
|
|
(2)
|
|
|
201
|
|
Unrealized gain on marketable securities
|
|
|
-
|
|
|
|
18,708
|
|
|
|
18,708
|
)
|
|
(2)
|
|
|
-
|
|
Interest expense
|
|
|
(469,373
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
(469,373
|
)
|
Loss before income taxes
|
|
|
(846,032
|
)
|
|
|
617,903
|
|
|
|
(1,342,643
|
)
|
|
|
|
|
(1,570,772
|
)
|
Provision for income taxes
|
|
|
800
|
|
|
|
-
|
|
|
|
-
|
|
|
(3)
|
|
|
800
|
|
Net income (loss)
|
|
$
|
(846,832
|
)
|
|
$
|
617,903
|
|
|
$
|
(1,342,643
|
)
|
|
|
|
$
|
(1,571,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
|
|
|
|
2,610,315
|
|
|
|
6,621,422
|
|
|
(4)
|
|
|
9,231,737
|
|
Basic and diluted net loss per
share
|
|
|
|
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
$
|
(0.17
|
)
|
Pro Forma Adjustments to the Unaudited
Combined Statements of Operations
|
(A)
|
Derived from the unaudited condensed consolidated statement of operations of Reviva for the
nine months ended September 30, 2020. See Reviva’s financial statements and the related notes appearing elsewhere
in this prospectus.
|
|
(B)
|
Derived from the unaudited condensed statement of operations of Tenzing for the six months
ended August 31, 2020. See Tenzing’s financial statements and the related notes appearing elsewhere in this prospectus.
|
|
(C)
|
Derived from the audited consolidated statement of operations of Reviva for the year ended
December 31, 2019. See Reviva’s financial statements and the related notes appearing elsewhere in this prospectus.
|
|
(D)
|
Derived from the audited statement of operations of Tenzing for the year ended February 29,
2020. See Tenzing’s financial statements and the related notes appearing elsewhere in this prospectus.
|
|
(1)
|
Represents an adjustment to eliminate direct, incremental costs of the Business Combination
which are reflected in the historical financial statements of Reviva and Tenzing in the amount of $0 and $1,042,433, for the
nine months ended September 30, 2020 and August 31, 2020, respectively. There were no such amounts recorded
for the year ended December 31, 2019 for Reviva and February 29, 2020 for Tenzing.
|
|
(2)
|
Represents an adjustment to eliminate interest income and unrealized gain on marketable securities
held in the trust account as of the beginning of the period.
|
|
(3)
|
To record normalized blended statutory income tax benefit rate of 21% for pro forma financial
presentation purposes resulting in the recognition of an income tax benefit, which however, has been offset by a full valuation
allowance as the combined company expects to incur continuing losses.
|
|
(4)
|
The calculation of weighted average shares outstanding for basic and diluted net loss per
share assumes that Tenzing’s initial public offering occurred as of the earliest period presented. In addition, as the
Business Combination is being reflected as if it had occurred on this date, the calculation of weighted average shares outstanding
for basic and diluted net loss per share assumes that the shares have been outstanding for the entire period presented. This
calculation is retroactively adjusted to eliminate the number of shares redeemed in the Business Combination for the entire
period.
|
The following presents the calculation
of basic and diluted weighted average ordinary shares outstanding. The computation of diluted loss per share excludes the effect
of warrants to purchase 6,881,313 shares of common stock, because the inclusion of these securities would be anti-dilutive.
|
|
|
Combined
|
|
Weighted average shares calculation, basic and diluted
|
|
|
|
|
Tenzing public shares
|
|
|
963,240
|
|
Tenzing Sponsor shares
|
|
|
2,137,563
|
|
Tenzing shares issued to underwriter
|
|
|
300,000
|
|
Tenzing shares issued to Backstop Investor
|
|
|
41,263
|
|
Tenzing shares issued to Shareholder
|
|
|
55,050
|
|
Tenzing shares issued in the Business Combination
|
|
|
5,734,621
|
|
Weighted average shares outstanding
|
|
|
9,231,737
|
|
Percent of shares owned by Reviva
|
|
|
62.1
|
%
|
Percent of shares owned by underwriter
|
|
|
3.3
|
%
|
Percent of shares owned by Backstop Investor
|
|
|
0.4
|
%
|
Percent of shares owned by Shareholder
|
|
|
0.6
|
%
|
Percent of shares owned by Tenzing
|
|
|
33.6
|
%
|
COMPARATIVE SHARE INFORMATION
The following table sets forth the historical
comparative share information for Reviva and Tenzing on a stand-alone basis and the unaudited pro forma combined per share
information after giving effect to the Business Combination.
The historical information should be read
in conjunction with the information contained in the historical financial statements of Tenzing and Reviva and included in this
prospectus. The unaudited pro forma condensed combined per share information is derived from, and should be read in conjunction
with, the information contained in the section of this prospectus entitled “Unaudited Pro Forma Condensed Combined Financial
Information.”
The unaudited pro forma combined
share information below does not purport to represent what the actual results of operations or the earnings per share would been
had the companies been combined during the periods presented, nor to project the Company’s results of operations or earnings
per share for any future date or period. The unaudited pro forma combined shareholders’ equity per share information
below does not purport to represent what the value of Tenzing and Reviva would have been had the companies been combined during
the periods presented.
​
|
|
Reviva
|
|
|
Tenzing
|
|
|
Unaudited
Combined
Pro
Forma
|
|
As of and for the Nine Months
Ended September 30, 2020 (Reviva) and as of and for the Nine Months Ended August 31, 2020 (Tenzing)
|
|
|
​
|
|
|
|
​
|
|
|
|
​
|
|
Net loss
|
|
$
|
(2,259,483
|
)
|
|
$
|
(803,449
|
)
|
|
$
|
(2,401,388
|
)
|
Stockholders’ (deficit) equity
|
|
|
(8,646,813
|
)
|
|
|
5,000,002
|
|
|
|
7,828,998
|
|
Weighted average shares outstanding – basic
and diluted
|
|
|
​
|
|
|
|
2,723,761
|
|
|
|
9,231,737
|
|
Basic and diluted net loss per share
|
|
|
​
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.26
|
)
|
Shareholders’ equity per share – basic
and diluted
|
|
|
​
|
|
|
$
|
1.84
|
|
|
$
|
0.85
|
|
​
|
|
Reviva
|
|
|
Tenzing
|
|
|
Unaudited
Combined
Pro
Forma
|
|
Year Ended December 31, 2019
(Reviva) and Year Ended February 29, 2020 (Tenzing)
|
|
|
​
|
|
|
|
​
|
|
|
|
​
|
|
Net (loss) income
|
|
$
|
(846,832
|
)
|
|
$
|
617,903
|
|
|
$
|
(1,571,572
|
)
|
Weighted average shares outstanding – basic
and diluted
|
|
|
​
|
|
|
|
2,610,315
|
|
|
|
9,231,737
|
|
Basic and diluted net (loss) income per share
|
|
|
​
|
|
|
$
|
(0.21
|
)
|
|
$
|
(0.17
|
)
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
As a result of the
completion of the Business Combination, the financial statements of Old Reviva are now the financial statements of the Company.
Prior to the Business Combination, the Company had no operating assets but, upon consummation of the Business Combination, the
business and operating assets of Old Reviva acquired by the Company became the sole business and operating assets of the Company.
Accordingly, the financial statements of Old Reviva and their respective subsidiaries as they existed prior to the Business Combination
and reflecting the sole business and operating assets of the Company going forward, are now the financial statements of the Company.
Thus, the following discussion and analysis should be read in conjunction with the consolidated financial statements and related
notes of Old Reviva set forth under the heading “Index to Financial Statements” elsewhere in this prospectus and the
unaudited pro forma condensed combined financial information, under the heading “Unaudited Pro Forma Condensed Combined
Financial Information.”
All statements other
than statements of historical fact included in this section regarding our financial position, business strategy and the plans
and objectives of management for future operations, are forward- looking statements. When used in this section, words such as
“anticipate,” “believe,” “estimate,” “expect,” “intend” and similar
expressions, as they relate to our management, identify forward-looking statements. Such forward-looking statements are based
on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results
could differ materially from those contemplated by the forward- looking statements as a result of certain factors detailed herein.
All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in
their entirety by this paragraph.
Some of the information
contained in this discussion and analysis or set forth elsewhere, including information with respect to our plans and strategy
for our business include forward-looking statements that involve risks, uncertainties and assumptions. You should read the sections
titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors ” for a discussion
of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis.
Company Overview
We are a clinical-stage biopharmaceutical
company that discovers, develops and seeks to commercialize next-generation therapeutics for diseases representing significant
unmet medical needs and burden to society, patients, and their families. Our current pipeline focuses on the central nervous system,
respiratory, and metabolic diseases. We use a chemical genomics driven technology platform and proprietary chemistry to develop
new medicines. Our pipeline currently has two drug candidates, RP5063 (Brilaroxazine) and RP1208. Both are new chemical entities
discovered in-house. We have been granted composition of matter patents for both RP5063 and R1208 in the United States (U.S.),
Europe, and several other countries.
Our lead drug candidate, RP5063, is ready
for continued clinical development for multiple neuropsychiatric indications. These include schizophrenia, bipolar disorder (BD),
major depressive disorder (MDD), behavioral and psychotic symptoms, dementia or Alzheimer’s disease (BPSD), Parkinson’s
disease psychosis (PDP), and attention deficit hyperactivity disorder (ADHD). Furthermore, RP5063 is also ready for clinical development
for two respiratory indications — pulmonary arterial hypertension (PAH) and idiopathic pulmonary fibrosis
(IPF). The U.S. Food and Drug Administration (FDA) has granted Orphan Drug designation to RP5063 for the treatment of PAH in November 2016
and IPF in April 2018.
Our primary focus is to complete the clinical
development of RP5063 for the treatment of acute and maintenance schizophrenia.
Subject to the receipt of additional financing,
we may also continue the clinical development of RP5063 for the treatment of BD, MDD, BPSD, PDP, ADHD, PAH and IPF. Moreover,
subject to the receipt of additional financing, we may also advance the development of our second drug candidate, RP1208, for
the treatment of depression and obesity.
Business Combination and Domestication
On December 14, 2020, our predecessor
company, formerly known as Tenzing Acquisition Corp., a British Virgin Islands exempted company (“Tenzing”), and Reviva
Pharmaceuticals, Inc., a Delaware corporation (together with its consolidated subsidiaries, “Old Reviva”), consummated
the transactions contemplated by the Agreement and Plan of Merger, dated as of July 20, 2020 (as amended, the “Merger
Agreement”), by and among Tenzing, Tenzing Merger Subsidiary Inc., a Delaware corporation and wholly-owned subsidiary of
Tenzing (“Merger Sub”), Old Reviva, and the other parties thereto. Pursuant to the Merger Agreement, Merger Sub merged
with and into Old Reviva, with Old Reviva surviving as our wholly owned subsidiary. We refer to this transaction as the Business
Combination. In connection with and one day prior to the completion of the Business Combination, Tenzing re-domiciled out of the
British Virgin Islands and continued as a company incorporated in the State of Delaware, and changed its name to Reviva Pharmaceuticals
Holdings, Inc. Prior to the completion of the Business Combination, the Company was a shell company. Following the Business
Combination, the business of Old Reviva is the business of the Company.
Old Reviva was incorporated in the state
of Delaware on May 1, 2006 and its subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated on December 23,
2014. Tenzing was formed pursuant to the laws of the British Virgin Islands on March 20, 2018.
The Business Combination will be accounted
for as a reverse merger in accordance with U.S. GAAP. Under this method of accounting, Tenzing will be treated as the “acquired”
company for financial reporting purposes. This determination was primarily based on the holders of Old Reviva expecting to have
a majority of the voting power of the post-combination company, Old Reviva senior management comprising substantially all of the
senior management of the post-combination company, the relative size of Old Reviva compared to Tenzing, and Old Reviva operations
comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination
will be treated as the equivalent of Old Reviva issuing stock for the net assets of Tenzing, accompanied by a recapitalization.
The net assets of Tenzing will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations
prior to the Business Combination will be those of Old Reviva.
Financial Overview
We are a clinical-stage
biopharmaceutical company and have not generated any revenues from the sale of products. We have never been profitable, and our
accumulated deficit as of September 30, 2020 was $56.8 million. Our net loss for the nine months ended September 30,
2020 was $2.26 million. We expect to incur significant expenses and increased operating losses for the next several years. We
expect our expenses to increase in connection with our ongoing activities to research, develop and commercialize our product candidates.
Furthermore, we expect to incur additional costs associated with operating as a public company. We will need to generate significant
revenues to achieve profitability, and we may never do so.
We expect our expenses
will increase substantially in connection with our ongoing activities, as we:
|
¨
|
invest significantly to further research and develop, through clinical trials for RP5063 (Brilaroxazine)
and pre-clinical research for RP1208, and seek regulatory approval for our product candidates RP5063 (Brilaroxazine) and RP1208;
|
|
¨
|
identify and develop additional product candidates;
|
|
¨
|
hire additional clinical, scientific and management personnel;
|
|
¨
|
seek regulatory and marketing approvals for any product candidates that we may develop;
|
|
¨
|
ultimately establish a sales, marketing and distribution infrastructure to commercialize any
drugs for which we may obtain marketing approval;
|
|
¨
|
maintain, expand and protect our intellectual property portfolio;
|
|
¨
|
acquire or in-license other drugs and technologies; and
|
|
¨
|
add operational, financial and management information systems and personnel, including personnel
to support our product candidate development, any future commercialization efforts and our transition to a public company.
|
We have
funded our operations to date primarily from the issuance and sale of our equity and convertible equity securities. As of September 30,
2020, we had cash and cash equivalents of approximately $353,000. To fund our current operating plans, we will need to raise additional
capital. The expected capital available upon completion of the Business Combination, together with our existing cash and cash
equivalents, will not be sufficient for us to complete development of our product candidates and, if applicable, to prepare for
commercializing any product candidate that may receive approval. Accordingly, we will continue to require substantial additional
capital beyond the expected capital available upon the completion of the Business Combination to continue our clinical development
and potential commercialization activities; however, we believe that the capital available upon completion of the Business Combination,
together with our existing cash and cash equivalents, will be sufficient to fund our current operating plans through at least
the first 12 months following the completion of the Business Combination. The amount and timing of our future funding requirements
will depend on many factors, including the pace and results of our clinical development efforts. We will seek to fund our operations
through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate
additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed
would have a negative impact on our financial condition and our ability to pursue our business strategy. We cannot assure you
that we will ever be profitable or generate positive cash flow from operating activities.
Research and Development Expenses
We focus our resources
on research and development activities, including the conduct of preclinical and clinical studies and product development and
expenses such costs as they are incurred. We have not historically tracked or recorded research and development expenses on a
project-by-project basis, primarily because we use our employee and infrastructure resources across multiple research and development
projects, and it is not practical for us to allocate such costs on a project-by-project basis. our research and development expenses
primarily consist of employee-related expenses, including deferred salaries, salaries, benefits and taxes for personnel in research
and development functions.
The largest recurring
component of our total operating expenses has historically been research and development activities. we expect our research and
development expenses will increase for the next several years as we advance our development programs, pursues regulatory approval
of our product candidates in the U.S. and other jurisdictions and prepare for potential commercialization, which would require
a significant investment in costs related to contract manufacturing, inventory buildup and sales and marketing activities.
Our primary product candidates
and their current status is as follows:
Drug Candidate
|
Indication
|
Status
|
RP5063
|
Schizophrenia
|
Phase 2
complete. Intending to initiate a pivotal Phase 3 study following the completion of the Business Combination.
|
RP5063
|
Bipolar
Disorder
|
Phase 1
complete**
|
RP5063
|
Depression-MDD
|
Phase 1
complete**
|
RP5063
|
Alzheimer’s
(AD-Psychosis/Behavior)
|
Phase 1
complete**
|
RP5063
|
Parkinson’s
|
Phase 1
complete**
|
RP5063
|
ADHD/ADD
|
Phase 1
complete**
|
RP5063
|
PAH
|
Phase 1
complete**
|
RP5063
|
IPF
|
Phase 1
complete**
|
RP1208
|
Depression
|
Completed
pre-clinical development studies, including in vitro receptor binding studies, animal efficacy studies, and PK studies. Compound
ready for IND enabling studies.
|
RP1208
|
Obesity
|
Completed
pre-clinical development studies, including in vitro receptor binding studies and PK studies. Compound ready for animal efficacy
studies.
|
** We completed the phase 1 clinical
study for RP5063 (Brilaroxazine) prior starting the phase 2 study in schizophrenia and schizoaffective disorder. We collected
safety data for RP5063 (Brilaroxazine) in over 200 patients, including healthy subjects and patients with stable schizophrenia,
acute schizophrenia and schizoaffective disorder. Generally, no separate phase 1 study is required for conducting a phase 2 study
for an additional indication, provided the treatment doses in the phase 2 study for an additional indication are within the range
of doses tested in the previously completed phase 1 study.
The successful development of our platform
and product candidates is highly uncertain, and we may never succeed in achieving marketing approval for our product candidates
RP5063 (Brilaroxazine), RP1208, or any future product candidates. At this time, we cannot reasonably estimate the nature, timing,
or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash,
if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing
therapeutics, including the uncertainty of:
|
¨
|
the scope, rate of progress, expense, and results of clinical trials;
|
|
¨
|
the scope, rate of progress, and expense of process development and manufacturing;
|
|
¨
|
preclinical and other research activities; and
|
|
¨
|
the timing of regulatory approvals.
|
General Administrative Expenses
General and administrative
expenses primarily consist of payroll and related costs for employees in executive, business development, finance, and administrative
functions. Other significant general and administrative expenses include professional fees for accounting and legal services.
We expect general and
administrative expenses to increase as we expand infrastructure and continue the development of our clinical programs. Other increases
could potentially include increased costs for director and officer liability insurance, costs related to the hiring of additional
personnel, and increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs
to comply with corporate governance, internal controls, and similar requirements applicable to public companies.
Interest Expense
As of September 30,
2020, interest expense consisted primarily of interest associated with our promissory notes.
Interest Income
Interest income consists
of interest earned on our cash & cash equivalents.
Critical Accounting Policies and Use
of Estimates
Our unaudited condensed
consolidated financial statements for the three and nine months ended September 30, 2020 and 2019 and the related notes,
included in this prospectus under the heading “Index to Financial Statements” are prepared in accordance with
U.S. GAAP.
This information should
be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2019 and 2018,
included in this prospectus under the heading “Index to Financial Statements”. Our significant accounting policies
are described in Note 2 to our audited consolidated financial statements for the years ended December 31, 2019 and 2018,
included in this prospectus under the heading “Index to Financial Statements.” There have been no significant
changes to these policies during the nine months ended September 30, 2020.
Results of Operations
Comparison of the three-month and nine-month
periods ended September 30, 2020 and 2019:
The following table summarizes our results
of operation for the three and nine months ended September 30, 2020 and 2019:
|
|
Three-Months
ended
September 30
|
|
|
Nine-Months
ended
September 30
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
955
|
|
|
$
|
-
|
|
|
$
|
295,150
|
|
|
$
|
53,377
|
|
General and administrative
|
|
|
511,336
|
|
|
|
36,804
|
|
|
|
1,612,803
|
|
|
|
281,769
|
|
Loss from operations
|
|
|
(512,291
|
)
|
|
|
(36,804
|
)
|
|
|
(1,907,953
|
)
|
|
|
(335,146
|
)
|
Total other expense
|
|
|
(146,250
|
)
|
|
|
(147,397
|
)
|
|
|
(350,183
|
)
|
|
|
(436,701
|
)
|
Net loss
|
|
$
|
(659,088
|
)
|
|
$
|
(184,201
|
)
|
|
$
|
(2,259,483
|
)
|
|
$
|
(772,647
|
)
|
Research & Development expenses
We incurred approximately
$1,000 and $0 in research and development expenses for the three-months ended September 30, 2020 and 2019, respectively.
We incurred approximately $295,000 and $53,000 in research and development expenses for the nine-months ended September 30,
2020 and 2019, respectively. The primary increase for both periods was due to higher salary expenditures. Our research and development
expenses are expected to increase for the foreseeable future as we continues to advance our platform and product candidates.
General Administrative Expenses
For the three-months
ended September 30, 2020 and 2019, we incurred approximately $511,000 and $37,000 in general and administrative expenses.
For the nine-months ended September 30, 2020 and 2019 we incurred approximately $1,613,000 and $282,000 in general and administrative
expenses. The increase in both periods were due to higher salary expenditure, 2020 warrant expenses, higher professional service
fees for legal, audit and accounting activities.
Interest Expense
Interest expense for
the three-months ended September 30, 2020 and 2019 was approximately $146,000 and $147,000, respectively. Interest expense
for the nine-months ended September 30, 2020 and 2019 was approximately $375,000 and $437,000, respectively. The reduction
in interest expense for the nine-month period was due to the investor note reclassification in the fourth quarter of 2019 to accrued
liability pursuant to a legal judgement.
Interest & Other Income
Interest income consists
of interest earned on our cash & cash equivalents. Other income of $25,000 recognized in the nine-month periods ending
on September 30, 2020, relates to a non-refundable transaction payment made by Tenzing.
Net Loss
Net loss for the three-months
ended September 30, 2020 and 2019 was approximately $659,000 and $184,000, respectively. The primary driver of the increased
net loss was higher general & administrative expenses due to higher salary expenditures, 2020 warrant expense and professional
fees. The net loss for the nine-months ended September 30, 2020 and 2019 was approximately $2,260,000 and $773,000, respectively.
The increased net loss for the nine-months ended September 30, 2020 was due to higher salary expenditure, 2020 warrants expense
and higher professional fees.
Liquidity and Capital Resources
As of September 30,
2020, we had cash and cash equivalents of approximately $353,000. We expect to continue to incur significant expenses and operating
losses for the foreseeable future as we continue our research and preclinical and clinical development of our product candidates;
expand the scope of our current studies for our product candidates; initiate additional preclinical, clinical or other studies
for our product candidates; change or add additional manufacturers or suppliers; seek regulatory and marketing approvals for any
of our product candidates that successfully complete clinical studies; seek to identify, evaluate and validate additional product
candidates; acquire or in-license other product candidates and technologies; maintain, protect and expand our intellectual property
portfolio; attract and retain skilled personnel; and experience any delays or encounter issues with any of the above.
Until such time as we
can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of equity or debt
financings and collaboration agreements. We do not currently have any committed external sources of capital.
To the extent that we
raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted,
and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing
stockholders.
If we raise additional
funds through collaboration agreements in the future, we may have to relinquish valuable rights to our technologies, future revenue
streams or product candidates or grant licenses on terms that may not be favorable to us.
If we are unable to raise
additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product
development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.
The table below sets
forth selected cash flow data for the periods presented:
|
|
Nine-Months Ended
|
|
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
Net cash from:
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(1,131,035
|
)
|
|
$
|
(214,103
|
)
|
Investing activities
|
|
|
-
|
|
|
|
-
|
|
Financing activities
|
|
$
|
1,484,100
|
|
|
$
|
100,000
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
353,065
|
|
|
$
|
(114,103
|
)
|
Stock Options
Shares outstanding
under our stock option plan are as follows as of September 30, 2020.
Shares Outstanding
|
|
|
Weighted average
remaining contractual
life (years)
|
|
|
Shares Exercisable
|
|
|
Weighted Average
Exercise Price Per Share
|
|
|
320,000
|
|
|
|
2.10
|
|
|
|
320,000
|
|
|
$
|
1.81
|
|
|
110,000
|
|
|
|
4.18
|
|
|
|
110,000
|
|
|
$
|
4.77
|
|
|
430,000
|
|
|
|
2.68
|
|
|
|
430,000
|
|
|
$
|
2.57
|
|
Off-Balance Sheet Arrangements
We did not have during
the periods presented, and do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
BUSINESS
Company Overview
We are a clinical-stage biopharmaceutical
company that discovers, develops and seeks to commercialize next-generation therapeutics for diseases representing significant
unmet medical needs and burden to society, patients, and their families. Our current pipeline focuses on the central nervous system,
respiratory, and metabolic diseases. We use a chemical genomics driven technology platform and proprietary chemistry to develop
new medicines. Our pipeline currently has two drug candidates, RP5063 (Brilaroxazine) and RP1208. Both are new chemical entities
discovered in-house. We have been granted composition of matter patents for both RP5063 and R1208 in the United States (U.S.),
Europe, and several other countries.
Our lead drug candidate, RP5063, is ready
for continued clinical development for multiple neuropsychiatric indications. These include schizophrenia, bipolar disorder (BD),
major depressive disorder (MDD), behavioral and psychotic symptoms, dementia or Alzheimer’s disease (BPSD), Parkinson’s
disease psychosis (PDP), and attention deficit hyperactivity disorder (ADHD). Furthermore, RP5063 is also ready for clinical development
for two respiratory indications — pulmonary arterial hypertension (PAH) and idiopathic pulmonary fibrosis
(IPF). The U.S. Food and Drug Administration (FDA) has granted Orphan Drug designation to RP5063 for the treatment of PAH in November 2016
and IPF in April 2018.
Our primary focus is to complete the clinical
development of RP5063 for the treatment of acute and maintenance schizophrenia.
Subject to the receipt of additional financing,
we may also continue the clinical development of RP5063 for the treatment of BD, MDD, BPSD, PDP, ADHD, PAH and IPF. Moreover,
subject to the receipt of additional financing, we may also advance the development of our second drug candidate, RP1208, for
the treatment of depression and obesity.
The development status of our product pipeline
is presented below:
Business Combination and Domestication
On December 14, 2020, our predecessor
company, formerly known as Tenzing Acquisition Corp., a British Virgin Islands exempted company (“Tenzing”), and Reviva
Pharmaceuticals, Inc., a Delaware corporation (together with its consolidated subsidiaries, “Old Reviva”), consummated
the transactions contemplated by the Agreement and Plan of Merger, dated as of July 20, 2020 (as amended, the “Merger
Agreement”), by and among Tenzing, Tenzing Merger Subsidiary Inc., a Delaware corporation and wholly-owned subsidiary of
Tenzing (“Merger Sub”), Old Reviva, and the other parties thereto. Pursuant to the Merger Agreement, Merger Sub merged
with and into Old Reviva, with Old Reviva surviving as our wholly owned subsidiary. We refer to this transaction as the Business
Combination. In connection with and one day prior to the completion of the Business Combination, Tenzing re-domiciled out of the
British Virgin Islands and continued as a company incorporated in the State of Delaware, and changed its name to Reviva Pharmaceuticals
Holdings, Inc. Prior to the completion of the Business Combination, the Company was a shell company. Following the Business
Combination, the business of Old Reviva is the business of the Company.
Old Reviva was incorporated in the state
of Delaware on May 1, 2006 and its subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated on December 23,
2014. Tenzing was formed pursuant to the laws of the British Virgin Islands on March 20, 2018.
About RP5063
Our RP5063 drug candidate is a novel, multimodal
serotonin (5HT), dopamine (DA), and nicotinic receptors modulator. Our compound displays a high affinity for 5HT2A/2B//7 and
DA2/3/4 receptors and a moderate affinity for nicotinic (nACh-α4β2) receptors (Rajagopal et al., 2017). The binding
affinity of RP5063 to dopamine and serotonin sub-receptors in radioligand binding assays is the following (Ki, nM): dopamine D2S (0.28),
D2L (0.45), D3 (3.7), and D4.4 (6.0); Serotonin 5HT1A (1.5), 5-HT2A (2.5), 5-HT2B (0.19), 5-HT2C (39),
5-HT6 (51), and 5-HT7 (2.7). RP5063 displayed moderate binding affinity to nicotine- nAChR, α4β2 (Ki
= 36.3 nM).
Radioactive and non-radioactive studies
in rat and dog show that the gastrointestinal tract completely absorbs orally administered RP5063-related material, with acceptable
bioavailability in rat (22%) and dog (85%) animal models. Exposure to RP5063 increased in a dose-dependent manner. Once absorbed,
RP5063 rapidly and extensively distributes into various tissues. Noteworthy is the brain with a brain:plasma ratio of ~3.5, despite
high plasma protein binding (>99%) characteristics. Rat and dog hepatocytes rapidly metabolize RP5063; however, human hepatocytes
metabolize this compound slower. This finding suggests that this compound will show a low clearance in humans. We believe the
risk of RP5063 inducing or inhibiting cytochrome P450 (CYP) at anticipated pharmacologically relevant concentrations in humans
is low. Hepatic metabolism via the cytochrome P450s is the primary route of elimination with CYP3A4/5, undertaking most of the
metabolism (69%), a small contribution from CYP2D6 (17%) and minor contributions by other cytochromes including extra-hepatic
CYP2J2. Two metabolites in human plasma and urine display no pharmacological activity. We believe there is a low risk of inhibition
and induction of human cytochromes by RP5063 at expected plasma concentrations clinically.
A full battery of regulatory compliant
toxicology and safety pharmacology studies are complete. We believe the results from these tests support the chronic administration
of RP5063 in clinical trials. We believe the completed safety pharmacology and toxicology studies report several significant safety
findings. These include (1) RP5063 is neither genotoxic nor clastogenic, (2) does not affect the function of cardiovascular
(Q.T. or blood pressure) or respiratory systems, and (3) is not phototoxic in the 3T3 in vitro assay.
DEVELOPMENT OF RP5063 FOR NEUROPSYCHIATRIC DISEASES
RP5063 Development for Schizophrenia
Schizophrenia is a complex, chronic, and
debilitating psychiatric syndrome. As presented in 2020, the Schizophrenia and Related Disorders Alliance of America (“SARDAA”)
estimates schizophrenia can be found in approximately 1.1% of the world’s population, regardless of racial, ethnic or economic
background, with approximately 3.5 million people diagnosed in the U.S. It is a complex disease involving a mix of positive
and negative symptoms, along with mood disorder and cognitive impairment. While the pathology of schizophrenia is not yet fully
understood, scientists implicate the dysregulation or disruption of both dopaminergic and serotonergic functions in the development
of this condition. The dysregulation of serotonergic function in the brain also contributes to schizoaffective disorders, such
as bipolar, major depression, and mania. Thus, the optimal treatment for schizophrenia may not rely solely on dopamine blockade.
Hypothetically, it may also include the stabilization of both the dopaminergic and serotonergic systems in the brain.
Current pharmacologic treatment involves
antipsychotic therapy. There are two types of antipsychotics, typical and atypical agents. Tolerability issues (e.g., neuroleptic
side effects with typical agents; metabolic and cardiovascular problems with atypical medications) limit compliance and the effectiveness
of both classes of medications. Hence, compliance is poor. We estimate, pursuant to a review of multiple peer reviewed articles
published between 1998 and 2015, discontinuation rates of 30 – 50% in the short-term management of acute patients
and 42 – 74% in the long-term treatment. Also, both classes of antipsychotics fail to provide a broad spectrum
of efficacy across the various symptom classes. Thus, we believe the optimal treatment of schizophrenia requires new compounds
with broader efficacy and better safety profiles.
All approved antipsychotics in the last
two decades block dopamine (D) and serotonin (5HT) receptors, particularly D2 and 5HT2A receptors. RP5063 possesses
a potent binding and functional activity for both D2 and 5HT2A receptors. We believe these targets are critical for
treating schizophrenia besides having potent activities for D4, 5HT1A, 5HT2B and 5HT7 receptors implicated as targets
for comorbid conditions associated with schizophrenia such as negative symptoms, mood symptoms (e.g., depression, anxiety) and
cognitive impairment. RP5063 also exerts a moderate activity for nicotinic (nAChR, α4β2) receptor, implicated as a
target for comorbid conditions in schizophrenia depression and cognitive impairment.
Preclinical studies define the activity,
pharmacokinetic, and safety profiles of RP5063 in animals. Rodent models of pharmacologic-induced behaviors associated with schizophrenia
have demonstrated that RP5063 limits both psychosis and cognitive symptoms.
We have completed a clinical Phase 1a
study in healthy subjects, a Phase 1b study in stable schizophrenia patients, and a Phase 2 study in acute schizophrenia
and schizoaffective patients. We are currently focusing our efforts on initiating a pivotal Phase 3 study in acute schizophrenia..
RP5063 Phase 1 Clinical Study in Stable Schizophrenia
Phase 1a and 1b studies have defined
the initial clinical experience with RP5063. The first-in-human study phase 1a involved a single-dose ascending study of 24 individuals.
Initially, it examined patient cohorts receiving individual doses of 10 and 15 mg fasting, followed by a food-effect cohort (food
versus fasting, crossover), with a 15 mg dose (Figure 1a). The multiple-dose study Phase 1b study examined multiple doses
of 10, 20, 50, and 100 mg given with food over ten days in 32 randomized patients (Figure 1b). Both studies characterized the
initial safety and pharmacokinetic profiles in normal healthy volunteers (Caucasian or Japanese men, 20 – 45 years)
and stable patients with schizophrenia (18 – 65 years, chronic, all types with Total Positive and Negative
Syndrome Scale (PANSS) score < 90 points). RP5063 displayed a dose-dependent Cmax at 4 to 6 h, a linear
dose proportionality for both Cmax and AUC, and a half-life between 40 and 71 h. In the single-dose study, food slightly
increased the extent of drug absorption. In the multiple-dose study, drug concentrations approached steady-state after 120 h (5 days)
of daily dosing. Pooled data in the single-dose study indicate that the pharmacokinetic profile appeared to be comparable between
Caucasians and Japanese. Study data have suggested a straightforward pharmacokinetic profile for RP5063 that we believe supports
once-daily dosing as an orally administered agent for Phase 2 and Phase 3 evaluation.
Figure 1. RP5063 Phase 1 Clinical Studies, Pharmacokinetics
in Healthy Subjects and Stable Schizophrenia Patients
As the multiple-dose study used patients
with stable schizophrenia, the data from this study provided an early assessment of the pharmacodynamics behavior and activity
of RP5063 in this population. Notable were the secondary analysis to explore the Positive and Negative Syndrome Scale (PANSS)
observations to evaluate the effect of RP5063 on positive symptoms and Trails A and B tests to assess the effect on cognition.
Pooled analysis of patients’ PANSS scores ≥50 at baseline showed a statistically significant reduction in positive symptoms
subscale scores (Figure 2a). Furthermore, study analysis identified favorable trends in reducing PANSS total scores from baseline
and in the General Psychopathology Score from baseline vs. placebo. Similarly, a pooled analysis of Trials A and B scores from
baseline to day 16 showed favorable trends in the improvement of cognition in the RP5063 treatment groups vs. placebo.
Figure 2. RP5063 Efficacy in the Phase 1B Clinical
Study in Stable Schizophrenia Patients
The phase 1b study in stable schizophrenia
patients found that RP5063 appears to be generally well-tolerated at doses ranging from 10 – 100 mg administered
over ten days. Most adverse events were mild and occurred at the higher doses 50mg and 100 mg. Notable was the lack of clinically
significant changes in glucose or prolactin levels, lipid profiles, and weight or ECG findings. A pharmacodynamic analysis of
the multiple-dose phase 1b study data provided early insight regarding the clinical activity of RP5063 relevant to psychosis,
along with mood and cognitive comorbidities, in patients with stable schizophrenia. Although we believe the phase 1b study safety
and efficacy findings are encouraging, it is important to recognize its power limitations due to the relatively small sample size.
RP5063 Phase 2 Clinical Study in Acute Schizophrenia
The Phase 2 clinical study involved
patients with acute exacerbations of schizophrenia or schizoaffective disorder in evaluating the efficacy, safety, tolerability,
and pharmacokinetics of RP5063 versus placebo. This evaluation utilized a double-blind, randomized, placebo-controlled 4-week
study. Aripiprazole inclusion in the study was purely for the assay sensitivity analysis, and not as a comparator. Investigators
randomized 234 eligible subjects into one of five treatment groups (15, 30, 50mg RP5063, aripiprazole 15mg, or placebo; 3:3:3:1:2,
respectively). Recruitment of male and female subjects included 22 sites in the US, India, Philippines, Malaysia, and Moldova.
Statistical plans calculated sample sizes
based on expected differences between the target dose of RP5063 and placebo 8.3 points (standard deviation of 11.3 points, effect
size = 0.735) in the primary efficacy analysis (mean change from baseline in PANSS Total Score). This plan projected a sample
size of 180 completing subjects (i.e., 45 subjects in each RP5063 dose group, this cohort included 15 subjects in the aripiprazole
group and 30 subjects in the placebo group) to achieve at least an 85% power at an alpha level of 0.05% (two-sided). This level
employed a t-test statistic for unequal group sizes, without controlling the alpha error in the pair-wise comparisons of the treatment
groups with placebo. The statistical plan did not power the aripiprazole arm for statistical comparisons with other arms, as evaluation
of this compound only assessed the study sensitivity; the study randomized 234 subjects to ensure that 180 would complete.
We conducted this study in compliance with
the International Conference on Harmonization (ICH) Good Clinical Practice (GCP) Consolidated Guidelines. The FDA approved the
protocol, investigational review boards/independent ethics committees, and all participating subjects provided informed consent.
The primary efficacy endpoint was the change
from baseline to Day 28 or End of Treatment (EOT) on PANSS Total Score. The secondary efficacy endpoints were the change from
baseline to Day 4, Day 8, Day 15, Day 22 and Day 28 on the following items: PANSS Total, PANSS Positive, and Negative subscales;
20% improvement in PANSS Total Score; Improvement by at least 1 point on the Clinical Global Impression (CGI-S); cognition by
trail-making Tests A and B and the Digit Symbol Substitution Test (DSST). Safety variables included adverse events (A.E.), physical
examinations, vital signs, body weight, laboratory measurements (hematology, serum chemistry including prolactin, urinalysis,
and pregnancy tests), and electrocardiograms (ECGs). The measurement of extrapyramidal symptoms (EPS) utilized the Simpson Angus
Scale (SAS), Abnormal Involuntary Movement Scale (AIMS), and the Barnes Akathisia Rating Scale (BARS). The Columbia-Suicide Severity
Rating Scale (C-SSRS) assessed and classified reported suicidal behavior and depression by the Calgary Depression Scale for Schizophrenia
(CDSS). Investigators collected blood samples throughout the dosing period and for 220 h beyond using a sparse sampling routine.
Analysis of these samples defined the population pharmacokinetics (PK) and correlated pharmacokinetic and pharmacodynamic (PK/PD)
effects.
RP5063 demonstrated a sustained decrease
in the total PANSS scores from Day 1 to 28 with statistically significant improvement within the group for all doses of RP5063
(p=<0.001) and aripiprazole (p=0.013), as compared with placebo (Figure 3).
Figure 3. RP5063 Efficacy in the Phase 2 Clinical Study
in Acute Schizophrenia patients, Total PANSS Scores, ITT Population (4 weeks, N = 234)
P = statistical
significance within the group
For the primary efficacy endpoint, the
change in PANSS Total Score from baseline to Day 28/EOT demonstrated a statistically significant treatment difference from placebo
for the RP5063 15-mg and 50-mg arms (p = 0.0212 and p = 0.0167), with a statistically significant difference versus placebo seen
as early as the Day 15 assessment (mixed-effect model with repeated measures (MMRM) analyses). The 30-mg arm did not reach statistical
significance (p=0.2733), although it was numerically superior. Investigators attributed the lack of significance of the RP5063
30 mg dose to a larger than normal early discontinuations (within 2-7 days) for reasons that were not related to the medication.
Aripiprazole only showed efficacy in PANSS negative scores. PANSS subscales scores showed greater RP5063 improvement versus placebo
in the PANSS Negative and Prosocial symptoms than the Positive symptoms (Figure 4). Both the RP5063 15-mg and 50-mg treatment
groups displayed statistical significance from placebo as early as Day 15 for the PANSS Negative and Prosocial scales. The 50-mg
treatment group showed statistical significance at Day 28 for PANSS Positive. All RP5063 groups were numerically superior to placebo.
Figure 4. RP5063 Phase 2 Clinical Efficacy Data for
Acute Schizophrenia and Major Comorbid Symptoms
At Day 28/EOT, the frequency of a 30% improvement
in total PANSS from baseline to EOT was 41%, 26%, and 39% for the respective RP5063 groups, versus 22% for the placebo cohort.
RP5063 subjects improved ≥2 points on the CGI-S by Day 28/EOT at twice the frequency of those on placebo. RP5063 15-mg, 30-mg,
and 50-mg groups resulted in 46%, 37%, and 40% improvements, respectively, versus placebo showing a 19% change. Further, relative
to >1 point changes, the 15-mg, 30-mg, and 50-mg RP5063 groups produced 73%, 58%, and 72% improvements, respectively, in the
CGI-S, as compared to placebo showing 57% change. The CGI-S changes from baseline to Day 28/EOT were statistically superior to
placebo for RP5063 15 mg and 50 mg, while the change for 30 mg was numerically superior. Overall, RP5063 (15, 30, and 50mg) treated
patients showed between 30-46% remission of acute schizophrenia symptoms, as compared with 22% in the placebo group (Figure 5a).
As expected in a short study in patients with acute schizophrenia, there were no statistically significant differences in change
from baseline for cognition scores. However, there were numerical improvements in RP5063 groups in the DSST, Trails A and Trails
B scores.
Figure 5. RP5063 Phase 2 Study, Remission of Acute
Schizophrenia and Discontinuation due to Side Effects
(A) Remission of Schizophrenia Symptoms
|
|
(B) Discontinuation due to Side Effects
|
​
|
|
|
|
​
|
Patients tolerated doses of RP5063 up to
50 mg with no side effect related discontinuation in the 15 mg and 30 mg dose groups. Only <2% of patients discontinued the
treatment in the 50 mg dose group compared to 10% of patients in the aripiprazole 15 mg group (Figure 5b). Treatment discontinuation
for any reason with 15 mg, 30 mg, and 50 mg doses of RP5063; the 15 mg dose of aripiprazole; and placebo were 14%, 25%, 12%, 35%,
and 26%, respectively. Investigators attribute the higher discontinuation in the 30 mg group of RP5063 to a larger than the normal
number of early discontinued patients (~10%) due to non-treatment reasons. Such early discontinuation is not uncommon in acute
schizophrenia. The discontinuation rates with aripiprazole (35% for any reason, and 10% due to side effects) are consistent with
findings in published clinical studies. Common treatment-emergent adverse events (TEAEs) were EPS (3%, 5%, and 9%) and akathisia
(2%, 5%, and 10%), and as expected there seemed to be a dose-related increase in TEAEs in the 15, 30, and 50 mg RP5063 treatment
groups, respectively (Figure 6).
There were no clinically relevant changes
from baseline in weight or body mass index (BMI); no subject had weight gain reported as a TEAE. This observation offered a clinically
relevant finding because weight gain has been a common side effect of second-generation antipsychotics and identified as a key
risk factor associated with increased morbidity and mortality in patients with schizophrenia with a major impact on compliance.
There were no clinically meaningful trends
in laboratory parameters (including glucose, cholesterol, triglycerides or thyroid hormone T4), ECG, or vital signs. The study
observed small mean decreases from baseline in prolactin levels in all treatment groups at Day 28. There were no reports of sexual
side effects (Figure 6).
Figure 6. RP5063 Side Effect Profile in the Phase 2
Clinical Study in Acute Schizophrenia (4 weeks, N=234)
The analysis of RP5063 pharmacokinetic-pharmacodynamics
relationship (PK-PD) reflected a linear, dose-proportional increase in exposure with dose and with no evidence of time dependency.
Noteworthy was that of RP5063 drug exposure, reflected by Cmax and AUC. These parameters increased in direct proportion to dose
irrespective of the population studied (e.g., healthy volunteers, patients with stable schizophrenia, patients with acute exacerbations
of schizophrenia or schizoaffective disorder). In Phase 1 multi-dose study, drug levels approached steady-state after 120
h (5 days) of daily dosing, with doses between 10 and 100 mg with maximum steady-state concentrations of 70.1 and 696 ng/mL
and AUCss of 1361 and 12526 ng*h/mL at the 10 and 100 mg dose, respectively.
We believe these findings offer important
clinical benefits. We believe the lack of excessive drug accumulation should translate to a potential clinical benefit of not
needing for the titration of therapy. Such might be the case with other atypical antipsychotics (e.g., aripiprazole). We believe
the long half-life (~40-50 h) should translate easily to a once-daily dosing schedule. We believe this schedule is of clinical
importance for the schizophrenic patient population since medication adherence, and missing doses with shorter half-life drugs
can be a clinical issue leading to destabilization of clinical control. Such can lead to poor long-term functional outcomes in
the treatment of schizophrenia. With RP5063, if a patient misses a single dose or two, we believe sufficient plasma concentrations
remain for clinical control. Furthermore, the pharmacokinetic profile of RP5063 is independent of gender, age, ethnicity, glomerular
filtration rate, smoking, concomitant medications, geographic location of the clinical site, and type of schizophrenia (acute
or stable) patients treated. These observations mean that clinicians may not need dose adjustments based on the patient population
(Figure 7b).
Investigators performed the PK-PD modeling
correlation with actual data using the observed and predicted PANSS demonstrating high predictability with relatively low variability.
As shown in the graph below, both the regression line and line of identity are very close to each other. We believe this relationship
indicates that the model is providing a very good fit (Figure 7a). The regression line is the line when one plots and regresses
the observed data against the data predicted from the population model. The line of identity is when there is a perfect fit of
the observed and predicted data (i.e., when each of the observed data is exactly equal to those of the corresponding predicted
data, so the slope of the line is in exact unity). The dose-response curve showed that the total PANSS decrease was approaching
its maximum response after a dose of approximately 15 mg. Thus, we believe RP5063 doses of 15 to 50 mg daily appear to be an effective
clinical range of dosing (Figure 7b).
Figure 7. RP5063 Phase 2 Clinical Study Pharmacokinetics
and Pharmacodynamics Correlation
RP5063 Phase 3 Studies in Schizophrenia
The phase 1 and phase 2 clinical experience
in multiple populations (healthy volunteers, stable schizophrenia, and acute schizophrenia and schizoaffective disorder patients)
reflect the promise of RP5063 as an addition to the treatment armamentarium of this disease. Both healthy volunteers and patients
tolerated RP5063 well in both Phase 1 and 2 studies. It did not produce any cardiometabolic, cardiovascular, prolactin, or
neurologic effects, which would complicate current treatments. Investigators observed the early activity in Phase 1 after
10-days of dosing in stable patients and we believe that results from the Phase 2 trial may support the NDA for RP5063, as
RP5063 demonstrated significance versus placebo in Total PANSS Score at Day 28 as compared to baseline. The pharmacokinetics proved
to be highly predictable and consistent between Phase 1 and 2 studies, participant type (healthy volunteer, patient), and
racial characteristics (Caucasian, Black, Indian, and Japanese). Analyses showed substantive and relatively rapid oral absorption,
linear, dose-proportional increases in Cmax and AUC, lack of undue accumulation, and a relatively long terminal half-life over
40 hours. We believe these findings translate to a straightforward once-daily dosing regimen with no need for titration or adjustments
for the type of patient. These characteristics set the stage for further evaluation in Phase 3.
As part of the Phase 3 development
plan, we had a successful end of Phase 2 (EOP2) meeting with the FDA in 2013. In the EOP2 meeting, we presented the Phase 2
schizophrenia study results, discussed the Phase 3 development plans, and sought guidance from the FDA concerning a “Superior
Safety Label Claim” to RP5063 for the treatment of schizophrenia. We received a favorable response from the FDA, as the
agency agreed to consider granting RP5063 a “Superior Safety Label Claim” for the treatment of schizophrenia if there
is a positive outcome of a pivotal Phase 3 study in schizophrenia. Further to support the “Superior Safety Label Claim”
for RP5063, the FDA agreed to waive the requirement to conduct a drug interaction clinical study with CYP2D6 inhibitors in Phase 3
development. We have accordingly planned Phase 3 development of RP5063 for acute and maintenance schizophrenia. We have completed
the required regulatory compliant non-clinical studies. These include safety pharmacology studies, toxicology studies, and chemistry,
manufacturing, and controls (CMC) development for initiating pivotal Phase 3 studies. Furthermore, the FDA has reviewed the
results of these non-clinical studies and the phase 3 protocols. We are currently focusing our efforts on initiating a pivotal
Phase 3 study in acute schizophrenia.
RP5063 Clinical Development for Bipolar Disorder (BD) and
Major Depressive Disorder (MDD)
Like schizophrenia, BD and MDD are major
neuropsychiatric diseases. These neuropsychiatric diseases exhibit distinct symptoms yet share varying degrees of overlapping
conditions that include psychosis, depression, and cognitive impairments. BD, a medical illness with substantial morbidity and
mortality, involves episodic, recurrent mania or hypomania, and major depression. An article published in 2018 in the journal
Therapeutic Advances in Psychopharmacology estimated that the global prevalence of bipolar spectrum disorders is approximately
2.4%, with approximately 0.6% for bipolar I and approximately 0.4% for bipolar II. The same journal article indicates prevalence
of bipolar I in the U.S. has been found to be 1%, slightly higher than in other countries. Similarly, MDD is a common, chronic,
recurrent, and debilitating psychiatric condition, leading to significant impairments in personal functional capacities. The National
Institute of Mental Health (NIMH) estimated the prevalence of MDD among U.S. adults aged 18 or older at 17.3 million in 2017.
NIMH also indicated the prevalence was higher among females (8.7%) compared to males (5.3%).
The clinical community also uses the antipsychotic
drugs (e.g., olanzapine, risperidone, quetiapine, and aripiprazole) for the treatment of BD and/or MDD. All these antipsychotics
display pharmacological activities for dopamine (D) and serotonin (5HT) receptors. The majority are selective for D2 and
5HT2A receptors, and may also be active for one or more of D4, 5HT1A, 5HT2B, and 5HT7 receptors. RP5063 exhibits potent
activity for D2 and 5HT2A receptors, and each of D4, 5HT1A, 5HT2B, and 5HT7 receptors are implicated as pharmacological
targets for depression and cognitive impairment conditions.
Subject to the receipt of additional financing,
we may proceed with phase 2 studies for RP5063 in BD and MDD.
RP5063 Clinical Development for Psychosis and Behavioral
Symptoms in Alzheimer’s Disease (BPSD), Parkinson’s Disease Psychosis (PDP) and Attention Deficit Hyperactivity Disorder
(ADHD)
Patients with Alzheimer’s disease
(AD) manifest not only progressive memory impairment, cognitive deficits, and functional alterations but also a variety of neuropsychiatric
symptoms (agitation, aggression, hallucinations, delusions). An article published in 2000 in the journal Archives of General Psychiatry
(now JAMA Psychiatry) states these symptoms ultimately affect up to 75% of individuals with dementia and, once present, sustain,
or recur. Similarly, patients with Parkinson’s disease also suffer from neuropsychiatric symptoms. There are very limited
pharmacological treatment options for managing psychotic and behavioral symptoms in Alzheimer’s and Parkinson’s diseases.
Without an approved drug, clinicians often manage the psychosis and behavioral symptoms in Alzheimer’s disease with antipsychotics
(e.g., quetiapine and olanzapine). Primavanserin (Nuplazid), a serotonin 5HT2A inverse agonist, is the only FDA approved
treatment for the treatment of Parkinson’s disease psychosis. However, clinicians do use some antipsychotics (e.g., quetiapine,
and olanzapine) as an off-label treatment.
ADHD is a common developmental disorder
in children and often continues into adulthood. The prevalence of ADHD in children is 5-12% worldwide, according to an article
published in 2016 in the Journal of Advanced Pharmaceutical Technology & Research. ADHD has a high rate of comorbid psychiatric
disorders.
Subject to the receipt of additional financing,
we may also continue the clinical development of RP5063 for the treatment of BPSD, PDP, and ADHD.
DEVELOPMENT OF RP5063 FOR RESPIRATORY DISEASES
Development of RP5063 for Pulmonary Arterial Hypertension
(PAH)
PAH is a progressive, debilitating condition
characterized by pulmonary vascular resistance leading to right ventricular failure and death. According to an article published
in 2016 in the journal The Lancet Respiratory Medicine, the global prevalence of PAH is estimated at 6.6 – 26.0
cases per million with 1.1 – 7.6 incidences per million adults per year. The same article indicates PAH is
frequently diagnosed in older patients, particularly those 65 years and older. As presented in 2020, the National Organization
for Rare Disorders (“NORD”) estimates PAH occurs 3 – 5 times more frequently in females than in
males, and it tends to affect females between the ages of 30 and 60. Pursuant to a study published in 2012, as reported by the
journal Circulation: Cardiovascular Quality and Outcomes, post-diagnosis of PAH, survival rates are approximately 1 year in 87%,
3 years in 75%, and 5 years in 65% of patients, respectively.
PAH occurs when the pulmonary arteries
have narrowed, thickened, or become blocked due to the constricting and remodeling of the pulmonary vasculature. Endothelial dysfunction
occurs early in the disease pathogenesis. Such pathology leads to the proliferation of the endothelium and smooth muscle tissue,
the remodeling of pulmonary arteriole walls, the impaired production of vasodilators, and the overexpression of vasoconstrictors.
Remodeling can involve a variety of smooth muscle (e.g., hyperplasia, medial hypertrophy, perivascular fibrosis) and other extrinsic
pathologic changes (e.g., microthrombosis, inflammatory cell infiltration, angioproliferative plexiform lesions).
Current treatment involves influencing
smooth muscle tone: 1 — decreasing the increased expression of phosphodiesterase 5 (PDE-5) inhibition (e.g.,
sildenafil) and increasing nitric oxide; 2 — antagonizing endothelin (e.g., bosentan); and 3 — providing
exogenous prostacyclins (e.g., epoprostenol, iloprost, treprostinil) to address the reduced production of prostaglandin I2. Such
treatments can reduce symptoms, improve the performance of activities of daily living, delay disease progression, and improve
survival somewhat (e.g., epoprostenol). However, they fail to stem the ongoing cytoproliferative processes that significantly
modify the pulmonary vascular structure and lead to progressive disease and/or the need for lung transplantation.
Serotonin (5-hydroxytryptamine; 5HT) plays
a role in both the proliferative and functional components of the pathogenesis of PAH, which involve a variety of contributing
factors, including inflammatory cytokines and chemokines. Pulmonary arteries express several 5HT receptors, including the 5HT2A,
5HT2B, and 5HT7. The presence of 5HT in the pulmonary circulation activates vascular smooth muscle (VSM), 5HT2A and 5HT2B receptors,
and SERT to cause constriction, the proliferation of pulmonary vascular smooth muscle cells, and fibroblast proliferation. Coupled
with stimulating of the transforming growth factor β pathway, the 5HT pathway facilitates cell proliferation and vascular
remodeling. These changes lead to the thickening of the medial layer. These accompany the narrowing and the remodeling of the
pulmonary artery. Together these define the characteristics of PAH.
RP5063 is a novel candidate for the management
of PAH. As a potent antagonist of the 5-HT receptor, it possesses a high binding affinity for several relevant targets associated
with PAH. These include 5HT2A (2.5 nM), 5HT2B (0.19 nM), and 5HT7 (2.7 nM), as well as a moderate affinity for
SERT (107 nM) in preclinical models.
RP5063 Preclinical Development for PAH
In November 2016, the U.S. Food and
Drug Administration granted RP5063 Orphan Designation Status for clinical investigation in PAH. The agency based its decision
on encouraging preclinical results with RP5063 in PAH, including disease-modifying antiproliferative effects. Two studies using
the monocrotaline (MCT) and Sugen hypoxia (Su-Hx) models evaluated the effectiveness of RP5063 as monotherapy. Further, an additional
study with the MCT model assessed this compound’s effectiveness as an adjunct with several other standard treatments for
PAH.
The monotherapy MCT-induced model involved
a 28-day treatment on single-agent RP5063. On Day 0, adult male Wistar–Kyoto rats, randomized into five groups of 10
animals, received a single intravenous 60-mg/kg MCT dose. Subsequently, on Days 0 to 27, the rats were gavaged twice daily (BID)
with vehicle (MCT+Veh; 5% glucose solution), RP5063 (1, 3, or 10 mg/kg), or sildenafil (50 mg/kg). On Day 28, during terminal
surgery, investigators obtained blood samples, hemodynamic readings, and harvested tissues.
In this study, RP5063 produced significant
functional and structural changes, as compared with those in the MCT+Veh group. Functionally, RP5063 displayed healthier pulmonary
hemodynamic parameters, translating to reduced right ventricle (R.V.) hypertrophy and suggesting greater pulmonary vascular elasticity.
This activity led to improved respiratory resistance and hemoglobin oxygen saturation, as compared with PAH animals without treatment.
Structurally, RP5063 appeared to prevent the remodeling of the smooth muscle cells in the pulmonary vasculature. The 10 mg dose
prevented vascular intimal thickening (endothelial and smooth muscle hyperplasia, and the multiplication of vascular smooth muscle
cells) in the smaller vessels, mostly non-muscular in healthy animals. In exploring the cytokine response, the study found that
all doses of RP5063 produced lower levels of tumor necrosis factor (TNF) α and interleukin (IL) β, and facilitated
a significant reduction of IL-6 (p<0.05). These observations suggest an antiproliferative capacity.
In the SuHx-induced PAH study, investigators
gave RP5063 treatment for 21 days. On Day 0, 4 groups of adult male Wistar–Kyoto rats received a subcutaneous injection
of Sugen 5416 (20 mg/kg). Investigators kept them at FiO2 of 10% (Days 0 – 21) and 21% (Days 22 – 35).
During the treatment period starting at Day 14, rats were gavaged twice daily (BID) with vehicle (SuHx+Veh; 5% glucose solution),
RP5063 (10 or 20 mg/kg; RP-10 and RP-20, respectively), or sildenafil 50 mg) on Days 14 to 35. On Day 35, during terminal surgery,
investigators obtained blood samples, hemodynamic readings, and harvested tissues.
Both doses of RP5063 and sildenafil produced
a significant effect on functional and structural parameters, as compared with the induced group treated with vehicle (SuHx+Veh).
Functionally, RP5063 improved pulmonary hemodynamics and respiratory function, resulting in higher oxygen saturation, as compared
to non-treated, Sugen-induced animals. Structurally, RP5063 decreased small-vessel wall thickness and the percentage of muscular
vessels. Most significantly, RP5063 limited arterial obliteration and prevented the formation of plexiform lesions. These observations
suggest that the compound might exert antiproliferative effects and, potentially, a disease-modifying capacity. Concerning the
cytokine effect, both RP5063 dose groups reflect lower levels of leukotriene-B4 at Days 21, 28, and 35.
Considering the initial observations with
RP5063 as a single-agent treatment in both the MCT and SuHx models in rats, we undertook an additional MCT study with this compound
to evaluate its role as adjunctive therapy to standard PAH treatments (Bhat et al., 2018). In the same MCT model as previously
described, investigators examined RP5063 as monotherapy and as an adjunct to current standards of PAH care (bosentan, sildenafil,
treprostinil).
As a single agent, RP5063 produced functional
and structural effects seen in the MCT+Veh group and was consistent with those seen in the initial monotherapy MCT study. Furthermore,
these effects were like (and in some cases, better than) the standard treatments. As an adjunct to all treatments, RP5063 significantly
(p<0.05) lowered mean and systolic pulmonary artery pressures and R.V. systolic pressure, and improved oxygen saturation, as
compared with the untreated, induced animals. The combination of RP5063 and sildenafil displayed the most consistent and robust
effects. The most notable was on pulmonary hemodynamics, respiratory parameters, and histopathologic changes.
Figure 8. Effect of RP5063 Treatment in MCT (8A) and Sugen-Hypoxia
(8B) Induced PAH in Rats
RP5063 Clinical Development for PAH
In November 2016,
the FDA granted Orphan Drug Designation to RP5063 for the treatment of PAH. We had a successful pre-IND meeting with the FDA.
In the pre-IND meeting, we presented RP5063 preclinical development data including efficacy results for PAH in rodent models,
the data of regulatory compliant non-clinical studies (e.g., safety pharmacology studies, toxicology studies, and Chemistry, Manufacturing,
and Controls (CMC) development), and the data of clinical phase 1 studies. We discussed the phase 2 clinical development plan
with FDA and sought the agency’s guidance for our clinical development plan for a “Disease Modifying Label Claim”
based on the positive specific clinical outcome. We received a favorable response from the FDA regarding the “Disease Modifying
Label Claim”.
Subject to the receipt of additional financing,
we may also develop the clinical protocols and proceed with a Phase 2 clinical trial for RP5063 in PAH.
Development of RP5063 for Idiopathic Pulmonary Fibrosis
(IPF)
IPF is a chronic, progressive, and debilitating
lung disease. In 2019, Medscape reported the worldwide prevalence of IPF is estimated at 20 cases per 100,000 persons for males
and 13 cases per 100,000 persons for females. Medscape also reported that in the U.S., the prevalence among individuals aged 50 years
or older ranges from 27.9 to 63 cases per 100,000. Medscape also reported, for patients suffering from IPF, the estimated mean
survival is 2-5 years from the time of diagnosis and that mortality rates are estimated at 64.3 deaths per million in men
and 58.4 deaths per million in women.
IPF involves chronic inflammation and progressive
fibrosis of the alveoli. This pathology leads to destroyed lung architecture, reduced lung capacity, impaired oxygenation, and
a decline in lung function.
Treatment involves early referral for lung
transplantation, palliative care, and clinical trials. Limitations exist with various interventions, including commonly used agents
(e.g., corticosteroids and immunosuppressants), and current guidelines do not support them. Two Food and Drug Administration approved
treatments — Nintedanib (Ofev), and Pirfenidone (Esbriet) — are inadequate in improving
functional decline and disease progression (Esbriet product Insert, 2018; Ofev Product Insert, 2018). Hence, we believe survival
continues as an unmet need.
Various studies have implicated 5HT in
the pathophysiology of IPF. It exerts a vasoactive effect on pulmonary arteries and stimulates lung myofibroblast actions. Pulmonary
5HT appears to mediate effects through 5-HT2A/2B/7 receptors.
RP5063 may be a new candidate for the management
of IPF. As a potent antagonist of the 5HT receptor, it possesses a high binding affinity for several relevant targets associated
with IPF. These include 5HT2A (2.5 nM), 5HT2B (0.19 nM), and 5HT7 (2.7 nM), as well as a moderate affinity for
SERT (107 nM) in preclinical models.
RP5063 Preclinical Development for IPF
A bleomycin (BLM)-induced model involved
a 21-day protocol using 34 Sprague Dawley rats divided into four groups- Group 1 (no induction, vehicle control), Group 2 (induction,
vehicle control), Group 3 (induction, RP5063, 15 mg/kg, intervention at Day 1), and Group 4 (induction, RP5063, 15 mg/kg, intervention
at Day 10). On Day 21, during terminal surgery, investigators obtained blood samples, hemodynamic readings, harvested tissues,
and bronchoalveolar lavage fluid (BALF) samples. The histological analysis to evaluate effects on fibrosis involved several tests.
Tissue stained with Masson’s Trichrome and visualized using a scanner to determine the percentage of the fibrotic tissue,
reflective of excessive collagen disposition in the lung. A colorimetric assay assessed the content of hydroxyproline, an amino
acid for fibrillar collagens, from the right lung tissue sample. Finally, cytokine analysis of the BALF samples evaluated the
effects on Macrophage inflammatory protein 1 (MIP1), Monocyte chemoattractant protein 1 (MCP1), Interleukin (IL)-6, Interferon
gamma-induced protein 10 (IP10) and RANTES levels.
Compared with the bleomycin-induced vehicle
group, the use of RP5063 at Day 0 and Day 10 sustained animal survival at 90.5% and 89.5%, respectively (P<0.05). Furthermore,
animals maintained their weight with both RP5063 interventions, as compared with the vehicle group (P<0.01). Animals in both
RP5063 groups restored cardiac output, with the Day 0 group displaying a significant effect as compared to those treated with
vehicle (P<0.01). The Day 0 RP5063 also normalized pulse pressure.
RP5063 treatment influenced multiple functional,
histological, and cytokine parameters reflective of pulmonary fibrosis. Animals in the RP5063 Day 0 group displayed a significant
reduction in respiratory resistance (P<0.05). Those in Day 10 group showed improvement (P=0.10). Both RP5063 interventions
produced a significant diminution in the concentration of hydroxyproline (P<0.05, Day 0; P<0.01, Day 10). Lung weights,
which increased in the vehicle group suggesting the presence of edema, were significantly lower in the RP5063 Day 0 group (P<0.05).
From the BALF samples, total cell count (inflammation) was lower in both RP5063 groups (P<0.05), as well as total protein content
(edema) in the RP5063 Day 0 group (P<0.05). Ashcroft Score from stained lung tissue reflected a significant reduction in the
lung parenchymal fibrotic changes in the Day 0 group (P<0.001). Concerning the percent of fibrosis areas measured with
Masson’s trichrome staining, the Day 0 RP5063 group significantly reduced these changes (P<0.001), as compared with the
vehicle group (Figure 9B). Furthermore, the Day 0 group showed significantly improved blood oxygen levels (P<0.05). Both groups
induced a diminution of blood lactate levels (P<0.01, Day 0; P<0.05, Day 5). Finally, both RP5063 groups reduced proinflammatory
and fibrotic cytokines, with significant effects on MCP-1 (P<0.05, Day 0), IP10 (P<0.01, both RP5063 interventions),
and RANTES (P<0.01, both RP5063 interventions).
Figure 9. Effect of RP5063 as a Monotherapy and Co-administered
with Standard of Care Nintedanib and Pirfenidone in Bleomycin (BLM) Induced IPF in Rats
A follow-up preclinical study utilized
the same BLM-induced model and methods. This study evaluated the effect of RP5063 (15 mg/kg twice daily) in combination with either
nintedanib or pirfenidone (both dosed at 100 mg/kg once daily). Both nintedanib and pirfenidone are the current standard of care
for patients with IPF. Single-agent treatment with nintedanib and pirfenidone (both dosed at 100 mg/kg once daily) served as controls.
Treatment started on Day 7 following BLM-induction and continued until Day 20. Terminal surgery occurred on Day 21, in which harvesting
of lung tissue and collecting of BALF occurred. Similar histological investigations evaluated the effects of treatment on mitigating
the development of fibrosis via BLM-induction.
Figure 10. Effect of RP5063 Treatment in Bleomycin (BLM)
Induced IPF in Rats
RP5063, as an adjunct to nintedanib and
pirfenidone, significantly augmented the functional and histological effects of nintedanib and pirfenidone, two standard treatments
for IPF, as evidenced by reduction in hydroxyproline level (Fig 9A) and fibrosis (Fig 9B) in the lungs. The RP5063 treatment demonstrated
a reduction in respiratory resistance (P<0.05), an increase in blood oxygenation P<0.05), and an improvement in survival
rate (95%), as compared with vehicle control (62%) (Figure 10). Furthermore, RP5063, as an adjunct, mitigated lung fibrosis, and
collagen disposition, the hallmarks of pulmonary fibrosis, as evidenced by the significantly (P<0.001) reduced concentration
of hydroxyproline in the lungs produced by the treatment combinations (Figure 9A), as compared with vehicle control.
RP5063 Clinical Development for IPF
In April 2018, the FDA has granted
Orphan Drug Designation to RP5063 for the treatment of IPF. We had a successful pre-IND meeting with the FDA. In the pre-IND meeting,
we presented RP5063 preclinical development data including efficacy results for IPF in rodent models, the data of regulatory compliant
non-clinical studies (e.g., safety pharmacology studies, toxicology studies, and Chemistry, Manufacturing, and Controls (CMC)
development), and the data of clinical phase 1 studies. We have discussed the phase 2 clinical development plan with FDA and sought
the agency’s guidance for our clinical development plan for a “Disease Modifying Label Claim” based on the positive
specific clinical outcome. We have received a favorable response from the FDA regarding the “Disease Modifying Label Claim.”
Subject to the receipt of additional financing,
we may also develop the clinical protocols and proceed with a Phase 2 clinical trial for RP5063 in IPF.
DEVELOPMENT OF RP1208 FOR DEPRESSION AND OBESITY
About RP1208
Our RP1208 drug candidate, a new chemical
entity (NCE), is a novel triple reuptake inhibitor (TRI) which we believe is ready to be in IND enabling studies for depression
and ready to be in animal efficacy studies for obesity, following the receipt of adequate additional financing. We possess a granted
composition of matter patent for RP1208 in the USA, Europe, and several other countries.
Depression is a debilitating illness characterized
by symptoms like anhedonia, depressed mood leading to suicidal thoughts, impaired cognitive functions, slowing of speech, and
other actions. The NIMH estimated the prevalence of MDD among U.S. adults aged 18 or older at 17.3 million in 2017. NIMH
also indicated the prevalence was higher among females (8.7%) compared to males (5.3%). Although a plethora of antidepressants
exists in the market, an article published in 2015 in the journal Future Medicinal Chemistry indicates clinicians believe that
approximately 30 – 40% of patients do not respond to the therapy, thus reflecting an unmet need to develop
novel therapeutics to combat depression. The persistence of anhedonia originating from a depressed dopaminergic activity is one
of the most treatment-resistant symptoms of depression. Currently, six major classes of antidepressant drugs, which target mainly
monoamine transporters serotonin (SERT) and norepinephrine transporters (NET), are available. Therefore, though leaders have hypothesized
that triple reuptake inhibitors (TRIs), with their potency to block dopamine reuptake by blocking dopamine transporter (DAT),
in addition to serotonin transporter (SERT) and norepinephrine transporter (NET) should produce higher efficacy.
Triple reuptake inhibitor active compounds
stimulate satiety and act as an appetite suppressant. Pharmacological studies have demonstrated that stimulated monoaminergic
activity induces profound effects on feeding behaviors and, thus, energy intake. Furthermore, they have shown that agents that
enhance synaptic levels of norepinephrine (NE), serotonin (5HT), or dopamine (DA) by stimulating release or reducing reuptake
can decrease feeding and weight gain.
We have conducted several in vitro and in
vivo studies on RP1208. In the radioligand binding assays, it has shown potent binding affinities for monoamine transporters
DAT (Ki = 1.2 nM), SERT (0.8 nM), and NET (11 nM). Studies using in vitro functional assays assessed the functional activity of
RP1208 for monoamine transporters. RP1208 showed potent functional inhibitory activities for monoamine transporters with IC50 values
<1 nM for DAT, 6.6 nM for SERT, and 2 nM for NET. In the in vivo studies, RP1208 has shown acceptable bioavailability of 9%
(t½=2.3 h) in rat and 50% (t½=13.1 h) in dog models. RP1208 rapidly and extensively distributes into tissues, including
the brain with a brain:plasma ratio of ~1:1 9 (rat), despite high plasma protein binding (>99%).
RP1208 Preclinical Studies for Depression
and Obesity.
We evaluated the antidepressant activity
of RP1208 in the tail-suspension test in the mouse model. The tail-suspension test is a mouse behavioral test useful in the screening
of potential antidepressant drugs, and assessing other manipulations that investigators expect to affect depression-related behaviors.
Mice are suspended by their tails with tape, in such a position that it cannot escape or hold on to nearby surfaces. During this
test, typically six minutes in duration, the resulting escape oriented behaviors are quantified. A tail-suspension test is a valuable
tool in drug discovery for high-throughput screening of prospective antidepressant compounds.
The tail-suspension test in male BALB/c
mice with 1, 3, 10, and 30mg/kg doses evaluated the antidepressant activity of RP1208. Venlafaxine, an approved antipsychotic
drug, 60 mg/kg, was the positive control in the study. RP1208 has shown statistically robust significant reduction in immobility
time at 3 mg/kg (p = <0.05), 10 mg/kg (p = <0.01), and 30 mg/kg (p = <0.001) doses. The antidepressant activity
of RP1208, as measured by reduction in immobility time at different dose levels, was dose-dependent with no adverse effects (Figure
11).
Subject to the receipt of additional financing,
we may also advance the development of RP1208 for depression and obesity.
Figure 11. Effect of RP1208 in Immobility Time in Male BALB/c
Mice in Tail Suspension Test
MARKET
Neuropsychiatric Diseases Schizophrenia, Bipolar Disorder
(BD) and Major Depressive Disorder (MDD)
Schizophrenia, BD, and MDD are major neuropsychiatric
diseases often chronic in nature. These neuropsychiatric diseases exhibit distinct symptoms yet share varying degrees of overlapping
conditions that include psychosis, depression, and cognitive impairments. Schizophrenia is a complex debilitating psychiatric
disease involving a mix of positive and negative symptoms, along with mood disorder (e.g. depression and anxiety) and cognitive
impairment. As presented in 2020, SARDAA estimates schizophrenia can be found in approximately 1.1% of the world’s population,
regardless of racial, ethnic or economic background, with approximately 3.5 million people diagnosed in the U.S. Schizophrenia
imposes substantial burden on patients, their families and overall society. Treatment and other economic costs due to schizophrenia
are enormous, estimated by SARDAA to be between $32.5 and $65 billion annually. Antipsychotic drugs are the first-line treatment
for patients with schizophrenia. Increasing awareness among patients and physicians in the field of mental health, particularly
schizophrenia is likely to increase the penetration of antipsychotic drugs in the market. Currently, second and third-generation
antipsychotics capture significant market share. Pipeline drugs undergoing clinical trials intend to block specific subtypes of
serotonin and dopamine receptors which would help to mitigate the symptoms, and address unmet medical needs. According to a 2017
report from Grand View Research, Inc., the total estimated drugs market size for schizophrenia is anticipated to reach approximately
$7.9 billion by 2022 (Figure 12).
Figure 12. Global Antipsychotics Market Insights for Schizophrenia,
Bipolar Disorder (BD) and Major Depressive Disorder (MDD)
BD, a medical illness with substantial
morbidity and mortality, involves episodic, recurrent mania or hypomania, and major depression. An article published in 2018 in
the journal Therapeutic Advances in Psychopharmacology estimates that the global prevalence of bipolar spectrum disorders is approximately
2.4%, with approximately 0.6% for bipolar I and approximately 0.4% for bipolar II. The same journal article indicates prevalence
of bipolar I in the U.S. has been found to be 1%, slightly higher than in other countries. In recent years, the general public
awareness of the symptoms and treatment of BD is on the rise. Typically, the treatment for BD is for a lifetime. Antipsychotic
drugs are the standard of care for patients with BD. According to a 2020 article from Market Data Forecast, the total estimated
drugs market size for BD treatment is estimated to reach approximately $5.4 billion by the year 2024 (Figure 12).
MDD is a common, chronic, recurrent, and
debilitating psychiatric condition, leading to significant impairments in personal functional capacities. MDD is one of the most
common mental disorders in the United States. NIMH has estimated the prevalence of MDD among U.S. adults aged 18 or older at 17.3 million
in 2017. NIMH also indicated the prevalence was higher among females (8.7%) compared to males (5.3%). Antipsychotic drugs are
standard of care either as a monotherapy or as an adjuvant treatment for patients with MDD. According to a 2018 report from Allied
Market Research, the total estimated drugs market size for the treatment of depression is estimated to reach approximately $15.9 billion
by the year 2023.
Respiratory Diseases Pulmonary Arterial Hypertension (PAH)
and Idiopathic pulmonary Fibrosis (IPF)
PAH and IPF are serious fatal lung diseases.
Currently, there is no cure for PAH and IPF diseases. PAH is a progressive, debilitating condition characterized by pulmonary
vascular resistance leading to right ventricular failure and death. According to an article published in 2016 in the journal The
Lancet Respiratory Medicine, the global prevalence of PAH is estimated at 6.6 – 26.0 cases per million with
1.1 – 7.6 incidences per million adults per year. The same article indicates PAH is frequently diagnosed in
older patients, particularly those 65 years and older. As presented in 2020, NORD estimates PAH occurs 3 – 5
times more frequently in females than in males, and it tends to affect females between the ages of 30 and 60. Pursuant to a study
published in 2012, as reported by the journal Circulation: Cardiovascular Quality and Outcomes, post-diagnosis of PAH, survival
rates are approximately 1 year in 87%, 3 years in 75%, and 5 years in 65% of patients, respectively. PAH treatment market
is expected to exhibit remarkable growth as drivers accountable for the market growth are globally growing older population coupled
with causative diseases including interstitial lung diseases (ILD), human immunodeficiency virus (HIV) infection, connective tissue
disorders, chronic liver diseases, sedentary lifestyle and other idiopathic conditions. The presence of favorable government support
in the U.S. such as Orphan Drug Act (ODA) 1983 and the Rare Disease Act (RDA) of 2002 to facilitate the development of orphan
drugs with benefits including tax incentives (reduced taxes/tax credits equal to half of the development costs), clinical research
subsidies, and improved patent protection and marketing rights. According to a 2018 report from Credence Research, the global
PAH treatment market is projected to reach USD 14.64 billion by 2026 (Figure 13).
Figure 13. Global Market Insights for Pulmonary Arterial
Hypertension (PAH) and Idiopathic Pulmonary Fibrosis (IPF)
IPF is a chronic, progressive, and fatal
lung disease. In 2019, Medscape reported the worldwide prevalence of IPF is estimated at 20 cases per 100,000 persons for males
and 13 cases per 100,000 persons for females. Medscape also reported that in the U.S., the prevalence among individuals aged 50 years
or older ranges from 27.9 to 63 cases per 100,000. For patients suffering from IPF, the estimated mean survival is 2 – 5 years
from the time of diagnosis and that mortality rates are estimated at 64.3 deaths per million in men and 58.4 deaths per million
in women. IPF involves chronic inflammation and progressive fibrosis of the alveoli. This pathology leads to destroyed lung architecture,
reduced lung capacity, impaired oxygenation, and a decline in lung function.
Treatment involves the FDA approved drugs
Nintedanib (Ofev), and Pirfenidone (Esbriet), lung transplantation or palliative care. According to a 2018 report from iHealthcare
Analyst, the total estimated drugs market size for IPF is anticipated to reach approximately $5.9 billion by 2023 (Figure
13).
Competition
The pharmaceutical industry is highly competitive
and characterized by rapidly evolving technology and intense research and development efforts. We expect to compete with companies,
including major international pharmaceutical companies, that have substantially greater financial, research and development, and
marketing and sales capabilities, and have substantially greater experience in undertaking preclinical and clinical testing of
products, obtaining regulatory approvals, and marketing and selling pharmaceutical products. We will face competition based on,
among other things, product efficacy and safety, the timing and scope of regulatory approvals, product ease of use, and price.
At the highest level, our potential competitors
are any company developing treatments for schizophrenia, PAH, IPF, BD, MDD, BPSD, PDP, and ADHD.
There are numerous therapies currently
used to treat schizophrenia patients, including olanzapine, risperidone, quetiapine, and aripiprazole. Such products are also
often used for the treatment of comorbid neuropsychiatric disorders, including BD, MDD, BPSD, PDP, and ADHD. While these offer
some clinical benefit, they are associated with adverse side effects, which include neuroleptic side effects (e.g. EPS, akathisia),
metabolic side effects (e.g. weight gain, obesity, type 2 diabetes, dyslipidemia) and endocrine side effects (e.g. hypothyroidism,
prolactin increase leading to sexual dysfunction). Thus, we believe there is an unmet medical need for safe and effective drugs
for the treatment of schizophrenia, and related comorbid neuropsychiatric disorders, that could potentially address the totality
of the disorders and help patients function and feel better, with minimal side effects.
Additionally, there are numerous therapies
currently used to treat PAH and IPF patients, including sildenafil, bosentan and treprostinil for PAH and nintedanib and pirfenidone
for IPF. While these offer some clinical benefit, they are associated with treating the symptoms of such diseases, and not the
underlying structural modification that causes the disease. Thus, we believe there is an unmet medical need for safe and effective
drugs for the treatment of PAH and IPF that could potentially address the underlying cause for the disease while also treating
known comorbid mental illness to potentially improve quality of life.
Sales and Marketing
We currently have no sales and marketing
personnel. As a clinical stage pharmaceutical company, we currently have no customers. We intend to develop domestic and international
marketing, commercial operation, distribution, market access and reimbursement capabilities, or collaborate with third parties
that have such infrastructure, in connection with the potential for FDA approval for RP5063 and RP1208.
Manufacturing and Supply
We have developed and validated a good
manufacturing practice (“GMP”), process to manufacture the active pharmaceutical ingredient (“API”) for
our RP5063 drug candidate through contract manufacturers. We have an API contract manufacturer to produce bulk batches under GMP
for our anticipated clinical studies and anticipate entering into agreements to produce sufficient API required prior to submitting
a New Drug Application (“NDA”) filing with the FDA. We do not own or operate manufacturing facilities for the production
of RP5063. We expect to depend on third-party suppliers and manufacturing organizations for all of our clinical trial quantities
of raw materials and drug substance. We believe there are readily available supplies of all raw materials necessary for the manufacture
of RP5063 and RP1208.
Employees
We have five full-time employees, and utilize
consultants, clinical research organizations and third parties to perform our pre-clinical studies, clinical studies, manufacturing,
regulatory, administrative, and financial functions. We believe our relations with our employees are good. We anticipate that
the number of people we employ may grow significantly as we continue to develop our current products or if we develop new product
candidates in the future.
Intellectual Property
We strive to protect our intellectual property
through a combination of patent, copyright, trademark and trade secrets laws, as well as through confidentiality provisions in
our contracts.
We strive to protect our intellectual property
that we believe is important to our business, including our proprietary technology platform, our product candidates, and our processes.
We seek patent protection in the U.S. and internationally for our products, their methods of use and processes of manufacture,
and any other technology to which we have rights, where available and when appropriate. We also rely on trade secrets that may
be important to the development of our business.
We also plan to seek trademark protection
in the U.S. and outside of the U.S. where available and when appropriate. We intend to use these registered marks in connection
with our pharmaceutical research and development as well as our product candidates.
We are the sole owner of a patent portfolio
that includes issued patents and pending patent applications covering compositions of matter and methods of use of our product
candidates RP5063 and RP1208, as well as related compounds. As of December 24, 2020, our portfolio of intellectual property consists
of 57 granted patents and 21 pending patent applications in the United States and in 25 foreign countries.
RP5063 is our first intended commercial
product. The original RP5063 patents include composition of matter, and methods of use in treating acute mania, autism, BD, depression,
psychosis, and schizophrenia. One RP5063 (brilaroxazine) original patent (U.S. Patent No. 8,188,076) and its 7 divisional/continuation
patents have been granted in US. The original RP5063 patents have also been granted in the following foreign countries: Australia,
Brazil, Canada, Germany, Spain, France, Great Britain, Hong Kong, Israel, India, Italy, Japan, S. Korea, Liechtenstein,
Mexico, Russia, and Slovakia; and pending in China, Columbia, Hong Kong, and Thailand. We believe that our patent portfolio provides
good protection of RP5063. All of the US and foreign original RP5063 granted patents and pending patent applications will expire
or are expected to expire in 2030, if a patent term extension is not obtained. If and when RP5063 receives regulatory approval,
we intend to apply for patent term extensions on patents covering RP5063 in any jurisdiction where patent term extension is available.
For example, the expiration date of the first US original RP5063 may be extendable up to 2035.
We also own additional RP5063 granted patents
and pending patent applications for additional indications such as attention hyperactivity disorder (U.S. Patent No. 9,907,803,
which will expire in 2036), pulmonary arterial hypertension (U.S. Patent No. 10,441,590, and pending applications in China,
Hong Kong, Europe, and Japan; all of which will expire or are expected to expire in 2036), Alzheimer’s Disease (pending
applications in China, Hong Kong, and Europe, which are expected to expire in 2036), Parkinson’s Disease (pending application
in China and Hong Kong, which are expected to expire in 2036) and pulmonary fibrosis (pending applications in US and PCT, which
are expected to expire in 2038).
We further own three US patents (U.S. Patent
Nos. 8,207,163; 8,247,420; 8,575,185; all of which will expire in 2030) directed to composition and use of compounds related to
RP5063.
We intend to continue to file patent applications
to cover additional patentable aspects of RP5063 including new indications and to endeavor to exclude competitors from entering
the field.
RP1208 may be our second intended commercial
product. The RP1208 patents include composition of matter, and methods of use in treating depression and obesity. Three RP1208
patents have been granted in the US. RP1208 patents have also been granted in the following foreign countries: Australia, China,
Columbia, Germany, Spain, France, Great Britain, Hong Kong, Italy, Mexico, Malaysia, Russia, Singapore, South Africa, and
Ukraine; and are pending in Canada, Egypt, India, Philippine, and Thailand. We believe that our patent portfolio provides
good protection of RP1208. The first RP1208 US patents will expire in 2033, and may be extendable up to 2038. The other two RP1208
continuation US patents will expire in 2032. All foreign RP1208 granted patents and pending patent applications will expire or
are expected to expire in 2032. If and when RP1208 receives regulatory approval, we intend to apply for patent term extensions
on patents covering RP1208 in any jurisdiction where patent term extension is available.
We also own two families of US patents
directed to related compounds of RP1208 covering composition and use. The first family consists of US Patent No. 7,989,500
and its 5 granted continuation patents, which will expire in 2027 or 2028. The second family consists of US Patent No. 8,604,244
and its 2 granted continuation patents, which will expire in 2031.
In addition to patents, we also rely upon
proprietary know-how (including trade secrets) to protect our technology and maintain and develop our competitive position. In
some situations, maintaining information such as a trade secret may be more appropriate to protect the type of technology than
filing a patent application. We seek to protect our confidential and proprietary information in part by confidentiality agreements,
and it is our policy generally to have our employees, consultants, scientific advisors, outside scientific collaborators, sponsored
researchers, investors, prospective investors and contractors execute such agreements upon the commencement of a relationship
with us.
Our success will depend on 1) the ability
to obtain and maintain patent and other proprietary rights in commercially important technology, inventions and know-how related
to our business, 2) the validity and enforceability of our patents, 3) the continued confidentiality of our trade secrets, and
4) our ability to operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also
rely on continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position.
We cannot be certain that patents will
be granted with respect to any of our pending patent applications, nor can we be certain that any of our existing patents will
be successful in protecting our technology. For this and more comprehensive risks related to our intellectual property, please
see “Risk Factors — Risks Related to our Intellectual Property.”
Regulatory Matters
The FDA and other federal, state, local
and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling, manufacture,
marketing and distribution of drug products. These agencies regulate, among other things, research and development activities
and the testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising
and promotion of our product candidates. The regulatory approval process is generally lengthy and expensive, with no guarantee
of a positive result. Moreover, failure to comply with applicable requirements by the FDA or other requirements may result in
civil or criminal penalties, recall or seizure of products, injunctive relief including partial or total suspension of production,
or withdrawal of a product from the market.
The FDA regulates, among other things,
the research, manufacture, promotion and distribution of drugs in the U.S. under the Federal Food, Drug and Cosmetic Act (“FDCA”)
and other statutes and implementing regulations. The process required by the FDA before prescription drug product candidates may
be marketed in the U.S. generally involves the following:
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completion
of extensive nonclinical laboratory tests, animal studies and formulation studies, all
performed in accordance with the FDA’s Good Laboratory Practice regulations;
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submission
to the FDA of an Investigational New Drug application (“IND”), which must
become effective before human clinical trials may begin;
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performance
of adequate and well-controlled human clinical trials in accordance with the FDA’s
regulations, including Good Clinical Practices, to establish the safety and efficacy
of the product candidate for each proposed indication;
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submission
to the FDA of an NDA for drug products, or a Biologics License Application (“BLA”),
for biologic products;
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satisfactory
completion of a preapproval inspection by the FDA of the manufacturing facilities at
which the product is produced to assess compliance with current GMP (“cGMP”)
regulations; and
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the FDA’s
review and approval of the NDA or BLA prior to any commercial marketing, sale or shipment
of the drug.
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The testing and approval process requires
substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will
be granted on a timely basis, if at all.
Nonclinical tests include laboratory evaluations
of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and other animal studies.
The results of nonclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND
to the FDA. Some nonclinical testing may continue even after an IND is submitted. The IND also includes one or more protocols
for the initial clinical trial or trials and an investigator’s brochure. An IND automatically becomes effective 30 days
after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to the proposed
clinical trials as outlined in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor and the
FDA must resolve any outstanding concerns or questions before any clinical trials can begin. Clinical trial holds also may be
imposed at any time before or during studies due to safety concerns or non-compliance with regulatory requirements. An independent
Institutional Review Board (“IRB”), at each of the clinical centers proposing to conduct the clinical trial must review
and approve the plan for any clinical trial before it commences at that center. An IRB considers, among other things, whether
the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits. The
IRB also approves the consent form signed by the trial participants and must monitor the study until completed.
Clinical Trials
Clinical trials involve the administration
of the product candidate to human subjects under the supervision of qualified medical investigators according to approved protocols
that detail the objectives of the study, dosing procedures, subject selection and exclusion criteria, and the parameters to be
used to monitor participant safety. Each protocol for a U.S. study is submitted to the FDA as part of the IND.
Human clinical trials are typically conducted
in three sequential phases, but the phases may overlap, or be combined.
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Phase 1
clinical trials typically involve the initial introduction of the product candidate into
healthy human volunteers. In Phase 1 clinical trials, the product candidate is typically
tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion
and pharmacodynamics.
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Phase 2
clinical trials are generally conducted in a limited patient population to gather evidence
about the efficacy of the product candidate for specific, targeted indications; to determine
dosage tolerance and optimal dosage; and to identify possible adverse effects and safety
risks. Phase 2 clinical trials, in particular Phase 2b trials, can be undertaken
to evaluate clinical efficacy and to test for safety in an expanded patient population
at geographically dispersed clinical trial sites.
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Phase 3
clinical trials are undertaken to evaluate clinical efficacy and to test for safety in
an expanded patient population at geographically dispersed clinical trial sites. The
size of Phase 3 clinical trials depends upon clinical and statistical considerations
for the product candidate and disease. Phase 3 clinical trials are intended to establish
the overall risk-benefit ratio of the product candidate and provide an adequate basis
for product labeling.
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Post-approval clinical trials, sometimes
referred to as Phase 4 clinical trials, may be conducted after initial approval. These clinical trials are used to gain additional
experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.
Clinical testing must satisfy the extensive
regulations of the FDA. Reports detailing the results of the clinical trials must be submitted at least annually to the FDA and
safety reports must be submitted for serious and unexpected adverse events. Success in early-stage clinical trials does not assure
success in later-stage clinical trials. We, or the FDA or an IRB, may suspend a clinical trial at any time on various grounds,
including a finding that the research subjects or patients are being exposed to an unacceptable health risk.
New Drug Applications
Assuming successful completion of the required
clinical trials, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part
of an NDA (or BLA, in the case of a biologic product). An NDA or BLA also must contain extensive manufacturing information, as
well as proposed labeling for the finished product. An NDA or BLA applicant must develop information about the chemistry and physical
characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP. The manufacturing process
must be capable of consistently producing quality product within specifications approved by the FDA. The manufacturer must develop
methods for testing the quality, purity and potency of the final product. In addition, appropriate packaging must be selected
and tested, and stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration
over its shelf life. Prior to approval, the FDA will conduct an inspection of the manufacturing facilities to assess compliance
with cGMP.
The FDA reviews all NDAs and BLAs submitted
before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this event,
the NDA or BLA must be resubmitted with the additional information and is subject to review before the FDA accepts it for filing.
After an application is filed, the FDA may refer the NDA or BLA to an advisory committee for review, evaluation and recommendation
as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an
advisory committee, but it considers them carefully when making decisions. The FDA may deny approval of an NDA or BLA if the applicable
regulatory criteria are not satisfied. Data obtained from clinical trials are not always conclusive and the FDA may interpret
data differently than we interpret the same data. The FDA may issue a complete response letter, which may require additional clinical
or other data or impose other conditions that must be met in order to secure final approval of the NDA or BLA. If a product receives
regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may
otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require us to conduct
Phase 4 testing which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA
or BLA approval, and may require surveillance programs to monitor the safety of approved products which have been commercialized.
Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety or efficacy questions
are raised after the product reaches the market.
Section 505(b) NDAs
There are two types of NDAs: the Section 505(b)(1) NDA,
or full NDA, and the Section 505(b)(2) NDA. A full NDA is submitted under Section 505(b)(1) of the FDCA, and
must contain full reports of investigations conducted by the applicant to demonstrate the safety and effectiveness of the drug.
A Section 505(b)(2) NDA may be submitted for a drug for which one or more of the investigations relied upon by the applicant
was not conducted by or for the applicant and for which the applicant has no right of reference from the person by or for whom
the investigations were conducted. A Section 505(b)(2) NDA may be submitted based in whole or in part on published literature
or on the FDA’s finding of safety and efficacy of one or more previously approved drugs, which are known as reference drugs.
Thus, the filing of a Section 505(b)(2) NDA may result in approval of a drug based on fewer clinical or nonclinical
studies than would be required under a full NDA. The number and size of studies that need to be conducted by the sponsor depends
on the amount and quality of data pertaining to the reference drug that are publicly available, and on the similarity of and differences
between the applicant’s drug and the reference drug. In some cases, extensive, time-consuming, and costly clinical and nonclinical
studies may still be required for approval of a Section 505(b)(2) NDA.
Patent Protections
An applicant submitting a Section 505(b)(2) NDA
must certify to the FDA with respect to the patent status of the reference drug upon which the applicant relies in support of
approval of its drug. With respect to every patent listed in the FDA’s Orange Book, which is the FDA’s list of approved
drug products, as claiming the reference drug or an approved method of use of the reference drug, the Section 505(b)(2) applicant
must certify that: (1) there is no patent information listed in the orange book for the reference drug; (2) the listed
patent has expired; (3) the listed patent has not expired, but will expire on a particular date; (4) the listed patent
is invalid or will not be infringed by the manufacture, use, or sale of the product in the Section 505(b)(2) NDA; or
(5) if the patent is a use patent, that the applicant does not seek approval for a use claimed by the patent. If the applicant
files a certification to the effect of clause (1), (2) or (5), FDA approval of the Section 505(b)(2) NDA may be
made effective immediately upon successful FDA review of the application, in the absence of marketing exclusivity delays, which
are discussed below. If the applicant files a certification to the effect of clause (3), the Section 505(b)(2) NDA approval
may not be made effective until the expiration of the relevant patent and the expiration of any marketing exclusivity delays.
If the Section 505(b)(2) NDA
applicant provides a certification to the effect of clause (4), referred to as a paragraph IV certification, the applicant also
must send notice of the certification to the patent owner and the holder of the NDA for the reference drug. The filing of a patent
infringement lawsuit within 45 days of the receipt of the notification may prevent the FDA from approving the Section 505(b)(2) NDA
for 30 months from the date of the receipt of the notification unless the court determines that a longer or shorter period
is appropriate because either party to the action failed to reasonably cooperate in expediting the action. However, the FDA may
approve the Section 505(b)(2) NDA before the 30 months have expired if a court decides that the patent is invalid
or not infringed, or if a court enters a settlement order or consent decree stating the patent is invalid or not infringed.
Notwithstanding the approval of many products
by the FDA pursuant to Section 505(b)(2), over the last few years certain brand-name pharmaceutical companies and others
have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is
successfully challenged in court, the FDA may be required to change its interpretation of Section 505(b)(2) which could
delay or even prevent the FDA from approving any Section 505(b)(2) NDA that we submit. The pharmaceutical industry is
highly competitive, and it is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking
to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions
can significantly delay, or even prevent, the approval of the new product. Moreover, even if the FDA ultimately denies such a
petition, the FDA may substantially delay approval while it considers and responds to the petition.
Marketing Exclusivity
Market exclusivity provisions under the
FDCA can delay the submission or the approval of Section 505(b)(2) NDAs, thereby delaying a Section 505(b)(2) product
from entering the market. The FDCA provides five-year marketing exclusivity to the first applicant to gain approval of an NDA
for a new chemical entity (“NCE”), meaning that the FDA has not previously approved any other drug containing the
same active moiety. This exclusivity prohibits the submission of a Section 505(b)(2) NDA for any drug product containing
the active ingredient during the five-year exclusivity period. However, submission of a Section 505(b)(2) NDA that certifies
that a listed patent is invalid, unenforceable, or will not be infringed, as discussed above, is permitted after four years,
but if a patent infringement lawsuit is brought within 45 days after such certification, FDA approval of the Section 505(b)(2) NDA
may automatically be stayed until 7½ years after the NCE approval date. The FDCA also provides three years of
marketing exclusivity for the approval of new and supplemental NDAs for product changes, including, among other things, new indications,
dosage forms, routes of administration or strengths of an existing drug, or for a new use, if new clinical investigations, other
than bioavailability studies, that were conducted or sponsored by the applicant are deemed by FDA to be essential to the approval
of the application. Five-year and three-year exclusivity will not delay the submission or approval of another full NDA; however,
as discussed above, an applicant submitting a full NDA under Section 505(b)(1) would be required to conduct or obtain
a right of reference to all of the nonclinical and adequate and well-controlled clinical trials necessary to demonstrate safety
and effectiveness.
Other types of exclusivity in the United
States include orphan drug exclusivity and pediatric exclusivity. The FDA may grant orphan drug designation to a drug intended
to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in
the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that
the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered
from sales in the United States for that drug. Seven-year orphan drug exclusivity is available to a product that has orphan drug
designation and that receives the first FDA approval for the indication for which the drug has such designation. Orphan drug exclusivity
prevents approval of another application for the same drug for the same orphan indication, for a period of seven years, regardless
of whether the application is a full NDA or a Section 505(b)(2) NDA, except in limited circumstances, such as a showing
of clinical superiority to the product with orphan exclusivity. Pediatric exclusivity, if granted, provides an additional six months
to an existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which
runs from the end of other exclusivity protection or patent delay, may be granted based on the voluntary completion of a pediatric
study in accordance with an FDA-issued “Written Request” for such a study.
Section 505(b)(2) NDAs are similar
to full NDAs filed under Section 505(b)(1) in that they are entitled to any of these forms of exclusivity if they meet
the qualifying criteria. They also are entitled to the patent protections described above, based on patents that are listed in
the FDA’s Orange Book in the same manner as patents claiming drugs and uses approved for NDAs submitted as full NDAs.
Breakthrough Therapy Designation
On July 9, 2012, the Food and Drug
Administration Safety and Innovation Act (“FDASIA”), was signed. FDASIA Section 902 provides for a new drug designation,
Breakthrough Therapy. A Breakthrough Therapy is a drug:
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intended
alone or in combination with one or more other drugs to treat a serious or life-threatening
disease or condition; and
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preliminary
clinical evidence indicates that the drug may demonstrate substantial improvement over
existing therapies on one or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development.
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Fast Track Designation
A Fast Track is a designation by the FDA
of an investigational drug which:
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intended
alone or in combination with one or more other drugs to treat a serious or life-threatening
disease or condition; and
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non-clinical
or clinical data demonstrate the potential to address an unmet medical need
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Fast track is a process designed to facilitate
the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need. The benefits of a
Fast Track designation include rolling submission of portions of the NDA for the drug candidate and eligibility for priority review
of the NDA. Additionally, more frequent meetings and written communication with the FDA regarding the development plan and trial
design for the drug candidate are encouraged throughout the entire drug development and review process, with the goal of having
earlier drug approval and access for patients.
Other Regulatory Requirements
Maintaining substantial compliance with
appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources.
Drug manufacturers are required to register their establishments with the FDA and certain state agencies, and after approval,
the FDA and these state agencies conduct periodic unannounced inspections to ensure continued compliance with ongoing regulatory
requirements, including cGMPs. In addition, after approval, some types of changes to the approved product, such as adding new
indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. The FDA may
require post-approval testing and surveillance programs to monitor safety and the effectiveness of approved products that have
been commercialized. Any drug products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation
by the FDA, including:
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record-keeping
requirements;
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reporting
of adverse experiences with the drug;
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providing
the FDA with updated safety and efficacy information;
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reporting
on advertisements and promotional labeling;
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drug
sampling and distribution requirements; and
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complying
with electronic record and signature requirements.
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In addition, the FDA strictly regulates
labeling, advertising, promotion and other types of information on products that are placed on the market. There are numerous
regulations and policies that govern various means for disseminating information to health-care professionals as well as consumers,
including to industry sponsored scientific and educational activities, information provided to the media and information provided
over the Internet. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved
label.
The FDA has very broad enforcement authority
and the failure to comply with applicable regulatory requirements can result in administrative or judicial sanctions being imposed
on us or on the manufacturers and distributors of our approved products, including warning letters, refusals of government contracts,
clinical holds, civil penalties, injunctions, restitution and disgorgement of profits, recall or seizure of products, total or
partial suspension of production or distribution, withdrawal of approvals, refusal to approve pending applications, and criminal
prosecution resulting in fines and incarceration. The FDA and other agencies actively enforce the laws and regulations prohibiting
the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant
liability. In addition, even after regulatory approval is obtained, later discovery of previously unknown problems with a product
may result in restrictions on the product or even complete withdrawal of the product from the market.
Coverage and Reimbursement
Sales of our product candidates, if approved,
will depend, in part, on the extent to which such products will be covered by third-party payors, such as government health care
programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly limiting coverage
or reducing reimbursements for medical products and services. In addition, the U.S. government, state legislatures and foreign
governments have continued implementing cost-containment programs, including price controls, restrictions on reimbursement and
requirements for substitution of generic products. Third-party payors decide which therapies they will pay for and establish reimbursement
levels. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and
reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any
drug candidates that we develop will be made on a payor-by-payor basis. Each payor determines whether or not it will provide coverage
for a therapy, what amount it will pay the manufacturer for the therapy, and on what tier of its formulary it will be placed.
The position on a payor’s list of covered drugs, or formulary, generally determines the co-payment that a patient will need
to make to obtain the therapy and can strongly influence the adoption of such therapy by patients and physicians. Adoption of
price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls
and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our product candidates
or a decision by a third-party payor to not cover our product candidates could reduce physician usage of our product candidates,
once approved, and have a material adverse effect on our sales, results of operations and financial condition.
Other Healthcare Laws
Because of our current and future arrangements
with healthcare professionals, principal investigators, consultants, customers and third-party payors, we will also be subject
to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we will conduct
our business, including our clinical research, proposed sales, marketing and educational programs. Failure to comply with these
laws, where applicable, can result in the imposition of significant civil penalties, criminal penalties, or both. The U.S. laws
that may affect our ability to operate, among others, include: the federal Health Insurance Portability and Accountability Act
of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act, which governs
the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information;
certain state laws governing the privacy and security of health information in certain circumstances, some of which are more stringent
than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance
efforts; the federal healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly
and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either
the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made
under federal healthcare programs such as the Medicare and Medicaid programs; federal false claims laws which prohibit, among
other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare,
Medicaid, or other third-party payors that are false or fraudulent; federal criminal laws that prohibit executing a scheme to
defraud any healthcare benefit program or making false statements relating to healthcare matters; the Physician Payments Sunshine
Act, which requires manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department
of Health and Human Services information related to payments and other transfers of value to physicians (defined to include doctors,
dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and ownership and investment interests held by
physicians and their immediate family members; and state law equivalents of each of the above federal laws, such as anti-kickback
and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
In addition, many states have similar laws
and regulations, such as anti-kickback and false claims laws that may be broader in scope and may apply regardless of payor, in
addition to items and services reimbursed under Medicaid and other state programs. Additionally, to the extent that our products
are sold in a foreign country, we may be subject to similar foreign laws.
The Impact of New Legislation and
Amendments to Existing Laws
The FDCA is subject to routine legislative
amendments with a broad range of downstream effects. In addition to new legislation, such as the FDA Reauthorization Act of 2017
or the FDASIA in 2012, Congress introduces amendments to reauthorize drug user fees and address emerging concerns every five years.
We cannot predict the impact of these new legislative acts and their implementing regulations on our business. The programs established
or to be established under the legislation may have adverse effects upon us, including increased regulation of our industry. Compliance
with such regulation may increase our costs and limit our ability to pursue business opportunities. In addition, the FDA’s
regulations, policies and guidance are often revised or reinterpreted by the agency or the courts in ways that may significantly
affect our business and products.
We expect that additional federal and state,
as well as foreign, healthcare reform measures will be adopted in the future, any of which could result in reduced demand for
our products or additional pricing pressure.
Facilities
Our principal offices are located at 19925
Stevens Creek Blvd., Suite 100, Cupertino, California 95014. We are subject to a one year lease, commencing February 2020.
Basic rent is $1,196 per month. The facility is used for office space only, and we believe the facility is adequate for our foreseeable
needs. We operate primarily as a virtual company.
Legal Matters
In December 2016 and July 2018,
New Silk Route Advisors LP (or NSR Advisors), a registered investment advisor of which Parag Saxena (the Chairman of the our board
of directors) is Chief Executive Officer and founding general partner, consented (without admitting or denying any findings) to
two U.S. Securities and Exchange Commission (or SEC) orders settling separate civil investigations by the SEC related to certain
of its practices that the SEC found violated the Investment Advisers Act of 1940, as amended. In the first matter, NSR Advisors
failed to secure required advisory board consents for certain co-investments and was fined $275,000 and censured. In the second
matter, NSR Advisors failed to timely distribute required annual audited financial statements to investors and was fined $75,000
and censured. Mr. Saxena was not named individually in either of these matters.
On January 2, 2020, there was a judgement
issued by the District Court of Harris County, Texas, pursuant to an agreement reached between us and the holder of a note issued
by us in April 2017. Under the terms of the judgement, we were obligated to repay the holder of the note the principal investment
of $1,200,000, accrued interest of $242,000, and legal fees of $5,000 (the “Judgment”). The obligatory payment was
accruing interest at 5.5% per annum. On December 16, 2020, pursuant to the terms of a Settlement and Release Agreement entered
into on December 2, 2020 (the “Settlement Agreement”), we made a payment to the holder of the note in the amount
of $1,514,619.70 in full satisfaction and settlement of all claims, matters, disputes and causes of action between the holder
of the note and us. Pursuant to the terms of the Settlement Agreement, the holder of the note subsequently filed a release of
judgment in the District Court of Harris County, Texas, releasing us from the Judgment.
We may also, from time to time, become
involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except
as described above, we are currently not aware of any such legal proceedings or claims that may be, individually or in the aggregate,
material to us.
MANAGEMENT
The following sets forth certain information with respect
to our officers and directors.
Name
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Age
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Position
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Laxminarayan Bhat
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55
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President Chief Executive Officer, Director
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Marc Cantillon, MD
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62
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Chief Medical Officer
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Narayan Prabhu
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49
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Chief Financial Officer
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Parag Saxena
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65
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Chairman of the Board
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Richard Margolin
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69
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Director
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Purav Patel
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38
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Director
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Les Funtleyder
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51
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Director
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Management
Laxminarayan Bhat - see description
below under the heading “Directors.”
Marc Cantillon has served
as Chief Medical Officer of Reviva Pharmaceuticals, Inc. since 2013, and previously served as Consulting Medical Director
of Reviva from 2008 to 2013. Dr. Bhat became the Company’s Chief Medical Officer in December 2020. From 1995 to
1997, Dr. Cantillon served as Sr. Director at AstraZeneca plc, (NYSE: AZN), a public company engaged in the biopharmaceuticals
business. From 1997 to 1999, he served as US Lead at Sanofi- Aventis S.A. (Nasdaq: SNY), also a publicly-traded biopharmaceuticals
company. From 2000 to 2002, he served as Global CNS Lead Medical Affairs at Wyeth/Pfizer (NYSE: PFE), another publicly-traded
biopharmaceuticals company, and, from 2006 to 2010, served as AVP at Schering-Plough/Merck Sharp & Dohme Corp., now Merck &
Co., Inc. (NYSE: MRK), another public company engaged in the biopharmaceuticals business. Dr. Cantillon has over 25 years
of experience in translational Proof-of-Mechanism (POM), Proof-of-Concept (POC) and Phases 1 through IV trials and development
in multiple therapeutics areas. Dr. Cantillon earned his MD from the Karolinska Institute of Medicine. He is board certified
by the American Board of Neurology and Psychiatry.
Narayan Prabhu joined the
Company as Chief Financial Officer in December 2020. Since May 2019, Mr. Prabhu served as an independent consultant
providing Interim Chief Financial Officer and Controller services. Mr. Prabhu previously served as the Chief Financial Officer
of Sony Biotechnology Inc., a biotechnology company focused on reagents, flow cytometry and spectral imaging from November 2014
to April 2019. From September 2009 to October 2014, Mr. Prabhu served as the M&A Controller at Cisco Systems, Inc.
(Nasdaq: CSCO). Mr. Prabhu is a CPA and received his B.S. in Accounting & Finance from Indiana University at Bloomington — Kelley
School of Business and MBA from the University of California at Berkeley — Haas School of Business.
Directors
Laxminarayan Bhat has served
as the Founder, President, Chief Executive Officer and as a Director of Reviva Pharmaceuticals, Inc. since 2006. Dr. Bhat
became the Company’s Chief Executive Officer, President, and a Director in December 2020. From 2000 to 2004, Dr. Bhat
served as research scientist at XenoPort, Inc., now a part of Arbor Pharmaceuticals, LLC (NYSE: ABR), a public company engaged
in the pharmaceuticals business. Dr. Bhat also served as a research scientist, from 2004 to 2006, at ARYx Therapeutics Inc,
(previously trading under OTCM: ARYX), a former public company that focused on the development of pharmaceutical products. From
1997 to 2000, Dr. Bhat served as a post-doctoral researcher in the Drug Discovery Program at the Higuchi Biosciences Center,
a biomedical research center at the University of Kansas. He has over twenty years of experience in drug discovery and development.
Dr. Bhat received his Ph.D. in synthetic organic chemistry from Central University (NEHU), in India, and has received post-doctoral
training at the University of Kansas, the Georg-August-Universität, in Göttingen, Germany and the Université
du Maine, in France. In 1995, he was selected for the Alexander von Humboldt Fellowship to pursue advanced research in Germany.
We believe Dr. Bhat’s history
as the founder of Reviva and his experience in drug discovery and development qualifies him to serve on our board of directors.
Les Funtleyder became a director
of the Company in December 2020. Mr. Funtleyder has served as a member of the board of directors of Applied Therapeutics
Inc. (Nasdaq: APLT), a clinical-stage biopharmaceutical company, since June 2016 and served as its interim Chief Financial
Officer from December 2018 to April 2019. Mr. Funtleyder has also served as a healthcare portfolio manager at E
Squared Capital Management, LLC since January 2014, a senior external advisor with McKinsey and Co. since June 2017,
and a consulting partner at Bluecloud Health, a private equity healthcare fund, since December 2013. Mr. Funtleyder
previously served as the director of strategic investments and communications of OPKO Health Inc. (Nasdaq: OPK), a publicly traded
healthcare company, from April 2014 to June 2016. Mr. Funtleyder currently serves on the board of directors of
several private healthcare companies and foundations. Mr. Funtleyder is also an adjunct professor at Columbia University
Medical Center. Mr. Funtleyder received his B.A. from Tulane University and MPH from Columbia University Mailman School of
Public Health.
We believe Mr. Funtleyder’s
extensive experience managing and investing in the healthcare industry and his experience serving as the CFO of another publicly-traded
pharmaceutical company qualifies him to serve on our board of directors.
Richard Margolin became a
director of the Company in December 2020. Since February 2020, Dr. Margolin has served as Senior Vice President,
Translational Sciences and Clinical Development at TauC3 Biologics Ltd., a privately held British biopharmaceutical company. Dr. Margolin
also currently serves as the Chief Medical Officer of Eikonizo Therapeutics, Inc., a biotechnology company since January 2020,
and he is the Founder and Principal Consultant of CNS Research Solutions LLC, a consulting firm supporting the development of
novel therapeutics for CNS disorders since May 2018. From December 2016 to April 2018, Dr. Margolin served
as Executive Director, Internal Medicine Research Unit at Pfizer, Inc. (NYSE: PFE), a publicly-traded pharmaceutical
company. From November 2013 to December 2016, Dr. Margolin served as the Vice President, Clinical Development at
CereSpir, Inc., a biotechnology company. Previously, he held positions in two major pharmaceutical companies, and earlier
in his career he held leadership positions in psychiatry departments of two major U.S. medical schools. Dr. Margolin earned
his AB from Harvard College and his MD from the University of California, Irvine and received research training at the National
Institutes of Health.
We believe Dr. Margolin’s 30 years
of experience in pharmaceutical research and development qualifies him to serve on our board of directors.
Purav Patel has served as
a director of Reviva since 2017. Mr. Patel became a director of the Company in December 2020.Since January 2014,
Mr. Patel has also been Founder and Managing Partner of Buena Vista Fund I, a company engaged in the business of startup
investments. Mr. Patel has over 14 years of experience in business operations and scaling startups. Mr. Patel serves
on the Board of Pratham, a charitable organization with the mission to vastly improve the quality of education for underprivileged
children and youth across India. Mr. Patel holds a Bachelor’s Degree in Biology and Business from the University of
Texas. Mr. Patel is skilled at financial analysis, business operations and fundraising.
We believe Mr. Patel’s 12 years
of knowledge of Reviva’s history, team, investors and product candidates qualifies him to serve on our board of directors.
Parag Saxena has served as
Chairman of the board of directors of Tenzing since 2018, and continues to serve as Charmian of our board of directors. Mr. Saxena
has extensive investment experience in the U.S. and in the Indian subcontinent. Mr. Saxena co-founded Vedanta Management
LP (or Vedanta) and NSR Advisors in 2006, private equity investment management firms, which currently collectively manage over
$1 billion in assets. He is the Managing Partner and Chief Executive Officer of both firms. Previously, he was Chief Executive
Officer of INVESCO Private Capital (and its predecessor firms), a venture capital firm in the U.S. During his 23-year tenure,
over 300 investments were made, including Amgen, Costco, PictureTel, Polycom, Staples and Starbucks. Mr. Saxena led more
than 90 investments for INVESCO Private Capital (and its predecessor firms), a third of which went on to become public companies.
These investments include Alkermes, Celgene, Genomic Health, Indigo, Masimo, Transgenomic, Xenon Pharmaceuticals, Amber Networks,
ARM Holdings, MetroPCS, and Volterra. Mr. Saxena has served on committees advising the Prime Minister of India on foreign
direct investments, and the Planning Commission of India on venture capital. He was also a Director of the Indian Institute of
Technology, Bombay’s Heritage Fund as well as a Trustee of the Bharatiya Vidya Bhavan. He is on the Advisory Board of the
Center for Advanced Studies on India at the University of Pennsylvania and is on the Indian Advisory Council of Brown University.
Mr. Saxena was the President of TiE Tri-State (NY, CT, NJ) from 2003 to 2010. He was also on Mayor Bloomberg’s Applied
Sciences NYC Advisory Committee. Mr. Saxena received an M.B.A. from the Wharton School of the University of Pennsylvania.
He earned a B.Tech. from the Indian Institute of Technology, Bombay and an M.S. in Chemical Engineering from the West Virginia
College of Graduate Studies.
We believe Mr. Saxena’s deep
financial, entrepreneurial and business expertise and extensive experience as a member of the boards and board committees of other
public companies qualifies him to serve on our board of directors.
Committees of the Board of Directors
Our board of directors has an audit committee,
compensation committee and nominating and corporate governance committee. All of the committees comply with all applicable requirements
of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations as further described below. The responsibilities of each
of the committees of our board of directors is described below. Members will serve on these committees until their resignation
or until as otherwise determined by the our board of directors.
Audit Committee
The members of our audit committee are
Mr. Funtleyder, Mr. Patel and Mr. Margolin, and Mr. Funtleyder serves as the chairperson of the audit committee.
Each of the members of our audit committee satisfies the requirements for independence and financial literacy under the applicable
rules and regulations of the SEC and rules of Nasdaq. We have determined that Mr. Funtleyder qualifies as an “audit
committee financial expert” as defined in the SEC rules and satisfies the financial sophistication requirements of
Nasdaq. Our audit committee is responsible for, among other things:
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appointing
(and recommending that our board of directors submit for stockholder ratification, if
applicable) compensate, retain and oversee the work performed by the independent auditor
retained for the purpose of preparing or issuing an audit report or performing other
audit or audit-related services;
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reviewing
the performance and independence of the independent auditor;
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pre-approving
all audit, review, and non-audit services (including any internal control-related services)
to be provided to us or its subsidiaries by the independent auditor;
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discussing
the scope and results of the audit with the independent registered public accounting
firm and reviewing, with management and the independent registered public accounting
firm, our interim and year-end financial statements;
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developing
procedures for employees to submit concerns anonymously about questionable accounting
or audit matters;
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reviewing
our policies on and oversees risk assessment and risk management, including enterprise
risk management; and
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reviewing
the adequacy and effectiveness of internal control policies and procedures and our disclosure
controls and procedures.
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Our board of directors has adopted a written
charter for the audit committee which is available on our website.
Compensation Committee
The members of our compensation
committee are Mr. Patel, Mr. Margolin and Mr. Saxena, and Mr. Patel serves as the chairperson of the compensation
committee. Each of the members of our compensation committee meets the requirements for independence under the under the applicable
rules and regulations of the SEC and rules of Nasdaq. Our compensation committee is responsible for, among other things:
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developing
and reviewing compensation policies and practices applicable to executive officers;
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determining
bases for and fixing compensation levels executive officers;
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reviewing,
approving and determining compensation and benefits, including equity awards, to directors
for service on our board of directors or any committee thereof; supervising, administering
and evaluating incentive, equity-based and our other compensatory plans in which executive
officers and key employees participate; and
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reviewing,
approving and making recommendations to our board of directors regarding incentive compensation
and equity compensation plans.
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Our board of directors has adopted a written
charter for the compensation committee which is available on our website.
Nominating and Corporate Governance Committee
The members of our nominating and corporate
governance committee are Mr.Saxena (chair), Mr. Funtleyder and Mr. Patel, and Mr. Saxena serves as the chairperson
of the nominating and corporate governance committee. Each of the members of the nominating and corporate governance committee
meets the requirements for independence under the applicable rules and regulations of the SEC and rules of Nasdaq. Our
nominating and corporate governance committee is responsible for, among other things:
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making
recommendations to our board of directors regarding, the size of our board of directors,
the composition of our board of directors, the process for filling vacancies on our board
of directors and the tenure of our board of directors;
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making
recommendations to our board of directors regarding the criteria for our board of directors
and committee membership;
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developing,
reviewing and overseeing our corporate governance practices and procedures; and
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making
recommendations to our board of directors regarding corporate governance guidelines and
matters.
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Our board of directors has adopted a written
charter for the nominating and corporate governance committee which is available on our website.
Director Independence
Our board of directors undertook a review
of its composition, the composition of its committees and the independence of each director. Based upon information requested
from and provided by each director concerning his or her background, employment and affiliations, including family relationships,
our board of directors has determined that Mr. Saxena, Mr. Funtleyder, Dr. Margolin, and Mr. Patel do not
have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director
and that each of these directors is “independent” as that term is defined under the Rules of the Nasdaq Market
and the SEC.
Code of Business Conduct and Ethics
We have adopted a written code of business
conduct and ethics that applies to our employees, officers and directors. A current copy of the code is posted on the Corporate
Governance section of our website, which is located at http://revivapharma.com/. We intend to disclose future amendments to certain
provisions of our code of business conduct and ethics, or waivers of such provisions applicable to any principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions, and our directors,
on our website identified above or in filings with the SEC.
Limitations on Liability and Indemnification of Officers
and Directors
The DGCL authorizes corporations to limit
or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’
fiduciary duties, subject to certain exceptions. Our certificate of incorporation, as amended, includes a provision that eliminates
the personal liability of directors for monetary damages for any breach of fiduciary duty as a director, except for liability
(i) for any breach of the director’s duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. The effect of these provisions
is to eliminate the rights of the Company and its stockholders, through stockholders’ derivative suits on the Company’s
behalf, to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from
grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in bad faith, knowingly
or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her
actions as a director.
Our certificate of incorporation, as amended
and our bylaws provide that we must indemnify and advance expenses to directors and officers to the fullest extent authorized
by the DGCL. We are also expressly authorized to carry directors’ and officers’ liability insurance providing indemnification
for directors, officers and certain employees for some liabilities. We believe that these indemnification and advancement provisions
and insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability, indemnification
and advancement provisions in our certificate of incorporation, as amended, and our bylaws may discourage stockholders from bringing
a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood
of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit the
Company and its stockholders. In addition, your investment may be adversely affected to the extent we pays the costs of settlement
and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions,
liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced directors and officers.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
There is currently no pending material
litigation or proceeding involving any of our respective directors, officers or employees for which indemnification is sought.
EXECUTIVE COMPENSATION
As we are an emerging growth company, we
have opted to comply with the executive compensation disclosure rules applicable to emerging growth companies. The scaled
down disclosure rules are those applicable to “smaller reporting companies,” as such term is defined in the rules promulgated
under the Securities Act, which require compensation disclosure for our principal executive officer and our two most highly compensated
executive officers, other than the principal executive officer, whose total compensation for 2020 exceeded $100,000 and who were
serving as executive officers as of December 31, 2020. We refer to these individuals as “named executive officers.”
Our named executive officers, consisting of our principal executive officer and the next two most highly compensated executive
officers, for the year ended December 31, 2020, were:
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Laxminarayan Bhat, our Chief Executive Officer and President;
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Narayan Prabhu, our Chief Financial Officer; and
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Marc Cantillon, our Chief
Medical Officer.
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2020 Summary Compensation Table
The following table presents information
regarding the total compensation awarded to, earned by, or paid to our named executive officers during the fiscal years ended
December 31, 2020 and 2019.
Name
and Principal Position
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Year
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Salary
($)(4)
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Total
($)
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Laxminarayan Bhat, PhD(1)
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2020
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247,952
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247,952
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Chief Executive Officer and President
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2019
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240,000
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240,000
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Narayan Prabhu (2)
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2020
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—
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—
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Chief Financial Officer
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2019
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—
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—
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Marc Cantillon, MD(3)
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2020
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—
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—
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Chief Medical Officer
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2019
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—
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(1) Laxminarayan Bhat has served as Chief Executive Officer
and President since the formation of Old Reviva in May 2006.
(2) Narayan Prabhu began serving as our Chief Financial
Officer on December 14, 2020. Total compensation earned by Mr. Prabhu did not exceed $100,000 during the fiscal year ended
December 31, 2020. Executive compensation and outstanding equity award disclosures are not provided for Mr. Prabhu because his
total compensation for the fiscal year ended December 31, 2020 did not exceed the $100,000 reporting threshold established by
SEC rules for “smaller reporting companies.”
(3) Marc Cantillon has served as our Chief Medical Officer
since 2013. Total compensation earned by Dr. Cantillon did not exceed $100,000 during each of the fiscal years ended
December 31, 2020 and 2019. Executive compensation and outstanding equity award disclosures are not provided for Dr. Cantillon
because his total compensation for each of the fiscal years ended December 31, 2020 and 2019 did not exceed the $100,000
reporting threshold established by SEC rules for “smaller reporting companies.”
(4) The “Salary ($)” column includes salary
amounts earned but deferred for each named executive officer during the fiscal years ended December 31, 2020 and 2019. The
total salary amounts paid, or to be paid, in cash to Dr. Bhat during the fiscal years ended December 31, 2020 and 2019
is approximately $187,952 and $70,000, respectively. Pursuant to a Stock Issuance Agreement and Release entered into as of September
24, 2020 with Dr. Bhat, 132,506 shares common stock of Reviva were issued to Dr. Bhat in full satisfaction of the entire
deferred salary balance owed to Dr. Bhat.
Employment Agreements
Laxminarayan Bhat. On
December 14, 2020 we entered into a customary employment agreement with Dr. Bhat (the “Bhat Employment Agreement”).
The Bhat Employment Agreement provides for Dr. Bhat to serve as Chief Executive Officer reporting to our board of directors
and provides for an annual base salary of $400,000 (the “Base Salary”). In addition, Dr. Bhat is eligible to
receive an annual bonus of up to fifty percent (50%) of his then-Base Salary (the “Target Bonus”), subject to
the satisfaction of certain subjective or objective criteria established and approved by our compensation committee. Pursuant
to the terms of the Bhat Employment Agreement, Dr. Bhat is eligible to receive equity awards under the Company’s equity
incentive plan. The Bhat Employment Agreement contains customary confidentiality and assignment of inventions provisions. In addition,
we will indemnify and hold Dr. Bhat harmless, to the maximum extent permitted under applicable law, from and against any
liabilities, costs, claims and expenses incurred in defense of any Proceeding (as defined in the Bhat Employment Agreement) that
Dr. Bhat is made a party to.
If we terminate Dr. Bhat’s employment
without Cause or Dr. Bhat terminates his employment for Good Reason (each as defined in the Bhat Employment Agreement), Dr. Bhat
will be entitled to receive (i) the Accrued Amounts (as defined in the Bhat Employment Agreement), and subject to Dr. Bhat’s
execution and nonrevocation of a release of claims, (ii) eighteen (18) months of his Base Salary plus one and one-half times
his annual Target Bonus (reduced to six (6) months of Base Salary and one-half of his annual Target Bonus if Dr. Bhat’s
employment is terminated after the third anniversary of the effective date of the Bhat Employment Agreement) payable in equal
installments in accordance with the Company’s normal payroll practices, (iii) twelve (12) months of service credit
under all outstanding unvested equity incentive awards granted during Dr. Bhat’s employment (reduced to six (6) months
of service credit if Dr. Bhat’s employment is terminated after the third anniversary of the effective date of the Bhat
Employment Agreement) and (iv) reimbursement of COBRA coverage for up to eighteen (18) months. If Dr. Bhat’s employment
is terminated on account of his death or Disability (as defined in the Bhat Employment Agreement), Dr. Bhat will be entitled
to receive the Accrued Amounts and a lump sum payment equal to eighteen (18) months Base Salary and Target Bonus. In addition,
if we terminate Dr. Bhat’s employment without Cause or Dr. Bhat terminates his employment for Good Reason within
twelve (12) months following a Change in Control (as defined in the Bhat Employment Agreement), Dr. Bhat will be entitled
to receive (i) the Accrued Amounts and, subject to Dr. Bhat’s execution and nonrevocation of a release of claims,
(ii) a lump sum payment equal to 1.5 times his Base Salary and Target Bonus for the year in which the termination occurs,
(iii) accelerated vesting of all of his outstanding equity incentive awards and cash incentive payments and (iv) reimbursement
of COBRA coverage for up to eighteen (18) months.
Simultaneously with the execution of the
Merger Agreement, Dr. Bhat entered into non-competition and non-solicitation agreement (the “Non-Competition Agreement”)
, which became effective on December 14, 2020, pursuant to which Dr. Bhat agreed not to compete with Tenzing, Reviva
and their respective affiliates during the three (3) year period following the Closing in North America, Europe or India
or in any other markets in which Tenzing and Reviva are engaged. Dr. Bhat also agreed that during such three (3) year
restricted period to not solicit employees or customers of such entities. The Non-Competition Agreement also contains customary
confidential and mutual non-disparagement provisions.
Narayan Prabhu.
On December 14, 2020, an offer letter Reviva entered into with Narayan Prabhu, dated October 19, 2020, became effective
(the “Prabhu Offer Letter”). The Prabhu Offer Letter provides for Mr. Prabhu to serve as Chief Financial Officer
reporting to our Chief Executive Officer or our board of directors and provides for an annual base salary of $275,000. Pursuant
to the Prabhu Offer Letter, Mr. Prabhu’s employment with the Company will be at-will.
In addition, Mr. Prabhu is eligible
for a discretionary bonus. Pursuant to the Prabhu Offer Letter, subject to approval by the board of directors, Mr. Prabhu
will be granted a stock option to purchase up to fifty thousand (50,000) shares of our Common Stock pursuant to our 2020 Equity
Incentive Plan. Pursuant to the terms of the Prabhu Offer Letter, Mr. Prabhu is also eligible to receive, from time to time,
equity awards under our 2020 Equity Incentive Plan, or any other equity incentive plan that we may adopt in the future, and the
terms and conditions of such awards, if any, will be determined by our board of directors, or a committee thereof, in their discretion.
The Prabhu Offer Letter contains customary
confidentiality and assignment of inventions provisions.
Marc Cantillon. Old Reviva
entered into an Offer Letter on December 12, 2012 with Marc Cantillon as its Chief Medical Officer (the “2012 Offer
Letter”). In October 2015, Dr. Cantillon entered into a letter agreement with Old Reviva pursuant to which Dr. Cantillon
agreed to a reduction in his base annual salary to $100,000.00 for an indefinite period of time (the “2015 Reduction Letter”).
In March 2016, Dr. Cantillon entered into a letter agreement with Old Reviva pursuant to which Dr. Cantillon agreed
to a reduction in his base annual salary to $30,000.00 for an indefinite period of time (the “2016 Reduction Letter,”
together with the 2012 Offer Letter and the 2015 Reduction Letter, the “Cantillon Offer Letter”). The Cantillon Offer
Letter was assumed by us at the Effective Time, and constitutes an at-will employment agreement. Dr. Cantillon is also eligible
to receive, from time to time, equity awards under our 2020 Equity Incentive Plan, or any other equity incentive plan we may adopt
in the future, and the terms and conditions of such awards, if any, will be determined by our board of directors, or a committee
thereof, in their discretion.
Outstanding Equity Awards at Fiscal Year-End — 2020
As of December 31,
2020, our principal executive officer did not hold any outstanding equity awards. Executive compensation and outstanding equity
award disclosures are not provided for Mr. Prabhu or Dr. Cantillon because each of their total compensation for the fiscal
year ended December 31, 2020 did not exceed the $100,000 reporting threshold established by SEC rules for “smaller
reporting companies.”
Director Compensation
Prior to the Business Combination, Old
Reviva did not pay any compensation to its two non-employee directors (Purav Patel, a current member of our board of directors,
and Bradley Thompson, a former director of Old Reviva) during the fiscal year ended December 31, 2020. After the Business
Combination, we did not pay any compensation to the current members of our board of directors during the fiscal year ended December
31, 2020. On November 5, 2018, in connection with their appointments to, and service on, the board of directors of Old Reviva,
the board of directors of Old Reviva proposed approving the grant of options to purchase up to 100,000 shares of common stock
of Old Reviva to each of Purav Patel and Bradley Thompson, to be approved by subsequent action of the board of directors of Old
Reviva (the “Promised Options”). Our compensation committee will determine the number of shares of Common Stock for
which Mr. Patel will be granted an option to purchase shares, which number is anticipated to be approximately 15,226, and
the terms of such option grant under the 2020 Equity Incentive Plan, in satisfaction of the obligation to issue the Promised Options
for Mr. Patel. Effective July 19, 2020, Old Reviva issued Mr. Thompson a Former Service Provider Warrant for 100,000
shares of common stock of Old Reviva, in satisfaction of the obligation to issue the Promised Options to Mr. Thompson.
Our board of directors
intends to consider and adopt a director compensation policy for its non-employee directors. Our board of directors anticipates
that such policy will include equity grants determined by the compensation committee and reimbursement for reasonable expenses
incurred in connection with attending board and committee meetings
Equity Incentive Plans
2020 Equity Incentive Plan
General
On December 14,
2020, the Reviva Pharmaceuticals Holdings, Inc. 2020 Equity Incentive Plan (the “2020 Equity Incentive Plan”)
became effective. The general purpose of the 2020 Equity Incentive Plan is to provide a means whereby employees, officers, directors,
consultants, advisors or other individual service providers may develop a sense of proprietorship and personal involvement in
our development and financial success, and to encourage them to devote their best efforts to us, thereby advancing our interests
and the interests of our stockholders. The 2020 Equity Incentive Plan provides for a broad array of equity incentives and performance
cash incentives. Employees, officers, directors, consultants, advisors and our other individual service providers who, in the
opinion of our compensation committee, are in a position to contribute to our success, or any person who is determined by our
composition committee to be a prospective employee, officer, director, consultant, advisor or other individual service provider
of the Company or any subsidiary are eligible for grants under the 2020 Equity Incentive Plan.
Description of the 2020 Equity Incentive Plan
The following is a summary
description of the principal terms of the 2020 Equity Incentive Plan and is qualified in its entirety by the full text of the
2020 Equity Incentive Plan.
Available
Shares. As of January 1, 2021, an aggregate of 1,384,761 shares of Common Stock may be issued
under the 2020 Equity Incentive Plan, subject to equitable adjustment in the event of stock splits and other capital changes (the
“Share Reserve”). In addition, the Share Reserve will automatically increase on January 1st of each year, for
a period of not more than ten years, commencing on January 1st of the year following the year in which the effective
date of the 2020 Equity Incentive Plan occurs, and ending on (and including) January 1, 2030, in an amount equal to the lesser
of (i) ten percent (10%) of the total number of shares of Common Stock outstanding on December 31st of the preceding
calendar year or (ii) such number of shares of common stock determined by the Company’s board of directors (the “Annual
Increase”). Notwithstanding the foregoing and, subject to adjustment as provided in the 2020 Equity Incentive Plan, the
maximum number of shares which may be issued in respect of Incentive Stock Options shall be equal to 461,587.
In applying the aggregate share limitation
under the 2020 Equity Incentive Plan, shares of Common Stock (i) subject to awards that are forfeited, cancelled, returned
to the Company for failure to satisfy vesting requirements or otherwise forfeited, or terminated without payment being made thereunder
and (ii) that are surrendered in payment or partial payment of taxes required to be withheld with respect to the exercise
of stock options or in payment with respect to any other form of award are not counted and, therefore, may be made subject to
new awards under the 2020 Equity Incentive Plan.
Non-Employee Director Compensation Limit
Under the 2020 Equity Incentive Plan, the
maximum number of shares of common stock subject to stock awards granted under the 2020 Equity Incentive Plan during any one calendar
year to any non-employee director may not exceed a number equal to twenty-five percent (25%) of all shares of common stock
available for awards under the 2020 Equity Incentive Plan shares of common stock.
Eligibility. Any
employee, officer, director, consultant, advisor or other individual service provider of the Company or any of its subsidiaries,
or any person who is determined by the compensation committee to be a prospective employee, officer, director, consultant, advisor
or other individual service provider of the Company or any of its subsidiaries is eligible to participate in the 2020 Equity Incentive
Plan.
Administration. The
2020 Equity Incentive Plan will be administered by our compensation committee. Our compensation committee will have discretion
to determine the individuals to whom awards may be granted under the 2020 Equity Incentive Plan, the number of shares Common Stock,
units or other rights subject to each award, the type of award, the manner in which such awards will vest, and the other conditions
applicable to awards. Our compensation committee will be authorized to interpret the 2020 Equity Incentive Plan, to prescribe,
amend and rescind any rules and regulations relating to the 2020 Equity Incentive Plan and to make any other determinations
necessary or desirable for the administration of the 2020 Equity Incentive Plan. All interpretations, determinations and actions
by our compensation committee will be final, conclusive and binding on all parties.
Types of Awards. Under
the 2020 Equity Incentive Plan, our compensation committee may grant nonqualified stock options (or NSOs), ISOs, stock appreciation
rights (or SARs), restricted stock, stock units, performance shares, performance units, other cash-based awards and
other stock-based awards. The terms of each award will be set forth in a written agreement with the recipient.
Stock
Options. Our compensation committee will determine the exercise price and other terms for each
option and whether the options will be NSOs or ISOs. The exercise price per share of each option will not be less than 100% of
the fair market value of the Common Stock on the date of grant or, if there are no trades on such date, then the closing price
of a share of the Common Stock on the most recent date preceding the date of grant on which shares of common stock were publicly
traded (or 110% of the fair market value per share in the case of ISOs granted to a ten-percent or more shareholder). However,
if permissible under law and the rules of the exchange on which the Company is listed, options to participants who are not
residents of the U.S. may be granted at a price below fair market value on the date of grant. On January 11, 2021, the closing
sale price of a share of Common Stock on Nasdaq was $9.2899.
ISOs may be granted only to employees and
are subject to certain other restrictions. To the extent an option intended to be an ISO does not qualify as an ISO, it will be
treated as a nonqualified option. A participant may exercise an option by written notice and payment of the exercise price in
cash, or, as determined by our compensation committee, through delivery of previously owned shares, the withholding of shares
deliverable upon exercise, a cashless exercise program implemented by our compensation committee in connection with the 2020 Equity
Incentive Plan, and/or such other method as approved by our compensation committee and set forth in an award agreement. The maximum
term of any option granted under the 2020 Equity Incentive Plan is ten years from the date of grant. The Compensation Committee
may, in its discretion, permit a holder of an NSO to exercise the option before it has otherwise become exercisable, in which
case the shares of the Company’s common stock issued to the recipient will be restricted stock having analogous vesting
restrictions to the unvested NSO before exercise.
No option may be exercisable
for more than ten years (five years in the case of an ISO granted to a ten-percent or more shareholder) from the date
of grant. Options granted under the 2020 Equity Incentive Plan will be exercisable at such time or times as our compensation committee
prescribes at the time of grant. No employee may receive ISOs that first become exercisable in any calendar year in an amount
exceeding $100,000.
Unless an award agreement provides otherwise,
if a participant’s Service (as defined in the 2020 Equity Incentive Plan) terminates (i) by reason of his or her death
or Disability (as defined in the 2020 Equity Incentive Plan), any option held by such participant may be exercised, to the extent
otherwise exercisable, by the participant or his or her estate or personal representative, as applicable, at any time in accordance
with its terms for up to one year after the date of such participant’s death or termination of Service, as applicable, (ii) for
Cause (as defined in the 2020 Equity Incentive Plan), any option held by such participant will be forfeited and cancelled as of
the date of termination of Service and (iii) for any reason other than death,, Disability or Cause, any option held by such
participant may be exercised, to the extent otherwise exercisable, up until ninety (90) days following termination of Service.
Stock Appreciation Rights. Our
compensation committee may grant SARs independent of or in connection with an option. Our compensation committee will determine
the other terms applicable to SARs. The base price per share of each SAR will not be less than 100% of the closing price of a
share of Common Stock on the date of grant or, if there are no trades on such date, then the closing price of a share of the Company’s
common stock on the most recent date preceding the date of grant on which shares of common stock were publicly traded. The maximum
term of any SAR granted under the 2020 Equity Incentive Plan will be ten years from the date of grant. Generally, each SAR
will entitle a participant upon exercise to an amount equal to:
|
·
|
the excess
of the fair market value on the exercise date of one share of our common stock over the
base price, multiplied by
|
|
·
|
the number
of shares of Common Stock as to which the SAR is exercised.
|
Payment may be made in shares of Common
Stock, in cash, or partly in shares of Common Stock and partly in cash, all as determined by our compensation committee.
Restricted Stock and Stock Units. Our
compensation committee may award restricted common stock and/or stock units under the 2020 Equity Incentive Plan. Restricted
stock awards consist of shares of stock that are transferred to a participant subject to restrictions that may result in forfeiture
if specified conditions are not satisfied. Stock units confer the right to receive shares of the Company’s common stock,
cash, or a combination of shares and cash, at a future date upon or following the attainment of certain conditions specified by
our compensation committee, subject to applicable tax withholding requirements. Our compensation committee will determine the
restrictions and conditions applicable to each award of restricted stock or stock units, which may include performance-based
conditions. Unless our compensation committee determines otherwise at the time of grant, holders of restricted stock will have
the right to vote the shares and receive all dividends and other distributions.
Performance Shares and Performance
Units. Our compensation committee may award performance shares and/or performance units under the
2020 Equity Incentive Plan. Performance shares and performance units are awards, payable in shares of Common Stock, cash
or a combination thereof, which are earned during a specified time period subject to the attainment of performance goals, as established
by our compensation committee. our compensation committee will determine the restrictions and conditions applicable to each award
of performance shares and performance units.
Incentive Bonus Awards. Our
compensation committee may award incentive bonus awards payable in cash or shares of common stock, as set forth in an award agreement.
Incentive bonus awards may be based upon the attainment of specified levels of Company or subsidiary performance. The amount of
an incentive bonus award to be paid upon the attainment of each targeted level of performance will equal a percentage of
a participant’s base salary for the fiscal year, a fixed dollar amount or such other formula, as determined by our compensation
committee. Our compensation committee will determine the terms and conditions applicable to each incentive bonus award.
Other Stock-Based and Cash-Based
Awards. Our compensation committee may award other types of stock-based or cash-based awards under
the 2020 Equity Incentive Plan, including the grant or offer for sale of unrestricted shares of Common Stock, in such amounts
and subject to such terms and conditions as our compensation committee determines.
Transferability. Awards
granted under the 2020 Equity Incentive Plan will not be transferable other than by will or by the laws of descent and distribution,
except that our compensation committee may permit NSOs, share-settled SARs, restricted stock, performance share or share-settled
other stock-based awards to be transferred to family members and/or for estate planning or charitable purposes.
Change in Control. Our
compensation committee may, at the time of the grant of an award, provide for the effect of a change in control (as defined in
the 2020 Equity Incentive Plan) on any award, including (i) accelerating or extending the time periods for exercising, vesting
in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, (iii) providing
for the cash settlement of an award for an equivalent cash value, as determined by our compensation committee, or (iv) such
other modification or adjustment to an award as our compensation committee deems appropriate to maintain and protect the rights
and interests of participants upon or following a change in control. Unless otherwise provided by an award agreement, our compensation
committee may, in its discretion and without the need for the consent of any recipient of an award, also take one or more of the
following actions contingent upon the occurrence of a change in control: (a) cause any or all outstanding options and SARs
to become immediately exercisable, in whole or in part; (b) cause any other awards to become non-forfeitable, in whole or
in part; (c) cancel any option or SAR in exchange for a substitute option and/or SAR; (d) cancel any award of restricted
stock, stock units, performance shares or performance units in exchange for a similar award of the capital stock of
any successor corporation; (e) redeem any restricted stock for cash and/or other substitute consideration with a value equal
to the fair market value of an unrestricted share of the Company’s common stock on the date of the change in control; or
(f) terminate any award in exchange for an amount of cash and/or property equal to the amount, if any, that would have been
attained upon the exercise of such award or realization of the participant’s rights as of the date of the occurrence of
the Change in Control (the “Change in Control Consideration”); provided, however that if the Change in Control Consideration
with respect to any option or SAR does not exceed the exercise price of such option or SAR, our compensation committee may cancel
the option or SAR without payment of any consideration therefor. Any such Change in Control Consideration may be subject to any
escrow, indemnification and similar obligations, contingencies and encumbrances applicable in connection with the change in control
to holders of the Company’s common stock. Without limitation of the foregoing, if as of the date of the occurrence of the
change in control our compensation committee determines that no amount would have been attained upon the realization of the participant’s
rights, then such award may be terminated by the Company without payment. The Compensation Committee may cause the Change in Control
Consideration to be subject to vesting conditions (whether or not the same as the vesting conditions applicable to the award prior
to the change in control) and/or make such other modifications, adjustments or amendments to outstanding Awards or the 2020 Equity
Incentive Plan as our compensation committee deems necessary or appropriate.
Term; Amendment and Termination. No
award may be granted under the 2020 Equity Incentive Plan on or after the 10th anniversary of the date of the adoption of the
2020 Equity Incentive Plan by the Tenzing Board. The board of directors may suspend, terminate, or amend the 2020 Equity Incentive
Plan in any respect at any time, provided, however, that (i) no amendment, suspension or termination may materially and adversely
affect the rights of a participant under any awards previously granted, without his or her consent, (ii) the Company shall
obtain stockholder approval of any 2020 Equity Incentive Plan amendment as required to comply with any applicable law, regulation
or stock exchange rule and (iii) stockholder approval is required for any amendment to the 2020 Equity Incentive Plan
that (x) increases the number of shares of common stock available for issuance thereunder or (y) changes the persons
or class of persons eligible to receive awards.
Summary of Material United States Federal Income Tax Consequences
of the 2020 Equity Incentive Plan
The following is a summary of the principal
federal income tax consequences of option grants and other awards under the 2020 Equity Incentive Plan. Optionees and recipients
of other rights and awards granted under the 2020 Equity Incentive Plan are advised to consult their personal tax advisors before
exercising an option or stock appreciation right or disposing of any stock received pursuant to the exercise of an option or stock
appreciation right or following vesting of a restricted stock award or restricted stock unit or upon grant of an unrestricted
stock award. In addition, the following summary is based upon an analysis of the Code as currently in effect, existing laws, judicial
decisions, administrative rulings, regulations and proposed regulations, all of which are subject to change and does not address
state, local or other tax laws.
Nonqualified Stock Options. There
will be no federal income tax consequences to a participant or to the Company upon the grant of a nonqualified stock option. When
the participant exercises a nonqualified option, he or she will recognize ordinary income in an amount equal to the excess of
the fair market value of the option shares on the date of exercise over the exercise price, and the Company will be allowed a
corresponding tax deduction, subject to any applicable limitations under Code Section 162(m). Any gain that
a participant realizes when the participant
later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the participant
held the shares.
Incentive Stock Options. There
will be no federal income tax consequences to a participant or to the Company upon the grant of an ISO. If the participant holds
the option shares for the required holding period of at least two years after the date the option was granted and one year
after exercise of the option, the difference between the exercise price and the amount realized upon sale or disposition of the
option shares will be long-term capital gain or loss, and the Company will not be entitled to a federal income tax deduction.
If the participant disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding
period ends, the participant will recognize taxable ordinary income in an amount equal to the difference between the exercise
price and the lesser of the fair market value of the shares on the date of exercise or the disposition price, and the Company
will be allowed a federal income tax deduction equal to such amount, subject to any applicable limitations under Code Section 162(m).
Any amount received by the participant in excess of the fair market value on the exercise date will be taxed to the participant
as capital gain, and the Company will receive no corresponding deduction. While the exercise of an ISO does not result in current
taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will
be a tax preference item that could subject a participant to alternative minimum tax in the year of exercise.
Stock Appreciation Rights. A
participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a SAR is granted. When
a participant exercises a SAR, the cash or fair market value of any common stock received will be taxable to the participant as
ordinary income, and the Company will be allowed a federal income tax deduction equal to such amount, subject to any applicable
limitations under Code Section 162(m).
Restricted Stock. Unless
a participant makes an election to accelerate recognition of income to the grant date as described below, the participant will
not recognize income, and the Company will not be allowed a compensation tax deduction, at the time restricted stock is granted.
When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the common stock
as of that date, less any amount paid for the stock, and the Company will be allowed a corresponding tax deduction, subject to
any applicable limitations under Code Section 162(m). If the participant files an election under Code Section 83(b) within
30 days after the grant date, the participant will recognize ordinary income as of the grant date equal to the fair market
value of the stock as of that date, less any amount paid for the stock, and the Company will be allowed a corresponding compensation
tax deduction at that time, subject to any applicable limitations under Code Section 162(m). Any future appreciation in the
stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, such participant will
not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.
Stock Units, Performance Awards,
and Incentive Bonus Awards. A participant will not recognize income, and the Company will not be allowed
a compensation tax deduction, at the time a stock unit, performance award or incentive bonus award is granted. When a participant
receives payment under a stock unit, performance award or incentive bonus award, the amount of cash received and the fair market
value of any shares of stock received will be ordinary income to the participant, and the Company will be allowed a corresponding
compensation tax deduction at that time, subject to any applicable limitations under Code Section 162(m).
Section 409A. If
an award is subject to Section 409A of the Code, but does not comply with the requirements of Section 409A of the Code,
the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes
and penalties. Participants are urged to consult with their tax advisors regarding the applicability of Section 409A of the
Code to their awards.
Potential Limitation on Company Deductions. Section 162(m) of
the Code generally disallows a tax deduction for compensation in excess of $1 million paid in a taxable year by a publicly
held corporation to its chief executive officer and certain other “covered employees”. The Company’s board of
directors and our compensation committee intend to consider the potential impact of Section 162(m) on grants made under
the 2020 Equity Incentive Plan, but reserve the right to approve grants of options and other awards for an executive officer that
exceeds the deduction limit of Section 162(m).
Tax Withholding. As
and when appropriate, each optionee purchasing shares of the Company’s common stock and each grantee receiving an award
of shares of the Company’s common stock under the 2020 Equity Incentive Plan will be required to pay any federal, state
or local taxes required by law to be withheld.
THE FOREGOING IS ONLY A SUMMARY OF
THE EFFECT OF THE U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY UNDER THE 2020 EQUITY INCENTIVE PLAN. IT DOES
NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH OR THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
New Grants under the 2020 Equity
Incentive Plan. The following table sets forth awards intended to be granted to each of the following
under the 2020 Equity Incentive Plan, subject to approval by our compensation committee:
Group
|
|
|
Number
of Options
Granted
Under
Plan
|
|
All Executive Officers as a Group
|
|
|
50,000
|
(1)
|
All Non-Employee Directors, as a Group
|
|
|
15,226
|
(2)
|
All employees other than executive officers as a Group
|
|
|
-
|
|
|
(1)
|
Pursuant to the Prabhu Offer Letter, the compensation committee of the Company will determine
the number of shares of Company Common Stock for which Mr. Prabhu will be granted an option to purchase shares, which
number is anticipated to be approximately 50,000 shares, and the terms of such option grant under the 2020 Equity Incentive
Plan.
|
|
(2)
|
On November 5, 2018, in connection with his appointment to, and service on, the board of directors of Reviva, the
board of directors of Reviva proposed approving the grant of options to purchase up to 100,000 shares of common stock of Reviva
to Purav Patel (the “Promised Options”). The compensation committee of the Company will determine the number
of shares of Common Stock for which Mr. Patel will be granted an option to purchase shares, which number is anticipated
to be approximately 15,226 shares, and the terms of such option grant under the 2020 Equity Incentive Plan, in satisfaction
of the obligation to issue the Promised Options.
|
Because future awards under the 2020 Equity
Incentive Plan (including the grants described in the table above) will be granted in the discretion of our compensation committee,
the type, number, recipients, and other terms of such awards cannot be determined at this time.
2006 Equity Incentive Plan
Reviva’s board of directors adopted,
and Reviva’s stockholders approved, the Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan, effective as of August 2006.
The Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan provided for the grant of incentive stock options, or ISOs, within
the meaning of Section 422 of the Code, to Reviva’s employees, and for the grant of nonstatutory stock options, or
NSOs, and restricted stock awards to Reviva’s employees, officers, directors and consultants; provided such consultants
render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. As of 2016,
no new grants of awards are permitted under the Reviva Pharmaceuticals, Inc. 2006 Equity Incentive Plan.
As of the Effective Time, the Reviva Pharmaceuticals, Inc.
2006 Equity Incentive Plan was amended to change its name to the Reviva Pharmaceuticals Holdings, Inc. 2006 Equity Incentive
Plan (the “2006 Equity Incentive Plan”), and each outstanding option to acquire Reviva common stock (whether vested
or unvested) under the 2006 Equity Incentive Plan was assumed by the Company and automatically converted into an option to acquire
shares of Common Stock, with its price and number of shares equitably adjusted based on the conversion of the shares of common
stock of Reviva into shares of the Common Stock pursuant to the Merger Agreement. Pursuant to such assumption and automatic conversion,
as of the Effective Time there are outstanding options under the 2006 Equity Incentive Plan exercisable for an aggregate of 65,471
shares of Company Common Stock, and no new grants of awards are permitted under the 2006 Equity Incentive Plan.
Indemnification Agreements
On December 14, 2020, our board of
directors adopted and entered into (a) a form of indemnification agreement (the “Indemnification Agreement”)
between the Company and each of its directors and executive officers, except for Parag Saxena, and (b) a form of
indemnification agreement (the “Saxena Indemnification Agreement”) with Parag Saxena.
The Indemnification Agreement requires
us to indemnify each director and officer to the fullest extent permitted by applicable law, for certain expenses, including attorneys’
fees, judgments, penalties, fines and settlement amounts actually and reasonably incurred in any threatened, pending or completed
action, suit, claim, investigation, inquiry, administrative hearing, arbitration or other proceeding to which the director or
officer was, or is threatened to be made, a party by reason of the fact that such director or officer is or was a director, officer,
employee or agent of us. Subject to certain limitations, the Indemnification Agreement provides for the advancement of expenses
incurred by the indemnitee, and the repayment to us of the amounts advanced to the extent that it is ultimately determined that
the indemnitee is not entitled to be indemnified by us. The Indemnification Agreement also creates certain rights in favor of
us, including the right to assume the defense of claims and to consent to settlements. The Indemnification Agreement does not
exclude any other rights to indemnification or advancement of expenses to which the indemnitee may be entitled under applicable
law, our the certificate of incorporation or our bylaws, any agreement, a vote of stockholders or disinterested directors, or
otherwise.
The Saxena Indemnification Agreement is
on substantially the same form as the Indemnification Agreement, except that it includes a provision specifying that the we will
act as the indemnitor of first resort and that we will not assert that Mr. Saxena, as indemnitee under the Saxena Indemnification
Agreement, must seek expense advancement or reimbursement, or indemnification, from any stockholder of the Company and/or certain
of any such stockholder’s affiliates who Mr. Saxena may have rights to indemnification, advancement of expenses and/or
insurance from, before we must perform our expense advancement and reimbursement, and indemnification obligations, under the Saxena
Indemnification Agreement.
CERTAIN RELATIONSHIPS
AND RELATED PERSON TRANSACTIONS
The following includes a summary of transactions
since March 20, 2018 (inception), to which we or Tenzing have been a participant in which the amount involved exceeded or
will exceed the lesser of (i) $120,000 or (ii) 1% of the average total assets of Tenzing at year end for the last two
completed fiscal years, and in which any of our directors, executive officers or beneficial owners of more than 5% of our capital
stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest,
other than equity and other compensation, termination, change in control and other arrangements, which are described in the section
entitled “Executive Compensation.”
Tenzing Related Person Transactions
Founder Shares
In June 2018, Tenzing issued an aggregate
of 1,437,500 Founder Shares to Sponsor for an aggregate purchase price of $25,000 in cash. On August 20, 2018, Tenzing
effectuated a 1.1-for-1 share dividend resulting in an aggregate of 1,581,250 Founder Shares outstanding. The Founder Shares included
an aggregate of up to 206,250 shares subject to forfeiture by Sponsor to the extent that the underwriters’ over-allotment
was not exercised in full or in part, so that Sponsor would collectively own 20% of Tenzing’s issued and outstanding shares
after the IPO. On August 30, 2018, as a result of the underwriters’ election to fully exercise their over-allotment
option, 206,250 Founder Shares are no longer subject to forfeiture.
Sponsor has agreed not to transfer, assign
or sell any of the Founder Shares (except to certain permitted transferees) until the earlier of (i) one year after
the date of the consummation of the Business Combination, or (ii) the date on which the closing price of Tenzing’s
ordinary shares equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing 150 days after the Business Combination. On December
28, 2020, Sponsor conducted a liquidating distribution of all of the shares of Company Common Stock that it held on such date,
including the Founder Shares, Sponsor’s Private Placement Shares, and Working Capital Shares, to its members (as permitted
transferees pursuant to a liquidating distribution) and assigned its registration rights in connection with the distribution.
As a result, each of the members of Sponsor have the same registration rights and transfer restrictions with respect to the shares
of Company Common Stock, including the Founder Shares, Sponsor’s Private Placement Shares, and Working Capital Shares, received
by such member pursuant to the liquidating distribution.
Related Party Advances
Through August 23, 2018, Tenzing’s
Chief Executive Officer advanced an aggregate of $363,436 to be used for the payment of costs related to the IPO. The advances
were non-interest bearing, unsecured and due on demand. The advances were repaid upon the consummation of the IPO on August 23,
2018.
Related Party Loans
In order to finance transaction costs in
connection with a business combination, Sponsor or an affiliate of Sponsor, or Tenzing’s officers and directors were permitted,
but were not obligated to, making working capital loans. Such working capital loans were evidenced by promissory notes. The notes
were to be repaid upon consummation of a business combination, without interest, or, at the lender’s discretion, up to $2,000,000
of notes were permitted to be converted upon consummation of a business combination into additional Private Placement Units (as
defined in the Prospectus) at a price of $10.00 per Unit.
On February 10, 2020, Tenzing entered
into a convertible promissory note with Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $750,000 (the “February Working
Capital Loan”). Of such amount, $567,182 was used to fund an extension loan into the Trust Account and the balance was used
to finance transaction costs in connection with a business combination. The February Working Capital Loan was non-interest
bearing and became due to be paid upon the consummation of the Business Combination. The February Working Capital Loan was
converted into units at a purchase price of $10.00 per unit. The units were identical to the Private Placement Units.
On May 21, 2020, Tenzing entered into
a convertible promissory note with Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $375,000 (the “May Working
Capital Loan”). Of such amount, $210,836 was used to fund the extension loan into the Trust Account and the balance was
used to finance transaction costs in connection with a business combination. The May Working Capital Loan was non-interest
bearing and became due to be paid upon the consummation of the Business Combination. The May Working Capital Loan was converted
into units at a purchase price of $10.00 per unit. The units were identical to the Private Placement Units.
On July 24, 2020, Tenzing entered
into a convertible promissory note with Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $175,000 (the “July Working
Capital Loan”). Of such amount, $105,418.17 was used to fund the extension loan into the Trust Account. The July Working
Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The July Working
Capital Loan was converted into units at a purchase price of $10.00 per unit. The units were identical to the Private
Placement Units.
On August 18, 2020, Tenzing entered
into a convertible promissory note with Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $125,000 (the “August Working
Capital Loan”). Of such amount, $105,418.17 was used to fund the extension loan into the Trust Account and the balance was
used to finance transaction costs in connection with a business combination. The August Working Capital Loan was non-interest
bearing and became due to be paid upon the consummation of the Business Combination. The August Working Capital Loan was
converted into units at a purchase price of $10.00 per unit. The units were identical to the Private Placement Units.
On September 24, 2020, Tenzing entered
into a convertible promissory note with Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $350,000 (the “September Working
Capital Loan”). Of such amount, $105,084.14 was used to fund the extension loan into the Trust Account and the balance was
used to finance transaction costs in connection with a business combination and to fund additional contributions in connection
with the extension. The September Working Capital Loan was non-interest bearing and became due to be paid upon the consummation
of the Business Combination. The September Working Capital Loan was converted into units at a purchase price of $10.00
per unit, provided that conversion greater than $75,000 of the unpaid balance of the note was subject to the approval of Tenzing
shareholders, which approval was obtained at the Shareholders Meeting. The units were identical to the Private Placement
Units.
On November 12, 2020, Tenzing entered
into a convertible promissory note with Sponsor, pursuant to which Tenzing borrowed an aggregate amount of $200,000 (the “November Working
Capital Loan”, together with the February Working Capital Loan, the May Working Capital Loan, the July Working
Capital Loan, the August Working Capital Loan and the September Working Capital Loan, the “Working Capital Loans”).
Of such amount, $105,084.14 was used to fund the extension loan into the Trust Account and the balance was used to finance transaction
costs in connection with a business combination and to fund additional contributions in connection with the extension. The November Working
Capital Loan was non-interest bearing and became due to be paid upon the consummation of the Business Combination. The November Working
Capital Loan was converted into units at a purchase price of $10.00 per unit, provided that conversion of the unpaid balance
of the note was subject to the approval of Tenzing shareholders, which approval was obtained at the Shareholders Meeting. The units
were identical to the Private Placement Units.
On December 14, 2020, in connection
with the consummation of the Business Combination, Sponsor elected to have the Working Capital Loans converted, pursuant to the
terms of the Working Capital Loans, into Private Placement Units, resulting in the issuance of an aggregate of 197,500 shares
of the Company’s Common Stock (the “Working Capital Shares”) and warrants to purchase 197,500 shares of the
Company’s Common Stock (the “Working Capital Warrants,” together with the Working Capital Shares, the “Conversion
Securities”). Upon issuance of the Conversion Securities all of the existing obligations of the Company under the Working
Capital Loans were satisfied in full and irrevocably discharged, terminated and released, and Sponsor retained no rights with
respect to such Working Capital Loans, other than the registration rights provided pursuant to such Working Capital Loans.
On December 28, 2020, Sponsor conducted
a liquidating distribution of all of the shares of Company Common Stock that it held on such date, including the Founder Shares,
Sponsor’s Private Placement Shares, and Working Capital Shares, to its members (as permitted transferees pursuant to a liquidating
distribution) and assigned its registration rights in connection with the distribution. As a result, each of the members of Sponsor
have the same registration rights and transfer restrictions with respect to the shares of Company Common Stock, including the
Founder Shares, Sponsor’s Private Placement Shares, and Working Capital Shares, received by such member pursuant to the
liquidating distribution.
Related Party Non-Redemption Agreement
Pursuant to the Non-Redemption Agreement,
on December 14, 2020 Sabby Volatility Warrant Master Fund, Ltd. received (a) fifty-five thousand fifty (55,050)
shares of Common Stock that was issued by the Company, (b) three hundred forty-three thousand (343,000) Private Placement
Warrants that were acquired by Sponsor as part of the private placement units issued to Sponsor in connection with Tenzing’s
IPO, which Sponsor transferred to Shareholder on December 15, 2020 pursuant to the terms of the Non-Redemption Agreement
and (c) the Working Capital Warrants, which Sponsor transferred to Shareholder on December 15, 2020.
Reviva Related Person Transactions
Other than compensation arrangements with
the named executive officers and directors of Reviva, the disclosures below describe each transaction or series of similar transactions,
since January 1, 2018, to which Reviva was a party or will be a party, in which:
|
·
|
the
amounts involved exceeded or will exceed the lesser of (i) $120,000 or (ii) 1%
of the average total assets of Reviva at year end for the last two completed fiscal years;
and
|
|
·
|
any
of Reviva’s directors, executive officers, promoters or holders of more than 5%
of its capital stock, or any member of the immediate family of the foregoing persons,
had or will have a direct or indirect material interest.
|
Compensation arrangements for Reviva’s named executive
officers and directors are described in the prospectus in the section titled “Executive Compensation”
Promissory Notes
On July 11, 2016, Reviva issued a
note to Purav Patel, one of Reviva’s directors, in the name of PENSCO Trust Company, Custodian, FBO Purav Patel IRA, pursuant
to which Reviva borrowed an aggregate principal amount of $50,000.00. The entire balance of the note was used to help finance
Reviva’s operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of July 11,
2017. The convertible promissory note had been in default since the maturity date, and was accruing interest at a default rate
of 12% per annum. Pursuant to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the
Business Combination, the note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to
the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest
on a date that was no more than five (5) days prior to the consummation of the Business Combination (which interest balance
was approximately $24,499) by (B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock
all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released,
and Mr. Patel retained no rights with respect to such note.
On July 11, 2016, Reviva issued a
note to Purav Patel, one of Reviva’s directors, pursuant to which Reviva borrowed an aggregate principal amount of $50,000.
The entire balance of the note was used to help finance Reviva’s operations. The note initially accrued interest at a rate
of 8% per annum with a maturity date of July 11, 2017. The convertible promissory note had been in default since the maturity
date, and was accruing interest at a default rate of 12% per annum. Pursuant to an amendment to the note, on December 14,
2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva
common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then
outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation
of the Business Combination (which interest balance was approximately $24,499) by (B) a conversion price equal to $1.329698.
Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in
full and irrevocably discharged, terminated and released and Mr. Patel retained no rights with respect to such note.
On November 13, 2018, Reviva issued
a note to Purav Patel, one of Reviva’s directors, pursuant to which Reviva borrowed an aggregate principal amount of $50,000.
The entire balance of the note was used to help finance Reviva’s operations. The note accrued interest at a rate of 8% per
annum with a maturity date of May 13, 2019. Pursuant to an amendment to the note, on December 14, 2020, immediately
prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva common stock equal
to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal
and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation of the Business Combination
(which interest balance was approximately $8,296) by (B) a conversion price equal to $0.831018. Upon issuance of such shares
of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in full and irrevocably discharged,
terminated and released and Mr. Patel retained no rights with respect to such note.
On December 13, 2018, Reviva issued
a note to Buena Vista Fund II, LLC of which Purav Patel, one of Reviva’s directors, is Managing Member, in the principal
amount of $25,000. The entire balance of the note was used to help finance Reviva’s operations. The note accrued interest
at a rate of 8% per annum with a maturity date of June 13, 2019. Pursuant to an amendment to the note, on December 14,
2020, immediately prior to the consummation of the Business Combination, the note converted into a number of shares of Reviva
common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then
outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days prior to the consummation
of the Business Combination (which interest balance was approximately $3,984) by (B) a conversion price equal to $1.330045.
Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under the note were satisfied in
full and irrevocably discharged, terminated and released and Buena Vista Fund II, LLC retained no rights with respect to such
note.
On October 14, 2016, Reviva issued
a note to The Firdos Sheikh Family Trust of which Firdos Sheikh, a holder of greater than 5% of Reviva’s preferred stock,
is Trustee, in the principal amount of $100,000. The entire balance of the note was used to help finance Reviva’s operations.
The note initially accrued interest at a rate of 8% per annum with a maturity date of October 14, 2017. The note had been
in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant to an amendment to
the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into
a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing
(A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days
prior to the consummation of the Business Combination (which interest balance was approximately $45,874) by (B) a conversion
price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under
the note were satisfied in full and irrevocably discharged, terminated and released and The Firdos Sheikh Family Trust retained
no rights with respect to such note.
On April 2, 2020, Reviva issued a
note to The Firdos Sheikh Family Trust of which Firdos Sheikh, a holder of greater than 5% of Reviva’s preferred stock,
is Trustee, in the principal amount of $100,000. The entire balance of the note was used to help finance Reviva’s operations.
The note accrued interest at a rate of 8% per annum with a maturity date of October 2, 2020. Pursuant to an amendment to
the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note converted into
a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing
(A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than five (5) days
prior to the consummation of the Business Combination (which interest balance was approximately $5,523) by (B) a conversion
price equal to $1.329770. Upon issuance of such shares of Reviva common stock all of the existing obligations of Reviva under
the note were satisfied in full and irrevocably discharged, terminated and released and The Firdos Sheikh Family Trust retained
no rights with respect to such note.
On September 9, 2016, Reviva issued
a note to the Thaker Family Limited Partnership, of which Pankaj Thaker, a holder of greater than 5% of Reviva’s preferred
stock, is the General Partner, in the principal amount of $25,000. The entire balance of the note was used to help finance Reviva’s
operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of September 9, 2017. The
note had been in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant to an
amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the note
converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained
by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no more than
five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $11,756) by
(B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations
of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and Thaker Family Limited
Partnership retained no rights with respect to such note.
On September 9, 2016, Reviva issued
a note to the 2012 Satyen P. Thaker Revocable Trust, of which Satyen Thaker, a holder of greater than 5% of Reviva’s preferred
stock, is the Trustee, in the principal amount of $25,000. The entire balance of the note was used to help finance Reviva’s
operations. The note initially accrued interest at a rate of 8% per annum with a maturity date of September 9, 2017. The
2016 Note had been in default since the maturity date, and was accruing interest at a default rate of 12% per annum. Pursuant
to an amendment to the note, on December 14, 2020, immediately prior to the consummation of the Business Combination, the
note converted into a number of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share)
obtained by dividing (A) the sum of all then outstanding principal and accrued but unpaid interest on a date that was no
more than five (5) days prior to the consummation of the Business Combination (which interest balance was approximately $11,756)
by (B) a conversion price equal to $1.329698. Upon issuance of such shares of Reviva common stock all of the existing obligations
of Reviva under the note were satisfied in full and irrevocably discharged, terminated and released and 2012 Satyen P. Thaker
Revocable Trust retained no rights with respect to such note.
Related Party Payable
Reviva had related party payables due to
Laxminarayan Bhat, Reviva’s Chief Executive Officer, for expenses that were incurred on Reviva’s behalf by Dr. Bhat
totaling $75,707 as of December 4, 2020, which amount was reimbursed to Dr. Bhat on December 7, 2020.
Indian Subsidiary
Mr. Krishnamurthy Bhat, an Indian
resident and the brother of Dr. Bhat, Reviva’s Chief Executive Officer’s, holds a 1% ownership stake and is a
director of the Company’s subsidiary, Reviva Pharmaceuticals India Private Limited. The Indian government regulates ownership
of Indian companies by non-residents. Foreign investment in Indian securities is generally regulated by the Consolidated Policy
on Foreign Direct Investment issued by the Government and the Foreign Exchange Management Act, 1999, which prevents 100% ownership
by a foreign parent company of its Indian subsidiary.
Employment
Reviva employs Seema R. Bhat, the spouse
of Laxminarayan Bhat, Reviva’s Chief Executive Officer, as its Vice President for Program & Portfolio Management,
pursuant to an Offer Letter dated March 1, 2011. In October 2015, Ms. Bhat entered into a letter agreement with
Reviva pursuant to which Ms. Bhat agreed to a reduction in her base annual salary to $30,000.00 for an indefinite period
of time. Effective since October 2018, Ms. Bhat had agreed to defer her entire salary, without interest. Effective as
of October 2, 2020, 35,385 shares of Reviva common stock were issued to Ms. Bhat in full satisfaction of the entire
deferred salary balance owed to Ms. Bhat, pursuant to a Stock Issuance Agreement and Release.
Effective since October 2018, Dr. Cantillon
had agreed to defer his entire salary, without interest. Effective as of October 2, 2020, 35,385 shares of Reviva common
stock were issued to Dr. Cantillon in full satisfaction of the entire deferred salary balance owed to Dr. Cantillon,
pursuant to a Stock Issuance Agreement and Release.
Effective since April 2019, Dr. Bhat
had agreed to the deferral of his past salary as necessary, without interest. Effective as of October 2, 2020, 132,506 shares
of Reviva common stock were issued to Dr. Bhat in full satisfaction of the entire deferred salary balance owed to Dr. Bhat,
pursuant to a Stock Issuance Agreement and Release.
Indemnification Agreements
The Company has entered into indemnification
agreements with each of its directors and named executive officers. These agreements require the Company to indemnify these individuals
to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to the Company,
and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. The Company
also intends to enter into indemnification agreements with its future directors and executive officers. For a more fulsome description
of the indemnification agreements refer to the disclosure in “Executive Compensation”.
Policies and Procedures for Related Party Transactions:
Our board of directors has adopted a policy
that its executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of
its Common Stock, any members of the immediate family of any of the foregoing persons and any firms, corporations or other entities
in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person
has a 5% or greater beneficial ownership interest (collectively “related parties”), are not permitted to enter into
a transaction with the Company without the prior consent of the our board of directors acting through the Audit Committee or,
in certain circumstances, the chairman of the Audit Committee. Any request for the Company to enter into a transaction with a
related party, in which the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must
first be presented to the Audit Committee, or in certain circumstances the chairman of the Audit Committee, for review, consideration
and approval. In approving or rejecting any such proposal, the Audit Committee, or the chairman of the Audit Committee, is to
consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable
than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits
to us, the availability of other sources of comparable products or services and the extent of the related party’s interest
in the transaction.
PRINCIPAL STOCKHOLDERS
The following table sets forth information
regarding the beneficial ownership of the Company, on December 28, 2020, upon the completion of the Business Combination, by:
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·
|
each
person known by the Company to be, or expected to be, the beneficial owner of more than
5% of shares of the Company’s Common Stock; and
|
|
·
|
each
of the Company’s executive officers and directors.
|
Beneficial ownership is determined according
to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses
sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or
exercisable within 60 days.
The beneficial ownership of the Common
Stock of the Company is based on 9,231,737 shares of Common Stock issued and outstanding as of December 28, 2020.
Name
of Beneficial Owner
|
|
Number
of
Shares
Beneficially
Owned
|
|
|
Percentage
of Shares
Beneficially
Owned
|
|
|
|
|
|
|
|
|
Officers and Directors (1)
|
|
|
|
|
|
|
|
|
Laxminarayan Bhat (2)
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|
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2,490,334
|
|
|
|
26.96
|
%
|
Marc Cantillon
|
|
|
*
|
|
|
|
*
|
|
Les Funtleyder
|
|
|
-
|
|
|
|
-
|
|
Richard Margolin
|
|
|
-
|
|
|
|
-
|
|
Purav Patel
|
|
|
*
|
|
|
|
*
|
|
Narayan Prabhu
|
|
|
-
|
|
|
|
-
|
|
Parag Saxena (3) (4)
|
|
|
970,876
|
|
|
|
10.52
|
%
|
All Directors and Officers as a Group (seven
persons)
|
|
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3,602,829
|
|
|
|
38.78
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%
|
|
|
|
|
|
|
|
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Greater than Five Percent Holders:
|
|
|
|
|
|
|
|
|
Sabby Volatility Warrant Master Fund, Ltd.
(5)
|
|
|
956,225
|
|
|
|
9.80
|
%
|
Rahul Nayar (6)
|
|
|
561,964
|
|
|
|
6.09
|
%
|
* Less than one percent.
|
(1)
|
The business address of each of the officers and directors is c/o Reviva
Pharmaceuticals Holdings, Inc., 19925 Stevens Creek Blvd., Suite 100, Cupertino, CA 95014.
|
|
(2)
|
Includes (a) 5,388 shares of Common Stock held by Dr. Bhat’s
spouse and (b) 6,090 shares of Common Stock issuable upon the exercise of Assumed Options held by Dr. Bhat’s
spouse, that are exercisable or will be exercisable within 60 days.
|
|
(3)
|
Includes 99,539 shares held by Vedanta Associates, LP. Vedanta Partners,
LLC is the general partner of Vedanta Associates, LP. Vedanta Partners, LLC has voting and dispositive power over the securities
held by Vedanta Associates, LP. Parag Saxena is the majority owner of Vedanta Partners, LLC and controls Vedanta Partners,
LLC, and may be deemed to be the beneficial owner of such securities. Mr. Saxena, however, disclaims beneficial ownership
over any securities owned by Vedanta Associates, LP. in which he does not have any pecuniary interest.
|
|
(4)
|
The business address of Vedanta Associates, LP and Vedanta Partners, LLC
is c/o Vedanta Partners, LLC, 250 West 55th Street, New York, New York 10019.
|
|
(5)
|
Includes
525,664 shares of Common Stock issuable upon the exercise of warrants, that are exercisable
or will be exercisable within 60 days. The exercise of the warrants are subject to a
9.8% beneficial ownership limitation blocker which the holder has elected. The amounts
and percentages in the table give effect to the beneficial ownership limitation. Sabby
Management, LLC serves as the investment manager of Sabby Volatility Warrant Master Fund, Ltd.
Hal Mintz is the manager of Sabby Management, LLC and has voting and investment control
of the securities held by Sabby Volatility Warrant Master Fund, Ltd. Each of Sabby
Management, LLC and Hal Mintz disclaims beneficial ownership over the securities beneficially
owned by Sabby Volatility Warrant Master Fund, Ltd., except to the extent of their
respective pecuniary interest therein. The business address for Sabby is c/o Ogier Fiduciary
Services (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman KY1-9007, Cayman Islands.
The address for Sabby Management, LLC and Mr. Mintz is 10 Mountainview Road, Suite 205,
Upper Saddle River, New Jersey 07458.
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|
(6)
|
Mr. Nayar was the Chief Executive Officer and a director
of Tenzing since its inception and resigned from such positions on December 14, 2020 in connection with the Business Combination.
The address of Mr. Nayar is 6700 Indian Creek Drive, Apt 1007, Miami Beach, Florida 33141.
|
MARKET
PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company’s Common Stock and warrants
trade on Nasdaq under the symbols “RVPH” and “RVPHW,” respectively, subject to ongoing review of the Company’s
satisfaction of all listing criteria post-business combination.
As of December 14, 2020, there were
approximately 14 holders of record of the Company’s Common Stock and approximately 4 holders of record of the Company’s
warrants. This number does not include beneficial owners whose shares were held in street name. The actual number of holders of
our Common Stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose
shares are held in street name by brokers or held by other nominees.
DESCRIPTION OF CAPITAL
STOCK
Authorized and Outstanding Stock
Our authorized capital stock consists of:
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·
|
115,000,000
shares of common stock, par value $0.0001 per share; and
|
|
·
|
10,000,000
shares of preferred stock, par value $0.0001 per share.
|
As of December 28, 2020 there were
9,231,737 shares of our common stock outstanding, and no shares of preferred stock outstanding.
The following statements are summaries
only of provisions of our authorized capital stock and are qualified in their entirety by our certificate of incorporation, as
amended. You should review these documents for a description of the rights, restrictions and obligations relating to our capital
stock. Copies of our certificate of incorporation may be obtained from the Company upon written request.
Common Stock
Voting. The holders
of our Common Stock are entitled to one vote for each share held of record on all matters on which the holders are entitled to
vote (or consent pursuant to written consent). Directors are elected by a plurality of the votes present in person or represented
by proxy and entitled to vote.
Dividends. The
holders of Common Stock are entitled to receive, ratably, dividends only if, when and as declared by our board of directors out
of funds legally available therefor and after provision is made for each class of capital stock having preference over the Common
Stock.
Liquidation Rights. In
the event of the Company’s liquidation, dissolution or winding-up, the holders of Common Stock will be entitled to share,
ratably, in all assets remaining available for distribution after payment of all liabilities and after provision is made for each
class of capital stock having preference over the Common Stock.
Conversion Right. The
holders of Common Stock have no conversion rights.
Preemptive and Similar Rights. The
holders of Common Stock have no preemptive or similar rights.
Redemption/Put Rights. There
are no redemption or sinking fund provisions applicable to the Common Stock. All of the outstanding shares of Common Stock will
be fully-paid and nonassessable.
Preferred Stock
Our board of directors has the authority
to issue shares of preferred stock from time to time on terms it may determine, to divide shares of preferred stock into one or
more series and to fix the designations, preferences, privileges, and restrictions of preferred stock, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preference, sinking fund terms, and the number of shares constituting
any series or the designation of any series to the fullest extent permitted by the DGCL.
Warrants
As of December 28, 2020, there were
Public Warrants outstanding to purchase an aggregate of 6,325,000 shares of Common Stock, Private Warrants outstanding to purchase
an aggregate of 556,313 shares of Common Stock, and Assumed Warrants outstanding to purchase an aggregate of 126,268 shares of
Common Stock.
Each Warrant entitles the holder thereof
to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as described in this prospectus.
No Public Warrants will be exercisable for cash unless we have an effective and current registration statement covering the issuance
of the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to such shares of
Common Stock. Notwithstanding the foregoing, if a registration statement covering the issuance of the shares of Common Stock issuable
upon exercise of the Public Warrants is not effective within 90 days from the closing of the Business Combination, the holders
of the Public Warrants 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 the Public 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 warrants will expire five years from the closing of the Business
Combination at 5:00 p.m., New York City time or earlier redemption.
The Private Warrants are identical to the
Public Warrants except that such Private Warrants will be exercisable for cash (even if a registration statement covering the
issuance of the ordinary shares 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 us, in each case so long as they are still held by the initial purchasers or their affiliates.
In addition, for as long as the Private Warrants are held by Maxim (or its designees or affiliates), they may not be exercised
after five years from the effective date of the registration statement relating to the IPO.
We may call the Public Warrants for redemption,
in whole and not in part, at a price of $0.01 per warrant:
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·
|
at
any time while the Public Warrants are exercisable,
|
|
·
|
upon
not less than 30 days’ prior written notice of redemption to each warrant
holder,
|
|
·
|
if,
and only if, the reported last sale price of the Common Stock equals or exceeds $21.00
per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations),
for any 20 trading days within a 30 trading day period ending on the third trading business
day prior to the notice of redemption to holders of the Public Warrants, and
|
|
·
|
if,
and only if, there is a current registration statement in effect with respect to the
issuance of the shares of Common Stock underlying such Public 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.
|
The right to exercise will be forfeited
unless the Public Warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption
date, a record holder of a Public Warrant will have no further rights except to receive the redemption price for such holder’s
warrant upon surrender of such warrant.
The redemption criteria for the Public
Warrants has been established at a price which is intended to provide the holders thereof a reasonable premium to the initial
exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so
that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below
the exercise price of the warrants.
If we call the Public Warrants for redemption
as described above, our management will have the option to require all holders that wish to exercise Public Warrants to do so
on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the Public Warrants
for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of ordinary
shares underlying the warrants, multiplied by the difference between the exercise price of the Public Warrants and the fair market
value by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of
the shares of Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption
is sent to the holders of the Public Warrants. For example, if a holder held 150 Public Warrants to purchase 150 shares of Common
Stock and the fair market value on the trading date prior to exercise was $15.00, that holder would receive 35 shares without
the payment of any additional cash consideration. Whether we will exercise its option to require all holders to exercise their
Public Warrants on a “cashless basis” will depend on a variety of factors including the price of our Common Stock
at the time the Public Warrants are called for redemption, our cash needs at such time and concerns regarding dilutive share issuances.
The Warrants are issued in registered form
under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement
provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any
defective provision, but requires the approval, by written consent or vote, of the holders of a majority of the then outstanding
warrants in order to make any change that adversely affects the interests of the registered holders.
The exercise price and number of shares
of Common Stock issuable on exercise of the Warrants may be adjusted in certain circumstances including in the event of a share
dividend, extraordinary dividend or a recapitalization, reorganization, merger or consolidation. However, the Warrants will not
be adjusted for issuances of Common Stock at a price below their respective exercise prices.
The Warrants may be exercised upon surrender
of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the
reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price
(or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of Warrants being exercised.
The holders of the Warrants do not have the rights or privileges of holders of Common Stock and any voting rights until they exercise
their Warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Warrants,
each holder will be entitled to one vote for each share held of record on all matters to be voted on by our shareholders.
Except as described above, no Public Warrants
will be exercisable and we will not be obligated to issue shares of Common Stock unless at the time a holder seeks to exercise
such Public Warrant, a prospectus relating to the shares of Common Stock issuable upon exercise of the Public Warrants is current
and the shares of Common Stock have been registered or qualified or deemed to be exempt under the securities laws of the state
of residence of the holder of the Private Warrants. Under the terms of the warrant agreement, we have agreed to use its best efforts
to meet these conditions and to maintain a current prospectus relating to the shares of Common Stock issuable upon exercise of
the Public Warrants until the expiration of the Public Warrants. However, we cannot assure you that we will be able to do so and,
if we do not maintain a current prospectus relating to the shares of Common Stock issuable upon exercise of the Public Warrants,
holders will be unable to exercise their Public Warrants and we will not be required to settle any such warrant exercise. If the
prospectus relating to the shares of Common Stock issuable upon the exercise of the Public Warrants is not current or if the shares
of Common Stock are not qualified or exempt from qualification in the jurisdictions in which the holders of the Public Warrants
reside, we will not be required to net cash settle or cash settle the warrant exercise, the Public Warrants may have no value,
the market for the Public Warrants may be limited and the warrants may expire worthless.
Warrant holders may elect to be subject
to a restriction on the exercise of their warrants such that an electing Warrant holder would not be able to exercise their Warrants
to the extent that, after giving effect to such exercise, such holder would beneficially own in excess of 9.8% of the shares of
Common Stock outstanding.
No fractional shares will be issued upon
exercise of the Warrants. If, upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a
share, we will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the
Warrant holder.
Anti-Takeover Effects of the Certificate of Incorporation,
our bylaws and Certain Provisions of Delaware Law
Our, certificate of incorporation, as amended,
our bylaws and the DGCL each contain provisions, which are summarized in the following paragraphs, which are intended to enhance
the likelihood of continuity and stability in the composition of our board of directors and to discourage certain types of transactions
that may involve an actual or threatened acquisition of the Company. These provisions are intended to avoid costly takeover battles,
reduce the Company’s vulnerability to a hostile change of control or other unsolicited acquisition proposal, and enhance
the ability of our board of directors to maximize stockholder value in connection with any unsolicited offer to acquire the Company.
However, these provisions may have the effect of delaying, deterring or preventing a merger or acquisition of the Company by means
of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including
attempts that might result in a premium over the prevailing market price for the shares of Common Stock. Our certificate of incorporation,
as amended, provides that any action required or permitted to be taken by the Company’s stockholders must be effected at
a duly called annual meeting of such stockholders and may not be effected by any consent in writing by such holders unless such
action is recommended by all directors of our board of directors then in office, except that holders of one or more series of
Preferred Stock, if such series are expressly permitted to do so by the certificate of designation relating to such series, may
take any action by written consent if such action permitted to be taken by such holders and the written consent is signed by the
holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting.
Authorized but Unissued Capital Stock
Delaware law does not require stockholder
approval for any issuance of authorized shares. However, the listing requirements of Nasdaq, which apply so long as the Common
Stock remains listed on Nasdaq, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding
voting power or then outstanding number of shares of Common Stock. Additional shares that may be issued in the future may be used
for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.
One of the effects of the existence of
unissued and unreserved Common Stock may be to enable our board of directors to issue shares to persons friendly to current management,
which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender
offer, proxy contest or otherwise and thereby protect the continuity of management and possibly deprive stockholders of opportunities
to sell their shares of Common Stock at prices higher than prevailing market prices.
Election of Directors and Vacancies
Our certificate of incorporation, as amended,
provides that our board of directors will determine the number of directors who will serve on our board of directors, subject
to the rights of the holders of any series of preferred stock to elect additional directors. The exact number of directors will
be fixed solely and exclusively by resolution duly adopted from time to time by our board of directors.
Our certificate of incorporation, as amended,
provides that any vacancy on our board of directors, including a vacancy that results from an increase in the number of directors
or a vacancy that results from the death, resignation, disqualification or removal of a director, may be filled only by a majority
of the directors then in office, even if less than a quorum, subject to the rights, if any, of the holders of preferred stock.
Notwithstanding the foregoing provisions
of this section, each director will serve until his successor is duly elected and qualified or until his earlier death, resignation
or removal. No decrease in the number of directors constituting our board of directors will shorten the term of any incumbent
director.
Business Combinations
We are subject to the provisions of Section 203
of the DGCL. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination”
with an “interested stockholder” for a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in the following prescribed manner:
|
·
|
prior
to the time of the transaction, the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder becoming
an interested stockholder;
|
|
·
|
upon
completion of the transaction that resulted in the stockholder becoming an interested
stockholder, the stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining
the number of shares outstanding (1) shares owned by persons who are directors and
also officers and (2) shares owned by employee stock plans in which employee participants
do not have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; and
|
|
·
|
on
or subsequent to the time of the transaction, the business combination is approved by
the board and authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
|
Generally, for purposes of Section 203,
a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit
to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates,
owns or, within three years prior to the determination of interested stockholder status, owned 15% or more of a corporation’s
outstanding voting securities.
Such provisions may encourage companies
interested in acquiring us to negotiate in advance with our board of directors because the stockholder approval requirement would
be avoided if our board of directors approves either the business combination or the transaction that results in the stockholder
becoming an interested stockholder. However, such provisions also could discourage attempts that might result in a premium over
the market price for the shares held by stockholders. These provisions also may make it more difficult to accomplish transactions
that stockholders may otherwise deem to be in their best interests.
Quorum
Our bylaws provide that at any meeting
of our board of directors, a majority of the directors then in office constitutes a quorum for all purposes.
No Cumulative Voting
Under Delaware law, the right to vote cumulatively
does not exist unless the certificate of incorporation expressly authorizes cumulative voting. Our certificate of incorporation,
as amended, does not authorize cumulative voting.
General Stockholder Meetings
Our certificate of incorporation, as amended,
provides that special meetings of stockholders may be called only by our board of directors acting pursuant to a resolution approved
by the affirmative vote of a majority of our board of directors, subject to the rights, if any, of the holders of any series of
preferred stock.
Requirements for Advance Notification of Stockholder Meetings,
Nominations and Proposals
Our bylaws establish advance notice procedures
with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made
by or at the direction of our board of directors. For any matter to be “properly brought” before a meeting, a stockholder
will have to comply with advance notice requirements and provide us with certain information. Generally, to be timely, a stockholder’s
notice must be received by the Secretary at our principal executive offices not less than 90 days nor more than 120 days
prior to the one-year anniversary of the date of the preceding annual meeting of stockholders (for the purposes of the first annual
meeting of our stockholders following the adoption of our bylaws, a stockholder’s notice must be received by the Secretary
at the Company’s principal executive offices not later than (i) 90 days prior to the date of the first annual
meeting or (ii) less than 10 days following the date the first annual meeting is publicly announced). Our bylaws also
specify requirements as to the form and content of a stockholder’s notice. Our bylaws allow our board of directors or a
committee of our board of directors to determine whether a nomination or any business proposed to be brought before a special
meeting of the stockholders was made in accordance with our bylaws. These provisions may also defer, delay or discourage a potential
acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting
to influence or obtain control of us.
Amendment Provisions
Our certificate of incorporation, as amended
and our bylaws provide that our board of directors, by the affirmative vote of a majority of our board of directors, is expressly
authorized to make, alter, amend, change, add to, rescind or repeal, in whole or in part, our bylaws without a stockholder vote
in any matter not inconsistent with the laws of the State of Delaware. Any amendment, alteration, rescission or repeal of our
bylaws by our stockholders requires the affirmative vote of the holders of at least a majority in voting power of all the then
outstanding shares of stock entitled to vote thereon, voting together as a single class.
Our certificate of incorporation, as amended,
provides that it may be amended, altered, changed or repealed in accordance with the DGCL.
Exclusive Forum
Our certificate of incorporation, as amended,
provides that, unless the we consent to the selection of an alternative forum, any (i) derivative action or proceeding brought
on our behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee
of the Company to us or our stockholders, creditors or other constituents, (iii) action asserting a claim against the Company
or any of our directors or officers arising pursuant to, or a claim against the Company or any director or officer of the Company
with respect to the interpretation or application of any provision of, the DGCL, our certificate of incorporation, as amended,
or our bylaws or (iv) action asserting a claim against the Company or any director or officer of the Company governed by
the internal affairs doctrine will, to the fullest extent permitted by law, be solely and exclusively brought in the Court of
Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, any other court located
in the State of Delaware with subject matter jurisdiction. To the fullest extent permitted by law, any person or entity purchasing
or otherwise acquiring or holding any interest in shares of capital stock of the Company will be deemed to have notice of and
consented to the forum provisions in our certificate of incorporation, as amended,. However, it is possible that a court could
find our forum selection provisions to be inapplicable or unenforceable. Although we believes this provision benefits it by providing
increased consistency in the application of Delaware law in believe types of lawsuits to which it applies, the provision may have
the effect of discouraging lawsuits against our directors and officers.
Our certificate of incorporation, as amended,
provides that, unless we consent to the selection of an alternative forum, the federal district courts of the United States of
America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting
a cause of action arising under the Securities Act of 1933, as amended; provided, however, that this provision will not apply
to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim
for which the federal courts have exclusive jurisdiction.
Lock-Up Restrictions
Simultaneously with the execution and delivery
of the Merger Agreement, Dr. Bhat and certain other Reviva Stockholders who (i) were executive officers or directors
of Reviva or (ii) own more than 5% of the issued and outstanding shares of Reviva Stock immediately prior to the Effective
Time (each, a “Significant Stockholder”) each entered into a Lock-Up Agreement with Tenzing and the purchaser representative
named in the Merger Agreement (each, a “Merger Lock-Up Agreement”). Pursuant to Dr. Bhat’s Merger Lock-Up
Agreement, Dr. Bhat agreed not to, during the period commencing from the Closing and ending on the three (3) year anniversary
of the Closing, with 1/3rd of his securities being released after the end of each anniversary of the Closing (subject to
early release if the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated
third party that results in all of the shareholders having the right to exchange their equity holdings in the Company for cash,
securities or other property): (x) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any restricted securities, (y) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences of ownership of the restricted securities, or
(z) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (x), (y) or
(z) above is to be settled by delivery of restricted securities or other securities, in cash or otherwise (any of the foregoing
described in clauses (i), (ii) or (iii), a “Prohibited Transfer”). Pursuant to the other Merger Lock-Up Agreements,
the other Significant Stockholders agreed not to consummate a Prohibited Transfer during the period commencing from Closing and
ending on the one (1) year anniversary of the Closing (subject to early release if the closing price of Common Stock equals
or exceeds $12.00 per share for any 20 out of 30 trading days commencing 150 days after the Closing and also subject to early
release if the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third
party that results in all of the Company’s shareholders having the right to exchange their equity holdings in the Company
for cash, securities or other property).
Sponsor has agreed not to transfer, assign
or sell any of the Founder Shares (except to certain permitted transferees) until the earlier of (i) one year after
the date of the consummation of the Business Combination, or (ii) the date on which the closing price of Tenzing’s
ordinary shares equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing 150 days after the Business Combination. On December
28, 2020, Sponsor conducted a liquidating distribution of all of the shares of Company Common Stock that it held on such date,
including the Founder Shares, Sponsor’s Private Placement Shares, and Working Capital Shares, to its members (as permitted
transferees pursuant to a liquidating distribution) and assigned its registration rights in connection with the distribution.
As a result, each of the members of Sponsor have the same registration rights and transfer restrictions with respect to the shares
of Company Common Stock, including the Founder Shares, Sponsor’s Private Placement Shares, and Working Capital Shares, received
by such member pursuant to the liquidating distribution.
Pursuant to the Subscription Agreement
in which Maxim Group purchased the Private Units at the time of Tenzing’s IPO, Maxim Group cannot, subject to certain exceptions,
sell, transferor assign any of its Private Placement Warrants or shares underlying the Private Units until thirty
(30) days after the Closing.
Transfer Agent and Registrar
The transfer agent for our Common Stock
and warrant agent for the Warrants is Continental Stock Transfer & Trust Company.
Listing
Our Common Stock and Warrants are listed
on Nasdaq under the symbol “RVPH” and RVPHW”, respectively.
SELLING SECURITYHOLDERS
The Common Stock and
Warrants being offered by the Selling Securityholders are those previously issued to the Selling Securityholders, and, with respect
to the Common Stock, those issuable to the selling shareholders, upon exercise of the Private Warrants. For additional information
regarding the issuances of those shares of common stock and warrants, see the Introductory Note to this Registration Statement.
We are registering the shares of Common Stock and Private Warrants in order to permit the Selling Securityholders to offer the
securities for resale from time to time. Except for the ownership of shares of Common Stock and Warrants and the information referred
to under the heading “Material Relationships with the Selling Securityholders” below, the Selling Securityholders
have not had any material relationship with us within the past three years.
The table below lists
the Selling Securityholders and other information regarding the beneficial ownership of the shares of Common Stock and Private
Warrants by each of the Selling Securityholders. The second and sixth columns list the number of Private Warrants and shares of
Common Stock, respectively, beneficially owned by each Selling Securityholder, based on its ownership of the Private Warrants
and shares of Common Stock, as of December 28, 2020. The third and seventh columns list the Private Warrants and shares of
Common Stock, respectively being offered by this prospectus by the Selling Securityholders. Under the terms of the Private Warrants,
a Selling Securityholder may elect to be subject to a restriction preventing the exercise the Private Warrants to the extent such
exercise would cause such Selling Securityholders, together with its affiliates, to beneficially own a number of shares of common
stock which would exceed 9.8% of our then outstanding shares of common stock following such exercise, excluding for purposes of
such determination shares of common stock issuable upon exercise of the Private Warrants which have not been exercised (the "Beneficial
Ownership Blocker"). The table below does not reflect this limitation for any Selling Securityholder that has made such election.
In accordance with
the terms of certain registration rights agreements and other arrangements with the Selling Securityholders, this prospectus generally
covers the resale of the sum of (i) the number of shares of common stock issued to the Selling Securityholders pursuant to
such arrangements in the Introductory Note described above and (ii) the maximum number of shares of common stock issuable
upon exercise of the related warrants, determined as if the outstanding warrants were exercised in full as of the trading day
immediately preceding the date this registration statement was initially filed with the Securities and Exchange Commission, each
as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in
the registration right agreement, without regard to any limitations on the exercise of the warrants.
Under the terms of
the Private Warrants, if affirmatively elected by a holder thereof, a selling shareholder may not exercise the warrants to the
extent such exercise would cause such selling shareholder, together with its affiliates, to beneficially own a number of shares
of Common Stock which would exceed 9.8% of our then outstanding Common Stock following such exercise, excluding for purposes of
such determination shares of common stock issuable upon exercise of the warrants which have not been exercised. The number of
shares in the sixth column does not reflect this limitation. The Selling Securityholders may sell all, some or none of their shares
in this offering. See “Plan of Distribution.”
Name
of Selling
Securityholder
|
|
Private
Warrants
Beneficially
Owned
Prior to
Offering
|
|
|
Private
Warrants
Available
Pursuant to
this
Prospectus
|
|
|
Existing
Warrants
Beneficially
Owned
After
Offering
|
|
|
Percentage
of
Private
Warrants
Beneficially
Owned
After
Offering(1)
|
|
|
Common
Stock
Beneficially
Owned
Prior to
Offering
|
|
|
Common
Stock
Available
Pursuant to
this
Prospectus
|
|
|
Common
Stock
Beneficially
Owned
After
Offering
|
|
|
Percentage
of
Common
Stock
Beneficially
Owned
After
Offering (2)
|
|
Sabby Volatility Warrant
Master Fund, Ltd.(3)
|
|
|
540,500
|
|
|
|
540,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
971,061
|
(4)
|
|
|
595,550
|
|
|
|
375,511
|
|
|
|
3.84
|
%
|
Maxim Partners LLC(5)(6)
|
|
|
15,813
|
|
|
|
15,813
|
|
|
|
-
|
|
|
|
-
|
|
|
|
331,626
|
(7)
|
|
|
331,626
|
|
|
|
-
|
|
|
|
-
|
|
Parag Saxena (8)(9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
871,337
|
|
|
|
871,337
|
|
|
|
-
|
|
|
|
-
|
|
Rahul Nayar (9)(10)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
561,964
|
|
|
|
561,964
|
|
|
|
-
|
|
|
|
-
|
|
Atanuu Agarrwal (9)(11)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,153
|
|
|
|
52,153
|
|
|
|
-
|
|
|
|
-
|
|
Gonzalo Cordova (9) (12)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,250
|
|
|
|
25,250
|
|
|
|
-
|
|
|
|
-
|
|
Nina Shapiro Living Trust
(9) (13)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,792
|
|
|
|
24,792
|
|
|
|
-
|
|
|
|
-
|
|
William Campbell (9)(14)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
Vikas Thapar (9)(15)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
Vedanta Associates, LP
(8)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
99,539
|
|
|
|
99,539
|
|
|
|
-
|
|
|
|
-
|
|
Binggo Investments Limited
(9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91,639
|
|
|
|
91,639
|
|
|
|
-
|
|
|
|
-
|
|
Pavilion Irrevocable Trust
2020 (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82,824
|
|
|
|
82,824
|
|
|
|
-
|
|
|
|
-
|
|
Sanoch Management LLC (9)(14)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,168
|
|
|
|
59,168
|
|
|
|
-
|
|
|
|
-
|
|
Article Eleventh Trust
u/w Alan Slifka f/b/o Randy Slifka Trustee (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47,059
|
|
|
|
47,059
|
|
|
|
-
|
|
|
|
-
|
|
Bidyut Sen (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,769
|
|
|
|
44,769
|
|
|
|
-
|
|
|
|
-
|
|
Vijay Kewalramani (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,408
|
|
|
|
40,408
|
|
|
|
-
|
|
|
|
-
|
|
Cortlandt Private Capital,
LLC (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29,584
|
|
|
|
29,584
|
|
|
|
-
|
|
|
|
-
|
|
Tanya Saxena Trust 2016
(9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,824
|
|
|
|
18,824
|
|
|
|
-
|
|
|
|
-
|
|
Siddharth Saxena Trust
2016 (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,824
|
|
|
|
18,824
|
|
|
|
-
|
|
|
|
-
|
|
Gaurav Saxena Trust 2016
(9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,824
|
|
|
|
18,824
|
|
|
|
-
|
|
|
|
-
|
|
Margaret Riley (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,792
|
|
|
|
14,792
|
|
|
|
-
|
|
|
|
-
|
|
Adva Capital Pte. Limited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,402
|
|
|
|
18,402
|
|
|
|
-
|
|
|
|
-
|
|
Triple SSS Partnership,
LP
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,892
|
|
|
|
8,892
|
|
|
|
-
|
|
|
|
-
|
|
Andrew (Indur) Kirpalani
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,629
|
|
|
|
4,629
|
|
|
|
-
|
|
|
|
-
|
|
Madhukar Pandya
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
-
|
|
|
|
-
|
|
Girish V. Reddy
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,314
|
|
|
|
2,314
|
|
|
|
-
|
|
|
|
-
|
|
Girish V. Reddy 2012 Trust
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,314
|
|
|
|
2,314
|
|
|
|
-
|
|
|
|
-
|
|
Raj Associates Family Limited
Partnership
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,312
|
|
|
|
2,312
|
|
|
|
-
|
|
|
|
-
|
|
Riaz Lakhani
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,976
|
|
|
|
6,540
|
|
|
|
1,436
|
|
|
|
*
|
|
Vinod Reddy Kaila and Vijaya
Lakshmi Kaila, as Joint Tenant with Right of Survivorship
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,597
|
|
|
|
6,540
|
|
|
|
16,057
|
|
|
|
*
|
|
Pravin D. Mehta
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89,344
|
|
|
|
15,700
|
|
|
|
73,644
|
|
|
|
*
|
|
Pranav Shukla
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
105,995
|
|
|
|
26,163
|
|
|
|
79,832
|
|
|
|
*
|
|
Mukesh C. Gandhi and Kiran
M. Gandhi as Joint Tenant with Right of Survivorship
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,103
|
|
|
|
15,700
|
|
|
|
42,403
|
|
|
|
*
|
|
Kauser Sharieff
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,833
|
|
|
|
6,540
|
|
|
|
6,293
|
|
|
|
*
|
|
IntegraNet PhysicianResources,
Inc
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,694
|
|
|
|
18,321
|
|
|
|
12,373
|
|
|
|
*
|
|
Harsadbhai D. Patel
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
77,979
|
|
|
|
9,160
|
|
|
|
68,819
|
|
|
|
*
|
|
Harsadbhai D. Patel and
Dharmishtha H. Patel as Joint Tenant with Right of Survivorship
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
123,765
|
|
|
|
54,946
|
|
|
|
68,819
|
|
|
|
*
|
|
Firdos Sheikh Family Trust
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
177,715
|
|
|
|
13,081
|
|
|
|
164,634
|
|
|
|
1.78
|
%
|
BluePointe Ventures Reviva
LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,176
|
|
|
|
35,323
|
|
|
|
36,853
|
|
|
|
*
|
|
Anand Patel
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,252
|
|
|
|
22,241
|
|
|
|
14,011
|
|
|
|
*
|
|
Ambis Holding LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
149,672
|
|
|
|
65,409
|
|
|
|
84,263
|
|
|
|
*
|
|
Sameer Thakur
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,093
|
|
|
|
13,081
|
|
|
|
33,012
|
|
|
|
*
|
|
Nikhil Thakur
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,093
|
|
|
|
13,081
|
|
|
|
33,012
|
|
|
|
*
|
|
Thakur Family Trust
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,093
|
|
|
|
13,081
|
|
|
|
33,012
|
|
|
|
*
|
|
Indru Bhatia and Nancy
Bhatia Joint Tenant with Right of Survivorship
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47,194
|
|
|
|
18,321
|
|
|
|
28,873
|
|
|
|
*
|
|
*
|
Represents less than 1%.
|
(1)
|
Percentage is based on 556,313 Private Warrants
outstanding as of December 28, 2020.
|
(2)
|
Percentage is based on 9,231,737 shares of common
stock outstanding as of December 28, 2020.
|
(3)
|
Sabby Management, LLC serves as the investment manager
of Sabby Volatility Warrant Master Fund, Ltd. Hal Mintz is the manager of Sabby Management, LLC and has voting and investment
control of the securities held by Sabby Volatility Warrant Master Fund, Ltd. Each of Sabby Management, LLC and Hal Mintz disclaims
beneficial ownership over the securities beneficially owned by Sabby Volatility Warrant Master Fund, Ltd., except to the extent
of their respective pecuniary interest therein. The business address for Sabby is c/o Ogier Fiduciary Services (Cayman) Limited,
89 Nexus Way, Camana Bay, Grand Cayman KY1-9007, Cayman Islands. The address for Sabby Management, LLC and Mr. Mintz is 10
Mountainview Road, Suite 205, Upper Saddle River, New Jersey 07458.
|
(4)
|
Consists of (i) 430,561 shares of Common Stock and
(ii) 540,500 shares of Common Stock issuable upon exercise of Private Warrants.
|
(5)
|
Maxim Partners LLC is the parent of registered broker-dealer
Maxim Group LLC. Maxim Partners, LLC was an original stockholder of our Company prior to the Business Combination and its subsidiary,
Maxim Group LLC, served as the underwriter of Tenzing’s IPO. Michael Rabinowitz is deemed to have power to vote or dispose
of the reported securities offered hereby.
|
(6)
|
Certain shares of Common Stock and Warrants held
by Maxim Partners LLC are subject to a lock-up pursuant to the Unit Subscription Agreement entered into at the time of the Tenzing
IPO.
|
(7)
|
Consists of (i) 315,813 shares of Common Stock and
(ii) 15,813 shares of Common Stock issuable upon exercise of Private Warrants.
|
(8)
|
Mr. Saxena is currently the Chairman of our board
of directors and was also the Chairman of the board of directors of Tenzing prior to the Business Combination. Vedanta Partners,
LLC is the general partner of Vedanta Associates, LP. Vedanta Partners, LLC has voting and dispositive power over the securities
held by Vedanta Associates, LP. Parag Saxena is the majority owner of Vedanta Partners, LLC and controls Vedanta Partners, LLC,
and may be deemed to be the beneficial owner of such securities. Mr. Saxena, however, disclaims beneficial ownership over any
securities owned by Vedanta Associates, LP. in which he does not have any pecuniary interest.
|
(9)
|
Certain shares of Common Stock held by the Selling
Securityholder are subject to a lock-up, pursuant to a Letter Agreement entered into at the time of the Tenzing IPO.
|
(10)
|
Mr. Nayar was the Chief Executive Officer and a
director of Tenzing since its inception and resigned from such positions on December 14, 2020 in connection with the Business
Combination.
|
(11)
|
Mr. Agarrwal was the Vice President of Tenzing since
its inception and resigned from such position on December 14, 2020 in connection with the Business Combination.
|
(12)
|
Mr. Cordova was the Chief Financial Officer of Tenzing
since its inception and resigned from such position on December 14, 2020 in connection with the Business Combination.
|
(13)
|
Nina Shapiro is the sole trustee and beneficiary
of the Nina Shapiro Living Trust. Ms. Shapiro was a director of Tenzing since its inception and resigned from such position on
December 14, 2020 in connection with the Business Combination.
|
(14)
|
Mr. Campbell was a director of Tenzing since its
inception and resigned from such position on December 14, 2020 in connection with the Business Combination. Mr. Campbell is the
control person of Sanoch Management LLC, and is deemed to have power to vote or dispose of the reported securities offered hereby.
|
(15)
|
Mr. Thapar was a director of Tenzing since its inception and resigned from such position on December 14, 2020 in connection
with the Business Combination.
|
Material Relationships with the Selling Securityholders
For a description of our relationships with certain of the
Selling Securityholders see the sections entitled “Introductory Note,” “Certain Relationships and
Related Person Transactions,” “Principal Stockholders,” and “Description of Capital Stock.”
PLAN OF DISTRIBUTION
Each Selling Securityholder
of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their
securities covered hereby on the principal stock exchange, market or trading facility on which the securities are traded or in
private transactions. These sales may be at fixed or negotiated prices. A Selling Securityholder may use any one or more of the
following methods when selling securities:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales;
|
|
·
|
in
transactions through broker-dealers that agree with the Selling Securityholders to sell
a specified number of such securities at a stipulated price per security;
|
|
·
|
through
the writing or settlement of options or other hedging transactions, whether through an
options exchange or otherwise;
|
|
·
|
a
combination of any such methods of sale; or
|
|
·
|
any
other method permitted pursuant to applicable law.
|
The Selling Securityholders
may also sell securities under Rule 144 promulgated under the Securities Act of 1933, as amended (the “Securities
Act”), or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged
by the Selling Securityholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Securityholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal
transaction a markup or markdown in compliance with FINRA Rule 2121.
In connection with the
sale of the securities or interests therein, the Selling Securityholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions
they assume. The Selling Securityholders may also sell securities short and deliver these securities to close out their short
positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Securityholders
may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative
securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus,
which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction).
The Selling Securityholders
and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within
the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each Selling Securityholder has informed the Company that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person or entity to distribute the securities.
The Company is required
to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed
to indemnify the Selling Securityholders against certain losses, claims, damages and liabilities, including liabilities under
the Securities Act.
The Company agreed to
keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Securityholders
without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144 under the Securities
Act, without the requirement for the Company to be in compliance with the current public information under Rule 144 under
the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this
prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold
only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain
states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and
regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any person or entity
engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined in Regulation M under the Exchange Act, prior to the commencement
of the distribution. In addition, the Selling Securityholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common
stock by the Selling Securityholders or any other person. The Company will make copies of this prospectus available to the Selling
Securityholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time
of the sale (including by compliance with Rule 172 under the Securities Act).
LEGAL MATTERS
The validity of the
securities offered hereby will be passed upon for us by Lowenstein Sandler LLP, New York, New York.
EXPERTS
The audited financial statements of Tenzing
Acquisition Corp. as of February 29, 2020 and February 28, 2019 and for the year ended February 29, 2020 and for
the period from March 20, 2018 (inception) through February 28, 2019 included in this prospectus and registration statement
have been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report, thereon (which contains
an explanatory paragraph relating to substantial doubt about the ability of Tenzing Acquisition Corp. to continue as a going concern
as described in Note 1 to the financial statements), appearing elsewhere in this prospectus, and are included in reliance on such
report given upon such firm as experts in auditing and accounting.
The consolidated financial statements of
Reviva Pharmaceuticals, Inc. and Subsidiary at December 31, 2019 and 2018 and for the years ended December 31,
2018 and 2019 appearing in this Prospectus have been audited by Armanino LLP, independent registered public accounting firm, as
set forth in their report thereon and are included in reliance on such report given on the authority of such firm as an expert
in auditing and accounting.
Changes in Registrant’s Certifying Accountant
Prior to the Business Combination, Tenzing’s
consolidated financial statements were audited by Marcum LLP. For accounting purposes, the Business Combination is treated as
a reverse acquisition and, as such, the historical financial statements of the accounting acquirer, Reviva, which have been audited
by Armanino LLP will become the historical consolidated financial statements of the Company. In a reverse acquisition, a change
of accountants is presumed to have occurred unless the same accountant audited the pre-transaction financial statements of both
the legal acquirer and the accounting acquirer, and such change is generally presumed to occur on the date the reverse acquisition
is completed.
On December 17, 2020, the audit committee
of our board of directors elected to continue to engage Marcum LLP, an independent registered accounting firm, as the our independent
registered public accounting firm to review the Company’s consolidated financial statements for the three month period ended
November 30, 2020. Following Marcum LLP’s review of the consolidated financial statements for the three month period
ended November 30, 2020, we intend to terminate Marcum’s engagement and appoint and continue the engagement of Armanino
LLP as the independent registered public accounting firm to review our consolidated financial statements.
WHERE YOU CAN FIND
MORE INFORMATION
We have filed a registration
statement on Form S-1 with the SEC under the Securities Act of 1933, as amended. This prospectus is part of the registration
statement, but the registration statement includes additional information and exhibits. We file annual, quarterly and current
reports, proxy statements and other information with the SEC. The SEC maintains a web site that contains reports, proxy and information
statements and other information regarding companies, such as ours, that file documents electronically with the SEC. The website
address is www.sec.gov. The information on the SEC’s website is not part of this prospectus, and any references to
this website or any other website are inactive textual references only. Additionally, you may access our filings with the SEC
through our website at http://revivapharma.com/. The information on our website is not part of this prospectus.
INDEX TO FINANCIAL
STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Tenzing Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance
sheets of Tenzing Acquisition Corp. (the “Company”) as of February 29, 2020 and February 28, 2019, the related
statements of operations, changes in shareholders’ equity and cash flows for the year ended February 29, 2020 and for
the period from March 20, 2018 (inception) through February 28, 2019, and the related notes (collectively referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of February 29, 2020 and February 28, 2019, and the results of its operations
and its cash flows for the year ended February 29, 2020 and for the period from March 20, 2018 (inception) through February 28,
2019, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph — Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements,
the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working
capital as of February 29, 2020 are not sufficient to complete its planned activities. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are
also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/ Marcum LLP
|
|
|
|
Marcum LLP
|
|
|
|
We have served as the Company’s auditor
since 2018.
|
|
|
|
New York, NY
|
|
|
|
May 1, 2020
|
|
TENZING
ACQUISITION CORP.
BALANCE SHEETS
|
|
February 29,
2020
|
|
|
February 28,
2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
69,276
|
|
|
$
|
313,049
|
|
Prepaid
expenses and other current assets
|
|
|
69,584
|
|
|
|
91,130
|
|
Total Current Assets
|
|
|
138,860
|
|
|
|
404,179
|
|
Marketable securities held in
Trust Account
|
|
|
60,882,949
|
|
|
|
65,241,920
|
|
Total Assets
|
|
$
|
61,021,809
|
|
|
$
|
65,646,099
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
299,653
|
|
|
|
23,050
|
|
Total Current Liabilities
|
|
|
299,653
|
|
|
|
23,050
|
|
Convertible promissory note – related
party
|
|
|
750,000
|
|
|
|
—
|
|
Deferred underwriting fee payable
|
|
|
2,213,750
|
|
|
|
2,213,750
|
|
Total Liabilities
|
|
|
3,263,403
|
|
|
|
2,236,800
|
|
Commitments
|
|
|
|
|
|
|
|
|
Ordinary
shares subject to possible redemption, 4,964,590 and 5,662,598 shares at redemption value at February 29, 2020 and February 28,
2019, respectively
|
|
|
52,758,399
|
|
|
|
58,409,291
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred shares, no par value;
unlimited shares authorized, none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Ordinary
shares, no par value; unlimited shares authorized; 2,704,587 and 2,602,465 shares issued and outstanding (excluding 4,964,590
and 5,662,598 shares subject to possible redemption) at February 29, 2020 and February 28, 2019, respectively
|
|
|
3,807,973
|
|
|
|
4,425,877
|
|
Retained
earnings
|
|
|
1,192,034
|
|
|
|
574,131
|
|
Total Shareholders’
equity
|
|
|
5,000,007
|
|
|
|
5,000,008
|
|
Total Liabilities and
Shareholders’ Equity
|
|
$
|
61,021,809
|
|
|
$
|
65,646,099
|
|
The accompanying
notes are an integral part of the financial statements.
TENZING
ACQUISITION CORP.
STATEMENTS OF
OPERATIONS
|
|
Year
Ended
February 29,
2020
|
|
|
For
the Period
from
March 20,
2018
(inception)
Through
February 28,
2019
|
|
Operating costs
|
|
$
|
724,740
|
|
|
$
|
152,789
|
|
Loss from operations
|
|
|
(724,740
|
)
|
|
|
(152,789
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,323,935
|
|
|
|
729,499
|
|
Unrealized
gain (loss) on marketable securities held in Trust Account
|
|
|
18,708
|
|
|
|
(2,579
|
)
|
Net
income
|
|
$
|
617,903
|
|
|
$
|
574,131
|
|
Weighted average ordinary shares outstanding,
basic and diluted(1)
|
|
|
2,610,315
|
|
|
|
2,039,690
|
|
Basic and diluted net loss
per ordinary share(2)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.04
|
)
|
(1)
|
Excludes an aggregate of up to 4,964,590
and 5,662,598 shares subject to possible redemption at February 29, 2020 and February 28,
2019, respectively.
|
(2)
|
Excludes interest income of $1,163,534
and $650,811 attributable to shares subject to possible redemption for the year ended
February 29, 2020 and for the period from March 20, 2018 (inception) through
February 28, 2019, respectively (see Note 3).
|
The accompanying
notes are an integral part of the financial statements.
TENZING
ACQUISITION CORP.
STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
|
|
Ordinary
Shares
|
|
|
Retained
|
|
|
Total
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Equity
|
|
Balance – March 20, 2018 (inception)
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Issuance of ordinary
shares to initial shareholder
|
|
|
1,581,250
|
|
|
|
25,000
|
|
|
|
—
|
|
|
|
25,000
|
|
Sale of
6,325,000 Units, net of underwriting discounts and offering expenses
|
|
|
6,325,000
|
|
|
|
59,222,038
|
|
|
|
—
|
|
|
|
59,222,038
|
|
Sale of 358,813 Private Units
|
|
|
358,813
|
|
|
|
3,588,130
|
|
|
|
—
|
|
|
|
3,588,130
|
|
Ordinary shares subject to redemption
|
|
|
(5,662,598
|
)
|
|
|
(58,409,291
|
)
|
|
|
—
|
|
|
|
(58,409,291
|
)
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
574,131
|
|
|
|
574,131
|
|
Balance – February 28, 2019
|
|
|
2,602,465
|
|
|
|
4,425,877
|
|
|
|
574,131
|
|
|
|
5,000,008
|
|
Change in value of ordinary shares subject to possible
redemption
|
|
|
102,122
|
|
|
|
(617,904
|
)
|
|
|
—
|
|
|
|
(617,.904
|
)
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
617,903
|
|
|
|
617,903
|
|
Balance – February 29,
2020
|
|
|
2,704,587
|
|
|
$
|
3,807,973
|
|
|
$
|
1,192,034
|
|
|
$
|
5,000,007
|
|
The accompanying
notes are an integral part of the financial statements.
TENZING
ACQUISITION CORP.
STATEMENTS OF
CASH FLOWS
|
|
Three
Months
Ended
February 29,
2020
|
|
|
For
the Period
from March 20,
2018 (inception)
Through
February 28,
2019
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
617,903
|
|
|
$
|
574,131
|
|
Adjustments to reconcile net income to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
Interest earned on marketable
securities held in Trust Account
|
|
|
(1,323,935
|
)
|
|
|
(729,499
|
)
|
Unrealized (gain) loss on marketable
securities held in Trust Account
|
|
|
(18,708
|
)
|
|
|
2,579
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current
assets
|
|
|
21,546
|
|
|
|
(91,130
|
)
|
Accounts
payable and accrued expenses
|
|
|
276,603
|
|
|
|
23.050
|
|
Net
cash used in operating activities
|
|
|
(426,591
|
)
|
|
|
(220,869
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Investment of cash into Trust Account
|
|
|
(567,182
|
)
|
|
|
(64,515,000
|
)
|
Cash withdrawn from Trust Account
for redemptions
|
|
|
6,268,796
|
|
|
|
—
|
|
Net
cash provided by (used in) investing activities
|
|
|
5,701,614
|
|
|
|
(64,515,000
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible promissory note – related
party
|
|
|
750,000
|
|
|
|
—
|
|
Redemption of ordinary shares
|
|
|
(6,268,796
|
)
|
|
|
—
|
|
Proceeds from issuance of ordinary shares to initial
shareholder
|
|
|
—
|
|
|
|
25,000
|
|
Proceeds from sale of Units, net of underwriting discounts
paid
|
|
|
—
|
|
|
|
61,826,875
|
|
Proceeds from sale of Private Units
|
|
|
—
|
|
|
|
3,588,130
|
|
Payment of offering costs
|
|
|
—
|
|
|
|
(391,087
|
)
|
Advances from related party
|
|
|
—
|
|
|
|
363,436
|
|
Repayment of advances from related
party
|
|
|
—
|
|
|
|
(363,436
|
)
|
Net
cash (used in) provided by financing activities
|
|
|
(5,518,796
|
)
|
|
|
65,048,918
|
|
Net Change in Cash
|
|
|
(243,773
|
)
|
|
|
313,049
|
|
Cash – Beginning
|
|
|
313,049
|
|
|
|
—
|
|
Cash – Ending
|
|
$
|
69,276
|
|
|
$
|
313,049
|
|
Non-Cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Initial classification of ordinary
shares subject to possible redemption
|
|
$
|
—
|
|
|
$
|
57,821,015
|
|
Change in value of ordinary
shares subject to possible redemption
|
|
$
|
617,904
|
|
|
$
|
588,276
|
|
Deferred underwriting fee payable
|
|
$
|
—
|
|
|
$
|
2,213,750
|
|
The accompanying
notes are an integral part of the financial statements.
TENZING
ACQUISITION CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
NOTE 1. DESCRIPTION OF ORGANIZATION AND
BUSINESS OPERATIONS
Tenzing Acquisition Corp. (the “Company”)
is a blank check company incorporated in the British Virgin Islands on March 20, 2018. The Company was formed for the purpose
of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of
the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or
more businesses or entities (“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 that operate
in India.
At February 29, 2020, the Company
had not yet commenced any operations other than seeking a Business Combination. All activity through February 29, 2020 relates
to the Company’s formation, its initial public offering (“Initial Public Offering”), which is described below,
and seeking to identify a target company for a Business Combination.
The registration statement for the Initial
Public Offering was declared effective on August 20, 2018. On August 23, 2018, the Company consummated the Initial Public
Offering of 5,500,000 units (“Units” and, with respect to the ordinary shares included in the Units offered,
the “Public Shares”) at $10.00 per Unit, generating total gross proceeds of $55,000,000, which is described in Note
4. Each Unit consists of one ordinary share of the Company and one warrant of the Company (which is redeemable under certain circumstances)
(the “Public Warrants”), with each Public Warrant entitling the holder thereof to purchase one ordinary share of the
Company for $11.50 per share.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of an aggregate of 323,750 units (the “Private Units”)
at a price of $10.00 per unit in a private placement to the Company’s sponsor, Tenzing LLC, a Delaware limited liability
company (the managing members of which are the Company’s Chairman and Chief Executive Officer) (the “Sponsor”),
and the underwriter of the Initial Public Offering, generating total gross proceeds of $3,237,500, which is described in Note
5.
Following the closing of the Initial Public
Offering on August 23, 2018, an amount of $56,100,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in
the Initial Public Offering and the sale of the Private Units was placed in a trust account (“Trust Account”) which
will be 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.
On August 30, 2018, in connection
with the underwriters’ election to fully exercise their over-allotment option, the Company consummated the sale of an additional
825,000 Units and the sale of an additional 35,063 Private Units, each at $10.00 per unit, generating total gross proceeds
of $8,600,630. Following the closing, an additional $8,415,000 of net proceeds ($10.20 per Unit) was deposited in the Trust Account,
resulting in $64,515,000 held in the Trust Account.
Transaction costs amounted to $4,027,962,
consisting of $1,423,125 of underwriting fees, $2,213,750 of deferred underwriting fees and $391,087 of offering costs. As of
February 29, 2020, there was $69,276 of cash held outside of the Trust Account and available for working capital purposes.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private
Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
NASDAQ rules provide that the 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 (less any deferred underwriting commissions and interest released
to pay taxes payable) at the time of signing a definitive agreement in connection with a Business Combination. There is no assurance
that the Company will be able to successfully effect a Business Combination.
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
The Company will provide its shareholders
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 shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. For
so long as the Company is deemed to be a foreign private issuer, it will conduct redemptions in accordance with the tender offer
rules of the Securities and Exchange Commission (“SEC”). In connection with a proposed Business Combination, unless
the Company is deemed to be a foreign private issuer at such time, the Company may seek shareholder approval of a Business Combination
at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote for
or against a Business Combination. The Company will proceed with a Business Combination only 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 shareholder approval, a majority
of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks shareholder approval
of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended
and Restated Memorandum and Articles of Association provides that, a public shareholder, together with any affiliate of such shareholder
or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption
rights with respect to 20% or more of the Public Shares without the Company’s prior written consent.
The shareholders will be entitled to redeem
their shares for a pro rata portion of the amount then in the Trust Account ($10.299 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 tax obligations). The per-share
amount to be distributed to shareholders who redeem their shares will not be reduced by the deferred underwriting commissions
the Company will pay to the underwriter (as discussed in Note 7). There will be no redemption rights upon the completion of a
Business Combination with respect to the Company’s warrants.
If a shareholder vote is not required
and the Company does not decide to hold a shareholder vote for business or other legal reasons, or if the Company is deemed to
be a foreign private issuer at such time, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association,
offer such redemption pursuant to the SEC’s tender offer rules, and file tender offer documents containing substantially
the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor has agreed
(a) to vote its founder shares, the ordinary shares included in the Private Units (the “Private Shares”) and
any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose
an amendment to the Company’s Amended and Restated Memorandum and Articles of Association with respect to the Company’s
pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting
public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to
redeem any ordinary shares (including the founder shares) and Private Units (including underlying securities) into the right to
receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any ordinary
shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection
therewith) or a vote to amend the provisions of the Amended and Restated Memorandum and Articles of Association relating to shareholders’
rights of pre-Business Combination activity and (d) that the founder shares and Private Units (including underlying securities)
shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However,
the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during
or after the Initial Public Offering if the Company fails to complete its Business Combination.
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
The Company initially had until February 23,
2020 to complete a Business Combination. On February 18, 2020, the Company’s shareholders approved an amendment to
its Amended and Restated Memorandum and Articles of Association to extend the period of time for which the Company was required
to consummate a Business Combination from February 23, 2020 to May 26, 2020 (the “Combination Period”).
In connection with the approval of the extension, shareholders elected to redeem an aggregate of 595,886 ordinary shares, of which
the Company paid cash in the aggregate amount of $6,268,796, or approximately $10.52 per share, to redeeming shareholders. In
connection with the extension, the Company deposited into the Trust Account $0.099 for each public share that was not redeemed
in connection with the extension, or an aggregate of approximately $567,182, for such extension. The amount deposited into the
Trust Account was loaned to the Company by the Sponsor. The loan is non-interest bearing and due to be paid upon the earlier of
(i) the consummation of a Business Combination and (ii) the date of the winding up of the Company (see Note 6).
The Company intends to hold a meeting
of shareholders on or prior to May 26, 2020 in order to provide shareholders with the ability to vote to extend the date
by which the Company must consummate a Business Combination (the “Second Extension”) from May 26, 2020 (or June 23,
2020 if the Company has executed a definitive agreement for a Business Combination by May 26, 2020) to July 27, 2020
(or September 28, 2020 if the Company has executed a definitive agreement for a Business Combination by July 27, 2020).
There is no assurance that the Company’s shareholders will vote to approve the extension of time with which the Company
has to complete a Business Combination. If the Company does not obtain shareholder approval, the Company would wind up its affairs
and liquidate.
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 and less up to $50,000 of interest to pay liquidation expenses), which redemption will completely
extinguish public shareholders’ rights as shareholders (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 shareholders 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 underwriter has agreed to waive its rights to the deferred underwriting commission held
in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such
event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of
the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available
for distribution will be less than the Initial Public Offering price per Unit ($10.20).
The Sponsor has agreed that it will 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 amounts in
the Trust Account to below $10.20 per share, except as to any claims by a third party who executed a waiver of any and all rights
to seek access to the Trust Account and except as 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”). 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.
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
NOTE 2. LIQUIDITY AND GOING CONCERN
As of February 29, 2020, the Company
had $69,276 in its operating bank accounts, $60,882,949 in securities held in the Trust Account to be used for a Business Combination
or to repurchase or redeem its Public Shares in connection therewith and working capital deficit of $160,793. As of February 29,
2020, approximately $1,879,000 of the amount on deposit in the Trust Account represented interest income, which is available to
pay the Company’s tax obligations, if any.
Until the consummation of a Business Combination,
the Company will be using the funds not held in the Trust Account primarily to identify and evaluate prospective acquisition candidates,
perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of
prospective target businesses, review corporate documents and material agreements of prospective target businesses, select the
target business to acquire and structure, negotiate and complete a Business Combination.
On February 10, 2020, the Company
issued the Sponsor a convertible promissory note, pursuant to which the Company borrowed an aggregate amount of $750,000. Of such
amount, $567,182 used to fund the extension loan into the Trust Account and the balance will be used to finance transaction costs
in connection with a Business Combination. The loan is non-interest bearing and due to be paid upon the earlier of (i) the
consummation of a Business Combination and (ii) the date of the winding up of the Company (see Note 6). The loan is convertible
into units at a purchase price of $10.00 per unit. The units would be identical to the Private Units. As of February 29,
2020, there was $750,000 outstanding under the convertible promissory note.
The Company will need to raise additional
capital through loans or additional investments from its Sponsor, an affiliate of the Sponsor, or the Company’s officer
and directors. The Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officer and directors may, but
are not obligated to, loan the Company funds as may be required. Accordingly, the Company may not be able to obtain additional
financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, suspending the pursuit of a potential transaction. The Company cannot
provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern through May 26, 2020, which is the
date the Company is required to cease all operations except for the purpose of winding up if it has not completed a Business Combination.
These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification
of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying financial statements
are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the rules and regulations of the SEC.
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 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 shareholder approval of any golden parachute
payments not previously approved.
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
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 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. The Company did not have any cash
equivalents as of February 29, 2020 and February 28, 2019.
Marketable securities held in Trust Account
At February 29, 2020 and February 28,
2019, the assets held in the Trust Account were substantially held in U.S. Treasury Bills.
Ordinary shares subject to possible redemption
The Company accounts for its ordinary
shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified
as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares
that feature 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) are classified as temporary equity. At all other times, ordinary
shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that
are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly,
ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’
equity section of the Company’s balance sheets.
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
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.
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’s management determined that the British Virgin Islands is the Company’s
major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as
income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of February 29,
2020 and February 28, 2019. The Company is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position.
The Company may be subject to potential
examination by foreign taxing authorities in the area 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 foreign tax laws.
The Company’s tax provision is zero
and it has no deferred tax assets. The Company is considered to be an exempted British Virgin Islands Company and is presently
not subject to income taxes or income tax filing requirements in the British Virgin Islands or the United States.
Net loss per ordinary share
Net loss per ordinary share is computed
by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The Company applies the two-class
method in calculating earnings per share. Ordinary shares subject to possible redemption at February 29, 2020 and February 28,
2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic
net loss per ordinary share since such ordinary 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 6,683,813 ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent
upon the occurrence of future events. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary
share for the periods.
Reconciliation of net loss per ordinary share
The Company’s net income is adjusted
for the portion of income that is attributable to ordinary shares 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 ordinary
share is calculated as follows:
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
​
|
|
Year
Ended
February 29,
2020
|
|
|
For
the Period
from March 20,
2018
(inception)
through
February 28,
2019
|
|
Net income
|
|
$
|
617,903
|
|
|
$
|
574,131
|
|
Less: Income attributable to ordinary
shares subject to possible redemption
|
|
|
(1,163,534
|
)
|
|
|
(650,811
|
)
|
Adjusted net loss
|
|
$
|
(545,631
|
)
|
|
$
|
(76,680
|
)
|
Weighted average ordinary shares
outstanding, basic and diluted
|
|
|
2,610,315
|
|
|
|
2,039,690
|
|
Basic and diluted net loss per
ordinary share
|
|
$
|
(0.21
|
)
|
|
$
|
(0.04
|
)
|
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. The Company has 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 Topic 820, “Fair Value Measurements,” approximates
the carrying amounts represented in the accompanying 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
financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 6,325,000 Units at a purchase price of $10.00 per Unit, inclusive of 825,000 Units sold to the underwriters
on August 30, 2018 upon the underwriters’ election to fully exercise their over-allotment option. Each Unit consists
of one ordinary share and one Public Warrant. Each Public Warrant entitles the holder to purchase one ordinary share at an exercise
price of $11.50 per share and is redeemable by the Company under certain circumstances (see Note 8).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Sponsor and the underwriter of the Initial Public Offering (and its designees) purchased an aggregate
of 323,750 Private Units at a price of $10.00 per Private Unit, of which 310,000 Private Units were purchased by the Sponsor
and 13,750 Private Units were purchased by the underwriter ($3,237,500 in the aggregate). On August 30, 2018, the Company
consummated the sale of an additional 35,063 Private Units at a price of $10.00 per Private Unit, of which 33,000 Private Units
were sold to the Sponsor and 2,063 Private Units were sold to the underwriter, generating gross proceeds of $350,630. Each Private
Unit consists of one Private Share and one redeemable warrant (each, a “Private Warrant”). Each Private Warrant is
exercisable to purchase one ordinary share at a price of $11.50 per share. The proceeds from the sale of the Private Units
were added to the net 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 Units will be used to fund the redemption
of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will expire worthless.
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
In June 2018, the Company issued
an aggregate of 1,437,500 founder shares to the Sponsor for an aggregate purchase price of $25,000 in cash. On August 20,
2018, the Company effectuated a 1.1-for-1 share dividend resulting in an aggregate of 1,581,250 founder shares outstanding. The
founder shares included an aggregate of up to 206,250 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 collectively own 20% of the Company’s issued
and outstanding ordinary shares after the Initial Public Offering. On August 30, 2018, as a result of the underwriters’
election to fully exercise their over-allotment option, 206,250 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed not to transfer,
assign or sell any of the founder shares (except to certain permitted transferees) until the earlier of (i) one year
after the date of the consummation of a Business Combination, or (ii) the date on which the closing price of the Company’s
ordinary shares equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing 150 days after a Business Combination.
Convertible Promissory Note — Related
Party
On February 10, 2020, the Company
entered into a convertible promissory note with the Sponsor, pursuant to which the Company borrowed an aggregate amount of $750,000.
Of such amount, $567,182 used to fund the extension loan into the Trust Account and the balance will be used to finance transaction
costs in connection with a Business Combination. The loan is non-interest bearing and due to be paid upon the earlier of (i) the
consummation of a Business Combination and (ii) the date of the winding up of the Company. The loan is convertible into units
at a purchase price of $10.00 per unit. The units would be identical to the Private Units. As of February 29, 2020,
there was $750,000 outstanding under the convertible promissory note.
Related Party Loans
In order to finance transaction costs
in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business
Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon consummation
of a Business Combination into additional Private Units at a price of $10.00 per Unit. In the event that a Business Combination
does not close, the Company may use a portion of 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.
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement
entered into on August 20, 2018, the holders of the founder shares, Private Units (and their underlying securities) and any
Units that may be issued upon conversion of the Working Capital Loans (and underlying securities) are entitled to registration
rights. The holders of 25% of these securities are entitled to make up to three demands, excluding short form demands, that the
Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
Underwriting Agreement
The underwriters are entitled to a deferred
fee of 3.50% of the gross proceeds of the Initial Public Offering, or $2,213,750. The deferred fee will be paid in cash only upon
the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement.
NOTE 8. SHAREHOLDERS’ EQUITY
Ordinary Shares — The
Company is authorized to issue an unlimited number of ordinary shares at no par value. Holders of the Company’s ordinary
shares are entitled to one vote for each share. At February 29, 2020 and February 28, 2019, there were 2,704,587 and
2,602,465 ordinary shares issued and outstanding, respectively, excluding 4,964,590 and 5,662,598 ordinary shares subject to possible
redemption, respectively.
Preferred Shares — The
Company is authorized to issue an unlimited number of preferred shares at no par value, divided into five classes, Class A
through Class E, each with such designation, rights and preferences as may be determined by a resolution of the Company’s
board of directors to amend the Amended and Restated Memorandum and Articles of Association to create such designations, rights
and preferences. The Company has five classes of preferred shares to give the Company flexibility as to the terms on which each
Class is issued. All shares of a single class must be issued with the same rights and obligations. Accordingly, starting with
five classes of preferred shares will allow the Company to issue shares at different times on different terms. At February 29,
2020 and February 28, 2019, there are no preferred shares designated, issued or outstanding.
Warrants — The
Public Warrants will become exercisable on the later of (a) the consummation of a Business Combination or (b) 12 months
from the effective date of the registration statement relating to the Initial Public Offering. No Public Warrants will be exercisable
for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise
of the Public Warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration
statement covering the ordinary shares issuable upon the exercise of the Public Warrants is not effective within 90 days
from the consummation of a Business Combination, the holders may, until such time as there is an effective registration statement
and during any period when the Company shall have failed to maintain an effective registration statement, exercise the Public
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 Public Warrants on a cashless basis. The Public Warrants
will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company may call the warrants for
redemption (excluding the Private Warrants), in whole and not in part, at a price of $0.01 per warrant:
|
•
|
at
any time while the Public Warrants are exercisable,
|
|
•
|
upon
not less than 30 days’ prior written notice of redemption to each Public Warrant
holder,
|
|
•
|
if,
and only if, the reported last sale price of the ordinary shares equals or exceeds $21.00
per share, for any 20 trading days within a 30-trading day period ending on the third
trading day prior to the notice of redemption to Public Warrant holders, and
|
|
•
|
if,
and only if, there is a current registration statement in effect with respect to the
issuance of the ordinary shares 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.
|
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
The Private Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants
and the ordinary shares issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will
be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
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 ordinary shares
issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances
of ordinary shares 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 respect to such warrants.
Accordingly, the warrants may expire worthless.
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:
Level 1:
|
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.
|
Level 2:
|
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.
|
Level 3:
|
Unobservable inputs
based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
TENZING ACQUISITION
CORP.
NOTES TO FINANCIAL
STATEMENTS
FEBRUARY 29, 2020
The following table presents information
about the Company’s assets that are measured at fair value on a recurring basis at February 29, 2020 and February 28,
2019, indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
|
February 29,
2020
|
|
|
February 28,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
60,882,949
|
|
|
$
|
65,241,920
|
|
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon
this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial
statements.
TENZING
ACQUISITION CORP.
CONDENSED BALANCE
SHEETS
|
|
August 31,
2020
|
|
|
February 29,
2020
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
​
|
|
|
|
​
|
|
Current Assets
|
|
|
​
|
|
|
|
​
|
|
Cash
|
|
$
|
15,539
|
|
|
$
|
69,276
|
|
Prepaid expenses
and other current assets
|
|
|
22,568
|
|
|
|
69,584
|
|
Total Current Assets
|
|
|
38,107
|
|
|
|
138,860
|
|
Marketable securities held in
Trust Account
|
|
|
34,439,933
|
|
|
|
60,882,949
|
|
Total Assets
|
|
$
|
34,478,040
|
|
|
$
|
61,021,809
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
​
|
|
|
|
​
|
|
Accounts payable and accrued expenses
|
|
$
|
736,437
|
|
|
|
299,653
|
|
Total Current Liabilities
|
|
|
736,437
|
|
|
|
299,653
|
|
Convertible promissory notes – related
party
|
|
|
1,425,000
|
|
|
|
750,000
|
|
Deferred underwriting fee payable
|
|
|
2,213,750
|
|
|
|
2,213,750
|
|
Total Liabilities
|
|
|
4,375,187
|
|
|
|
3,263,403
|
|
Commitments (Note 7)
|
|
|
​
|
|
|
|
​
|
|
Ordinary
shares subject to possible redemption, 2,328,425 and 4,964,590 shares at redemption value at August 31, 2020 and February 29,
2020, respectively
|
|
|
25,102,851
|
|
|
|
52,758,399
|
|
Shareholders’ Equity
|
|
|
​
|
|
|
|
​
|
|
Preferred
shares, no par value; unlimited shares authorized, none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Ordinary shares,
no par value; unlimited shares authorized; 2,806,128 and 2,704,587 shares issued and outstanding (excluding 2,328,425 and
4,964,590 shares subject to possible redemption) at August 31, 2020 and February 29, 2020, respectively
|
|
|
4,479,766
|
|
|
|
3,807,973
|
|
Retained earnings
|
|
|
520,236
|
|
|
|
1,192,034
|
|
Total Shareholders’
equity
|
|
|
5,000,002
|
|
|
|
5,000,007
|
|
Total Liabilities and Shareholders’
Equity
|
|
$
|
34,478,040
|
|
|
$
|
61,021,809
|
|
The accompanying
notes are an integral part of the unaudited condensed financial statements.
TENZING
ACQUISITION CORP.
CONDENSED STATEMENTS
OF OPERATIONS
(Unaudited)
|
|
Three
Months Ended
August 31,
|
|
|
Six
Months Ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating costs
|
|
$
|
525,924
|
|
|
$
|
94,110
|
|
|
$
|
790,865
|
|
|
$
|
165,245
|
|
Loss from operations
|
|
|
(525,924
|
)
|
|
|
(94,110
|
)
|
|
|
(790,865
|
)
|
|
|
(165,245
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
9,892
|
|
|
|
351,738
|
|
|
|
119,067
|
|
|
|
750,484
|
|
Unrealized
gain on marketable securities held in Trust Account
|
|
|
—
|
|
|
|
16,692
|
|
|
|
—
|
|
|
|
27,507
|
|
Net
(loss) income
|
|
$
|
(516,032
|
)
|
|
$
|
274,320
|
|
|
$
|
(671,798
|
)
|
|
$
|
612,746
|
|
Weighted
average ordinary shares outstanding, basic and diluted(1)
|
|
|
2,742,935
|
|
|
|
2,605,186
|
|
|
|
2,723,761
|
|
|
|
2,603,826
|
|
Basic and diluted net loss
per ordinary share(2)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.03
|
)
|
|
(1)
|
Excludes
an aggregate of up to 2,328,425 and 5,654,573 shares subject to possible redemption at
August 31, 2020 and 2019, respectively.
|
|
(2)
|
Excludes interest
income of $7,210 and $86,788 attributable to shares subject to possible redemption for
the three and six months ended August 31, 2020, respectively, and $329,376
and $695,524 for the three and six months ended August 31, 2019, respectively
(see Note 3).
|
|
|
|
Three
Months Ended
August 31,
|
|
|
|
Six
Months Ended
August 31,
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
Operating costs
|
|
$
|
525,924
|
|
|
$
|
94,110
|
|
|
$
|
790,865
|
|
|
$
|
165,245
|
|
Loss from operations
|
|
|
(525,924
|
)
|
|
|
(94,110
|
)
|
|
|
(790,865
|
)
|
|
|
(165,245
|
)
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
9,892
|
|
|
|
351,738
|
|
|
|
119,067
|
|
|
|
750,484
|
|
Unrealized
gain on marketable securities held in Trust Account
|
|
|
—
|
|
|
|
16,692
|
|
|
|
—
|
|
|
|
27,507
|
|
Net
(loss) income
|
|
$
|
(516,032
|
)
|
|
$
|
274,320
|
|
|
$
|
(671,798
|
)
|
|
$
|
612,746
|
|
Weighted
average ordinary shares outstanding, basic and diluted(1)
|
|
|
2,742,935
|
|
|
|
2,605,186
|
|
|
|
2,723,761
|
|
|
|
2,603,826
|
|
Basic and diluted net loss
per ordinary share(2)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.03
|
)
|
|
(1)
|
Excludes
an aggregate of up to 2,328,425 and 5,654,573 shares subject to possible redemption at
August 31, 2020 and 2019, respectively.
|
|
(2)
|
Excludes
interest income of $7,210 and $86,788 attributable to shares subject to possible redemption
for the three and six months ended August 31, 2020, respectively, and $329,376
and $695,524 for the three and six months ended August 31, 2019, respectively
(see Note 3).
|
The accompanying
notes are an integral part of the unaudited condensed financial statements.
TENZING
ACQUISITION CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
THREE AND SIX MONTHS
ENDED AUGUST 31, 2020
|
|
|
Ordinary
Shares
|
|
|
Retained
|
|
|
Total
Shareholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Equity
|
|
Balance – March 1, 2020
|
|
|
2,704,587
|
|
|
$
|
3,807,973
|
|
|
$
|
1,192,034
|
|
|
$
|
5,000,007
|
|
Change in
value of ordinary shares subject to possible redemption
|
|
|
38,348
|
|
|
|
155,761
|
|
|
|
—
|
|
|
|
155,761
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
(155,766
|
)
|
|
|
(155,766
|
)
|
Balance – May 31, 2020
|
|
|
2,742,935
|
|
|
$
|
3,963,734
|
|
|
$
|
1,036,268
|
|
|
$
|
5,000,002
|
|
Change in
value of ordinary shares subject to possible redemption
|
|
|
63,193
|
|
|
|
516,032
|
|
|
|
—
|
|
|
|
516,032
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
(516,032
|
)
|
|
|
(516,032
|
)
|
Balance – August 31,
2020
|
|
|
2,806,128
|
|
|
$
|
4,479,766
|
|
|
$
|
520,236
|
|
|
$
|
5,000,002
|
|
THREE AND SIX MONTHS
ENDED AUGUST 31, 2019
|
|
|
Ordinary
Shares
|
|
|
Retained
|
|
|
Total
Shareholders’
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
Earnings
|
|
|
Equity
|
|
Balance – March 1, 2019
|
|
|
2,602,465
|
|
|
$
|
4,425,877
|
|
|
$
|
574,131
|
|
|
$
|
5,000,008
|
|
Change in
value of ordinary shares subject to possible redemption
|
|
|
2,721
|
|
|
|
(338,425
|
)
|
|
|
—
|
|
|
|
(338,425
|
)
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
338,426
|
|
|
|
338,426
|
|
Balance – May 31, 2019
|
|
|
2,605,186
|
|
|
$
|
4,087,452
|
|
|
$
|
912,557
|
|
|
$
|
5,000,009
|
|
Change in
value of ordinary shares subject to possible redemption
|
|
|
5,304
|
|
|
|
(274,324
|
)
|
|
|
—
|
|
|
|
(274,324
|
)
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
274,320
|
|
|
|
274,320
|
|
Balance – August 31,
2019
|
|
|
2,610,490
|
|
|
$
|
3,813,128
|
|
|
$
|
1,186,877
|
|
|
$
|
5,000,005
|
|
The accompanying
notes are an integral part of the unaudited condensed consolidated financial statements.
TENZING
ACQUISITION CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six
Months Ended August 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(671,798
|
)
|
|
$
|
612,746
|
|
Adjustments to
reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities
held in Trust Account
|
|
|
(119,067
|
)
|
|
|
(750,484
|
)
|
Unrealized gain on marketable securities
held in Trust Account
|
|
|
—
|
|
|
|
(27,507
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current
assets
|
|
|
47,016
|
|
|
|
52,557
|
|
Accounts
payable and accrued expenses
|
|
|
436,784
|
|
|
|
10,876
|
|
Net cash
used in operating activities
|
|
|
(307,065
|
)
|
|
|
(101,812
|
)
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Investment of cash into Trust Account
|
|
|
(421,672
|
)
|
|
|
—
|
|
Cash withdrawn from Trust Account
for redemptions
|
|
|
26,983,755
|
|
|
|
—
|
|
Net cash
provided by investing activities
|
|
|
26,562,083
|
|
|
|
—
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from convertible promissory note – related
party
|
|
|
675,000
|
|
|
|
—
|
|
Redemption of ordinary shares
|
|
|
(26,983,755
|
)
|
|
|
—
|
|
Net cash
used in financing activities
|
|
|
(26,308,755
|
)
|
|
|
—
|
|
Net Change in Cash
|
|
|
(53,737
|
)
|
|
|
(101,812
|
)
|
Cash – Beginning
|
|
|
69,276
|
|
|
|
313,049
|
|
Cash – Ending
|
|
$
|
15,539
|
|
|
$
|
211,237
|
|
Non-Cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Change in value of ordinary
shares subject to possible redemption
|
|
$
|
(671,793
|
)
|
|
$
|
612,749
|
|
The accompanying notes
are an integral part of the unaudited condensed consolidated financial statements.
TENZING
ACQUISITION CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2020
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Tenzing Acquisition
Corp. (the “Company”) is a blank check company incorporated in the British Virgin Islands on March 20, 2018.
The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with,
purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar
business combination with one or more businesses or entities (“Business Combination”). The Company is not limited
to a particular industry or geographic region for purposes of consummating a Business Combination.
Tenzing Merger Subsidiary
Inc., a Delaware corporation, is a wholly owned subsidiary of the Company (“Merger Sub”).
At August 31,
2020, the Company had not yet commenced any operations other than seeking a Business Combination. All activity through August 31,
2020 relates to the Company’s formation, its initial public offering (“Initial Public Offering”), which is described
below, and, following the Initial Public Offering, seeking to identify a target company for a Business Combination and the proposed
business combination with Reviva Pharmaceuticals, Inc. (“Reviva”) (see Note 7).
The registration statement
for the Initial Public Offering was declared effective on August 20, 2018. On August 23, 2018 the Company consummated
the Initial Public Offering of 5,500,000 units (“Units” and, with respect to the ordinary shares included in
the Units offered, the “Public Shares”) at $10.00 per Unit, generating total gross proceeds of $55,000,000, which
is described in Note 4. Each Unit consists of one ordinary share of the Company and one warrant of the Company (which is redeemable
under certain circumstances) (the “Public Warrants”), with each Public Warrant entitling the holder thereof to purchase
one ordinary share of the Company for $11.50 per share.
Simultaneously with
the closing of the Initial Public Offering, the Company consummated the sale of an aggregate of 323,750 units (the “Private
Units”) at a price of $10.00 per unit in a private placement to the Company’s sponsor, Tenzing LLC, a Delaware limited
liability company (the managing members of which are the Company’s Chairman and Chief Executive Officer) (the “Sponsor”),
and the underwriter of the Initial Public Offering, generating total gross proceeds of $3,237,500, which is described in Note
5.
Following the closing
of the Initial Public Offering on August 23, 2018, an amount of $56,100,000 ($10.20 per Unit) from the net proceeds of the
sale of the Units in the Initial Public Offering and the sale of the Private Units 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.
On August 30,
2018, in connection with the underwriters’ election to fully exercise their over-allotment option, the Company consummated
the sale of an additional 825,000 Units and the sale of an additional 35,063 Private Units, each at $10.00 per unit, generating
total gross proceeds of $8,600,630. Following the closing, an additional $8,415,000 of net proceeds ($10.20 per Unit) was deposited
in the Trust Account, resulting in $64,515,000 held in the Trust Account.
Transaction costs amounted
to $4,027,962, consisting of $1,423,125 of underwriting fees, $2,213,750 of deferred underwriting fees and $391,087 of offering
costs. As of August 31, 2020, there was $15,539 of cash held outside of the Trust Account and available for working capital
purposes.
The Company’s
management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and
sale of the Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. NASDAQ rules provide that the 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 (less any deferred underwriting commissions
and interest released to pay taxes payable) at the time of signing a definitive agreement in connection with a Business Combination.
There is no assurance that the Company will be able to successfully effect a Business Combination.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
The Company will provide
its shareholders 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 shareholder meeting called to approve the Business Combination or (ii) by means of a
tender offer. For so long as the Company is deemed to be a foreign private issuer, it will conduct redemptions in accordance with
the tender offer rules of the Securities and Exchange Commission (“SEC”). In connection with a proposed Business Combination,
unless the Company is deemed to be a foreign private issuer at such time, the Company may seek shareholder approval of a Business
Combination at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether
they vote for or against a Business Combination. The Company will proceed with a Business Combination only 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 shareholder
approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks
shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s
Amended and Restated Memorandum and Articles of Association provides that, a public shareholder, together with any affiliate of
such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from
seeking redemption rights with respect to 20% or more of the Public Shares without the Company’s prior written consent.
The shareholders will
be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account ($10.781 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
tax obligations). The per-share amount to be distributed to shareholders who redeem their shares will not be reduced by the deferred
underwriting commissions the Company will pay to the underwriter (as discussed in Note 7). There will be no redemption rights
upon the completion of a Business Combination with respect to the Company’s warrants.
If a shareholder vote
is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, or if the Company
is deemed to be a foreign private issuer at such time, the Company will, pursuant to its Amended and Restated Memorandum and Articles
of Association, offer such redemption pursuant to the SEC’s tender offer rules, and file tender offer documents containing
substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s
Sponsor has agreed (a) to vote its founder shares, the ordinary shares included in the Private Units (the “Private
Shares”) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination,
(b) not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association with respect
to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company
provides dissenting public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment;
(c) not to redeem any ordinary shares (including the founder shares) and Private Units (including underlying securities)
into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination
(or to sell any ordinary shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder
approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Memorandum and Articles of Association
relating to shareholders’ rights of pre-Business Combination activity and (d) that the founder shares and Private Units
(including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination
is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to
any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
The Company initially
had until February 23, 2020 to complete a Business Combination. On February 18, 2020, the Company’s shareholders
approved an amendment to its Amended and Restated Memorandum and Articles of Association to extend the period of time for which
the Company was required to consummate a Business Combination from February 23, 2020 to May 26, 2020. In connection
with the approval of the extension, shareholders elected to redeem an aggregate of 595,886 ordinary shares, of which the Company
paid cash in the aggregate amount of $6,268,796, or approximately $10.52 per share, to redeeming shareholders. In connection with
the extension, the Company deposited into the Trust Account $0.099 for each public share that was not redeemed in connection with
the extension, or an aggregate of $567,182, for such extension. The amount deposited into the Trust Account was loaned to the
Company by the Sponsor. The loan is non-interest bearing and due upon the earlier of (i) the consummation of a Business Combination
and (ii) the date of the winding up of the Company (see Note 6).
On May 21, 2020,
the Company’s shareholders approved an amendment to its Amended and Restated Memorandum and Articles of Association to extend
the period of time for which the Company is required to consummate a Business Combination (the “Second Extension”)
from May 26, 2020 to July 27, 2020 (or September 28, 2020 if the Company has executed a definitive agreement for
a Business Combination by July 27, 2020). In connection with the approval of the Second Extension, shareholders elected to
redeem an aggregate of 2,534,624 ordinary shares, of which the Company paid cash in the aggregate amount of $26,983,755, or approximately
$10.65 per share, to redeeming shareholders. In connection with the Second Extension, the Company deposited into the Trust Account
an aggregate of $0.066 for each public share that was not redeemed in connection with the Second Extension, or an aggregate of
$210,836, for such extension. The amount deposited into the Trust Account was loaned to the Company by the Sponsor. The loan is
non-interest bearing and due upon the earlier of (i) the consummation of a Business Combination and (ii) the date the
winding up of the Company (see Note 6).
As a result of the
execution of the Merger Agreement with Reviva (as discussed in Note 7), the date by which the Company must consummate a Business
Combination was extended until September 28, 2020. Accordingly, on July 24, 2020 and August 18, 2020, the Company
deposited into the Trust Account an aggregate of $0.066 for each public share that was not redeemed in connection with the Second
Extension, or an aggregate of $210,836. As a result, the period of time for which the Company is required to consummate a Business
Combination was extended from July 27, 2020 to September 28, 2020 (the “Third Extension”). The amount deposited
into the Trust Account was loaned to the Company by the Sponsor. The loan is non-interest bearing and due upon the earlier of
(i) the consummation of a Business Combination and (ii) the date the winding up of the Company (see Note 6).
On September 24,
2020, the Company’s shareholders approved an amendment to its Amended and Restated Memorandum and Articles of Association
to extend the period of time for which the Company is required to consummate a Business Combination (the “Fourth Extension”)
from September 28, 2020 to December 28, 2020 (the “Combination Period”). In connection with the approval
of the Fourth Extension, shareholders elected to redeem an aggregate of 10,122 ordinary shares, of which the Company paid cash
in the aggregate amount of $109,130, or approximately $10.78 per share, to redeeming shareholders. In connection with the Fourth
Extension, the Company deposited into the Trust Account $0.033 for each public share that was not redeemed in connection with
the Fourth Extension, or an aggregate of $105,084, for such extension. The amount deposited into the Trust Account was loaned
to the Company by the Sponsor.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
The loan is non-interest
bearing and due upon the earlier of (i) the consummation of a Business Combination and (ii) the date of the winding
up of the Company (see Note 6).
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 and less up to $50,000 of interest to pay liquidation expenses),
which redemption will completely extinguish public shareholders’ rights as shareholders (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 shareholders 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 underwriter has agreed to waive its rights to the deferred
underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the
Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available
to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the
assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
The Sponsor has agreed
that it will 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
amounts in the Trust Account to below $10.20 per share, except as to any claims by a third party who executed a waiver of any
and all rights to seek access to the Trust Account and except as 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”). 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.
NOTE 2. LIQUIDITY
AND GOING CONCERN
As of August 31,
2020, the Company had $15,539 in its operating bank accounts, $34,439,933 in securities held in the Trust Account to be used for
a Business Combination or to repurchase or redeem the Public Shares in connection therewith and a working capital deficit of $698,330.
As of August 31, 2020, approximately $1,118,000 of the amount on deposit in the Trust Account represented interest income,
which is available to pay the Company’s tax obligations, if any.
Until the consummation
of a Business Combination, the Company will be using the funds not held in the Trust Account primarily to identify and evaluate
prospective acquisition candidates, perform business due diligence on prospective target businesses, travel to and from the offices,
plants or similar locations of prospective target businesses, review corporate documents and material agreements of prospective
target businesses, select the target business to acquire and structure, negotiate and complete a Business Combination.
On February 10,
2020, the Company issued the Sponsor a convertible promissory note, pursuant to which the Company borrowed an aggregate amount
of $750,000. Of such amount, $567,182 was used to fund the extension loan into the Trust Account and the balance was used to finance
transaction costs in connection with a Business Combination. During the six months ended August 31, 2020, the Company
issued the Sponsor additional convertible promissory notes, pursuant to which the Company borrowed an aggregate amount of $675,000.
Of such amount, $421,672 was used to fund the extension loans into the Trust Account and the balance was used to finance transaction
costs in connection with a Business Combination. The loans are non-interest bearing and due upon the earlier of (i) the consummation
of a Business Combination and (ii) the date of the winding up of the Company (see Note 6). The loans are convertible into units
at a purchase price of $10.00 per unit. The units would be identical to the Private Units.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
On September 24,
2020, the Company issued the Sponsor another convertible promissory note, pursuant to which the Company borrowed an aggregate
amount of $350,000. Of such amount, $105,084 was used to fund the extension loan into the Trust Account and the balance will be
used to finance transaction costs in connection with a Business Combination. The loan is non-interest bearing and due upon the
earlier of (i) the consummation of a Business Combination and (ii) the date of the winding up of the Company (see Note
6). The loans are convertible into units at a purchase price of $10.00 per unit; conversions greater than $75,000 are subject
to shareholder approval. The units would be identical to the Private Units.
The Company will need
to raise additional capital through loans or additional investments from its Sponsor, an affiliate of the Sponsor, or the Company’s
officer and directors. The Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officer and directors
may, but are not obligated to, loan the Company funds as may be required. Accordingly, the Company may not be able to obtain additional
financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, suspending the pursuit of a potential transaction. The Company cannot
provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern through December 28, 2020, which
is the date the Company is required to cease all operations except for the purpose of winding up if it has not completed a Business
Combination. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
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 consolidated 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 February 29, 2020 as filed with the SEC on May 4, 2020, which contains the audited financial statements
and notes thereto. The financial information as of February 29, 2020 is derived from the audited financial statements presented
in the Company’s Annual Report on Form 10-K for the year ended February 29, 2020. The interim results for the three
and six months ended August 31, 2020 are not necessarily indicative of the results to be expected for the year ending
February 28, 2021 or for any future interim periods.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
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 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 shareholder 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 statements
with another public company, which is neither an emerging growth company nor an emerging growth company, and 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
the condensed consolidated 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 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. The Company
did not have any cash equivalents as of August 31, 2020 and February 29, 2020.
Marketable Securities
Held in Trust Account
At August 31,
2020, substantially all of the assets held in the Trust Account were held in money market funds, which invest in U.S. Treasury
securities. At February 29, 2020, substantially all of the assets held in the Trust Account were substantially held in U.S.
Treasury Bills.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
Ordinary Shares
Subject to Possible Redemption
The Company accounts
for its ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified
as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares
that feature 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) are classified as temporary equity. At all other times, ordinary
shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that
are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly,
ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’
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.
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’s management determined that the British Virgin Islands is
the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax
benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties
as of August 31, 2020 and February 29, 2020. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position.
The Company may be
subject to potential examination by foreign taxing authorities in the area 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 foreign
tax laws.
The Company is considered
to be an exempted British Virgin Islands Company and is presently not subject to income taxes or income tax filing requirements
in the British Virgin Islands or the United States. As such, the Company’s tax provision was zero for the periods presented.
Net Loss Per Ordinary
Share
Net loss per ordinary
share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The Company
applies the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption at August 31,
2020 and 2019, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation
of basic net loss per ordinary share since such ordinary 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 6,683,813 ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants
are contingent upon the occurrence of future events. As a result, diluted net loss per ordinary share is the same as basic net
loss per ordinary share for the periods.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
Reconciliation of
Net Loss Per Ordinary Share
The Company’s
net (loss) income is adjusted for the portion of income that is attributable to ordinary shares 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 ordinary share is calculated as follows:
|
|
Three
Months Ended
August 31,
|
|
|
Six
Months Ended
August 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net (loss) income
|
|
$
|
(516,032
|
)
|
|
$
|
274,320
|
|
|
$
|
(671,798
|
)
|
|
$
|
612,746
|
|
Less:
Income attributable to ordinary shares subject to possible redemption
|
|
|
(7,210
|
)
|
|
|
(329,376
|
)
|
|
|
(86,788
|
)
|
|
|
(695,524
|
)
|
Adjusted net loss
|
|
$
|
(523,242
|
)
|
|
$
|
(55,056
|
)
|
|
$
|
(758,586
|
)
|
|
$
|
(82,778
|
)
|
Weighted
average ordinary shares outstanding, basic
and diluted
|
|
|
2,742,935
|
|
|
|
2,605,186
|
|
|
|
2,723,761
|
|
|
|
2,603,826
|
|
Basic and diluted net loss per
ordinary share
|
|
$
|
(0.19
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.03
|
)
|
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. The Company has 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 Topic 820, “Fair Value Measurement,”
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 standards, if currently adopted, would have a material effect
on the Company’s condensed consolidated financial statements.
Risk and Uncertainties
Management continues
to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the
virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target
company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4. INITIAL
PUBLIC OFFERING
Pursuant to the Initial
Public Offering, the Company sold 6,325,000 Units at a purchase price of $10.00 per Unit, inclusive of 825,000 Units
sold to the underwriters on August 30, 2018 upon the underwriters’ election to fully exercise their over-allotment
option. Each Unit consists of one ordinary share and one Public Warrant. Each Public Warrant entitles the holder to purchase one
ordinary share at an exercise price of $11.50 per share and is redeemable by the Company under certain circumstances (see
Note 8).
TENZING
ACQUISITION CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
NOTE 5. PRIVATE PLACEMENT
Simultaneously with
the closing of the Initial Public Offering, the Sponsor and the underwriter of the Initial Public Offering (and its designees)
purchased an aggregate of 323,750 Private Units at a price of $10.00 per Private Unit, of which 310,000 Private Units were
purchased by the Sponsor and 13,750 Private Units were purchased by the underwriter ($3,237,500 in the aggregate). On August 30,
2018, the Company consummated the sale of an additional 35,063 Private Units at a price of $10.00 per Private Unit, of which 33,000
Private Units were sold to the Sponsor and 2,063 Private Units were sold to the underwriter, generating gross proceeds of $350,630.
Each Private Unit consists of one Private Share and one redeemable warrant (each, a “Private Warrant”). Each Private
Warrant is exercisable to purchase one ordinary share at a price of $11.50 per share. The proceeds from the sale of the
Private Units were added to the net 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 Units will be used to
fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will expire
worthless.
NOTE 6. RELATED PARTY
TRANSACTIONS
Founder Shares
In June 2018,
the Company issued an aggregate of 1,437,500 founder shares to the Sponsor for an aggregate purchase price of $25,000 in
cash. On August 20, 2018, the Company effectuated a 1.1-for-1 share dividend resulting in an aggregate of 1,581,250 founder
shares outstanding. The founder shares included an aggregate of up to 206,250 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 collectively
own 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. On August 30, 2018,
as a result of the underwriters’ election to fully exercise their over-allotment option, 206,250 Founder Shares are no longer
subject to forfeiture.
The Sponsor has
agreed not to transfer, assign or sell any of the founder shares (except to certain permitted transferees) until the earlier of
(i) one year after the date of the consummation of a Business Combination, or (ii) the date on which the closing price
of the Company’s ordinary shares equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations
and recapitalizations) for any 20 trading days within any 30-trading day period commencing 150 days after a Business Combination.
Convertible Promissory Notes — Related
Party
On February 10,
2020, the Company issued the Sponsor a convertible promissory note, pursuant to which the Company borrowed an aggregate amount
of $750,000. Of such amount, $567,182 was used to fund the extension loan into the Trust Account and the balance was used to finance
transaction costs in connection with a Business Combination. During the six months ended August 31, 2020, the Company
issued the Sponsor additional convertible promissory notes, pursuant to which the Company borrowed an aggregate amount of $675,000.
Of such amounts, $421,672 was used to fund the extension loans into the Trust Account and the balance will be used to finance
transaction costs in connection with a Business Combination. The loan is non-interest bearing and due to be paid upon the earlier
of (i) the consummation of a Business Combination and (ii) the date of the winding up of the Company. The loan is convertible
into units at a purchase price of $10.00 per unit. The units would be identical to the Private Units.
As of August 31,
2020, there was $1,425,000 outstanding under the convertible promissory notes.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
On September 24,
2020, the Company issued another convertible promissory note with the Sponsor, pursuant to which the Company borrowed an aggregate
amount of $350,000. Of such amount, $105,084 was used to fund the Fourth Extension loan into the Trust Account and the balance
will be used to finance transaction costs in connection with a Business Combination. The loan is non-interest bearing and due
to be paid upon the earlier of (i) the consummation of a Business Combination and (ii) the date of the winding up of
the Company. The loan is convertible into units at a purchase price of $10.00 per unit; conversions greater than $75,000
are subject to shareholder approval. The units would be identical to the Private Units.
Related Party Loans
In order to finance
transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the
Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon
consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may
be converted upon consummation of a Business Combination into additional Private Units at a price of $10.00 per Unit. In the event
that a Business Combination does not close, the Company may use a portion of 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.
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration
rights agreement entered into on August 20, 2018, the holders of the founder shares, Private Units (and their underlying
securities) and any Units that may be issued upon conversion of the Working Capital Loans (and underlying securities) are entitled
to registration rights. The holders of 25% of these securities are entitled to make up to three demands, excluding short form
demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company will
bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters
are entitled to a deferred fee of 3.50% of the gross proceeds of the Initial Public Offering, or $2,213,750. The deferred fee
will be paid in cash only upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the
terms of the underwriting agreement.
Merger Agreement
On July 20,
2020, the Company, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Merger Sub, the Sponsor,
Reviva, and Laxminarayan Bhat Ph.D. (“Dr. Bhat”). Pursuant to the Merger Agreement, subject to the terms and
conditions set forth therein, (i) prior to the Closing (as defined below), the Company will re-domicile from the British
Virgin Islands to the State of Delaware through a statutory re-domestication (the “Conversion”), and (ii) upon
the consummation of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with
and into Reviva (the “Merger” and, together with the Conversion and the other transactions contemplated by the Merger
Agreement, the “Transactions”), with Reviva continuing as the surviving corporation in the Merger and a wholly-owned
subsidiary of the Company (after its domiciliation to Delaware).
The aggregate merger
consideration to be paid pursuant to the Merger Agreement to holders of Reviva common stock and preferred stock as of immediately
prior to the effective time of the Merger (the “Reviva Stockholders” and, together with the holders of Reviva options
and warrants immediately prior to the effective time of the Merger, the “Reviva Security Holders”) will be an amount
equal to $62,400,000 (the “Merger Consideration”), plus the additional contingent right to receive the Earnout Shares
(as defined below) after the Closing, as described below. The Merger Consideration to be paid to Reviva Stockholders will be paid
solely by the delivery of new shares of the Company’s common stock, each valued at the price per share (the “Redemption
Price”) at which each share of the Company’s common stock is redeemed or converted pursuant to the redemption by the
Company of its public stockholders in connection with the Company’s initial business combination.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
In addition to the
Merger Consideration set forth above, the Reviva Stockholders will also have a contingent right to receive up to an additional
1,000,000 shares of the Company’s common stock (the “Earnout Shares”) after the Closing based on the stock price
performance of the Company’s common stock and the achievement by Reviva of certain clinical trial milestones during the
three (3) year period following the Closing (the “Earnout Period”).
The Merger Agreement
contains customary representations, warranties and covenants by the parties thereto and the Closing is subject to certain conditions
as further described in the Merger Agreement.
NOTE 8. SHAREHOLDERS’
EQUITY
Ordinary Shares — The
Company is authorized to issue an unlimited number of ordinary shares at no par value. Holders of the Company’s ordinary
shares are entitled to one vote for each share. At August 31, 2020 and February 29, 2020, there were 2,806,128 and 2,704,587
ordinary shares issued and outstanding, respectively, excluding 2,328,425 and 4,964,590 ordinary shares subject to possible redemption,
respectively.
Preferred Shares — The
Company is authorized to issue an unlimited number of preferred shares at no par value, divided into five classes, Class A
through Class E, each with such designation, rights and preferences as may be determined by a resolution of the Company’s
board of directors to amend the Amended and Restated Memorandum and Articles of Association to create such designations, rights
and preferences. The Company has five classes of preferred shares to give the Company flexibility as to the terms on which each
Class is issued. All shares of a single class must be issued with the same rights and obligations. Accordingly, starting with
five classes of preferred shares will allow the Company to issue shares at different times on different terms. At August 31,
2020 and February 29, 2020, there are no preferred shares designated, issued or outstanding.
Warrants — The
Public Warrants will become exercisable on the later of (a) the consummation of a Business Combination or (b) 12 months
from the effective date of the registration statement relating to the Initial Public Offering. No Public Warrants will be exercisable
for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise
of the Public Warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration
statement covering the ordinary shares issuable upon the exercise of the Public Warrants is not effective within 90 days
from the consummation of a Business Combination, the holders may, until such time as there is an effective registration statement
and during any period when the Company shall have failed to maintain an effective registration statement, exercise the Public
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 Public Warrants on a cashless basis. The Public Warrants
will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company may
call the warrants for redemption (excluding the Private Warrants), in whole and not in part, at a price of $0.01 per warrant:
•
at any time while the Public Warrants are
exercisable,
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
•
upon
not less than 30 days’ prior written notice of redemption to each Public Warrant holder,
•
if, and only if, the reported last sale price
of the ordinary shares equals or exceeds $21.00 per share, for any 20 trading days within a 30-trading day period ending on the
third trading day prior to the notice of redemption to Public Warrant holders, and
•
if, and only if, there is a current registration
statement in effect with respect to the issuance of the ordinary shares 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.
The Private Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants
and the ordinary shares issuable upon the exercise of the Private Warrants will not be transferable, assignable or salable until
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will
be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
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 ordinary shares
issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances
of ordinary shares 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 respect to such warrants.
Accordingly, the warrants may expire worthless.
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:
Level 1:
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.
Level 2:
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.
TENZING ACQUISITION
CORP.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2020
(Unaudited)
Level 3:
Unobservable inputs based on the Company’s
assessment of the assumptions that market participants would use in pricing the asset or liability.
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
August 31, 2020 and February 29, 2020, indicates the fair value hierarchy of the valuation inputs the Company utilized
to determine such fair value:
Description
|
|
Level
|
|
|
August 31,
2020
|
|
|
February 29,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
34,439,933
|
|
|
$
|
60,882,949
|
|
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 in these financial statements, the Company did not identify any subsequent events
that would have required adjustment or disclosure in the condensed consolidated financial statements.
Reviva Pharmaceuticals,
Inc.
Consolidated Financial
Statements
December 31,
2019 and 2018
Table of Contents
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Reviva Pharmaceuticals
Inc.
Cupertino, California
Opinion on the Financial Statements
We have audited
the accompanying consolidated balance sheets of Reviva Pharmaceuticals Inc. and subsidiary (collectively the “Company”)
as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ deficit, and
cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the consolidated results
of its operations and its cash flows for each of the two years in the two-year period ended December 31, 2019, in conformity
with U.S. generally accepted accounting principles.
The Company’s ability to continue
as a Going Concern
The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company’s significant recurring losses and accumulated deficit raise
substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described
in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our
audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Emphasis of Matter- COVID-19
As described in
Note 10 to the consolidated financial statements, the World Health Organization has declared COVID-19 a global pandemic leading
to broader global economic uncertainties. The measures taken by government agencies to slow the progression of the disease is
uncertain and may adversely affect the Company’s result of operations, cash flow and financial position. Our opinion is
not modified with respect to this matter.
We have served as
the Company’s auditor since 2016.
|
/s/ ArmaninoLLP
|
|
|
San Ramon, California
|
July 23, 2020
|
|
REVIVA
PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE
SHEETS
December 31, 2019 and 2018
|
2019
|
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
193
|
|
|
$
|
118,637
|
|
Property and equipment, net
|
|
|
591
|
|
|
|
1,236
|
|
Non-current
assets
|
|
|
1,816
|
|
|
|
1,816
|
|
Total assets
|
|
$
|
2,600
|
|
|
$
|
121,689
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
224,543
|
|
|
$
|
66,371
|
|
Accrued expenses and other current
liabilities
|
|
|
2,722,875
|
|
|
|
1,046,895
|
|
Contingent warrant, net
|
|
|
101,525
|
|
|
|
107,934
|
|
Convertible
promissory notes, net
|
|
|
3,765,087
|
|
|
|
4,865,087
|
|
Total
liabilities
|
|
|
6,814,030
|
|
|
|
6,086,287
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.0001, 13,625,237 shares authorized, 5,802,350 undesignated
|
|
|
|
|
|
|
|
|
Series 1
convertible preferred stock, 625,237 shares designated; 625,237 shares issued and outstanding (liquidation preference of $3,069,913)
|
|
|
3,069,913
|
|
|
|
3,069,913
|
|
Series 2
convertible preferred stock, 1,245,889 shares designated; 1,245,889 shares issued and outstanding (liquidation preference
of $7,624,841)
|
|
|
7,624,841
|
|
|
|
7,624,841
|
|
Series 3
convertible preferred stock, 951,761 shares designated; 951,761 shares issued and outstanding (liquidation preference of $12,039,777)
|
|
|
7,973,720
|
|
|
|
7,973,720
|
|
Series 4
convertible preferred stock, 5,000,000 shares designated; 1,029,994 shares issued and outstanding (liquidation preference
$15,861,892)
|
|
|
10,401,500
|
|
|
|
10,401,500
|
|
Common
stock, par value of $0.0001; 35,000,000 shares authorized; 18,180,748 shares issued and outstanding
|
|
|
618
|
|
|
|
618
|
|
Additional paid-in capital
|
|
|
18,644,683
|
|
|
|
18,644,683
|
|
Accumulated deficit
|
|
|
(54,526,705
|
)
|
|
|
(53,679,873
|
)
|
Total stockholders’
deficit
|
|
|
(6,811,430
|
)
|
|
|
(5,964,598
|
)
|
Total Liabilities and Stockholders’
deficit
|
|
$
|
2,600
|
|
|
$
|
121,689
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
REVIVA
PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS
OF OPERATIONS
For the Years Ended December 31, 2019 and 2018
|
|
2019
|
|
|
2018
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
195,744
|
|
|
$
|
946,301
|
|
General and administrative
|
|
|
181,116
|
|
|
|
175,579
|
|
Total operating expenses
|
|
|
376,860
|
|
|
|
1,121,880
|
|
Loss from operations
|
|
|
(376,860
|
)
|
|
|
(1,121,880
|
)
|
Other income (expense)
|
|
|
|
|
|
|
​
|
|
Interest income
|
|
|
201
|
|
|
|
1,365
|
|
Interest expense
|
|
|
(469,373
|
)
|
|
|
(559,040
|
)
|
Total other income (expense)
|
|
|
(469,172
|
)
|
|
|
(557,675
|
)
|
Loss before provision for income
taxes
|
|
|
(846,032
|
)
|
|
|
(1,679,555
|
)
|
Provision
for income taxes
|
|
|
800
|
|
|
|
800
|
|
Net loss
|
|
$
|
(846,832
|
)
|
|
$
|
(1,680,355
|
)
|
The accompanying notes
are an integral part of these consolidated financial statements.
REVIVA
PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2019 and 2018
|
|
Series 1,2,3,4
Convertible
Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2017
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,623,629
|
|
|
$
|
(51,999,518
|
)
|
|
$
|
(4,305,297
|
)
|
Stock-based
compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,054
|
|
|
|
—
|
|
|
|
21,054
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,680,355
|
)
|
|
|
(1,680,355
|
)
|
Balance, December 31, 2018
|
|
|
3,852,881
|
|
|
|
29,069,974
|
|
|
|
18,180,748
|
|
|
|
618
|
|
|
|
18,644,683
|
|
|
|
(53,679,873
|
)
|
|
|
(5,964,598
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(846,832
|
)
|
|
|
(846,832
|
)
|
Balance, December 31, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(54,526,705
|
)
|
|
$
|
(6,811,430
|
)
|
The accompanying notes
are an integral part of these consolidated financial statements.
REVIVA
PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
For the Years Ended December 31, 2019 and 2018
|
|
2019
|
|
|
2018
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(846,832
|
)
|
|
$
|
(1,680,355
|
)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
645
|
|
|
|
1,017
|
|
Amortization of warrant expenses
|
|
|
—
|
|
|
|
34,895
|
|
Amortization of debt discount
|
|
|
—
|
|
|
|
16,701
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
21,054
|
|
Mark-to-market of warrant liability
|
|
|
(6,409
|
)
|
|
|
—
|
|
Changes in operating assets
and liabilities
|
|
|
—
|
|
|
|
—
|
|
Non-current assets
|
|
|
—
|
|
|
|
7,262
|
|
Accounts payable
|
|
|
158,172
|
|
|
|
(6,654
|
)
|
Accrued interest
|
|
|
226,312
|
|
|
|
542,339
|
|
Accrued expenses and other current
liabilities
|
|
|
249,668
|
|
|
|
(7,622
|
)
|
Net cash flow provided by
(used in) operating activities
|
|
|
(218,444
|
)
|
|
|
(1,071,363
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible
promissory notes
|
|
|
100,000
|
|
|
|
175,000
|
|
Net cash provided by (used
in) financing activities
|
|
|
100,000
|
|
|
|
175,000
|
|
Net decrease in cash
|
|
|
(118,444
|
)
|
|
|
(896,363
|
)
|
Cash, beginning of year
|
|
|
118,637
|
|
|
|
1,015,000
|
|
Cash, end of year
|
|
$
|
193
|
|
|
$
|
118,637
|
|
Supplementary information:
|
|
|
|
|
|
|
|
|
Cash paid for taxes
|
|
$
|
800
|
|
|
$
|
800
|
|
Non cash transactions:
|
|
|
|
|
|
|
|
|
Conversion of convertible promissory
notes into accrued legal liability
|
|
$
|
1,200,000
|
|
|
|
—
|
|
Discount due to warrants issued
with debt
|
|
|
—
|
|
|
$
|
34,895
|
|
Debt discount on issuance of
convertible promissory notes
|
|
|
—
|
|
|
$
|
16,701
|
|
The accompanying notes
are an integral part of these consolidated financial statements.
REVIVA
PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2019 and 2018
1. NATURE OF OPERATIONS
Reviva Pharmaceuticals, Inc.
(the “Parent”) was incorporated in the state of Delaware and registered in California, and commenced operations on
May 1, 2006 and its Indian subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated in 2014 (referred herein
as “the Company”). The Company is an emerging research based pharmaceutical company focused on developing a portfolio
of internally discovered next generation safe and effective therapeutic drugs by using an integrated chemical genomics technology
platform and proprietary chemistries. The Company is currently focused on developing drugs for the central nervous system (CNS),
cardiovascular (CV), metabolic and inflammatory diseases.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the
Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s
management, who is responsible for their integrity and objectivity.
Principals of consolidation
The accompanying consolidated
financial statements include the accounts of the Reviva Pharmaceuticals, Inc. and its wholly owned subsidiary Reviva Pharmaceuticals,
India Pvt Ltd. The accompanying consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. All transactions and balances between the parent and its subsidiary have been
eliminated in consolidation.
Going concern
The Company has incurred
operating losses and negative cash flows since inception. The Company has a limited history of operations and its prospects are
subject to risks, expenses, and uncertainties frequently encountered by companies in pharmaceutical industry. These risks include,
but are not limited to, the uncertainty of successfully developing its products, availability of additional financing, obtaining
regulatory approvals and the uncertainty of achieving future profitability. The Company has a limited operating history and has
yet to generate material revenues from commercial operations. To date, the Company has been funded primarily by equity financings
and convertible promissory notes. The Company’s ultimate success is dependent upon its ability to raise additional capital,
to obtain necessary regulatory approvals for its products, and to successfully develop and market its products.
The accompanying consolidated
financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern.
As of December 31, 2019, the Company had had a cash and cash equivalents of $193. During the year ended December 31,
2019, the Company incurred a net loss of $846,832 and had negative cash flows from operating activities of $218,444, net of accrued
legal liability due to settlement of convertible notes with a face value of $1,200,000. In addition, the Company had an accumulated
deficit of $54,526,705 at December 31, 2019. Management intends to continue its clinical trials and research efforts and
to finance operations of the Company through convertible promissory notes or equity financings. There can be no assurance that
the Company will be successful in obtaining additional financing on favorable terms or at all.
These matters raise substantial
doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
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 as of the date of the financial statements and the reported
amounts of expenses during the reporting periods covered by the financial statements and accompanying notes. Significant areas
requiring the use of management estimates include, but are not limited to, valuation of intangible assets, depreciative and amortization
useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial
conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities. Actual results
could differ materially from such estimates under different assumptions or circumstances.
Concentration of credit risk and other risks
and uncertainties
Financial instruments that
potentially subject the Company to a concentration of credit risk consist of cash. Substantially, all the Company’s cash
are held in demand deposit form by one financial institution. The Company has not experienced any losses on its deposits of cash.
The Company is subject to
all of the risks inherent in an early stage company developing new pharmaceutical products. These risks include, but are not limited
to, limited management resources, dependence upon medical acceptance of the product in development, regulatory approvals, successful
clinical trials, availability and willingness of patients to participate in human trials, and competition in the pharmaceutical
industry. The Company’s operating results may be materially affected by the foregoing factors.
Cash
The Company considers all
highly liquid investments purchased with an original maturity at the date of purchase of three months or less to be cash
equivalents. As of December 31, 2019, and 2018, the Company’s cash was maintained in demand deposit forms at two financial
institutions. Deposits in financial institutions may, from time to time, have exceed federally insured limits.
Property and equipment
The Company capitalizes expenditures
related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets
purchased; (2) existing assets that are replaced, improved or the useful lives have been extended. Acquisitions of new assets,
additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair
costs are expensed as incurred. Assets classified as property and equipment are stated at cost less accumulated depreciation and
are depreciated using the straight-line method over the estimated useful lives of the assets, generally between three and five years,
or the lease term of the respective assets, whichever is less. When assets are retired or otherwise disposed, their original cost
and related accumulated depreciation are removed from the consolidated balance sheet, and any resulting gain or loss is reflected
in related operating expense.
Leases
In February 2016, the
FASB issued ASU 2016-2 for leases. The ASU introduces a new lessee model that brings most leases on the balance sheet. The new
standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as
well as the FASB’s new revenue recognition standard. However, the ASU eliminates the use of bright-line tests in determining
lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with
specific quantitative disclosures to better enable users of consolidated financial statements to assess the amount, timing, and
uncertainty of cash flows arising from leases. The Company adopted this standard and determined that there is no material impact
that the new accounting guidance will have on its financial statements and related disclosures.
Research and development costs
Research and development
costs are charged to operating expenses as incurred. Research and development costs include, but are not limited to, payroll and
personnel expenses, laboratory supplies, consulting costs, and allocated overhead, including rent, equipment depreciation, and
utilities.
General and Administrative costs
General and administrative
costs are charged to operating expenses as incurred. General and administrative costs include, but are not limited to, payroll
and personnel expenses, travel and entertainment, consulting costs, conference and meeting costs, legal expenses and allocated
overhead, including rent depreciation, and utilities.
Income taxes
The Company utilizes FASB
ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial
reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected
to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax
asset will not be realized.
The Company accounts for
income taxes using the liability method whereby deferred tax asset and liability account balances are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary,
to reduce deferred tax assets to their estimated realizable value.
In evaluating the ability
recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its opening
results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. The Company generated
a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due
to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration. In the
event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their
net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes.
Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an
adjustment to the valuation allowance would be charged to earnings in the period such determination is made.
Stock based compensation
Stock-based compensation
is calculated based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated
financial statements of the cost of employee and director services received in exchange for an award of equity instruments over
the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting
period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based
on the grant-date fair value of the award. The Company accounts for equity instruments issued to non-employees in accordance with
the provisions of ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees based upon the fair-value of the underlying
instrument.
The fair value of the award
that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which
is generally the vesting period. The determination of the fair value of stock-based payment awards on the date of grant is affected
by the stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected
stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest
rates, and expected dividends as under:
•
Expected term — The Company’s
expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined
using the simplified method.
•
Expected volatility — Expected
volatility is estimated using comparable public companies’ volatility for similar terms.
•
Expected dividend — The
Black-Scholes-Merton valuation model calls for a single expected dividend yield as an input. The Company has never paid dividends
and has no plans to pay dividends.
•
Risk-free interest rate — The
risk-free interest rate used in the Black-Scholes-Merton valuation method is based on the U.S. Treasury zero-coupon issues in
effect at the time of grant for periods corresponding with the expected term of option.
As of January 1, 2019,
the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not
materially impact our consolidated financial statements. The Company recognizes fair value of stock options granted to non-employees
as a stock-based compensation expense over the period in which the related services are received. Non-employee option grants that
do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting
period, the value of these options, as calculated using the Black-Scholes-Merton option-pricing model, is determined, and compensation
expense recognized during the period is adjusted accordingly.
Fair Value of Financial Instruments
Due to their short maturities,
the carrying amounts for cash and cash equivalents, accounts payable, and accrued expenses approximate their fair value. Non-current
assets are primarily related to certain advances with carrying values that approximate their fair values.
Fair Value Measurements of Warrants
ASC 820 “Fair Value
Measurements” defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about
fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy
that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources
(observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the
best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1)
and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy under
ASC 820 are described below:
•
Level 1 — Quoted prices
(unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
•
Level 2 — Directly or indirectly
observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and
liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities
that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions
used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted
markets for substantially the full term of the financial instrument.
•
Level 3 — Unobservable
inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values
are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant
assumptions.
In determining the fair value
of warrants, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
Beneficial Conversion Features
In accordance with FASB ASC
470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”)
related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are
in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds
equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the
commitment date as the difference between the conversion price and the fair value of the common stock or other securities into
which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other
securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of
the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine
the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic
value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.
3. PROPERTY
AND EQUIPMENT, NET
Property
and equipment, net consist of the following:
|
|
2019
|
|
|
2018
|
|
Computer equipment
|
|
$
|
32,500
|
|
|
$
|
32,500
|
|
Furniture and fixtures
|
|
|
9,208
|
|
|
|
9,208
|
|
Accumulated depreciation
|
|
|
(41,117
|
)
|
|
|
(40,472
|
)
|
Property and equipment, net
|
|
$
|
591
|
|
|
$
|
1,236
|
|
Depreciation
expense for the years ended December 31, 2019 and 2018 was $645 and $1,017 respectively.
4. EMPLOYEE
BENEFIT PLAN
In
2014, the Company implemented a tax deferred savings plan, commonly referred to as a 401(k) plan. Employee’s contributions
are withheld from standard payroll checks and are automatically withdrawn from the Company checking account and deposited into
individual employee retirement accounts a few days following each payroll period. Employees can defer or contribute the statutory
legal limits. There has been no Company matching of employee contributions to the plan through December 31, 2019.
5. COMMITMENTS
AND CONTINGENCIES
Clinical
trials
Since
2010, the Company has entered into multiple clinical trial agreements with medical institutions in the United States, Europe and
Asia for the purpose of enrolling patients into various clinical trials. The agreements are substantially similar by trial and
include a detailed listing of the clinical trial services for which the Company will pay, how much will be paid for each service,
a set-up charge (if any), Investigational Review Board fees, contractual term, and other provisions. The clinical trial services
provided by each site generally include the screening of prospective patients and, for those patients to be enrolled in the study,
administration of the Company’s investigation drug according to the trial protocol, any required hospitalization, ancillary
medical supplies, and 2-week patient follow-up. Further, each agreement requires the Company to indemnify each respective clinical
site against any and all liability, loss, or damage it may suffer as a result of third-party claims; the Company maintains general
product liability insurance of not less than $5 million in conjunction with this indemnification. The agreements may be terminated
upon 30 days’ written notice, subject to conditions of paying all liabilities incurred through the date of termination.
Additionally, with each screened patient, the Company incurs expense with other entities engaged to provide independent review
of patient medical records.
Indemnification
From
time to time, in its normal course of business, the Company may indemnify other parties, with whom it enters into contractual
relationships, including lessors and parties to other transactions with the Company. The Company may agree to hold other parties
harmless against specific losses, such as those that could arise from a breach of representation, covenant or third-party infringement
claims. It may not be possible to determine the maximum potential amount of liability under such indemnification obligations due
to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically,
there have been no such indemnification claims. The Company has also indemnified its directors and executive officers, to the
extent legally permissible, against all liabilities reasonably incurred in connection with any action in which such individual
may be involved by reason of such individual being or having been a director or executive officer.
Operating
Leases
The
Company has adopted ASC 842 to our existing leases. The Company has elected to apply the short-term lease exception to leases
of one year or less. Presently, the Company has a single twelve-month lease on its Corporate Office located at 19925 Stevens Creek
Blvd., Suite 100, Cupertino, CA 95014. The monthly lease payment is approximately $1,500 and the lease expires on January 31,
2021 at which point the Company will renew for another 12-month term.
6. CONVERTIBLE
PROMISSORY NOTES
From
June 2016 through April 2017, the Company issued an aggregate of $4,795,088 in convertible promissory notes to various
investors (“2016 Notes”). The Company received $4,647,235 net of placement fees of $147,853. Upon next equity financing
close of at least $5,000,000, (“Qualified Financing”), the 2016 Notes can be converted if the entire balance has not
been paid, at which time the then outstanding balance and accrued interest shall automatically be cancelled and converted into
that number of conversion shares at a price equal to the lower of either (i) a 20% discount to the price paid by investors
in the qualified financing (“Qualified Financing Event Share Price”), or (ii) an $85,000,000 pre-offering valuation
divided by the number of shares of the Company’s common stock outstanding on a fully diluted basis immediately prior to
the closing of such a qualified financing event.
Additionally,
the Company is obliged to issue a warrant for 38,200 shares of common stock at an exercise price equal to the Qualified Financing
Event Share Price and a maturity of 5-years (“2016 Contingent Warrants”) to the broker/placement agent. Placement
fees and fair value of the 2016 Contingent Warrants were recognized as a debt discount and amortized over the initial 12-month
term of the 2016 Notes.
The
interest was initially accrued at 8% per annum and was scheduled to be paid in cash at maturity date. The 2016 Notes were scheduled
to mature twelve months from the dates of issue. The 2016 Notes were neither converted nor paid back, and therefore have
been in default since 2017 and are accruing interest at a default rate of 12% per annum. As of December 31, 2019, the Company
owes $3,490,087 and $1,192,496 as principle and accrued interest, respectively.
The
stated conversion term for the 2016 Notes creates a contingent BCF that is not measurable due to a contingency in the conversion
mechanics that would allow a conversion to take place at the lower of either a 20% discount to the Qualified Financing Event Share
Price or a $85 million valuation. Consequently, the BCF will be recognized as additional interest expense when the conversion
takes place.
From
November 2018 through January 2019, the Company issued an aggregate of $275,000 in convertible promissory notes to various
investors (“2018 notes”). Upon a Qualified Financing, the 2018 Notes can be converted if the entire balance has not
been paid. The principal and accrued interest of the 2018 notes shall automatically be converted into that number of shares at
a price equal to a 20% discount to the Qualified Financing event price (price paid by investors in the Qualified Financing).
Additionally,
the holders of the 2018 notes are also eligible for an equivalent number of warrants (i.e. as the number of converted shares),
to purchase common stock (“2018 Contingent Warrants”) with a strike price equal to the Qualified Financing event price
with a maturity of 5 years from the date of such a conversion event.
Interest
on the 2018 Notes accrues at 8% per annum and was scheduled to be paid in cash at maturity unless converted. The 2018 Notes were
scheduled to mature six months from the date of issue with an option to extend the maturity by an additional six months
with certain additional conversion privileges. Pursuant to the option, the maturity dates of all 2018 notes were extended an additional
six months. The 2018 Notes were neither converted nor paid back and continue to accrue interest at a default rate of 8% per
annum.
The
Company is obliged to issue an additional 82,500 shares of common stock (“2019 Contingent stock”) the 2018 note holders
when the 2018 notes are converted into preferred shares in a Qualified Financing. As of December 31, 2019, the Company owes
$275,000 and $23,293 in principal and accrued interest. The stated conversion term for the 2018 Notes creates a contingent BCF
of $68,750 which will be recognized as additional interest expense when the conversion takes place.
A
summary table of the convertible notes by year is presented below:
Year
|
|
|
Note Description
|
|
Amount
|
|
|
2016
|
|
|
2016 Notes
|
|
$
|
2,120,087
|
|
|
2017
|
|
|
2016 Notes
|
|
|
2,570,000
|
|
|
2018
|
|
|
2018 Notes
|
|
|
175,000
|
|
|
2019
|
|
|
2018 Notes
|
|
|
100,000
|
|
|
2019
|
|
|
2016 Notes – reclass
to Accrued Legal liability (see Note 10)
|
|
|
(1,200,000
|
)
|
|
|
|
|
Total Balance
|
|
$
|
3,765,087
|
|
7. INCOME
TAXES
The
Company’s provision for income taxes differs from the amount computed by applying the statutory U.S. federal income tax
rate to loss before taxes as follows for the years ending December 31, 2019 and December 31, 2018:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Statutory federal income tax
|
|
$
|
(177,562
|
)
|
|
$
|
(352,548
|
)
|
State income taxes, net of federal tax benefits
|
|
|
(79,258
|
)
|
|
|
800
|
|
Stock based compensation
|
|
|
27,940
|
|
|
|
—
|
|
Other permanent differences
|
|
|
474
|
|
|
|
2,280
|
|
Valuation allowance
|
|
|
229,206
|
|
|
|
350,268
|
|
Tax provision
|
|
$
|
800
|
|
|
$
|
800
|
|
Deferred
tax assets and liabilities at December 31, 2019 and December 31, 2018 consist of the following:
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
NOL carryforwards
|
|
$
|
8,711,765
|
|
|
$
|
8,479,781
|
|
Credit carryforwards
|
|
|
—
|
|
|
|
—
|
|
Accruals and reserves
|
|
|
14,402
|
|
|
|
9,800
|
|
Stock compensation
|
|
|
83,472
|
|
|
|
90,581
|
|
Fixed assets/capitalized start-up costs
|
|
|
3,589
|
|
|
|
3,722
|
|
Total deferred tax assets
|
|
|
8,813,228
|
|
|
|
8,583,884
|
|
Valuation allowance
|
|
|
(8,813,228
|
)
|
|
|
(8,583,884
|
)
|
Net deferred tax assets
|
|
|
—
|
|
|
|
—
|
|
Realization
of the deferred tax asset is dependent upon future taxable income, if any, the amount and time of which are uncertain. Accordingly,
a full valuation allowance has been established, as the generation of future taxable income is uncertain.
As
of December 31, 2019, and December 31, 2018, the Company had federal net operating loss carryforwards of $37,861,540
and 37,017,700. As of December 31, 2019, and December 31, 2018, the Company had California net operating loss carryforwards
of $10,894,690 and $10,110,300. If unused, the federal and state net operating loss carryforwards begin expiring in 2030.
Utilization
of the net operating loss carry forward may be subject to an annual limitation due to the ownership percentage change limitations
provided by the Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of the net operating loss before utilization. As of December 31, 2019, no complete study has been
completed.
The
company files US and state income tax returns with varying statues of limitations. The federal statue remains open for three years
after a return is filed, however is re-opened if tax attributes from that year are used. The company is not currently under audit.
As
of December 31, 2019, the Company had $0 in unrecognized tax benefits and does not anticipate any significant changes to
its unrecognized tax benefits within the next 12 months. The company’s policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense. There was no interest and penalties accrued as
of December 31, 2019 and 2018.
Balance as of December 31, 2018
|
|
$
|
0
|
|
Gross amount
of increases in unrecognized tax benefits for tax positions taken in current year
|
|
|
—
|
|
Gross amount
of decreases in unrecognized tax benefits for tax positions taken in prior year
|
|
|
—
|
|
Balance as of December 31, 2019
|
|
$
|
0
|
|
The
Company does not anticipate that its total unrecognized tax benefits will significantly change due to settlement of examination
or the expiration of statute of limitations during the next 12 months.
The
Company has not provided for U.S. income taxes on undistributed earnings of its foreign subsidiaries, because it intends to permanently
re-invest these earnings outside the United States. Undistributed earnings of foreign subsidiaries is immaterial for all periods
presented.
On
March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law.
Certain provisions of the CARES Act impact the 2019 income tax provision computations of the Company and will be reflected in
the first quarter of 2020, or the period of enactment. The CARES Act contains modifications on the limitation of business interest
for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest
deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. As the company is in losses, there is no modification
for the current year.
8. STOCKHOLDERS’
DEFICIT
Convertible
preferred stock
•
Voting — The
holders of each share of the Series 1, 2, 3, and 4 convertible preferred stock are entitled to vote, together with the holders
of common stock, on all matters submitted to the shareholders for a vote. Each preferred shareholder is entitled to the number
of votes equal to the number of shares of common stock into which each preferred share is convertible at the time of such vote.
•
Dividends — The
holders of shares of the Series 1, 2, 3, and 4 convertible preferred stock are not entitled to receive dividends.
•
Conversion — Each
share of Series 1, 2, 3, and 4 convertible preferred stock is convertible into common stock, at the option of the holder,
according to a conversion ratio. The initial conversion price of the Series 1, 2, 3, and 4 convertible preferred stock is
$1.57, $1.81, $3.92, and $4.77 per share, respectively, subject to adjustment in accordance with anti-dilution provisions contained
in the Company’s certificate of incorporation, as amended. The conversion ratios are 1.0:1.0 for Series 1, 2, 3, and
4. Each share of Series 1, 2, 3, and 4 will automatically convert into shares of common stock at the then-effective conversion
price for each such share immediately upon the earlier of (i) the Company’s sale of its common stock in a firm commitment
of an underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended, the public
offering price of which is not less than the public offering price per share of $5.00, and which results in aggregate gross proceeds
to the Company of $25,000,000 or (ii) the date specified by the written consent or agreement of at least a majority of the
holders of the then- outstanding shares of convertible preferred stock.
Liquidation
preference — In the event of any liquidation, dissolution, or winding up of the Company, either voluntary or
involuntary, the holders of Series 1, 2, 3, and 4 are entitled to receive, on a pari-passu basis and prior and in preference
to any distribution to the holders of common stock based on the available funds will be distributed ratably to the holders of
convertible preferred stock in proportion to the preferential amount each such holder is otherwise entitled to receive. Any remaining
assets of the Company will be distributed ratably among the holders of common stock.
Common
stock
Each
share of common stock is entitled to one vote. The holders of common stock, voting as a class, are entitled to elect one member
to the Company’s board of directors. The holders of common stock are also entitled to receive dividends whenever funds are
legally available and when and if declared by the board of directors, subject to the prior rights of holders of all series of
preferred stock outstanding.
The
Company has 18,180,748 shares of common stock issued and outstanding and has reserved additional shares of common stock for issuance
for the following purposes at December 31, 2019:
Conversion of Series 1
convertible preferred stock
|
|
|
625,237
|
|
Conversion of Series 2 convertible preferred
stock
|
|
|
1,245,889
|
|
Conversion of Series 3 convertible preferred
stock
|
|
|
951,761
|
|
Conversion of Series 4 convertible preferred
stock
|
|
|
1,029,994
|
|
2016 Contingent Warrants
|
|
|
38,200
|
|
2019 Contingent Stock
|
|
|
82,500
|
|
Options to purchase common stock
|
|
|
741,666
|
|
Shares available for grant
|
|
|
2,258,334
|
|
|
|
|
6,973,581
|
|
The
Company expects to issue preferred stock and contingent warrants on completion of Qualified Financing Event with respect to conversion
of 2016 Notes and 2018 Notes. These preferred stock and contingent warrants can be converted to common stock under certain circumstances
as detailed above. The Company’s available authorized preferred stock and common stock are sufficient to accommodate these
conversions.
Common
stock warrants
During
2014, in connection with the 2014 Notes, the Company issued warrants to purchase 138,500 shares of common stock at $5.00 per share
to certain investors (“2014 Warrants”). The 2014 Warrants were exercisable immediately and expired in 2019. The Company
estimated the fair value of the 2014 Warrants to be $426,383, using the Black-Scholes- Merton option-pricing model with the following
assumptions:
|
|
Assumptions
|
|
Common stock value
|
|
$
|
5.00
|
|
Expected life
|
|
|
4.5 – 4.7 years
|
|
Risk-free interest rate
|
|
|
1.33 – 1.52%
|
|
Expected dividend yields
|
|
|
0
|
%
|
Volatility
|
|
|
86.5
|
%
|
Using
the relative fair values allocation, the 2014 Warrants value of $407,578 was recorded as a discount to the 2014 Notes and an increase
to additional paid-in capital. Upon conversion of the 2014 Notes into Series 4 Preferred Stock in June 2014, the corresponding
debt discount was immediately amortized to interest expense.
Contingent
Warrants
During
2017, in connection with the 2016 Notes, the Company was contractually obliged to issue (“2016 Contingent warrants”)
to purchase 38,200 shares of common stock and by agreement these warrants expire on May 31, 2022.
The
Company analyzed the 2016 Contingent Warrants and determined that they were to be classified as a liability, which are required
to be re-measured at fair value (“marked-to-market”) each reporting period.
The
Company estimated the fair value of the 2016 Contingent Warrants using the Black-Scholes-Merton option-pricing model with the
following assumptions:
|
|
2018
|
|
|
2019
|
|
Common stock value
|
|
$
|
3.86
|
|
|
$
|
3.63
|
|
Expected life
|
|
|
3 years
|
|
|
|
3 years
|
|
Risk-free interest rate
|
|
|
1.76
|
%
|
|
|
1.76
|
%
|
Expected dividend yields
|
|
|
0
|
%
|
|
|
0
|
%
|
Volatility
|
|
|
126
|
%
|
|
|
126
|
%
|
The
value of the 2016 Contingent Warrants was recognized as a debt discount and amortized over the initial 12-month term of the 2016
Notes.
The
following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair
value on a recurring basis:
|
|
Total
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
2016 Contingent Warrants
|
|
$
|
101,525
|
|
|
|
|
|
|
|
|
|
|
$
|
101,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table summarizes fair value measurements by level at December 31, 2018 for assets and liabilities measured at fair
value on a recurring basis:
|
|
Total
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
2016 Contingent Warrants
|
|
$
|
107,934
|
|
|
|
|
|
|
|
|
|
|
$
|
107,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
connection with the 2018 notes, the Company will issue 2018 Contingent Warrants equivalent to the number of converted shares to
be determined at the Qualified Financing Event with a strike price equal to the qualified financing event price and with a maturity
of 5 years from the date of such a conversion event.
A
summary of warrant activity for the periods ended December 31, 2019 and 2018 is as follows:
|
|
Number
of
Shares
|
|
|
Range
of
Exercise
Prices
|
|
|
Weighted-
Average
Exercise
Prices
|
|
|
Weighted-
Average
Remaining
Life
|
|
Outstanding at January 1, 2018
|
|
|
186,700
|
|
|
|
$3.86 – 5.00
|
|
|
$
|
4.77
|
|
|
|
1.5
|
|
Cancelled
|
|
|
(10,000
|
)
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
—
|
|
Outstanding at December 31, 2018
|
|
|
176,700
|
|
|
|
$3.86 – 5.00
|
|
|
$
|
4.75
|
|
|
|
0.5
|
|
Cancelled
|
|
|
(138,500
|
)
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
—
|
|
Outstanding at December 31, 2019
|
|
|
38,200
|
|
|
$
|
3.86
|
|
|
$
|
3.86
|
|
|
|
3.5
|
|
9. STOCK
OPTION PLAN AND STOCK-BASED COMPENSATION
Option
activity
In
2006, the Company established its 2006 Equity Incentive Plan (the “Plan”), which provides for the granting of stock
options and stock purchase rights to employees and consultants of the Company. Options granted under the Plan may be either incentive
stock options (ISOs) or nonqualified stock options (NSOs). ISOs may be granted only to Company employees (including officers and
directors who are also employees). NSO may be granted to Company employees and consultants.
Options
under the Plan may be granted for periods of up to 10 years. The exercise price of an ISO and NSO shall not be less than
100% and 85% of the estimated fair value of the shares on the date of grant, respectively, as determined by the board of directors.
The exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the
shares on the date of grant, as determined by the board of directors. Options generally vest over four years whereas 25%
vest upon the first anniversary of the issuance date and 1/48th per month there-after.
Under
the Plan, in the event of the termination of a participant’s employment or the proposed transfer of such shares to a third
party, the Company has the right to repurchase the stock under terms specified in the Plan agreement.
Activity
under the stock option plan are as follows for the years ended December 31, 2019 and 2018:
|
|
Shares
available for
Grant
|
|
|
Number
of
Shares
Outstanding
|
|
|
Weighted
average
exercise
price per
share
|
|
Balance, December 31, 2017
|
|
|
2,055,834
|
|
|
|
944,166
|
|
|
$
|
2.24
|
|
Options cancelled
|
|
|
105,000
|
|
|
|
(105,000
|
)
|
|
|
—
|
|
Balance, December 31, 2018
|
|
|
2,160,834
|
|
|
|
839,166
|
|
|
$
|
2.34
|
|
Options cancelled
|
|
|
97,500
|
|
|
|
(97,500
|
)
|
|
|
—
|
|
Balance, December 31, 2019
|
|
|
2,258,334
|
|
|
|
741,666
|
|
|
$
|
2.34
|
|
Vested, December 31, 2019
|
|
|
—
|
|
|
|
741,666
|
|
|
$
|
2.43
|
|
Vested and expected to vest, December 31,
2019
|
|
|
—
|
|
|
|
741,666
|
|
|
$
|
2.43
|
|
Shares
outstanding under the stock option plan are as follows as of December 31, 2019:
Options
Outstanding
|
|
Exercise
price
Per Share
|
|
|
Weighted
average
remaining
contractual
life (years)
|
|
|
Shares
Exercisable
|
|
|
Weighted
Average
Exercise
Prices
|
|
190,000
|
|
$
|
1.45
|
|
|
|
0.40
|
|
|
|
190,000
|
|
|
$
|
1.45
|
|
50,000
|
|
$
|
1.57
|
|
|
|
1.67
|
|
|
|
50,000
|
|
|
$
|
1.57
|
|
320,000
|
|
$
|
1.81
|
|
|
|
2.79
|
|
|
|
320,000
|
|
|
$
|
1.81
|
|
181,666
|
|
$
|
4.77
|
|
|
|
4.18
|
|
|
|
181,666
|
|
|
$
|
4.77
|
|
741,666
|
|
|
|
|
|
|
2.44
|
|
|
|
741,666
|
|
|
$
|
2.43
|
|
Stock-based
compensation associated with awards to employees
During
the years ended December 31, 2019 and 2018, the Company granted no stock options to employees.
During
the years ended December 31, 2019 and 2018, stock-based employee compensation expense was $0 and $21,054, respectively,
which was recorded as general and administrative expense. As of December 31, 2019, the Company had no unrecognized compensation
expense, net of estimated forfeitures, related to stock option awards to employees. No income tax benefit has been recognized
relating to stock-based compensation expense, and no tax benefits have been realized from exercised stock options.
10. SUBSEQUENT
EVENTS
On
January 2, 2020, there was a judgement issued by the District Court of Harris County, Texas, pursuant to an agreement reached
between the Company and an investor in the 2016 Notes. Under the terms of the judgements, the Company is obligated to repay an
investor of the 2016 Notes, the principal investment of $1,200,000, accrued interest of $242,000, and legal fees of $5,000. The
$1,447,000 obligatory payment is currently accruing interest at 5.5% per annum.
Between
March and May 2020, the Company received $610,000 in gross and net proceeds via a bridge loan whose terms are similar to
the 2018 Notes.
On
July 20, 2020, the Company entered into a definitive agreement and plan of merger for a business combination with Tenzing
Acquisition Corp., a special purpose acquisition company incorporated in the British Virgin Islands (NASDAQ: TZAC).
As
a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which may impact operating activities,
though such potential impact is unknown at this time. Management has determined that there are no other subsequent events to be
reported.
The
Company has evaluated subsequent events through July 23, 2020, the date the consolidated financial statements were available
for general release, for appropriate accounting and financial statement disclosures.
Reviva Pharmaceuticals,
Inc.
Condensed Consolidated
Financial Statements
As of and for the Three
and Six Months ended
June 30, 2020 and
2019
(Unaudited)
Table of Contents
REVIVA
PHARMACEUTICALS, INC.
ITEM 1. FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June 30,
2020
|
|
|
December 31,
2019*
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$
|
194,798
|
|
|
$
|
193
|
|
Property and equipment, net
|
|
|
269
|
|
|
|
591
|
|
Prepaid
|
|
|
7,019
|
|
|
|
—
|
|
Non-current assets
|
|
|
1,816
|
|
|
|
1,816
|
|
Total
assets
|
|
$
|
203,902
|
|
|
$
|
2,600
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
730,146
|
|
|
$
|
224,543
|
|
Accrued expenses and other current
liabilities
|
|
|
3,462,008
|
|
|
|
2,722,875
|
|
Contingent warrants, net
|
|
|
48,486
|
|
|
|
101,525
|
|
Convertible
promissory notes, net
|
|
|
4,375,087
|
|
|
|
3,765,087
|
|
Total
liabilities
|
|
$
|
8,615,727
|
|
|
$
|
6,814,030
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
Convertible Preferred
stock, par value $0.0001, 13,625,237 shares authorized
|
|
|
|
|
|
|
|
|
Series 1
|
|
$
|
3,069,913
|
|
|
$
|
3,069,913
|
|
Series 2
|
|
|
7,624,841
|
|
|
|
7,624,841
|
|
Series 3
|
|
|
7,973,720
|
|
|
|
7,973,720
|
|
Series 4
|
|
|
10,401,500
|
|
|
|
10,401,500
|
|
Common stock
|
|
|
618
|
|
|
|
618
|
|
Additional paid-in capital
|
|
|
18,644,683
|
|
|
|
18,644,683
|
|
Accumulated deficit
|
|
|
(56,127,100
|
)
|
|
|
(54,526,705
|
)
|
Total stockholders’
deficit
|
|
|
(8,411,825
|
)
|
|
|
(6,811,430
|
)
|
Total Liabilities and Stockholders’
deficit
|
|
$
|
203,902
|
|
|
$
|
2,600
|
|
*
Derived from Audited Financial Statements
as of December 31, 2019
REVIVA
PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Three
Months ended
|
|
|
Six
Months ended
|
|
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
36,471
|
|
|
$
|
21,694
|
|
|
$
|
294,195
|
|
|
$
|
53,377
|
|
General
and administrative
|
|
|
740,913
|
|
|
|
105,815
|
|
|
|
1,101,467
|
|
|
|
244,965
|
|
Total operating expenses
|
|
|
777,384
|
|
|
|
127,509
|
|
|
|
1,395,662
|
|
|
|
298,342
|
|
Loss from operations
|
|
|
(777,384
|
)
|
|
|
(127,509
|
)
|
|
|
(1,395,662
|
)
|
|
|
(298,342
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
25,004
|
|
|
|
55
|
|
|
|
25,004
|
|
|
|
194
|
|
Interest
expense
|
|
|
(99,053
|
)
|
|
|
(145,802
|
)
|
|
|
(228,937
|
)
|
|
|
(289,498
|
)
|
Total other expense
|
|
|
(74,049
|
)
|
|
|
(145,747
|
)
|
|
|
(203,933
|
)
|
|
|
(289,304
|
)
|
Loss before
provision for income taxes
|
|
|
(851,433
|
)
|
|
|
(273,256
|
)
|
|
|
(1,599,595
|
)
|
|
|
(587,646
|
)
|
Provision
for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
800
|
|
|
|
800
|
|
Net loss
|
|
$
|
(851,433
|
)
|
|
$
|
(273,256
|
)
|
|
$
|
(1,600,395
|
)
|
|
$
|
(588,446
|
)
|
Basic
and Diluted net loss per share attributable to common stockholders
|
|
$
|
(0.05
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.03
|
)
|
Weighted-average
shares used to compute basic and diluted net loss per share
|
|
|
18,180,748
|
|
|
|
18,180,748
|
|
|
|
18,180,748
|
|
|
|
18,180,748
|
|
REVIVA
PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
Series 1,2,3,4
Convertible Preferred Stock
|
|
|
|
Common
Stock
|
|
|
|
Additional
Paid-in
Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31,
2020
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(55,275,667
|
)
|
|
$
|
7,560,392
|
)
|
Net
loss (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(851,433
|
)
|
|
$
|
(851,433
|
)
|
Balance, June 30, 2020
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(56,127,100
|
)
|
|
$
|
(8,411,825
|
)
|
Three-months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(53,995,063
|
)
|
|
$
|
(6,279,788
|
)
|
Net
loss (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(273,256
|
)
|
|
$
|
(273,256
|
)
|
Balance, June 30, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(54,268,319
|
)
|
|
$
|
(6,553,044
|
)
|
Six-months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(54,526,705
|
)
|
|
$
|
(6,811,430
|
)
|
Net
loss (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,600,395
|
)
|
|
$
|
(1,600,395
|
)
|
Balance, June 30, 2020
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(56,127,100
|
)
|
|
$
|
(8,411,825
|
)
|
Six-months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(53,679,873
|
)
|
|
$
|
(5,964,598
|
)
|
Net
loss (Unaudited)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(588,446
|
)
|
|
$
|
(588,446
|
)
|
Balance, June 30, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
|
$
|
(54,268,319
|
)
|
|
$
|
(6,553,044
|
)
|
REVIVA
PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Six
Months ended
|
|
|
|
30
June, 2020
|
|
|
30
June 2019
|
|
|
|
(unaudited)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,600,395
|
)
|
|
$
|
(588,446
|
)
|
Adjustments to reconcile net
loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
322
|
|
|
|
323
|
|
Mark-to-market of warrant liability
|
|
|
(53,039
|
)
|
|
|
—
|
|
Changes in operating assets and
liabilities
|
|
|
|
|
|
|
|
|
Prepaid
|
|
|
(7,019
|
)
|
|
|
—
|
|
Accounts payable
|
|
|
505,603
|
|
|
|
99,940
|
|
Accrued interest
|
|
|
228,937
|
|
|
|
289,498
|
|
Accrued
expenses and other current liabilities
|
|
|
510,196
|
|
|
|
(6,336
|
)
|
Cash flows used in operating
activities
|
|
$
|
(415,395
|
)
|
|
$
|
(205,021
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible promissory notes
|
|
|
610,000
|
|
|
|
100,000
|
|
Net cash from financing
activities
|
|
|
610,000
|
|
|
|
100,000
|
|
Net increase (decrease)
in cash
|
|
|
194,605
|
|
|
|
(105,021
|
)
|
Cash, beginning of period
|
|
|
193
|
|
|
|
118,637
|
|
Cash, end of period
|
|
$
|
194,798
|
|
|
$
|
13,616
|
|
Reviva
Pharmaceuticals, Inc.
Notes to Condensed
Consolidated Financial Statements (UNAUDITED)
(Information as of
June 30, 2020 and for the three and six months ended June 30, 2020 and 2019)
1. NATURE OF OPERATIONS
Reviva Pharmaceuticals, Inc. (the “Parent”)
was incorporated in the state of Delaware and registered in California, and commenced operations on May 1, 2006 and its Indian
subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated in 2014 (referred herein as “the Company”). The
Company is an emerging research based pharmaceutical company focused on developing a portfolio of internally discovered next generation
safe and effective therapeutic drugs by using an integrated chemical genomics technology platform and proprietary chemistries.
The Company is currently focused on developing drugs for the central nervous system (CNS), cardiovascular (CV), metabolic and
inflammatory diseases.
2. SIGNIFICANT ACCOUNTING POLICIES
This Quarterly Report should be read in
conjunction with the Company’s audited consolidated financial statements which was included in Form S-4 with the Securities
and Exchange Commission (“SEC”) on August 12, 2020. The Company’s significant accounting policies are described
in Note 2 to its audited 2019 Consolidated Financial Statements. There have been no significant changes to these policies during
the six months ended June 30, 2020.
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following:
|
|
As
of
|
|
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Computer equipment
|
|
$
|
32,500
|
|
|
$
|
32,500
|
|
Furniture and fixtures
|
|
|
9,208
|
|
|
|
9,208
|
|
Accumulated depreciation
|
|
|
(41,439
|
)
|
|
|
(41,117
|
)
|
Property and equipment, net
|
|
$
|
269
|
|
|
$
|
591
|
|
Depreciation expense for the six months
ended June 30, 2020 and 2019 was $322 and $323 respectively.
4. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company adopted ASC 842 for its existing
operating leases effective January 1, 2019. The Company has elected to apply the short-term lease exception to leases of
one year or less. Presently, the Company has a single twelve-month lease on its Corporate Office located at 19925 Stevens Creek
Blvd., Suite 100, Cupertino, CA 95014. The monthly lease payment is approximately $1,500 and the lease expires on January 31,
2021 at which point the Company will renew for another 12-month term.
5. CONVERTIBLE PROMISSORY NOTES
From March through May 2020, the
Company issued an aggregate of $610,000 in convertible promissory notes to various investors (“2020 Notes”). Upon
a Qualified Financing, the 2020 Notes can be converted if the entire balance has not been paid. The principal and accrued interest
of the 2020 notes shall automatically be converted into that number of shares at a price equal to a 20% discount to the Qualified
Financing event price (price paid by investors in the Qualified Financing).
Additionally, the holders of the 2020
Notes are also eligible for an equivalent number of warrants (i.e. as the number of converted shares), to purchase common stock
(“2020 Contingent Warrants”) with a strike price equal to the Qualified Financing event price with a maturity of 5 years
from the date of such a conversion event. The holders of the 2020 Notes, for entering into the Notes agreement, are also eligible
to receive common stock when the 2020 Notes are converted into preferred shares in a Qualified Financing event (“2020 Contingent
Stock”).
Interest on the 2020 Notes accrues at
8% per annum and is scheduled to be paid in cash at maturity unless converted. The 2020 Notes are scheduled to mature six months
from the date of issue with an option to extend the maturity by an additional six months. The extension triggers an added
conversion privilege wherein the holders of 2018 Notes are eligible to receive additional common stock when the 2020 Notes are
converted into preferred shares in a Qualified Financing event (“2020 Contingent Stock”). The 2020 Notes are still
within the initial term of maturity.
The Company is obligated to issue 110,000
shares of common stock (“2020 Contingent stock”) to the 2020 note holders when the 2020 notes are converted into preferred
shares in a Qualified Financing. As of June 30, 2020, the Company owes $610,000 and $10,979 in principal and accrued interest.
The stated conversion term for the 2020 Notes resulted in the measurement of contingent beneficial conversion feature of $152,500
which will be recognized as additional interest expense when the conversion takes place.
6. CONVERTIBLE PROMISSORY NOTES — Continued
A summary table of the convertible notes by year
of issuance is presented below:
Year of
Issuance
|
|
|
Note Description
|
|
Amount
|
|
2016
|
|
|
2016 Notes
|
|
$
|
2,120,087
|
|
2017
|
|
|
2016 Notes
|
|
|
2,570,000
|
|
2018
|
|
|
2018 Notes
|
|
|
175,000
|
|
2019
|
|
|
2018 Notes
|
|
|
100,000
|
|
2019
|
|
|
2016 Notes — reclass to Accrued Legal
liability
|
|
|
(1,200,000
|
)
|
2020
|
|
|
2020 Notes
|
|
|
610,000
|
|
|
|
|
Total Balance
|
|
$
|
4,375,087
|
|
7. INCOME TAXES
The Company accounts for income taxes
using the asset and liability method as codified in Topic 740. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.
The Company recorded $800 income tax expense
for the six months ended June 30, 2020 and $800 income tax expense for the six months ended June 30, 2019.
As of June 30, 2020, the Company
did not have any unrecognized tax benefits related to uncertain tax positions. The Company does not expect the liability for unrecognized
tax benefits to change materially within the next 12 months.
On March 27, 2020, the Coronavirus
Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of the CARES Act
impact the 2019 income tax provision computations of the Company and will be reflected in the first quarter of 2020, or the period
of enactment. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019
and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable
income to 50% of adjusted taxable income. The tax impacts of the CARES Act are not material to the financial statements as a whole.
The Company is not currently under examination by
the IRS or other state taxing authorities.
8. STOCKHOLDERS’ DEFICIT
The Company expects to issue preferred
stock and warrants upon completion of a Qualified Financing Event with respect to conversion of 2016 Notes, 2018 Notes and 2020
Notes. A summary of the conversion mechanics is presented in the table below:
Notes
Issued
|
|
Initial
Term
|
|
Interest
Rate
Per
Annum
|
|
|
Issue
Date
|
|
Conversion
Price
Determination
|
|
Conversion
Price
|
|
Conversion
Instruments
|
|
Principal
Amount
|
|
2016
Notes
|
|
12 months
|
|
|
8%
increasing to 12%
|
|
|
June 2016
to April 2017
|
|
Lower of
$85 Million enterprise valuation or price per share paid at a Qualified Financing Event (of at least $5 Million)
|
|
20%
discount
|
|
Preferred
stock & common stock warrants
|
|
$
|
3,490,087
|
|
2018
Notes
|
|
6 months
extendable to 12 months
|
|
|
8
|
%
|
|
Nov
2018 to Jan 2019
|
|
Price per share paid
at the next equity financing event (of at least $5 Million)
|
|
20%
discount
|
|
Preferred
stock & common stock warrants
|
|
$
|
275,000
|
|
2020
Notes
|
|
6 months
extendable to 12 months
|
|
|
8
|
%
|
|
Mar
2020 to present
|
|
Price per share paid
at the next equity financing event (of at least $5 Million)
|
|
20%
discount
|
|
Preferred
stock, common stock warrants & common stock
|
|
$
|
610,000
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,375,087
|
|
Common stock warrants
During 2014, in connection with the 2014
Notes, the Company issued warrants with a five-year term to purchase 138,500 shares of common stock at $5.00 per share to certain
investors (“2014 Warrants”). The 2014 Warrants were exercisable immediately and were unexercised and expired in 2019.
The Company estimated the fair value of the 2014 Warrants to be $426,383, using the Black-Scholes-Merton option-pricing model
with the following assumptions:
|
|
Assumptions
|
|
Common stock value
|
|
$
|
5.00
|
|
Expected life
|
|
|
4.5 – 4.7 years
|
|
Risk-free interest rate
|
|
|
1.33 – 1.52%
|
|
Expected dividend yields
|
|
|
0%
|
Volatility
|
|
|
86.5%
|
|
Using the relative fair values allocation,
the 2014 Warrants value of $407,578 was recorded as a discount to the 2014 Notes and an increase to additional paid-in capital.
Upon conversion of the 2014 Notes into Series 4 Preferred Stock in June 2014, the corresponding debt discount was immediately
amortized to interest expense.
Contingent Warrants
During 2017, in connection with the 2016
Notes, the Company was contractually obliged to issue warrants (“2016 Contingent warrants”) to purchase 38,200 shares
of common stock which expire on April 28, 2022. These warrants were issued in July 2020 with effective date of April 29,
2017
The Company analyzed the 2016 Contingent
Warrants and determined that they should be classified as a liability and re-measured at fair value each reporting period.
The Company estimated the fair value of
the 2016 Contingent Warrants using the Black-Scholes-Merton option-pricing model with the following assumptions:
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Common stock value
|
|
$
|
2.25
|
|
|
$
|
3.63
|
|
Expected life
|
|
|
3 years
|
|
|
|
3 years
|
|
Risk-free interest rate
|
|
|
0.37
|
%
|
|
|
1.76
|
%
|
Expected dividend yields
|
|
|
0
|
%
|
|
|
0
|
%
|
Volatility
|
|
|
126
|
%
|
|
|
126
|
%
|
The initial fair value of the 2016 Contingent
Warrants was recognized as a debt discount and amortized over the original 12-month term of the 2016 Notes.
The following table summarizes fair value
measurements by level at June 30, 2020 for assets and liabilities measured at fair value on a recurring basis:
|
|
Total
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
2016 Contingent Warrants
|
|
$
|
48,486
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
48,486
|
|
The following table summarizes fair value
measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis:
|
|
Total
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
2016 Contingent Warrants
|
|
$
|
101,525
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
101,525
|
|
In connection with the 2018 notes, the
Company will issue 2018 Contingent Warrants equivalent to the number of converted shares to be determined at the Qualified Financing
Event with a strike price equal to the qualified financing event price and with a maturity of 5 years from the date of such
a conversion event.
A summary of warrant activity for the six months
ended June 30, 2020 is as follows:
|
|
Number
of
Shares
|
|
|
Range
of
Exercise Prices
|
|
|
Weighted-Average
Exercise Prices
|
|
|
Weighted-Average
Remaining Life
|
|
Outstanding at December 31, 2019
|
|
|
38,200
|
|
|
$
|
6.44
|
|
|
$
|
6.44
|
|
|
|
2.5
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding at June 30, 2020
|
|
|
38,200
|
|
|
$
|
6.44
|
|
|
$
|
6.44
|
|
|
|
2.0
|
|
9. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION
Activity under the stock option plan for the six months
ended June 30, 2020 is as follows:
|
|
Shares
available
for Grant
|
|
|
Number
of Shares Outstanding
|
|
|
Weighted
average
exercise price per
share
|
|
Balance, December 31, 2019
|
|
|
2,258,334
|
|
|
|
741,666
|
|
|
$
|
2.43
|
|
Cancelled
|
|
|
311,666
|
|
|
|
(311,666
|
)
|
|
|
—
|
|
Balance, June 30, 2020
|
|
|
2,570,000
|
|
|
|
430,000
|
|
|
$
|
2.57
|
|
Vested, June 30, 2020
|
|
|
—
|
|
|
|
430,000
|
|
|
$
|
2.57
|
|
Vested and expected to vest,
June 30, 2020
|
|
|
—
|
|
|
|
430,000
|
|
|
$
|
2.57
|
|
Shares outstanding under the stock option plan as
of June 30, 2020 are as follows:
Options Outstanding
|
|
Weighted
average
remaining contractual
life (years)
|
|
|
Shares
Exercisable
|
|
|
Weighted
Average
Exercise Price Per
Share
|
|
320,000
|
|
|
2.35
|
|
|
|
320,000
|
|
|
$
|
1.81
|
|
110,000
|
|
|
4.44
|
|
|
|
110,000
|
|
|
$
|
4.77
|
|
Stock-based compensation associated with awards to employees
During the six months ended June 30,
2020 and 2019, the Company granted no stock options to employees.
During the six months ended June 30,
2020 and 2019, no stock-based employee compensation expense was recorded. As of June 30, 2020, the Company had no unrecognized
compensation expense, net of estimated forfeitures, related to stock option awards to employees. No income tax benefit has been
recognized relating to stock-based compensation expense, and no tax benefits have been realized from exercised stock options.
The Company computes net loss per share
attributable to common stockholders using the two-class method required for participating securities. The Company considers its
convertible preferred stock to be participating securities. In accordance with the two-class method, earnings allocated to these
participating securities, which include participation rights in undistributed earnings, are subtracted from net income to determine
total undistributed earnings to be allocated to common stockholders.
Basic net loss per share attributable
to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of
common shares outstanding during the period. All participating securities are excluded from basic weighted-average common shares
outstanding. Diluted net loss per share attributable to common stockholders excludes any dilutive effect from outstanding stock
options and warrants using the treasury stock method.
The following table details the shares excluded
in the calculation of Net Loss Per Share:
|
|
June 30,
2020
|
|
|
June 30,
2019
|
|
Convertible Preferred Stock
|
|
|
|
|
|
|
|
|
Series 1
|
|
|
625,237
|
|
|
|
625,237
|
|
Series 2
|
|
|
1,245,889
|
|
|
|
1,245,889
|
|
Series 3
|
|
|
951,761
|
|
|
|
951,761
|
|
Series 4
|
|
|
1,029,994
|
|
|
|
1,029,994
|
|
2016 Contingent Warrant
|
|
|
38,200
|
|
|
|
38,200
|
|
Options Outstanding
|
|
|
430,000
|
|
|
|
769,166
|
|
Total
|
|
|
4,321,081
|
|
|
|
4,660,247
|
|
On July 20, 2020, the Company entered
into a definitive agreement and plan of merger (the “Merger Agreement”) for a business combination (the “Business
Combination”) with Tenzing Acquisition Corp. (“Tenzing”), a special purpose acquisition company incorporated
in the British Virgin Islands (NASDAQ: TZAC). As part of this Business Combination, Tenzing will reincorporate from the British
Virgin Islands to the State of Delaware, changes its name to “Reviva Pharmaceuticals Holdings, Inc.”, and a newly
formed Delaware subsidiary of Tenzing will merge with and into Reviva Pharmaceuticals, Inc., with Reviva continuing as the surviving
corporation and a wholly-owned subsidiary of Tenzing. Following the closing of the Business Combination, Reviva Pharmaceuticals
Holdings, Inc. will be led by Reviva’s management team, with Dr. Laxminarayan Bhat as Chief Executive Officer, and
Marc Cantillon, MD, as the Chief Medical Officer. Parag Saxena from Tenzing will serve as the Chairman of the Board of Directors
of Reviva Pharmaceuticals Holdings, Inc. post-closing. The Board of Directors, subject to shareholder approval, will have a total
of five individuals with a majority meeting the requirement of independent directors in accordance with NASDAQ requirements.
On July 19, 2020, the company issued
615,540 warrants to certain current and former service providers at a strike price of $3.50 with a 5-year term.
Between August 27, 2020 and September 16,
2020, Reviva issued and received an aggregate principal amount of $350,000 in unsecured convertible promissory note to certain
investors who agreed to purchase at least $50,000 principal amount of such notes pursuant to a subscription agreement (the “Reviva
Interim Period Notes”) to finance its ordinary course of administrative costs and expenses and other expenses incurred in
connection with the consummation of the Business Combination and the other transactions contemplated by the Merger Agreement.
Each of the Reviva Interim Period Notes ranks equally without preference or priority of any kind over one another, and all other
series of outstanding notes of Reviva.
The Reviva Interim Period Notes contain
customary representations and warranties and events of default. Each of the Reviva Interim Period Notes are scheduled to mature
six months from the dates of issuance, with an option to extend the maturity by an additional six months. The Reviva
Interim Period Notes bear no interest and have been issued free of interest. The Reviva Interim Period Notes provide that the
Reviva Interim Period Notes will automatically convert, immediately prior to consummation of the Business Combination, into a
number of shares of Reviva Common Stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the
sum of all then outstanding principal under the Reviva Interim Period Notes on a date that is no more than five (5) days
prior to Closing by (B) a conversion price equal to $0.831063.
As a result of the spread of the COVID-19
coronavirus, economic uncertainties have arisen which may impact operating activities, though such potential impact is unknown
at this time. Management has determined that there are no other subsequent events to be reported.
The Company included its annual audited
financial statements for the years ending December 31, 2019 and 2018 and the first quarter unaudited financial statement
for the three-months ending March 31, 2020 as part of a S-4 registration statement under Tenzing Acquisition Corp.
The Company has evaluated subsequent events
through September 16, 2020, the date the consolidated financial statements were available for general release, for appropriate
accounting and financial statement disclosures.
Reviva Pharmaceuticals, Inc.
Condensed Consolidated
Financial Statements
As of and for the
Three and Nine Months ended
September 30,
2020 and 2019
(Unaudited)
Table of Contents
Reviva Pharmaceuticals, Inc.
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated
Balance Sheets
|
|
September 30,
2020
(unaudited)
|
|
|
December 31,
2019*
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
353,258
|
|
|
$
|
193
|
|
Property and equipment, net
|
|
|
107
|
|
|
|
591
|
|
Deferred Cost
|
|
|
1,680,954
|
|
|
|
-
|
|
Non-current assets
|
|
|
1,816
|
|
|
|
1,816
|
|
Total assets
|
|
$
|
2,036,155
|
|
|
$
|
2,600
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,461,099
|
|
|
$
|
224,543
|
|
Accrued expenses and other current liabilities
|
|
|
3,170,048
|
|
|
|
2,722,875
|
|
Contingent warrant, net
|
|
|
1,226,714
|
|
|
|
101,525
|
|
Convertible promissory notes, net
|
|
|
4,825,087
|
|
|
|
3,765,087
|
|
Total liabilities
|
|
$
|
10,682,948
|
|
|
$
|
6,814,030
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
|
Convertible Preferred stock, par value $0.0001, 13,625,237 shares authorized
|
|
|
|
|
|
|
|
|
Series 1
|
|
$
|
3,069,913
|
|
|
$
|
3,069,913
|
|
Series 2
|
|
|
7,624,841
|
|
|
|
7,624,841
|
|
Series 3
|
|
|
7,973,720
|
|
|
|
7,973,720
|
|
Series 4
|
|
|
10,401,500
|
|
|
|
10,401,500
|
|
Common stock
|
|
|
643
|
|
|
|
618
|
|
Additional paid-in capital
|
|
|
19,068,758
|
|
|
|
18,644,683
|
|
Accumulated deficit
|
|
|
(56,786,188
|
)
|
|
|
(54,526,705
|
)
|
Total stockholders' deficit
|
|
|
(8,646,813
|
)
|
|
|
(6,811,430
|
)
|
Total Liabilities
and Stockholders' deficit
|
|
$
|
2,036,135
|
|
|
$
|
2,600
|
|
*Derived from Audited Financial Statements as of December 31,
2019
The accompanying notes are an integral
part of these condensed consolidated financial statements.
Reviva Pharmaceuticals, Inc.
Condensed Consolidated Statements of
Operations
|
|
Three Months
ended
|
|
|
Nine Months
ended
|
|
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
955
|
|
|
$
|
0
|
|
|
$
|
295,150
|
|
|
$
|
53,377
|
|
General and administrative
|
|
|
511,336
|
|
|
|
36,804
|
|
|
|
1,612,803
|
|
|
|
281,769
|
|
Total operating expenses
|
|
|
512,291
|
|
|
|
36,804
|
|
|
|
1,907,953
|
|
|
|
335,146
|
|
Loss from operations
|
|
|
(512,291
|
)
|
|
|
(36,804
|
)
|
|
|
(1,907,953
|
)
|
|
|
(335,146
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and Other income
|
|
|
-
|
|
|
|
7
|
|
|
|
25,004
|
|
|
|
201
|
|
Interest expense
|
|
|
(146,250
|
)
|
|
|
(147,404
|
)
|
|
|
(375,187
|
)
|
|
|
(436,902
|
)
|
Total other expense
|
|
|
(146,250
|
)
|
|
|
(147,397
|
)
|
|
|
(350,183
|
)
|
|
|
(436,701
|
)
|
Loss before provision for income
taxes
|
|
|
(658,541
|
)
|
|
|
(184,201
|
)
|
|
|
(2,258,136
|
)
|
|
|
(771,847
|
)
|
Provision for income taxes
|
|
|
547
|
|
|
|
-
|
|
|
|
1,347
|
|
|
|
800
|
|
Net loss
|
(
|
$
|
659,088
|
)
|
(
|
$
|
184,201
|
)
|
(
|
$
|
2,259,483
|
)
|
(
|
$
|
772,647
|
)
|
Basic and Diluted net loss per share attributable to
common stockholders
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.04
|
)
|
Weighted-average shares used to compute basic and diluted
net loss per share
|
|
|
18,198,047
|
|
|
|
18,180,748
|
|
|
|
18,186,557
|
|
|
|
18,180,748
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
Reviva Pharmaceuticals, Inc.
Condensed Consolidated Statements of
Stockholders’ Deficit
|
|
Series 1,2,3,4
Convertible Preferred
Stock
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Deficit
|
|
Three months ending September 30
2020
|
Balance June 30, 2020
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
(
|
$
|
56,127,100
|
)
|
(
|
$
|
8,411,825
|
)
|
Issuance of common
stock in lieu of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
256,078
|
|
|
|
25
|
|
|
|
424,075
|
|
|
|
-
|
|
|
|
424,100
|
|
Net loss (Unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(659,088
|
)
|
(
|
$
|
659,088
|
)
|
Balance, September 30, 2020
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,436,826
|
|
|
$
|
643
|
|
|
$
|
19,068,758
|
|
(
|
$
|
56,786,188
|
)
|
(
|
$
|
8,646,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ending September 30
2019
|
Balance, June 30, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
(
|
$
|
54,268,319
|
)
|
(
|
$
|
6,279,788
|
)
|
Net loss (Unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(184,201
|
)
|
|
|
(184,201
|
)
|
Balance, September 30, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
(
|
$
|
54,452,520
|
)
|
(
|
$
|
6,737,245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-months ending September 30
2020
|
Balance, December 31, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
(
|
$
|
54,526,705
|
)
|
(
|
$
|
6,811,430
|
)
|
Issuance of common
stock in lieu of deferred compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
256,078
|
|
|
|
25
|
|
|
|
424,075
|
|
|
|
-
|
|
|
|
424,100
|
|
Net loss (Unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,259,483
|
)
|
(
|
$
|
2,259,483
|
)
|
Balance, September 30, 2020
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,436,826
|
|
|
$
|
643
|
|
|
$
|
19,068,758
|
|
(
|
$
|
56,786,188
|
)
|
(
|
$
|
8,646,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-months ending September 30
2019
|
Balance, December 31, 2018
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
(
|
$
|
53,679,873
|
)
|
(
|
$
|
5,964,598
|
)
|
Net loss (Unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(772,647
|
)
|
(
|
$
|
772,647
|
)
|
Balance, September 30, 2019
|
|
|
3,852,881
|
|
|
$
|
29,069,974
|
|
|
|
18,180,748
|
|
|
$
|
618
|
|
|
$
|
18,644,683
|
|
(
|
$
|
54,452,520
|
)
|
(
|
$
|
6,737,245
|
)
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
Reviva Pharmaceuticals, Inc.
Condensed Consolidated Statements of
Cash Flows
|
|
Nine Months
ended
|
|
|
|
30 September,
2020
|
|
|
30 September
2019
|
|
|
|
(unaudited)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
(
|
$
|
2,259,483
|
)
|
(
|
$
|
772,647
|
)
|
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
484
|
|
|
|
486
|
|
Change in fair value of warrant liability
|
|
|
1,125,189
|
|
|
|
-
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Deferred Cost
|
|
|
(1,680,954
|
)
|
|
|
-
|
|
Accounts payable
|
|
|
1,236,556
|
|
|
|
127,492
|
|
Accrued interest
|
|
|
228,937
|
|
|
|
289,498
|
|
Accrued expenses and other current liabilities
|
|
|
218,236
|
|
|
|
141,068
|
|
Cash flow used
in operating activities
|
(
|
$
|
1,131,035
|
)
|
(
|
$
|
214,103
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Issuance of common stock in lieu of deferred compensation
|
|
|
424,100
|
|
|
|
-
|
|
Proceeds from issuance of convertible promissory notes
|
|
|
1,060,000
|
|
|
|
100,000
|
|
Net cash from financing activities
|
|
|
1,484,100
|
|
|
|
100,000
|
|
Net increase (decrease) in cash
|
|
|
353,065
|
|
|
|
(114,103
|
)
|
Cash, beginning of period
|
|
|
193
|
|
|
|
118,637
|
|
Cash, end of period
|
|
$
|
353,258
|
|
|
$
|
4,534
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
Reviva Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial
Statements (UNAUDITED)
(Information
as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019)
1. NATURE OF OPERATIONS
Reviva Pharmaceuticals, Inc.
(the "Parent") was incorporated in the state of Delaware and registered in California, and commenced operations on May 1,
2006 and its Indian subsidiary, Reviva Pharmaceuticals India Pvt. Ltd., was incorporated in 2014 (referred herein as "the
Company"). The Company is an emerging research based pharmaceutical company focused on developing a portfolio of internally
discovered next generation safe and effective therapeutic drugs by using an integrated chemical genomics technology platform and
proprietary chemistries. The Company is currently focused on developing drugs for the central nervous system (CNS), cardiovascular
(CV), metabolic and inflammatory diseases.
On July 20, 2020, the
Company entered into a definitive agreement and plan of merger (the “Merger Agreement”) for a business combination
(the “Business Combination”) with Tenzing Acquisition Corp. (“Tenzing”), a special purpose acquisition
company incorporated in the British Virgin Islands (NASDAQ: TZAC). As part of this Business Combination, Tenzing will reincorporate
from the British Virgin Islands to the State of Delaware, change its name to “Reviva Pharmaceuticals Holdings, Inc.”,
and a newly formed Delaware subsidiary of Tenzing will merge with and into Reviva Pharmaceuticals, Inc., with Reviva continuing
as the surviving corporation and a wholly-owned subsidiary of Tenzing. Following the closing of the Business Combination (“Closing”),
Reviva Pharmaceuticals Holdings, Inc. will be led by Reviva’s management team, with Dr. Laxminarayan Bhat as Chief
Executive Officer, and Marc Cantillon, MD, as the Chief Medical Officer. Parag Saxena from Tenzing will serve as the Chairman
of the Board of Directors of Reviva Pharmaceuticals Holdings, Inc. post-closing. The Board of Directors, subject to shareholder
approval, will have a total of five individuals with a majority meeting the requirement of independent directors in accordance
with NASDAQ requirements.
2. SIGNIFICANT ACCOUNTING
POLICIES
This Quarterly Report should
be read in conjunction with the Company’s audited consolidated financial statements which was included in Form S-4
with the Securities and Exchange Commission (“SEC”) on August 12, 2020. The Company’s significant accounting
policies are described in Note 2 to its audited 2019 Consolidated Financial Statements. There have been no significant changes
to these policies during the nine months ended September 30, 2020.
3. DEFERRED COST
The Company has incurred certain
expenses related to the execution of the Business Combination described in Note 1. These expenses have been deferred until the
closing of the Business Combination and will be deducted from Additional Paid-in Capital upon closing
4. PROPERTY AND
EQUIPMENT, NET
Property and equipment, net consist of the following:
|
|
As of
|
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Computer equipment
|
|
$
|
32,500
|
|
|
$
|
32,500
|
|
Furniture and fixtures
|
|
|
9,208
|
|
|
|
9,208
|
|
Accumulated depreciation
|
|
|
(41,601
|
)
|
|
|
(41,117
|
)
|
Property and equipment, net
|
|
$
|
107
|
|
|
$
|
591
|
|
Depreciation expense for the
nine months ended September 30, 2020 and 2019 was $484 and $486 respectively.
5. COMMITMENTS AND
CONTINGENCIES
Operating Leases
The Company adopted ASC 842
for its existing operating leases effective January 1, 2019. The Company has elected to apply the short-term lease exception
to leases of one year or less. Presently, the Company has a single twelve-month lease on its Corporate Office located at 19925
Stevens Creek Blvd., Suite 100, Cupertino, CA 95014. The monthly lease payment is approximately $1,500 and the lease expires
on January 31, 2021 at which point the Company will renew for another 12-month term.
6. CONVERTIBLE PROMISSORY
NOTES
Between August 27, 2020
and September 16, 2020, the Company issued and received an aggregate principal amount of $450,000 in unsecured convertible
promissory note to certain investors who agreed to purchase at least $50,000 principal amount of such notes pursuant to a subscription
agreement (the “Reviva Interim Period Notes”) to finance its ordinary course of administrative costs and expenses
and other expenses incurred in connection with the consummation of the Business Combination and the other transactions contemplated
by the Merger Agreement with Tenzing Acquisition Corp. (“Tenzing”), a special purpose acquisition company incorporated
in the British Virgin Islands (NASDAQ: TZAC). Each of the Reviva Interim Period Notes ranks equally without preference or priority
of any kind over one another, and all other outstanding notes of the Company.
In addition, the Company entered
into a contingent capital commitment with certain investors for $2,000,000 (“Reviva Contingent Interim Period Notes”)
that shall become effective upon consummation of the Business Combination. The Reviva Contingent Interim Period Notes will be
interest free. The closing of, and release from escrow of funds for, the Reviva Contingent Interim Period Notes is contingent
upon the substantially concurrent consummation of the closing. The Reviva Contingent Interim Period Notes will provide that the
notes will automatically convert, immediately prior to consummation of the Business Combination, into a number of shares of Reviva
common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then
outstanding principal under the Reviva Contingent Interim Period Notes on a date that is no more than five (5) days prior
to closing by (B) a conversion price equal to $1.163953.
The Reviva Interim Period Notes
are scheduled to mature six months from the dates of issuance, with an option to extend the maturity by an additional six months.
The Reviva Interim Period Notes bear no interest and have been issued free of interest. The Reviva Interim Period Notes will automatically
convert, immediately prior to consummation of the Business
Combination, into a number
of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the
sum of all then outstanding principal under the Reviva Interim Period Notes on a date that is no more than five (5) days
prior to closing by (B) a conversion price equal to $0.831063. The stated conversion term for the Reviva Interim Period Notes
does not create a contingent beneficial conversion feature.
From March through May 2020,
the Company issued an aggregate of $610,000 in convertible promissory notes to various investors (“2020 Notes”). Upon
a Qualified Financing, the 2020 Notes can be converted if the entire balance has not been paid. The principal and accrued interest
of the 2020 notes shall automatically be converted into that number of shares at a price equal to a 20% discount to the Qualified
Financing event price (price paid by investors in the Qualified Financing).
6. CONVERTIBLE PROMISSORY
NOTES – Continued
Additionally, the holders of
the 2020 Notes are also eligible for an equivalent number of warrants (i.e. as the number of converted shares), to purchase common
stock (“2020 contingent warrants”) with a strike price equal to the Qualified Financing event price with a maturity
of 5 years from the date of such a conversion event. The holders of the 2020 Notes, for entering into the Notes agreement, are
also eligible to receive common stock when the 2020 Notes are converted into preferred shares in a Qualified Financing event (“2020
Contingent Stock”).
Interest on the 2020 Notes
accrues at 8% per annum and is scheduled to be paid in cash at maturity unless converted. The 2020 Notes are scheduled to mature
six months from the date of issue with an option to extend the maturity by an additional six months. The extension triggers an
added conversion privilege wherein the holders of 2018 Notes are eligible to receive additional common stock when the 2020 Notes
are converted into preferred shares in a
Qualified Financing event (“2020
Contingent Stock”). The 2020 Notes are still within the initial term of maturity.
The Company is obligated to
issue 110,000 shares of common stock (“2020 Contingent stock”) to the 2020 note holders when the 2020 notes are converted
into preferred shares in a Qualified Financing. As of September 30, 2020, the Company owes $610,000 and $23,279 in principal
and accrued interest respectively. The stated conversion term for the 2020 Notes resulted in the measurement of contingent beneficial
conversion feature of $152,500 which will be recognized as additional interest expense when the conversion takes place.
A summary table of the convertible
notes by year of issuance is presented below:
Year of
Issuance
|
|
Note Description
|
|
Amount
|
|
2016
|
|
2016 Notes
|
|
$
|
2,120,087
|
|
2017
|
|
2016 Notes
|
|
|
2,570,000
|
|
2018
|
|
2018 Notes
|
|
|
175,000
|
|
2019
|
|
2018 Notes
|
|
|
100,000
|
|
2019
|
|
2016 Notes - reclass to Accrued Legal liability
|
|
|
(1,200,000
|
)
|
2020
|
|
2020 Notes
|
|
|
610,000
|
|
2020
|
|
Reviva Interim Period Notes
|
|
|
450,000
|
|
|
|
Total Balance
|
|
$
|
4,825,087
|
|
7. INCOME
TAXES
The Company accounts for income
taxes using the asset and liability method as codified in Topic 740. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.
The Company recorded $1,347
income tax expense for the nine months ended September 30, 2020 and $800 income tax expense for the nine months ended September 30,
2019.
As of September 30, 2020,
the Company did not have any unrecognized tax benefits related to uncertain tax positions. The Company does not expect the liability
for unrecognized tax benefits to change materially within the next 12 months.
On March 27, 2020, the
Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of
the CARES Act impact the 2019 income tax provision computations of the Company and will be reflected in the first quarter of 2020,
or the period of enactment. The CARES Act contains modifications on the limitation of business interest for tax years beginning
in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of
adjusted taxable income to 50% of adjusted taxable income. The tax impacts of the CARES Act are not material to the financial
statements as a whole.
The Company is not currently
under examination by the IRS or other state taxing authorities.
8. STOCKHOLDERS'
DEFICIT
Common stock
Each share of common stock
is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available
and when and if declared by the board of directors, subject to the prior rights of holders of all series of preferred stock outstanding.
In September 2020, the
Company issued 256,078 shares of common stock to current and past employees in lieu of certain dues and obligations. The Company
has 18,436,826 shares of common stock issued and outstanding and has reserved additional shares of common stock for issuance for
the following purposes at September 30, 2020:
Conversion of Series 1 convertible preferred stock
|
|
|
625,237
|
|
Conversion of Series 2 convertible preferred stock
|
|
|
1,245,889
|
|
Conversion of Series 3 convertible preferred stock
|
|
|
951,761
|
|
Conversion of Series 4 convertible preferred stock
|
|
|
1,029,994
|
|
Shares issuable upon conversion of Notes
|
|
|
|
|
2016 contingent warrants
|
|
|
38,200
|
|
2020 warrants
|
|
|
791,080
|
|
2019 contingent stock
|
|
|
82,500
|
|
2020 contingent stock
|
|
|
110,000
|
|
2020 Reviva interim period notes
|
|
|
541,475
|
|
Options to purchase common stock
|
|
|
430,000
|
|
Shares available for grant
|
|
|
2,570,000
|
|
|
|
|
8,416,136
|
|
The Company expects to issue
Common stock, preferred stock and warrants upon completion of a Qualified Financing Event with respect to conversion of 2016 Notes,
2018 Notes, 2020.
8. STOCKHOLDERS'
DEFICIT– Continued
Notes and Reviva Interim Period
Notes. A summary of the conversion mechanics is presented in the table below:
Notes
Issued
|
Initial
Term
|
Interest
Rate Per Annum
|
Issue
Date
|
Conversion
Price Determination
|
Conversion
Price
|
Conversion
Instruments
|
Principal
Amount
|
2016
Notes
|
12
months
|
8%
increasing
to 12%
|
June
2016
to
April
2017
|
Lower
of $85 Million
enterprise
valuation or
price
per share paid at a
Qualified
Financing
Event
(of at
least
$5
Million)
|
20%
discount
|
Preferred
stock &
common
stock
warrants
|
$3,490,087
|
2018
Notes
|
6
months
extendable
to
12
months
|
8%
|
Nov
2018
to
Jan
2019
|
Price
per share paid at the next equity
financing
event (of at least $5 Million)
|
20%
discount
|
Preferred
stock &
common
stock
warrants
|
$275,000
|
2020
Notes
|
6
months
extendable
to
12
months
|
8%
|
Mar
2020
to
May
2020
|
Price
per share paid at the next equity
financing
event (of at least $5 Million)
|
20%
discount
|
Preferred
stock,
common
stock
warrants &
common
stock
|
$610,000
|
2020
Reviva
Interim
Period
Notes
|
6
months
extendable
to
12
months
|
0%
|
Aug
2020
to
present
|
$0.831063
|
-
|
Common
stock
|
$450,000
|
Total
|
|
|
|
|
|
|
$4,825,087
|
|
8.
|
STOCKHOLDERS' DEFICIT–
Continued
|
Common stock warrants
In July 2020 the company
issued 791,080 warrants with a five-year term to purchase equal number of common stock at $3.50 per share to certain current and
past consultants (“2020 warrants”). The 2020 warrants were exercisable immediately. The Company estimated the fair
value of the 2020 warrants to be $1,178,182, using the Black-Scholes-Merton option-pricing model with the following assumptions:
|
|
Assumptions
|
|
Common stock value
|
|
$
|
2.25
|
|
Expected life
|
|
|
3
years
|
|
Risk-free interest rate
|
|
|
0.28
|
%
|
Expected dividend yields
|
|
|
0
|
%
|
Volatility
|
|
|
126
|
%
|
The 2020 warrants are classified
as a liability and re-measured at fair value each reporting period.
During 2014, in connection
with the 2014 Notes, the Company issued warrants with a five-year term to purchase 138,500 shares of common stock at $5.00 per
share to certain investors ("2014 warrants"). The 2014 warrants were exercisable immediately and were not exercised
and consequently expired in 2019. The Company estimated the fair value of the 2014 warrants to be $426,383, using the Black-Scholes-Merton
option-pricing model with the following assumptions:
|
|
Assumptions
|
|
Common stock value
|
|
$
|
5.00
|
|
Expected life
|
|
|
4.5-4.7
years
|
|
Risk-free interest rate
|
|
|
1.33-1.52%
|
|
Expected dividend yields
|
|
|
0
|
%
|
Volatility
|
|
|
86.5
|
%
|
Using the relative fair values
allocation, the 2014 warrants value of $407,578 was recorded as a discount to the 2014 Notes and an increase to additional paid-in
capital. Upon conversion of the 2014 Notes into Series 4 Preferred Stock in June 2014, the corresponding debt discount
was immediately amortized to interest expense.
|
8.
|
STOCKHOLDERS' DEFICIT - Continued
|
Contingent Warrants
The Company issued 2016 warrants
(the “2016 contingent warrants”) in connection with the 2016 Notes to purchase 38,200 shares of its common stock which
expire on April 28, 2022.
The Company estimated the fair
value of the 2016 contingent warrants using the Black-Scholes-Merton option-pricing model with the following assumptions:
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
Common stock value
|
|
$
|
2.25
|
|
|
$
|
3.63
|
|
Expected life
|
|
|
3
years
|
|
|
|
3
years
|
|
Risk-free interest rate
|
|
|
0.28
|
%
|
|
|
1.76
|
%
|
Expected dividend yields
|
|
|
0
|
%
|
|
|
0
|
%
|
Volatility
|
|
|
126
|
%
|
|
|
126
|
%
|
The initial fair value of the
2016 contingent warrants was recognized as a debt discount and amortized over the original 12-month term of the 2016 Notes.
The following table summarizes
fair value measurements by level at September 30, 2020 for assets and liabilities measured at fair value on a recurring basis:
|
|
Total Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
2016 contingent warrants
|
|
$
|
48,531
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
48,531
|
|
2020 warrants
|
|
$
|
1,178,183
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1,178,183
|
|
Total
|
|
$
|
1,226,714
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
1,226,714
|
|
The following table summarizes
fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis:
|
|
Total Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
2016 contingent warrants
|
|
$
|
101,525
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
101,525
|
|
In connection with the 2018
notes, the Company will issue 2018 contingent warrants equivalent to the number of converted shares to be determined at the Qualified
Financing Event with a strike price equal to the qualified financing event price and with a maturity of 5 years from the date
of such a conversion event.
|
8.
|
STOCKHOLDERS' DEFICIT- Continued
|
A summary of warrant activity
for the nine months ended September 30, 2020 is as follows:
|
|
Number of
Shares
|
|
|
Range of
Exercise
Prices
|
|
|
Weighted-
Average
Exercise
Prices
|
|
|
Weighted-
Average
Remaining
Life
|
|
Outstanding at December 31, 2019
|
|
|
38,200
|
|
|
$
|
6.44
|
|
|
$
|
6.44
|
|
|
|
1.6
|
|
Issued
|
|
|
791,080
|
|
|
$
|
3.50
|
|
|
$
|
3.50
|
|
|
|
4.8
|
|
Outstanding at September 30, 2020
|
|
|
829,280
|
|
|
$
|
3.76
|
|
|
$
|
3.76
|
|
|
|
4.7
|
|
|
9.
|
STOCK OPTION PLAN
AND STOCK-BASED COMPENSATION
|
Activity under the stock option
plan for the nine months ended September 30, 2020 is as follows:
|
|
Shares available
for Grant
|
|
|
Number of Shares
Outstanding
|
|
|
Weighted average
exercise price per share
|
|
Balance, December 31, 2019
|
|
|
2,258,334
|
|
|
|
741,666
|
|
|
$
|
2.43
|
|
Cancelled
|
|
|
311,666
|
|
|
|
(311,666
|
)
|
|
|
-
|
|
Balance, September 30, 2020
|
|
|
2,570,000
|
|
|
|
430,000
|
|
|
$
|
2.57
|
|
Vested, September 30, 2020
|
|
|
-
|
|
|
|
430,000
|
|
|
$
|
2.57
|
|
Vested and expected to vest, September 30,
2020
|
|
|
-
|
|
|
|
430,000
|
|
|
$
|
2.57
|
|
Shares outstanding under the
stock option plan as of September 30, 2020 are as follows:
Options Outstanding
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Shares
Exercisable
|
|
|
Weighted Average
Exercise Price Per
Share
|
|
|
320,000
|
|
|
|
2.10
|
|
|
|
320,000
|
|
|
$
|
1.81
|
|
|
110,000
|
|
|
|
4.18
|
|
|
|
110,000
|
|
|
$
|
4.77
|
|
|
9.
|
STOCK OPTION PLAN
AND STOCK-BASED COMPENSATION - Continued
|
During the nine months ended
September 30, 2020 and 2019, the Company granted no stock options to employees.
During the nine months ended
September 30, 2020 and 2019, no stock-based employee compensation expense was recorded. As of September 30, 2020, the
Company had no unrecognized compensation expense, net of estimated forfeitures, related to stock option awards to employees. No
income tax benefit has been recognized relating to stock-based compensation expense, and no tax benefits have been realized from
exercised stock options.
The
Company computes net loss per share attributable to common stockholders using the two-class method required for participating
securities. The Company considers its convertible preferred stock to be participating securities. In accordance with the two-class method,
earnings allocated to these participating securities, which include participation rights in undistributed earnings, are subtracted
from net income to determine total undistributed earnings to be allocated to common stockholders.
Basic net loss per share attributable
to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of
common shares outstanding during the period. All participating securities are excluded from basic weighted-average common shares
outstanding. Diluted net loss per share attributable to common stockholders excludes any dilutive effect from outstanding stock
options and warrants using the treasury stock method.
|
10.
|
NET LOSS PER SHARE
- Continued
|
The following table details
the shares excluded in the calculation of net loss per share:
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
Convertible Preferred Stock
|
|
|
|
|
|
|
|
|
Series 1
|
|
|
625,237
|
|
|
|
625,237
|
|
Series 2
|
|
|
1,245,889
|
|
|
|
1,245,889
|
|
Series 3
|
|
|
951,761
|
|
|
|
951,761
|
|
Series 4
|
|
|
1,029,994
|
|
|
|
1,029,994
|
|
2016 contingent warrants
|
|
|
38,200
|
|
|
|
38,200
|
|
2020 warrants
|
|
|
791,080
|
|
|
|
-
|
|
2020 Reviva interim period notes
|
|
|
541,475
|
|
|
|
-
|
|
Options outstanding
|
|
|
430,000
|
|
|
|
769,166
|
|
Total
|
|
|
5,653,636
|
|
|
|
4,660,247
|
|
In October 2020, the Company
issued and received an aggregate principal amount of $50,000 from its 2020 Reviva Interim Period Notes.
On October 20, 2020, Reviva
executed an offer letter with an individual to start as CFO of the surviving entity post transaction, conditioned upon the closing
of the Business Combination.
On October 21, 2020, Tenzing
entered into backstop agreements (each, a “Backstop Agreement”) with Reviva and certain investors (the “Backstop
Investors”) in connection with the Business Combination.
Under the Backstop Agreements,
the Backstop Investors agreed to purchase in the aggregate, among all Backstop Investors, a total of 417,518 of Tenzing’s
ordinary shares in open market or private transactions (the “Backstop Shares”) and to hold, not transfer, not grant
any proxies or power of attorney, not to incur any liens with respect to the shares through the closing of the business combination.
In exchange, Tenzing agreed to issue to the Backstop Investors for each ten Backstop shares that they purchase on or prior to
October 23, 2020 and hold without transfer, do not redeem and otherwise act in material compliance with the terms of the
Backstop
|
11.
|
SUBSEQUENT EVENTS
– Continued
|
Agreement one share (each,
an “Additional Share”) of its common stock after Tenzing’s conversion from a British Virgin Islands company
to a Delaware corporation, as contemplated by the Merger Agreement.
On October 22, 2020, Tenzing
entered into an additional backstop agreement (the “Additional Backstop Agreement”) with Reviva, and additional investors
in connection with the Business Combination, pursuant to which such investor agreed to purchase 23,148 of the Tenzing’s
ordinary shares in open market or private transactions, and Tenzing agreed to issue up to 2,314 of its ordinary shares of in connection
therewith. The Additional Backstop Agreement is the same form and subject to the same terms and conditions as the backstop agreements
that were signed on October 21, 2020.
On October 26, 2020, Tenzing
and Reviva granted waiver letters (each, a “Waiver Letter”) to certain investors under the backstop agreements (including
the investors under the Additional Backstop Agreement as described above) representing investors obligated to purchase an aggregate
of 394,370 backstop shares, waiving such investors’ failure to purchase the required backstop shares on or prior to October 23,
2020 and agreeing to extend the date by which such investors must purchase their required backstop shares in order to be eligible
to receive the additional shares of Tenzing under the backstop agreements to November 13, 2020.
Subsequent to September 30,
2020, Reviva executed an amendment to the 2016 Notes with the holders representing at least a majority of the aggregate principal
balances of the 2016 Notes pursuant to which, subject to and immediately prior to the closing of the Business Combination, all
of the issued and outstanding 2016 Notes will automatically convert into a number of shares of Reviva common stock equal to the
quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and
accrued but unpaid interest under the 2016 Notes on a date that is no more than five (5) days prior to closing by (B) a
conversion price equal to $1.329698.
Subsequent to September 30,
2020, Reviva has executed an amendment to the 2018 Notes with the holders representing at least a majority of the aggregate principal
balances of the 2018 Notes pursuant to which, subject to and immediately prior to the closing of the Business Combination, all
of the issued and outstanding 2018 Notes will automatically convert into a number of shares of Reviva common stock equal to the
quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then outstanding principal and
accrued but unpaid interest under the 2018 Notes on a date that is no more than five (5) days prior to closing by (B) a
conversion price equal to (i) $0.831018 for each holder of 2018 Notes who purchased at least $50,000 in aggregate principal
amount of 2018 Notes or (ii) $1.330045 for each holder of 2018 Notes who purchased less than $50,000 in aggregate principal
amount of 2018 Notes.
|
11.
|
SUBSEQUENT EVENTS
– Continued
|
Subsequent to September 30,
2020, Reviva has executed an amendment to the 2020 Notes with the holders representing at least a majority of the aggregate principal
balances of the 2020 Notes (“2020 Notes Majority Holders”) pursuant to which, subject to and immediately prior to
the closing of the Business Combination, all of the issued and outstanding 2020 Notes will automatically convert into a number
of shares of Reviva common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the
sum of all then outstanding principal and accrued but unpaid interest under the 2020 Notes on a date that is no more than five
(5) days prior to closing by (B) a conversion price equal to (i) $0.831009 for each holder of 2020 Notes who purchased
at least $50,000 in aggregate principal amount of 2020 Notes or (ii) $1.329770 for each holder of 2020 Notes who purchased
less than $50,000 in aggregate principal amount of 2020 Notes.
Reviva has executed an amendment
to the 2020 Notes with the holders representing at least a majority of the aggregate principal balances of the 2020 Notes (“2020
Notes Majority Holders”) pursuant to which, immediately prior to the closing, all of the issued and outstanding 2020 Notes
will automatically convert, immediately prior to the consummation of the Business Combination, into a number of shares of Reviva
common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing (A) the sum of all then
outstanding principal and accrued but unpaid interest under the 2020 Notes on a date that is no more than five (5) days prior
to closing by (B) a conversion price equal to (i) $0.831009 for each holder of 2020 Notes who purchased at least $50,000
in aggregate principal amount of 2020 Notes or (ii) $1.329770 for each holder of 2020 Notes who purchased less than $50,000
in aggregate principal amount of 2020 Notes.
On November 30, 2020,
Reviva retained the services of TigerBridge Capital LLC to act as a non-exclusive financial advisor to the Company. TigerBridge
Capital LLC would be entitled to a $2.4 Million fee payable in Reviva common stock upon consummation of the Business Combination.
On December 14, 2020, Reviva
Pharmaceuticals Holdings, Inc., a Delaware corporation and the successor by re-domiciliation to Tenzing Acquisition Corp., a British
Virgin Islands exempted company, and Reviva Pharmaceuticals, Inc., consummated the business combination (the “Closing”)
contemplated by the previously announced Agreement and Plan of Merger, dated as of July 20, 2020, by and among Tenzing, Reviva
and the other parties named therein.
As a result of the spread of
the COVID-19 coronavirus, economic uncertainties have arisen which may impact operating activities, though such potential impact
is unknown at this time. Management has determined that there are no other subsequent events to be reported.
The Company has evaluated subsequent
events through December 14, 2020, the date the consolidated financial statements were available for general release, for
appropriate accounting and financial statement disclosures.
Up to 2,887,104 Shares of Common Stock
6,881,313 Shares of Common Stock Issuable
Upon Exercise of Warrants
556,313 Warrants to Purchase Common
Stock
REVIVA PHARMACEUTICALS HOLDINGS, INC.
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