Filed Pursuant to Rule 424(b)(3)

Registration No. 333-260299

Prospectus Supplement No. 13

(to prospectus dated November 1, 2021)

 

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UP TO 8,526,546 SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF WARRANTS

UP TO 12,668,314 SHARES OF COMMON STOCK

UP TO 3,500,000 PRIVATE PLACEMENT WARRANTS

 

__________________________________

This prospectus supplement (this “Prospectus Supplement”) is being filed to update and supplement the information contained in the prospectus dated November 1, 2021 (as may be supplemented or amended from time to time, the “Prospectus”), with the information contained in our Quarterly Report on Form 10-Q, which we filed with the SEC on November 10, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this Prospectus Supplement.

The Prospectus and this Prospectus Supplement relate to the issuance by us of up to an aggregate of 8,526,546 shares of our common stock, par value $0.0001 per share (“Common Stock”), which consists of:

 

 

 

up to 4,311,322 shares of Common Stock that are issuable upon the exercise of 8,622,644 warrants originally issued in the initial public offering of Chardan Healthcare Acquisition 2 Corp. (“Chardan”) to the holders thereof (the “Public Warrants”);

 

 

 

up to 3,500,000 shares of Common Stock that are issuable upon the exercise of 3,500,000 warrants originally issued in a private placement concurrently with the initial public offering of Chardan (the “Private Placement Warrants”); and

 

 

 

up to 715,224 shares of Common Stock that are issuable upon the exercise of a pre-funded warrant originally issued in the PIPE Investment (as defined below) (the “Pre-Funded Warrant”, and together with the Public Warrants and the Private Placement Warrants, the “Warrants”).

In addition, the Prospectus and this Prospectus Supplement relate to the resale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”), or their permitted transferees, of up to 12,668,314 shares of Common Stock and 3,500,000 Private Placement Warrants, which consists of:

 

 

 

up to 2,284,776 shares of Common Stock (the “PIPE Shares”) issued in a private placement pursuant to subscription agreements entered into between us and the subscribers on March 22, 2021 (the “PIPE Investment”);

 

 

 

up to 6,305,061 shares of Common Stock (the “Old Renovacor Stockholder Shares”) issued to certain former stockholders of Old Renovacor (defined below) (the “Old Renovacor Stockholders”) in connection with the Merger (as defined below);

 

 

 

up to 1,655,661 shares of Common Stock (the “Sponsor Shares”) originally issued in a private placement to Chardan Investments 2, LLC (the “Sponsor”) and certain of its directors and employees;

 

 

 

up to 1,922,816 shares of Common Stock (the “Earnout Shares”) that may be issued pursuant to the earnout provisions of the Merger Agreement (as defined herein);

 

 

 

up to 500,000 shares of restricted Common Stock held in escrow and subject to forfeiture pursuant to certain conditions more fully described in the Sponsor Support Agreement (as defined herein) (the “Sponsor Earnout Shares”); and

 

 

 

up to 3,500,000 Private Placement Warrants.

 

 


 

This Prospectus Supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This Prospectus Supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this Prospectus Supplement, you should rely on the information in this Prospectus Supplement.

We are a “smaller reporting company” and “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), and are subject to reduced reporting requirements.

Our Common Stock is currently listed on the NYSE American LLC (the “NYSE”) under the symbol “RCOR”, and our Public Warrants are currently listed on NYSE under the symbol “RCOR.WS”. On November 9, 2022, the closing price of our Common Stock was $2.56 and the closing price for our Public Warrants was $0.10.

 

__________________________________

See the section “Risk Factors” beginning on page 10 of the Prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is November 10, 2022.

 

 

 


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from __________ to __________

Commission File Number: 001-39271

 

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Renovacor, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

83-3169838

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

201 Broadway, Suite 310

Cambridge, Massachusetts

02139

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (610) 424-2650

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

RCOR

 

NYSE American LLC

Warrants to purchase common stock at an exercise price of $11.50 per share

 

RCOR.WS

 

NYSE American LLC

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of November 10, 2022, the registrant had 17,269,415 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

Renovacor, Inc.

Form 10-Q

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Cash Flows

3

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

40

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3.

Defaults Upon Senior Securities

45

Item 4.

Mine Safety Disclosures

45

Item 5.

Other Information

45

Item 6.

Exhibits

46

Signatures

47

 

 


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical fact, included or incorporated in this Quarterly Report on Form 10-Q regarding our strategy, future operations, clinical trials, collaborations, intellectual property, cash resources, financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will, "could," “should,” "potential," "likely," "projects," "target," "continue," "will," "schedule," "would" or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements contain these identifying words. We cannot guarantee that we will actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements.

 

Factors that may impact such forward-looking statements include:

the occurrence of any change, event, series of events or circumstances that could give rise to the termination of the Agreement and Plan of Merger, or the Rocket Merger Agreement, by and among us, Rocket Pharmaceuticals, Inc., or Rocket, Zebrafish Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Rocket, or Merger Sub I, and Zebrafish Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of Rocket, or Merger Sub II, and together with Merger Sub I, the Merger Subs, that provides for the acquisition of Renovacor by Rocket, or the merger, including a termination of the Rocket Merger Agreement under circumstances that could require Renovacor or Rocket to pay a termination fee to the other party;
the possibility that we are unable to complete the merger due to the failure of our stockholders to adopt the Rocket Merger Agreement, or the failure to satisfy any of the other conditions to the completion of the mergers, or unexpected delays in satisfying any conditions; risks that the pendency or completion of the merger and the other transactions contemplated by the Rocket Merger Agreement disrupt current plans and operations, which may adversely impact our business;
the risk of legal proceedings that may be instituted against us, our directors and/or others relating to the merger;
our ability to raise additional capital to fund our operations and continue the development of our current and future product candidates;
the accuracy of our projections and estimates regarding our expenses, capital requirements, cash utilization, and need for additional financing;
the initiation, progress, success, cost, and timing of our development activities, preclinical studies and future clinical trials;
the timing, scope and likelihood of regulatory filings and approvals, including final regulatory approval of our product candidates;
the preclinical nature of our business and our ability to successfully advance current and future product candidates through development activities, preclinical studies, and clinical trials;
the timing of our future Investigational New Drug, or IND, applications and the likelihood of, and our ability to obtain and maintain, regulatory clearance of such IND applications for our product candidates;
the novelty of our approach to the treatment of BAG3 mutation-associated dilated cardiomyopathy, or DCM, utilizing adeno-associated virus, or AAV, BAG3-based gene therapies to target BAG3 mutations, and the challenges we will face due to the novel nature of such technology;
our dependence on the success of our product candidates, in particular REN-001;
the potential scope and value of our intellectual property and proprietary rights;
our ability, and the ability of our licensors, to obtain, maintain, defend, and enforce intellectual property and proprietary rights protecting our product candidates, and our ability to develop and commercialize our product candidates without infringing, misappropriating, or otherwise violating the intellectual property or proprietary rights of third parties;
the success of competing therapies that are or become available;
regulatory developments and approval pathways in the United States and foreign countries for our product candidates;

i


 

the performance of third parties in connection with the development of our product candidates, including third parties conducting our future clinical trials as well as third-party suppliers and manufacturers;
our ability to attract and retain strategic collaborators with development, regulatory, and commercialization expertise;
the extent to which health epidemics and other outbreaks of communicable diseases, including the COVID-19 pandemic, geopolitical turmoil, including the ongoing invasion of Ukraine by Russia or increased trade restrictions between the United States, Russia, China, and other countries, social unrest, political instability, terrorism, or other acts of war could ultimately impact our business, including supply chain, labor, development activities, preclinical studies, and future clinical trials;
the public opinion and scrutiny of AAV/BAG3-based gene therapies for the treatment of heart failure and our potential impact on public perception of our products and product candidates;
our ability to successfully commercialize our product candidates and develop sales and marketing capabilities, if our product candidates are approved;
our ability to generate revenue from future product sales and our ability to achieve and maintain profitability;
the size and growth of the potential markets for our product candidates and our ability to serve those markets;
changes in applicable laws or regulations;
our ability to recruit and retain key members of management and other clinical and scientific personnel;
the volatility of capital markets and other macroeconomic factors, including due to geopolitical tensions or the outbreak of hostilities or war;
the possibility that we may be adversely impacted by other economic, business, and/or competitive factors, including inflation; and
other risks and uncertainties, including those listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Form 10-K”), our Quarterly Reports on Form 10-Q and the other documents we file with the Securities and Exchange Commission (the “SEC”).

 

There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. These important factors include those set forth under Part I, Item 1A "Risk Factors" in our 2021 Form 10-K, which was filed with the SEC on March 24, 2022, and in our other disclosures and filings with the SEC. These factors and the other cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all related forward-looking statements whenever they appear in this Quarterly Report on Form 10-Q.

 

In addition, any forward-looking statements represent our estimates only as of the date that this Quarterly Report on Form 10-Q is filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. All forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof, and are expressly qualified in their entirety by this cautionary notice. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Renovacor, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

(In thousands, except share and per share amounts)

 

2022

 

 

2021*

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

53,713

 

 

$

78,790

 

Prepaid expenses and other current assets

 

 

1,941

 

 

 

1,763

 

Total current assets

 

 

55,654

 

 

 

80,553

 

Property and equipment, net

 

 

1,441

 

 

 

379

 

Operating lease right-of-use assets

 

 

484

 

 

 

 

Other assets

 

 

163

 

 

 

67

 

Total assets

 

$

57,742

 

 

$

80,999

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,228

 

 

$

1,536

 

Accrued expenses

 

 

3,945

 

 

 

2,498

 

Operating lease liability

 

 

241

 

 

 

 

Other current liability

 

 

1,019

 

 

 

 

Total current liabilities

 

 

8,433

 

 

 

4,034

 

Warrant liability

 

 

1,369

 

 

 

11,165

 

Share earnout liability (includes 500,000 shares of Common stock, $0.0001 par value per share, subject to forfeiture, issued and outstanding at September 30, 2022 and December 31, 2021 –– Note 3)

 

 

4,967

 

 

 

12,256

 

Operating lease liability, net of current portion

 

 

265

 

 

 

 

Total liabilities

 

 

15,034

 

 

 

27,455

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value per share; 1,000,000 shares authorized; none issued or outstanding at September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value per share; 100,000,000 shares authorized; 16,769,415 and 16,756,042 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

74,361

 

 

 

72,540

 

Accumulated deficit

 

 

(31,655

)

 

 

(18,998

)

Total stockholders’ equity

 

 

42,708

 

 

 

53,544

 

Total liabilities and stockholders’ equity

 

$

57,742

 

 

$

80,999

 

———————

* The condensed balance sheet at December 31, 2021 has been derived from the audited financial statements at that date.
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

Renovacor, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(In thousands, except share and per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

7,423

 

 

$

2,925

 

 

$

19,642

 

 

$

7,413

 

General and administrative

 

 

4,682

 

 

 

2,315

 

 

 

10,445

 

 

 

3,227

 

Loss from operations

 

 

(12,105

)

 

 

(5,240

)

 

 

(30,087

)

 

 

(10,640

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

298

 

 

 

 

 

 

347

 

 

 

 

Interest expense

 

 

(4

)

 

 

(147

)

 

 

(4

)

 

 

(147

)

Change in fair value of derivative liability

 

 

 

 

 

80

 

 

 

 

 

 

80

 

Change in fair value of warrant liability

 

 

(389

)

 

 

(1,435

)

 

 

9,796

 

 

 

(1,435

)

Change in fair value of share earnout liability

 

 

(3,029

)

 

 

(1,427

)

 

 

7,289

 

 

 

(1,427

)

Other income (expense), net

 

 

2

 

 

 

 

 

 

2

 

 

 

 

Net loss

 

$

(15,227

)

 

$

(8,169

)

 

$

(12,657

)

 

$

(13,569

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share –– basic and diluted

 

$

(0.87

)

 

$

(0.83

)

 

$

(0.72

)

 

$

(1.82

)

Weighted-average number of common shares used in computing net loss per share –– basic and diluted

 

 

17,482,933

 

 

 

9,794,348

 

 

 

17,477,445

 

 

 

7,460,719

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

2


 

Renovacor, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine months ended

 

 

 

September 30,

 

(In thousands)

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(12,657

)

 

$

(13,569

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

1,815

 

 

 

710

 

Change in fair value of derivative liability

 

 

 

 

 

(80

)

Change in fair value of warrant liability

 

 

(9,796

)

 

 

1,435

 

Change in fair value of share earnout liability

 

 

(7,289

)

 

 

1,427

 

Amortization of debt discount

 

 

 

 

 

136

 

Depreciation expense

 

 

55

 

 

 

1

 

Change in assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

841

 

 

 

(2,528

)

Accounts payable

 

 

1,605

 

 

 

1,289

 

Accrued expenses

 

 

1,781

 

 

 

1,879

 

Other

 

 

(74

)

 

 

 

Net cash used in operating activities

 

 

(23,719

)

 

 

(9,300

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Acquisitions of property and equipment

 

 

(1,311

)

 

 

 

Net cash used in investing activities

 

 

(1,311

)

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Merger-related costs

 

 

(53

)

 

 

 

Proceeds from issuance of convertible promissory note, net of issuance costs

 

 

 

 

 

2,445

 

Effect of Merger, net of transaction costs (Note 3)

 

 

 

 

 

86,792

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

6

 

 

 

 

Net cash provided by (used in) financing activities

 

 

(47

)

 

 

89,237

 

Net decrease in cash and cash equivalents

 

 

(25,077

)

 

 

79,937

 

Cash and cash equivalents at beginning of period

 

 

78,790

 

 

 

5,384

 

Cash and cash equivalents at end of period

 

$

53,713

 

 

$

85,321

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:

 

 

 

 

 

 

Deferred merger costs in accounts payable

 

$

 

 

$

304

 

Property and equipment in accounts payable and accrued expenses

 

$

166

 

 

$

20

 

Non-cash insurance premium financing

 

$

1,019

 

 

$

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFO:

 

 

 

 

 

 

Cash paid for amounts included in measurement of lease liabilities

 

$

118

 

 

$

 

Cash paid during the period for interest

 

$

 

 

$

12

 

Right-of-use assets obtained in exchange for new operating lease obligations

 

$

575

 

 

$

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Renovacor, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

 

 

 

 

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in-

 

 

Accumulated

 

 

Stockholders'

 

(In thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2021

 

 

16,756,042

 

 

$

2

 

 

$

72,540

 

 

$

(18,998

)

 

$

53,544

 

Stock-based compensation

 

 

 

 

 

 

 

 

601

 

 

 

 

 

 

601

 

Net income

 

 

 

 

 

 

 

 

 

 

 

6,594

 

 

 

6,594

 

Balance, March 31, 2022

 

 

16,756,042

 

 

$

2

 

 

$

73,141

 

 

$

(12,404

)

 

$

60,739

 

Issuance of common stock upon exercise of stock options

 

 

11,648

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Stock-based compensation

 

 

 

 

 

 

 

 

632

 

 

 

 

 

 

632

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,024

)

 

 

(4,024

)

Balance, June 30, 2022

 

 

16,767,690

 

 

$

2

 

 

$

73,778

 

 

$

(16,428

)

 

$

57,352

 

Issuance of common stock upon exercise of stock options

 

 

1,725

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

582

 

 

 

 

 

 

582

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(15,227

)

 

 

(15,227

)

Balance, September 30, 2022

 

 

16,769,415

 

 

$

2

 

 

$

74,361

 

 

$

(31,655

)

 

$

42,708

 

 

 

 

 

Nine Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Stockholders'

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Paid-in-

 

 

Accumulated

 

 

Equity

 

(In thousands, except share amounts)

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Deficit)

 

Balance, December 31, 2020

 

 

2,578,518

 

 

$

10,074

 

 

 

 

1,953,368

 

 

$

 

 

$

121

 

 

$

(4,897

)

 

$

(4,776

)

Retroactive application of reverse recapitalization (Note 3)

 

 

(2,578,518

)

 

 

(10,074

)

 

 

 

4,321,198

 

 

 

1

 

 

 

10,073

 

 

 

 

 

 

10,074

 

Balance, December 31, 2020, effect of Merger

 

 

 

 

$

 

 

 

 

6,274,566

 

 

$

1

 

 

$

10,194

 

 

$

(4,897

)

 

$

5,298

 

Issuance of restricted common stock

 

 

 

 

 

 

 

 

 

30,495

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,681

)

 

 

(1,681

)

Balance, March 31, 2021

 

 

 

 

$

 

 

 

 

6,305,061

 

 

$

1

 

 

$

10,201

 

 

$

(6,578

)

 

$

3,624

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

185

 

 

 

 

 

 

185

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,719

)

 

 

(3,719

)

Balance, June 30, 2021

 

 

 

 

$

 

 

 

 

6,305,061

 

 

$

1

 

 

$

10,386

 

 

$

(10,297

)

 

$

90

 

Issuance of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of Merger and recapitalization (refer to Note 3)

 

 

 

 

 

 

 

 

 

8,166,205

 

 

 

1

 

 

 

31,269

 

 

 

 

 

 

31,270

 

Common stock and pre-funded warrants issued pursuant to PIPE financing

 

 

 

 

 

 

 

 

 

2,284,776

 

 

 

 

 

 

29,704

 

 

 

 

 

 

29,704

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

518

 

 

 

 

 

 

518

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,169

)

 

 

(8,169

)

Balance, September 30, 2021

 

 

 

 

$

 

 

 

 

16,756,042

 

 

$

2

 

 

$

71,877

 

 

$

(18,466

)

 

$

53,413

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

Renovacor, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Business and Organization

 

Business Overview

 

Renovacor, Inc. (the “Company,” or “Renovacor”) (f/k/a Chardan Healthcare Acquisition 2 Corp. ("Chardan")), a Delaware corporation, is a biotechnology company focused on delivering innovative precision therapies to improve the lives of patients and families battling genetically-driven cardiovascular and mechanistically-related diseases. The Company’s initial focus is on the treatment of BCL2-associated athanogene 3 (BAG3) mutation-associated dilated cardiomyopathy ("DCM") ("BAG3 DCM"). BAG3 DCM is a heritable rare disease that leads to early onset, rapidly progressing heart failure and significant mortality and morbidity. The Company’s lead product candidate, REN-001, is a recombinant adeno-associated virus ("AAV") 9-based gene therapy designed to deliver a fully functional BAG3 gene to augment BAG3 protein levels in cardiomyocytes and slow or halt progression of BAG3 DCM. The Company has entered into and may explore future collaborative alliances to support research, development, and commercialization of any of its product candidates.

 

The Company is subject to risks common to companies in the biopharmaceutical industry, including, but not limited to, risks related to the successful development and commercialization of product candidates, fluctuations in operating results and financial risks, the ability to successfully raise additional funds when needed, protection of proprietary rights and patent risks, patent litigation, compliance with government regulations, dependence on key personnel and prospective collaborative partners, and competition from competing products in the marketplace.

 

Rocket Merger Agreement

 

On September 19, 2022, the Company entered into an Agreement and Plan of Merger (the “Rocket Merger Agreement”) with Rocket Pharmaceuticals, Inc., a Delaware corporation (“Rocket”), Zebrafish Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Rocket (“Merger Sub I”), and Zebrafish Merger Sub II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Rocket (“Merger Sub II,” and together with Merger Sub I, the “Merger Subs”) pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Rocket Merger Agreement, (i) Merger Sub I will merge with and into the Company (the “First Merger”) and (ii) the Company, as the surviving company of the First Merger, will merge with and into Merger Sub II (the “Second Merger” and together with the First Merger, the “Mergers”), with Merger Sub II as the surviving company in the Second Merger and as a wholly owned subsidiary of Rocket (the “Surviving Company”).

 

Among other things and subject to the terms and conditions of the Rocket Merger Agreement, at the effective time of the First Merger (the “First Effective Time”), each share of the Company's common stock, par value $0.0001 per share (collectively, the “Renovacor Shares”), issued and outstanding immediately prior to the First Effective Time will be converted into the right to receive a number of shares of common stock of Rocket, par value $0.01 per share (collectively, the “Rocket Shares”), determined on the basis of an exchange formula set forth in the Rocket Merger Agreement (the “Rocket Exchange Ratio”). The Rocket Exchange Ratio will initially be equal to approximately 0.1676 Rocket Shares for each Renovacor Share (subject to adjustment as described in this paragraph). Under certain circumstances further described in the Rocket Merger Agreement, the Rocket Exchange Ratio may be adjusted upward or downward based on the level of Company's net cash at the closing of the First Merger and certain other adjustments, as determined in accordance with the Rocket Merger Agreement. There can be no assurances as to Company's level of net cash between now and the closing of the transactions contemplated by the Merger Agreement. Immediately following the completion of the mergers, former Renovacor stockholders are expected to own approximately 4.1% of the of the outstanding shares of Rocket.

 

Each of the board of directors of Rocket and the board of directors of Renovacor have approved the Rocket Merger Agreement and the transactions contemplated thereby. The transaction is subject to approval by the stockholders of both companies, as well as regulatory approvals and satisfaction of other customary closing conditions. Contemporaneously with the execution of the Rocket Merger Agreement, Renovacor and certain stockholders of Rocket, holding approximately 35% of Rocket’s outstanding shares, and Rocket and certain stockholders of Renovacor, holding approximately 9.4% of Renovacor’s outstanding shares, entered into a voting and support agreement and have agreed to vote in favor of the transaction. The special meetings of shareholders of both Rocket and Renovacor to approve the Rocket Merger Agreement and the transactions contemplated thereby is scheduled to be held on November 30, 2022. However, there is no assurance that Rocket and/or Renovacor shareholders will approve the proposals required to complete the Mergers successfully.

 

5


 

The foregoing description of the Rocket Merger Agreement is not a complete description of all the parties’ rights and obligations under the Rocket Merger Agreement and is qualified in its entirety by reference to the Rocket Merger Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 20, 2022, and is filed herewith.

 

SPAC Merger Agreement

 

Prior to September 2, 2021, the Company was a special purpose acquisition company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business transaction with one or more businesses or entities. On September 2, 2021 (the "SPAC Merger Closing Date"), the Company consummated the business combination contemplated by that certain Agreement and Plan of Merger, dated March 22, 2021 (the “SPAC Merger Agreement”), by and among the Company, CHAQ2 Merger Sub, Inc., a wholly owned subsidiary of the Company (“SPAC Merger Sub”), and Renovacor Holdings, Inc. (f/k/a Renovacor, Inc. ("Old Renovacor")). Pursuant to the SPAC Merger Agreement, (i) SPAC Merger Sub merged with and into Old Renovacor, with Old Renovacor as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly owned subsidiary of the Company (the “SPAC Merger”) and (ii) the Company’s name was changed from Chardan Healthcare Acquisition 2 Corp. to Renovacor, Inc. (the “SPAC Merger” and, together with the other transactions contemplated by the SPAC Merger Agreement, the “SPAC Business Combination”).

 

Liquidity Considerations

 

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date the financial statements are issued. As of September 30, 2022, the Company had an accumulated deficit of $31.7 million and a cash and cash equivalents balance of $53.7 million. The Company has incurred losses and negative cash flows from operations since inception. The Company expects to continue to incur substantial operating losses and negative cash flows for the foreseeable future and will require additional capital as it continues to advance REN-001 and/or any future product candidates through development.

 

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Management currently anticipates that the Company’s balance of cash and cash equivalents, as of September 30, 2022, is sufficient to enable the Company to continue as a going concern through the one-year period subsequent to the filing date of this Quarterly Report on Form 10-Q. Management’s operating plan, which underlies the analysis of the Company’s ability to continue as a going concern, involves the estimation of the amount and timing of future cash inflows and outflows. Actual results could vary from the operating plan.

 

The Company has and, assuming the Mergers are not completed, will continue to evaluate available alternatives to extend its operations beyond this date, which include financing its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. However, the Company may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If the Company fails to raise capital or enter into such agreements or arrangements as, and when, needed, it may have to significantly delay, scale back or discontinue the development and commercialization of one or more of its product candidates.

 

6


 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to fairly present the results of the interim periods. The results of operations and cash flows for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 2022 or any other future period.

 

As further described in Note 1, in September 2022, the Company entered into the Rocket Merger Agreement. However, as the Mergers have not yet been completed, the Company has prepared these financial statements as if the Company will remain an independent reporting company, and accordingly, these financial statements do not include any of the potential accounting impacts that may result from the completion of the Rocket Merger Agreement.

 

Reverse Recapitalization

 

The SPAC Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, the Company is treated as the “acquired” company and Old Renovacor is treated as the acquirer for financial reporting purposes. As a result, the consolidated assets, liabilities and results of operations prior to the SPAC Business Combination are those of Old Renovacor. Additionally, the shares and corresponding capital amounts and losses per share, prior to the SPAC Business Combination, have been retroactively restated based on shares reflecting the applicable exchange ratio resulting from the Common Per Share Merger Consideration and/or the Preferred Per Share Merger Consideration (each as defined by the SPAC Merger Agreement).

 

Emerging Growth Company Status

 

The Company is an "emerging growth company", as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expense, and related disclosures. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. Estimates relied upon in preparing these financial statements relate to, but are not limited to, the fair value of financial instruments, stock-based compensation assumptions and accrued expenses (including accrued and prepaid clinical costs). Actual results may differ from these estimates under different assumptions or conditions.

 

 

7


 

Financial Instruments

 

The fair value of the Company’s financial instruments is determined and disclosed in accordance with the three-tier fair value hierarchy specified in Note 4, Fair Value Measurements. The Company is required to disclose the estimated fair values of its financial instruments. As of September 30, 2022 and December 31, 2021, the Company’s financial instruments consisted of cash equivalents, receivables, a note payable, and warrant and share earnout liabilities. As of September 30, 2022, the Company did not have any other derivatives, hedging instruments or other similar financial instruments.

 

Concentration of Credit Risk

 

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash primarily held at one financial institution, which, at times, may exceed federally insured limits, and cash equivalents consisting of investments in money market funds managed by a variety of financial institutions. The Company's credit risk is managed by investing in only highly rated money market instruments. As a result, no significant additional credit risk is believed by management to be inherent in the Company’s assets and the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk on such accounts.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of 90 days or less when purchased to be “cash equivalents.” Cash and cash equivalents at September 30, 2022 consisted of cash and money market funds.

 

Property and Equipment, net

 

Property and equipment is carried at acquisition cost less accumulated depreciation and amortization, subject to review for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with ASC 360-10-35, Impairment or Disposal of Long-Lived Assets. The cost of normal, recurring, or periodic repairs and maintenance activities related to property and equipment, if any, are expensed as incurred. The cost for planned major maintenance activities, including the related acquisition or construction of assets, is capitalized if the repair will result in future economic benefits.

 

Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of the related assets. Equipment and other long-lived assets are depreciated over three to five years. Leasehold improvements are amortized over the remaining lease term or the related useful life, if shorter. When an asset is disposed of, the associated cost and accumulated depreciation or amortization is removed from the related accounts on the Company's balance sheet with any resulting gain or loss included in the Company's condensed consolidated statement of operations.

 

Operating Lease Right-of-use Assets and Lease Liabilities

 

The Company accounts for leases under ASC 842, Leases ("ASC 842"). The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. Under ASC 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset.

 

Operating leases are included in “Operating lease right-of-use assets” within the Company’s balance sheets and represent the Company’s right to use an underlying asset for the lease term. The Company’s related obligation to make lease payments are included in “Operating lease liability” and “Operating lease liability, net of current portion” within the Company’s balance sheets. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As none of the Company’s leases provide an implicit rate, the Company uses its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The ROU assets are tested for impairment according to ASC 360, Property, Plant, and Equipment (“ASC 360”). Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term.

 

As of September 30, 2022, the Company’s operating lease ROU assets and corresponding short-term and long-term lease liabilities primarily relate to its Cambridge, Massachusetts facility operating lease, as more fully described in Note 8.

 

 

8


 

Other Current Liability

 

In September 2022, the Company entered into a short-term financing arrangement with a third-party vendor to finance insurance premiums. The aggregate amount financed under this agreement was $1.0 million. As of September 30, 2022, the balance of $1.0 million, which is included in “Other current liability’ in the Company’s balance sheets, is scheduled to be paid in monthly installments through May 2023.

 

Warrant Liability

 

The Company accounts for stock warrants as either equity instruments, liabilities or derivative liabilities in accordance with ASC Topic 480, Distinguishing Liabilities from Equity ("ASC 480") and/or ASC Topic 815, Derivatives and Hedging ("ASC 815"), depending on the specific terms of the warrant agreement. Liability-classified warrants are recorded at their estimated fair values at each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-classified warrants are recorded in Change in Fair Value of Warrant Liability in the Company’s condensed consolidated statements of operations. Equity-classified warrants are recorded within additional paid-in capital at the time of issuance and not subject to remeasurement.

 

Share Earnout Liability

 

The Company accounts for share earnout arrangements that represent equity-linked instruments as either liabilities or equity instruments in accordance with ASC 815, unless such arrangements are within the scope of ASC Topic 718, Compensation–Stock Compensation ("ASC 718"), depending on the specific terms of the contract. Contracts classified as liabilities are recorded at their estimated fair values at each reporting period until they are no longer outstanding. Changes in the estimated fair value of liability-classified share earnout arrangements are recorded in Change in Fair Value of Share Earnout Liability in the Company’s condensed consolidated statements of operations.

 

Research and Development Expense

 

The Company expenses research and development expenses as incurred. The Company’s research and development expenses consist primarily of personnel-related expenses such as salaries, stock-based compensation, and benefits, and external costs of outside vendors engaged to conduct preclinical development activities, including manufacturing of preclinical and clinical drug supply. The Company accrues for expenses related to development activities performed by third parties based on an evaluation of services received and efforts expended pursuant to the terms of the contractual arrangements. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of expenses. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual or prepaid expense accordingly.

 

Stock-Based Compensation

 

The Company expenses stock-based compensation to employees and non-employees over the requisite service period, generally the vesting period, based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. All stock-based compensation costs are recorded in general and administrative or research and development costs in the condensed consolidated statements of operations based upon the underlying individual’s role at the Company.

 

Income Taxes

 

In accordance with ASC 270, Interim Reporting, and ASC 740, Income Taxes, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. For the three and nine months ended September 30, 2022 and 2021, the Company recorded no tax expense or benefit due to the expected current year loss and its historical losses. The Company has not recorded its net deferred tax asset as of either September 30, 2022 or December 31, 2021 because it maintained a full valuation allowance against all deferred tax assets as of these dates as management has determined that it is not more likely than not that the Company will realize these future tax benefits. As of September 30, 2022 and December 31, 2021, the Company had no uncertain tax positions.

 

 

9


 

Net Loss per Share of Common Stock

 

Basic and diluted net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period, which includes shares of common stock underlying the Pre-funded Warrant (as defined herein), as such warrant is exercisable, in whole or in part, for nominal cash consideration with no expiration date. Shares of common stock outstanding but subject to forfeiture and cancellation by the Company (e.g., Sponsor Earnout Shares, as defined in the SPAC Merger Agreement) are excluded from the weighted-average shares until the period in which such shares are no longer subject to forfeiture. The diluted net loss per share calculation gives effect to, if any, the potential exercise or conversion of securities, such as stock options, Public Warrants and Private Placement Warrants, and Sponsor Earnout Shares and Old Renovacor Earnout Shares (each as defined herein), which would result in the issuance of incremental shares of common stock, unless their effect would be anti-dilutive. See Note 13 for additional details.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any other recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future consolidated financial statements.

 

Accounting Pronouncements Recently Adopted

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 (amended by ASU 2019-10 and ASU 2020-05) is effective for non-public entities and emerging growth companies for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The new standard establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. A modified retrospective transition approach is required at the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company adopted this standard effective January 1, 2022. The adoption did not have a material impact on the Company’s consolidated condensed financial statements as of the adoption date. However, in the second quarter of 2022, the Company entered into two real estate leases which resulted in the recognition of the required right-of use asset and corresponding lease liability for such lease obligations. See Note 8 for additional details. Should the Company enter into new or amend its current leases in the future, the carrying values of the Company's right-of use assets and lease liabilities could be materially impacted.

 

 

10


 

Note 3. Merger and Recapitalization

 

SPAC Merger Agreement

 

As discussed in Note 1, on the SPAC Merger Closing Date, the Company closed the SPAC Business Combination with Old Renovacor, as a result of which Old Renovacor became a wholly-owned subsidiary of the Company. While the Company was the legal acquirer of Old Renovacor in the business combination, for accounting purposes, the SPAC Merger is treated as a reverse recapitalization, whereby Old Renovacor is deemed to be the accounting acquirer, and the historical financial statements of Old Renovacor became the historical consolidated financial statements of the Company upon the closing of the SPAC Merger. Under this method of accounting, the Company was treated as the “acquired” company and Old Renovacor is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the SPAC Merger was treated as the equivalent of Old Renovacor issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the SPAC Merger are presented as those of Old Renovacor.

 

At the consummation of the SPAC Merger Agreement upon filing of a certificate of merger, which occurred on the SPAC Closing Date (the "SPAC Effective Time"), an aggregate of 6,305,061 shares of the Company’s common stock, par value $0.0001 per share, plus 194,926 Exchanged Options (defined below) (the "Aggregate SPAC Merger Consideration") was issued to equityholders of Old Renovacor as of immediately prior to the SPAC Effective Time. Out of the Aggregate SPAC Merger Consideration, each holder of preferred stock of Old Renovacor, par value $0.0001 per share (the "Old Renovacor Preferred Stock") was entitled to receive a number of shares of the Company's common stock equal to the Preferred Per Share Merger Consideration (as defined in the SPAC Merger Agreement) with respect to such holder’s shares of Old Renovacor Preferred Stock. Each holder of common stock of Old Renovacor, par value $0.0001 per share (the "Old Renovacor Common Stock," and together with Old Renovacor’s preferred stock, (the "Old Renovacor Capital Stock"), was entitled to receive a number of shares of the Company’s common stock equal to the Common Per Share Merger Consideration (as defined in the SPAC Merger Agreement) with respect to such holder’s shares of Old Renovacor Common Stock. In addition, pursuant to the Company's 2021 Investor Incentive Plan, a portion of the Aggregate SPAC Merger Consideration was allocated among certain Old Renovacor equityholders or their affiliates who elected to participate in the PIPE Investment on a pro rata basis based on their respective investment amounts.

 

Each option to purchase shares of Old Renovacor Common Stock ("Old Renovacor Option") outstanding as of immediately prior to the SPAC Effective Time was converted into an option to purchase a number of shares of the Company’s common stock (rounded down to the nearest whole number) equal to the product of the number of shares of Old Renovacor Common Stock subject to such Old Renovacor option and the Common Per Share Merger Consideration (as defined in the SPAC Merger Agreement) (an "Exchanged Option"), which Exchanged Option is subject to the same vesting terms applicable to the Old Renovacor Option as of immediately prior to the Effective Time.

 

The shares and corresponding capital amounts and loss per share related to Old Renovacor Common Stock prior to the SPAC Business Combination Transaction were retroactively restated to reflect the Common Per Share Merger Consideration and the Preferred Per Share Merger Consideration (each as defined in the SPAC Merger Agreement), as applicable.

 

Holders of Old Renovacor Capital Stock are entitled to receive up to an additional 1,922,816 shares of the Company’s common stock (the “Old Renovacor Earnout Shares”) as follows:

 

576,845 Old Renovacor Earnout Shares, in the aggregate, if at any time during the period beginning on the date of the SPAC Merger Closing Date and ending on December 31, 2023 (the “First Earnout Period”), the volume-weighted average price ("VWAP") (as defined in the SPAC Merger Agreement) of the Company’s common stock over any twenty (20) Trading Days (as defined in the SPAC Merger Agreement) (which may or may not be consecutive) within any thirty (30) consecutive Trading Day period is greater than or equal to $17.50 per share of the Company’s common stock (the “First Milestone”).

 

An additional 576,845 Old Renovacor Earnout Shares, in the aggregate, if at any time during the period beginning on the SPAC Merger Closing Date and ending on December 31, 2025 (the “Second Earnout Period”), the VWAP of the Company’s common stock over any twenty (20) Trading Days (which may or may not be consecutive) within any thirty (30) consecutive Trading Day period is greater than or equal to $25.00 per share of the Company’s common stock (the “Second Milestone”).

 

An additional 769,126 Old Renovacor Earnout Shares, in the aggregate, if at any time during the period beginning on the SPAC Merger Closing Date and ending on December 31, 2027 (the “Third Earnout Period” and together with the First Earnout Period and the Second Earnout Period, each, an “Earnout Period” and collectively, the “Earnout Periods”), the VWAP of the Company’s common stock over any twenty (20) Trading Days (which may or may not be consecutive) within any thirty (30)

11


 

consecutive Trading Day period is greater than or equal to $35.00 per share of the Company’s common stock (the “Third Milestone” and together with the First Milestone and the Second Milestone, the “Earnout Milestones”).

 

Upon the consummation of any Change in Control (as defined in the SPAC Merger Agreement) during any Earnout Period, any Earnout Milestone with respect to such Earnout Period that has not yet been achieved shall automatically be deemed to have been achieved regardless of the valuation of the Company’s common stock in such Change in Control transaction and the Company will take all actions necessary to provide for the issuance of the shares of the Company’s common stock comprising the applicable Old Renovacor Earnout Shares issuable in respect of such Earnout Milestone(s) prior to the consummation of such Change in Control.

 

Each holder of Old Renovacor's Capital Stock was entitled to such holder’s aggregate Per Share Earnout Consideration (as defined in the SPAC Merger Agreement) in respect of such shares of Old Renovacor's Capital Stock as described above. In addition, at the SPAC Effective Time, holders of Old Renovacor Options received the right to be granted an Earnout RSU Award (as defined in the SPAC Merger Agreement) in respect of such holder’s Old Renovacor Options, which entitle such holder to an aggregate number of shares of the Company's common stock equal to the aggregate Per Share Earnout Consideration in respect of the shares of Old Renovacor Capital Stock underlying such Old Renovacor Options, if any, subject to the satisfaction of the applicable vesting conditions with respect to the Exchanged Options issued in respect of such Renovacor Options at the SPAC Merger closing. See Note 11 for further details.

 

Further, under the terms of the SPAC Business Combination (as provided for in the Sponsor Support Agreement), certain Sponsor Shares totaling 500,000 were placed into escrow and subject to forfeiture (the "Sponsor Earnout Shares"). Such Sponsor Earnout Shares will be released from escrow if the weighted average sale price of the Company's common stock equals or exceeds the applicable Target Price (as set forth in the table below) for any 20 trading days within a 30-day trading period from the SPAC Effective Time until the applicable end date. Upon consummation of any Change in Control (as defined in the SPAC Merger Agreement) during any Earnout Period, any Earnout Milestone with respect to such Earnout Period that has not yet been achieved shall automatically be deemed to have been achieved regardless of the valuation of the per share common stock price in such Change in Control transaction. Any Sponsor Earnout Shares that remain unvested as of the expiration of the applicable earnout period shall be forfeited and canceled.

 

The Old Renovacor Earnout Shares and Sponsor Earnout Shares (collectively, the "Earnout Shares") are summarized, as set forth in the table below:

 

 

 

 

 

 

Old Renovacor

 

 

Sponsor

 

 

 

 

 

 

Target Price

 

 

Earnout Shares

 

 

Earnout Shares

 

 

Total

 

December 31, 2023

 

$

17.50

 

 

 

576,845

 

 

 

150,000

 

 

 

726,845

 

December 31, 2025

 

$

25.00

 

 

 

576,845

 

 

 

150,000

 

 

 

726,845

 

December 31, 2027

 

$

35.00

 

 

 

769,126

 

 

 

200,000

 

 

 

969,126

 

 

 

 

 

 

 

1,922,816

 

 

 

500,000

 

 

 

2,422,816

 

 

PIPE Investment (Private Placement)

 

Concurrently with the execution of the SPAC Merger Agreement, the Company entered into subscription agreements (the "Subscription Agreements"), with certain investors ("PIPE Investors"), including Chardan Healthcare, certain stockholders of Old Renovacor and certain other institutional and accredited investors, pursuant to which, on the SPAC Closing Date, and concurrently with the closing of the SPAC Business Combination, the PIPE Investors purchased an aggregate of 2,284,776 shares the Company's common stock, at a price of $10.00 per share, and a pre-funded warrant entitling the holder thereof to purchase 715,224 shares of the Company's common stock (the "Pre-Funded Warrant") at an initial purchase price of $9.99 per share underlying the Pre-Funded Warrant, for aggregate gross proceeds of approximately $30.0 million (the "PIPE Investment"). The Pre-Funded Warrant is immediately exercisable at an exercise price of $0.01 and is exercisable indefinitely, provided that the holder of the Pre-Funded Warrant is prohibited from exercising such Pre-Funded Warrant in an amount that would cause such holder’s beneficial ownership of our Common Stock to exceed 9.99%, which limitation may be increased up to 19.99% at the option of the holder from time to time.

 

 

12


 

The following table summarizes the elements of the net proceeds from the SPAC Merger as of September 30, 2022:

 

(In thousands)

 

Amount

 

Cash – CHAQ trust and cash, net of redemptions

 

$

65,127

 

Cash – PIPE financing

 

 

29,993

 

Less: CHAQ and Old Renovacor transaction costs paid

 

 

(5,828

)

Less: Settlement of convertible note at closing

 

 

(2,500

)

   Effect of SPAC Merger, net of redemptions and transaction costs

 

$

86,792

 

 

The following table details the number of shares of common stock issued immediately following the consummation of the SPAC Merger:

 

 

 

Number of Shares

 

Common stock, outstanding prior to SPAC Merger

 

 

8,622,644

 

Less: redemption of CHAQ shares

 

 

(2,112,100

)

Common stock of CHAQ

 

 

6,510,544

 

CHAQ Founder shares

 

 

2,155,661

 

Shares issued in PIPE Financing

 

 

2,284,776

 

Merger and PIPE financing shares - common stock

 

 

10,950,981

 

Shares issued to Old Renovacor - common stock (1)

 

 

6,305,061

 

Total shares of common stock immediately after SPAC Merger (2)

 

 

17,256,042

 

____________________

(1)
The number of shares of common stock issued to Old Renovacor equityholders was determined based on (i) 1,987,636 shares of Old Renovacor Common Stock outstanding immediately prior to the closing of the SPAC Merger converted based on the Common Per Share Merger Consideration (as defined in the SPAC Merger Agreement) and (ii) 2,578,518 shares of Old Renovacor Preferred Stock outstanding immediately prior to the closing of the SPAC Merger converted based on the Preferred Per Share Merger Consideration (as defined in the SPAC Merger Agreement). All fractional shares were rounded down.
(2)
Includes 500,000 shares of common stock being held in escrow and subject to vesting or forfeiture based on satisfaction of the Earnout Milestones set forth in the Sponsor Support Agreement. Such shares are liability classified and included in the Share earnout liability as of September 30, 2022 and December 31, 2021.

 

See Note 10 – Stockholders’ Equity for additional details of the Company’s capital stock.

 

13


 

Note 4. Fair Value Measurements

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

The Company applies the guidance in ASC 820, Fair Value Measurement, to account for financial assets and liabilities measured on a recurring basis. Fair value is measured at 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. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

 

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2 and 3 during the nine months ended September 30, 2022.

 

The table below presents the liabilities measured and recorded in the financial statements at fair value on a recurring basis at September 30, 2022 and December 31, 2021 categorized by the level of inputs used in the valuation of each asset and liability.

 

 

 

September 30, 2022

 

(In thousands)

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents – money market funds

 

$

52,724

 

 

$

52,724

 

 

$

 

 

$

 

Total assets

 

$

52,724

 

 

$

52,724

 

 

$

 

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability