RENOVACOR, INC. Discussion and Analysis of the Administration’s Financial Situation and Results of Operations. (Form 10-Q)

RENOVACOR, INC.  Discussion and Analysis of the Administration’s Financial Situation and Results of Operations.  (Form 10-Q)

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with:

Our unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q; Y

Our financial statements and the accompanying notes thereto included in our 2021
Form 10-K, as well as the information contained under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
2021 Form 10-K.

In addition to historical information, this discussion and analysis includes
forward-looking statements that are subject to risks and uncertainties,
including those discussed in the section titled "Risk Factors," set forth in
Item 1A of our 2021 Form 10-K, that could cause actual results to differ
materially from historical results or anticipated results. Additionally, we have
prepared this Quarterly Report on Form 10-Q and the forward-looking statements
contained herein assuming the Rocket mergers (as defined below) are not
consummated, and we remain an independent company.

Prior to September 2, 2021, we were known as Chardan Healthcare Acquisition 2
Corp. On September 2, 2021, we completed the Business Combination with Renovacor
Holdings, Inc., a private company. For accounting purposes, Chardan Healthcare
Acquisition 2 Corp. was deemed to be the acquired entity. Unless the context
indicates otherwise, references in this section to the "Company," "Renovacor,"
"we," "us," "our" and similar terms refer to Renovacor, Inc. (f/k/a Chardan
Healthcare Acquisition 2 Corp.) and our consolidated subsidiaries. References to
"Chardan" refer to our predecessor company prior to the consummation of the
Business Combination. References to "Old Renovacor" refer to Renovacor, Inc.
prior to the consummation of the Business Combination and to Renovacor Holdings,
Inc. (f/k/a Renovacor, Inc.), now the wholly owned subsidiary of Renovacor, upon
the consummation of the Business Combination.

Overview


We are 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. Our
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. Our 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. We have entered into
and may explore future collaborative alliances to support research, development,
and commercialization of any of our product candidates.

We believe that development of a BAG3 gene replacement therapy for DCM patients
who carry BAG3 gene mutations has the potential to prevent progression of DCM
and heart failure. Diseases caused by monogenic defects are especially tractable
targets for gene therapies. Recently approved therapies have successfully
utilized AAV as a vehicle to deliver genes to patients suffering from these
diseases and there are many additional ongoing clinical development programs
utilizing AAV-based gene therapies to address monogenic diseases.

We believe we are the first company to apply AAV technology to patients with DCM
specifically due to mutations in the BAG3 gene. REN-001 utilizes an AAV9 vector
intended to deliver a healthy version of the BAG3 gene to produce functional
BAG3 protein in patients with genetic mutations that cause insufficient levels
of functional BAG3 protein. This approach has shown promise in multiple
preclinical models, demonstrating production of functional BAG3 protein and
improvement in cardiac function.

We plan to submit an Investigational New Drug ("IND") application in connection
with our lead product candidate, REN-001. If our IND submission is accepted by
the U.S. Food and Drug Administration ("FDA"), we plan to subsequently initiate
a phase I/II clinical trial of REN-001 in patients with BAG3 DCM. We completed a
Type B Pre-Investigational New Drug (the "Pre-IND") meeting with the FDA on June
16, 2020 to obtain FDA feedback on REN-001. Due to the Agreement and Plan of
Merger with Rocket Pharmaceuticals, Inc. as more fully described below, we have
suspended guidance for when we expect to submit the IND application for REN-001.


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Agreement and Merger Project


As further described in Note 1 to the financial statements appearing elsewhere
in this Quarterly Report on Form 10-Q, on September 19, 2022, we 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 wholly owned subsidiary of Rocket ("Merger
Sub I"), and Zebrafish Merger Sub II, LLC, a Delaware limited liability company
and a wholly owned subsidiary of Rocket ("Merger Sub II," and together with
Merger Sub I, the "Merger Subs"), that provides for the acquisition of Renovacor
by Rocket. Upon the terms and subject to the conditions set forth in the Rocket
Merger Agreement, including approval of the Rocket Merger Agreement by our
stockholders, first, Merger Sub I will merge with and into Renovacor (the "first
merger"), with Renovacor continuing as the surviving entity (the "Initial
Surviving Corporation") in the first merger, and second, the Initial Surviving
Corporation will merge with and into Merger Sub II (the "second merger" and
together with the first merger, "the Rocket mergers"), with Merger Sub II
continuing as the surviving entity in the second merger and as a wholly owned
subsidiary of Rocket.

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.

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 has been filed herewith.

The Rocket mergers are currently expected to be completed by the fourth quarter
of 2022. However, we have prepared this Quarterly Report on Form 10-Q and the
forward-looking statements contained in this Quarterly Report on Form 10-Q as if
we were going to remain an independent company.




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Investigation and development

our channel


In addition to our lead product candidate, REN-001, we are currently developing
a pipeline of innovative and proprietary BAG3-associated gene therapies for
diseases with high unmet medical need associated with mutations in the BAG3 gene
and mechanistically linked to BAG3's expression and function. Additionally, we
recently announced that we have expanded our pipeline to advance an AAV gene
therapy program as a potential precision therapy for three genetic segments of
arrhythmogenic cardiomyopathy ("ACM").

Our current pipeline is represented in the diagram below.

[[Image Removed: img88125949_1.jpg]]


RCSI: retrograde coronary sinus infusion; IV: intravenous; CV: Cardiovascular;
CNS: Central nervous system; DCM: Dilated Cardiomyopathy; ACM: Arrhythmogenic
Cardiomyopathy

* The diagram above is representative of the current stage of our development
and does not reflect our expectations of the clinical trials needed or an agreed
upon pathway with the FDA for commercialization of our product candidates. We
acknowledge that the required clinical studies and pathway to commercialization
must be agreed upon with the FDA.



REN-001 (AAV9-BAG3) – Our Leading Product Candidate

Overview


Our lead product candidate, REN-001, is an AAV9 vector-based gene therapy
designed to treat BAG-3 associated DCM through delivery of a human BAG3 gene to
express a fully functional human BAG3 protein in transduced cells. After
transducing the cardiomyocyte, the vector translocates into the nucleus, where
the capsid proteins dissociate, allowing the cell's native expression machinery
to initiate transcription of the BAG3 gene. Unlike wild-type AAVs, REN-001 lacks
an S1 domain, which significantly limits the potential for the vector genome to
integrate into the host chromosome. Instead, the gene has the potential to
remain in the nucleus as episomal DNA.

Third-party studies have demonstrated that recombinant AAV-delivered episomal
DNA persists in the nucleus of transfected non-proliferating cells for up to
several years. This suggests that a single dose of REN-001 could provide
prolonged BAG3 gene replacement in haploinsufficient cells transduced by the
vector. Following transcription and translation of the BAG3 gene, the function
of the BAG3 protein is expected to be restored, and disease progression has the
potential to be halted or significantly slowed.

We are currently exploring the delivery of REN-001 through RCSI. We plan to file an IND application for our lead product candidate, REN-001. Due to pending Rocket merges, we have suspended guidance on when we expect to submit an IND for REN-001.

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Preclinical research and development for REN-001


We are currently conducting preclinical studies exploring the ability of a BAG3
gene therapy to treat patients suffering from DCM caused by BAG3
haploinsufficiency. In conducting preclinical research in this field to generate
data validating this novel therapeutic approach, animal studies have been
completed in several heart failure disease models, including studies involving
mice subjected to trans-aortic constriction, mice suffering from left
ventricular dysfunction following a myocardial infarction ("MI"), mice with left
ventricular dysfunction post-ischemia and reperfusion, and large animal studies
in pigs suffering from left ventricular dysfunction following an MI.

We have several preclinical studies of REN-001 currently in progress or recently
completed to further evaluate AAV9 transduction efficiency, safety, and efficacy
in mouse and pig models. These studies include a recently completed natural
history study (including survival analysis), and ongoing dose-ranging efficacy
and durability of effect studies, all in BAG3 haploinsufficient mice, which
continue to progress at the Feldman laboratory at Temple pursuant to the Temple
SRA, as defined below. Preliminary data from our recently completed natural
history study has demonstrated an impaired survival phenotype, alongside left
ventricular dilation and cardiac function decline, findings that are consistent
with several hallmark characteristics of DCM seen clinically in patients. These
new data have been leveraged to optimize the design of our ongoing dose-ranging
study.

In addition, our Good Laboratory Practice (“GLP”) toxicology and biodistribution study under normal conditions Yucatan pigs using the RCSI route of administration is ongoing and has completed dosing.

We plan to file an IND application for our lead product candidate, REN-001. Due to pending Rocket merges, we have suspended guidance on when we expect to submit an IND for REN-001.

Clinical Development Plan for REN-001


We completed a Type B Pre-IND meeting with the FDA on June 16, 2020 to obtain
FDA feedback on REN-001. We plan to submit an IND for REN-001 and if our IND
submission is accepted by the FDA, we plan to subsequently initiate a phase I/II
clinical trial of REN-001 in patients with BAG3-associated DCM. We expect the
phase I/II clinical trial will be conducted in two sequential parts consisting
of dose escalation and dose expansion components. The dose escalation part will
enroll cohorts of three to six subjects to identify a preferred dose and be
followed by a dose expansion cohort to further explore the safety, tolerability
and preliminary evidence of efficacy at the preferred dose. This will be an open
label study with the goal of evaluating the safety and efficacy of REN-001.
Safety and tolerability will be evaluated based on assessment of frequency and
severity measures of adverse events and serious adverse events. Efficacy will be
evaluated based on measures of cardiac structure and function, circulating
biomarkers, and patient functional capacity and quality of life.

We will consult with the FDA following the completion of our planned Phase I/II clinical trial to determine the need for and optimal design of future clinical trials.


Other Target Indications

Our preclinical strategy includes plans to advance earlier stage research
programs where we believe our BAG3 gene therapy technology has the potential to
provide meaningful clinical benefit for diseases in areas of high unmet medical
need. These research and discovery programs include BAG3-mediated diseases
associated with the cardiovascular system and the central nervous system.
Additionally, we are exploring an AAV gene therapy program as a potential
precision therapy for multiple genetic segments of ACM. To accelerate this new
program, we have entered into a sponsored research agreement with the Nora
Eccles Harrison Cardiovascular Research and Training Institute of the University
of Utah ("Utah"). See further information under the heading "License and
Sponsored Research Agreements."


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License Agreements and Sponsored Research


Our current license and sponsored research agreements include the Temple License
Agreement and Temple SRA, each described under the caption "Item 1. Business -
License and Sponsored Research Agreements" in our 2021 Form 10-K and within Note
9 of the accompanying notes to the condensed consolidated financial statements
contained elsewhere in this Quarterly Report on Form 10-Q, and the Utah SRA, as
defined and more fully described below. In addition to our current arrangements,
we may seek to enter into additional sponsored research agreements or
collaborative alliances to support development and commercialization of REN-001
and/or research additional drug candidates. During the three months ended
September 30, 2022 and 2021, we recorded research and development expenses of
approximately $0.4 million and $0.5 million, respectively, related to the Temple
SRA. During the nine months ended September 30, 2022 and 2021, we recorded
research and development expenses of approximately $0.8 million and $0.7
million, respectively, related to the Temple SRA.

University of Utah SRA


In June 2022, we entered into a research agreement (the "Utah SRA") with Utah,
pursuant to which (i) Utah and Renovacor will conduct a research collaboration
focused on a protein discovered by Utah's scientists that has the potential to
address multiple genetic segments of ACM, and (ii) we were granted an option for
an exclusive license to inventions generated from the collaboration, the terms
of which shall be negotiated following notice in writing of exercise of the
option. The term of the Utah SRA commenced on July 1, 2022 and shall continue
until June 30, 2027 unless earlier terminated in accordance with the provisions
of the Utah SRA (the "Initial Term"); provided, however, the Utah SRA may be
extended for additional periods of performance beyond the Initial Term, upon
written approval by us and Utah. Pursuant to the terms of the Utah SRA, we are
obligated to fund Utah a total of approximately $3.5 million during the
five-year Initial Term. During the three and nine months ended September 30,
2022, we recorded research and development expenses of approximately $0.2
million related to the Utah SRA.

SPAC’s business combination


On September 2, 2021, we consummated the previously announced business
combination contemplated by that certain Agreement and Plan of Merger, dated
March 22, 2021, by and among the Company, CHAQ2 Merger Sub, Inc., a wholly owned
subsidiary of the Company, and Renovacor Holdings, Inc. (f/k/a Renovacor, Inc.
("Old Renovacor")), pursuant to which CHAQ2 Merger Sub, Inc. 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 Business Combination"). On September 2, 2021, the
Company changed its name from Chardan Healthcare Acquisition 2 Corp. to
Renovacor, Inc.

The SPAC business combination was accounted for as a reverse recapitalization in accordance with U.S GAAP.

In September 2, 2021our common shares, par value $0.0001 per share and our warrants originally issued in our initial public offering, began trading on the
NYSE American LLC under the ticker symbols “RCOR” and “RCOR.WS”, respectively.

See Note 1, “Company and Organizationand Note 3, “Merger and Recapitalization” of the notes to the condensed consolidated financial statements included in this Quarterly Report for greater detail.

COVID-19


We continue to monitor the potential impact of the novel coronavirus disease
("COVID-19") pandemic, including variants thereof such as the delta and omicron
variants, on our business and financial statements. To date, we have not
experienced material business disruptions. We are following, and will continue
to follow, recommendations from the U.S. Centers for Disease Control and
Prevention as well as federal, state, and local governments regarding
working-from-home practices for non-essential employees. For example, the
COVID-19 outbreak in Pennsylvania resulted in a temporary reduction in workforce
presence at the Temple research facility, including the Feldman laboratory,
located in Philadelphia, at which we operate. While the Feldman laboratory is
currently operating at normal capacity, we cannot be certain that the Temple
facility or the Feldman laboratory will not be closed in the future, or
experience labor shortages, as a result of the COVID-19 outbreak. Accordingly,
the full extent to which the COVID-19 pandemic will directly or indirectly
impact our business, results of operations and financial condition, including
expenses and manufacturing, supply chain, labor, preclinical and clinical trials
and research and development costs, will depend on future developments that are
highly uncertain at this time.


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Results of Operations

three and nine months ended September 30, 2022 and 2021

Overview


During the three months ended September 30, 2022, our loss from operations
totaled $12.1 million, a 131% increase compared to a loss from operations of
$5.2 million for the three months ended September 30, 2021. During the nine
months ended September 30, 2022, our loss from operations totaled $30.1 million,
a 183% increase compared to a loss from operations of $10.6 million for the nine
months ended September 30, 2021. Research and development expenses comprised the
majority of our total operating expenses, as shown in the table below.

                                         Three Months Ended                        Nine Months Ended
                                           September 30,                             September 30,
($ in thousands)                  2022          2021       $ Change        2022          2021        $ Change
Operating expenses:
Research and development        $   7,423     $  2,925     $   4,498     $  19,642     $   7,413     $  12,229
General and administrative          4,682        2,315         2,367        10,445         3,227         7,218
Total operating expenses        $  12,105     $  5,240     $   6,865     $  30,087        10,640     $  19,447
Loss from operations            $ (12,105 )   $ (5,240 )   $  (6,865 )   $ (30,087 )   $ (10,640 )   $ (19,447 )



Research and development expenses

Research and development expenses consist of the costs incurred by our research activities, including our discovery efforts and the development of our programs. These expenses include:

employee-related expenses, including salaries, payroll taxes, related benefits, and stock-based compensation expenses for employees engaged in research and development roles;

expenses incurred in connection with the preclinical development of our product
candidates and the development of research programs, including under agreements
with third parties, such as consultants, contractors, preclinical laboratories,
licensors, CMOs, and CROs; and

laboratory supplies and research materials.


We expense research and development costs as incurred. Non-refundable advance
payments that we make for goods or services to be received in the future for use
in research and development activities are recorded as prepaid expenses. The
prepaid amounts are expensed as the related goods are delivered or the services
are performed, or when it is no longer expected that the goods will be delivered
or the services rendered.

Our direct external research and development expenses consist of costs that
include fees, reimbursed materials, and other costs paid to consultants,
contractors, CMOs and other research organizations in connection with our
preclinical activities. We do not allocate employee costs, costs associated with
our discovery efforts, laboratory supplies, facilities expenses, including
depreciation or other indirect costs, to specific product development programs
because these costs are deployed across multiple programs and, as such, are not
separately classified.


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In the table below, research and development expenses are set out in the following categories: (i) compensation and related benefits and (ii) other external research and development costs.


                                         Three Months Ended                     Nine Months Ended
                                           September 30,                          September 30,
($ in thousands)                  2022        2021        $ Change        2022        2021       $ Change
Compensation and related
benefits                         $ 2,470     $   928     $    1,542     $  6,824     $ 1,424     $   5,400
Other external research and
development costs                  4,953       1,997          2,956       12,818       5,989         6,829
Total research and development
expenses                         $ 7,423     $ 2,925     $    4,498     $ 19,642     $ 7,413     $  12,229



Total research and development expenses were $7.4 million for the three months
ended September 30, 2022, a 154% increase compared to total research and
development expenses of $2.9 million for the three months ended September 30,
2021. Total research and development expenses for the nine months ended
September 30, 2022 were $19.6 million, a 165% increase compared to total
research and development expenses of $7.4 million for the nine months ended
September 30, 2021. The increase during the each of the three and nine months
ended September 30, 2022, as compared to the corresponding prior period, were
primarily due to increases in (i) compensation-related costs associated with the
hiring of key personnel and overall increase in number of employees, (ii) drug
supply costs associated with our preclinical activities, including IND-enabling
studies and preparation for potential clinical trials, and (iii) external costs
associated with the execution of ongoing preclinical studies as we prepare for
an IND submission for REN-001 and related clinical activities.

Virtually all of the research and development expenses we have incurred to date are related to the discovery and preclinical development of REN-001.

General and adminsitrative expenses


General and administrative expenses consist primarily of salaries and
personnel-related costs, including stock-based compensation, for personnel in
executive, finance and accounting, and other administrative functions. General
and administrative expenses also include legal fees relating to patent and
corporate matters; professional fees paid for accounting, auditing, consulting,
and tax services; insurance costs and travel expenses.

                                         Three Months Ended                      Nine Months Ended
                                           September 30,                           September 30,
($ in thousands)                  2022        2021        $ Change        2022        2021        $ Change
Compensation and related
benefits                         $   997     $   861     $      136     $  3,143     $ 1,080     $    2,063
Professional and consulting
fees                                 831         626            205        3,028       1,252          1,776
Merger-related transaction
costs                              2,173         616          1,557        2,173         616          1,557
Other administrative costs           681         212            469        2,101         279          1,822
Total general and
administrative expenses          $ 4,682     $ 2,315     $    2,367     $ 10,445     $ 3,227     $    7,218



Total general and administrative expenses were $4.7 million for the three months
ended September 30, 2022, a 102% increase compared to total general and
administrative expenses of $2.3 million for the three months ended September 30,
2021. Total general and administrative expenses were $10.4 million for the nine
months ended September 30, 2022, a 224% increase compared to total general and
administrative expenses of $3.2 million for the nine months ended September 30,
2021. The increase during each of the three and nine months ended September 30,
2022, as compared to the corresponding prior period, were primarily due to
increases in (i) compensation-related costs associated with the hiring of key
personnel and overall increase in number of employees, (ii) professional and
consulting fees due to increases in legal costs, fees incurred with
investor/public relations firms, and contract labor, (iv) merger-related costs
due to increases in legal and professional fees related to the proposed Rocket
mergers as more fully described under the heading "Agreement and Plan of Merger"
in this Item 2 of our Quarterly Report on Form 10-Q, and (iii) other
administrative costs related to additional spending as a result of our growth
and operating as a publicly-traded company, including board fees and director
and officer insurance.


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Interest income


Interest income for the three and nine months ended September 30, 2022 totaled
approximately $0.3 million and primarily related to investments in money market
funds classified as cash equivalents. No such interest income was recognized
during the three and nine months ended September 30, 2021. Amounts may fluctuate
from period to period due to changes in average investment balances, including
money market funds classified as cash equivalents, composition of investments,
and prevailing interest rates.

Interest expenses


Interest expense for the three and nine months ended September 30, 2022 was
nominal and related to interest incurred in connection with our insurance
premium financing arrangement. During the three and nine months ended September
30, 2021, we recorded interest expense of approximately $0.1 million
representing interest paid and amortization of debt discounts (e.g., issuance
costs and embedded derivative) related to our convertible note issued in July
2021, which was converted into shares of our common stock in September 2021 upon
closing of the SPAC Business Combination.

Change in fair value of collateral obligation


During the three months ended September 30, 2022 and 2021, we recorded a change
in the fair value of warrant liability, each representing a non-cash warrant
revaluation loss, of approximately $0.4 million and $1.4 million, respectively,
related to our liability-classified Private Placement Warrants, as more fully
described in Note 10 of the notes to the condensed consolidated financial
statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the
nine months ended September 30, 2022, we recorded a change in the fair value of
warrant liability representing a non-cash warrant revaluation gain of
approximately $9.8 million, compared to a $1.4 million non-cash warrant
revaluation loss during the nine months ended September 30, 2021. Due to the
nature of and inputs in the model used to assess the fair value of our
outstanding Private Placement Warrants, it is not abnormal to experience
significant fluctuations during each remeasurement period. These fluctuations
may be due to a variety of factors, including changes in our stock price and
changes in estimated stock price volatility over the remaining life of the
warrants. Changes in the fair value of the warrant liability and resulting
warrant revaluation loss for the three months ended September 30, 2022 was
driven primarily by an increase in our stock price during each period. Changes
in the fair value of the warrant liability and resulting warrant revaluation
gain for the nine months ended September 30, 2022 was driven primarily by a
decrease in our stock price during the period.

Change in the fair value of the liability for gain of shares


During the three months ended September 30, 2022 and 2021, we recorded a change
in fair value of share earnout liability, each representing a non-cash share
earnout revaluation loss, of approximately $3.0 million and $1.4 million,
respectively, related to our liability-classified Earnout Shares, as more fully
described in Note 4 of the notes to the condensed consolidated financial
statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the
nine months ended September 30, 2022, we recorded a change in the fair value of
warrant liability representing a non-cash share earnout revaluation gain of
approximately $7.3 million, compared to a $1.4 million non-cash warrant
revaluation loss during the nine months ended September 30, 2021. Due to the
nature of and inputs in the model used to assess the fair value of the
outstanding Earnout Shares, it is not abnormal to experience significant
fluctuations during each remeasurement period. These fluctuations may be due to
a variety of factors, including changes in our stock price and changes in
estimated stock price volatility over the remaining life of the warrants.
Changes in the fair value of the share earnout liability and resulting share
earnout revaluation loss for the three months ended September 30, 2022 was
driven primarily an increase in our stock price and an increase in the
probability that the Earnout Shares would vest under certain change in control
provisions due to the Rocket mergers. Changes in the fair value of the share
earnout liability and resulting share earnout revaluation gain for the nine
months ended September 30, 2022 was driven primarily by a decrease in our stock
price during the period, partially offset by an increase in the probability that
the Earnout Shares would vest under certain change in control provisions due to
the Rocket mergers.

Net Loss

As a result of the factors discussed above, net loss for the three months ended
September 30, 2022 was $15.2 million, compared to net loss of $8.2 million for
the three months ended September 30, 2021. Net income for the nine months ended
September 30, 2022 was $12.7 million, compared to a net loss of $13.6 million
for the nine months ended September 30, 2021.


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Financial Condition, Liquidity and Capital Resources

financial condition

From September 30, 2022we had a cumulative deficit of $31.7 million. To date, we have not generated any revenue.


Since our inception, we have focused substantially all of our resources on
organizing and staffing the company, in-licensing key intellectual property,
business planning, raising capital, conducting research and development
activities, filing and prosecuting patent applications, and engaging in other
preclinical activities. We do not have any products approved for sale and have
not generated any revenue from product sales or from any other sources. To date,
we have funded our operations with proceeds from the Business Combination and
the PIPE Investment, sales of convertible preferred stock, and a convertible
note. Since our inception, we have incurred significant operating losses. Our
ability to generate any product revenue, and in particular to generate product
revenue sufficient to achieve profitability, will depend on the successful
development and eventual commercialization of one or more of our product
candidates.

Liquidity and Capital Resources

Overview


We require cash to fund our operating expenses and to make capital expenditures.
Historically, we have funded our cash requirements primarily through the sale of
preferred stock, common stock, pre-funded warrants, common stock warrants and a
convertible note. As of September 30, 2022 we had $53.7 million of cash and cash
equivalents.

Funding Requirements

We believe that, based on our current operating plan (assuming the Rocket
mergers are not completed), our existing cash and cash equivalents on hand as of
September 30, 2022 will enable us to fund our operations through the one-year
period subsequent to the filing date of this Quarterly Report on Form 10-Q.
Specifically, we believe our available funds will be sufficient to enable us to
perform the following:

complete IND enablement studies for our REN-001 AAV-based gene therapy program and potentially submit an IND for REN-001;

finance our obligations under the Temple License Agreement, Temple SRA and Utah SRA;

start our phase I/II trial in patients with DCM with mutation BAG3 (REN-001); Y

maintain the necessary level of general and administrative expenses to support the business.


However, we have based this estimate on assumptions that may prove to be wrong,
and our operating plan may change as a result of many factors currently unknown
to us, such as the completion of the Rocket mergers. In addition, we could
utilize our available capital resources sooner than expected. Substantially all
of our losses have resulted from expenses incurred in connection with our
research and development programs and from general and administrative costs
associated with our operations. We expect our expenses and capital expenditures
to increase substantially in connection with our ongoing activities (assuming
the Rocket mergers are not completed), particularly if and as we:

initiate IND enablement studies for our REN-001 AAV-based gene therapy program;

continuing our current research programs and preclinical development of product candidates from our current research programs;

advancing additional product candidates in preclinical and clinical development;

advance our clinical-stage product candidate, if any, to later-stage clinical trials;

seek to discover, validate, and develop additional product candidates, including conducting activities related to our discovery stage programs;

seek regulatory approvals for any candidate product that successfully completes clinical trials;

scale up our manufacturing processes and capabilities, or arrange for a third
party to do so on our behalf, to support our clinical trials of our product
candidates and potential commercialization of any of our product candidates for
which we may obtain marketing approval;

establish a sales, marketing and distribution infrastructure or channel to commercialize any candidate products for which we may obtain regulatory approval;

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acquire or license products, product candidates or technologies;

maintain, expand, enforce, defend and protect our portfolio of intellectual property;

hire additional clinical, quality control, and scientific staff; Y

aggregate operational, financial, and management information systems and personnel, including personnel to support our product development, planned future marketing efforts, and our operations as a public company.


We will not generate revenue from product sales unless and until we successfully
complete clinical development and obtain regulatory approval for one or more of
our product candidates. If we obtain regulatory approval for any of our product
candidates, we expect to incur significant expenses related to developing our
commercialization capability to support product sales, marketing, and
distribution. As a result, we will need substantial additional funding to
support our continuing operations and pursue our growth strategy.

Until such time as we can generate significant revenue from product sales, if
ever, we expect to finance our operations through a combination of equity
offerings, debt financings, collaborations, strategic alliances and licensing
arrangements. Additionally, we may receive up to an aggregate of approximately
$89.8 million from the exercise of our warrants outstanding as of September 30,
2022, assuming the exercise in full of such warrants for cash. See Note 10 of
the notes to the condensed consolidated financial statements appearing elsewhere
in this Quarterly Report on Form 10-Q for additional details on our outstanding
warrants. However, certain warrants may be exercised on a cashless basis and our
warrants may never be exercised. If we fail to raise capital or enter into such
agreements or arrangements as, and when, needed, we may have to significantly
delay, scale back or discontinue the development and commercialization of one or
more of our product candidates. The timing and amount of our funding
requirements will depend on many factors, including:

the completion of the Rocket mergers;

the scope, progress, costs and results of preclinical and clinical development for our other product candidates and development programs;

the quantity and development requirements for other product candidates we are seeking;

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

the cost and completion time of commercial-scale manufacturing activities;

our ability to establish and maintain strategic collaborations, licenses or other arrangements and the financial terms of such arrangements;

the payment or receipt of milestones and receipt of other collaboration-based income, if any;

our efforts to improve operating systems and hire additional staff to meet our obligations as a public company, including improved internal controls over financial reporting;

the costs and timing of future marketing activities, including manufacturing, selling, marketing and distributing products, for any of our candidate products for which we have received marketing approval;

the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we received marketing approval;

the costs and timing of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property and proprietary rights and
defending any intellectual property-related claims;

the extent to which we acquire or license other products, product candidates or technologies;

the receptivity of the capital markets to financings by biotechnology companies
generally and companies with product candidates and technologies similar to ours
specifically;

the volatility of capital markets, inflation and other macroeconomic factors,
including due to geopolitical tensions or the outbreak of hostilities or war;
and

the impact of the ongoing coronavirus disease, COVID-19, on the global economy and capital markets, and on our supply chain, business and financial results.

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In addition, increases in expenses or delays in clinical development may have an adverse impact on our cash position and require additional funds or cost reductions.


Because of the numerous risks and uncertainties associated with pharmaceutical
product development, we are unable to accurately predict the timing or amount of
increased expenses or when, or if, it will be able to achieve or maintain
profitability. Even if we are able to generate product sales, we may not become
profitable. If we fail to become profitable or are unable to sustain
profitability on a continuing basis, then we may be unable to continue our
operations at planned levels and may be forced to reduce or terminate our
operations, or relinquish rights to portions of our technology and/or product
candidates.


Cash Flows

The following table provides a summary of the main sources and uses of cash for the periods presented:


                                                         Nine months ended
                                                           September 30,
(In thousands)                                           2022          2021
Net cash (used in) provided by:
Net cash used in operating activities                  $ (23,719 )   $ (9,300 )
Net cash used in investing activities                     (1,311 )          -
Net cash used in financing activities                        (47 )     

89,237

Net increase (decrease) in cash and cash equivalents $(25,077) $79,937




Operating Activities. Net cash used in operating activities for each period
presented consists primarily of net loss adjusted for non-cash gains or charges
and changes in components of working capital. The increase in cash used in
operating activities for the nine months ended September 30, 2022, as compared
to the same period in 2021, was primarily due to significant increases in
expenditures and corresponding cash outflows related to our REN-001 development
program, including payments to consultants and contract research and
manufacturing organizations, as we prepare for our potential clinical activities
for REN-001.

Investing Activities. Net cash used in investing activities for the nine months
ended September 30, 2022 consisted of $1.3 million for the purchase of property
and equipment. There was no cash used in or provided by investing activities
during the nine months ended September 30, 2021.

Financing activities. Net cash provided by (used in) financing activities consisted primarily of the following:

for the nine months ended September 30, 2022, $0.1 million of payments made in
connection with our insurance premium financing arrangement and less than $0.1
million of merger-related expenditures associated with the SPAC Business
Combination.

for the nine months ended September 30, 2021, $2.4 million in net proceeds from
the issuance of the Convertible Promissory Note and $86.8 million in net
proceeds related to the SPAC Business Combination, which was accounted for as a
reverse recapitalization. See Note 3 of the notes to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q for additional information.


Contractual Obligations and Commitments


During the nine months ended September 30, 2022, there were no material changes
outside the ordinary course of our business to our contractual obligations as
disclosed in our 2021 Form 10-K, however, during the nine months ended September
30, 2022, we entered into two lease agreements and the Utah SRA, each as more
fully described in Note 9 of the notes to the condensed consolidated financial
statements appearing elsewhere in this Quarterly Report on Form 10-Q.



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Critical accounting policies and significant judgments and estimates


This management's discussion and analysis of financial condition and results of
operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the 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. On an ongoing
basis, management evaluates its estimates and judgments which are affected by
the application of our accounting policies

Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be appropriate under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions.

We consider an accounting estimate or assumption underlying our financial statements to be a “critical accounting estimate” when:

(Yo)

the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; Y

(iii)

the impact of the estimates and assumptions on the financial condition or operating performance is material.


Our significant accounting policies are described in Note 2 of the accompanying
notes to the unaudited condensed consolidated financial statements contained in
this Quarterly Report on Form 10-Q. Not all of these significant policies,
however, fit the definition of critical accounting policies and estimates. We
believe that our accounting policies relating to (i) research and development
prepayments, accruals and related expenses, (ii) warrant liabilities and related
change in fair values (gains / losses), and (iii) share earnout liabilities and
related change in fair values (gains / losses), fit the description of critical
accounting estimates and judgments.


New Accounting Pronouncements

The new accounting pronouncements are discussed in Note 2 of the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Off-Balance Arrangements

From September 30, 2022we had no off-balance sheet arrangements, as defined in the rules and regulations of the SECOND.

Emerging Growth Company Status


We are an emerging growth company, as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards issued subsequent to the enactment of the JOBS Act until such time as
those standards apply to private companies. We elected to use this extended
transition period for complying with new or revised accounting standards that
have different effective dates for public and private companies until the
earlier of the date that we (1) are no longer an emerging growth company, or (2)
affirmatively and irrevocably opt out of the extended transition period provided
in the JOBS Act. As a result, our financial statements may not be comparable to
companies that comply with the new or revised accounting pronouncements as of
public company effective dates.

We will remain an emerging growth company until the earliest of (1) the last day
of the fiscal year following the fifth anniversary of the closing of the initial
public offering of Chardan, (2) the last day of the fiscal year in which we have
total annual gross revenue of at least $1.07 billion, (3) the last day of the
fiscal year in which we are deemed to be a "large accelerated filer" as defined
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, which would occur if the market value of our common stock held by
non-affiliates exceeded $700.0 million as of the last business day of the second
fiscal quarter of such year, or (4) the date on which we have issued more than
$1.0 billion in non-convertible debt securities during the prior three-year
period.


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