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



?
Our unaudited condensed consolidated financial statements and accompanying notes
included in Part I, Item 1 of this Quarterly Report on Form 10-Q; and
?
Our financial statements and the related notes thereto for the year ended
December 31, 2020, included in our registration statement on Form S-1 filed with
the SEC on October 15, 2021.

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
Part II, Item 1A of this Quarterly Report on Form 10-Q, that could cause actual
results to differ materially from historical results or anticipated results.

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



Following consummation of the Business Combination, described below, we are a
biotechnology company focused on delivering innovative precision therapies to
improve the lives of patients and families battling genetically-driven
cardiovascular and related diseases. Our initial focus is on the treatment of
BAG3 mutation-associated dilated cardiomyopathy ("BAG3 DCM"), 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 AAV9-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 are leveraging the expertise of our founder, Dr.
Arthur M. Feldman, M.D., Ph.D., the Laura H. Carnell Professor of Medicine at
the Lewis Katz School of Medicine at Temple University ("Temple"), a
cardiovascular scientist and pre-eminent expert on BAG3 biology, to advance the
development of REN-001 and our other product candidates.



We believe that development of a BAG3 gene replacement therapy for DCM patients
who carry BAG3 mutations has the potential to prevent progression of DCM in this
otherwise healthy patient population. Gene therapy has recently re-emerged as a
potentially novel therapy for patients suffering from monogenic diseases.
Recently approved therapies have utilized adeno-associated virus ("AAV") as a
vehicle to deliver genes to patients suffering from these diseases. For example,
in 2017, the U.S. Food and Drug Administration, or the FDA, approved Luxturna,
an AAV2-based gene therapy developed by Spark Therapeutics, Inc., a subsidiary
of Roche Holdings AG, for the treatment of patients with retinal dystrophy due
to mutation of the RPE65 gene and in 2019, Zolgensma, an AAV9-based gene therapy
developed by AveXis, Inc., a subsidiary of Novartis Pharmaceuticals Corporation,
was approved for the treatment of patients with spinal muscular atrophy ("SMA")
due to mutations in the SMN1 gene. 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
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 anticipate filing an Investigational New Drug ("IND") submission in connection with our lead product candidate, REN-001, in mid-2022, and plan to initiate a phase I/II clinical trial of REN-001 in patients with BAG3 DCM following IND submission.







                                       25


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Research and Development



Our Pipeline



In addition to our lead product candidate, REN-001, we are currently developing
a pipeline of innovative and proprietary BAG3-based gene therapies for diseases
with high unmet medical need associated with mutations in the BAG3 gene. Our
current pipeline is represented in the diagram below.

[[Image Removed: img87202428_1.jpg]]





* 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 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. We are
currently exploring the delivery of REN-001 through retrograde coronary sinus
infusion ("RCSI") and anticipate filing an IND for REN-001 in mid-2022.

Preclinical Research and Development for REN-001

REN-001 has been studied in multiple animal models of heart failure. These studies have demonstrated the ability of REN-001 to induce increased expression of BAG3 protein and to improve cardiac function.






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 IND-enabling preclinical studies of REN-001 currently planned or
in progress to further evaluate AAV9 transduction efficiency, safety, and
efficacy in mouse and pig models. These studies include a dose-ranging efficacy
study in BAG3 haploinsufficient mice, a survival and durability of effect study
in BAG3 haploinsufficient mice and a good laboratory practice ("GLP") toxicology
study in normal Yucatan pigs. Data from these studies are expected to be
available to support a mid-2022 IND filing.



                                       26

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The BAG3 haploinsufficient mouse survival and durability study continues to progress at the Feldman laboratory under our Sponsored Research Agreement, as amended to date, with Temple and results are expected in the first half of 2022.






The study in normal Yucatan pigs to evaluate transduction efficiency and
preliminary safety of multiple doses of REN-001 administered via RCSI has been
completed. Data from this study demonstrated that RCSI drives successful cardiac
transduction above a key vector copy number threshold at doses less than 1e13 vg
per kilogram. Results of this preclinical feasibility study informed the design
of our ongoing GLP toxicology study.

We expect our GLP toxicology study in normal Yucatan pigs to be completed in the first half of 2022.

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 anticipate filing an IND for REN-001 in mid-2022,
and plan to initiate a phase I/II clinical trial of REN-001 in patients with
BAG3-associated DCM following IND submission. We expect the phase I/II clinical
trial will enroll an initial cohort of six patients who will be evaluated by an
independent data and safety monitoring board. We anticipate a second cohort of
four to six patients will subsequently be enrolled, with potential for
adjustments to dosing dependent on the response in the initial cohort. An
additional cohort of similar size to evaluate other REN-001 doses may be
studied. 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 series of
adverse events. Efficacy will be evaluated based on improvement in EF, with
additional secondary endpoints capturing anatomical, biomarker, functional, and
quality of life changes.

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





Other 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.





                                       27


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The 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 (the "Merger Agreement"), by and among the Company, CHAQ2 Merger
Sub, Inc., a wholly owned subsidiary of the Company ("Merger Sub"), and
Renovacor Holdings, Inc. (f/k/a Renovacor, Inc. ("Old Renovacor")). Pursuant to
the Merger Agreement, on September 2, 2021 (the "Closing Date"), 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 "Merger" and, together with the other
transactions contemplated by the Merger Agreement, the "Business Combination").
On the Closing Date, the Company changed its name from Chardan Healthcare
Acquisition 2 Corp. to Renovacor, Inc.



The Business Combination was accounted for as a reverse recapitalization in
accordance with U.S. GAAP. Under this method of accounting, Chardan was treated
as the "acquired" company and Old Renovacor is treated as the acquirer for
financial reporting purposes as more fully explained in Note 3 of the
accompanying notes to the condensed consolidated financial statements contained
elsewhere in this Quarterly Report on Form 10-Q.



Prior to the Business Combination, we were a special purpose acquisition
company, formed for the purpose of acquiring, through a merger, share exchange,
asset acquisition, stock purchase, reorganization, recapitalization, or other
similar business transaction, one or more operating businesses or entities, and
prior to consummation of the Business Combination, our operating activities
consisted of our formation, initial public offering and costs associated with
the Business Combination. The intended strategy of the combined company will
continue to focus on Old Renovacor's core product/service offerings related to
gene therapy-based treatments for cardiovascular disease, as more fully
described below.



On September 2, 2021, our common stock, par value $0.0001 per share ("Common
Stock") and our warrants originally issued in our initial public offering, began
trading on the New York Stock Exchange ("NYSE") under the ticker symbols "RCOR"
and "RCOR.WS," respectively.



COVID-19



We are monitoring the potential impact of the novel coronavirus disease
("COVID-19") pandemic, including variants thereof such as the delta variant, 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 located in Philadelphia, at which we operate. While we increased
workforce presence at the Temple research facility in the second quarter of
2020, not all employees have returned to the facility and we cannot be certain
that the facility will not be closed in the future 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, preclinical and clinical trials
and research and development costs, will depend on future developments that are
highly uncertain at this time.





                                       28


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Results of Operations

Three and Nine Months Ended September 30, 2021 and 2020





Overview



During the three months ended September 30, 2021, our loss from operations
totaled $5.2 million, a 404% increase compared to a loss from operations of $1.0
million for the three months ended September 30, 2020. During the nine months
ended September 30, 2021, our loss from operations totaled $10.6 million, a 341%
increase compared to a loss from operations of $2.4 million for the nine months
ended September 30, 2020. Research and development expenses comprise 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)                   2021          2020       $ Change        2021          2020       $ Change
Operating expenses:
Research and development        $    2,925     $    892     $   2,033     $   7,413     $  1,868     $   5,545
General and administrative           2,315          147         2,168         3,227          547         2,680
Total operating expenses        $    5,240     $  1,039     $   4,201     $  10,640        2,415     $   8,225
Loss from operations            $   (5,240 )   $ (1,039 )   $  (4,201 )   $ (10,640 )   $ (2,415 )   $  (8,225 )




Revenue



To date, we have not generated any revenue from any sources, including product
sales, and do not expect to generate any revenue from the sale of products for
the foreseeable future. If our development efforts for our product candidates
are successful and result in regulatory approval or collaboration or license
agreements with third parties, we may generate revenue in the future from
product sales, payments from collaboration or license agreements that we may
enter into with third parties, or any combination thereof.

Research and Development Expenses

Research and development expenses consist of costs incurred for 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 expense for employees engaged in research and
development functions;
?
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.





                                       29


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In the table below, research and development expenses are set forth 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)                   2021            2020        $ Change         2021         2020        $ Change
Compensation and related
benefits                        $       928       $    31     $      897     $    1,424     $    94     $    1,330
Other external research and
development costs                     1,997           861          1,136          5,989       1,774          4,215
Total research and
development expenses            $     2,925       $   892     $    2,033     $    7,413     $ 1,868     $    5,545




Total research and development expenses were $2.9 million for the three months
ended September 30, 2021, a 228% increase compared to total research and
development expenses of $0.9 million for the three months ended September 30,
2020. Total research and development expenses were $7.4 million for the nine
months ended September 30, 2021, a 297% increase compared to total research and
development expenses of $1.9 million for the nine months ended September 30,
2020. The increases during each of the three and nine months ended September 30,
2021, as compared to the corresponding prior period, were primarily due to
increases in (i) compensation-related costs associated with the hiring of key
personnel, (ii) drug supply costs associated with our preclinical activities,
including IND-enabling studies and preparation of future clinical trials, and
(iii) external costs associated with the execution of ongoing preclinical
studies as we prepare for an IND submission for REN-001, anticipated in
mid-2022, and related clinical activities.

General and Administrative 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)                   2021            2020        $ Change         2021           2020        $ Change
Compensation and related
benefits                        $       861       $    59     $      802     $     1,080      $   178     $      902
Professional and consulting
fees                                    626            84            542           1,252          326            926
Merger-related transaction
costs                                   616             -            616             616            -            616
Other administrative costs              212             4            208             279           43            236
Total general and
administrative expenses         $     2,315       $   147     $    2,168     $     3,227      $   547     $    2,680




Total general and administrative expenses were $2.3 million for the three months
ended September 30, 2021, a 1475% increase compared to total general and
administrative expenses of $0.1 million for the three months ended September 30,
2020. Total general and administrative expenses were $3.2 million for the nine
months ended September 30, 2021, a 490% increase compared to total general
administrative expenses of $0.5 million for the nine months ended September 30,
2020. The increases during each of the three and nine months ended September 30,
2021, as compared to the corresponding prior period, were primarily due to
increases in (i) compensation-related costs associated with the hiring of key
personnel, (ii) professional and consulting fees due to increases in
patent-related legal costs and fees incurred with investor/public relations and
financial advisory firms, (iii) merger-related costs, including legal and
accounting fees, incurred in connection with the Business Combination which were
allocated to warrant and share earnout liabilities, and (iv) other costs related
to additional spending as a result of our growth and operating as a
publicly-traded company.



Interest Expense



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 Business
Combination.





                                       30


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Change in Fair Value of Derivative Liability





During the three and nine months ended September 30, 2021, we recorded a change
in fair value of derivative liability, representing a non-cash derivative
revaluation gain of approximately $0.1 million, related to the derecognition of
the derivative liability associated with certain embedded features in the Note
Purchase Agreement which were required to be bifurcated and accounted for
separately as derivative financial instrument, due to the conversion of the
Convertible Promissory Note upon closing of the Business Combination.

Change in Fair Value of Warrant Liability





During the three and nine months ended September 30, 2021, we recorded a change
in the fair value of warrant liability, representing a non-cash warrant
revaluation loss of approximately $1.4 million, related to our
liability-classified Private Placement Warrants, as more fully described in note
9 of the notes to the unaudited condensed consolidated financial statements
appearing elsewhere in this Quarterly Report on Form 10-Q. 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 and nine months ended September 30, 2021 was driven primarily by the
increase in our stock price as of September 30, 2021, compared to our stock
price as of the September 2, 2021 issuance date.

Change in Fair Value of Share Earnout Liability





During the three and nine months ended September 30, 2021, we recorded a change
in fair value of share earnout liability, representing a non-cash share earnout
revaluation loss of approximately $1.4 million, related to our
liability-classified Earnout Shares, as more fully described in note 3 of the
notes to the unaudited condensed consolidated financial statements appearing
elsewhere in this Quarterly Report on Form 10-Q. 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 and nine
months ended September 30, 2021 was driven primarily by the increase in our
stock price as of September 30, 2021, compared to our stock price as of the
September 2, 2021 issuance date.

Net Loss Applicable to Common Stockholders





As a result of the factors discussed above, our net loss applicable to common
stockholders for the three months ended September 30, 2021 and 2020 was $8.2
million and $1.0 million, respectively, and our net loss for the nine months
ended September 30, 2021 and 2020 was $13.6 million and $2.4 million,
respectively.



The weighted-average number of common shares used in computing net loss per
share applicable to common stockholders for the three and nine months ended
September 30, 2021 and 2020 excludes, for the entirety of the three and nine
month periods ended September 30, 2020, and for the majority of the three and
nine month periods ended September 30, 2021, the shares deemed issued in
connection with the Merger and recapitalization, and shares and pre-funded
warrants issued pursuant to the PIPE financing transaction, each which occurred
in September 2021 and are more fully described in Note 3 of the accompanying
notes to the condensed financial statements contained elsewhere in this
Quarterly Report on Form 10-Q.





                                       31


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Financial Condition, Liquidity and Capital Resources





Financial Condition

As of September 30, 2021, we had an accumulated deficit of $18.5 million. To date, we have not generated any revenues.





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, 2021 we had $85.3 million of cash.



Note Purchase Agreement



On July 20, 2021, in accordance with the Merger Agreement and pursuant to a note
purchase agreement (the "Note Purchase Agreement"), dated July 20, 2021, by and
between Old Renovacor and Chardan Healthcare Investments, LLC ("Chardan
Healthcare"), an affiliate of our sponsor, Chardan Investments 2, LLC (the
"Sponsor"), Old Renovacor issued a $2.5 million convertible promissory note to
Chardan Healthcare (the "Convertible Promissory Note") in exchange for $2.5
million in cash to be used to finance Old Renovacor's operations through the
consummation of the Merger. In connection with the consummation of the Merger,
the total principal of $2.5 million converted automatically into shares of
Common Stock, at a price per share equal to $10.00.

PIPE Investment (Private Placement)





Concurrently with the execution of the Merger Agreement, we 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 Closing Date, and concurrently with the closing of the Business
Combination, the PIPE Investors purchased an aggregate of 2,284,776 shares
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 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").



Funding Requirements



We believe based on our current operating plan, our existing cash on hand as of
September 30, 2021 will enable us to fund our operations into 2023.
Specifically, we believe our available funds will be sufficient to enable us to
perform the following:

?
complete IND-enabling studies for its REN-001 AAV-based gene therapy program and
submit an IND for REN-001;
?
fund our obligations under the Temple License Agreement and Temple SRA;
?
initiate our phase 1/2 trial in DCM patients with BAG3 mutation (REN-001); and
?
maintain the necessary level of general and administrative expense in order 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. In addition, we could utilize our available capital resources sooner than
expected.





                                       32


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Our net losses were $13.6 million for the nine months ended September 30, 2021
and $3.2 million for the year ended December 31, 2020. 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, particularly if and as
we:

?
initiate IND-enabling studies for our REN-001 AAV-based gene therapy program;
?
continue our current research programs and preclinical development of product
candidates from our current research programs;
?
advance additional product candidates into preclinical and clinical development;
?
advance our clinical-stage product candidate into later stage clinical trials;
?
seek to discover, validate, and develop additional product candidates, including
carrying out activities related to our discovery stage programs;
?
seek regulatory approvals for any product candidates that successfully complete
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 product candidate for which we may obtain regulatory approval;
?
acquire or in-license products, product candidates, or technologies;
?
maintain, expand, enforce, defend, and protect our intellectual property
portfolio;
?
hire additional clinical, quality control, and scientific personnel; and
?
add operational, financial, and management information systems and personnel,
including personnel to support our product development, planned future
commercialization 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 marketing,
distribution or 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, 2021, assuming the exercise in full of such
warrants for cash. See Note 9 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 scope, progress, costs, and results of preclinical and clinical development
for our other product candidates and development programs;
?
the number of and development requirements for other product candidates that we
pursue;
?
the costs, timing and outcome of regulatory review of our product candidates;
?
the cost and timing of completion of commercial-scale manufacturing activities;
?
our ability to establish and maintain strategic collaborations, licensing or
other arrangements and the financial terms of such arrangements;
?
the payment or receipt of milestones and receipt of other collaboration-based
revenues, if any;
?
our efforts to enhance operational systems and hire additional personnel to
satisfy our obligations as a public company, including enhanced internal
controls over financial reporting;

                                       33

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?
the costs and timing of future commercialization activities, including product
manufacturing, sales, marketing and distribution, for any of our product
candidates for which we receive marketing approval;
?
the amount and timing of revenue, if any, received from commercial sales of our
product candidates for which we receive 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 in-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; and
?
the impact of the novel coronavirus disease, COVID-19, to global economy and
capital markets, and to our business and our financial results.

In addition, increases in expenses or delays in clinical development may adversely impact 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 primary sources and uses of cash for the periods presented:





                                               Nine Months Ended September 30,
(In thousands)                                   2021                  2020
Net cash provided by (used in):
Net cash used in operating activities       $        (9,300 )     $        (2,329 )
Net cash provided by financing activities            89,237

821


Net increase (decrease) in cash             $        79,937       $        (1,508 )




Operating Activities. The net cash used in operating activities for each period
presented consists primarily of net loss adjusted for non-cash charges and
changes in components of working capital. The increase in cash used in operating
activities for the nine months ended September 30, 2021, as compared to the same
period in 2020, was primarily due to timing of cash outflows related to our
REN-001 development program, including payments to consultants and contract
research and manufacturing organizations, as we prepare for our forthcoming
clinical activities for REN-001.

Financing Activities. Net cash provided by financing activities primarily consisted of the following amounts received in connection with the following transactions:



?
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 Merger, 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.
?
for the nine months ended September 30, 2020, $0.8 million in net proceeds from
the issuance of Old Renovacor Series A Preferred Stock, which was converted into
common stock upon closing of the Business Combination.

Investing Activities. There was no cash used in or provided by investing activities during the nine months ended September 30,



2021 or 2020.





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Contractual Obligations and Commitments

Temple License Agreement and SRA





In August 2019, we entered into both the Temple License Agreement and Temple
SRA, as defined within Note 8 of the notes to our unaudited condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q. Pursuant to the Temple License Agreement, we are responsible for all
the ongoing costs relating to the prosecution and maintenance of the licensed
Temple Patent Rights going forward. We also agreed to pay Temple a minimum
annual administrative fee of $20,000 per year beginning with the effective date
of the License Agreement and continuing each annual anniversary thereafter.



Additionally, the Temple License Agreement requires us to pay up to an aggregate
of $1.25 million to Temple upon the achievement of certain developmental,
regulatory and commercial milestones for the first licensed product that
achieves said milestones regardless of the number of licensed products that
achieve them. In addition, we are required to pay Temple a low single-digit
royalty on net sales of any product utilizing the Temple Patent Rights, up to
50% of which may be reduced by payments we make to third parties for freedom to
operate. In addition, we must also pay a percentage of all consideration based
on a percentage of sublicense consideration received by it, which percentage
ranges from the mid-teens to mid-twenties depending on the stage of development
at the time of the sublicense agreement.



The Temple License Agreement will remain effective until (i) the expiration date
of the last-to-expire patents covered under the Temple License Agreement
(currently expected to occur in 2041), (ii) the termination by Temple upon (a)
an uncured breach by us, with a 60-day notification period, (b) our filing of a
voluntary petition in bankruptcy or related proceeding, provided such petition
is not dismissed within 90 days after the filing thereof, (c) a failure by us to
meet certain milestones set forth in the License Agreement, or (d) non-payment
of undisputed monies due to Temple, with a 30-day notification period.
Additionally, we may terminate the entire agreement or with respect to an
individual patent or patent application, if desired, subject to a 90-day
notification period.



As it relates to the Temple SRA, which was amended effective as of August 12,
2019, August 27, 2019 and July 1, 2021, Temple will conduct certain preclinical
activities through June 2024, unless terminated sooner or extended by mutual
written consent, for which we will be obligated to fund approximately $5.3
million through June 30, 2024, of which approximately $1.1 million has been
funded and/or incurred since inception of the Temple SRA through September 30,
2021.



Other



We enter into contracts in the normal course of business with CMOs, CROs, and
other third parties for preclinical study activities. These contracts do not
contain minimum purchase commitments and are cancelable by us upon prior written
notice. Payments due upon cancellation consist only of payments for services
provided or expenses incurred, including non- cancelable obligations of our
service providers, up to the date of cancellation.





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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 regard an accounting estimate or assumption underlying our financial statements as a "critical accounting estimate" where:

(i)


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; and
(ii)
the impact of the estimates and assumptions on 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.



Additionally, see Note 3 of the accompanying notes to the unaudited condensed
consolidated financial statements contained in this Quarterly Report on Form
10-Q for information pertaining to accounting for the Business Combination.

New Accounting Pronouncements

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

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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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