BiomX(PHGE) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Chardan Healthcare Acquisition Corp., including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and significant transactions Condensed Consolidated Balance Sheets This section presents the Company's financial position, showing cash, marketable securities in Trust Account, total assets, liabilities, and stockholders' equity as of September 30, 2019, and June 30, 2019 Condensed Consolidated Balance Sheets (Unaudited) | Metric | September 30, 2019 ($) | June 30, 2019 ($) | | :----------------------------------- | :------------------- | :------------------- | | ASSETS | | | | Cash and cash equivalents | $97,238 | $696,830 | | Marketable securities held in Trust Account | $71,083,267 | $70,881,151 | | Total Assets | $71,206,755 | $71,618,827 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable and accrued expenses | $738,409 | $234,592 | | Income taxes payable | $12,709 | $136,419 | | Total Liabilities | $751,118 | $871,011 | | Common stock subject to possible redemption | $65,455,636 | $65,747,813 | | Total Stockholders' Equity | $5,000,001 | $5,000,003 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $71,206,755 | $71,618,827 | Condensed Consolidated Statements of Operations This section details the Company's net loss, operating costs, interest income, and income tax provision for the three months ended September 30, 2019, and 2018 Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2019 ($) | Three Months Ended Sep 30, 2018 ($) | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Operating costs | $618,936 | $650 | | Loss from operations | $(618,936) | $(650) | | Interest income on marketable securities held in Trust Account | $372,380 | — | | Loss before provision for income taxes | $(244,403) | $(650) | | Provision for income taxes | $(47,776) | — | | Net loss | $(292,179) | $(650) | | Basic and diluted net loss per common share | $(0.25) | $(0.00) | - Net loss significantly increased to $(292,179) for the three months ended September 30, 2019, compared to $(650) for the same period in 2018, primarily due to higher operating costs and a provision for income taxes, partially offset by interest income from the Trust Account[12] Condensed Consolidated Statements of Changes in Stockholders' Equity This section outlines the changes in common stock, additional paid-in capital, and retained earnings, reflecting the net loss and adjustments to common stock subject to redemption Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) | Metric | July 1, 2019 | September 30, 2019 | | :------------------------------------------ | :----------- | :----------------- | | Common Stock (Shares) | 2,239,757 | 2,296,223 | | Common Stock (Amount) | $224 | $230 | | Additional Paid-in Capital | $4,653,397 | $4,945,568 | | Retained Earnings | $346,382 | $54,203 | | Total Stockholders' Equity | $5,000,003 | $5,000,001 | Key Changes (July 1, 2019 to September 30, 2019): * Change in value of common stock subject to possible redemption: $292,177 * Net loss: $(292,179) Condensed Consolidated Statements of Cash Flows This section reports cash flows from operating, investing, and financing activities, detailing the net change in cash and cash equivalents for the three months ended September 30, 2019, and 2018 Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended Sep 30, 2019 ($) | Three Months Ended Sep 30, 2018 ($) | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net cash and cash equivalents used in operating activities | $(269,856) | $(650) | | Net cash and cash equivalents provided by investing activities | $170,264 | — | | Net cash and cash equivalents (used in) provided by financing activities | $(500,000) | $23,500 | | Net Change in Cash and Cash Equivalents | $(599,592) | $22,850 | | Cash and Cash Equivalents – Ending | $97,238 | $23,280 | - The company experienced a significant net decrease in cash and cash equivalents of $(599,592) for the three months ended September 30, 2019, primarily driven by cash used in financing activities for the repayment of a related party promissory note and operating activities, partially offset by cash provided by investing activities from Trust Account withdrawals for income taxes[19] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the Company's organization, significant accounting policies, and key transactions, supporting the condensed consolidated financial statements NOTE 1. Description of Organization and Business Operations Chardan Healthcare Acquisition Corp. is a blank check company formed in November 2017 to effect a business combination, primarily targeting North American healthcare businesses. The company completed its IPO in December 2018, raising $70 million, which was placed in a Trust Account. It is currently pursuing a merger with BiomX Ltd. - The Company was formed on November 1, 2017, as a blank check company to pursue a Business Combination, with an intent to focus on the North American healthcare industry[22] - The Initial Public Offering (IPO) was consummated on December 18, 2018, selling 7,000,000 units at $10.00 per unit, generating $70,000,000 in gross proceeds[25] - Simultaneously with the IPO, 2,900,000 Private Placement Warrants were sold for $1,160,000, with proceeds added to the Trust Account[26] - A total of $70,000,000 from the IPO and private placement was placed in a Trust Account, to be invested in U.S. government securities until a Business Combination or liquidation[28] - The Company has until December 18, 2020, to consummate a Business Combination, after which it will redeem outstanding Public Shares and liquidate[34] NOTE 2. Liquidity As of September 30, 2019, the Company had $97,238 in operating cash and $71,083,267 in marketable securities in its Trust Account. It reported a working capital deficit of $539,917. The Sponsor committed to provide up to $875,000 in loans to finance transaction costs for a Business Combination, replacing an earlier $500,000 commitment. Liquidity Position as of September 30, 2019: | Metric | Amount | | :------------------------------------------ | :----------- | | Cash in operating bank accounts | $97,238 | | Marketable securities in Trust Account | $71,083,267 | | Working capital deficit | $(539,917) | | Interest income available from Trust Account (net of unrealized losses) | ~$1,083,000 | | Interest withdrawn from Trust Account for income taxes (Q3 2019) | $170,264 | - The Sponsor committed to provide an aggregate of $875,000 in non-interest bearing, unsecured loans to finance transaction costs for a Business Combination, replacing a prior $500,000 commitment; these loans are repayable upon completion of a Business Combination and up to $500,000 may be convertible into private warrants[40] NOTE 3. Summary of Significant Accounting Policies The financial statements are prepared in accordance with GAAP for interim reporting, with certain disclosures condensed. The Company consolidates its wholly-owned subsidiary and operates as an 'emerging growth company,' electing to use the extended transition period for new accounting standards. Key policies include the use of estimates, classification of cash and marketable securities, accounting for common stock subject to possible redemption as temporary equity, and income tax recognition with an effective tax rate of approximately (20%) for Q3 2019. - The Company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[44][46] - Common stock subject to possible redemption is classified as temporary equity, presented at redemption value outside of stockholders' equity, due to redemption rights outside the Company's control[51] - The effective tax rate for the three months ended September 30, 2019, was approximately (20%), differing from the statutory rate mainly due to non-deductible Business Combination expenses[53] Net Loss Per Common Share Reconciliation (Unaudited) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net loss | $(292,179) | $(650) | | Less: Income attributable to common stock subject to possible redemption | $(275,958) | — | | Adjusted net loss | $(568,137) | $(650) | | Weighted average shares outstanding, basic and diluted | 2,239,757 | 1,750,000 | | Basic and diluted net loss per share | $(0.25) | $(0.00) | NOTE 4. Initial Public Offering The Company sold 7,000,000 Units in its IPO at $10.00 per Unit, each consisting of one share of common stock and one Public Warrant, which entitles the holder to purchase one-half of one share of common stock at an exercise price of $11.50 per whole share. - The IPO involved the sale of 7,000,000 Units at $10.00 per Unit, each comprising one share of common stock and one Public Warrant[63] - Each Public Warrant allows the holder to purchase one-half of one share of common stock at an exercise price of $11.50 per whole share[63] NOTE 5. Private Placement Simultaneously with the IPO, Mountain Wood, LLC purchased 2,900,000 Private Placement Warrants for $0.40 each, totaling $1,160,000. These warrants are exercisable for one share of common stock at $11.50 and their proceeds were added to the Trust Account. They will expire worthless if a Business Combination is not completed within the Combination Period. - Mountain Wood, LLC purchased 2,900,000 Private Placement Warrants at $0.40 per warrant, generating $1,160,000[64] - Each Private Placement Warrant is exercisable for one share of common stock at $11.50[64] - Proceeds from the Private Placement Warrants were added to the Trust Account and will be used to fund the redemption of Public Shares if a Business Combination is not completed[64] NOTE 6. Related Party Transactions The Company issued 1,750,000 Founder Shares to the Sponsor, which are subject to transfer restrictions. The Company also had promissory notes with the Sponsor, including a $500,000 note repaid in July 2019, and the Sponsor committed to provide up to $875,000 in new working capital loans for transaction costs, convertible into private warrants. - The Company issued 1,750,000 Founder Shares to the Sponsor, which are subject to transfer restrictions for 6 months post-Business Combination, with 50% potentially released earlier if the stock price reaches $12.50[65][66] - A $500,000 promissory note issued to the Sponsor for underwriting discounts was repaid in July 2019[68] - The Sponsor committed to provide up to $875,000 in non-interest bearing, unsecured Working Capital Loans for transaction costs, repayable upon Business Combination completion, with up to $500,000 convertible into private warrants[70][71] NOTE 7. Commitments The Company has registration rights agreements for Founder Shares, Private Placement Warrants, and securities from Working Capital Loans. A significant commitment is the Merger Agreement entered into on July 16, 2019, with BiomX Ltd. and CHAC Merger Sub Ltd., where BiomX will become a wholly-owned subsidiary. The merger involves the issuance or reservation of 16,625,000 shares of the Company's common stock for BiomX capital stock, options, and warrants. - Holders of Founder Shares, Private Placement Warrants, and securities from Working Capital Loans are entitled to registration rights[72] - On July 16, 2019, the Company entered into a Merger Agreement with BiomX Ltd., under which BiomX will become a wholly-owned subsidiary[73] - The Merger will result in the issuance or reservation of 16,625,000 shares of the Company's common stock for BiomX capital stock, options, and warrants[74] NOTE 8. Stockholder's Equity The Company is authorized to issue 1,000,000 shares of preferred stock (none outstanding) and 30,000,000 shares of common stock, with 2,296,223 shares outstanding as of September 30, 2019 (excluding shares subject to redemption). Public Warrants become exercisable upon Business Combination completion, allowing purchase of common stock at $11.50 per whole share, and are redeemable by the Company under specific conditions. Private Placement Warrants are identical but non-redeemable and exercisable on a cashless basis by initial holders. - The Company is authorized to issue 1,000,000 shares of preferred stock and 30,000,000 shares of common stock[77][78] - As of September 30, 2019, there were 2,296,223 shares of common stock issued and outstanding (excluding 6,453,777 shares subject to possible redemption)[78] - Public Warrants become exercisable upon the consummation of a Business Combination, allowing purchase of one-half of one share of common stock at $11.50 per whole share[80] - The Company may redeem Public Warrants under specific conditions, including if the common stock price equals or exceeds $16.00 for 20 trading days within a 30-day period[82] - Private Placement Warrants are identical to Public Warrants but are non-redeemable by the Company and exercisable on a cashless basis by initial purchasers or permitted transferees[82] NOTE 9. Fair Value Measurements The Company measures financial assets and liabilities at fair value using a hierarchy of inputs (Level 1, 2, or 3). As of September 30, 2019, and June 30, 2019, marketable securities held in the Trust Account were valued using Level 1 inputs (quoted prices in active markets). - The Company uses a fair value hierarchy (Level 1, 2, 3) to classify assets and liabilities based on observable and unobservable inputs[85][89] Fair Value Measurements of Assets (Unaudited) | Description | Level | September 30, 2019 ($) | June 30, 2019 ($) | | :------------------------------------------ | :---- | :------------------- | :------------------- | | Marketable securities held in Trust Account | 1 | $71,083,267 | $70,881,151 | NOTE 10. Subsequent Events Subsequent to September 30, 2019, the Sponsor increased its commitment to provide loans for transaction costs from $500,000 to $875,000. These loans are non-interest bearing, unsecured, repayable upon Business Combination completion, and up to $500,000 may be convertible into private warrants. - In October 2019, the Sponsor increased its loan commitment to the Company for transaction costs from $500,000 to $875,000[88] - These loans are non-interest bearing, unsecured, repayable upon Business Combination completion, and up to $500,000 may be convertible into private warrants[88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results, highlighting its status as a blank check company focused on a Business Combination, recent developments regarding the BiomX merger, and its liquidity position. It also discusses the Company's operating expenses, non-operating interest income, and critical accounting policies Special Note Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to risks and uncertainties, advising readers to consult the Annual Report's Risk Factors section - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations[91] - Readers are advised to refer to the Risk Factors section of the Company's Annual Report on Form 10-K for important factors that could impact actual results[91] Recent Developments This section details the Company's recent merger agreement with BiomX Ltd., under which BiomX will become a wholly-owned subsidiary, involving the issuance of 16,625,000 shares - On July 16, 2019, the Company entered into a Merger Agreement with BiomX Ltd., under which BiomX will become a wholly-owned subsidiary[92] - The merger involves the issuance or reservation of 16,625,000 shares of CHAC common stock for BiomX capital stock, options, and warrants[93] Overview This section describes the Company's formation as a blank check entity to pursue a business combination in healthcare, its IPO, and the establishment of a Trust Account - The Company was formed as a blank check company on November 1, 2017, to pursue a business combination, primarily targeting the North American healthcare industry[94] - The IPO on December 18, 2018, raised $70,000,000 from the sale of 7,000,000 units, each consisting of one common stock share and one redeemable warrant[95] - A total of $70,000,000 from the IPO and private placement was placed in a trust account, to be released upon a business combination or liquidation by December 18, 2020[97] Results of Operations This section explains that the Company has not generated operating revenues, with activities limited to formation, IPO, and business combination evaluation, detailing net loss and its components - The Company has not generated operating revenues and its activities are limited to formation, IPO, and evaluation/acquisition of business combination candidates[99] Net Loss and Key Components (Unaudited) | Metric | Three Months Ended Sep 30, 2019 ($) | Three Months Ended Sep 30, 2018 ($) | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net loss | $(292,179) | $(650) | | Operating costs | $618,936 | $650 | | Provision for income taxes | $47,776 | — | | Interest income on marketable securities held in Trust Account | $372,380 | — | Liquidity and Capital Resources This section discusses the Company's liquidity, including marketable securities in the Trust Account, operating cash, and the Sponsor's commitment for working capital loans Liquidity Position and Cash Flows (Unaudited) | Metric | As of Sep 30, 2019 | Three Months Ended Sep 30, 2019 | | :------------------------------------------ | :----------------- | :------------------------------ | | Marketable securities in Trust Account | $71,083,267 | N/A | | Interest income from Trust Account (net of unrealized losses) | ~$1,083,000 | N/A | | Cash withdrawn from Trust Account for income taxes | N/A | $170,264 | | Cash and cash equivalents outside Trust Account | $97,238 | N/A | | Net cash used in operating activities | N/A | $(269,856) | - The Company intends to use substantially all net IPO proceeds, including Trust Account funds, for acquiring a target business and related expenses[105] - The Sponsor committed to provide up to $875,000 in loans for transaction costs, which may be convertible into private warrants[110] - The Company does not believe it needs to raise additional funds for current operations but may require financing for a business combination or significant redemptions[111] Off-Balance Sheet Arrangements This section confirms that the Company had no off-balance sheet arrangements, obligations, assets, or liabilities as of September 30, 2019 - As of September 30, 2019, the Company did not have any off-balance sheet arrangements, obligations, assets, or liabilities[112] Contractual Obligations This section states that the Company has no long-term debt, capital lease obligations, operating lease obligations, or other long-term liabilities - The Company does not have any long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities[113] Critical Accounting Policies This section identifies critical accounting policies, including the classification of common stock subject to redemption and the two-class method for net loss per share calculation - The Company's critical accounting policies include the treatment of common stock subject to possible redemption as temporary equity and the application of the two-class method for net loss per common share calculation[115][116] - Management does not anticipate any material effect on financial statements from recently issued, but not yet effective, accounting pronouncements[117] Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk The Company's funds in the Trust Account are invested in short-term U.S. Treasuries via money market funds, leading to a belief that there is no material exposure to interest rate risk - Funds in the Trust Account are invested in money market funds that primarily hold short-term U.S. Treasuries[118] - Due to the short-term nature of these investments, the Company does not believe there is a material exposure to interest rate risk[118] Item 4. Controls and Procedures Management, including the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2019. There have been no material changes in internal control over financial reporting during the fiscal quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2019[119] - No material changes in internal control over financial reporting occurred during the fiscal quarter[121] PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company reported no legal proceedings - The Company is not currently involved in any legal proceedings[124] Item 1A. Risk Factors The Company refers to the risk factors disclosed in its Annual Report on Form 10-K filed on August 21, 2019, and states that there have been no material changes to these risk factors as of the date of this Quarterly Report - The Company's risk factors are detailed in its Annual Report on Form 10-K filed on August 21, 2019[125] - No material changes to the disclosed risk factors have occurred as of the date of this Quarterly Report[125] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company completed its IPO on December 18, 2018, selling 7,000,000 units for $70,000,000. Simultaneously, it conducted a private placement of 2,900,000 Private Placement Warrants to Mountain Wood, LLC for $1,160,000, issued under a Section 4(a)(2) exemption. The gross proceeds from both offerings, totaling $70,000,000, were placed in a Trust Account - The IPO on December 18, 2018, involved the sale of 7,000,000 Units at $10.00 per Unit, generating $70,000,000 in gross proceeds[126] - A private placement of 2,900,000 Private Placement Warrants to Mountain Wood, LLC generated $1,160,000, issued under Section 4(a)(2) of the Securities Act[127] - The Private Placement Warrants are non-transferable, non-assignable, and non-salable until after a Business Combination, and are exercisable on a cashless basis and non-redeemable by initial holders[129] - A total of $70,000,000 from the IPO and Private Placement Warrants was placed in a Trust Account[130] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - The Company has no defaults upon senior securities[131] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[131] Item 5. Other Information The Company reported no other information - The Company has no other information to disclose under this item[132] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL taxonomy documents - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2) and XBRL taxonomy documents (101.INS, 101.CAL, 101.SCH, 101.DEF, 101.LAB, 101.PRE)[134] PART III. SIGNATURES Signatures The report was duly signed on October 16, 2019, by Jonas Grossman, President and Chief Executive Officer, and George Kaufman, Chief Financial Officer and Head of Strategy, on behalf of Chardan Healthcare Acquisition Corp - The report was signed on October 16, 2019, by Jonas Grossman, President and Chief Executive Officer, and George Kaufman, Chief Financial Officer and Head of Strategy[139]