enVVeno Medical Corp 10-Q

ITEM 1 – Financial Statements HANCOCK JAFFE LABORATORIES, INC. CONDENSED BALANCE SHEETS (unaudited) June 30, December 31, 2021 2020 Assets Current Assets: Cash and cash equivalents $ 41,039,182 $ 9,334,584 Prepaid expenses and other current assets 399,685 234,467 Total Current Assets 41,438,867 9,569,051 Property and equipment, net 490,418 398,967 Operating lease right-of-use assets, net 387,852 539,974 Security deposits and other assets 34,993 29,843 Total Assets $ 42,352,130 $ 10,537,835 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 308,881 $ 1,390,362 Accrued expenses and other current liabilities 412,466 1,135,969 Note Payable 312,700 312,700 Deferred revenue - related party 33,000 33,000 Current portion of operating lease liabilities 326,265 314,202 Total Current Liabilities 1,393,312 3,186,233 Long-term operating lease liabilities 84,582 253,746 Total Liabilities 1,477,894 3,439,979 Commitments and Contingencies - - Stockholders’ Equity: Preferred stock, par value $ 0.00001 , 10,000,000 shares authorized: no shares issued or outstanding - - Common stock, par value $ 0.00001 , 250,000,000 shares authorized, 8,513,662 and 2,541,529 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 85 25 Additional paid-in capital 111,348,343 72,421,242 Accumulated deficit ( 70,474,192 ) ( 65,323,411 ) Total Stockholders’ Equity 40,874,236 7,097,856 Total Liabilities and Stockholders’ Equity $ 42,352,130 $ 10,537,835 See Notes to these Unaudited Condensed Financial Statements 1 HANCOCK JAFFE LABORATORIES, INC. CONDENSED STATEMENTS OF OPERATIONS (unaudited) 2021 2020 2021 2020 For the Three Months Ended For the Six Months Ended June 30, June 30, 2021 2020 2021 2020 Operating Expenses: Selling, general and administrative expenses 1,295,747 839,735 2,472,202 1,837,631 Research and development expenses 1,089,716 706,173 2,721,511 1,216,797 Loss from Operations ( 2,385,463 ) ( 1,545,908 ) ( 5,193,713 ) ( 3,054,428 ) Other (Income) Expense: Interest (income) expense, net ( 6,701 ) ( 228 ) ( 9,660 ) ( 2,861 ) Change in fair value of derivative liabilities - 81,276 - ( 264,853 ) Other expense ( 867 ) - ( 33,272 ) - Total Other (Income) Expense ( 7,568 ) 81,048 ( 42,932 ) ( 267,714 ) Net Loss $ ( 2,377,895 ) $ ( 1,626,956 ) $ ( 5,150,781 ) $ ( 2,786,714 ) Net Loss Per Basic and Diluted Common Share: $ ( 0.28 ) $ ( 1.89 ) $ ( 0.72 ) $ ( 3.49 ) Weighted Average Number of Common Shares Outstanding: Basic and Diluted 8,512,059 858,572 7,159,782 797,875 See Notes to these Unaudited Condensed Financial Statements 2 HANCOCK JAFFE LABORATORIES, INC. CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) (unaudited) Shares Amount Capital Deficit Equity Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance at January 1, 2021 2,541,529 $ 25 $ 72,421,242 $ ( 65,323,411 ) $ 7,097,856 Common stock issued in public offering 5,914,284 59 38,127,717 - 38,127,776 Common stock issued for exercise of warrants 52,077 1 239,999 - 240,000 Shared-Based Compensation - - 106,850 - 106,850 Shares issued to in satisfaction of trade payable Shares issued to in satisfaction of trade payable, shares Common stock issued in private placement offering Common stock issued in private placement offering, shares Warrants granted to consultants Fair Value of Warrants Issued - - 211,976 - 211,976 Net loss - - - ( 2,772,886 ) ( 2,772,886 ) Balance at March 31, 2021 8,507,890 $ 85 $ 111,107,784 $ ( 68,096,297 ) $ 43,011,572 Balance at March 31, 2021 8,507,890 $ 85 $ 111,107,784 $ ( 68,096,297 ) $ 43,011,572 Shared-Based Compensation - - 202,983 - 202,983 Shares issued in satisfaction of trade payable 5,772 - 37,576 - 37,576 Net loss - - - ( 2,377,895 ) ( 2,377,895 ) Balance at June 30, 2021 8,513,662 85 111,348,343 ( 70,474,192 ) 40,874,236 Additional Total Common Stock Paid-in Accumulated Stockholders Shares Amount Capital Deficit Equity Balance at January 1, 2020 717,274 $ 7 $ 57,177,858 $ ( 56,187,925 ) $ 989,940 Common stock issued in private placement offering 52,000 1 24,304 - 24,305 Share-based compensation: - - 116,820 - 116,820 Warrants granted to consultants - - 14,070 - 14,070 Net loss - - - ( 1,159,758 ) ( 1,159,758 ) Balance at March 31, 2020 769,274 $ 8 $ 57,333,052 $ ( 57,347,683 ) $ ( 14,623 ) Balance at March 31, 2020 769,274 $ 8 $ 57,333,052 $ ( 57,347,683 ) $ ( 14,623 ) Common stock issued in public offering 192,688 2 1,973,306 - 1,973,308 Share-Based Compensation - - 37,717 - 37,717 Net loss - - - ( 1,626,956 ) ( 1,626,956 ) Balance at June 30, 2020 961,962 $ 10 $ 59,344,075 $ ( 58,974,639 ) $ 369,446 See Notes to these Unaudited Condensed Financial Statements 3 HANCOCK JAFFE LABORATORIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (unaudited) 2021 2020 For the Six Months Ended June 30, 2021 2020 Cash Flows from Operating Activities Net loss $ ( 5,150,781 ) $ ( 2,786,714 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation 331,281 168,607 Depreciation and amortization 59,058 44,961 Amortization of right-of-use assets 152,122 144,494 Change in fair value of derivatives - ( 264,853 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 125,218 ) ( 104,159 ) Security deposit and other assets ( 5,150 ) - Accounts payable ( 1,083,905 ) 346,167 Accrued expenses ( 532,975 ) 123,971 Payments on lease liabilities ( 157,101 ) ( 144,342 ) Total adjustments ( 1,361,888 ) 314,846 Net Cash Used in Operating Activities ( 6,512,669 ) ( 2,471,868 ) Cash Flows from Investing Activities Purchase of property and equipment ( 150,509 ) ( 127,786 ) Net Cash Used in Investing Activities ( 150,509 ) ( 127,786 ) Cash Flows from Financing Activities Proceeds from private placements of common stock and warrants, net - 570,341 Proceeds from registered direct offerings of common stock with warrants, net - 1,973,308 Proceeds from public offering, net 38,127,776 - Proceeds from issuance of note payable - 312,700 Proceeds from Warrant Exercises 240,000 - Net Cash Provided by Financing Activities 38,367,776 2,856,349 Net Increase in Cash, Cash Equivalent, and Restricted Cash 31,704,598 256,695 Cash, cash equivalents and restricted cash - Beginning of period 9,334,584 2,117,286 Cash, cash equivalents and restricted cash - End of period $ 41,039,182 $ 2,373,981 See Notes to these Unaudited Condensed Financial Statements 4 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) For the Six Months Ended June 30, 2021 2020 Supplemental Disclosures of Cash Flow Information: Cash Paid (Received) During the Years For: Interest, net $ ( 9,660 ) $ ( 2,861 ) Non-Cash Financing Activities: Fair value of warrants issued in connection with common stock included in derivative liabilities $ - $ 513,534 Fair value of placement agent warrants issued in connection with common stock included in derivative liabilities $ - $ 32,502 Fair value of common stock issued in satisfaction of trade payable $ 37,576 - Fair value of warrants issued $ ( 211,976 ) $ - See Notes to these Unaudited Condensed Financial Statements 5 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 1 – Business Organization and Nature of Operations Hancock Jaffe Laboratories, Inc. is a medical device company developing tissue-based solutions that are designed to be life sustaining or life enhancing for patients with cardiovascular disease, and peripheral arterial and venous disease. The Company’s products are being developed to address large unmet medical needs by either offering treatments where none currently exist or by substantially increasing the current standards of care. Our products which we are developing include: the VenoValve®, a porcine based device to be surgically implanted in the deep venous system of the leg to treat a debilitating condition called chronic venous deficiency (“CVI”); and the CoreoGraft®, a bovine based conduit to be used to revascularize the heart during coronary artery bypass graft (“CABG”) surgeries. Both of these products are currently being developed for approval by the U.S. Food and Drug Administration (“FDA”). Our current senior management team has been affiliated with more than 50 products that have received FDA approval or CE marking. We currently lease a 14,507 sq. ft. manufacturing facility in Irvine, California, where we manufacture products for our clinical trials and which has previously been FDA certified for commercial manufacturing of product. Each of our products will be required to successfully complete significant clinical trials to demonstrate the safety and efficacy of the product before it will be able to be approved by the FDA. 6 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 2 – Going Concern and Management’s Liquidity Plan The accompanying unaudited condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Although we expect to continue incurring losses for the foreseeable future, may never earn revenues large enough to support operations, and may need to raise additional capital to sustain operations, pursue product development initiatives, and penetrate markets for the sale of products, Management believes that our capital resources at June 30, 2021, are sufficient to meet our obligations as they become due within one year after the date of this interim filing, and sustain operations. 7 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 3 – Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed financial statements of the Company as of June 30, 2021 and December 31, 2020, and for the three and six months ended June 30, 2021 and 2020. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results for the full year. These unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Form 10-K filed with the SEC on March 31, 2021. The condensed balance sheet as of December 31, 2020 has been derived from the Company’s audited financial statements. 8 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Concentrations The Company maintains cash with major financial institutions. Cash held in United States bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 at each institution. There was an aggregate uninsured cash balance of $ 40,789,182 as of June 30, 2021. Net Loss per Share The Company computes basic and diluted loss per share by dividing net loss attributable to common stockholders by the weighted average number of common stock outstanding during the period. Basic and diluted net loss per common share are the same since the inclusion of common stock issuable pursuant to the exercise of warrants and options, would have been anti-dilutive. Subsequent Events The Company evaluated events that have occurred after the balance sheet date through the date the financial statements were issued. Based upon the evaluation and transactions, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements. Recent Accounting Standards In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. There was not a significant impact to the financial statements from the adoption of this standard. 9 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 4 – Property and Equipment As of June 30, 2021 and December 31, 2020, property and equipment consist of the following: Schedule of Property and Equipment June 30, December 31, 2021 2020 Laboratory equipment $ 412,342 $ 320,830 Furniture and fixtures 124,093 98,392 Computer software and equipment 91,624 65,078 Leasehold improvements 164,842 158,092 Software 244,479 244,479 1,037,380 886,871 Less: accumulated depreciation ( 546,962 ) ( 487,904 ) Property and equipment, net $ 490,418 $ 398,967 Depreciation expense amounted to $ 59,058 and $ 44,961 for the six months ended June 30, 2021 and 2020, respectively. Depreciation expense is reflected in general and administrative expenses in the accompanying statements of operations. Note 5 – Right-of-Use Assets and Lease Liability On September 20, 2017, the Company renewed its operating lease for its manufacturing facility in Irvine, California, effective October 1, 2017, for five years with an option to extend the lease for an additional five years at the end of the initial lease term. The initial lease rate was $ 26,838 per month with escalating payments. In connection with the lease, the Company is obligated to pay $ 7,254 monthly for operating expenses for building repairs and maintenance. The Company has no other operating or financing leases with terms greater than 12 months. The Company accounts for this lease following the guidance in ASC Topic 842, Leases, and elected to adopt the short-term lease exception and not apply Topic 842 to arrangements with lease terms of 12 months or less. The Company determined the lease liabilities using the Company’s estimated incremental borrowing rate of 8.5 % to estimate the present value of the monthly lease payments. 10 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Our operating lease cost is as follows: Schedule of Operating Lease Cost For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2021 Operating lease cost $ 85,492 $ 170,983 Supplemental cash flow information related to our operating lease is as follows: Schedule of Supplemental Cash Flow Information Related to Operating Lease For the Three Months Ended June 30, For the Six Months Ended June 30, 2021 2021 Operating Cash Flow Information: Cash paid for amounts in the measurement of lease liabilities $ 87,981 $ 175,962 Schedule of Operating Remaining Lease Term and Discount Rate Remaining lease term and discount rate for our operating lease is as follows: June 30, 2021 Remaining lease term 1.3 years Discount rate 8.5 % Schedule of Maturity of Lease Liabilities Maturity of our lease liabilities by fiscal year for our operating lease is as follows: June 30, 2021 Six months ended December 31, 2021 $ 178,599 Year ended December 31, 2022 271,854 Total $ 450,453 Less: Imputed Interest ( 13,422 ) Present value of our lease liability $ 437,031 11 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 6 – Accrued Expenses and Other Current Liabilities As of June 30, 2021, and December 31, 2020, accrued expenses consist of the following: Schedule of Accrued Expenses and Other Current Liabilities June 30, December 31, 2021 2020 Accrued compensation costs $ 276,718 $ 473,799 Accrued professional fees 92,500 79,650 Accrued franchise taxes 27,832 25,607 Accrued research and development 15,416 368,809 Accrued warrants - 188,104 Total $ 412,466 $ 1,135,969 Note 7 – Note Payable The note payable consists of the following at June 30, 2021 and December 31, 2020: Schedule of Note Payable Carrying value $ 312,700 Stated maturity date April 22, 2022 Stated interest rate 1 % per annum Note 8 – Commitments and Contingencies Litigations Claims and Assessments In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. Robert Rankin Complaints On July 9, 2020, the Company was served with a civil complaint filed in the Superior Court for the State of California, County of Orange by a former employee, Robert Rankin, who resigned his employment on or about March 30, 2020. The case is entitled Rankin v. Hancock Jaffe Laboratories, Inc. et al., Case No. 30-2020-01146555-CU-WR-CJC and was filed on May 27, 2020. On September 3, 2020 the Company and its Chief Executive Officer were served with a second complaint filed in the Superior Court for the State of California, County of Orange by Mr. Rankin. The case is entitled Rankin v. Hancock Jaffe Laboratories, Inc. et al., Case No. 30-2020-01157857 and was filed on August 31, 2020. The complaints assert several causes of action including a cause of action for failure to timely pay Mr. Rankin’s accrued and unused vacation and three months’ severance under his July 16, 2018 employment agreement, defamation, unlawful labor code violations, sex-based discrimination, and unfair competition, and seeks damages for lost wages, emotional and mental distress, consequential damages, punitive damages and attorney’s fees and costs. The Company intends to vigorously defend the claims, investigate the allegations, and assert counterclaims. As of the date of these financial statements, the amount of loss associated with these complaints, if any, cannot be reasonably estimated. Accordingly, no amounts related to these complaints are accrued as of June 30, 2021. 12 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 9 – Stockholders’ Equity Common Stock On February 11, 2021, the Company raised $ 41,400,000 in gross proceeds, with cash offering costs of approximately $ 3,300,000 , in a public offering of 5,914,284 shares of its common stock for a purchase price of $ 7.00 per share and warrants to purchase 2,957,142 shares of its common stock. The exercise price of the warrants is $ 7.00 per share, subject to customary adjustments and they expire on February 11, 2026 . The warrants had grant date fair value of $ 4.84 per share for an aggregate grant date fair value of $ 14,312,567 , using the Black Scholes method with the following assumptions used: stock price of $ 7.53 , risk-free interest rate of 0.11 %, volatility of 113.1 %, annual rate of quarterly dividends of 0 %, and a contractual term of 2.5 years. We determined that equity classification of the warrants was appropriate. Accordingly, their value is included in additional paid-in capital. On April 26, 2021, the Company issued 5,772 shares with a value of $ 6.51 per share, or $ 37,576 , in satisfaction of a trade payable. Warrants In November 2020 the Company’s Board of Directors approved the issuance of warrants to purchase 6,400 shares of common stock to an advisor and warrants to purchase 20,000 shares of common stock to certain participants in the preferred share exchange. Separately the Company agreed to re-price warrants issued to the placement agent for the Company’s February 25, 2020 private placement. These warrants and the re-priced warrant were issued in February 2021. The value of these warrants when they were issued $ 211,976 . The Company determined their value using the Black-Scholes method with the following assumptions: stock price of $ 8.91 - $ 9.31 , risk-free interest rate of 0.47 % , volatility of 113% , annual rate of quarterly dividends of 0% , and an expected term of 2.5 to 3.5 years. Stock Options From time to time, the Company issues options for the purchase of its common stock to employees and others. Share-based compensation related to stock options is included in selling, general and administrative expenses on the accompanying statement of operations, and was $ 0.3 and $ 0.2 million of during the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, there was $ 1.5 million of unrecognized stock-based compensation expense related to outstanding stock options that will be recognized over the weighted average remaining vesting period of 2.2 years. Note 10 – Net Loss per Share The following table summarizes the number of potentially dilutive common stock equivalents excluded from the calculation of diluted net loss per common share as of June 30, 2021 and 2020: Schedule of Diluted Net Loss Per Common Share June 30, 2021 2020 Shares of common stock issuable upon exercise of warrants 4,402,032 438,072 Shares of common stock issuable upon exercise of options 386,096 96,689 Potentially dilutive common stock equivalents excluded from diluted net loss per share 4,788,128 534,761 13 HANCOCK JAFFE LABORATORIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 11 – Related Party Transactions On June 8, 2021, the Company updated its agreement with the vendor affiliated by common ownership and control with a shareholder holding approximately 10 % of the Company’s outstanding common stock. The Company engaged this vendor to provide support in the VenoValve U.S. pivotal trial. Expenditures to that vendor were approximately $ 0.4 million during the six months ending June 30, 2021, and are included in in Research and Development expenses in the accompanying statement of operations. 14