enVVeno Medical Corp 10-Q

ITEM 1 – Financial Statements ENVVENO MEDICAL CORPORATION CONDENSED BALANCE SHEETS (Unaudited) September 30, December 31, 2022 2021 (In thousands except par values, unless otherwise indicated) Assets Current Assets: Cash and cash equivalents $ 2,895 $ 54,728 Short-term investments 37,432 - Prepaid expenses and other current assets 381 312 Total Current Assets 40,708 55,040 Property and equipment, net 566 618 Operating lease right-of-use assets, net 1,750 1,987 Long-term investments 2,398 - Security deposits and other assets 34 54 Total Assets $ 45,456 $ 57,699 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 501 $ 560 Accrued expenses and other current liabilities 495 729 Current portion of operating lease liabilities 308 291 Total Current Liabilities 1,304 1,580 Long-term operating lease liabilities 1,481 1,715 Total Liabilities 2,785 3,295 Commitments and Contingencies - - Stockholders’ Equity: Preferred stock, par value $ 0.00001 , 10,000 shares authorized: no shares issued or outstanding - - Common stock, par value $ 0.00001 , 250,000 shares authorized, 9,472 and 9,470 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively - - Additional paid-in capital 143,011 136,255 Accumulated deficit ( 100,340 ) ( 81,851 ) Total Stockholders’ Equity 42,671 54,404 Total Liabilities and Stockholders’ Equity $ 45,456 $ 57,699 See Notes to these Unaudited Condensed Financial Statements 1 ENVVENO MEDICAL CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited) 2022 2021 2022 2021 For the Three Months Ended For the Nine Months Ended September 30, September 30, 2022 2021 2022 2021 (In thousands, except per share data) Operating Expenses: Selling, general and administrative expenses 3,659 1,482 11,355 3,954 Research and development expenses 2,492 1,225 7,117 3,946 Loss from Operations ( 6,151 ) ( 2,707 ) ( 18,472 ) ( 7,900 ) Other (Income) Expense: Gain on extinguishment of note payable - ( 313 ) - ( 313 ) Interest income, net ( 75 ) ( 5 ) ( 117 ) ( 14 ) Unrealized loss from investments 21 - 134 - Other expense - - - ( 33 ) Total Other (Income) Expense ( 54 ) ( 318 ) 17 ( 360 ) Net Loss $ ( 6,097 ) $ ( 2,389 ) $ ( 18,489 ) $ ( 7,540 ) Net Loss Per Basic and Diluted Common Share: $ ( 0.54 ) $ ( 0.26 ) $ ( 1.65 ) $ ( 0.96 ) Weighted Average Number of Common Shares Outstanding: Basic and Diluted 11,229 9,180 11,229 7,840 See Notes to these Unaudited Condensed Financial Statements 2 ENVVENO MEDICAL CORPORATION CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands, unless otherwise indicated) (Unaudited) Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance at January 1, 2022 9,470 $ - $ 136,255 $ ( 81,851 ) $ 54,404 Shared-Based Compensation - - 2,243 - 2,243 Net loss - - - ( 5,330 ) ( 5,330 ) Balance at March 31, 2022 9,470 $ - $ 138,498 $ ( 87,181 ) $ 51,317 Shared-Based Compensation - - 2,303 - 2,303 Net loss - - - ( 7,062 ) ( 7,062 ) Balance at June 30, 2022 9,470 - 140,801 ( 94,243 ) 46,558 Share-Based Compensation 2 - 2,210 - 2,210 Net loss - - - ( 6,097 ) ( 6,097 ) Balance at September 30, 2022 9,472 - 143,011 ( 100,340 ) 42,671 Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance at January 1, 2021 2,542 $ - $ 72,421 $ ( 65,323 ) $ 7,098 Common stock issued in public offering 5,914 - 38,128 - 38,128 Common stock issued for exercise of warrants 52 - 240 - 240 Shared-Based Compensation - - 107 - 107 Fair Value of Warrants Issued - - 212 - 212 Net loss - - - ( 2,773 ) ( 2,773 ) Balance at March 31, 2021 8,508 $ - $ 111,108 $ ( 68,096 ) $ 43,012 Shared-Based Compensation - - 203 - 203 Shares issued in satisfaction of trade payable 6 - 37 - 37 Net loss - - - ( 2,378 ) ( 2,378 ) Balance at June 30, 2021 8,514 - 111,348 ( 70,474 ) 40,874 Common stock issued in at the market transactions 171 - 971 - 971 Common stock issued in registered direct offering 781 - 18,274 18,274 Shared-Based Compensation - - 325 - 325 Net loss - - - ( 2,389 ) ( 2,389 ) Balance at September 30, 2021 9,466 - 130,918 ( 72,863 ) 58,055 See Notes to these Unaudited Condensed Financial Statements 3 ENVVENO MEDICAL CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (In thousands, unless otherwise indicated) (Unaudited) 2022 2021 For the Nine Months Ended September 30, 2022 2021 Cash Flows from Operating Activities Net loss $ ( 18,489 ) $ ( 7,540 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation 6,756 656 Depreciation and amortization 158 103 Amortization of right-of-use assets 237 228 Gain on extinguishment of note payable - ( 313 ) Unrealized loss from investments, net 134 - Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 69 ) ( 35 ) Security deposit and other assets 20 ( 25 ) Accounts payable ( 59 ) ( 998 ) Accrued expenses and other current liabilities ( 234 ) ( 587 ) Operating lease liabilities ( 217 ) ( 235 ) Total adjustments 6,726 ( 1,206 ) Net Cash Used in Operating Activities ( 11,763 ) ( 8,746 ) Cash Flows from Investing Activities Purchase of property and equipment ( 106 ) ( 303 ) Purchases of investments ( 42,214 ) - Maturities of investments 2,250 - Net Cash Used in Investing Activities ( 40,070 ) ( 303 ) Cash Flows from Financing Activities Proceeds from shares issued under ATM, net - 970 Proceeds from registered direct offering, net - 18,273 Proceeds from public offering, net - 38,128 Proceeds from Warrant Exercises - 240 Net Cash Provided by Financing Activities - 57,611 Net (Decrease) Increase in Cash, Cash Equivalents ( 51,833 ) 48,562 Cash, cash equivalents - Beginning of period 54,728 9,334 Cash, cash equivalents - End of period $ 2,895 $ 57,896 See Notes to these Unaudited Condensed Financial Statements 4 ENVVENO MEDICAL CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (Continued) (In thousands, unless otherwise indicated) (Unaudited) For the Nine Months Ended September 30, 2022 2021 Supplemental Disclosures of Cash Flow Information: Cash Received During the Period For: Interest, net $ 67 $ 14 Non-Cash Financing Activities: Fair value of common stock issued in satisfaction of trade payable $ - $ 38 Fair value of warrants issued in satisfaction of trade payables and accrued expenses $ 130 $ 212 See Notes to these Unaudited Condensed Financial Statements 5 ENVVENO MEDICAL CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 1 – Business Organization and Nature of Operations enVVeno Medical Corporation is a late clinical-stage med-tech company focused on the advancement of innovative bioprosthetic (tissue-based) solutions to improve the standard of care for the treatment of venous disease. The Company’s lead product, the VenoValve®, is a first-in-class surgical replacement venous valve being developed for the treatment of deep venous Chronic Venous Insufficiency (CVI). The Company is also developing a non-surgical, transcatheter based replacement venous valve for the treatment of deep venous CVI called enVVe™. CVI occurs when valves inside of the veins of the leg become damaged, resulting in the backwards flow of blood (reflux), blood pooling in the lower leg, increased pressure in the veins of the leg (venous hypertension) and in severe cases, venous ulcers that are difficult to heal and become chronic. Both the VenoValve and enVVe are designed to act as one-way valves, to help assist in propelling blood up the leg, and back to the heart and lungs. The VenoValve is currently being evaluated in the SAVVE U.S. pivotal study and the company is currently waiting for regulatory approval to begin the TAVVE first-in-human trial for enVVe. Our team of officers and directors has been affiliated with numerous medical devices that have received FDA approval or CE marking and that have been commercially successful. We develop and manufacture our products in a 14,507 sq. ft. leased manufacturing facility in Irvine, California, which has been ISO 13485-2016 certified for the design, development and manufacturing of tissue based implantable medical devices. Note 2 – Management’s Liquidity Plan As of September 30, 2022, the Company had a cash balance of $ 2.9 million, investments of $ 39.8 million and working capital of $ 39.4 million. Although the Company expects to continue incurring losses for the foreseeable future and may need to raise additional capital to sustain its operations, pursue its product development initiatives and penetrate markets for the sale of its products, Management believes that our capital resources at September 30, 2022 are sufficient to meet our obligations as they become due within one year after the date of this Quarterly Report, and sustain operations. 6 ENVVENO MEDICAL CORPORATION 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 September 30, 2022 and December 31, 2021, and for the three and nine months ended September 30, 2022 and 2021. The results of operations for the three and nine months ended September 30, 2022 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, 2021 included in the Company’s Form 10-K filed with the SEC on March 28, 2022. The condensed balance sheet as of December 31, 2021 has been derived from the Company’s audited financial statements. Investments We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values. Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year are classified as long-term investments. Debt investments are classified as trading securities and realized gains and losses are recorded using the specific identification method. Changes in fair value, excluding credit losses and impairments, are recorded in unrealized gains (losses) from investments. Fair value is calculated based on publicly available market information. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost. We recognize interest income based on the stated coupon rate of the investments purchased. Note 4 – Investments The components of investments were as follows at September 30, 2022: Schedule of Investments (In thousands) Cash Equivalents Short-Term Investment Long Term Investment Fair Value Level 1 U.S. Government securities $ 2,126 $ 37,432 $ 2,398 Total debt investments $ 2,126 $ 37,432 $ 2,398 Unrealized losses from fixed-income securities are primarily attributable to changes in interest rates. Management does not believe any remaining unrealized losses represent impairments based on our evaluation of available evidence. There were no similar investments at December 31, 2021. 7 ENVVENO MEDICAL CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 5 – 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 at each institution. There were aggregate uninsured cash balances of $ 2.6 million and $ 54.5 million as of September 30, 2022 and December 31, 2021, respectively. Note 6 – Accrued Expenses and Other Current Liabilities As of September 30, 2022, and December 31, 2021, accrued expenses and other current liabilities consist of the following: Schedule of Accrued Expenses and Other Current Liabilities September 30, December 31, (In thousands) 2022 2021 Accrued compensation costs $ 394 $ 525 Accrued professional fees 40 84 Accrued research and development - 60 Other accrued expenses 61 60 Accrued expenses $ 495 $ 729 Note 7 – 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 has denied all claims in both matters (which have now been consolidated) and has filed a counterclaim asserting that Rankin has breached his employment agreement with the Company to the Company’s damage. The Company continues to believe it has meritorious defenses to both matters which are currently set for trial on June 12, 2023. As of the date of these financial statements, the amount of loss associated with these complaints, if any, cannot be reasonably estimated. 8 ENVVENO MEDICAL CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 8 – Stockholders’ Equity Stock Options From time to time, the Company issues options for the purchase of its common stock to employees and others. During the nine-months ended September 30, 2022, the Company granted options to employees for the purchase off forty-three thousand shares with a weighted average exercise price of $ 6.76 per share. The Company recognized $ 6.6 million and $ 0.7 million of share-based compensation related to stock options during the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $ 8.6 million of unrecognized stock-based compensation expense related to outstanding stock options that will be recognized over the weighted average remaining vesting period of 1.6 years. Note 9 – 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 September 30, 2022 and 2021: Schedule of Dilutive Net Loss Per Common Share 2022 2021 September 30, (In thousands) 2022 2021 Shares of common stock issuable upon exercise of warrants 4,570 4,554 Shares of common stock issuable upon exercise of options 3,438 485 Potentially dilutive common stock equivalents excluded from diluted net loss per share 8,008 5,039 9