enVVeno Medical Corp 10-Q

ITEM 1 – Financial Statements ENVVENO MEDICAL CORPORATION CONDENSED BALANCE SHEETS (Unaudited) September 30, 2023 December 31, 2022 (In thousands except par values, unless otherwise indicated) Assets Current Assets: Cash and cash equivalents $ 4,946 $ 4,555 Short-term investments 20,751 34,489 Prepaid expenses and other current assets 520 392 Total current assets 26,217 39,436 Property and equipment, net 385 521 Operating lease right-of-use assets, net 1,426 1,673 Security deposits and other assets 66 31 Total assets $ 28,094 $ 41,661 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable, accrued expenses and other current liabilities $ 1,700 $ 1,216 Current portion of operating lease liabilities 331 314 Total current liabilities 2,031 1,530 Long-term operating lease liabilities 1,148 1,402 Total liabilities 3,179 2,932 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 shares issued and outstanding as of September 30, 2023 and December 31, 2022 - - Additional paid-in capital 149,302 145,249 Accumulated deficit ( 124,387 ) ( 106,520 ) Total stockholders’ equity 24,915 38,729 Total liabilities and stockholders’ equity $ 28,094 $ 41,661 See Notes to these Condensed Financial Statements 1 ENVVENO MEDICAL CORPORATION CONDENSED STATEMENTS OF OPERATIONS (Unaudited) 2023 2022 2023 2022 For the Three Months Ended For the Nine Months Ended September 30, September 30, 2023 2022 2023 2022 (In thousands, except per share data) Operating Expenses: Selling, general and administrative expenses 2,551 3,659 8,358 11,355 Research and development expenses 2,798 2,492 10,602 7,117 Loss from Operations ( 5,349 ) ( 6,151 ) ( 18,960 ) ( 18,472 ) Other (Income) Expense: Realized (gain) from sales of trading securities ( 148 ) - ( 398 ) - Unrealized (gain) loss from trading securities ( 156 ) 21 ( 567 ) 134 Interest income, net ( 44 ) ( 75 ) ( 128 ) ( 117 ) Total Other (Income) Expense ( 348 ) ( 54 ) ( 1,093 ) 17 Net Loss $ ( 5,001 ) $ ( 6,097 ) $ ( 17,867 ) $ ( 18,489 ) Net Loss Per Basic and Diluted Common Share: $ ( 0.45 ) ( 0.54 ) ( 1.59 ) ( 1.65 ) Weighted Average Number of Common Shares Outstanding: Basic and Diluted 11,231 11,229 11,231 11,229 See Notes to these Condensed Financial Statements 2 ENVVENO MEDICAL CORPORATION CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands, unless otherwise indicated) (Unaudited) Shares Amount Capital Deficit Equity Three Months Ended September 30, 2023 Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance at July 1, 2023 9,472 - $ 148,198 $ ( 119,386 ) $ 28,812 Share-Based Compensation - - 1,104 - 1,104 Net loss - - - ( 5,001 ) ( 5,001 ) Balance at September 30, 2023 9,472 $ - $ 149,302 $ ( 124,387 ) $ 24,915 Three Months Ended September 30, 2022 Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance at July 1, 2022 9,470 - $ 140,801 $ ( 94,243 ) $ 46,558 Share-Based Compensation - - 2,210 - 2,210 Net loss - - - ( 6,097 ) ( 6,097 ) Balance at September 30, 2022 9,470 $ - $ 143,011 $ ( 100,340 ) $ 42,671 Nine Months Ended September 30, 2023 Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance at January 1, 2023 9,472 $ - $ 145,249 $ ( 106,520 ) $ 38,729 Share-Based Compensation - - 4,053 - 4,053 Net loss - - - ( 17,867 ) ( 17,867 ) Balance at September 30, 2023 9,472 $ - $ 149,302 $ ( 124,387 ) $ 24,915 Nine Months Ended September 30, 2022 Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance at January 1, 2022 9,470 $ - $ 136,255 $ ( 81,851 ) $ 54,404 Balance 9,470 $ - $ 136,255 $ ( 81,851 ) $ 54,404 Share-Based Compensation - - 6,756 - 6,756 Net loss - - - ( 18,489 ) ( 18,489 ) Balance at September 30, 2022 9,470 $ - $ 143,011 $ ( 100,340 ) $ 42,671 Balance 9,470 $ - $ 143,011 $ ( 100,340 ) $ 42,671 See Notes to these Condensed Financial Statements 3 ENVVENO MEDICAL CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (In thousands, unless otherwise indicated) (Unaudited) 2023 2022 For the Nine Months Ended September 30, 2023 2022 Cash Flows from Operating Activities Net loss $ ( 17,867 ) $ ( 18,489 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation 4,052 6,756 Depreciation and amortization 165 158 Amortization of right-of-use assets 247 237 Unrealized (gain) loss from investments, net ( 567 ) 134 Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 155 ) ( 69 ) Security deposit and other assets ( 8 ) 20 Accounts payable, accrued expenses and other current liabilities 484 ( 293 ) Operating lease liabilities ( 236 ) ( 217 ) Net Cash Used in Operating Activities ( 13,885 ) ( 11,763 ) Cash Flows from Investing Activities Purchase of property and equipment ( 29 ) ( 106 ) Purchases of investments ( 24,276 ) ( 42,214 ) Maturities of investments 38,581 2,250 Net Cash Provided by (Used in) Investing Activities 14,276 ( 40,070 ) Net Increase (Decrease) in Cash, Cash Equivalents 391 ( 51,833 ) Cash, cash equivalents - Beginning of period 4,555 54,728 Cash, cash equivalents - End of period $ 4,946 $ 2,895 See Notes to these 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, 2023 2022 Supplemental Disclosures of Cash Flow Information: Non-Cash Financing Activities: Fair value of warrants issued in satisfaction of trade payable $ - $ 130 See Notes to these 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 is developing surgical and non-surgical replacement venous valves for patients suffering from severe Chronic Venous Insufficiency (CVI) of the deep venous system of the leg. CVI most often occurs when valves inside 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. The Company’s lead product is the VenoValve® which is currently being evaluated in a U.S. pivotal study. The Company is also developing a second product called enVVe®, which is a transcatheter based replacement venous valve. Both the VenoValve and enVVe are designed to act as one-way valves, to help assist in propelling blood up the veins of the leg, and back to the heart and lungs. The Company develops and manufactures its 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 The Company has incurred historical losses and operating cash outflows, expects to continue to do so 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, 2023 are sufficient to meet our obligations as they become due within one year after the date of this Quarterly Report. 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, 2023 and December 31, 2022, and for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 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, 2022 included in the Company’s Form 10-K filed with the SEC on March 2, 2023. The condensed balance sheet as of December 31, 2022 has been derived from the Company’s audited financial statements. Note 4 – Investments The components of investments were as follows at September 30, 2023 and December 31, 2022: Schedule of Components of Investments (In thousands) September 30, 2023 December 31, 2022 Cash Equivalents Short-Term Investment Cash Equivalents Short-Term Investments Fair Value Level 1 U.S. Government securities $ 4,678 $ 20,751 $ 4,040 $ 34,489 Total debt investments $ 4,678 $ 20,751 $ 4,040 $ 34,489 Unrealized and realized gains and losses on the accompanying statement of operations result from fixed-income securities and 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. 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 $ 0.25 million at each institution. There were aggregate uninsured cash balances of $ 4.7 million and $ 4.3 million as of September 30, 2023 and December 31, 2022, respectively. Note 6 – Accounts Payable, Accrued Expenses and Other Current Liabilities As of September 30, 2023, and December 31, 2022, accounts payable, accrued expenses and other current liabilities consist of the following: Schedule of Accounts Payable Accrued Expenses and Other Current Liabilities (In thousands) September 30, 2023 December 31, 2022 Accounts payable $ 1,235 $ 648 Accrued compensation costs 360 391 Accrued professional fees 19 62 Other accrued expenses 86 115 Total accrued expenses and other current liabilities $ 1,700 $ 1,216 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 as the Company’s Chief Financial Officer, Secretary, and Treasurer on 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. The complaint asserts causes of action alleging failure to timely pay Mr. Rankin’s accrued and unused vacation and three months’ severance under his July 16, 2018 employment agreement, Labor Code violations, and unfair competition, and seeks damages for back pay, unpaid wages, compensatory damages, punitive damages, and attorney’s fees and costs. 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 second complaint asserts causes of action alleging defamation, 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 denies all claims in both matters (which have now been consolidated), is vigorously defending same, and has asserted counterclaims against Mr. Rankin contending that he breached his fiduciary duty and employment agreement with the Company and the Company incurred damages as a result. The Company continues to believe it has meritorious defenses to both matters which are currently set for trial on October 30, 2023. 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 September 30, 2023. 8 ENVVENO MEDICAL CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 8 – Stockholders’ Equity Stock Options During the nine-months ended September 30, 2023, the Company granted options to employees for the purchase of one-hundred-ten thousand shares with a weighted average exercise price of $ 6.70 per share. The Company recognized $ 4.1 million and $ 6.6 million of share-based compensation related to stock options during the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $ 4.5 million of unrecognized stock-based compensation expense related to outstanding stock options that will be recognized over the weighted average remaining vesting period of 1.3 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, 2023 and 2022: Schedule of Dilutive Net Loss Per Common Share (In thousands) 2023 2022 September 30, (In thousands) 2023 2022 Shares of common stock issuable upon exercise of warrants 4,506 4,570 Shares of common stock issuable upon exercise of options 4,254 3,838 Potentially dilutive common stock equivalents excluded from diluted net loss per share 8,760 8,408 Note 10 – Subsequent Events On October 6, 2023, the Company entered into a Securities Purchase Agreement with certain investors. The transaction closed on October 11, 2023. The following table provides an overview of this transaction. Schedule of Common Stock and Warrants Activity Date Description Unit Type Number of shares Number of pre-funded warrants Number of Tranche A Warrants Number of Tranche B Warrants Net Proceeds (In thousands) October 11, 2023 PIPE Offering Common Stock, warrants and pre-funded warrants 3,845 978 4,823 4,823 $ 25,686 The purchase price was $ 5.806 for each unit consisting of one share of common stock (or one Pre-Funded Warrant in lieu thereof), one Tranche A Warrant and one Tranche B Warrant (the pre-funded warrants, Tranche A Warrants and Tranche B Warrants, collectively, the “Warrants”). The Warrants are immediately exercisable at an exercise price of $ 6.945 per share for the Tranche A Warrants, $ 8.334 per share for the Tranche B Warrants, and a nominal exercise price of $ 0.0001 per share for the Pre-Funded Warrants. The Tranche A Warrants will expire on the earlier of (i) the thirtieth (30th) calendar day following the release by the Company of initial top line efficacy data including rVCSS data constituting a 3 or more-point improvement for the SAVVE clinical trial or (ii) October 11, 2024. The Tranche B Warrants will expire on the earlier of (i) the thirtieth (30th) calendar day following the PMA Approval by the U.S. FDA for the VenoValve or (ii) October 12, 2026. The Pre-Funded Warrants will terminate when they are exercised in full. The Company also issued to the placement agent in the transaction warrants to purchase 241,000 shares of Common Stock at an exercise price of $ 6.945 which expire on October 11, 2028 . 9