enVVeno Medical Corp 10-K

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Annual Report on Form 10-K and in our other Securities and Exchange Commission filings. The following discussion may contain predictions, estimates, and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. These risks could cause our actual results to differ materially from any future performance suggested below. Overview enVVeno Medical Corporation is a late clinical-stage medical device company focused on the advancement of innovative bioprosthetic (tissue-based) solutions to improve the standard of care for the treatment of venous disease. Chronic Venous Disease (CVD) is the world’s most prevalent chronic disease, impacting approximately 71% of the adult population of the U.S. Chronic Venous Insufficiency (CVI), is a large subset of CVD, which most often 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. The Company is developing surgical and non-surgical replacement venous valves for patients suffering from severe CVI of the deep venous system of the leg. The Company’s lead product is the VenoValve®, which is a first-in-class surgical replacement venous valve that is currently being evaluated in a U.S. pivotal study. The Company is also developing a second product called enVVe®, which is a first-in-class, non-surgical, transcatheter based replacement venous valve. The Company is currently conducting pre-clinical testing on enVVe. 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 VenoValve and enVVe are being developed first for approval by the U.S. Food and Drug Administration (FDA). We expect the VenoValve to be eligible for FDA approval first, followed two to three years later by enVVe. If approved, we expect the VenoValve and enVVe to co-exist, with the VenoValve as a surgical replacement venous valve option and enVVe as a non-surgical replacement venous valve option, although we cannot provide any assurance that either the VenoValve or enVVe will receive approval from the FDA (see the section entitled “Risk Factors” in our Annual Report on Form 10-K). There are currently no devices approved as surgical or non-surgical replacement venous valves, and there are currently no effective treatments for deep venous CVI caused by incompetent valves. 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. Results of Operations Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 Revenues As a late-stage clinical medical device Company, we are not currently generating revenue and our future revenue, if any, is dependent on our ability to commercialize our product candidates. We do not expect to begin generating revenue with respect to any of our product candidates in the near term. We hope to eventually achieve revenues by commercializing and selling our products or licensing our technologies to companies that have the resources and infrastructure in place to manufacture, market and sell our products. The commercialization and/or licensing of any of our products may take several years, if it is to occur at all, and depends on our ability to obtain regulatory approval. Net Loss We reported net losses of $23.5 million and $24.7 million for the years ended December 31, 2023 and 2022, respectively, representing a decrease in net loss of $1.2 million or 5%, resulting from, as described in further detail below, an increase in operating expenses of $0.3 million, and an increase in other income of $1.5 million. Selling, General and Administrative Expenses For the year ended December 31, 2023, selling, general and administrative expenses decreased by $3.3 million or 22%, to $11.7 million from $15.0 million for the year ended December 31, 2022. This decrease is primarily driven by share-based compensation. Expense related to grants made in 2021 was $4.2 million lower in 2023 than in 2022. This decrease was partially offset by the expense from grants made in 2022, resulting in a net reduction of $3.6 million in share-based compensation from 2022 to 2023. Selling, general and administrative expenses also decreased $0.2 million from warrants issued to a vendor in 2022 with no similar warrants issued in 2023, and $0.1 million from lower insurance cost in 2023. These decreases were partially offset by $0.6 million of higher cash compensation related to management bonuses paid during 2023 compared to 2022 when no bonus was paid. 29 Research and Development Expenses For the year ended December 31, 2023, research and development expenses increased by $3.7 million or 37%, to $13.6 million from $9.9 million for the year ended December 31, 2022. The increase is due to an increase of $2.7 million in costs for the SAVVE trial from $3.5 million in 2022 to $6.2 million in 2023, and $1.1 million in compensation from the increases in staffing also to support the SAVVE trial, partially offset by a decrease of $0.1 million in other lab costs for development and other preparation for the enVVe trials. Other Income Other income in 2023 was $1.7 million consisting of $1.2 million in interest income and realized gains, and $0.5 million of unrealized gains, all related to our investments in US Treasury securities. Interest income and realized gains were $0.2 million, and unrealized gains were $0.1 million in 2022. Liquidity and Capital Resources For the year ended December 31, 2023, the Company incurred losses from operations of $25.2 million and used $18.9 million cash in operating activities. The net cash used in operating activities during 2023 increased by $3.3 million from $15.6 million for the year ended December 31, 2022, primarily due to the increase in research and development expenses from 2022 to 2023. Our cash balance as of December 31, 2023, is $3.6 million. In addition, we have $42.8 million in investments, for total cash and investments of $46.4 million. The operating losses and the uses of cash are primarily due to the Company’s product research and development and administrative activities. Administrative functions relate to costs to support the Company’s public reporting and investor relations activities as well as internal administrative functions. Research and development activities are for continued product development and clinical trials for the VenoValve and for the enVVe. The Company will continue to incur these costs to complete its clinical trials, enhance products, develop new products, and operate as a public company for the foreseeable future as we seek to obtain regulatory approval for our studies and product candidates. We are not currently generating revenue. We do not currently have material commitments for capital expenditures or other expenditures with the exception of our facility lease commitment of $0.3 million per year. We expect a modest increase in purchases of property and equipment as we continue SAVVE, commence TAVVE, and plan for commercialization of the VenoValve. Our future capital requirements will remain dependent upon a variety of factors, especially including the success of our clinical trials and related product development costs and our ability to successfully bring products to market. We anticipate that our cash burn rate will increase from current levels of approximately $4 million to $5 million per quarter to $5 million to $6 million per quarter in 2025. Even after considering this increase, we should have sufficient cash to fund operations through late 2025. We have historically funded our operations through financing activities such as the capital raise completed in 2023 and will need to raise additional capital in the future. Any inability to raise additional financing would have a material adverse effect on us. Based upon our cash and working capital as of December 31, 2023, we have sufficient capital resources to meet our obligations as they become due within at least one year after the date of this Annual Report and sustain operations. 30 Off-Balance Sheet Arrangements None. Contractual Obligations As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information requested by paragraph (a)(5) of this Item. ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. ITEM 8. Financial Statements and Supplementary Data Please see the financial statements beginning on page F-1 following the signature pages in this Annual Report on Form 10-K and incorporated herein by reference. 31 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable.