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ENVVENO MEDICAL CORPORATION
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
ITEM 1 – Financial Statements
ENVVENO MEDICAL CORPORATION
CONDENSED BALANCE SHEETS
(unaudited)
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (In thousands except par values, unless otherwise indicated) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Security deposits and other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | - | - | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, par value $, shares authorized: shares issued or outstanding | - | - | ||||||
| Common stock, par value $, shares authorized, shares issued and outstanding as of March 31, 2022 and December 31, 2021 | - | - | ||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See Notes to these Unaudited Condensed Financial Statements
| 1 |
ENVVENO MEDICAL CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| (In thousands, except per share data) | ||||||||
| Operating Expenses: | ||||||||
| Selling, general and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income: | ||||||||
| Interest income, net | ( | ) | ( | ) | ||||
| Other expense | - | ( | ) | |||||
| Total Other Income | ( | ) | ( | ) | ||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net Loss Per Basic and Diluted Common Share: | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Common Shares Outstanding: | ||||||||
| Basic and Diluted | ||||||||
See Notes to these Unaudited Condensed Financial Statements
| 2 |
ENVVENO MEDICAL CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
(In thousands, unless otherwise indicated)
(unaudited)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at January 1, 2022 | $ | - | $ | $ | ( | ) | $ | |||||||||||||
| Shared-Based Compensation | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common stock issued in public offering | - | - | ||||||||||||||||||
| Common stock issued for exercise of warrants | - | - | ||||||||||||||||||
| Shared-Based Compensation | - | - | - | |||||||||||||||||
| Fair Value of Warrants Issued | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See Notes to these Unaudited Condensed Financial Statements
| 3 |
ENVVENO MEDICAL CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands, unless otherwise indicated)
(unaudited)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Share-based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right of use assets | ||||||||
| Deposit applied to consulting services | - | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | - | ( | ) | |||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Total adjustments | ( | ) | ||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from public offering of common stock and warrants, net | - | |||||||
| Proceeds from Warrant Exercises | - | |||||||
| Net Cash Provided by Financing Activities | - | |||||||
| Net (Decrease) Increase in Cash | ( | ) | ||||||
| Cash, cash equivalents - Beginning of period | ||||||||
| Cash, cash equivalents - End of period | $ | $ | ||||||
For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash Received During the Period For: | ||||||||
| Interest, net | $ | ( | ) | $ | ( | ) | ||
| Non-Cash Financing Activities | ||||||||
| Fair value of warrants issued | $ | $ | ( | ) | ||||
See Notes to these Unaudited Condensed Financial Statements
| 4 |
ENVVENO MEDICAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 1 – Business Organization and Nature of Operations
enVVeno Medical Corporation is a med-tech company focused on improving the standard of care in the treatment of venous disease. We are developing tissue-based solutions that are designed to be life sustaining or life enhancing for patients with deep venous Chronic Venous Insufficiency (CVI). CVI occurs when valves inside of the veins of the leg fail, resulting in insufficient blood being returned to the heart. Our 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 lead product is a porcine based device to be surgically implanted in our deep venous system of the leg, and is called the VenoValve®. The VenoValve is currently being evaluated in the SAVVE U.S. pivotal trial for the purpose of obtaining approval to market and sell the device from the U.S. Food and Drug Administration (“FDA”). Our team of officers and directors has been affiliated with numerous medical devices that have received FDA approval or CE marking and have been commercially successful. We currently lease a 14,507 sq. ft. manufacturing facility in Irvine, California, where we manufacture medical devices for our clinical trials, and which has capacity for commercial manufacturing.
Note 2 – Management’s Liquidity Plan
As
of March 31, 2022, the Company had a cash balance of $
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 March 31, 2022 and December 31, 2021, and for the three months ended March 31, 2022 and 2021. The results of operations for the three months ended March 31, 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.
| 5 |
ENVVENO MEDICAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 4 – 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 $
Note 5 – Property and Equipment
As of March 31, 2022 and December 31, 2021, property and equipment consist of the following:
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Laboratory equipment | $ | |||||||
| Furniture and fixtures | ||||||||
| Computer software and equipment | ||||||||
| Leasehold improvements | ||||||||
| Construction Work in Progress – Software | ||||||||
| Less: accumulated depreciation | ( |
) | ( |
) | ||||
| Property and equipment, net | $ | |||||||
Depreciation
expense amounted to $
| 6 |
ENVVENO MEDICAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
Note 6 – Accrued Expenses and Other Current Liabilities
As of March 31, 2022, and December 31, 2021, accrued expenses and other current liabilities consist of the following:
March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accrued compensation costs | $ | $ | ||||||
| Accrued professional fees | ||||||||
| Accrued research and development | - | |||||||
| Other accrued expenses | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
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. 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 March 31, 2022.
| 7 |
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. The Company recognized $ million and $ million of share-based compensation related to stock options during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there was $ million of unrecognized stock-based compensation expense related to outstanding stock options that will be recognized over the weighted average remaining vesting period of years.
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Shares of common stock issuable upon exercise of warrants | ||||||||
| Shares of common stock issuable upon exercise of options | ||||||||
| Potentially dilutive common stock equivalents excluded from diluted net loss per share | ||||||||
| 8 |
Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited condensed financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Such forward-looking statements involve significant risks and uncertainties. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements. Such forward-looking statements also involve other factors which may cause our actual results, performance or achievements to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements and to vary significantly from reporting period to reporting period. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be different from the expectations expressed in this Quarterly Report. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Unless the context requires otherwise, references in this document to “NVNO”, “we”, “our”, “us” or the “Company” are to EnVVeno Medical Corporation
Overview
enVVeno Medical Corporation is a med-tech company focused on improving the standard of care in the treatment of venous disease. We are developing tissue-based solutions that are designed to be life sustaining or life enhancing for patients with Chronic Venous Insufficiency (CVI). CVI occurs when valves inside of the veins of the leg fail, resulting in insufficient blood being returned to the heart. We aim to develop products to address large unmet medical needs by either offering treatments where none currently exist or by substantially increasing the current standards of care. Our lead product is a porcine based device to be surgically implanted in the deep venous system of the leg and is called the VenoValve®. The VenoValve is currently being evaluated in the SAVVE U.S. pivotal trial for the purpose of obtaining approval to market and sell the device from the U.S. Food and Drug Administration (“FDA”). 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.
| 9 |
VenoValve
The VenoValve is a porcine based valve developed at enVVeno Medical to be implanted in the deep venous system of the leg to treat severe CVI. By reducing reflux, and lowering pressure (venous hypertension) within the deep venous system of the leg, the VenoValve has the potential to reduce or eliminate the symptoms of severe deep venous CVI, including the potential to heal recurring venous leg ulcers. The current version of the VenoValve is designed to be implanted into the femoral vein of the patient in an open surgical procedure via a 5-to-6-inch incision in the upper thigh.
There are presently no FDA approved medical devices to address valvular incompetence in the deep venous system, or effective treatments for deep venous CVI. Current treatment options include compression garments, or constant leg elevation, and wound care for venous ulcers. These treatments are generally ineffective, as they attempt to alleviate the symptoms of CVI without addressing the underlying causes of the disease. In addition, we believe compliance with compression garments and leg elevation is extremely low, especially among the elderly. The premise behind the VenoValve is that by reducing the underlying causes of CVI, reflux and venous hypertension, the debilitating symptoms of CVI will decrease, resulting in improvement in the quality of the lives of CVI sufferers.
We estimate that there are approximately 2.4 million people in the U.S. that suffer from deep venous CVI due to valvular incompetence.
VenoValve Clinical Status
After consultation with the FDA, and as a precursor to the U.S. pivotal trial, we conducted a small first-in-human study for the VenoValve in Colombia which included eleven (11) patients. In addition to providing safety and efficacy data, the purpose of the first-in-human study was to provide proof of concept, and to provide valuable feedback to make any necessary product modifications or adjustments to our surgical implantation procedure for the VenoValve prior to conducting the U.S. pivotal trial. Endpoints for the VenoValve first-in-human study included safety (device related adverse events), reflux, measured by doppler, a VCSS score used by the clinician to measure disease severity and progress, a VAS score used by the patient to measure pain, and a quality of life measurement.
Final results from the one (1) year first-in-human study were presented at the Charing Cross International Symposium in April of 2021. Among the eleven (11) patients in the study, reflux improved an average of 54%, Venous Clinical Severity Scores (“VCSSs”) improved an average of 56%, and visual analog scale (VAS) scores, which are used by patients to measure pain, improved an average of 76%, all at one (1) year when compared to pre-surgery levels. VCSS scores are commonly used by clinicians in practice and in clinical trials to objectively assess outcomes in the treatment of venous disease, and include ten characteristics including pain, inflammation, skin changes such as pigmentation and induration, the number of active ulcers, and ulcer duration. The improvement in VCSS scores is significant and indicates the VenoValve patients who had severe CVI pre-surgery, had mild CVI or the complete absence of disease at one-year post surgery.
There were no device related safety incidences during the one (1) year first-in-human study. Non-device related safety incidences were minor and included one (1) fluid pocket (which was aspirated), intolerance from Coumadin anticoagulation therapy, three (3) minor wound infections (treated with antibiotics), and one occlusion due to patient non-compliance with anti-coagulation therapy.
In preparation for the VenoValve U.S. pivotal trial, on March 5, 2021, we submitted an IDE application with the FDA.
An investigational device exemption or IDE from the FDA is required before a medical device company can proceed with a pivotal trial for a class III medical device. On April 1, 2021, we received notification from the FDA that our IDE application was approved. We have named the U.S. pivotal trial for the VenoValve the SAVVE (Surgical Anti-reflux Veno Valve Endoprosthesis) study. It is a prospective, non-blinded, single arm, multi-center study of seventy-five (75) CVI patients to be enrolled at up to twenty (20) U.S. sites.
No product modifications for the VenoValve were necessary following the first-in-human study and the SAVVE trial is evaluating the same device that was used in the first-in-human study. Endpoints for the SAVVE trial mirror those endpoints used for the first-in-human study. The primary safety endpoint for the pivotal trial is a material adverse safety event (mortality, deep wound infection, major bleeding, ipsilateral deep vein thrombosis, pulmonary embolism) in no more than twenty six percent (26%) of the patients at one (1) month post implantation, and the primary effectiveness endpoint for the pivotal trial is improvement in reflux of at least thirty percent (30%), measured at six (6) months post VenoValve implantation. In the first-in-human study there were no reported material adverse safety events at one (1) month post implantation, and reflux improved an average of fifty six percent (56%) at six (6) months post implantation. VCSS scoring to measure disease manifestations, VAS scores to measure pain, and quality of life measurements will also be monitored in the study.
| 10 |
On August 3, 2020, we announced that the FDA granted Breakthrough Device Designation status to the VenoValve. The FDA’s Breakthrough Devices Program was established to enable priority review for devices that provide more effective treatment or diagnosis of life threatening or irreversibly debilitating diseases or conditions. The goal of the FDA’s Breakthrough Devices Program is to provide patients and health care providers with timely access to medical devices by speeding up their development, assessment, and review, while preserving the FDA’s mission to protect and promote public health.
At the end of the VenoValve first-in-human study, eight (8) study participants agreed to additional monitoring. In August of 2021, longer term follow-up data was presented at the Society of Vascular Surgery Conference in San Diego, for the cohort of eight (8) patients. That data indicated no recurrences of the severe CVI that was present pre-VenoValve, including no ulcer recurrences for those patients whose venous ulcers had healed following VenoValve surgery. There were no reported safety issues from the end of one (1) year first-in-human study to the end of the two (2) year reporting period. In addition, the patients continued to improve, reporting 63%, 60%, and 93%, average improvements in reflux, VCSS, and VAS scores, respectively, at an average of two (2) years post VenoValve surgery compared to pre-VenoValve levels.
In October of 2021, we announced that the first patient in the SAVVE pivotal trial underwent successful VenoValve implantation surgery and had been discharged from the hospital. During April 2022 our twentieth site in the SAVVE study became active and is eligible to enroll patients.
The resurgence of COVID and the Omicron variant had both direct and indirect consequences on our clinical trial. Several of our clinical sites put elective surgeries on hold and prohibited potential study subjects from coming to the hospital for screening. Further, as reported in the media, COVID resurgences put an enormous strain on all hospital resources including clinical staffs. In addition to caring for the influx of COVID patients, hospitals become short staffed due to their own employees’ COVID sicknesses, resulting in clinical staff being reassigned to cover the shortfall. The lack of available clinical personnel both slows enrollment and impacts the speed at which we can activate clinical sites.
Finally, COVID impacts our patient population. Patients with COVID or who have had COVID within ninety (90) days of their screening, are excluded from our study until after the ninety (90) day period has passed. In addition, concerns about getting COVID impact the patients’ willingness to undergo an elective surgical procedure with a one-night hospital stay. As hospital clinical operations return to more normal levels, our goal is to fully enroll the SAVVE pivotal trial by the end of 2022 or the beginning of 2023. We continue to monitor the ongoing overall impact of COVID on the SAVVE clinical trial and will issue updates when appropriate.
In February of 2021, we raised $41.4 million of capital in a public offering of our common stock. In September of 2021, we raised $20 million dollars of capital in a registered direct offering priced at the market under Nasdaq rules and purchased by a fund managed by Perceptive Advisors, a leading life sciences investment firm. We finished 2021 with approximately $55 million of cash and had approximately $51.3 million of cash at March 31, 2022. At our existing cash burn rate of approximately $4 million per quarter, we should have sufficient cash to fund operations through the end of 2024 and into 2025. With primary endpoints following full enrollment in the SAVVE pivotal trial of thirty (30) days for safety, and six (6) months for effectiveness, we expect to have primary endpoint data well in advance of the need to raise additional capital.
| 11 |
Results of Operations
Comparison of the three months ended March 31, 2022 and 2021
Overview
We reported net losses of $5.3 million and $2.8 million for the three months ended March 31, 2022 and 2021, respectively, representing an increase in net loss of $2.5 million, or 89%, resulting from an increase in operating expenses.
Revenues
As a developmental stage Company, our revenue, if any, is expected to be diminutive and dependent on our ability to commercialize our product candidates. We are not currently generating revenue and do not expect significant revenue until we successfully commercialize our lead product candidate.
Selling, General and Administrative Expenses
For the three months ended March 31, 2022, selling, general and administrative expenses increased by $2.6 million or 222%, to $3.8 million from $1.2 million for the three months ended March 31, 2021. Of this increase, $2.1 million was due to share based compensation from grants made during 2021, which increased share-based compensation cost to $2.2 million in 2022 from $0.1 million in 2021.
The remaining $0.5 million increase reflects $0.2 million from consulting for reimbursement codes for the Company’s product once commercially approved, $0.1 million from higher Delaware franchise taxes in 2022 which increased due to changes in our capital structure, $0.1 million from higher information technology and other office expense to support increases in staff, and $0.1 million in higher insurance premiums related to our D&O, cyber security and product liability insurance coverages.
Research and Development Expenses
For the three months ended March 31, 2022, research and development expenses decreased by $0.1 million or 5%, to $1.5 million from $1.6 million for the three months ended March 31, 2021. This decrease primarily resulted from $0.3 million in costs related the Coreograft product development in 2021, which we did not incur in 2022 due the change in our strategic direction and decision to focus on development of the VenoValve, partially offset by a $0.2 million increase in lab and personnel costs to support the VenoValve pivotal trial and continued development.
Liquidity and Capital Resources
For the three-months ended March 31, 2022, the Company incurred losses from operations of $5.3 million and used $3.3 million cash in operating activities. The net cash used in operating activities during the 2022 period decreased by $0.5 from $3.8 million for the quarter ended March 31, 2021.
The losses and the uses of cash are primarily due to the Company’s administrative and product research and development 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. The Company will continue to incur these costs to complete its clinical trials, enhance products, develop new products, and operate as a public company. Although we have discretion in how we use the Company’s cash resources, we expect to continue these activities for the foreseeable future as we seek to obtain regulatory approval for our lead product candidate. We are not currently generating revenue and do not expect significant revenue until we successfully commercialize our lead product candidate.
Our cash flows from investing activity have historically consisted of purchases of property and equipment for our lab and offices. In the quarter ended March 31, 2022, we purchased $0.1 million of property and equipment consisting primarily of lab and test equipment. We do not currently have material commitments for capital expenditures or other expenditures with the exception of our facility lease commitment of $0.4 million per year. However, we expect a modest increase in purchases of property and equipment as we continue SAVVE and plan for commercialization of the VenoValve.
The Company has historically funded its operations through financing activities such as the capital raises completed in 2021. During 2021, the Company raised an aggregate of $57.4 million in net proceeds in private and public placements of its securities. Our cash balance as of March 31, 2022, is $51.3 million.
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. At our existing cash burn rate of approximately $4 million per quarter, we should have sufficient cash to fund operations through the end of 2024 and into 2025. With primary endpoints following full enrollment in the SAVVE pivotal trial of thirty (30) days for safety, and six (6) months for effectiveness, we expect to have primary endpoint data well in advance of the need to raise additional capital. Any inability to raise additional financing would have a material adverse effect on us.
Based upon our cash and working capital as of March 31, 2022, we have sufficient capital resources to meet our obligations as they become due for at least one year after the date of this Report and sustain operations.
As of April 28, 2022, we had a cash balance of $50.5 million.
The COVID-19 pandemic continues to disrupt the global economy and has negatively impacted large populations including people and businesses that may be directly or indirectly involved with the operation of our Company and the manufacturing, development, and testing of our product candidates. The resurgence of COVID and the Omicron variant had both direct and indirect consequences on our clinical trial. Several of our clinical sites put elective surgeries on hold and prohibited potential study subjects from coming to the hospital for screening. Further COVID resurgences put an enormous strain on all hospital resources including clinical staffs. The lack of available clinical personnel both slows enrollment and impacts the speed at which we can activate clinical sites.
COVID has also impacted our patient population. Patients with COVID or who have had COVID within ninety (90) days of their screening, are excluded from our study until after the ninety (90) day period has passed. In addition, concerns about getting COVID impact the patients’ willingness to undergo an elective surgical procedure with a one-night hospital stay. As hospital clinical operations return to more normal levels, our goal is to fully enroll the SAVVE pivotal trial by the end of 2022 or the beginning of 2023. We continue to monitor the ongoing overall impact of COVID on the SAVVE clinical trial and will issue updates when appropriate.
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Off-Balance Sheet Arrangements
None.
Contractual Obligations
As a smaller reporting company, we are not required to provide the information requested by paragraph (a)(5) of this Item.
Critical Accounting Policies and Estimates
For a description of our critical accounting policies, see Note 3 – Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
Item 3. 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 4: Controls and Procedures
Disclosure Controls and Procedures
Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (who is our Principal Executive Officer) and our Chief Financial Officer (who is our Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of March 31, 2022, pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022.
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Changes in Internal Control over Financial Reporting
During the three months ended March 31, 2022, there were no changes in our internal controls over financial reporting, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we may be subject to litigation and arbitration claims incidental to its business. Such claims may not be covered by our insurance coverage, and even if they are, if claims against us are successful, they may exceed the limits of applicable insurance coverage.
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. The complaint asserts 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 with the Company. Mr. Rankin alleges that he was forced to resign, however, we believe that he did not give the Company notice or an opportunity to cure the allegations. The complaint seeks, inter alia, back pay, unpaid wages, compensatory damages, punitive damages, attorneys’ 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 complaint asserts several causes of action, including defamation, unlawful labor code violations, sex-based discrimination, unfair competition, and seeks damages for lost wages, emotional and mental distress, consequential damages, punitive damages and attorney’s fees and costs. Mr. Rankin resigned as the Company’s Chief Financial Officer, Secretary and Treasurer on March 30, 2020. 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 June 27, 2022.
Item 1A. Risk Factors
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. Our current risk factors are set forth in our Form 10-K, filed with the SEC on March 28, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine and Safety Disclosure
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
| Exhibit | Description | |
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act. * | |
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Sarbanes-Oxley Act. * | |
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act** | |
| 101.INS | Inline XBRL Instance Document* | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document* | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document* | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
| ** | Furnished and not filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: April 29, 2022 | ENVVENO MEDICAL CORPORATION | |
| By: | /s/ Robert Berman | |
| Robert Berman | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Craig Glynn | |
| Craig Glynn | ||
| Chief Financial Officer | ||
| (Principal Financing and Accounting Officer) | ||
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