Note
2 – Management’s Liquidity Plan
As
of March 31, 2022, the Company had a cash balance of $51.3
million and working capital of $50.4
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 March 31, 2022 are
sufficient to meet our obligations as they become due within one year after the date of this Quarterly Report, and sustain operations.
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.
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 $250 at each institution. There were aggregate uninsured cash balances of $51.1 and $54.5
million as of March 31, 2022 and December 31, 2021, respectively.
Note
5 – Property and Equipment
As
of March 31, 2022 and December 31, 2021, property and equipment consist of the following:
Schedule
of Property and Equipment
| |
|
March
31, |
|
|
December
31, |
|
| |
|
2022 |
|
|
2021 |
|
| Laboratory
equipment |
|
$ |
523 |
|
|
|
523 |
|
| Furniture
and fixtures |
|
|
155 |
|
|
|
124 |
|
| Computer
software and equipment |
|
|
185 |
|
|
|
164 |
|
| Leasehold
improvements |
|
|
209 |
|
|
|
193 |
|
| Construction
Work in Progress – Software |
|
|
251 |
|
|
|
251 |
|
| Total
property and equipment |
|
|
1,323 |
|
|
|
1,255 |
|
| Less:
accumulated depreciation |
|
|
(688 |
) |
|
|
(637 |
) |
| Property
and equipment, net |
|
$ |
635 |
|
|
|
618 |
|
Depreciation
expense amounted to $0.1 million
for the three months ended March 31, 2022 and 2021.
Depreciation expense is reflected in general and administrative expenses in the accompanying statements of operations.
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:
Schedule
of Accrued Expenses and Other Current Liabilities
| | |
March 31, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Accrued compensation costs | |
$ | 294 | | |
$ | 525 | |
| Accrued professional fees | |
| 62 | | |
| 84 | |
| Accrued research and development | |
| - | | |
| 60 | |
| Other accrued expenses | |
| 60 | | |
| 60 | |
| Total accrued expenses and other current liabilities | |
$ | 416 | | |
$ | 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. 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.
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 $2.2 million
and $0.1 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 $13.0 million of unrecognized stock-based compensation expense related to outstanding stock options that
will be recognized over the weighted average remaining vesting period of 1.9 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 March 31, 2022 and 2021:
Schedule of Dilutive Net Loss Per Common Share
| | |
| | | |
| | |
| | |
March 31, | |
| | |
2022 | | |
2021 | |
| Shares of common stock issuable upon exercise of warrants | |
| 6,312 | | |
| 4,402 | |
| Shares of common stock issuable upon exercise of options | |
| 3,454 | | |
| 257 | |
| Potentially dilutive common stock equivalents excluded from diluted net loss per share | |
| 9,766 | | |
| 4,659 | |
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.
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.
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.
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.
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.
