Envveno Medical Corp annual report, FY2019

Business context and reporting period

Registrant: Hancock Jaffe Laboratories, Inc. (Nasdaq: HJLI; warrants: HJLIW), a pre-revenue medical-device developer. The supplied filing is its Form 10-K for the fiscal year ended December 31, 2019, filed March 18, 2020; it does not provide standalone fourth-quarter results. The request metadata names Envveno Medical Corp, but the filing identifies Hancock Jaffe Laboratories, Inc.

The company’s lead candidates are VenoValve, a porcine-tissue implant intended to treat deep-vein chronic venous insufficiency, and CoreoGraft, a bovine-tissue conduit for coronary bypass surgery. Both require FDA review and clinical development. The company’s stated strategy is to license, sell, or partner its products with larger medical-device companies.

Financial performance and position

• 2019 revenue fell approximately 83%; all reported revenue was royalty income. The LeMaitre royalty term ended March 18, 2019, and no further royalty income under that agreement is expected. No contract-research revenue was recorded in 2019.
• Net loss narrowed 42%, largely because 2018 included $6.56 million of debt-discount amortization and other noncash financing items. This improvement does not reflect a material revenue base.
• Selling, general and administrative expense decreased 24% to $4.91 million; research and development expense increased 78% to $2.21 million, principally reflecting VenoValve trial and personnel costs.
• The company reported no meaningful gross-margin trend; the filing does not provide a clear gross-profit figure for these development-stage operations. It recorded a $588,822 impairment of its bioprosthetic heart-valve patent asset after deprioritizing that program.
• At year-end, cash and cash equivalents were $1.31 million, restricted cash was $810,055, working capital was negative $452,434, total assets were $3.43 million, total liabilities were $2.44 million, and stockholders’ equity was $989,940. Liabilities included $856,633 of operating-lease obligations; the balance sheet showed no convertible-note balance.
• 2019 financing provided $5.64 million net: $2.32 million from a private placement and $3.32 million from a public offering. Cash and cash equivalents declined from $2.74 million at 2018 year-end. Capital expenditures were $363,891.

Material changes, outlook, and risks

• VenoValve: The company completed first-phase implantations in Colombia during 2019. In March 2020, it reported 11 implants and aggregate improvements from preoperative levels of 51% in reflux, 61% in VCSS scores, and 65% in pain scores. One patient’s device was occluded and not functioning as intended; reported safety events included a fluid pocket, anticoagulation intolerance, and two minor wound infections. These are small, early-stage results, not evidence of FDA approval or definitive efficacy. Management hoped to submit a U.S. pivotal-trial IDE application in Q3 2020.
• CoreoGraft: A January 2020 report described a six-month feasibility study in nine sheep, with grafts reported patent and functional through 180 days. Management planned to explore a first-in-human study outside the U.S. These are animal-study findings.
• The independent auditor issued an unmodified opinion on the financial statements but included a going-concern explanatory paragraph, citing losses, a working-capital deficit, and the need for additional funding. Management said further capital was necessary to meet obligations and sustain operations; failure to obtain financing could force the company to curtail or discontinue operations.
• After year-end, the company raised $650,000 gross in a February 2020 bridge placement of 1.3 million shares and warrants for 1.3 million shares at $0.79 per share. The filing also warns that additional equity or convertible financing could materially dilute existing holders.
• Nasdaq had notified the company that its share price was below the $1 minimum-bid requirement, with an initial compliance deadline of April 13, 2020. At year-end, equity of $989,940 was also below the stated $2.5 million Nasdaq minimum; the company expected a related notice.
• Litigation includes ATSCO’s amended claim of $1,606,820 plus damages and interest, disputed by the company. A court attachment order for $810,055 is reflected as restricted cash. Management said it had fully accrued the disputed invoices and had begun settlement discussions; trial was set for July 2020. A separate law-firm invoice claim of $178,926 plus interest and costs was also disputed and accrued.
• Other key risks include dependence on regulatory approval and future financing, no established sales infrastructure, reliance on tissue and component suppliers, uncertain commercialization and reimbursement, and potential dilution. No product-revenue or profitability guidance is provided.

Most important facts for investors to verify

• Available cash, near-term obligations, subsequent financing proceeds and expenses, and whether additional capital was raised after the February 2020 bridge placement.
• Going-concern status and any developments affecting Nasdaq bid-price or stockholders’ equity compliance.
• VenoValve patient follow-up, the occlusion and other adverse events, cohort accounting, and the status and requirements of any U.S. IDE or pivotal trial.
• CoreoGraft study methods and complete animal data, and whether a human study received regulatory and ethics approval.
• Current status, accounting accruals, settlement developments, and potential cash exposure for the ATSCO and Gusrae disputes.
• Share and warrant counts after subsequent financings and the resulting potential dilution.