Envveno Medical Corp quarterly report, Q3 FY2019

Filing summary: Hancock Jaffe Laboratories, Inc. (HJLI), not Envveno Medical Corp.

The supplied 10-Q is for the quarter ended September 30, 2019, and identifies Hancock Jaffe Laboratories, Inc. as the registrant. Financial statements are unaudited.

Business context and reporting period

HJLI is a development-stage medical-device company developing tissue-based cardiovascular products. Its lead candidates are VenoValve, for chronic venous insufficiency, and CoreoGraft, for coronary bypass surgery. Both were under development for FDA approval; the company reported no commercial-scale product revenue in the quarter.

Financial results and liquidity

MetricThree months ended September 30, 2019Nine months ended September 30, 2019
Revenue$0$31,243
Operating loss$1,834,034$5,376,324
Net loss$1,814,895$5,334,644
Basic and diluted loss per share$0.10$0.35
Cash used in operating activitiesNot presented quarterly$4,273,179

At September 30, 2019, cash and cash equivalents were $2,943,409; restricted cash was $810,055; working capital was $1,044,668; total assets were $5,751,434; and total liabilities were $2,667,436. Liabilities included $922,943 of operating lease obligations, with no other borrowings reported on the balance sheet. The restricted cash relates to a court-ordered attachment in the ATSCO litigation. The company reported an accumulated deficit of $53,897,172.

No meaningful gross margin is reported: quarterly revenue was zero, and the filing does not provide a clear gross-margin figure. Nine-month revenue consisted of royalties; the former royalty arrangement ended March 18, 2019.

Changes versus comparable periods

  • Quarterly net loss increased by $346,729, or 24%, from $1,468,166 in 2018. R&D expense rose 59% to $676,970, while SG&A rose 5% to $1,157,064; the quarter had no revenue versus $41,662 a year earlier.
  • Nine-month net loss fell to $5,334,644 from $11,261,066. This improvement was mainly due to the absence of the prior-year $6,562,736 noncash debt-discount amortization and lower SG&A, partly offset by increased R&D and lower revenue.
  • Nine-month R&D increased 50% to $1,418,293, reflecting VenoValve clinical work and CoreoGraft animal studies. SG&A decreased 24% to $3,989,274.
  • Operating cash use improved 13% year over year. Financing provided $5,636,932 during the nine months, including net proceeds from a March private placement and June public offering. Shares outstanding increased to 17,922,129 from 11,722,647 at December 31, 2018.

Outlook, risks, contingencies, and unusual items

  • Going concern: Management said additional capital is required to meet obligations and sustain operations, and the filing states substantial doubt about the company’s ability to continue as a going concern within one year. Management expected continued losses and warned financing might not be available on acceptable terms, or at all; failure to raise funds could require curtailing or ending operations.
  • Product development: The filing reported eight VenoValve implants in a first-in-human study in Colombia, with encouraging early results described by the investigator. Management expected to release further follow-up data and begin FDA pre-IDE discussions, with an IDE application targeted for Q2 2020. CoreoGraft animal-study results were described as positive to date; six-month results were expected in early December 2019, followed by a possible GLP animal study or first-in-human study outside the U.S. These were forward-looking plans, not completed milestones.
  • Litigation: ATSCO amended its disputed supply-invoice claim to $1,606,820 plus incidental damages and interest. HJLI disputed the claim, said it had accrued the outstanding claims, and reported informal settlement discussions; trial was set for July 20, 2020. A separate law-firm invoice claim sought $178,926 plus interest and costs; HJLI disputed the amount and said it had accrued the claim.
  • NASDAQ: After quarter-end, the company received notice that it was below the $1 minimum bid-price requirement. It had until April 13, 2020 to regain compliance; management said it intended to address the matter.
  • Other items: The company settled a capital-raising fee dispute by issuing 157,000 restricted shares and a five-year warrant for 150,000 shares. It also reported $3,503,464 in uninsured cash balances at September 30, 2019.

Important facts for investors to verify

  • Confirm that Hancock Jaffe Laboratories, Inc.—rather than Envveno Medical Corp—is the intended filing and issuer.
  • Review the company’s cash burn, post-quarter cash balance, financing needs, and the basis for its going-concern assessment.
  • Check subsequent VenoValve and CoreoGraft study results, regulatory progress, and whether planned milestones were achieved.
  • Track the ATSCO and law-firm disputes, potential settlement amounts, and availability of the $810,055 restricted cash.
  • Verify NASDAQ bid-price compliance and the effects of equity issuance and outstanding warrants/options on dilution.