Filing summary
The supplied filing is Hancock Jaffe Laboratories, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2021, filed May 12, 2021. This differs from the request metadata naming Envveno Medical Corp; investors should verify the intended issuer. Hancock Jaffe was a development-stage medical-device company developing VenoValve and CoreoGraft, both requiring clinical trials and FDA approval.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 or prior date |
|---|---|---|
| Revenue | No material revenue reported; management describes expected revenue as diminutive until commercialization | — |
| Operating expenses | $2.81 million | $1.51 million |
| Operating loss | $2.81 million | $1.51 million |
| Net loss | $2.77 million | $1.16 million |
| Net loss per share | $0.48 | $1.57 |
| Net cash used in operations | $3.84 million | $1.15 million |
| Cash and cash equivalents | $43.84 million | $9.33 million at Dec. 31, 2020 |
| Working capital | $42.29 million | $6.38 million at Dec. 31, 2020 |
| Total liabilities | $2.04 million | $3.44 million at Dec. 31, 2020 |
There is no meaningful revenue-based margin to assess. The company funded operations principally through equity offerings. Its February 2021 public offering generated $41.4 million gross proceeds and $38.13 million net proceeds; warrant exercises added $240,000. The balance sheet included a $312,700 note payable due April 22, 2022, bearing 1% interest, and $489,398 in operating lease liabilities. Management said available resources were sufficient to meet obligations for at least one year after the filing.
Changes from the prior comparable period
- Net loss increased by $1.61 million, or 133%, as operating expenses rose $1.30 million; lower other income versus Q1 2020 also contributed.
- Research and development expense rose 220% to $1.63 million, primarily reflecting VenoValve pivotal-trial preparation, CoreoGraft first-in-human preparation, testing, and added personnel and laboratory costs.
- Selling, general and administrative expense increased 18% to $1.18 million. Management cited higher franchise taxes, directors’ and officers’ insurance, and legal fees.
- Cash increased substantially following the public offering, while common shares outstanding rose from 2.54 million at year-end to 8.51 million at March 31. The quarter’s weighted-average share count was 5.74 million, compared with 737,275 in Q1 2020; therefore, the reported per-share loss is not directly comparable to the increase in total net loss.
Outlook, developments, and risks
- VenoValve: The FDA approved the company’s IDE application on April 1, 2021, after quarter-end. The planned SAVVE pivotal study is a non-blinded, single-arm, multicenter trial of 75 patients at up to 20 U.S. sites. Management expected the first implantation at the beginning of Q3 2021; site qualification and other preparations were underway.
- CoreoGraft: The first-in-human feasibility study in Paraguay remained on hold because of COVID-19 conditions, despite ethics committee approval to resume. Two patients in the study had died from events described as unrelated to the device; the filing provided no expected restart date.
- Clinical and financing risk: The company expected continued losses and said it may need additional capital. Its candidates must complete significant clinical trials to demonstrate safety and efficacy before FDA approval. COVID-19 could disrupt development, manufacturing, and testing.
- Legal contingency: Two complaints by a former employee allege, among other things, wage and severance issues, defamation, labor-code violations, sex-based discrimination, and unfair competition. The company intends to defend the claims; potential loss could not be reasonably estimated, and no accrual was recorded.
- Internal controls: Management concluded disclosure controls were ineffective due to a material weakness involving timely accounting for warrants and an associated derivative liability. The filing says the weakness did not require revision of previously issued financial statements; a remediation plan was being developed.
- Other items: The company reported no off-balance-sheet arrangements. $43.59 million of cash was uninsured at March 31, 2021. No formal financial guidance was provided.
Key facts for investors to verify
- Confirm that Hancock Jaffe Laboratories, Inc. (HJLI) is the intended issuer, given the Envveno Medical Corp. metadata mismatch.
- Check subsequent filings for SAVVE trial enrollment, timing, costs, and clinical progress, and for any updates to CoreoGraft’s study hold.
- Review the latest liquidity, cash burn, and potential financing needs, as the company expects ongoing losses.
- Follow the former employee litigation and any change in the company’s estimate or accrual for potential losses.
- Assess whether the warrant-accounting material weakness has been remediated and whether controls are subsequently deemed effective.