enVVeno Medical (NVNO) - 2020 Q4 - Annual Report

PART I Business Hancock Jaffe Laboratories, Inc. develops tissue-based devices for cardiovascular, peripheral, and venous diseases, with VenoValve and CoreoGraft as key product candidates requiring FDA approval - Hancock Jaffe Laboratories, Inc. develops tissue-based medical devices for cardiovascular, peripheral arterial, and venous diseases, aiming to address unmet medical needs or improve current standards of care[18] - The company's main product candidates are the VenoValve, a porcine-based device for severe chronic venous insufficiency (CVI), and the CoreoGraft, a bovine-based conduit for coronary artery bypass graft (CABG) surgeries[18] - Both VenoValve and CoreoGraft are currently undergoing development for U.S. Food and Drug Administration (FDA) approval, requiring successful completion of significant clinical trials[18][19] - The company possesses extensive proprietary processing and manufacturing methodology for biologic devices, including FDA-compliant quality control, tissue processing technologies, and a 14,507 sq. ft. FDA-certified manufacturing facility in Irvine, California[18][56][58] Overview Hancock Jaffe Laboratories, Inc. is a medical device company developing tissue-based devices for cardiovascular, peripheral arterial, and venous diseases - Hancock Jaffe Laboratories, Inc. is a medical device company developing tissue-based devices for cardiovascular, peripheral arterial, and venous diseases[18] - The company's key products, VenoValve and CoreoGraft, are in development for FDA approval, with management having experience in over 50 FDA-approved or CE-marked products[18] Products The company's VenoValve treats chronic venous insufficiency, showing positive trial results, while CoreoGraft offers an alternative for CABG surgeries - The VenoValve is a porcine-based device designed to treat severe Chronic Venous Insufficiency (CVI) in the deep venous system, a condition affecting approximately 2.4 million people in the U.S. with no currently effective FDA-approved treatments[21][22][24][25][26] - The VenoValve's first-in-human trial in Colombia (11 patients) showed positive one-year results: average 54% improvement in reflux, 56% in VCSS scores, and 76% in VAS pain scores, with minor non-device related adverse events[27][28][29] - An IDE application for the VenoValve U.S. pivotal trial (75 CVI patients across up to 20 sites) was filed with the FDA on March 5, 2021, following a Pre-IDE meeting in January 2021[30][31] - The CoreoGraft is a bovine-based, off-the-shelf conduit intended for coronary artery bypass graft (CABG) surgeries, offering an alternative to saphenous vein grafts (SVGs) which have high failure rates (10-40% within first year, up to 75% at 10 years) and harvest complications[34][35][36][37][38] - A six-month animal feasibility study for CoreoGraft (9 sheep) demonstrated patency and full endothelialization, indicating long-term biocompatibility[41][43][44] - The CoreoGraft's first-in-human trial in Paraguay began in 2020, with three successful bypass surgeries; two patients expired due to what the company believes are non-device related adverse events, leading to a temporary hold on enrollment[45] Government Regulation The company's Class III medical devices, VenoValve and CoreoGraft, require extensive FDA Pre-Market Approval and ongoing post-market compliance - The company's product candidates, VenoValve and CoreoGraft, are classified as Class III medical devices, requiring Pre-Market Approval (PMA) from the FDA before commercialization in the U.S.[47][48] - PMA requires extensive data from preclinical studies and human clinical trials, with the FDA's review process often taking several years[47] - Clinical trials for significant risk devices like VenoValve and CoreoGraft require an Investigational Device Exemption (IDE) from the FDA and approval from an Institutional Review Board (IRB) for each clinical site[49][51] - Post-market regulation includes ongoing compliance with Quality System Regulation (QSR), labeling, adverse event reporting, and potential recalls[54] - Regulation outside the U.S. varies by country; for example, in the EEA, products must comply with the Medical Device Regulation (MDR) and obtain a CE mark[55] Our Competitive Strengths The company leverages proprietary manufacturing, an FDA-certified facility, experienced management, and patent applications for competitive advantage - The company possesses extensive proprietary processing and manufacturing methodology for biologic tissue devices, including FDA-compliant quality control and tissue preservation technologies[56][58] - It operates a 14,507 sq. ft. manufacturing facility in Irvine, California, designed for Class III tissue-based implantable medical devices, equipped for R&D, prototype fabrication, cGMP manufacturing, and shipping[58] - The senior management team has significant experience, having been affiliated with over 50 medical devices that received FDA approval or CE marking[58] - The company has filed several patent applications for VenoValve and CoreoGraft, with a notice of allowance received in February 2021 for a VenoValve frame application[56] Risk Factors The company faces significant risks including ongoing net losses, dependence on VenoValve and CoreoGraft regulatory approval, manufacturing challenges, supply chain reliance, intense competition, and extensive governmental regulations - The company has incurred significant net losses since inception, with an accumulated deficit of $65,323,411 as of December 31, 2020, and expects to continue incurring losses for the foreseeable future[61] - Success is entirely dependent on the successful and timely regulatory approval and commercialization of its two product candidates, VenoValve and CoreoGraft, which may never receive approval or market acceptance[62][64] - The company is subject to rigorous and extensive regulation by the FDA and comparable foreign agencies, with the PMA approval process being complex, time-consuming, and unpredictable[65][66][118] - The COVID-19 pandemic has negatively impacted business operations, causing disruptions to animal studies, patient trials, and regulatory meetings, and could continue to do so[73][76] - Reliance on a few third-party suppliers for porcine and bovine tissue and other components creates vulnerability to supply problems and price fluctuations[85][88] - The company has identified a material weakness in internal control over financial reporting related to the timely recording of derivative liabilities for warrants issued in February 2020[78][80] - The company's ability to use its net operating loss carryforwards (NOLs) and certain other tax attributes may be limited due to ownership changes under Section 382 of the Internal Revenue Code[111][112] - Failure to adequately protect proprietary technology and maintain issued patents could allow competitors to erode competitive advantages[147][148] - The trading price of the company's securities is likely to be volatile due to various factors, including clinical trial results, regulatory approvals, and market performance[160] Summary Investing in the company's securities involves a high degree of risk, requiring careful consideration of principal risk factors - Investing in the company's securities involves a high degree of risk, and investors should carefully consider the principal risk factors outlined in the report[59][60] Risks Related to Our Business and Strategy Business risks include significant net losses, dependence on product approval, manufacturing scale-up challenges, supplier reliance, and COVID-19 impacts - The company has incurred significant net losses, including $9,135,486 in 2020 and $7,625,397 in 2019, and expects future losses, with an accumulated deficit of $65,323,411 as of December 31, 2020[61] - The company's business depends entirely on the successful and timely regulatory approval and commercialization of its two product candidates, VenoValve and CoreoGraft[62][64] - Failure to scale up manufacturing processes in a timely manner or at all could adversely affect the business[63][99] - The company relies on a few third-party suppliers for porcine and bovine tissue and other components, making it vulnerable to supply disruptions and price fluctuations[85][88] - If the company cannot sell or license its products to larger medical device companies, it may have to commercialize them independently, requiring significant investment in sales and marketing infrastructure[91][102] - The COVID-19 pandemic has caused disruptions, including travel restrictions and cancellations of non-essential medical procedures, impacting clinical trials and development timelines[73][76] - A material weakness in internal control over financial reporting was identified in 2020 regarding the timely recording of a derivative liability for warrants, which management is working to remediate[78][80] Risks Related to Regulatory Approval and Other Governmental Regulations Regulatory risks include extensive FDA and international oversight, complex approval processes, ongoing post-market compliance, and potential impacts from healthcare reforms - The company's product candidates are subject to extensive governmental regulation by the FDA in the U.S. and comparable agencies internationally, requiring PMA approval for Class III devices[114][118] - Obtaining regulatory approval is complex, time-consuming, and unpredictable, with potential delays or denials due to safety/efficacy concerns, trial design, or manufacturing compliance[118][119] - Post-market compliance is ongoing, and failure to comply with regulations or unanticipated product problems could lead to restrictions, market withdrawal, recalls, or penalties[121][123] - Legislative or regulatory reforms, such as the EU Medical Device Regulation (MDR) and U.S. healthcare reform measures (e.g., PPACA), could increase costs, lengthen approval times, or reduce demand for products[124][126][135] - Relationships with physician consultants, owners, and investors are subject to federal, state, and foreign healthcare laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), and non-compliance could result in significant penalties[131][132][139][141] Risks Related to Our Intellectual Property Intellectual property risks include challenges to patents, reliance on trade secrets, and potential for extensive litigation in the medical device industry - The company's success depends on its ability to obtain and maintain issued patents and other intellectual property rights for its VenoValve and CoreoGraft products[147][148][149] - Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented, and competitors may develop related or competitive technologies[150][151] - The company relies on unpatented trade secrets and know-how, which are protected by confidentiality agreements, but independent development or breaches could lead to loss of competitive advantage[154] - The medical device industry is characterized by frequent and extensive intellectual property litigation, which could result in substantial costs, diversion of management attention, and potential adverse effects on the business[157][158] Risks Related to Ownership of Our Securities Risks to securities ownership include stock price volatility, potential dilution from options and warrants, future capital needs, and Nasdaq listing compliance - The trading price of the company's securities is likely to be volatile, influenced by factors such as financial results, product development status, regulatory approvals, and competitive announcements[160][162] - The issuance of a significant number of options and warrants (2,128,181 options and 4,405,659 warrants outstanding as of March 25, 2021) could dilute existing stockholders' ownership and exert downward pressure on the stock price[161] - The company will need to raise additional capital in the future, which may be costly, difficult to obtain, and could result in further dilution to current stockholders[163][166] - Failure to meet Nasdaq's continued listing requirements could result in delisting, negatively affecting stock price and liquidity[167] - As an 'emerging growth company,' the company benefits from reduced disclosure requirements, which might make its common stock less attractive to some investors[168] - Provisions in charter documents and Delaware law could delay or prevent an acquisition, even if beneficial to stockholders, and the company does not anticipate paying cash dividends in the foreseeable future[171][174][175] Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[176] Properties The company leases a 14,507 sq. ft. FDA-certified manufacturing facility in Irvine, California, capable of producing up to 24,000 venous valves annually - The company leases a 14,507 square foot manufacturing facility in Irvine, California, with a lease renewed for five years effective October 1, 2017, and an option for an additional 60-month term[176] - The facility is designed for Class III tissue-based implantable medical devices, equipped for R&D, prototype fabrication, cGMP manufacturing, and shipping[176] - The current capacity allows for the manufacture of up to 24,000 venous valves per year, which is deemed sufficient for near-future market demands[176] Legal Proceedings The company faces legal proceedings, including two civil complaints from a former employee, which it intends to vigorously defend, with potential losses unestimable - The company is subject to litigation and arbitration claims incidental to its business, which may not be fully covered by insurance[177] - A former employee, Robert Rankin, filed two civil complaints in July and September 2020, alleging failure to pay accrued vacation and severance, defamation, unlawful labor code violations, sex-based discrimination, and unfair competition[178] - The company intends to vigorously defend against these claims and assert counterclaims, but the amount of loss, if any, cannot be reasonably estimated as of December 31, 2020[178] Mine and Safety Disclosures This item is not applicable to the company - This section is not applicable[179] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer of Equity Securities The company's common stock (HJLI) and warrants (HJLIW) trade on Nasdaq, with 8.5 million shares outstanding as of March 25, 2021, and no cash dividends paid - The company's common stock (HJLI) and warrants (HJLIW) commenced trading on Nasdaq on May 31, 2018[181] Common Stock and Warrant Information (as of March 25, 2021) | Metric | Value | | :--------------------------------- | :------------------- | | Common Stock Outstanding | 8,503,636 shares | | Common Stock Holders of Record | 79 | | Listed Warrants Outstanding | 69,000 shares | | Listed Warrant Holders of Record | 1 | | Common Stock Closing Price | $6.68 | | Warrant Closing Price | $0.35 | Securities Authorized for Issuance Under Equity Compensation Plan (as of December 31, 2020) | Plan Category | Number of securities to be issued upon exercise of outstanding options and restricted stock units | Weighted average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans | | :------------------------------------------------- | :----------------------------------------------------------------- | :------------------------------------------ | :------------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 215,631 | $31.48 | 370,725 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 215,631 | $31.48 | 370,725 | - The company has never declared or paid cash dividends on its common stock and intends to retain all available funds and future earnings for business development[185] Selected Financial Data As a 'smaller reporting company,' the company is not required to provide selected financial data - As a 'smaller reporting company,' the company is not required to provide selected financial data[187] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a 20% increase in net loss to $9.1 million in 2020, driven by higher R&D expenses, with no revenue, but significantly improved liquidity from $38.1 million raised in February 2021 Net Loss Comparison (Years Ended December 31) | Metric | 2020 | 2019 | Change (YoY) | | :---------------- | :----------- | :----------- | :----------- | | Net Loss | $(9,135,486) | $(7,625,397) | $(1,510,089) | | Percentage Change | - | - | 20% Increase | Revenue Comparison (Years Ended December 31) | Metric | 2020 | 2019 | Change (YoY) | | :----------- | :--- | :----------- | :----------- | | Royalty Income | $0 | $31,243 | $(31,243) | | Total Revenues | $0 | $31,243 | $(31,243) | Operating Expenses Comparison (Years Ended December 31) | Expense Category | 2020 | 2019 | Change (YoY) | | :------------------------------------ | :----------- | :----------- | :----------- | | Selling, General and Administrative | $4,882,877 | $4,911,613 | $(28,736) | | Research and Development | $4,252,249 | $2,206,120 | $2,046,129 | | Loss on Impairment of Intangible Asset | $0 | $588,822 | $(588,822) | Cash Flow from Operating Activities (Years Ended December 31) | Metric | 2020 | 2019 | Change (YoY) | | :-------------------------------- | :----------- | :----------- | :----------- | | Net Cash Used in Operating Activities | $(7,677,210) | $(5,896,400) | $(1,780,810) | | Percentage Change | - | - | 30% Increase | Liquidity Metrics (as of December 31) | Metric | 2020 | 2019 | | :-------------------------- | :----------- | :----------- | | Cash (excluding restricted cash) | $9,334,584 | $1,307,231 | | Working Capital (Deficiency) | $6,382,818 | $(452,434) | - The company raised $15,074,799 in net cash from financing activities in 2020, including private and public placements of common and preferred stock, warrant exercises, and a PPP loan[206] - Subsequent to year-end, on February 11, 2021, the company raised approximately $38,143,000 in net proceeds from a public offering, significantly improving its liquidity[207][371] Overview Hancock Jaffe Laboratories, Inc. develops tissue-based medical devices, with VenoValve and CoreoGraft as primary product candidates requiring FDA approval - Hancock Jaffe Laboratories, Inc. is a medical device company developing tissue-based solutions for cardiovascular, peripheral arterial, and venous diseases[189] - The company's primary products in development are the VenoValve for chronic venous insufficiency and the CoreoGraft for coronary artery bypass graft surgeries, both requiring FDA approval[189][190] Results of Operations The company reported a 20% increase in net loss to $9.1 million in 2020, driven by a 93% rise in R&D expenses, and no royalty income Net Loss (Years Ended December 31) | Year | Net Loss | | :--- | :----------- | | 2020 | $(9,135,486) | | 2019 | $(7,625,397) | | Change | $(1,510,089) (20% increase) | Revenue (Years Ended December 31) | Year | Royalty Income | | :--- | :------------- | | 2020 | $0 | | 2019 | $31,243 | | Change | $(31,243) | Selling, General and Administrative Expenses (Years Ended December 31) | Year | SG&A Expenses | | :--- | :-------------- | | 2020 | $4,882,877 | | 2019 | $4,911,613 | | Change | $(28,736) (1% decrease) | Research and Development Expenses (Years Ended December 31) | Year | R&D Expenses | | :--- | :------------- | | 2020 | $4,252,249 | | 2019 | $2,206,120 | | Change | $2,046,129 (93% increase) | Interest Income, Net (Years Ended December 31) | Year | Interest Income, Net | | :--- | :------------------- | | 2020 | $3,739 | | 2019 | $49,915 | | Change | $(46,176) (93% decrease) | - A gain of $211,807 was recorded in 2020 from the change in fair value of derivative liabilities related to warrants issued in the Bridge Offering[199] - An impairment loss of $588,822 was recorded in 2019 for the bio-prosthetic heart valve (BHV) due to limited R&D resources being reallocated to VenoValve and CoreoGraft development; no impairment loss in 2020[200] - Other expenses in 2020 primarily included charges for warrants issued to a consultant, participants in a preferred stock exchange, and repricing of placement agent warrants[201] Liquidity and Capital Resources The company experienced increased negative operating cash flow but significantly improved liquidity with $15.1 million from financing in 2020 and $38.1 million in early 2021 - The company has incurred losses and negative operating cash flows since inception, funding operations primarily through IPOs, equity offerings, and convertible debt[203] Cash Flow from Operating Activities (Years Ended December 31) | Year | Net Cash Used in Operating Activities | | :--- | :------------------------------------ | | 2020 | $(7,677,210) | | 2019 | $(5,896,400) | | Change | $(1,780,810) (30% increase) | Cash Flow from Investing Activities (Years Ended December 31) | Year | Net Cash Used in Investing Activities | | :--- | :------------------------------------ | | 2020 | $(180,291) | | 2019 | $(363,891) | | Change | $183,600 (50% decrease) | Cash Flow from Financing Activities (Years Ended December 31) | Year | Net Cash Provided by Financing Activities | | :--- | :---------------------------------------- | | 2020 | $15,074,799 | | 2019 | $5,636,932 | | Change | $9,437,867 (167% increase) | - As of December 31, 2020, cash was $9,334,584 and working capital was $6,382,818; a public offering in February 2021 raised an additional $38.1 million, providing sufficient capital for the next year[208][371][372] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[210] Contractual Obligations As a 'smaller reporting company,' the company is not required to provide detailed contractual obligations information - As a 'smaller reporting company,' the company is not required to provide detailed contractual obligations information[211] Critical Accounting Policies and Estimates Key accounting policies involve estimates for deferred tax assets and derivative liabilities, equity method for investments, revenue recognition, and stock-based compensation - Financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions, particularly for deferred tax assets, warrants, and derivative liabilities[212][213][375] - Equity investments with significant influence but not control are accounted for using the equity method; the company's 28.0% investment in HJLA is recorded at $0 due to cumulative losses[214][215][376][377] - Revenue is recognized when goods or services are transferred to customers, following a five-step analysis; royalty income from a 2016 asset sale agreement ended on March 18, 2019[217][218][398][399] - Stock-based compensation cost is measured at fair value on the grant date and recognized over the vesting period[222][403] - The company maintains cash with major financial institutions, with uninsured balances of $9,084,584 and $1,867,286 as of December 31, 2020 and 2019, respectively[223][404] Quantitative and Qualitative Disclosure About Market Risk As a 'smaller reporting company,' the company is not required to provide quantitative and qualitative disclosures about market risk - As a 'smaller reporting company,' the company is not required to provide information on quantitative and qualitative disclosure about market risk[228] Financial Statements and Supplementary Data This section incorporates by reference the consolidated financial statements and supplementary data, including the auditor's report, balance sheets, statements of operations, equity, cash flows, and notes - The financial statements and supplementary data are provided starting on page F-1 of the Annual Report on Form 10-K[229] Changes In and Disagreements with Accountants on Accounting and Financial Disclosures The company reported no changes in or disagreements with accountants on accounting and financial disclosures - Not Applicable[230] Controls and Procedures Management concluded that disclosure controls were ineffective due to a material weakness in internal controls over financial reporting related to complex equity transactions - As of December 31, 2020, management concluded that disclosure controls and procedures were not effective[231] - A material weakness was identified in internal controls over financial reporting concerning complex equity transactions, specifically the failure to timely record an associated derivative liability for warrants issued in February 2020[234] - Remediation efforts include devoting resources to improve internal control over financial reporting and consulting with third-party professionals for complex financial accounting issues[235] - The management's assessment of internal control effectiveness was not audited by the independent registered public accounting firm due to a permanent exemption for the company[236] Other Information This item is not applicable to the company - Not Applicable[237] PART III Directors, Executive Officers and Corporate Governance The company's board comprises five directors, with four independent, overseeing risk management through audit, compensation, and governance committees, and key executives include Robert A. Berman (CEO) and Craig Glynn (CFO) Directors and Executive Officers (as of March 25, 2021) | Name | Age | Position(s) Held | Year of Service Commencement | | :---------------------- | :-- | :------------------------------------ | :--------------------------- | | Robert A. Berman | 58 | Director, Chief Executive Officer | 2018 | | Craig Glynn | 59 | Chief Financial Officer and Treasurer | 2020 | | Dr. Francis Duhay | 60 | Director | 2018 | | Dr. Sanjay Shrivastava | 53 | Director | 2018 | | Matthew M. Jenusaitis | 59 | Director | 2019 | | Robert C. Gray | 74 | Director | 2019 | | Marc H. Glickman, M.D. | 71 | Senior Vice President and Chief Medical Officer | 2016 | - The board of directors consists of five members, divided into three staggered classes, with four independent directors (Dr. Duhay, Mr. Gray, Mr. Jenusaitis, and Dr. Shrivastava)[251][253][257] - The board has established Audit, Compensation, and Nominating and Corporate Governance committees, all composed of independent directors, with Mr. Gray qualifying as an 'audit committee financial expert'[260][261][263][264] - The company has a written code of conduct applicable to directors, officers, and employees, and the board actively oversees risk management[265][268] Executive Compensation Executive compensation in 2020 included significant option awards and bonuses for the CEO and CMO, with the CFO transitioning to full-time, and director compensation shifting towards increased stock options Summary Compensation Table (Years Ended December 31) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :---------------- | :------------------------- | :---------- | | Robert A. Berman, CEO | 2020 | 400,000 | 200,000 | 478,171 | 15,808 | 1,093,979 | | | 2019 | 400,000 | - | - | 15,285 | 415,285 | | Robert A. Rankin, Former CFO | 2020 | 73,077 | - | - | 10,586 | 83,663 | | | 2019 | 250,000 | - | - | 44,195 | 294,195 | | Craig Glynn, CFO | 2020 | 143,000 | - | 32,020 | - | 175,020 | | Marc H. Glickman, M.D., CMO | 2020 | 350,000 | 50,000 | 321,928 | 53,976 | 775,904 | | | 2019 | 322,115 | - | 49,095 | 50,814 | 422,024 | - Robert A. Berman's employment agreement includes a base salary of $400,000, eligibility for an annual bonus up to 50% of base salary, and severance provisions[275][277] - Craig Glynn was elevated to full-time CFO in January 2021 with an annual salary of $225,000 and stock options to purchase 324,000 shares[281] - Dr. Marc H. Glickman's employment agreement provides a base salary of $350,000 and includes repriced existing options and new option grants[286] Outstanding Equity Awards at Fiscal Year-End (December 31, 2020) | Name | Exercisable Options () | Unexercisable Options () | Option Exercise Price ($) | Option Expiration Date | | :-------------------------- | :---------------------- | :------------------------ | :------------------------ | :--------------------- | | Robert A. Berman | 43,209 | 34,000 | 10.00 | Sep 23, 2028 / Jul 18, 2030 | | Marc H. Glickman, M.D. | 10,380 | 4,200 | 50.00 | Jul 25, 2029 / Oct 1, 2026 | | Craig Glynn | 600 | 3,400 | 10.00 | Jul 18, 2030 | - The Amended and Restated 2016 Omnibus Incentive Plan reserves 600,000 shares of common stock for awards, plus an annual increase of 3% of outstanding shares[297][503] - Non-employee directors receive an annual award of options and restricted stock units, with 2021 compensation changing to eliminate RSUs and increase stock option value to $37,500[312] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 22, 2021, Analytica Ventures, Inc. was the largest beneficial owner with 10.1% of common stock, while executive officers and directors collectively owned 4.1% Beneficial Ownership (as of March 22, 2021) | Name and Address of Beneficial Owner | Number of Shares | Percentage | | :----------------------------------- | :--------------- | :--------- | | 5% Stockholders | | | | Analytica Ventures, Inc. | 954,142 | 10.1% | | Empery Asset Management LLC | 571,428 | 6.3% | | CVI Investments, Inc. | 435,714 | 4.9% | | Named Executive Officers and Directors | | | | Robert A. Berman | 53,944 | 0.6% | | Marc Glickman, M.D. | 21,580 | * | | Craig Glynn | 1,000 | * | | Francis Duhay, M.D. | 10,698 | * | | Dr. Sanjay Shrivastava | 9,918 | * | | Robert Gray | 10,160 | * | | Matthew Jenusaitis | 10,160 | * | | All directors and executive officers as a group (7 persons) | 117,460 | 4.1% | - Applicable percentage ownership is based on 8,503,636 shares of common stock outstanding as of March 22, 2021[320] Certain Relationships and Related Transactions, and Director Independence The company has related party transactions with Axiom Real Time Metrics, an affiliate of a 10.1% stockholder, with expenditures of $820,000 in 2020, and all directors except the CEO are independent - Analytica Ventures, Inc., a 10.1% stockholder, is affiliated with Axiom Real Time Metrics, a vendor providing services for the company's pivotal and first-in-human trials[324][518] Expenditures to Axiom Real Time Metrics (Related Party) | Year | Amount | | :--- | :----------- | | 2020 | $820,000 | | 2019 | $210,000 | - Future related party transactions will be on terms no less favorable than those with unaffiliated third parties and will require approval by a majority of independent directors[327] - All directors, except the CEO, Robert A. Berman, are considered 'independent directors' as defined by Nasdaq Marketplace Rules[257] Principal Accounting Fees and Services Audit fees billed by Marcum LLP were $243,750 in 2020 and $175,407 in 2019, with all engagements pre-approved by the audit committee Audit Fees Billed by Marcum LLP | Year | Audit Fees | | :--- | :----------- | | 2020 | $243,750 | | 2019 | $175,407 | - All audit and permissible non-audit engagements with the independent registered public accounting firm are pre-approved by the audit committee[332] PART IV Exhibits and Financial Statements Schedules This section lists all exhibits filed with the Form 10-K, including consolidated financial statements and various legal and corporate documents, with schedules omitted - The consolidated financial statements and notes are filed as part of this report, starting on page F-1[333] - All financial statement schedules are omitted because the information is either not applicable, not present in sufficient amounts, or included in the consolidated financial statements and notes[333] - A complete list of exhibits, including corporate governance documents, employment agreements, and various warrant forms, is provided[334][335][336] Form 10-K Summary This item is not applicable to the company - Not applicable[338] Signatures The Annual Report on Form 10-K was signed on March 31, 2021, by the Chief Executive Officer and Chief Financial Officer - The report was signed on March 31, 2021, by Robert Berman (Chief Executive Officer) and Craig Glynn (Chief Financial Officer)[341] Financial Statements and Supplementary Data The financial statements for 2020 and 2019, including auditor's report, balance sheets, statements of operations, equity, cash flows, and notes, present the company's financial position and performance in accordance with GAAP - The financial statements include the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations, Statements of Stockholders' Equity, and Statements of Cash Flows for the years ended December 31, 2020 and 2019[343] - The financial statements are presented in conformity with accounting principles generally accepted in the United States of America (GAAP)[344] - The company's auditor, Marcum LLP, has served since 2015 and issued an unqualified opinion on the financial statements[344][348] Report of Independent Registered Public Accounting Firm Marcum LLP issued an unqualified opinion on the financial statements for 2020 and 2019, conducted under PCAOB standards - Marcum LLP, the independent registered public accounting firm since 2015, issued an unqualified opinion on the financial statements for the years ended December 31, 2020 and 2019[344][348] - The audit was conducted in accordance with PCAOB standards, but did not include an audit of internal control over financial reporting due to the company's exemption[346] Balance Sheets The balance sheets show total assets of $10.5 million and total liabilities of $3.4 million as of December 31, 2020 Balance Sheet Summary (as of December 31) | Metric | 2020 | 2019 | | :-------------------------------- | :----------- | :----------- | | Assets | | | | Cash and cash equivalents | $9,334,584 | $1,307,231 | | Total Current Assets | $9,569,051 | $1,423,878 | | Total Assets | $10,537,835 | $3,434,200 | | Liabilities | | | | Total Current Liabilities | $3,186,233 | $1,876,312 | | Total Liabilities | $3,439,979 | $2,444,260 | | Stockholders' Equity | | | | Total Stockholders' Equity | $7,097,856 | $989,940 | | Accumulated Deficit | $(65,323,411) | $(56,187,925) | Statements of Operations The statements of operations show a net loss of $9.1 million in 2020 and $7.6 million in 2019, with no royalty income in 2020 Statements of Operations Summary (Years Ended December 31) | Metric | 2020 | 2019 | | :------------------------------------ | :----------- | :----------- | | Royalty income | $0 | $31,243 | | Selling, general and administrative expenses | $4,882,877 | $4,911,613 | | Research and development expenses | $4,252,249 | $2,206,120 | | Loss on impairment of intangible asset | $0 | $588,822 | | Net Loss | $(9,135,486) | $(7,625,397) | | Net Loss Attributable to Common Stockholders | $(9,742,706) | $(7,625,397) | | Net Loss Per Basic and Diluted Common Share | $(7.54) | $(12.10) | | Weighted Average Number of Common Shares Outstanding | 1,291,469 | 630,418 | Statements of Stockholders' Equity The statements of stockholders' equity show total equity of $7.1 million as of December 31, 2020, with an accumulated deficit of $65.3 million Statements of Stockholders' Equity Summary (Years Ended December 31) | Metric | 2020 | 2019 | | :-------------------------------- | :----------- | :----------- | | Common Stock Shares Outstanding | 2,541,529 | 717,274 | | Additional Paid-in Capital | $72,421,242 | $57,177,858 | | Accumulated Deficit | $(65,323,411) | $(56,187,925) | | Total Stockholders' Equity | $7,097,856 | $989,940 | | Net Loss | $(9,135,486) | $(7,625,397) | | Deemed dividend to Series C Preferred Stockholders | $(607,220) | $0 | Statements of Cash Flows The statements of cash flows show net cash used in operating activities of $7.7 million in 2020 and $5.9 million in 2019, with significant financing inflows Statements of Cash Flows Summary (Years Ended December 31) | Metric | 2020 | 2019 | | :---------------------------------------- | :----------- | :----------- | | Net Cash Used in Operating Activities | $(7,677,210) | $(5,896,400) | | Net Cash Used in Investing Activities | $(180,291) | $(363,891) | | Net Cash Provided by Financing Activities | $15,074,799 | $5,636,932 | | Net Increase (Decrease) in Cash, Cash Equivalent, and Restricted Cash | $7,217,298 | $(623,359) | | Cash, cash equivalents and restricted cash - End of year | $9,334,584 | $2,117,286 | Notes to Financial Statements The notes detail the company's operations, liquidity, significant accounting policies, property and equipment, accrued expenses, and equity transactions - The company operates as a medical device company developing tissue-based solutions for cardiovascular and peripheral diseases, with VenoValve and CoreoGraft as key products requiring FDA approval[368][369] - As of December 31, 2020, the company had $9,334,584 in cash and $6,382,818 in working capital; management believes that, with an additional $38.1 million raised in February 2021, it has sufficient capital for the next year[371][372] - Significant accounting policies include the use of estimates, equity method for investments, property and equipment depreciation, impairment of long-lived assets, income taxes (with a full valuation allowance on deferred tax assets), and fair value measurements for financial instruments[375][376][378][379][382][384] - Restricted cash of $810,055 as of December 31, 2019, related to a vendor litigation matter, was released in August 2020 as full settlement[411][413][442] Property and Equipment, Net (as of December 31) | Category | 2020 | 2019 | | :---------------------- | :----------- | :----------- | | Laboratory equipment | $320,830 | $214,838 | | Furniture and fixtures | $98,392 | $93,417 | | Computer equipment | $65,078 | $50,403 | | Leasehold improvements | $158,092 | $158,092 | | Software | $244,479 | $220,384 | | Total property and equipment | $886,871 | $737,134 | | Less: accumulated depreciation | $(487,904) | $(393,107) | | Property and equipment, net | $398,967 | $344,027 | | Depreciation expense | $97,549 | $46,017 | - The company leases its manufacturing facility, with operating lease costs of $341,966 in 2020 and remaining lease liabilities of $567,948 as of December 31, 2020[417][419][421] Accrued Expenses (as of December 31) | Category | 2020 | 2019 | | :-------------------------- | :----------- | :----------- | | Accrued compensation costs | $473,799 | $151,858 | | Accrued professional fees | $79,650 | $141,310 | | Accrued franchise taxes | $25,607 | $30,270 | | Accrued research and development | $368,809 | $0 | | Accrued warrants | $188,104 | $0 | | Other accrued expenses | $0 | $10,000 | | Total Accrued expenses | $1,135,969 | $333,438 | - A $312,700 loan was obtained in April 2020 under the Paycheck Protection Program (PPP) and is included as a current liability, with the company intending to repay it within 12 months[424][425][426] - The company has significant net operating loss carryforwards (NOLs) for federal ($35.0 million) and state ($35.0 million) income tax purposes as of December 31, 2020, but a full valuation allowance is applied due to uncertainty of realization[431][433][434] - Legal proceedings include two civil complaints from a former employee, Robert Rankin, alleging various claims, which the company intends to vigorously defend[446] - In 2020, the company completed a 1-for-25 reverse stock split and raised capital through various equity transactions, including private and public offerings of common and preferred stock, and warrant exercises[449][450][451][453][454][457][459][460] - The Series C Convertible Preferred Stock, issued in July 2020, was exchanged for common stock in November 2020, resulting in a deemed dividend of $607,220[468][471][476] - Warrants issued in the February 2020 Bridge Offering were initially classified as derivative liabilities and reclassified to equity in September 2020 after stockholder approval of a capital event[491][494] Warrant Activity Summary (Years Ended December 31) | Metric | 2020 | 2019 | | :------------------------------------ | :----------- | :----------- | | Outstanding, January 1 | 174,681 | 151,224 | | Issued | 1,702,810 | 24,157 | | Exercised | (367,661) | 0 | | Cancelled | (2,028) | (700) | | Outstanding, December 31 | 1,507,802 | 174,681 | | Weighted Average Exercise Price | $20.10 | $127.50 | | Weighted Average Remaining Life (Years) | 5.3 | 3.3 | | Intrinsic Value | $448,140 | $0 | Stock Option Activity Summary (Years Ended December 31) | Metric | 2020 | 2019 | | :------------------------------------ | :----------- | :----------- | | Outstanding, January 1 | 99,689 | 111,829 | | Granted | 122,000 | 28,600 | | Forfeited | (11,000) | (40,740) | | Outstanding, December 31 | 210,689 | 99,689 | | Weighted Average Exercise Price | $31.48 | $111.00 | | Weighted Average Remaining Life (Years) | 8.7 | 8.6 | | Exercisable, December 31 | 108,982 | - | | Unrecognized Share-Based Compensation Expense | $777,552 | - | - Subsequent to year-end, on February 11, 2021, the company raised $41.4 million in gross proceeds from a public offering of common stock and warrants; on February 18, 2021, the Board approved option grants for 1,917,492 shares, with 1,888,000 shares subject to stockholder approval[519][521]