• | our inability to recruit and retain adequate numbers of effective sales and marketing personnel; | |
• | the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe our products; | |
• | the lack of complementary | |
• | unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing organization. |
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Further, we develop, if any. We may pursue arrangements regarding the sales and marketing and distribution of one or more of our product candidates and our future revenues may depend, in part, on our ability to enter into and maintain arrangements with other companies having sales, marketing and distribution capabilities and the ability of such companies to successfully market and sell any such products. Any failure to enter into such arrangements and marketing alliances on favorable terms, if at all, could delay or impair our ability to commercialize our product candidates and could increase our costs of commercialization. Any use of distribution arrangements and marketing alliances to commercialize our product candidates will subject us to a number of risks, including the following:
• | we may be required to relinquish important rights to our products or product candidates; | |
• | we may not be able to control the amount and timing of resources that our distributors or collaborators may devote to the commercialization of our product candidates; | |
• | our distributors or collaborators may experience financial difficulties; | |
• | our distributors or collaborators may not devote sufficient time to the marketing and sales of our products; and | |
• | business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement. |
If we may be requiredare unable to relinquish important rightsimplement our own sales and marketing capability or are unable to our productscontract with one or product candidates;
Risks RelatingRelated to Intellectual Property
Our success will depend in part on obtaining and costly to protectmaintaining effective patent and other intellectual property protection for our product candidates and proprietary rights, and we may not be able to ensure their protection.
Our commercial success will depend in part on obtaining and maintaining effective patent protection and trade secretother intellectual property protection of our product candidates and the methods used to manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using, selling, offering to sell or importing our products, isif any, will be dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.
We license certain intellectual property from third partiesare pursuing a multi-faceted IP strategy for levosimendan that coversincludes filing patent applications in the U.S. and Canada that, if granted, could protect various uses and formulations of levosimendan In January 2022, the USPTO granted us a patent protecting claims for different uses of various cyclodextrin-based subcutaneous formulations of levosimendan, including a claim for its use in the treatment of PH-HFpEF patients. In addition, we received in March 2023 another patent protecting the use of levosimendan in the treatment of PH-HFpEF. Two subsequent patents expanded these protections on the use of levosimendan in the treatment of PH-HFpEF.
Our strategy to maximize market exclusivity for imatinib relies on two forms of exclusivity. First, we have been granted Orphan Drug Designation for the treatment of PAH by the FDA which would provide seven years of regulatory exclusivity in the U.S. if our product candidates. We rely on certain of these third partiesimatinib formulation is the first to receive FDA approval for PAH. In addition, we expect to file prosecute and maintainone or more patent applications and otherwise protect the intellectual property to which we havecover patentable subject matter that may result from our imatinib development. If granted, a license, and we have not had and do not have primary control over these activitiespatent would provide protection for certain of these patents or patent applications and other intellectual property rights. We cannot be certain that such activities by third parties have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. Our enforcement of certain of these licensed patents or defense of any claims asserting the invalidity of these patents would also be subject to the cooperation of the third parties.
The patent positions of pharmaceutical and biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biopharmaceutical patents has emerged to date in the United States. The biopharmaceutical patent situation outside the United States is even more uncertain.less certain still. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the patents we own or to which we have a license from a third-party.own. Further, if any of our patents are deemed invalid and unenforceable, it could impact our ability to commercialize or license our technology.
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The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
• | others may be able to make compositions or formulations that are similar to our product candidates but that are not covered by the claims of our patents; | |
• | we might not have been the first to make the inventions covered by our issued patents or pending patent applications; | |
• | we might not have been the first to file patent applications for these inventions; | |
• | others may independently develop similar or alternative technologies or duplicate any of our technologies; | |
• | it is possible that our pending patent applications will not result in issued patents; | |
• | our issued patents may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges by third parties; | |
• | we may not develop additional proprietary technologies that are patentable; or | |
• | the patents of others may have an adverse effect on our business. |
We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.
We rely on confidentiality agreements that, if breached, may be difficult to enforce and could have a material adverse effect on our business and competitive position.
Our policy is to enter into agreements relating to the non-disclosure and non-use of confidential information with third parties, including our contractors, consultants, advisors and research collaborators, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them. However, these agreements can be difficult and costly to enforce. Moreover, to the extent that our contractors, consultants, advisors and research collaborators apply or independently develop intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to the intellectual property. If a dispute arises, a court may determine that the right belongs to a third party, and enforcement of our rights can be costly and unpredictable. In addition, we rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ, we still face the risk that:
• | these agreements may be breached; | |
• | these agreements may not provide adequate remedies for the applicable type of breach; or | |
• | our trade secrets or proprietary know-how will otherwise become known. |
Any breach of our confidentiality agreements or our failure to effectively enforce such agreements would have a material adverse effect on our business and competitive position.
We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use, our technology.
If we or our partners choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or company has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to these patents.
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Furthermore, a third party may claim that we or our manufacturing or commercialization partners are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we or our commercialization partners are infringing the third party’s patents and would order us or our partners to stop the activities covered by the patents. In addition, there is a risk that a court will order us or our partners to pay the other party damages for having violated the other party’s patents. We have agreed to indemnify certain of our commercial partners against certain patent infringement claims brought by third parties. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either doesdo not infringe the patent claims of the relevant patent and/or that the patent claims are invalid, and we may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.
Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen18 months after filing and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications, or that we were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our patent applications or patents, which could further require us to obtain rights to issued patents by others covering such technologies. If another party has filed a U.S. patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the U.S. Patent and Trademark OfficeUSPTO to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful if, unbeknownst to us, the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such inventions.
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.
Under current law, we may not be able to enforce all employees’ covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.
We have entered into non-competition agreements with certain of our employees. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. Under current law, we may be unable to enforce these agreements against certain of our employees and it may be difficult for us to restrict our competitors from gaining the expertise our former employees gained while working for us. If we cannot enforce our employees’ non-compete agreements, we may be unable to prevent our competitors from benefiting from the expertise of our former employees.
We may infringe or be alleged to infringe intellectual property rights of third parties.
Our products or product candidates may infringe on, or be accused of infringing on, one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued and to which we do not hold a license or other rights. Third parties may own or control these patents or patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.
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If we are found to infringe the patent rights of a third party, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms.
There have been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark OfficeUSPTO and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products. Our products, after commercial launch, may become subject to Paragraph IV certification under the Hatch-Waxman Act, thus forcing us to initiate infringement proceedings against such third-party filers. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.
Some of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We try to ensure that our employees do not use the proprietary information or know-how of others in their work for us. We may, however, be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee’s former employer. Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management. If we fail to defend any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
Risks Related to Owning Our Common Stock
Our share price has been volatile, and may continue to be volatile, which may subject us to securities class action litigation in the future.
Our stock price has in the past been, and is likely to be in the future, volatile. The stock market in general, and the market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. During the period from January 20, 2017 to March 9, 2017, the closing sales price of our common stock ranged from a high of $2.50 per share to a low of $0.46 per share. Our stock price experienced significant volatility during that period after we announced the top-line results of our Phase III LEVO-CTS clinical trial. As a result of this volatility, our existing stockholders may not be able to sell their stock at a favorable price. The market price for our common stockCommon Stock may be influenced by many factors, including:
• | actual or anticipated fluctuations in our financial condition and operating results; | |
• | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; | |
• | status and/or results of our clinical trials; | |
• | status of ongoing litigation; | |
• | results of clinical trials of our competitors’ products; | |
• | regulatory actions with respect to our products or our competitors’ products; | |
• | actions and decisions by our collaborators or partners; | |
• | actual or anticipated changes in our growth rate relative to our competitors; | |
• | actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate; | |
• | competition from existing products or new products that may emerge; | |
• | issuance of new or updated research or reports by securities analysts; | |
• | fluctuations in the valuation of companies perceived by investors to be comparable to us; | |
• | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; | |
• | market conditions for biopharmaceutical stocks in general; | |
• | status of our search and selection of future management and leadership; and | |
• | general economic and market conditions, including as a result of epidemics or other disruptive events broadly affecting society, and as a result of geopolitical uncertainties, including in the Middle East and the Russian invasion of and war against the country of Ukraine. |
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Some companies that have had volatile market prices for their growth rate;
Anti-takeover provisions in our existing cashcorporate charter documents and cash equivalents are sufficientunder Delaware law could make an acquisition of us more difficult, which could discourage takeover attempts and lead to continue to fund operations through the first half of calendar year 2018. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution of their ownership interests. Debt financing, if available, may involve restrictive covenants that limit our financial flexibility or otherwise restrict our ability to pursue our business strategies. Additionally, if we issue shares of common stock, or securities convertible or exchangeable for common stock,management entrenchment, and the market price of our existing common stock may decline. Therebe lower as a result.
Certain provisions in our Certificate of Incorporation, as amended (the “Charter”), and our Fourth Amended and Restated Bylaws (the “Bylaws”), may make it difficult for a third party to acquire, or attempt to acquire, control of the Company, even if a change in control was considered favorable by the stockholders. For example, our Board of Directors has the authority to issue up to 10,000,000 shares of preferred stock. The Board can fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a change in control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders may be no assuranceadversely affected. An issuance of shares of preferred stock may result in the loss of voting control to other stockholders.
Our organizational documents also contain other provisions that could have an anti-takeover effect, including provisions that:
• | provide that vacancies on the Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum; | |
• | eliminate cumulative voting in the election of directors; | |
• | grant the Board of directors the authority to increase or decrease the size of the Board; | |
• | prohibit stockholders from calling a special meeting of stockholders; | |
• | require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings; and | |
• | authorize the Board of Directors, by a majority vote, to amend the Bylaws. |
In addition, we willare subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which limit the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in stockholder best interests. These provisions may also prevent changes in our management or limit the price that certain investors are willing to pay for our stock.
Our Bylaws contain an exclusive forum provision, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents.
Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, any North Carolina state court that has jurisdiction, or the Delaware Court of Chancery shall, to the fullest extent permitted by law, be the sole and exclusive forum for any internal corporate claims, including without limitation (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, and (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said court having personal jurisdiction over the indispensable parties named as defendants in such action. This provision would not apply to suits brought to enforce a duty or liability created by the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) or the Securities Act of 1933, as amended (the “Securities Act”), or any other claim for which federal courts have exclusive jurisdiction.
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This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees or could result in increased costs for our stockholders to bring a claim in the chosen forum. If a court were to find the exclusive forum provision in our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations. Even if we are successful in obtaining any additional capital resourcesdefending against these claims, litigation could result in substantial costs and be a timely manner, on favorable terms, or at all.
We have issuednot paid cash dividends in the past and may issuedo not expect to pay dividends in the future, substantial amountsfuture. Any return on investment may be limited to the value of instruments that are convertible intoour common stock.
We have never declared or exercisable for common stock, and our existing stockholders may face substantial dilution if such instruments are converted or exercised.
Our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income may be subject to certain limitations.
We have U.S. federal net operating loss carryforwards (“NOLs”), which expire in various years if not utilized. In addition, we have federal research and development credit carryforwards. The federal research and development credit carryforwards expire in various years if not utilized. Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership interests.
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ITEM 1B—UNRESOLVED STAFF COMMENTS
Smaller reporting companies are not required to provide the information required by this Item.
ITEM 1C—CYBERSECURITY
The Company has a cybersecurity strategy designed to protect our information systems and data from an evolving cyber-threat landscape. Our cybersecurity program, administered by the Company’s Senior Network Administrator and overseen by the Audit and Compliance Committee, has the support of executive leadership and the Board of Directors, and the Company continues to invest in cybersecurity to protect the Company’s systems.
Our cybersecurity program focuses on all areas of our business, including cloud-based environments, devices used by employees and contractors, facilities, networks, applications, vendors, disaster recovery, business continuity and controls and safeguards enabled through business processes and tools. We continuously monitor for threats and unauthorized access. We learn of security threats through automated detection solutions as well as reports from users and business partners. We draw on the knowledge and insight of external cybersecurity experts and vendors and employ an array of third-party tools to secure our information infrastructure and protect systems and information from unauthorized access.
As of the date of this Annual Report, we have not encountered any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition. For more information on our cybersecurity related risks, see “Risk Factors - Risks Related to Our Industry” included elsewhere in this Annual Report on Form 10-K.
ITEM 2—PROPERTIES
We own no real property. We leaseBeginning November 1, 2022, we maintain a membership providing dedicated office space, as well as shared services and shared space for meetings, catering, and other business activities, at our principal executive office at ONE Copley Parkway,relocated to 101 Glen Lennox Drive, Suite 490, Morrisville,300, Chapel Hill, North Carolina 27560.27517. The current rent is approximately $9,179$800 per monthmonth.
On February 7, 2023, we entered into a Lease Termination Agreement with CCP Concourse, LLC, a Virginia limited liability company (the “Landlord”) with respect to the Company’s prior principal executive office lease (the “Prior Lease). The Prior Lease, as amended, was originally entered into on January 27, 2011 and would have terminated on June 30, 2024. As consideration for the facility.
ITEM 3—LEGAL PROCEEDINGS
We are subject to litigation in the normal course of business, none of which management believes will have a material adverse effect on the Company’s Consolidated Financial Statements.
Not applicable
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PART II
ITEM 5—MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market PriceInformation and Number of Stockholders
Our common stock is listed on the Nasdaq Capital Market under the symbol “TENX.” The following table sets forth, for the periods indicated, the range of high and low sales prices in each fiscal quarter for“TENX”.
Based upon information furnished by our common stock, alltransfer agent, as adjusted for the 1-for-20 reverse split effective May 10, 2013.
| Year-Ended April 30, 2015 | High | Low |
| First Quarter | $5.18 | $3.60 |
| Second Quarter | $4.40 | $3.34 |
| Third Quarter | $4.76 | $3.01 |
| Fourth Quarter | $3.54 | $2.88 |
| Transition Period Ended December 31, 2015 | High | Low |
| First Quarter | $3.88 | $3.26 |
| Second Quarter | $3.98 | $2.88 |
| Two Months Ended December 31, 2015 | $3.40 | $2.98 |
| Year-Ended December 31, 2016 | High | Low |
| First Quarter | $3.37 | $1.94 |
| Second Quarter | $2.94 | $2.00 |
| Third Quarter | $2.77 | $2.16 |
| Fourth Quarter | $2.43 | $1.21 |
Dividend Policy
We have never declared dividends on our equity securities, and currently do not plan to declare dividends on shares of our common stock hold their shares in nominee or in “street name” accounts through brokers, and any such beneficial owners are not included in this number of holders of record. On March 9, 2017, the last sale price reported on the Nasdaq Capital Market for our common stock was $0.70 per share.
2011-4-30 | 2012-4-30 | 2013-4-30 | 2014-4-30 | 2015-4-30 | 2015-12-31 | 2016-12-31 | |
| Tenax Therapeutics, Inc. | $100.00 | $100.56 | $14.12 | $13.79 | $9.66 | $9.27 | $5.51 |
| Nasdaq Composite | $100.00 | $106.01 | $115.84 | $143.19 | $171.96 | $174.26 | $187.33 |
| Nasdaq Biotechnology | $100.00 | $116.54 | $160.98 | $215.04 | $313.15 | $316.91 | $248.19 |
| S&P Global Heathcare | $100.00 | $103.13 | $130.72 | $156.02 | $184.01 | $175.33 | $162.00 |
Repurchases of Common Stock
None.
Unregistered Sales of Equity Securities
During the year ended December 31, 2016, the eight months ended December 31, 2015, the fiscal year ended April 30, 2015 and the fiscal year ended April 30, 2014, and the consolidated balance sheets as of December 31, 2016 and December 31, 2015 are derived from the consolidated financial statements included elsewhere2023, we did not issue or sell any unregistered securities not previously disclosed in this report. The consolidated statements of operations and cash flows data for fiscal years ended April 30, 2013 and 2012, and the consolidated balance sheet data as of April 30, 2015, 2014, 2013 and 2012 are derived from previously filed consolidated financial statements. The data set forth below should be reada Quarterly Report on Form 10-Q or in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes beginninga Current Report on page 42 and other financial information included in this report. Our historical results are not necessarily indicative of the results we may achieve in any future period.
Fiscal Year Ended December 31, | Eight Months Ended December 31, | Fiscal Year Ended April 30, | ||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | |
| Statements of Operations Data: | ||||||
| Total net revenue | $- | $- | $49,286 | $158,926 | $1,190,928 | $363,781 |
| Operating loss | (52,650,739) | (10,425,498) | (14,816,743) | (16,611,120) | (5,189,072) | (8,220,197) |
| Net loss | (43,923,904) | (10,067,964) | (14,081,812) | (19,541,839) | (9,415,800) | (15,712,410) |
| Diluted net loss per share (1) | (1.57) | (0.36) | (0.50) | (2.71) | (6.68) | (14.07) |
| Balance Sheet Data: | ||||||
| Cash, short-term and long-term investments | 21,866,681 | 38,208,001 | 48,101,534 | 58,320,555 | 783,528 | 1,879,872 |
| Total assets | 23,340,175 | 72,987,078 | 82,908,344 | 93,429,440 | 3,180,643 | 4,141,934 |
| Long-term liabilities | - | 7,962,100 | 7,962,100 | 7,973,032 | 3,049,102 | 1,361,110 |
| Accumulated deficit | (204,659,603) | (160,735,699) | (150,667,735) | (136,585,923) | (117,044,084) | (107,628,284) |
| Total stockholders’ equity (deficit) | 17,140,938 | 60,423,348 | 70,429,034 | 82,885,361 | (1,778,036) | (346,046) |
| Statements of Cash Flows Data: | ||||||
| Net cash flows from operating activities | (15,871,300) | (8,950,610) | (9,748,794) | (9,261,571) | (4,921,283) | (8,278,366) |
ITEM 6—RESERVED
ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with the Consolidated Financial Statementsconsolidated financial statements and the related notes to those statements included in “ItemPart II, Item 8 – Consolidated Financial“Financial Statements and Supplementary Data.”Data”. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
The Company was originally formed as a New Jersey corporation in Fiscal Year
On November 13, 2013, we acquired a license granting Life Newco, our wholly-owned subsidiary, an exclusive, sublicensable right to develop and commercialize pharmaceutical products containing levosimendan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial in the United States and Canada. On October 9, 2020 and January 25, 2022, we entered into amendments to the license agreement between the Company and Orion to include in the scope of the license two new oral product formulations containing levosimendan, in capsule and solid dosage form (TNX-103), and a subcutaneously administered dosage form (TNX-102), subject to specified limitations. In 2015,February 2024, we entered into an additional amendment to the license, providing global rights to oral and subcutaneous formulations of levosimendan used in the treatment of PH-HFpEF, revising the royalty structure, lowering the royalty rates, modifying milestones associated with certain regulatory and commercial achievements, and excluding from our Boardright of Directors approved a change infirst negotiation the right to commercialize new applications of levosimendan for neurological diseases and disorders developed by Orion.
On January 15, 2021, we acquired 100% of the equity of PHPM, with PHPM surviving as our fiscal year to a fiscal year beginning on January 1 and ending on December 31 of each year, such change beginning as of January 1, 2016.wholly-owned subsidiary. As a result of the merger, pending the outcome of our strategic process, we plan to develop and commercialize pharmaceutical products containing imatinib for the treatment of PAH.
Reverse Stock Splits
The Company has adjusted all share amounts and references to stock prices in this Annual Report on Form 10-K, as well as our financial statements, to reflect that on January 2, 2024, we effected a 1-for-80 reverse stock split (the “Reverse Stock Split”), and on January 4, 2023, we effected a 1-for-20 reverse stock split (the “Prior Reverse Stock Split”, together with the Reverse Stock Split, the “Reverse Stock Splits”). The Reverse Stock Splits did not change financialthe number of authorized shares of capital stock or cause an adjustment to the par value of our capital stock. Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under our outstanding stock options and warrants. The number of shares authorized for issuance pursuant to our equity incentive plans have also been adjusted proportionately to reflect the Reverse Stock Splits.
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Business Strategy
Having carefully considered alternatives within the ongoing strategic process announced in September 2022, and having raised capital expected to fund the Company through 2024, the Company has elected to prioritize its LEVEL trial (Phase 3 testing of oral levosimendan), ahead of imatinib. Activity to initiate the LEVEL trial continued in the fourth quarter of 2023, and site qualification, selection, and initiation processes are ongoing, the Company having received U.S. Food and Drug Administration (“FDA”) input into the oral levosimendan protocol and clinical development program in the third quarter of 2023. The Company began initiating sites in the fourth quarter of 2023, and commenced enrolling patients early in 2024. Additional funding will be needed to complete the LEVEL trial, which includes an open label extension phase following the completion of the randomized phase. The Company will complete efficacy and safety analyses of levosimendan versus placebo at the end of the randomized treatment phase, but many patients will continue to be treated under the protocol on open label levosimendan, beyond the completion of these analyses. Supporting this strategic decision to prioritize levosimendan development and commence Phase 3 trial work were two U.S. Patents issued in March and July 2023, covering the use of IV and oral levosimendan in patients with PH-HFpEF. These patents are the second and third levosimendan patents granted to us since the start of 2022. An additional new patent to be issued in early 2024 provides protections covering all therapeutic doses of all three formulations of the product in patients with PH-HFpEF. Given our prioritization of the Phase 3 testing of levosimendan, we have suspended plans to launch an imatinib Phase 3 trial.
The Company took steps to reduce its monthly operating expenses and conserve cash, as it commenced exploring strategic alternatives in late 2022. The Company at that time cancelled many non-essential operating expenses such as consulting, its office lease, and dues and subscriptions and office supplies associated with that leased office. During the third quarter of 2023, the Company and its contracted CRO increased outreach to North American clinical trial sites, Institutional Review Boards, and other partners who will support the LEVEL trial, and in the fourth quarter of 2023 commenced site initiations.
Pending the outcome of our ongoing strategic process, the key elements of our business strategy are outlined below.
Efficiently conduct clinical development to establish clinical proof of principle in new indications, refine formulation, and commence Phase 3 testing of our current product candidates.
Levosimendan and imatinib have been approved and prescribed in countries around the world for more than 20 years, but we believe their mechanisms of action have not been fully exploited, despite promising evidence they may significantly improve the lives of patients with pulmonary hypertension. We are conducting clinical development with the intent to establish proof of beneficial activity in cardiopulmonary diseases in which these therapeutics would be expected to have benefit for patients with diseases for which either no pharmaceutical therapies are approved at all, or in the case of PAH, where numerous expensive therapies generally offer a modest reduction of symptoms. Our focus is primarily on designing and executing formulation improvements, protecting these innovations with patents and other forms of exclusivity, and employing innovative clinical trial science to establish a robust foundation for subsequent development, product approval, and commercialization. We intend to submit marketing authorization applications following two Phase 3 trials of levosimendan and, when appropriate, a single Phase 3 trial of imatinib. Our trials are designed to incorporate and reflect advanced clinical trial design science and the regulatory and advisory experience of our team. We intend to continue partnering with innovative companies, renowned biostatisticians and trialists, medical leaders, formulation and regulatory experts, and premier clinical testing organizations to help expedite development, and continue expanding into complementary areas when opportunities arise through our development, research, and discoveries. We also intend to continue outsourcing to CROs, and seeking and acting upon the advice of preeminent scientists focused on cardiovascular and pulmonary drug development, when designing and executing our research.
Efficiently explore new high-potential therapeutic applications, in particular where expedited regulatory pathways are available, leveraging third-party research collaborations and our results from related areas.
Levosimendan has shown promise in multiple disease areas in the more than two decades following its approval. Our own Phase 2 study and open-label extension has demonstrated that a formerly under-appreciated mechanism of action of levosimendan, its property of relaxing the venous circulation, brings about durable improvements in exercise capacity and quality of life, as well as other clinical assessments, in patients with PH-HFpEF. We believe this patient population today has no pharmaceutical therapies available and we are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs.
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We believe these factors will support approval by the FDA of these product candidates based on positive Phase 3 data. Through our agreement with our licensor, Orion, the originator of levosimendan for acute decompensated heart failure, we have access to a library of ongoing and completed trials and research projects, including certain documentation, which we believe, in combination with positive Phase 3 data we hope to generate in at least one indication, will support FDA approval of levosimendan. Likewise, the regulatory pathway for approval of imatinib for the treatment of PAH, as formulated by us at the dose shown to be effective in a prior Phase 3 trial conducted by Novartis, allows us to build on the dossier of research results already reviewed by the FDA. In order to achieve our objective of developing these medicines for new groups of patients, we have established collaborative research relationships with investigators from leading research and clinical institutions, and our strategic partners. These collaborative relationships have enabled us to explore where our product candidates may have therapeutic relevance, gain the advice and support of key opinion leaders in medicine and clinical trial science, and invest in development efforts to exploit opportunities to advance beyond current clinical care.
Continue to expand our intellectual property portfolio.
Our intellectual property and the confidentiality of all our Company information is important to our business and we take significant steps to help protect its value. Our research and development efforts, both through internal activities and through collaborative research activities with others, aim to develop new intellectual property and enable us to file patent applications that cover new uses of our existing technologies, alone or in combination with existing therapies, as well as other product candidates.
Notice of Allowance and Patents
On February 1, 2023, the Company announced it was granted a Notice of Allowance from the USPTO for its patent application with claims covering the use of IV levosimendan (TNX-101) in the treatment of PH-HFpEF. This patent (U.S. Patent No. 11,607,412) was issued on March 21, 2023. On July 19, 2023, the Company announced USPTO issuance of another patent, this one including claims covering the use of oral levosimendan (TNX-103) in patients with PH-HFpEF. This issued patent (U.S. Patent No. 11,701,355) provides exclusivity through December 2040. On February 6, 2024, the Company announced it was granted a Notice of Allowance from USPTO for its patent application broadening IP protection for oral, I.V., and subcutaneous use of levosimendan and its active metabolites in PH-HFpEF, at all therapeutic doses and in combination with various cardiovascular drugs. At present, we have other patent applications pending, with additional decisions expected in the future. Patents pending in Europe may lead to intellectual property protections on the use of levosimendan in patients with PH-HFpEF in 2024.
Enter into licensing or product co-development arrangements.
In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, maintain our low development and business operations costs, and broaden our commercialization capabilities globally. We believe this strategy will help us develop a portfolio of high-quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies.
As we focus on our strategic process, we also continue to position ourselves to execute upon licensing and other partnering opportunities. To do so, we need to continue to maintain our strategic direction, manage and deploy our available cash efficiently, and strengthen our collaborative research development and partner relationships.
Historically, we have financed our operations principally through equity and debt offerings, including private placements and loans from our stockholders. Based on our current operating plan, there is substantial doubt about our ability to continue as a going concern. Management has implemented certain cost-cutting measures as described above and is actively exploring a diverse range of strategic options to help drive stockholder value including, among other things, capital raises, a sale of our Company, merger, one or more license agreements, a co-development agreement, a combination of these, or other strategic transactions; however, there is no assurance that these efforts will result in a transaction or other alternative or that any additional funding will be available. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities and through collaboration and licensing agreements, to support our future operations. If we are unable to complete a strategic transaction or secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs.
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| Table of Contents |
Comparison of Our Results of Operations for the Years Ended December 31, 2023 and 2022
|
| The year ended December 31, |
|
| Increase/(Decrease) |
| ||||||
|
| 2023 |
|
| 2022 |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| |||
Operating expenses |
|
|
|
|
|
|
|
|
| |||
General and administrative |
| $ | 5,005,135 |
|
| $ | 5,675,231 |
|
|
| (670,096 | ) |
Research and development |
|
| 3,228,806 |
|
|
| 5,377,412 |
|
|
| (2,148,606 | ) |
Total operating expenses |
|
| 8,233,941 |
|
|
| 11,052,643 |
|
|
| (2,818,702 | ) |
General and Administrative Expenses
General and administrative expenses were $5.0 million for the year ended December 31, 2016 are2023, compared to the unaudited results$5.7 million for the year ended December 31, 2015, and the financial results for the eight months ended December 31, 2015 are compared to the unaudited financial results for the eight months ended December 31, 2014. When financial results for the fiscal year ended April 30, 2015 are compared to the prior year, the results are presented on the basis of our previous fiscal year-end on a twelve month basis.
Year ended December 31, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2016 | 2015 | |||
| Legal and professional fees | $1,878,032 | $2,164,910 | $(286,878) | (13)% |
| Personnel costs | 3,390,457 | 3,269,639 | 120,818 | 4% |
| Other costs | 824,307 | 1,024,092 | (199,785) | (20)% |
| Facilities | 140,575 | 153,227 | (12,652) | (8)% |
| Depreciation and amortization | 12,587 | 59,700 | (47,113) | (79)% |
|
| Year ended December 31, |
|
| Increase/ (Decrease) |
|
| % Increase/ (Decrease) |
| |||||||
|
| 2023 |
|
| 2022 |
|
|
|
|
|
|
| ||||
Personnel costs |
| $ | 2,176,682 |
|
| $ | 2,370,362 |
|
| $ | (193,680 | ) |
|
| (8 | )% |
Legal and professional fees |
|
| 1,967,276 |
|
|
| 2,369,126 |
|
|
| (401,850 | ) |
|
| (17 | )% |
Other costs |
|
| 831,908 |
|
|
| 782,023 |
|
|
| 49,885 |
|
|
| 6 | % |
Facilities |
|
| 29,269 |
|
|
| 153,720 |
|
|
| (124,451 | ) |
|
| (81 | )% |
Personnel costs decreased approximately $194,000 for the year ended December 31, 2023, compared to the same period in the prior year. The decrease was due to reductions in head count and stock compensation expenses.
Stock Compensation expense was approximately $191,000 for the year ended December 31, 2023, and decreased approximately $174,000 compared to the same period in the prior year. The decrease in expense was due to the decrease in head count and option awards during the year.
Legal and professional fees:
Legal and professional fees decreased approximately $287,000$264,000 for the year ended December 31, 2016,2023, as compared to the same period in the prior year. ThisThe decrease was primarily due to a reduction in costs incurred for investor relations services, legallower capital market activities and IP-related costs.
Professional fees and fees paid to our Board of Directors, partially offset by an increase in consulting costs.
Other costs increased approximately $267,000 in the recognized expense$50,000 for the vesting of outstanding stock option awards partially offset by a decrease of approximately $68,000 in salaries and bonuses paid as well as an overall decrease in payroll taxes and benefits paid asyear ended December 31, 2023, compared to the same period in the prior year.
Facilities costs decreased approximately $124,000 for the year ended December 31, 2016 was due primarily to an approximately $181,000 decrease in franchise taxes paid, a $29,000 decrease in banking fees, as well as general decreases in costs incurred for travel and supplies; partially offset by an increase of approximately $31,000 in insurance costs, as2023, compared to the same period in the prior year.
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Research and Development Expenses
Research and development expenses were $3.2 million for the years ended December 31, 2016 and 2015.
Year ended December 31, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2016 | 2015 | |||
| Clinical and preclinical development | $11,681,352 | $7,775,366 | $3,905,986 | 50% |
| Personnel costs | 785,550 | 594,306 | 191,244 | 32% |
| Consulting | 640,088 | 490,210 | 149,878 | 31% |
| Other costs | 26,326 | 25,901 | 425 | 2% |
| Depreciation | 6,365 | 19,004 | (12,639) | (67)% |
|
| Year ended December 31, |
|
| Increase/ (Decrease) |
|
| % Increase/ (Decrease) |
| |||||||
|
| 2023 |
|
| 2022 |
|
|
|
|
|
|
| ||||
Clinical and preclinical development |
| $ | 2,309,652 |
|
| $ | 4,657,916 |
|
| $ | (2,348,264 | ) |
|
| (50 | )% |
Personnel costs |
|
| 829,588 |
|
|
| 684,451 |
|
|
| 145,137 |
|
|
| 21 | % |
Other costs |
|
| 89,566 |
|
|
| 35,046 |
|
|
| 54,520 |
|
|
| 156 | % |
Clinical and preclinical development costs include the costs associated with our Phase III and Phase II clinical trials for levosimendan and Oxycyte. The increase ofdecreased approximately $3.9$2.3 million in clinical and preclinical development costs for the year ended December 31, 2016, compared to the prior year, was primarily due to increased expenditures for CRO costs to manage the Phase III LEVO-CTS clinical trial, partially offset by a reduction in costs incurred in the current period for the development and clinical testing of Oxycyte, which development we decided to suspend in September 2014.
Personnel costs increased approximately $13,000$145,000 for the year ended December 31, 2016, compared to the prior year. This decrease was due primarily to depreciation of lab equipment that was written off and disposed of in the prior year following our decision to suspend development of our Oxycyte products.
Year ended December 31, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2016 | 2015 | |||
| Loss on impairment of long-lived assets | $33,265,100 | $1,034,863 | $32,230,237 | 3114% |
Other costs increased approximately $1.0 million during$55,000 for the year ended December 31, 2015.
Other Income and corresponding Goodwill, was more than temporarily impaired.
Other income and expense net
Year ended December 31, | (Increase)/ Decrease | ||
2016 | 2015 | ||
| Other (income) expense, net | $(764,735) | $(633,632) | $(131,103) |
Year ended April 30, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2014 | 2013 | |||
| Personnel costs | $10,593,234 | $1,490,752 | $9,102,482 | 611% |
| Legal and professional fees | 2,556,643 | 2,005,311 | 551,332 | 27% |
| Other costs | 350,855 | (206,788) | 557,643 | 270% |
| Facilities | 157,449 | 167,693 | (10,244) | (6)% |
| Depreciation and amortization | 115,042 | 111,012 | 4,030 | 4% |
Eight months ended December 31, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2015 | 2014 | |||
| Clinical and preclinical development | $5,560,860 | $3,820,196 | $1,740,664 | 46% |
| Consulting | 470,335 | 15,231 | 455,104 | 2988% |
| Personnel costs | 427,873 | 359,129 | 68,744 | 19% |
| Other costs | 25,799 | 45,911 | (20,112) | (44)% |
Eight Months ended December 31, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2015 | 2014 | |||
| Interest expense | $1,507 | $46,736 | $(45,229) | (97)% |
Eight Months ended December 31, | (Increase)/ Decrease | ||
2015 | 2014 | ||
| Other (income) expense, net | $(359,041) | $(509,420) | $150,379 |
Liquidity, Capital Resources and Plan of Dermacyte® through distribution agreements, on-line retailers and direct sales to physician and medical spa facilities. Product revenue, cost of sales and gross profit, as well as corresponding percentage changes, for the years ended April 30, 2015 and 2014 are as follows:
Year ended April 30, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2015 | 2014 | |||
| Product revenue | $- | $25,731 | $(25,731) | (100)% |
| Cost of sales | - | 129,800 | (129,800) | (100)% |
| Gross profit | $- | $(104,069) | $104,069 | (100)% |
Year ended April 30, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2015 | 2014 | |||
| Government grant revenue | $49,286 | $262,995 | $(213,709) | (81)% |
Year ended April 30, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2015 | 2014 | |||
| Legal and professional fees | $3,017,584 | $2,556,643 | $460,941 | 18% |
| Personnel costs | 2,986,589 | 10,593,234 | (7,606,645) | (72)% |
| Other costs | 890,940 | 350,855 | 540,085 | 154% |
| Facilities | 160,818 | 157,449 | 3,369 | 2% |
| Depreciation and amortization | 114,848 | 115,042 | (194) | (0)% |
Year ended April 30, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2015 | 2014 | |||
| Clinical and preclinical development | $6,034,702 | $1,947,461 | $4,087,241 | 210% |
| Personnel costs | 525,561 | 818,264 | (292,703) | (36)% |
| Consulting | 35,106 | 153,506 | (118,400) | (77)% |
| Depreciation | 33,292 | 35,447 | (2,155) | (6)% |
| Other costs | 27,287 | 31,780 | (4,493) | (14)% |
| Facilities | 4,439 | 10,263 | (5,824) | (57)% |
Year ended April 30, | Increase/ (Decrease) | % Increase/ (Decrease) | ||
2015 | 2014 | |||
| Interest expense | $49,081 | $2,212,283 | $(2,163,202) | (98)% |
Year ended April 30, | (Increase)/ Decrease | ||
2015 | 2014 | ||
| Other (income) expense, net | $(784,012) | $718,436 | $(1,502,448) |
We have incurred losses since our inception and, as of December 31, 2016,2023, we had an accumulated deficit of approximately $205$297 million. We will continue to incur losses until we generate sufficient revenue to offset our expenses, and we anticipate that we will continue to incur net losses for at least the next several years. We expect to incur additional expenses related to our development and potential commercialization of levosimendan in the LEVEL trial and, pending the outcome of our strategic process, imatinib for heart failurepulmonary hypertension and other potential indications, as well as identifying and developing other potential product candidates, and as a result, we will need to generate significant net product sales, royalty and other revenues to achieve profitability.
The process of conducting preclinical studies and clinical trials necessary to obtain approval from the FDA is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among other things, the quality of the product candidate’s early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties discussed above, uncertainty associated with clinical trial enrollment and risks inherent in the development process, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates. Development timelines, probability of success and development costs vary widely. We are currently focused on developing our two product candidates, levosimendan and imatinib, and have prioritized levosimendan in the short-term; however, we will need substantial additional capital in the future in order to complete the development and potential commercialization of levosimendan and imatinib, and to continue with the development of other potential product candidates.
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Liquidity
We have financed our operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. We had total current assets of $13,628,175approximately $11.7 million and $20,560,353$3.2 million and working capital of $7,428,938approximately $8.1 million and $15,958,723$1.4 million as of December 31, 20162023 and December 31, 2015,2022, respectively. Our practice is to invest excess cash, where available, in short-term money market investment instruments and high quality corporate and government bonds.
Clinical and Preclinical Product Development
We are in the clinical trial stage in the development of our product candidates. We recently completedcurrently conducting a Phase III clinical3 trial for levosimendan. We expect our primary focus will be on initiating additional clinicalof oral levosimendan (LEVEL), and preclinical studies for levosimendan for heart failure or other potential indications.intend to recruit patients throughout 2024 and into at least the first half of 2025. Our ability to continue to pursue testing and development of our products, including completing the LEVEL trial, beyond the first half of calendar year 2018 may2024 will depend on obtaining license income or outside financial resources. There is no assurance that we will obtain any license agreement or outside financing or that we will otherwise succeed in obtaining any necessary resources.
Financings
On February 8, 2024, we sold in a registered public offering (i) an aggregate of 421,260 shares of our common stock and 2014, we received approximately $544,000pre-funded warrants to purchase an aggregate of 1,178,740 shares of our common stock and $7.1 million and issued 209,230 and 3,161,145(ii) accompanying warrants to purchase up to an aggregate of 3,200,000 shares of our common stock at a combined offering price of $5.65 per share of common stock respectively uponand associated warrant, or $5.649 per pre-funded warrant and associated warrant, resulting in gross proceeds to the exerciseCompany of approximately $9.0 million. Net proceeds of the offering were approximately $8.0 million, after deducting the placement agent fees and estimated offering expenses payable by the Company.
As retrospectively adjusted for the Reverse Stock Split, on February 3, 2023, we sold in a registered public offering (i) an aggregate of 86,994 shares of our outstanding warrants. We did not complete any financings duringcommon stock and pre-funded warrants to purchase an aggregate of 21,341 shares of our common stock and (ii) accompanying warrants to purchase up to an aggregate of 216,667 shares of our common stock at a combined offering price of $144.00 per share of common stock and associated warrant, or $143.92 per pre-funded warrant and associated warrant, resulting in gross proceeds to the year ended December 31, 2016 orCompany of approximately $15.6 million. Net proceeds of the eight months ended December 31, 2015.
As retrospectively adjusted for the Reverse Stock Splits, on May 17, 2022, we sold 9,285,714 shares6,623 units in a private placement at a purchase price of common stock$1,240.00 per unit for net proceeds of approximately $55$7.9 million.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Year ended December 31, | ||
2016 | 2015 | |
| Net cash used in operating activities | $(15,871,300) | $(12,057,891) |
| Net cash provided by investing activities | 22,206,802 | 4,206,244 |
| Net cash used in financing activities | - | (164,224) |
|
| Year ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net cash (used in) operating activities |
| $ | (5,903,532 | ) |
| $ | (11,388,571 | ) |
Net cash (used in) provided by investing activities |
|
| 2,843 |
|
|
| (2,323 | ) |
Net cash provided by financing activities |
|
| 13,569,137 |
|
|
| 7,930,654 |
|
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Net cash used in(used in) operating activities.
Net cash used in operating activities was $15.9approximately $5.9 million for the year ended December 31, 20162023 compared to net cash used in operating activities of $12.1approximately $11.4 million for the year ended December 31, 2015.2022. The increasedecrease in cash used for operating activities of $3.8 million was primarily due primarily to cost incurred forlower expense activity in the Phase III clinic trials for LCOS.
Net cash (used in)/provided by investing activities
Net cash used in or provided by investing activities was $22.2 millionapproximately $2,843 for the year ended December 31, 20162023, compared to net cash usedapproximately $(2,323) in investing activities of $4.2 million for the year ended December 31, 2015.2022. The increase in cash provided by investing activities was primarily due primarily to the salessale of marketable securities.
Eight months ended December 31, | ||
2015 | 2014 | |
| Net cash used in operating activities | $(8,950,610) | $(6,632,268) |
| Net cash provided by (used in) investing activities | 4,784,732 | (40,356,616) |
| Net cash (used in) provided by financing activities | (100,160) | 344,654 |
Net cash provided by financing activities
Year ended April 30, | ||
2015 | 2014 | |
| Net cash used in operating activities | $(9,748,794) | $(9,261,571) |
| Net cash used in investing activities | (40,925,860) | (147,038) |
| Net cash provided by financing activities | 280,590 | 66,945,636 |
Net cash provided by financing activities was $280,590 for the year ended April 30, 2015 compared to net cash provided by financing activities of $66.9approximately $13.6 million for the year ended April 30, 2014.December 31, 2023, compared to approximately $7.9 million in the prior year. The decrease of netincrease in cash provided by financing activities was due primarily to the net proceeds of $55 million received from the issuanceFebruary 3, 2023 sale of common stock $4.9 million received from the issuance of Series C 8% Convertible Preferred Stockand proceeds of $7 million received fromwarrants and the exercise of certain warrants in the prior year.
Operating Capital and Capital Expenditure Requirements
Our future capital requirements will depend on many factors that include, but are not limited to the following:
· | the initiation, progress, timing and completion of clinical trials for our product candidates and potential product candidates; | |
· | the outcome, timing and cost of regulatory approvals and the regulatory approval process; | |
· | delays that may be caused by changing regulatory requirements; | |
· | the number of product candidates we pursue; | |
· | the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims; | |
· | the timing and terms of future collaboration, licensing, consulting or other arrangements that we may enter into; | |
· | the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities; | |
· | the cost of procuring clinical and commercial supplies of our product candidates; | |
· | the extent to which we acquire or invest in businesses, products or technologies; | |
· | delays that may be caused by the global coronavirus pandemic or similar global societal disruptions; and | |
· | the possible costs of litigation. |
Based on our working capital aton December 31, 20162023, and the financing completed on February 8, 2024, we believe we have sufficient capital on hand to continue to fund operations through the first half of calendar year 2018.
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We will need substantial additional capital beyond 2024, assuming ongoing activities with the LEVEL trial continue at the expected pace. In addition, we will need additional funding in the future in order to complete the regulatory approval and commercialization of levosimendan, as well as to fund the development and commercialization of levosimendan and ourother future product candidates. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Such funding, if needed, may not be available on favorable terms, if at all. In the event we are unable to obtain additional capital, we may delay or reduce the scope of our current research and development programs and other expenses.
If adequate funds are not available, we may also be required to eliminate one or more of our clinical trials, delaying approval of levosimendan or our commercialization efforts. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates or grant licenses on terms that may not be favorable to us. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital.
Payments Due by Period | |||||
Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | |
| Operating Lease Obligations | $528,655 | $112,431 | $354,421 | $61,803 | $- |
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.
Summary of Critical Accounting Policies
Use of Estimates
—The preparation of the accompanyingPreclinical Study and Clinical Accruals
—We estimate our preclinical study and clinical trial expenses based on the services received pursuant to contracts with several research institutions and CROs that conduct and manage preclinical and clinical trials on our behalf. The financial terms of the agreements vary from contract to contract and may result in uneven expenses and payment flows. Preclinical study and clinical trial expenses include the following:· | fees paid to CROs in connection with clinical trials; | |
· | fees paid to research institutions in conjunction with preclinical research studies; and | |
· | fees paid to contract manufacturers and service providers in connection with the production and testing of active pharmaceutical ingredients and drug materials for use in preclinical studies and clinical trials. |
Stock-Based Compensation
—We account for stock-based awards to employees in accordance with Accounting Standards Codification, or ASCWe account for equity instruments issued to non-employees in accordance with ASC 505-50, Accounting for Equity Instruments That Are IssuedEquity-Based Payments to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. EquityNon-Employees. We record equity instruments issued to non-employees are recordednon- at their fair value on the measurement date and are subject to periodic adjustmentperiodically adjust them as the underlying equity instruments vest.
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Recent Accounting Pronouncements
In January 2017,June 2016, the Financial Accounting Standards Board or the FASB,(“FASB”) issued a new accounting standard that provides guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance provides a screen to determine when an integrated set of assets and activities, or a set, does not qualify to be a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in an identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the guidance requires a set to be considered a business to include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs and removes the evaluation as to whether a market participant could replace the missing elements. The new standard will be effective for us on January 1, 2018 and will be adopted on a prospective basis. Early adoption is permitted. We are currently evaluating the effect that the standard will have on our consolidated financial statements and related disclosures.
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ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies and government agencies in order to limit the amount of credit exposure. Some of the securities we invest in may have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate.
See the financial statements included at the end of this report beginning on page F-1.
ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A—CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by paragraph (b) of Rules 13a-15 and 15d-15 promulgated under the Exchange Act, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Interim Chief Financial Officer, we conducted an evaluation as of the end of the period covered by this Annual Report on Form 10-K, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e).
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on their evaluation, our President and Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023, the end of the period covered by this Annual Report on Form 10-K, in that they provide reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the SEC and is accumulated and communicated to our management, including our President and Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We routinely review our internal controls over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal controls over financial reporting on an ongoing basis and will take action as appropriate.
During the most recently completed fiscal quarter, management reviewed all work generated in support of the financial statements and corresponding footnotes to determine areas which may be susceptible to human error. The review focused on limiting manual inputs into work papers wherever possible and tying inputs to external source documents. In addition, management also enhanced its work paper review to compare figures to prior year amounts or source documents and increased the number of calculations in the work papers that are reviewed and re-performed.
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Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Rule 13a-15(f) and Rule 15(d)-15(f) under the Exchange Act, is a process designed by, or under the supervision of, our President and Chief Executive Officer and Interim Chief Financial Officer and affected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:
· | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; | |
· | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and | |
· | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making its assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control — Integrated Framework. Based on its assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2023.
Attestation Report of Registered Public Accounting Firm
Our independent registered public accounting firm has not assessed the effectiveness of our internal control over financial reporting and, under SEC rules, will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as a “non-accelerated filer”.
ITEM 9B—OTHER INFORMATION
None.
ITEM 9C—DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10— DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Board of Directors
Information about our directors, their ages as of March 28, 2024, and the expiration dates of their current terms of Board service are provided in the table below. Additional biographical descriptions are set forth in the text below the tables and include the primary individual experience, qualifications, attributes and skills of each director that led to the conclusion that such director should serve as a member of our Board at this time.
Name | Age | Position with Tenax Therapeutics, Inc. | Director Since | |||
June Almenoff, MD, PhD | 67 | Director | February 2021 | |||
Michael Davidson, MD | 67 | Director | February 2021 | |||
Declan Doogan, MD | 72 | Director | February 2021 | |||
Christopher T. Giordano | 50 | President and Chief Executive Officer and Director | July 2021 | |||
Robyn M. Hunter | 62 | Director | January 2022 | |||
Gerald T. Proehl | 65 | Chair | April 2014 | |||
Stuart Rich, MD | 74 | Chief Medical Officer and Director | February 2021 |
June Almenoff, MD, PhD has served as a director since February 2021. Dr. Almenoff is currently the Chief Medical Officer at RedHill Biopharma Inc. (NASDAQ: RDHL), a specialty biopharmaceutical company, primarily focused on gastrointestinal and infectious diseases, where she serves on the commercial executive team. From March 2010 to October 2014, Dr. Almenoff served as President and Chief Medical Officer and a member of the board of directors of Furiex Pharmaceuticals, Inc. (previously NASDAQ: FURX) (“Furiex”), a drug development collaboration company that was acquired by Actavis plc (now AbbVie, Inc.) for $1.2 billion in July 2014. Prior to joining Furiex, Dr. Almenoff was at GlaxoSmithKline plc (NYSE: GSK) for twelve years, where she held various positions of increasing responsibility, most recently Vice President in the Clinical Safety organization. Dr. Almenoff is on the investment advisory board of the Harrington Discovery Institute, a private venture philanthropy. She serves on the board of directors of Avalo Therapeutics, Inc. (NASDAQ: AVTX) and is a director-advisor of inSoma Bio, Inc. She previously served as a member of the board of directors of Brainstorm Therapeutics, Inc. (NASDAQ: BCLI), Tigenix NV (formerly NASDAQ: TIG), OHR Pharmaceutical Inc. (formerly NASDAQ: OHRP), Kurome Therapeutics, Inc., and as executive chair of the board of directors of RDD Pharma, Ltd. Dr. Almenoff received her B.A. cum laude from Smith College and graduated with AOA honors from the M.D.-Ph.D. program at the Icahn (Mt. Sinai) School of Medicine. She completed post-graduate medical training at Stanford University Medical Center and served on the faculty of Duke University School of Medicine. She is an adjunct Professor at Duke, a Fellow of the American College of Physicians and has authored over 60 publications.
Our Board of Directors believes that Dr. Almenoff’s close to 25 years of leadership experience as a biopharma executive, her expertise in research and development, as well as her experience with public and private biotech boards, venture philanthropy investment, and product commercialization qualify her to serve on our Board.
Michael Davidson, MD has served as a director since February 2021. Since August 2020, Dr. Davidson has served as the Chief Executive Officer of New Amsterdam Pharma B.V., a clinical stage company focused on the treatment of cardio-metabolic diseases. Since April 2007, Dr. Davidson has also served as Clinical Professor and Director of the Lipid Clinic at the University of Chicago Pritzker School of Medicine. From January 2016 to July 2020, Dr. Davidson was the Founder and Chief Scientific Officer and a director of Corvidia Therapeutics, a company focused on the development of transformational therapies for cardio-renal diseases, which was acquired by Novo-Nordisk for up to $2.1 billion in June 2020. Prior to that, from November 2009 to January 2016, Dr. Davidson was the co-founding Chief Medical Officer of Omthera Pharmaceuticals, Inc., a specialty pharmaceuticals company focusing its efforts on the clinical development of new therapies for dyslipidemia, which was acquired by AstraZeneca plc in 2013 for $443 million. Earlier in his career, he founded the Chicago Center for Clinical Research, which became the largest investigator site in the United States and was acquired by PPD, Inc. in 1996. He currently serves as a member of the board of directors of Caladrius Biosciences, Inc. (NASDAQ: CLBS), Silence Therapeutics PLC (NASDAQ: SLN), Sonogene LLC, Jocasta Neuroscience, Inc. and Trofi Nutritionals, Inc. His research background encompasses both pharmaceutical and nutritional clinical trials including extensive research on statins, novel lipid-lowering drugs, and omega-3 fatty acids. Dr. Davidson is board-certified in internal medicine, cardiology, and clinical lipidology and served as President of the National Lipid Association from 2010 to 2011. He received his B.A./M.S. from Northwestern University and M.D. from The Ohio State University School of Medicine.
Our Board of Directors believes that Dr. Davidson’s medical background and extensive experience in clinical development, as well as his extensive experience as an executive of several biotechnology companies, qualify him to serve on our Board.
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Declan Doogan, MD has served as a director since February 2021. Since November 2019, Dr. Doogan has served as co-founder and Chief Medical Officer of Juvenescence Ltd., a life sciences company developing therapies to modify aging and increase healthy human lifespan. From June 2013 to May 2019, Dr. Doogan served as Chief Executive Officer of Portage Biotech, Inc. (NASDAQ: PRTG), a clinical-stage immuno-oncology company, where he currently remains a director. From 2007 to 2012, Dr. Doogan held various executive roles at Amarin Corporation (NASDAQ: AMRN), a pharmaceutical company focused on cardiovascular disease management, including Head of Research and Development, Interim Chief Executive Officer, and Chief Medical Officer. Prior to that, from 1982 to 2007, he held a number of executive positions in the U.S., the U.K. and Japan at Pfizer, Inc. (NYSE: PFE), a multinational pharmaceutical and biotechnology corporation, and was most recently the Senior Vice President and Head of Worldwide Development. Beyond his executive career, Dr. Doogan is an investor in emerging biotechnology companies, and is a partner at Mediqventures Ltd., a biotech merchant bank and investment firm. In addition to Portage Biotech, Inc., Dr. Doogan currently serves as a member of the board of directors of Apterna Ltd. and Causeway Therapeutics Ltd. Dr. Doogan previously served as chairman of the board of directors of Biohaven Pharmaceuticals (NYSE: BHVN) and a member of the boards of directors of Intensity Therapeutics, Inc. (NASDAQ: INTS), Sosei Group Corporation (TSE: 4565), Kleo Pharmaceuticals, Inc. and Celleron Therapeutics Ltd. Dr. Doogan has also held professorships at Harvard School of Public Health, Glasgow University Medical School and Kitasato University (Tokyo). He received his medical degree from Glasgow University. He is a Fellow of the Royal College of Physicians and the Faculty Pharmaceutical Medicine and holds a Doctorate of Science at the University of Kent in the U.K.
Our Board of Directors believes that Dr. Doogan’s 30 years of experience in the global pharmaceutical industry in both major pharmaceutical and biotechnology companies, in addition to his medical background, experience in clinical development and extensive board experience on both public and privately held life sciences companies, qualify him to serve on our Board.
Christopher T. Giordano joined the Company as our Chief Executive Officer and a member of our Board of Directors in July 2021 and became President and Chief Executive Officer in October 2021. From March 2018 to July 2021, he served as President of IQVIA Biotech LLC and IQVIA MedTech Inc., a provider of integrated clinical and commercial solutions to medical device and small biotech companies, where he led an executive team that managed a clinical trial portfolio that grew from 250 to 400 active projects during his three years of leadership. Prior to that role, from August 2008 to March 2018, Mr. Giordano held roles of increasing responsibility at Quintiles Transnational Holdings Inc., a provider of pharmaceutical outsourcing services (acquired by IMS Health Holdings, Inc. in October 2016 to become IQVIA Holdings Inc.), and was most recently Global Vice President of the cardiovascular, renal, and metabolic group. From January 2001 to July 2008, Mr. Giordano served in various sales and operational roles at PPD, Inc., a global clinical research organization. Mr. Giordano holds a B.A. (summa cum laude) in English from the University of San Diego and a M.A. in English from the University of North Carolina at Chapel Hill.
Our Board of Directors believes that Mr. Giordano’s 20 years of experience in the clinical research industry and extensive experience with bringing pharmaceutical products to market qualify him to serve on our Board.
Robyn M. Hunter has served as a director since January 2022. Since August 2022, she has served as global Chief Financial Officer of Sotio Biotech Inc., a clinical stage immuno-oncology company. Previously, she served as the Chief Financial Officer of Fortress Biotech, Inc. (NASDAQ: FBIO) ("Fortress Biotech") from June 2017 to August 2022, and from August 2011 to June 2017, she served as the Vice President and Corporate Controller of Fortress Biotech. From January 2006 to May 2011, Ms. Hunter served as Senior Vice President and Chief Financial Officer of Schochet Associates, Inc. From August 2004 to January 2006, Ms. Hunter served as the Corporate Controller for Indevus Pharmaceuticals, Inc. From 1990 to 2004, Ms. Hunter held several positions from Accounting Manager to Vice President and Treasurer of The Stackpole Corporation. Ms. Hunter holds a B.A. in Economics from Union College in Schenectady, New York.
Our Board of Directors believes that Ms. Hunter’s general business experience and finance expertise and practice in the pharmaceutical industry, developed through her leadership at other companies, qualifies her to serve on our Board.
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Gerald T. Proehlhas served as a director since April 2014. Since June 2015, Mr. Proehl has served as Founder, President, Chief Executive Officer and Chair of the board of directors of Dermata Therapeutics, Inc., a biotechnology company (NASDAQ: DRMA). In January 1999, Mr. Proehl co-founded Santarus, Inc., a specialty biopharmaceutical company, and through January 2014, until its sale to Salix Pharmaceuticals, Ltd. for $2.6 billion, he held various leadership roles, including as President, Chief Executive Officer and a director. Prior to joining Santarus, Mr. Proehl was with Hoechst Marion Roussel (HMR) for 14 years where he served in various capacities, including Vice President of Global Marketing. During his career at HMR he worked across numerous therapeutic areas, including central nervous system, cardiovascular, and gastrointestinal. In addition to Dermata Therapeutics, Mr. Proehl serves on the board of directors of Kinetek Sports, Inc. Mr. Proehl previously served on the boards of Sophiris Bio Inc. (formerly OTCQB: SPHS), Ritter Pharmaceuticals, Inc. (formerly NASDAQ: RTTR), and Auspex Pharmaceuticals, Inc. (formerly NASDAQ: ASPX). Mr. Proehl holds a B.S. in education from the State University of New York at Cortland, an M.A. in exercise physiology from Wake Forest University and an M.B.A. from Rockhurst University.
Our Board of Directors believes that Mr. Proehl’s general business and commercial experience in the pharmaceutical industry, as well as his strong background in business operations developed through his leadership at other companies, qualify him to serve on our Board.
Stuart Rich, MD has served as our Chief Medical Officer since January 2021 and a director since February 2021. Dr. Rich joined the Company from PHPrecisionMed Inc. (PHPM), where he was a co-founder and held the positions of Chief Executive Officer and Director from October 2018 until PHPM’s merger with the Company in January 2021. Beginning July 2015, Dr. Rich has served as Professor of Medicine (and since 2021, Professor Emeritus) at Northwestern University Feinberg School of Medicine. He was co-founder and a Trustee of the Pulmonary Vascular Research Institute from 2006 until 2023, a U.K. based charity. From July 2015 until January 2021, he also served as the Director of the Pulmonary Vascular Disease Program at the Bluhm Cardiovascular Institute of Northwestern University, and since January 2006 he has served as a Director of the Cardiovascular Medical and Research Foundation, a U.S. based charity. He was a standing member of the Cardiovascular and Renal Advisory Committee of the U.S. Food and Drug Administration from 2002 through 2013. Prior to Northwestern University, Dr. Rich was Professor of Medicine at the Section of Cardiology of the University of Chicago Pritzker School of Medicine from September 2004 to July 2015. Dr. Rich also served as the Chief Medical Officer (part-time) of United Therapeutics from October 2003 until December 2004. He was Professor of Medicine at the Rush Heart Institute of the Rush University School of Medicine from July 1996 to September 2004 and Professor of Medicine and Chief of the Section of Cardiology at the University of Illinois College of Medicine in Chicago from July 1980 to July 1996. Dr. Rich received his B.S. in Biology at the University of Illinois and his M.D. at Loyola University Stritch School of Medicine, and he completed his residency in medicine at the Washington University of St. Louis and his fellowship in cardiology at the University of Chicago.
Our Board of Directors believes that Dr. Rich’s extensive medical background in the field of pulmonary hypertension and experience as a consultant and standing member of the Cardiovascular and Renal Advisory Committee of the U.S. Food and Drug Administration qualify him to serve on our Board.
EXECUTIVE OFFICERS
The following table sets forth information concerning our executive officers as of March 28, 2024:
Name | Age | Position with Tenax Therapeutics, Inc. | ||
Christopher T. Giordano | 50 | President and Chief Executive Officer and Director | ||
Lawrence R. Hoffman | 69 | Interim Chief Financial Officer | ||
Stuart Rich, MD | 74 | Chief Medical Officer and Director |
The biographies of Mr. Giordano and Dr. Rich appear above, under the heading “Directors”.
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Lawrence R. Hoffman has served as our Interim Chief Financial Officer since January 2024. Since November 2021, Mr. Hoffman has served as a consultant to several companies through Danforth, including as Interim Chief Financial Officer for SCYNEXIS, Inc. (Nasdaq: SCYX) from November 2021 until October 2022. Prior to joining Danforth, from February 2018 to October 2021, Mr. Hoffman was Chief Financial Officer of Sermonix Pharmaceuticals, Inc. Prior to that, Mr. Hoffman has held executive management positions at multiple public and private companies in the United States. Mr. Hoffman holds a B.S. in Business Administration from La Salle University, a J.D. from Temple University School of Law, an LL.M. (taxation) from Villanova University School of Law, and is a Certified Public Accountant in Pennsylvania.
Director Independence
In accordance with the applicable Nasdaq Listing Rules, our Board of Directors must consist of a majority of “independent directors”, which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of our Board would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.
The Board has determined that directors Drs. Almenoff, Davidson, and Doogan, Mr. Proehl and Ms. Hunter are independent directors in accordance with applicable Nasdaq Listing Rules. In making these determinations, the Board reviewed the information provided by the director nominees with regard to each individual’s business and personal activities as they may relate to us and our management.
The Board of Directors has determined that all of the members of each of the Audit and Compliance, Compensation, and Corporate Governance and Nominating Committees are independent as defined under applicable Nasdaq Listing Rules. In addition, the Board has determined that Ms. Hunter, and Drs. Almenoff and Davidson meet the additional test for independence for audit committee members and Ms. Hunter, Mr. Proehl and Dr. Davidson meet the additional test for independence for compensation committee members imposed by SEC regulations and the Nasdaq Listing Rules.
Standing Committees of the Board of Directors
Our Board of Directors has three standing committees: the Audit and Compliance Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee. Copies of the charters of the Audit and Compliance, Compensation, and Corporate Governance and Nominating Committees, as they may be amended from time to time, are available on our website at http://www.tenaxthera.com.
The following table provides membership information of our directors on each committee of our Board of Directors as of January 30, 2024.
Audit and Compliance Committee | Compensation Committee | Corporate Governance and Nominating Committee | ||||||||||
June Almenoff |
|
| ||||||||||
Michael Davidson |
|
| ||||||||||
Declan Doogan |
| |||||||||||
Robyn M. Hunter |
|
| ||||||||||
Gerald T. Proehl |
|
| ||||||||||
= Committee Chair
= Member
Audit and Compliance Committee
The members of the Audit and Compliance Committee are currently Drs. Almenoff and Davidson and Ms. Hunter. Ms. Hunter serves as chair of the Audit and Compliance Committee. The Board of Directors has determined that Ms. Hunter qualifies as an “audit committee financial expert” as defined by applicable SEC rules. The Audit and Compliance Committee met four times during the year ended December 31, 2023.
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Legal Proceedings with Directors or Executive Officers
There are no legal proceedings related to any of our directors or executive officers that require disclosure pursuant to Items 103 or 401(f) of Regulation S-K.
Family Relationships
There is no family relationship between any director, executive officer, or person nominated to become a director or executive officer of our Company.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) applicable to all of our officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. A copy of this Code of Ethics is available free of charge and is posted on our website at http://investors.tenaxthera.com/corporate-governance. In the event the Code of Ethics is revised, or any waiver is granted under the Code of Ethics with respect to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions, notice of such revision or waiver will be posted on our website or disclosed on a current report on Form 8-K as required.
Compliance with Section 16(a) Reports
The information required by this Item, if any, concerning compliance with Section 16(a) of the Exchange Act will be incorporated by reference from the section of the proxy statement captioned “Delinquent Section 16(a) Reports”.
ITEM 11— EXECUTIVE COMPENSATION
The following tables and narrative discussion describe the material elements of our executive compensation program during 2023. We also provide an overview of our executive compensation philosophy, including our principal compensation policies and practices.
Our “named executive officers” for fiscal year 2023 includes the individual who served as our principal executive officer during 2023, the only other person serving as an executive officer as of December 31, 2023, and the individual who formerly served as our principal financial officer during 2023 (who died in December 2023). Our named executive officers (“NEOs”) for 2023 were:
· | Christopher T. Giordano, our President and Chief Executive Officer (our “CEO”); | |
· | Stuart Rich, our Chief Medical Officer (our “CMO”); and | |
· | Eliot M. Lurier, our Former Interim Chief Financial Officer (our “Former Interim CFO”). |
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2023 Summary Compensation Table
|
|
|
| Salary |
|
| Option Awards |
|
|
|
| Non-Equity Incentive Plan Compensation |
|
|
|
| All Other Compensation |
|
|
|
| Total |
| |||||||||||
Name and Principal Position |
| Year |
| ($)(1) |
|
| ($)(2) |
|
|
|
| ($) |
|
|
|
| ($) |
|
|
|
| ($) |
| |||||||||||
Christopher T. Giordano |
| 2023 |
|
| 405,300 |
|
|
| -- |
|
|
|
|
|
| 202,650 |
|
|
| (3 | ) |
|
| 36,820 |
|
|
| (4 | ) |
|
| 644,770 |
| |
President and Chief Executive Officer |
| 2022 |
|
| 386,000 |
|
|
| 104,296 |
|
|
| (5 | ) |
|
| 144,750 |
|
|
| (6 | ) |
|
| 32,286 |
|
|
| (7 | ) |
|
| 667,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart Rich |
| 2023 |
|
| 318,000 |
|
|
| -- |
|
|
|
|
|
|
| 127,200 |
|
|
| (8 | ) |
|
| 36,023 |
|
|
| (9 | ) |
|
| 481,223 |
|
Chief Medical Officer |
| 2022 |
|
| 309,000 |
|
|
| 52,148 |
|
|
| (10 | ) |
|
| 92,700 |
|
|
| (11 | ) |
|
| 14,296 |
|
|
| (12 | ) |
|
| 468,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliot M. Lurier (13) |
| 2023 |
|
| -- |
|
|
| -- |
|
|
|
|
|
|
| -- |
|
|
|
|
|
|
| 166,288 |
|
|
| (14 | ) |
|
| 166,288 |
|
Former Interim Chief Financial Officer |
| 2022 |
|
| -- |
|
|
| -- |
|
|
|
|
|
|
| -- |
|
|
|
|
|
|
| 221,700 |
|
|
| (14 | ) |
|
| 221,700 |
|
(1) | Reflects base salary earned during the fiscal year covered. | |
(2) | The amounts in these columns reflect the aggregate grant date fair value of awards granted during the year computed in accordance with FASB ASC Topic 718, Compensation - Stock Compensation. The assumptions made in determining the fair values of our stock and option awards are set forth in Note F to our Financial Statements for the year ended December 31, 2022, included in our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 31, 2023. | |
(3) | In March 2024, the Compensation Committee calculated the predetermined operational goals for 2023 had been achieved at 100%, resulting in a cash bonus of $202,650 paid to Mr. Giordano. | |
(4) | Consists of $23,620 of health and benefit premiums for coverage of Mr. Giordano and his eligible dependents and $13,200 of Company contributions to Mr. Giordano’s 401(k) plan. | |
(5) | During 2022, we granted an option to purchase 125 shares of Common Stock at an exercise price of $992 per share to Mr. Giordano, as retrospectively adjusted for the Reverse Stock Splits. The option is exercisable as to one-fourth of the shares underlying the option on each of June 9, 2023, June 9, 2024, June 9, 2025 and June 9, 2026, subject to Mr. Giordano’s continued employment. | |
(6) | Mr. Giordano was eligible to receive a target cash bonus of $193,000, if the Compensation Committee calculated that the predetermined operational goals had been achieved at 100%. In March 2023, the Compensation Committee calculated the predetermined operational goals for 2022 had been achieved at 75% resulting in a cash bonus of $144,750 paid to Mr. Giordano. | |
(7) | Consists of $20,086 of health and benefit premiums for coverage of Mr. Giordano and his eligible dependents and $12,200 of Company contributions to Mr. Giordano’s 401(k) plan. | |
(8) | In March 2024, the Compensation Committee calculated the predetermined operational goals for 2023 had been achieved at 100%, resulting in a cash bonus of $127,200 paid to Dr. Rich. | |
(9) | Consists of $22,823 of benefit premiums for Dr. Rich and $13,200 of Company contributions to Dr. Rich’s 401(k) plan. | |
(10) | During 2022, we granted an option to purchase 63 shares of Common Stock at an exercise price of $992 per share to Dr. Rich, as retrospectively adjusted for the Reverse Stock Splits. The option is exercisable as to one-fourth of the shares underlying the option on each of June 9, 2023, June 9, 2024, June 9, 2025 and June 9, 2026, subject to Dr. Rich’s continued employment. | |
(11) | Dr. Rich was eligible to receive a target cash bonus of $123,600, if the Compensation Committee calculated that the predetermined operational goals had been achieved at 100%. In March 2023, the Compensation Committee calculated the predetermined operational goals for 2022 had been achieved at 75% resulting in a cash bonus of $92,700 paid to Dr. Rich. | |
(12) | Consists of $2,096 of benefit premiums for Dr. Rich and $12,200 of Company contributions to Dr. Rich’s 401(k) plan. | |
(13) | Mr. Lurier died in December 2023. | |
(14) | Mr. Lurier was a consulting Interim Chief Financial Officer employed by Danforth and was contracted on a part time basis beginning in October 2021. We paid $166,288 in consulting fees to Danforth for Mr. Lurier’s services in fiscal year 2023 and $221,700 in 2022. |
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Narrative to Summary Compensation Table
Elements of Compensation
During the year ended December 31, 2023, we compensated our Named Executive Officers generally through a mix of (i) base salary and (ii) annual cash bonus based on achievement of predetermined operational goals. We did not issue long-term equity compensation because the Board determined there were insufficient shares reserved under our 2022 Stock Incentive Plan.
Mr. Lurier was our Interim Chief Financial Officer employed by Danforth and was compensated on an hourly basis in accordance with his consulting agreement (the “Danforth Consulting Agreement”). See “Employment and Other Contracts - Eliot M. Lurier” for further discussion of Mr. Lurier's consulting agreement.
Annual Base Salaries
Mr. Giordano and Dr. Rich received a base salary to compensate them for services rendered to us during the year ended December 31, 2023. The base salary is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. In the year ended December 31, 2023, we paid an annual base salary of $405,300 to Mr. Giordano and $318,000 to Dr. Rich.
Cash Bonuses
Under each of their employment agreements, Mr. Giordano and Dr. Rich are eligible to receive annual cash bonuses based on the achievement of annual goals. During the year ended December 31, 2023, Mr. Giordano and Dr. Rich were eligible to receive a target cash bonus consisting of 50% and 40%, respectively, of their base salaries, based on 100% achievement of the predetermined operational goals. There is no cap on the bonuses for greater than 100% achievement of goals, and there is no pre-identified threshold amount that must be achieved to receive any cash bonus payment. Our Compensation Committee evaluated performance for the year ended December 31, 2023, and consistent with the determinations made in prior years, did so in March 2024.
Long-Term Equity Compensation
Provided we have sufficient shares reserved under our 2022 Stock Incentive Plan, we typically award stock options to our key employees, including to our non-executive employees, on an annual basis and subject to approval by (i) the Board of Directors upon the Compensation Committee’s recommendation with respect to executive officers and (ii) the Compensation Committee with respect to all other employees.
Other Elements of Compensation
Employee Benefits and Perquisites
We maintain broad based benefits that are provided to all employees, including health and dental insurance. Our executive officers are eligible to participate in all of our employee benefit plans, in each case, on the same basis as other employees.
No Tax Gross-Ups
We do not make gross-up payments to cover our NEOs’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by us.
Severance and Change-of-Control Benefits
Pursuant to employment agreements we have entered into with certain NEOs, each such officer is entitled to specified benefits in the event of the termination of his employment under specified circumstances, including termination following a change in control of the Company. We have provided more detailed information about these benefits under the caption “-Employment and Other Contracts” below.
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Employment and Other Contracts
Christopher T. Giordano
We entered into an executive employment agreement with Mr. Giordano, effective July 6, 2021 (the “Giordano Employment Agreement”). Under the Giordano Employment Agreement, Mr. Giordano initially received an annual base salary of $375,000, which has been subsequently increased to $469,000, effective January 1, 2024. Mr. Giordano also will receive participation in medical insurance, dental insurance, and other benefit plans on the same basis as our other officers. Under the Giordano Employment Agreement, Mr. Giordano will receive an annual cash bonus consisting of 50% of his base salary, based on 100% achievement of annual goals (with no cap on the bonus for greater than 100% achievement of goals). The Giordano Employment Agreement also provides for the grant of the following employment inducement stock options (as retrospectively adjusted for the Reverse Stock Splits): (i) a one-time stock option grant of 160 shares of Common Stock with four-year straight-line vesting; and (ii) a one-time stock option grant of 63 shares of Common Stock with 50% vesting upon the achievement of certain performance metrics related to our clinical trials. As of December 31, 2023, none of the vesting milestones had been achieved and the options were subsequently cancelled. We also reimbursed Mr. Giordano for up to $10,000 of legal expenses related to the Giordano Employment Agreement.
The Giordano Employment Agreement is effective for a one-year term, and automatically renews for additional one-year terms, unless the Giordano Employment Agreement is terminated in advance of renewal or either party gives notice at least 90 days prior to the end of the then-current term of an intention not to renew. If Mr. Giordano is terminated without “cause”, if he terminates his employment for “good reason”, or if the Company elects not to renew the Giordano Employment Agreement, Mr. Giordano would be entitled to receive (i) one-year of base salary, (ii) a pro-rated amount of the annual bonus that he would have received had 100% of goals been achieved, and (iii) one-year of COBRA reimbursements or benefits payments, as applicable. Mr. Giordano’s entitlement to these payments is conditioned upon execution of a release of claims.
For purposes of the Giordano Employment Agreement: (i) “cause” includes (1) a willful material breach of the Giordano Employment Agreement by Mr. Giordano, (2) material misappropriation of Company property, (3) material failure to comply with our policies, (4) abuse of illegal drugs or abuse of alcohol in a manner that interferes with the performance of his duties, (5) dishonest or illegal action that is materially detrimental to the Company, (6) failure to cooperate with internal investigations or law enforcement and regulatory investigations, and (7) failure to disclose material conflicts of interest and (ii) “good reason” includes (1) a material reduction in base salary, (2) a material reduction of Mr. Giordano’s authority, duties or responsibility, (3) certain changes in geographic location of Mr. Giordano’s employment, or (4) a material breach of the Giordano Employment Agreement or other written agreement with Mr. Giordano by the Company.
Stuart Rich
We entered into an employment agreement with Dr. Rich, effective January 15, 2021 (the “Rich Employment Agreement”). Under the Rich Employment Agreement, Dr. Rich initially received an annual base salary of $300,000, which has been subsequently increased to $318,000. Dr. Rich will also receive participation in medical insurance, dental insurance, and other benefit plans on the same basis as our other officers. Under the Rich Employment Agreement, Dr. Rich is eligible for an annual target cash bonus of 40% of his base salary, based on 100% achievement of annual goals (with no cap on the bonus for greater than 100% achievement of goals). Pursuant to the Rich Employment Agreement, Dr. Rich received as an inducement award a one-time non-statutory stock option grant of 160 shares of Common Stock (as retrospectively adjusted for the Reverse Stock Splits). The option award will vest as follows: 25% upon initiation of a Phase 3 trial (the “Trial”); 25% upon database lock of the Trial; 25% upon acceptance for review of an Investigational New Drug Application; and 25% upon approval from the FDA. The option grant has a 10-year term and an exercise price of $2,848 per share.
The Rich Employment Agreement is effective for a one-year term, and automatically renews for additional one-year terms, unless terminated in advance of renewal or either party gives notice at least 90 days prior to the end of the then-current term of an intention not to renew. If Dr. Rich is terminated without “cause”, if he terminates his employment for “good reason, or if we elect not to renew the Rich Employment Agreement, Dr. Rich would be entitled to receive (i) one-year of his then current base salary, (ii) a pro-rated amount of the annual bonus that he would have received had 100% of goals been achieved, (iii) acceleration of vesting of all outstanding equity-based compensation awards held by Dr. Rich, and (iv) one-year of COBRA reimbursements or benefits payments, as applicable. Dr. Rich’s entitlement to these payments is conditioned upon execution of a release of claims.
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For purposes of the Rich Employment Agreement: (i) “cause” includes (1) a willful material breach of the Rich Employment Agreement by Dr. Rich, (2) material misappropriation of Company property, (3) material failure to comply with our policies, (4) abuse of illegal drugs or abuse of alcohol in a manner that materially interferes with the performance of his duties, (5) dishonest or illegal action that is materially detrimental to the Company, and (6) failure to disclose material conflicts of interest; and (ii) “good reason” includes (1) a material reduction in base salary, (2) a material reduction of his authority, duties or responsibility, or (3) a material breach of the Rich Employment Agreement by the Company.
Eliot M. Lurier
We entered into a consulting agreement with Danforth, dated October 14, 2021, providing for the engagement of Mr. Lurier, a consultant with Danforth, as Interim Chief Financial Officer of the Company (the “Danforth Consulting Agreement”). Pursuant to the Danforth Consulting Agreement, Mr. Lurier was responsible for the Company’s accounting and finance functions and served as our principal financial officer and principal accounting officer. Mr. Lurier provided services to the Company under the Danforth Consulting Agreement as an independent contractor. The Danforth Consulting Agreement may be terminated by us or Danforth (i) with “Cause”, immediately upon written notice to the other party or (ii) without Cause upon 30 days prior written notice to the other party. Pursuant to the Danforth Consulting Agreement, Danforth received cash compensation at a rate of $416 per hour for Mr. Lurier’s services.
As of January 2024, our new Interim Chief Financial Officer, Mr. Hoffman will provide services to the Company as an independent contractor pursuant to the Company’s existing Danforth Consulting Agreement. Pursuant to the Danforth Consulting Agreement, Danforth will receive cash compensation at a rate of $416 per hour for Mr. Hoffman’s services, which rate may be increased by up to 4% annually.
For purposes of the Danforth Consulting Agreement, “Cause” is a material breach of the terms of the Danforth Consulting Agreement which, if curable, is not cured within 10 days of written notice of such default, or the commission of any act of fraud, embezzlement or deliberate disregard of a rule or policy of the Company.
Outstanding Equity Awards
The following table provides information about outstanding equity awards held by the NEOs as of December 31, 2023, as retrospectively adjusted for the Reverse Stock Splits.
Outstanding Equity Awards as of December 31, 2023
|
| Option Awards |
| |||||||||||||
Name and Principal Position |
| Number of securities underlying unexercised options (Exercisable) |
|
| Number of securities underlying unexercised options (Unexercisable) |
|
| Option exercise price |
|
| Option expiration date |
| ||||
|
| (#) |
|
| (#) |
|
| ($/Sh) |
|
|
| |||||
Christopher T. Giordano |
|
| 31 |
|
|
| 94 | (1) |
|
| 992 |
|
| 6/9/2032 |
| |
President and Chief Executive Officer |
|
| 80 | (2) |
|
| 80 |
|
|
| 3,152 |
|
| 7/6/2031 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Stuart Rich |
|
| 16 |
|
|
| 47 | (3) |
|
| 992 |
|
| 6/9/2032 |
| |
Chief Medical Officer |
|
| 40 | (4) |
|
| 120 |
|
|
| 2,848 |
|
| 1/15/2031 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Eliot M. Lurier |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Former Interim Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The option is exercisable as to one-fourth of the shares of Common Stock underlying the option on each of June 9, 2023, June 9, 2024, June 9, 2025 and June 9, 2026, subject to Mr. Giordano’s continued employment. | |
(2) | The option is exercisable as to one-fourth of the shares of Common Stock underlying the option on each of July 6, 2022, July 6, 2023, July 6, 2024 and July 6, 2025, subject to Mr. Giordano’s continued employment. | |
(3) | The option is exercisable as to one-fourth of the shares of Common Stock underlying the option on each of June 9, 2023, June 9, 2024, June 9, 2025 and June 9, 2026, subject to Dr. Rich’s continued employment. | |
(4) | This option award is exercisable in four equal installments, with 25% vesting after the start of the Trial, 25% vesting after the database lock with respect to the Trial, 25% vesting after the opening of an Investigational New Drug Application with the FDA, and 25% vesting after the approval from the FDA, subject to Dr. Rich’s continued employment. |
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DIRECTOR COMPENSATION
During the fiscal year ended December 31, 2023, our non-employee directors were paid the following compensation for service on the Board of Directors and committees according to the policies established for director compensation by the Corporate Governance and Nominating Committee:
· | An annual director fee in each fiscal year of $45,000 ($75,000 for our Chairman of the Board of Directors), which is paid in equal quarterly installments on the first day of each fiscal quarter; | |
· | An annual Audit and Compliance Committee member fee in each fiscal year of $7,500 ($15,000 for our Audit and Compliance Committee Chair), which is paid in equal quarterly installments on the first day of each fiscal quarter; | |
· | An annual Compensation Committee member fee in each fiscal year of $5,000 ($10,000 for our Compensation Committee Chair), which is paid in equal quarterly installments on the first day of each fiscal quarter; | |
· | An annual Corporate Governance and Nominating Committee member fee in each fiscal year of $3,500 ($7,000 for our Corporate Governance and Nominating Committee Chair), which is paid in equal quarterly installments on the first day of each fiscal quarter; | |
· | If sufficient shares are available under our 2022 Stock Incentive Plan, an annual grant of 63 stock options (79 stock options in the initial year), which vest one-year after the grant date and are exercisable for a period of ten years, issued at the date of the annual meeting of stockholders each year (beginning in fiscal year 2024, the initial equity grant to new directors will vest over three years); and | |
· | Reimbursement of travel and related expenses for attending Board of Directors and committee meetings, as incurred. |
The following table summarizes the compensation paid to non-employee directors for fiscal year ended December 31, 2023:
Director |
| Fees Earned or Paid in Cash |
|
| Option Awards (1) |
|
| Stock Awards |
|
| All Other Compensation |
|
| Total |
| |||||
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
| |||||
Gerald T. Proehl (Chairman) |
|
| 88,500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 88,500 |
|
June Almenoff, MD, PhD |
|
| 59,500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 59,500 |
|
Michael Davidson, MD |
|
| 57,500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 57,500 |
|
Declan Doogan, MD |
|
| 48,500 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 48,500 |
|
Robyn M. Hunter |
|
| 65,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 65,000 |
|
(1) | Due to insufficient shares reserved under the 2022 Stock Incentive Plan, the Board determined not to issue an annual option grant to the directors. As of December 31, 2022, as retrospectively adjusted for the Reverse Stock Splits, our non-employee directors then serving on the Board of Directors held the following stock options: Mr. Proehl, 9; Dr. Almenoff, 8; Dr. Davidson, 8; Dr. Doogan, 8; and Ms. Hunter 4. |
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| Table of Contents |
ITEM 12— SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table provides information about the securities authorized for issuance under our equity compensation plans as of December 31, 2023.
|
| Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
| Weighted-average exercise price of outstanding options, warrants and rights |
|
| Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a)) |
| |||
Plan category |
|
|
|
|
|
|
|
|
| |||
Equity compensation plans approved by security holders: |
|
|
|
|
|
|
|
|
| |||
2022 Stock Incentive Plan |
|
| 331 |
|
| $ | 992.00 |
|
|
| 1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Stock Incentive Plan, as amended |
|
| 284 |
|
| $ | 3,251.77 |
|
|
| -- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated 1999 Amended Stock Plan, as amended |
|
| 9 |
|
| $ | 86,108.74 |
|
|
| -- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan for Employee Inducement Stock Option Grants |
|
| 312 |
|
| $ | 3,008.00 |
|
|
| -- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
| 936 |
|
| $ | 3,140.29 |
|
|
| 1,000 |
|
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| Table of Contents |
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 20, 2024, the number and percentage of the outstanding shares of common stock that, according to the information supplied to us, were beneficially owned by (i) each person who is currently a director or a director nominee, (ii) our Named Executive Officers, (iii) all current directors and executive officers as a group and (iv) each person who, to our knowledge, is the beneficial owner of more than five percent of the outstanding common stock. Except as otherwise indicated, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable.
Beneficial Owner Name and Address (1) |
| Amount and Nature of Beneficial Ownership(2) |
|
| Percent of Class |
| ||
Principal Stockholders |
|
|
|
|
|
| ||
CVI Investments, Inc. (3) P.O. Box 309GT Ugland House South Church Street George Town, Grand Caman, KY1-1104 Cayman Islands |
|
| 195,629 |
|
|
| 9.99 | % |
Lind Global Fund II LP (4) 44 Madison Ave., Floor 41 New York, NY 10022 |
|
| 195,629 |
|
|
| 9.99 | % |
S.H.N. Financial Investments Ltd.(5) Herzliya Hills Arik Einstein 3, Israel, 4610601 |
|
| 205,465 |
|
|
| 9.99 | % |
Officers and Directors |
|
|
|
|
|
|
|
|
June Almenoff, MD(6) |
|
| 8 |
|
| * |
| |
Michael Davidson, MD (7) |
|
| 388 |
|
| * |
| |
Declan Doogan, MD (8) |
|
| 2,282 |
|
| * |
| |
Christopher T. Giordano (9) |
|
| 110 |
|
| * |
| |
Lawrence R. Hoffman |
|
| -- |
|
| * |
| |
Robyn M. Hunter(10) |
|
| 4 |
|
| * |
| |
Gerald T. Proehl (11) |
|
| 10 |
|
| * |
| |
Stuart Rich, MD (12) |
|
| 2,711 |
|
| * |
| |
All current officers and directors as a group (8 persons) (13) |
|
| 5,513 |
|
| * |
| |
* Less than 1%
(1) | Unless otherwise noted, all addresses are in care of Tenax Therapeutics, Inc. at 101 Glen Lennox Drive, Suite 300, Chapel Hill, North Carolina 27517. | |
(2) | Based upon 1,958,245 shares of common stock outstanding on March 20, 2024. The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which the person has sole or shared voting power or investment power and also any shares that the person has the right to acquire within 60 days of March 20, 2024 through the exercise of any stock options, warrants or other rights or the conversion of preferred stock. Any shares that a person has the right to acquire within 60 days are deemed to be outstanding for the purpose of computing the percentage ownership of such person but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. |
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(3) | Based in part on a Schedule 13G filed with the SEC on February 16, 2024. CVI Investments, Inc. and Heights Capital Management, Inc. (with CVI Investments, Inc., collectively “CVI”) have voting and dispositive power over 60,000 shares and up to 531,000 shares issuable upon the exercise of common warrants and 205,500 shares issuable upon the exercise of pre-funded warrants. Based upon Company records, CVI has exercised all of the pre-funded warrants. All of the pre-funded warrants held by CVI were subject to beneficial ownership limitations of 9.99%, which prohibited CVI from exercising any portion of any pre-funded warrant to the extent that, following such exercise, CVI’s ownership of the common stock would exceed the 9.99% beneficial ownership limitation. All of the common warrants held by CVI are subject to beneficial ownership limitations of 4.99%, which prohibit CVI from exercising any portion of any common warrant to the extent that, following such exercise, CVI’s ownership of the common stock would exceed the 4.99% beneficial ownership limitation. The beneficial ownership limitations, taken as a whole, cap CVI’s ownership in the common stock at 9.99% of the Company’s outstanding shares, other than to the extent CVI were to acquire additional shares on the open market. Consequently, CVI is not able to exercise all of its common warrants due to the aforementioned beneficial ownership limitations, which is reflected in the table above. | |
(4) | Based in part on a Schedule 13G filed with the SEC on February 15, 2024. Lind Global Fund II LP and Lind Global Partners II LLC (with Lind Global Fund II LP, collectively “Lind”) have voting and dispositive power over 70,000 shares and up to 442,480 shares issuable upon the exercise of common warrants and 151,240 shares issuable upon the exercise of pre-funded warrants. Based upon Company records, Lind has exercised all of the pre-funded warrants. All of the common warrants and pre-funded warrants held by Lind were or are subject to beneficial ownership limitations of 9.99%, which prohibit Lind from exercising any portion of any warrant to the extent that, following such exercise, Lind’s ownership of the common stock would exceed the beneficial ownership limitation. The beneficial ownership limitations, taken as a whole, cap Lind’s ownership in the common stock at 9.99% of the Company’s outstanding shares, other than to the extent Lind were to acquire additional shares on the open market. Consequently, Lind is not able to exercise all of its common warrants due to the aforementioned beneficial ownership limitations, which is reflected in the table above. | |
(5) | Based in part on a Schedule 13G filed with the SEC on February 20, 2024. S.H.N Financial Investments Ltd. (“S.H.N.”) has voting and dispositive power over 70,000 shares and up to 354,000 shares issuable upon the exercise of common warrants and 107,000 shares issuable upon the exercise of pre-funded warrants. S.H.N. has exercised all of the pre-funded warrants. All of the warrants held S.H.N. were or are subject to beneficial ownership limitations of 9.99%, which prohibit S.H.N. from exercising any portion of any warrant to the extent that, following such exercise, S.H.N.’s ownership of the common stock would exceed the beneficial ownership limitation. The beneficial ownership limitations, taken as a whole, cap S.H.N.’s ownership in the common stock at 9.99% of the Company’s outstanding shares, other than to the extent S.H.N. were to acquire additional shares on the open market. Consequently, S.H.N. is not able to exercise all of its common warrants due to the aforementioned beneficial ownership limitations, which is reflected in the table above. | |
(6) | With respect to Dr. Almenoff, includes 8 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024. | |
(7) | With respect to Dr. Davidson, includes 8 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024. | |
(8) | With respect to Dr. Doogan, includes 8 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024. | |
(9) | With respect to Mr. Giordano, consists of 110 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024. | |
(10) | With respect to Ms. Hunter, consists of 4 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024. | |
(11) | With respect to Mr. Proehl, includes 9 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024. | |
(12) | With respect to Dr. Rich, includes (i) 56 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024, (ii) 1,194 shares of common stock held by the Andrea Rich 2021 Irrevocable Trust of which Dr. Rich is a co-trustee and (iii) 1,194 shares of common stock held by the Stuart Rich 2022 Irrevocable Trust of which Dr. Rich is special asset advisor. | |
(13) | With respect to all current officers and directors as a group, includes 203 shares of common stock subject to options that are vested or vesting within 60 days of March 20, 2024. |
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ITEM 13— CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Party Transactions Policy and Procedures
The Board of Directors has adopted a written related person transaction policy setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, in which the amount involved exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our Audit and Compliance Committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. Notwithstanding anything therein to the contrary, the policy is to be interpreted only in such a manner as to comply with Item 404 of Regulation S-K.
Certain Related Person Transactions
Described below is each transaction occurring since January 1, 2022, and any currently proposed transaction to which we were or are to be a participant, respectively, and in which:
· | The amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years; and | |
· | Any person (i) who since January 1, 2022 served as a director or executive officer of the Company or any member of such person’s immediate family that had or will have a direct or indirect material interest, other than compensation, termination and change of control arrangements that are described under the section titled “Executive Compensation” or (ii) who, at the time when a transaction in which such person had a direct or indirect material interest occurred or existed, was a beneficial owner of more than 5% of our outstanding Common Stock or any member of such person’s immediate family. |
Each such transaction is approved pursuant to our related transaction policy.
May 2022 Private Placement (the “May 2022 Offering”)
On May 17, 2022, we entered into a securities purchase agreement with then-affiliate Armistice Capital, LLC, pursuant to which we agreed to sell and issue to the investor 6,623 units in a private placement at a purchase price of $1,240 per unit. Each unit consisted of (i) one unregistered pre-funded warrant to purchase one share of our Common Stock and (ii) one unregistered warrant to purchase one share of Common Stock, at an exercise price of $1,008 per share with a term of five and a half years, (together with the pre-funded warrants, the “2022 Warrants”). The net proceeds from the May 2022 Offering, after direct offering expenses, were approximately $7.9 million.
Additionally, in connection with the May 2022 Offering, we entered into a warrant amendment agreement with Armistice, in consideration for Armistice’s purchase of units in the May 2022 Offering, pursuant to which we agreed to amend certain previously issued warrants held by Armistice.
Also, on May 17, 2022, and in connection with the May 2022 Offering, the Company entered into a registration rights agreement with Armistice, pursuant to which the Company agreed to register for resale the shares of Common Stock issuable upon exercise of the 2022 Warrants within 120 days following the effective date of the May 2022 registration rights agreement. Pursuant to the May 2022 registration rights agreement, on May 25, 2022, the Company filed a resale registration statement on Form S-3, which went effective on June 3, 2022.
This description of the May 2022 Offering has been retrospectively adjusted for the Reverse Stock Splits.
ITEM 14— PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to the information under the section captioned “Audit and Compliance Committee Report” in our proxy statement.
| 61 |
| Table of Contents |
PART IV
ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of documents filed as part of this report:
i. | Financial Statements: |
The financial statements of the Company and the related reports of the Company’s independent registered public accounting firm thereon have been filed under Item 8 hereof. | |
ii. | Financial Statement Schedules: |
None. | |
iii. | Exhibit Index |
The following exhibits have been or are being filed herewith and are numbered in accordance with Item 601 of Regulation S-K:
Incorporated by Reference (Unless Otherwise Indicated) | ||||||||||
Exhibit Number | Exhibit Title | Form | File | Exhibit | Filing Date | |||||
8-K | 002-31909 | 2.01 | June 30, 2008 | |||||||
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| 8-K |
| 001-34600 |
| 2.1 |
| October 25, 2013 | ||
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8-K | 001-34600 | 2.1 | January 19, 2021 | |||||||
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Certificate of Incorporation of Oxygen Biotherapeutics, Inc., dated April 17, 2008. | 8-K | 002-31909 | 3.01 | June 30, 2008 | ||||||
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Certificate of Amendment of the Certificate of Incorporation, effective November 9, 2009. | 8-K | 002-31909 | 3.1 | November 13, 2009 | ||||||
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Certificate of Amendment of the Certificate of Incorporation, effective May 10, 2013. | 8-K | 001-34600 | 3.1 | May 15, 2013 | ||||||
| 62 |
| Table of Contents |
| 63 |
| Table of Contents |
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| 8-K |
| 001-34600 |
| 4.1 |
| May 20, 2022 | ||
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| 8-K |
| 001-34600 |
| 4.2 |
| May 20, 2022 | ||
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| Warrant Amendment Agreement, dated as of May 17, 2022, by and between the Company and the Investor |
| 8-K |
| 001-34600 |
| 4.3 |
| May 20, 2022 | |
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| 8-K |
| 001-34600 |
| 4.1 |
| February 7, 2023 | ||
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| Form of Pre-Funded Common Stock Purchase Warrant, dated February 3, 2023. |
| 8-K |
| 001-34600 |
| 4.2 |
| February 7, 2023 | |
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| Form of Common Stock Purchase Warrant, dated February 3, 2023. |
| 8-K |
| 001-34600 |
| 4.3 |
| February 7, 2023 | |
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- | - | - | Filed herewith | |||||||
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1999 Amended Stock Plan, as amended and restated June 17, 2008. | 10-K | 002-31909 | 10.15 | August 13, 2008 | ||||||
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Amendment No. 1 to Oxygen Biotherapeutics, Inc. 1999 Amended Stock Plan. | 10-K | 001-34600 | 10.19 | July 29, 2014 | ||||||
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Amendment No. 2 to Oxygen Biotherapeutics, Inc. 1999 Amended Stock Plan. | 10-K | 001-34600 | 10.20 | July 29, 2014 | ||||||
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10-K | 002-31909 | 10.5 | August 13, 2004 | |||||||
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10-K | 002-31909 | 10.6 | August 13, 2004 | |||||||
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10-K | 001-34600 | 10.9 | March 16, 2017 | |||||||
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| 10-Q | 001-34600 | 10.6 | March 21, 2011 | |||||
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| First Amendment to Lease Agreement for North Carolina Corporate Office. |
| 10-K | 001-34600 | 10.74 | March 14, 2016 | ||||
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| Lease Termination Agreement for North Carolina Corporate Office. |
| 8-K |
| 001-34600 |
| 10.1 |
| February 10, 2023 | |
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| 10-K | 001-34600 | 10.36 | July 15, 2011 | |||||
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| 10-Q | 001-34600 | 10.3 | March 17, 2014 |
| 64 |
| Table of Contents |
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| 8-K |
| 001-34600 |
| 10.1 |
| October 15, 2020 | ||
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| 8-K |
| 001-34600 |
| 10.1 |
| January 28, 2022 | ||
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| Description of Non-Employee Director Compensation, effective June 15, 2015. |
| 10-Q | 001-34600 | 10.1 | September 9, 2015 | ||||
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10-Q | 001-34600 | 10.1 | August 9, 2016 | |||||||
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10-Q | 001-34600 | 10.1 | August 14, 2019 | |||||||
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| 10-Q | 001-34600 | 10.1 | August 16, 2021 | |||||
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Form of Option issued to Non-Employee Directors under 2016 Stock Incentive Plan. | 10-Q | 001-34600 | 10.2 | August 14, 2018 | ||||||
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Form of Option issued to Employees and Contractors under 2016 Stock Incentive Plan. | 10-Q | 001-34600 | 10.3 | August 14, 2018 | ||||||
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Form of Incentive Stock Option Agreement under 2016 Stock Incentive Plan. | 10-Q | 001-34600 | 10.4 | August 14, 2018 | ||||||
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| 8-K |
| 001-34600 |
| 10.1 |
| March 13, 2020 | |
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| 8-K |
| 001-34600 |
| 10.1 |
| July 8, 2020 | |
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| 8-K |
| 001-34600 |
| 10.2 |
| July 8, 2020 |
| 65 |
| Table of Contents |
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| 8-K |
| 001-34600 |
| 10.3 |
| July 8, 2020 | ||
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| Executive Employment Agreement with Dr. Stuart Rich dated January 15, 2021. |
| 8-K | 001-34600 | 10.1 | January 19, 2021 | ||||
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| 8-K |
| 001-34600 |
| 10.1 |
| July 8, 2021 | ||
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| 8-K | 001-34600 | 10.2 | July 8, 2021 | |||||
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| 8-K |
| 001-34600 |
| 10.4 |
| July 8, 2021 | ||
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| Plan for Employee Inducement Stock Options adopted July 6, 2021 with Form of Stock Option Agreement. |
| 8-K | 001-34600 | 10.5 | July 8, 2021 | ||||
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| 10-K |
| 001-34600 |
| 10.20 |
| March 29, 2022 | ||
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| 8-K |
| 001-34600 |
| 10.1 |
| May 20, 2022 | ||
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| Registration Rights Agreement, dated as of May 17, 2022, by and between the Company and the Investor. |
| 8-K |
| 001-34600 |
| 10.2 |
| May 20, 2022 | |
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| 8-K |
| 001-34600 |
| 10.1 |
| June 10, 2022 |
| 66 |
| Table of Contents |
| Form of Tenax Therapeutics, Inc. Notice of Stock Option Grant and Award Agreement. |
| 8-K |
| 001-34600 |
| 10.2 |
| June 10, 2022 | ||
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| 8-K |
| 001-34600 |
| 10.1 |
| June 16, 2022 | |||
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| 8-K |
| 001-34600 |
| 10.1 |
| February 7, 2023 | |||
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| 8-K |
| 001-34600 |
| 10.2 |
| February 7, 2023 | |||
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| Form of Leak-Out Agreement by and between Tenax Therapeutics, Inc. and the purchasers named therein. |
| 8-K |
| 001-34600 |
| 10.3 |
| February 7, 2023 | ||
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10-K | 001-34600 | 21.1 | March 31, 2023 | ||||||||
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- |
| - |
| - | Filed herewith | ||||||
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- |
| - |
| - | Filed herewith | ||||||
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- |
| - |
| - | Filed herewith | ||||||
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-
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| -
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| -
| Furnished herewith | ||||||
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| -
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| -
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| -
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| Furnished herewith
| |||
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| Tenax Therapeutics, Inc. Compensation Recovery Policy, adopted September 20, 2023 |
| - |
| - |
| - |
| Filed herewith | ||
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101.INS | XBRL Instance Document. | - |
| - |
| - | Filed herewith | ||||
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| ||
101.SCH | XBRL Taxonomy Extension Schema Document. | - |
| - |
| - | Filed herewith | ||||
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| ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | - |
| - |
| - | Filed herewith | ||||
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| ||
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| - |
| - |
| - |
| Filed herewith | |
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| ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | - |
| - |
| - | Filed herewith | ||||
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| ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | - |
| - |
| - | Filed herewith | ||||
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| |
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
|
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|
| Filed herewith | |
__
+ Management contract or compensatory plan.
* Certain confidential portions and/or the schedules and attachments to this exhibit have been omitted from this filing pursuant to a confidential treatment request filed with the SEC, or Item 601(a)(5) or 601(b)(10)of Regulation S-K, as applicable. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the SEC upon request.
ITEM 16—FORM 10-K SUMMARY
None.
| 67 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 2024 | TENAX THERAPEUTICS, INC. | ||
By: | /s/ Lawrence R. Hoffman | ||
Lawrence R. Hoffman Interim Chief Financial Officer (On behalf of the Registrant and as Principal Financial and Accounting Officer) | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name | Title | Date | ||
/s/ Christopher T. Giordano | President and Chief Executive Officer and Director | March 28, 2024 | ||
Christopher T. Giordano | (Principal Executive Officer) | |||
/s/ Lawrence R. Hoffman | Interim Chief Financial Officer | March 28, 2024 | ||
Lawrence R. Hoffman | (Principal Financial Officer and Principal Accounting Officer) | |||
/s/ Gerald Proehl | Chairman of the Board and Director | March 28, 2024 | ||
Gerald Proehl | ||||
/s/ June Almenoff, MD | Director | March 28, 2024 | ||
June Almenoff, MD | ||||
/s/ Michael Davidson, MD | Director | March 28, 2024 | ||
Michael Davidson, MD | ||||
/s/ Declan Doogan, MD | Director | March 28, 2024 | ||
Declan Doogan, MD | ||||
/s/ Robyn M. Hunter | Director | March 28, 2024 | ||
Robyn M. Hunter | ||||
/s/ Stuart Rich, MD | Director | March 28, 2024 | ||
Stuart Rich, MD |
| 68 |
| Table of Contents |
TENAX THERAPEUTICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 00677) | F-2 | ||
F-4 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | F-5 | ||
F-6 | |||
F-7 | |||
F-8 |
| F-1 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Tenax Therapeutics, Inc.
Chapel Hill, North Carolina
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Tenax Therapeutics,Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company maintained,will continue as a going concern. As discussed in allNote A and Note B to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are described in Note A and Note B to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material respects, effectivemisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of December 31, 2016,the financial statements. We believe that our audits provide a reasonable basis for our opinion.
| F-2 |
| Table of Contents |
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Capital Raise Transaction Involving Equity Instruments
Description of Matter – As disclosed in Note E to the consolidated financial statements, the Company participated in a significant capital raise transaction during the year which involved the issuance of shares of the Company’s common stock, unregistered pre-funded warrants, and unregistered common stock warrants to purchase shares of the Company’s common stock. The accounting for the transaction was complex and a valuation of the freestanding warrants was required, which involved estimation of the fair value, and evaluation of the appropriate classification of both the pre-funded warrants and common stock warrants in the consolidated financial statements.
How We Addressed the Matter in Our Audit – Our audit procedures included the following:
· | We obtained an understanding of the internal controls and processes in place over management’s process for recording transactions involving equity instruments. | |
· | We obtained and read the underlying agreements. | |
· | We confirmed shares outstanding with the stock transfer agent as of December 31, 2023. | |
· | We verified proper approval of equity transactions by the Board of Directors. | |
· | We evaluated the Company’s selection of the valuation methodology and significant assumptions used by the Company and evaluated the completeness and accuracy of the underlying data supporting the significant assumptions. | |
· | Specifically, when assessing the key assumptions, we evaluated the appropriateness of the Company’s estimates of its credit risk, volatility, dividend yield, and the market risk free rate. | |
· | We tested management’s application of the relevant accounting guidance. |
Prepaid or Accrued Clinical Trial Expenses
Description of Matter – TheCompany’s total prepaid expenses and other current assets totaled $1.9 million, which included amounts in advance of services incurred pursuant to clinical trials in the amount of approximately $1.1 million.
As discussed in Note B to the consolidated financial statements, when the third party contract research organization and other vendor billing terms do not coincide with the Company’s period-end, the Company is required to make estimates of its obligations to those vendors, including personnel costs, allocated facility costs, lab supplies, outside services, contract laboratory costs related to manufacturing drug product, clinical trials, and preclinical studies costs incurred in a given accounting period and record accruals at the end of the period. The Company bases its estimates on its knowledge of the research and development programs, services performed for the period, past history for related activities, and the expected duration of the vendor service contract, where applicable. Payments for these activities are based on criteria establishedthe terms of the individual arrangements and may result in
| F-3 |
| Table of Contents |
Auditing the Company’s prepaid or accrued clinical trial expenses is especially challenging due to the large volume of information received from multiple vendors that perform services on the Company’s behalf. While the Company’s estimates of prepaid or accrued clinical trial expenses are primarily based on information received related to each study from its vendors, the Company recognized a net lossmay need to make an estimate for additional costs incurred. Additionally, due to the long duration of approximately $43.9 millionclinical trials and asthe timing of December 31, 2016,invoicing received from vendors, the Company hadactual amounts incurred cumulative net losses of approximately $204.7 million. Management’s plans with regard to liquidity and capital resources are describednot typically known at the time the financial statements are issued.
How We Addressed the Matter in Note B.
· | Obtained an understanding of the internal controls and processes in place over the Company’s process used in determining the existence and completeness of prepaid or accrued clinical trial expenses. | |
· | Tested the accuracy and completeness of the underlying data used in determining the prepaid or accrued clinical trial expenses and evaluating the assumptions and estimates used by management to adjust the actual information received. We corroborated the schedules of the underlying data used in the accrual calculation with the Company’s third party contract research organization who oversees the clinical trials. To evaluate the completeness any required accrual, we also tested subsequent invoices received to assess the impact to the accrual. |
/s/ Cherry Bekaert LLP | |
We have served as the Company’s auditor since 2009. | |
Raleigh, North Carolina | |
March | |
| F-4 |
| Table of Contents |
TENAX THERAPEUTICS, INC.
December 31, 2016 | December 31, 2015 | |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $9,995,955 | $3,660,453 |
| Marketable securities | 3,284,616 | 16,528,494 |
| Accounts receivable | 72,599 | 49,448 |
| Prepaid expenses | 275,005 | 321,958 |
| Total current assets | 13,628,175 | 20,560,353 |
| Marketable securities | 8,586,110 | 18,019,054 |
| Property and equipment, net | 19,105 | 35,786 |
| Intangible assets, net | - | 22,000,000 |
| Goodwill | - | 11,265,100 |
| Other assets | 1,106,785 | 1,106,785 |
| Total assets | $23,340,175 | $72,987,078 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| Current liabilities | ||
| Accounts payable | $727,599 | $972,483 |
| Accrued liabilities | 5,245,546 | 3,104,807 |
| Warrant liabilities | 226,092 | 524,340 |
| Total current liabilities | 6,199,237 | 4,601,630 |
| Deferred tax liability | - | 7,962,100 |
| Total liabilities | 6,199,237 | 12,563,730 |
| Commitments and contingencies; see Note H | ||
| Stockholders' equity | ||
| Common stock, par value $.0001 per share; authorized 400,000,000 shares; issued and outstanding 28,120,021 and 28,119,694, respectively | 2,812 | 2,812 |
| Additional paid-in capital | 221,816,447 | 221,285,677 |
| Accumulated other comprehensive loss | (18,718) | (129,442) |
| Accumulated deficit | (204,659,603) | (160,735,699) |
| Total stockholders’ equity | 17,140,938 | 60,423,348 |
| Total liabilities and stockholders' equity | $23,340,175 | $72,987,078 |
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
|
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 9,792,130 |
|
| $ | 2,123,682 |
|
Prepaid expenses |
|
| 1,639,797 |
|
|
| 738,927 |
|
Other current assets |
|
| 251,583 |
|
|
| 345,856 |
|
Total current assets |
|
| 11,683,510 |
|
|
| 3,208,465 |
|
Right of use asset |
|
| - |
|
|
| 179,503 |
|
Property and equipment, net |
|
| - |
|
|
| 7,189 |
|
Other assets |
|
| 1,117 |
|
|
| 9,552 |
|
Total assets |
| $ | 11,684,627 |
|
| $ | 3,404,709 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 2,073,149 |
|
| $ | 448,425 |
|
Accrued liabilities |
|
| 1,012,468 |
|
|
| 775,045 |
|
Note Payable |
|
| 500,903 |
|
|
| 624,302 |
|
Total current liabilities |
|
| 3,586,520 |
|
|
| 1,847,772 |
|
Long term liabilities |
|
|
|
|
|
|
|
|
Lease liability |
|
| - |
|
|
| 64,196 |
|
Total long term liabilities |
|
| - |
|
|
| 64,196 |
|
Total liabilities |
|
| 3,586,520 |
|
|
| 1,911,968 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies; See Note F |
|
|
|
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
|
|
|
Preferred stock, undesignated, authorized 4,818,654 shares; See Note E |
|
|
|
|
|
|
|
|
Series A Preferred stock, par value $0.0001, issued 5,181,346 shares; outstanding 210, as of December 31, 2023 and December 31, 2022, respectively |
|
| - |
|
|
| - |
|
Common stock, par value $0.0001 per share; authorized 400,000,000 shares; issued and outstanding 298,281 as of December 31, 2023 and 28,648 as of December 31, 2022 |
|
| 30 |
|
|
| 3 |
|
Additional paid-in capital |
|
| 305,350,830 |
|
|
| 291,034,818 |
|
Accumulated deficit |
|
| (297,252,753 | ) |
|
| (289,542,080 | ) |
Total stockholders’ equity |
|
| 8,098,107 |
|
|
| 1,492,741 |
|
Total liabilities and stockholders' equity |
| $ | 11,684,627 |
|
| $ | 3,404,709 |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
| F-5 |
| Table of Contents |
TENAX THERAPEUTICS, INC.
Year ended December 31, | Eight months ended December 31, | Year ended April 30, | ||
2016 | 2015 | 2015 | 2014 | |
| Product revenue | $- | $- | $- | $25,731 |
| Cost of sales | - | - | - | 129,800 |
| Net product revenue | - | - | - | (104,069) |
| Government grant revenue | - | - | 49,286 | 262,995 |
| Total net revenue | - | - | 49,286 | 158,926 |
| Operating expenses | ||||
| General and administrative | 6,245,958 | 3,940,631 | 7,170,779 | 13,773,325 |
| Research and development | 13,139,681 | 6,484,867 | 6,660,387 | 2,996,721 |
| Loss on impairment of long-lived assets | 33,265,100 | - | 1,034,863 | - |
| Total operating expenses | 52,650,739 | 10,425,498 | 14,866,029 | 16,770,046 |
| Net operating loss | 52,650,739 | 10,425,498 | 14,816,743 | 16,611,120 |
| Interest expense | - | 1,507 | 49,081 | 2,212,283 |
| Other (income) expense | (764,735) | (359,041) | (784,012) | 718,436 |
| Income tax benefit | (7,962,100) | - | - | - |
| Net loss | $43,923,904 | $10,067,964 | $14,081,812 | $19,541,839 |
| Unrealized (gain) loss on marketable securities | (110,724) | 156,160 | (26,718) | - |
| Total comprehensive loss | $43,813,180 | $10,224,124 | $14,055,094 | $19,541,839 |
| Reconciliation of net loss to net loss attributable to common stockholders | ||||
| Net loss | $43,923,904 | $10,067,964 | $14,081,812 | $19,541,839 |
| Preferred stock dividend | - | - | - | 5,803,362 |
| Net loss attributable to common stockholders | $43,923,904 | $10,067,964 | $14,081,812 | $25,345,201 |
| Net loss per share, basic and diluted | $(1.56) | $(0.36) | $(0.50) | $(2.71) |
| Weighted average number of common shares outstanding, basic and diluted | 28,119,835 | 28,119,597 | 28,077,963 | 9,362,031 |
|
| The year ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Operating expenses |
|
|
|
|
|
| ||
General and administrative |
| $ | 5,005,135 |
|
| $ | 5,675,231 |
|
Research and development |
|
| 3,228,806 |
|
|
| 5,377,412 |
|
Total operating expenses |
|
| 8,233,941 |
|
|
| 11,052,643 |
|
|
|
|
|
|
|
|
|
|
Net operating loss |
|
| 8,233,941 |
|
|
| 11,052,643 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 23,967 |
|
|
| 4,443 |
|
Other income, net |
|
| (547,235 | ) |
|
| (9,191 | ) |
Net loss |
| $ | 7,710,673 |
|
| $ | 11,047,895 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
| $ | 7,710,673 |
|
| $ | 11,047,895 |
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted |
| $ | (31.04 | ) |
| $ | (600.71 | ) |
Weighted average number of common shares outstanding, basic and diluted |
|
| 248,447 |
|
|
| 18,391 |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
| F-6 |
| Table of Contents |
TENAX THERAPEUTICS, INC.
Preferred Stock | Common Stock | |||||||
Number of Shares | Amount | Number of Shares | Amount | Additional paid-in capital | Accumulated other comprehensive gain (loss) | Accumulated deficit | Total stockholders' equity | |
| Balance at April 30, 2013 | 987 | $1 | 1,930,078 | $193 | $115,265,854 | $- | $(117,044,084) | $(1,778,036) |
| Preferred stock sold, net of offering costs | 5,369 | 1 | 4,895,187 | 4,895,188 | ||||
| Preferred stock issued for convertible debt | 4,600 | 3 | 4,599,997 | 4,600,000 | ||||
| Common and preferred stock issued for asset purchase | 32,992 | 3 | 1,366,844 | 137 | 24,046,860 | 24,047,000 | ||
| Common stock sold, net of offering costs | 10,678,571 | 1,068 | 54,907,282 | 54,908,350 | ||||
| Common stock issued for convertible preferred stock | (43,948) | (8) | 9,056,415 | 906 | (898) | - | ||
| Common stock issued as interest on convertible debt | 4,881 | 1 | 220,040 | 220,041 | ||||
| Common stock issued as dividend on convertible preferred stock | 1,407,485 | 140 | (140) | - | ||||
| Compensation on options and restricted stock issued | 50,144 | 5 | 8,131,619 | 8,131,624 | ||||
| Common stock issued for services rendered | 198,668 | 20 | 499,980 | 500,000 | ||||
| Exercise of warrants | 3,161,145 | 316 | 7,135,753 | 7,136,069 | ||||
| Reclassification of warrants from equity to derivative liability | (233,036) | (233,036) | ||||||
| Fractional shares of common stock due to reverse stock split | 3,769 | - | ||||||
| Net loss | (19,541,839) | (19,541,839) | ||||||
| Balance at April 30, 2014 | - | $- | 27,858,000 | $2,786 | $219,468,498 | $- | $(136,585,923) | $82,885,361 |
| Compensation on options and restricted stock issued | 29,956 | 3 | 465,151 | 465,154 | ||||
| Common stock issued for services rendered | 22,079 | 2 | 99,998 | 100,000 | ||||
| Common stock issued as interest on convertible debt | 255 | - | 11,500 | 11,500 | ||||
| Issuance of warrants | 478,115 | 478,115 | ||||||
| Exercise of warrants | 209,230 | 21 | 543,977 | 543,998 | ||||
| Unrealized gain (loss) on marketable securities | 26,718 | - | 26,718 | |||||
| Net loss | (14,081,812) | (14,081,812) | ||||||
| Balance at April 30, 2015 | - | $- | 28,119,520 | $2,812 | $221,067,239 | $26,718 | $(150,667,735) | $70,429,034 |
| Compensation on options and restricted stock issued | 174 | - | 218,438 | 218,438 | ||||
| Unrealized gain (loss) on marketable securities | (156,160) | (156,160) | ||||||
| Net loss | (10,067,964) | (10,067,964) | ||||||
Balance at December 31, 2015 | - | $- | 28,119,694 | $2,812 | $221,285,677 | $(129,442) | $(160,735,699) | $60,423,348 |
| Compensation on options and restricted stock issued | 327 | - | 530,770 | 530,770 | ||||
| Unrealized gain (loss) on marketable securities | 110,724 | 110,724 | ||||||
| Net loss | (43,923,904) | (43,923,904) | ||||||
| Balance at December 31, 2016 | - | $- | 28,120,021 | $2,812 | $221,816,447 | $(18,718) | $(204,659,603) | $17,140,938 |
|
| Preferred Stock |
|
| Common Stock |
|
| Additional |
|
|
|
| Total |
| ||||||||||||||
|
| Number of Shares |
|
| Amount |
|
| Number of Shares |
|
| Amount |
|
| paid-in capital |
|
| Accumulated deficit |
|
| stockholders' equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance at December 31, 2021 |
|
| 210 |
|
| $ | - |
|
|
| 15,754 |
|
| $ | 2 |
|
| $ | 282,738,851 |
|
| $ | (278,494,185 | ) |
| $ | 4,244,668 |
|
Pre-funded warrants and warrants sold, net of offering costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,930,653 |
|
|
|
|
|
|
| 7,930,653 |
|
Exercise of pre-funded warrants |
|
|
|
|
|
|
|
|
|
| 12,893 |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
| 1 |
|
Compensation on options issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 365,314 |
|
|
|
|
|
|
| 365,314 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,047,895 | ) |
|
| (11,047,895 | ) |
Balance at December 31, 2022 |
|
| 210 |
|
| $ | - |
|
|
| 28,647 |
|
| $ | 3 |
|
| $ | 291,034,818 |
|
| $ | (289,542,080 | ) |
| $ | 1,492,741 |
|
Public offering sale of common stock and warrants |
|
|
|
|
|
|
|
|
|
| 86,994 |
|
|
| 9 |
|
|
| 13,897,203 |
|
|
|
|
|
|
| 13,897,212 |
|
Offering costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (282,647 | ) |
|
|
|
|
|
| (282,647 | ) |
Exercise of pre-funded warrants for cash |
|
|
|
|
|
|
|
|
|
| 18,076 |
|
|
| 2 |
|
|
| 511,309 |
|
|
|
|
|
|
| 511,311 |
|
Exercise of pre-funded warrants, cashless |
|
|
|
|
|
|
|
|
|
| 3,259 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
Exercise of warrants, cashless |
|
|
|
|
|
|
|
|
|
| 161,131 |
|
|
| 16 |
|
|
| (16 | ) |
|
|
|
|
|
| - |
|
Stock split and fractional shares issued |
|
|
|
|
|
|
|
|
|
| 174 |
|
|
|
|
|
|
| (687 | ) |
|
|
|
|
|
| (687 | ) |
Compensation on options issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 190,850 |
|
|
|
|
|
|
| 190,850 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,710,673 | ) |
|
| (7,710,673 | ) |
Balance at December 31, 2023 |
|
| 210 |
|
| $ | - |
|
|
| 298,281 |
|
| $ | 30 |
|
| $ | 305,350,830 |
|
| $ | (297,252,753 | ) |
| $ | 8,098,107 |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
| F-7 |
| Table of Contents |
TENAX THERAPEUTICS, INC.
Year ended December 31, | Eight months ended December 31, | Year ended April 30, | ||
2016 | 2015 | 2015 | 2014 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net Loss | $(43,923,904) | $(10,067,964) | $(14,081,812) | $(19,541,839) |
| Adjustments to reconcile net loss to net cash used in operating activities | ||||
| Depreciation and amortization | 18,952 | 31,224 | 148,140 | 150,489 |
| Interest on debt instruments | - | - | 45,606 | 2,181,955 |
| Loss on impairment, disposal and write down of long-lived assets | 33,265,100 | - | 1,034,863 | - |
| Gain on disposal of property and equipment | (74,388) | - | (6,050) | 2,519 |
| Issuance and vesting of compensatory stock options and warrants | 529,708 | 217,736 | 769,906 | 8,042,662 |
| Issuance of common stock as compensation | 1,062 | 703 | 117,295 | 651,460 |
| Change in the fair value of warrants | (298,248) | (48,105) | (382,431) | 721,840 |
| Amortization of premium on marketable securities | 652,861 | 669,915 | 674,378 | - |
| Deferred income taxes | (7,962,100) | - | - | - |
| Changes in operating assets and liabilities | ||||
| Accounts receivable, prepaid expenses and other assets | 23,801 | 13,197 | (793,148) | 519,255 |
| Inventory | - | - | - | 99,204 |
| Accounts payable and accrued liabilities | 1,895,856 | 232,684 | 2,724,459 | (2,089,116) |
| Net cash used in operating activities | (15,871,300) | (8,950,610) | (9,748,794) | (9,261,571) |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Purchase of marketable securities | (7,255,578) | (5,554,385) | (55,142,333) | - |
| Sale of marketable securities | 29,390,264 | 10,355,805 | 14,319,630 | - |
| Purchase of property and equipment | (2,884) | (16,688) | (4,234) | (9,804) |
| Proceeds from the sale of property and equipment | 75,000 | - | 6,500 | - |
| Capitalization of patent costs and license rights | - | - | (105,423) | (137,234) |
| Net cash provided by (used in) investing activities | 22,206,802 | 4,784,732 | (40,925,860) | (147,038) |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Proceeds from sale of common stock and exercise of stock options and warrants, net of related expenses and payments | - | - | 543,998 | 62,044,419 |
| Proceeds from issuance of notes payable, net of issuance costs | - | - | 172,025 | 141,320 |
| Payments on notes - short-term | - | (100,160) | (435,433) | (135,291) |
| Net cash (used in) provided by financing activities | - | (100,160) | 280,590 | 66,945,636 |
| Net change in cash and cash equivalents | 6,335,502 | (4,266,038) | (50,394,064) | 57,537,027 |
| Cash and cash equivalents, beginning of period | 3,660,453 | 7,926,491 | 58,320,555 | 783,528 |
| Cash and cash equivalents, end of period | $9,995,955 | $3,660,453 | $7,926,491 | $58,320,555 |
| Cash paid for: | ||||
| Interest | $- | $1,507 | $3,475 | $30,328 |
|
| Year ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net Loss |
| $ | (7,710,673 | ) |
| $ | (11,047,895 | ) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 7,570 |
|
|
| 5,143 |
|
Interest on debt instrument |
|
| 23,967 |
|
|
| 4,443 |
|
Amortization of right of use asset |
|
| - |
|
|
| 108,189 |
|
(Gain)/Loss on sale of equipment |
|
| 1,125 |
|
|
| (2,901 | ) |
Issuance and vesting of compensatory stock options and warrants |
|
| 190,850 |
|
|
| 365,314 |
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable, prepaid expenses and other assets |
|
| (305,694 | ) |
|
| (356,520 | ) |
Accounts payable and accrued liabilities |
|
| 1,889,323 |
|
|
| (344,951 | ) |
Long term portion of lease liability |
|
| - |
|
|
| (119,393 | ) |
Net cash used in operating activities |
|
| (5,903,532 | ) |
|
| (11,388,571 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from sale/(purchase) of property and equipment |
|
| 2,843 |
|
|
| (2,323 | ) |
Net cash (used in) provided by investing activities |
|
| 2,843 |
|
|
| (2,323 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from issuance of warrants and pre-funded warrants, net of issuance costs |
|
| 14,192,278 |
|
|
| 7,928,591 |
|
Proceeds from the exercise of warrants |
|
| 1,161 |
|
|
| 2,063 |
|
Payments on short-term note |
|
| (624,302 | ) |
|
| - |
|
Net cash provided by financing activities |
|
| 13,569,137 |
|
|
| 7,930,654 |
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
| 7,668,448 |
|
|
| (3,460,240 | ) |
Cash and cash equivalents, beginning of period |
|
| 2,123,682 |
|
|
| 5,583,922 |
|
Cash and cash equivalents, end of period |
| $ | 9,792,130 |
|
| $ | 2,123,682 |
|
|
|
|
|
|
|
|
|
|
Non-cash operating activity |
|
|
|
|
|
|
|
|
Addition to prepaids for insurance premium |
| $ | (500,903 | ) |
| $ | (624,302 | ) |
|
|
|
|
|
|
|
|
|
Non-cash financing activity |
|
|
|
|
|
|
|
|
Addition to notes payable for financing insurance premium |
| $ | 500,903 |
|
| $ | 624,302 |
|
| F-8 |
| Table of Contents |
TENAX THERAPEUTICS, INC.
NOTE A—DESCRIPTION OF BUSINESS
Tenax Therapeutics, Inc. (the “Company”) was originally formed as a New Jersey corporation in 1967 under the name Rudmer, David & Associates, Inc., and subsequently changed its name to Synthetic Blood International, Inc. On June 17, 2008, the stockholders of Synthetic Blood International approved the Agreement and Plan of Merger dated April 28, 2008, between Synthetic Blood International and Oxygen Biotherapeutics, Inc., a Delaware corporation. Synthetic Blood International formed Oxygen Biotherapeutics was formed on April 17, 2008 by Synthetic Blood International to participate in the merger for the purpose of changing the state of domicile of Synthetic Blood International from New Jersey to Delaware. Certificates of Merger were filed with the states of New Jersey and Delaware and the merger was effective June 30, 2008. Under the Plan of Merger, Oxygen Biotherapeutics was the surviving corporation and each share of Synthetic Blood International common stock outstanding on June 30, 2008 was converted tointo one share of Oxygen Biotherapeutics common stock. On September 19, 2014, the Company changed its name to Tenax Therapeutics, Inc.
On October 18,November 13, 2013, the Company, created a wholly ownedthrough its wholly-owned subsidiary, Life Newco, Inc., a Delaware corporation, (“Life Newco”), to acquireacquired certain assets of Phyxius Pharma, Inc., a Delaware corporation (“Phyxius”), pursuant to an Asset Purchase Agreement dated October 21, 2013 (the “Asset Purchase Agreement”), by and among the Company, Life Newco, Phyxius and the stockholders of Phyxius (the “Phyxius Stockholders”Phyxius. Among these assets was a license with Orion Corporation (as amended, the “License”). As further discussed in Note D below, on November 13, 2013,, a global healthcare company incorporated under the terms and subject tolaws of Finland (“Orion”) for the conditions of the Asset Purchase Agreement, Life Newco acquired certain assets, including a license granting Life Newco an exclusive, sublicenseablesublicensable right to develop and commercialize pharmaceutical products containing Levosimedan,levosimendan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial in the United States and Canada.
On January 15, 2021, the Company, Life Newco II, Inc., a Delaware corporation and per share amountsa wholly-owned, subsidiary of the Company (“Life Newco II”), PHPrecisionMed Inc., a Delaware corporation (“PHPM”) and Dr. Stuart Rich, solely in these Consolidated Financial Statementshis capacity as holders’ representative ( the “Representative”), entered into an Agreement and notes theretoPlan of Merger (the “Merger Agreement”) pursuant to which the Company acquired all of the equity of PHPM, a company developing pharmaceutical products containing imatinib for the treatment of PAH (“PAH”) in the United States and the rest of the world. Under the terms of the Merger Agreement, Life Newco II merged with and into PHPM, with PHPM surviving as a wholly-owned subsidiary of the Company (the “Merger”).
Going Concern
Management believes the accompanying financial statements have been retroactively adjusted to give effect to the reverse stock split.
In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying December 31, 2023 balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, to maintain present financing, and to generate cash from future operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
| F-9 |
| Table of Contents |
NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
On an ongoing basis, management reviews its estimates to ensure that these estimates appropriately reflect changes in the Company’s business and new information as it becomes available. If historical experience and other factors used by management to make these estimates do not reasonably reflect future activity, the Company’s results of operations and financial position could be materially impacted.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts and transactions of Tenax Therapeutics, Inc., Life Newco, Inc. and Life Newco,PHPrecisionMed Inc. All material intercompany transactions and balances have been eliminated in consolidation.
Reverse Stock Splits
The Company has adjusted the acquisition methodfinancial statements to reflect that on January 2, 2024, we effected a 1-for-80 reverse stock split (the “Reverse Stock Split”). The Company has also adjusted the financial statements to reflect that on January 4, 2023, we effected a 1-for-20 reverse stock split (the “Prior Reverse Stock Split”, together with the Reverse Stock Split, the “Reverse Stock Splits”). The Reverse Stock Splits did not change the number of accounting, which requires that assets acquired, including identifiable intangible assets, and liabilities assumed be recorded at fair value, with limited exceptions. Any excessauthorized shares of capital stock or cause an adjustment to the purchase price over the fairpar value of our capital stock. Pursuant to their terms, a proportionate adjustment was made to the net assets acquired is recorded as goodwill. If the acquired net assets do not constitute a business, the transaction is accountedper share exercise price and number of shares issuable under our outstanding stock options and warrants. The number of shares authorized for as an asset acquisition and no goodwill is recognized.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity date of three months or less, when acquired, to be cash equivalents.
Cash Concentration Risk
The Federal Deposit Insurance Corporation (the “FDIC”) insurance limits toare $250,000 per depositor per insured bank. The Company had cash balances of $9,362,812$2,383,498 and $2,908,446$1,877,589 uninsured by the FDIC as of December 31, 20162023 and 2015,2022, respectively.
Liquidity and Capital Resources
The Company has financed its operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. The Company had total current assets of $13,628,175approximately $11.7 million and $20,560,353$3.2 million and working capital of $7,428,937$8.1 million and $15,958,723 as of December 31, 2016 and 2015, respectively.
The Company’s cash resources were approximately $9.8 million as of December 31, 2023, compared to cash resources of approximately $2.1 million as of December 31, 2022.
The Company expects to continue to incur expenses related to the development of levosimendan for heart failurepulmonary hypertension and other potential indications and, over the long term, imatinib for PAH, as well as identifying and developing other potential product candidates. Based on its resources aton December 31, 2016,2023, the Company believes that it has sufficient capital to fund its planned operations through the first half of calendar year 2018.2024. However, the Company will need substantial additional financing in order to fund its operations beyond such period and thereafter until it can achieve profitability, if ever. The Company depends on its ability to raise additional funds through various potential sources, such as equity and debt financing, or to license its product candidates to another pharmaceutical company. The Company will continue to fund operations from cash on hand and through sources of capital similar to those previously described. The Company cannot assureprovide assurance that it will be able to secure such additional financing, or if available, that it will be sufficient to meet its needs.
To the extent that the Company raises additional funds by issuing shares of its common stock or other securities convertible or exchangeable for shares of common stock, stockholders will experience dilution, which may be significant. In the event the Company raises additional capital through debt financings, the Company may incur significant interest expense and become subject to covenants in the related transaction documentation that may affect the manner in which the Company conducts its business. To the extent that the Company raises additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to its technologies or product candidates or grant licenses on terms that may not be favorable to the Company. Any or all of the foregoing may have a material adverse effect on the Company’s business and financial performance.
| F-10 |
| Table of Contents |
Preclinical Study and Clinical Accruals
The Company estimates its preclinical study and clinical trial expenses based on the services received pursuant to contracts with several research institutions and contract research organizations (“CROs”) that do or may conduct and manage preclinical and clinical trials on its behalf. The financial terms of the agreements vary from contract to contract, may be estimated by Tenax Therapeutics and outside advisors prior to contracting with a CRO, and may result in uneven expenses and payment flows. Preclinical study and clinical trial expenses include the following:
- | fees paid to CROs in connection with clinical trials, |
- | fees paid to research institutions in conjunction with preclinical and clinical research studies, and |
- | fees paid to contract manufacturers and service providers in connection with the production and testing of active pharmaceutical ingredients and drug materials for use in preclinical studies and clinical trials. |
Property and Equipment, Net
Property and equipment are stated at cost, subject to adjustments for impairment, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the followingwith estimated useful lives:
Maintenance and repairs are charged to expenseexpensed as incurred, and improvements to leased facilities and equipment are capitalized.
| F-11 |
| Table of Contents |
Research and Development Costs
Research and development costs include, but are not limited to, (i) expenses incurred under agreements with CROs and investigative sites, which conduct our clinical trials and a substantial portion of our preclinical studies;trials; (ii) the cost of manufacturing and supplying clinical trial materials; (iii) payments to contract service organizations, as well as consultants; (iv) employee-related expenses, which include salaries and benefits; and (v) facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities and equipment, depreciation of leasehold improvements, equipment, laboratory and other supplies. All research and development expenses are expensed as incurred.
Income Taxes
Deferred tax assets and liabilities are recorded for differences between the financial statement and tax bases of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
Stock-Based Compensation
The Company accounts for stock based compensationstock-based awards to employees in accordance with ASC 718, Compensation — Stock Compensation, which requiresprovides for the use of the fair value-based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Fair values of equity securities are determined by management based predominantly on the trading price of the Company’s common stock. The values of these awards are based upon their grant-date fair value. That cost is recognized over the period during which the employee is required to provide service in exchange for the reward.
The Company accounts for equity instruments issued to non-employees in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Board (“ASC”) 505-50, Equity-Based Payments to Non-Employees. The Company records equity instruments at their fair value on the measurement date and recognition of compensation expense for all stock-based payment awards granted, modified and settled to our employees and directors. The Company choseperiodically adjust them as the “straight-line” attribution method for allocating compensation costs of each stock option on a straight-line basis over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value.
Loss Per Share
Basic loss per share, which excludes antidilutive securities, is computed by dividing net loss by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, restricted stock and warrants.
The following outstanding options, restricted stock grants, convertible notepreferred shares and warrants were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.
Year ended December 31, | Eight months ended December 31, | Year ended April 30, | ||
2016 | 2015 | 2015 | 2014 | |
| Options to purchase common stock | 4,742,032 | 4,032,698 | 3,718,298 | 3,647,858 |
| Warrants to purchase common stock | 2,415,675 | 2,728,236 | 2,728,236 | 2,762,466 |
| Restricted stock grants | 214 | 394 | 90 | 42,629 |
| Convertible note shares outstanding | - | - | - | 6,652 |
|
| Year ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Warrants to purchase common stock |
|
| 19,694 |
|
|
| 19,703 |
|
Pre-funded warrants to purchase common stock |
|
| - |
|
|
| - |
|
Options to purchase common stock |
|
| 936 |
|
|
| 968 |
|
Convertible preferred shares outstanding |
|
| 210 |
|
|
| 210 |
|
| F-12 |
| Table of Contents |
Operating Leases
The Company maintainsdetermines if an arrangement includes a lease at inception. Operating leases are included in operating lease right-of-use assets, other current liabilities, and long-term lease liabilities in the Company’s consolidated balance sheet as of December 31, 2022. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses the incremental borrowing rate based on the information available at the lease commencement date. The operating lease right-of-use assets also include any lease payments made and exclude lease incentives. The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that the Company will exercise any such option. Lease expense is recognized on a straight-line basis over the expected lease term. The Company has elected to account for leases with an initial term of 12 months or less similar to previous guidance for operating leases, for its officeunder which the Company will recognize those lease payments in the consolidated statements of operations and laboratory facilities. The lease agreements may include rent escalation clauses and tenant improvement allowances. The Company recognizes scheduled rent increasescomprehensive loss on a straight-line basis over the lease term beginning with the date the company takes possession of the leased space. Differences between rental expense and actual rental payments are recorded as deferred rent liabilities and are included in “Other liabilities” on the consolidated balance sheets.
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (the “FASB”), issued a new accounting standard that provides guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance provides a screen to determine when an integrated set of assets and activities, or a set, does not qualify to be a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in an identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the guidance requires a set to be considered a business to include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs and removes the evaluation as to whether a market participant could replace the missing elements. The new standard will be effective for the Company on January 1, 2018 and will be adopted on a prospective basis. Early adoption is permitted. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures.
Fair Value
The Company determines the fair value of its financial assets and liabilities in accordance with the FASB Accounting Standards Codification (“ASC”)ASC 820, Fair Value Measurements. The Company’s balance sheet includes the following financial instruments: cash and cash equivalents, investments in marketable securities and short-term notes payable, and warrant liabilities.payable. The Company considers the carrying amount of its cash and cash equivalents and short-term notes payable to approximate fair value due to the short-term nature of these instruments.
Accounting for fair value measurements involves a single definition of fair value, along with a conceptual framework to measure fair value, with a fair value defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”date”. The fair value measurement hierarchy consists of three levels:
Level one | Quoted market prices in active markets for identical assets or liabilities; |
Level two | Inputs other than level one inputs that are either directly or indirectly observable; and |
Level three | Unobservable inputs developed using estimates and assumptions; which are developed by the reporting entity and reflect those assumptions that a market participant would use. |
The Company applies valuation techniques that (1) place greater reliance on observable inputs and less reliance on unobservable inputs and (2) are consistent with the market approach, the income approach and/or the cost approach, and include enhanced disclosures of fair value measurements in the Company’s consolidated financial statements.
Reclassification of its investments as available-for-sale. Unrealized gains and lossesPrior Year Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on investments are recognized in comprehensive income/(loss), unless an unrealized loss is consideredthe financial position or reported results of operations for the periods presented. An adjustment has been made to be other than temporary, in which case the unrealized loss is charged to operations. The Company periodically reviews its investments for other than temporary declines in fair value below cost basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company believes the individual unrealized losses represent temporary declines primarily resulting from interest rate changes. Realized gains and losses are reflected in other income (expense) in the Consolidated Statements of Operations and Comprehensive Loss and are determined using the specific identification method with transactions recorded on a settlement date basis.
December 31, 2016 | |||||
Amortized Cost | Accrued Interest | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |
| Corporate debt securities | $11,780,631 | $108,813 | $5,385 | $(24,103) | $11,870,726 |
December 31, 2016 | December 31, 2015 | |
| Maturing in one year or less | $3,284,616 | $16,528,494 |
| Maturing after one year through three years | 8,586,110 | 18,019,054 |
| Total investments | $11,870,726 | $34,547,548 |
| Series C Warrants | December 31, 2016 | December 31, 2015 |
| Closing stock price | $1.95 | $3.28 |
| Expected dividend rate | 0% | 0% |
| Expected stock price volatility | 79.60% | 84.08% |
| Risk-free interest rate | 1.35% | 1.44% |
| Expected life (years) | 2.56 | 3.56 |
Fair Value Measurements at Reporting Date Using | ||||
Balance as of December 31, 2016 | Quoted prices in Active Markets for Identical Securities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |
| Current Assets | ||||
| Cash and cash equivalents | $9,995,955 | $9,995,955 | $- | $- |
| Marketable securities | $3,284,616 | $- | $3,284,616 | $- |
| Long-term Assets | ||||
| Marketable securities | $8,586,110 | $- | $8,586,110 | $- |
| Current Liabilities | ||||
| Warrant liabilities | $226,092 | $- | $- | $226,092 |
Fair Value Measurements at Reporting Date Using | ||||
Balance as of December 31, 2015 | Quoted prices in Active Markets for Identical Securities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |
| Current Assets | ||||
| Cash and cash equivalents | $3,660,453 | $3,660,453 | $- | $- |
| Marketable securities | $16,528,494 | $- | $16,528,494 | $- |
| Long-term Assets | ||||
| Marketable securities | $18,019,054 | $- | $18,019,054 | $- |
| Current Liabilities | ||||
| Warrant liabilities | $524,340 | $- | $- | $524,340 |
NOTE C—BALANCE SHEET COMPONENTS
Property and equipment, net
Property and equipment primarily consist of the following:
December 31, 2016 | December 31, 2015 | |
| Laboratory equipment | $354,861 | $514,214 |
| Computer equipment and software | 101,677 | 139,984 |
| Office furniture and fixtures | 130,192 | 130,192 |
586,730 | 784,390 | |
| Less: Accumulated depreciation | (567,625) | (748,604) |
$19,105 | $35,786 |
| F-13 |
| Table of Contents |
Depreciation and amortization expense was $18,952were $7,570 and $31,224$5,143 for the yearyears ended December 31, 20162023 and for the eight months ended December 31, 2015,2022, respectively.
Accrued liabilities
Accrued liabilities consist of the following:
December 31, 2016 | December 31, 2015 | |
| Operating costs | $4,361,538 | $2,559,092 |
| Employee related | 884,008 | 545,715 |
$5,245,546 | $3,104,807 |
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Operating costs |
| $ | 236,878 |
|
| $ | 245,391 |
|
Lease liability |
|
| - |
|
|
| 119,393 |
|
Employee related |
|
| 775,590 |
|
|
| 410,261 |
|
|
| $ | 1,012,468 |
|
| $ | 775,045 |
|
NOTE D��ACQUISITION
Premium Finance Agreement
On November 13, 2013,December 31, 2023, the Company through its wholly owned subsidiary, Life Newco, acquired certain assets of Phyxius pursuant toexecuted a premium finance agreement with Premium Funding Associates, Inc. The agreement financed the Asset Purchase Agreement. The acquisition was accounted for under the acquisition method of accounting for business combinations in accordance with FASB ASC 805,
On December 31, 2014. While2022, the Company did not commenceexecuted a premium finance agreement with Premium Funding Associates, Inc. The agreement financed the trial by that date, on September 9, 2014, Orion notified the Company in writing that it did not intend to terminate the License so longCompany’s Directors and Officers Insurance Policy as well as the trialErrors and Omissions policy. The total amount financed was commenced on or before October 31, 2014.$693,669. The Company subsequently commenced the human clinical trial for levosimendan on September 18, 2014 when the first patient was enrolled.
November 13, 2013 (As initially reported) | Measurement Period Adjustments (1) | November 13, 2013 (As adjusted) | |
| IPR&D | $22,000,000 | $- | $22,000,000 |
| Trade and other payables | (256,000) | - | (256,000) |
| Liabilities arising from a contingency | (1,000,000) | - | (1,000,000) |
| Deferred tax liability related to intangibles acquired | - | (7,962,100) | (7,962,100) |
| Total identifiable net assets | 20,744,000 | (7,962,100) | 12,781,900 |
| Goodwill | 3,303,000 | 7,962,100 | 11,265,100 |
| Total fair value of consideration | $24,047,000 | $- | $24,047,000 |
| Asset Category | Weighted Average Amortization Period (in Years) | Value Assigned | Accumulated Amortization | Impairments | Carrying Value (Net of Impairments and Accumulated Amortization) |
| IPR&D | N/A | $22,000,000 | $- | $(22,000,000) | $- |
| Total | $22,000,000 | $(22,000,000) | $- |
| Asset Category | Weighted Average Amortization Period (in Years) | Value Assigned | Accumulated Amortization | Impairments | Carrying Value (Net of Impairments and Accumulated Amortization) |
| IPR&D | N/A | $22,000,000 | $- | $- | $(22,000,000) |
| Total | $22,000,000 | $- | $(22,000,000) |
NOTE G—E—STOCKHOLDERS’ EQUITY
Under the Company’s Certificate of Incorporation, the Board of Directors is authorized, without further stockholder action, to provide for the issuance of up to 10,000,000 shares of preferred stock, par value $0.0001 per share, in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof.
Series E Stock.
On December 8, 2011, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 7,500 shares of its authorized but unissued shares of preferred stock as Series A Stock.
| F-14 |
| Table of Contents |
As of December 31, 20162023, and December 31, 20152022 there were no210 shares of Series B Stock outstanding.
Common Stock and Series E Stock. No shares of the Preferred Stock were outstanding at the time of the filing of the Certificates of Elimination. The Certificates of Elimination, which were effective upon filing, canceled the Company’s Series A Stock, Series B-1 Stock, Series B-2 Stock, Series C Stock, Series D Stock and Series E Stock. At the time of filing the Certificates of Elimination, no shares of preferred stock remained outstanding. As of December 31, 2016, 10,000,000 shares of preferred stock are undesignated.
The Company’s Certificate of Incorporation authorizes it to issue 400,000,000 shares of $0.0001 par value common stock. As of December 31, 20162023, and December 31, 20152022, there were 28,120,021298,281 and 28,119,69428,648 shares of common stock issued and outstanding.
| F-15 |
| Table of Contents |
February 2023 Registered Public Offering (the “February 2023 Offering”)
On November 11, 2014,February 3, 2023, the Company issuedentered into a securities purchase agreement with certain purchasers for the purchase and sale, in a registered public offering by the Company of (i) an aggregate of 86,994 shares of its common stock, and pre-funded warrants to purchase an aggregate of 21,341 shares of common stock and (ii) accompanying warrants to purchase up to an aggregate of 216,667 shares of its common stock at a combined offering price of $144 per share of common stock and associated common warrant, or $143.92 per pre-funded warrant and associated common warrant, resulting in gross proceeds of approximately $15.6 million. The net proceeds of the February 2023 Offering after deducting placement agent fees and direct offering expenses were approximately $14.1 million. The fair value allocated to the common stock, pre-funded warrants and warrants was $5.0 million, $1.2 million and $9.4 million, respectively.
May 2022 Private Placement (the “May 2022 Offering”)
On May 17, 2022, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company agreed to sell and issue to the investor 6,623 units in a private placement at a purchase price of $1,240 per unit. Each unit consisted of (i) one unregistered pre-funded warrant to purchase one share of common stock and (ii) one unregistered warrant to purchase one share of common stock (together with the pre-funded warrants, the “2022 Warrants”). In the aggregate, 13,246 shares of the Company’s common stock are underlying the 2022 Warrants. The net proceeds from the private placement, after direct offering expenses, were approximately $7.9 million. The fair value allocated to the pre-funded warrants and warrants was $4.2 million and $3.8 million, respectively.
Also, on May 17, 2022 and in connection with the executionMay 2022 Offering, the Company entered into a registration rights agreement (the “May 2022 Registration Rights Agreement”) with the investor, pursuant to which the Company agreed to register for resale the shares of common stock issuable upon exercise of the 2022 Warrants within 120 days following the effective date of the May 2022 Registration Rights Agreement. Pursuant to the May 2022 Registration Rights Agreement, on May 25, 2022, the Company filed a serviceresale registration statement on Form S-3 with the SEC, which went effective on June 3, 2022.
Additionally, in connection with the May 2022 Offering, the Company entered into a warrant amendment agreement with the investor, in consideration for investor relationsthe investor’s purchase of units in the May 2022 Offering, pursuant to which the Company agreed to amend certain previously issued warrants held by the investor.
Warrants
During the year ended December 31, 2023, the Company received approximately $511 and corporate communications. issued 21,335 shares of common stock upon the exercise of previously outstanding pre-funded warrants issued in connection with the Company’s February 7, 2023 offering.
During the year ended December 31, 2023, the Company issued 161,306 shares of common stock upon the alternative cashless exercise of previously outstanding warrants issued in connection with the Company’s February 7, 2023 offering.
During the year ended December 31, 2022, the Company received approximately $526 and issued 3,288 shares of common stock upon the exercise of previously outstanding pre-funded warrants issued in connection with the Company’s July 2020 offering.
During the year ended December 31, 2022, the Company received approximately $477 and issued 2,984 shares of common stock upon the exercise of previously outstanding pre-funded warrants issued in connection with the Company’s July 2021 Offering.
During the year ended December 31, 2022, the Company received approximately $1,060 and issued 6,623 shares of common stock upon the exercise of previously outstanding pre-funded warrants issued in connection with the Company’s May 2022 Offering.
| F-16 |
| Table of Contents |
As of December 31, 2023, the Company has 19,694 warrants outstanding. The following table summarizes the Company’s warrant activity for the year ended December 31, 2022 and 2023:
|
| Warrants |
|
| Weighted Average Exercise Price |
| ||
Outstanding at December 31, 2021 |
|
| 13,080 |
|
| $ | 2,323.10 |
|
Issued |
|
| 6,623 |
|
|
| 1,008.00 |
|
Amended and restated |
|
| (5,754 | ) |
|
| 2,756.09 |
|
Amended and restated |
|
| 5,754 |
|
|
| 1,008.00 |
|
Outstanding at December 31, 2022 |
|
| 19,703 |
|
| $ | 1,370.58 |
|
Issued |
|
| 216,667 |
|
|
| 180.00 |
|
Exercised |
|
| (214,842 | ) |
|
| 180.00 |
|
Canceled |
|
| (1,834 | ) |
|
| 3,142.54 |
|
Outstanding at December 31, 2023 |
|
| 19,694 |
|
| $ | 1,095.27 |
|
February 2023 Warrants
As described above, as a part of the compensation under the agreement,February 2023 Offering, the Company issued upregistered warrants to 175,000 warrantspurchase 216,667 shares of its common stock at an exercise price of $4.00$180.00 per share and contractual term of 5five years. The warrant is initially exercisable for 25,000 shares of common stock, and the number of shares of common stock exercisable under this warrant will be automatically increased by 50,000 upon the first occurrence of market price goals of $6.00, $8.00 and $10.00, respectively, during the eighteen month period beginning on the effective date. In accordance with ASC 815, Derivatives and Hedging, these warrants are classified as equity and their estimated fair-valuerelative fair value of $478,115approximately $10.6 million was recorded as an operating expense in the consolidated statement of operations andrecognized as additional paid in capital during the year ended April 30, 2015.capital. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.
Remaining contractual term | 5 Years | |||
Risk free interest rate | 2.23 | % | ||
Expected dividends | - | |||
Expected Volatility | 105.69 | % | ||
May 2022 Warrants
As described above, as a part of the May 2022 Offering, the Company closed its private placement of an aggregate of $4.6 millionissued unregistered warrants to purchase 6,623 shares of the Company’s Series D Stock to OXBT Fund. In connection with the purchase of shares of Series D Stock, OXBT Fund received the Series D Warrant to purchase 2,358,975 shares ofits common stock at an exercise price equal to $2.60of $1,008.00 per share and contractual term of 6 years
Stock and the
The following table summarizes the Company’s warrant activity for the year endedall options outstanding as of December 31, 2016, the eight months ended2023:
|
|
|
|
|
| Options Outstanding at December 31, 2023 |
|
| Options Exercisable and Vested at December 31, 2023 |
| ||||||||||||||
Exercise Price |
|
|
|
|
| Number of Options |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Number of Options |
|
| Weighted Average Exercise Price |
| ||||||||
$ | 992.00 |
|
|
| $ | 2,960.00 |
|
|
| 569 |
|
|
| 7.7 |
|
|
| 295 |
|
| $ | 1,872.06 |
| |
$ | 3,200.00 |
|
|
|
| $ | 16,960.00 |
|
|
| 47 |
|
|
| 6.0 |
|
|
| 47 |
|
| $ | 7,801.03 |
|
$ | 66,240.00 |
|
|
|
| $ | 101,120.00 |
|
|
| 5 |
|
|
| 2.8 |
|
|
| 5 |
|
| $ | 71,190.16 |
|
$ | 109,440.00 |
|
|
|
| $ | 180,800.00 |
|
|
| 3 |
|
|
| 0.7 |
|
|
| 3 |
|
| $ | 145,623.66 |
|
|
|
|
|
|
|
|
|
|
|
| 624 |
|
|
| 7.5 |
|
|
| 350 |
|
| $ | 4,719.64 |
|
The following table summarizes options outstanding that have vested and are expected to vest based on options outstanding as of December 31, 2015 and the fiscal years ended April 30, 2015 and 2014:
Warrants | Weighted Average Exercise Price | |
| Outstanding at April 30, 2013 | 759,410 | $11.00 |
| Issued | 5,165,862 | 2.60 |
| Exercised | (3,161,145) | 2.26 |
| Forfeited | (1,661) | 126.00 |
| Outstanding at April 30, 2014 | 2,762,466 | $4.28 |
| Issued | 175,000 | 4.00 |
| Exercised | (209,230) | 2.60 |
| Outstanding at April 30, 2015 | 2,728,236 | $4.39 |
| Issued | - | - |
| Exercised | - | - |
| Outstanding at December 31, 2015 | 2,728,236 | $4.39 |
| Issued | - | - |
| Exercised | - | - |
| Forfeited | (312,561) | 17.93 |
| Outstanding at December 31, 2016 | 2,415,675 | $2.64 |
|
| Number of Options |
|
| WA Exercise Price |
|
| Aggregate Intrinsic Value |
|
| Weighted Average Remaining Contractual Life (Years) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Vested |
|
| 350 |
|
| $ | 4,719.64 |
|
| $ | - |
|
|
| 6.9 |
|
Vested & expected to vest |
|
| 593 |
|
| $ | 3,299.59 |
|
| $ | - |
|
|
| 7.4 |
|
| F-17 |
| Table of Contents |
2022 Stock Incentive Plan
In October 2000,June 2022, the Company adopted the 19992022 Stock Incentive Plan as amended and restated on June 17, 2008 (the “Plan”“2022 Plan”). Under the 2022 Plan, with the approval of the Board’s Compensation Committee, of the Board of Directors, the Company may grant stock options, restricted stock, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards. On June 9, 2022, the Company’s stockholders approved the 2022 Plan, which authorizes for issuance under the 2022 Plan a total of 688 shares of common stock. Upon approval by the stockholders, the 2022 Plan superseded and newreplaced the Tenax Therapeutics, Inc. 2016 Stock Incentive Plan, as amended (the “2016 Plan”) and all shares of common stock upon exercise of stock options. On September 30, 2011, the Company’s stockholders approved an amendment to the Plan which increased the amount of sharesremaining authorized and available for issuance under the 2016 Plan and any shares subject to 300,000, up from 40,000 previously authorized.
Shares for | ||||
Balances, at December 31, | - | |||
Shares reserved under 2022 Plan | 688 | |||
Shares rolled over from 2016 Plan | 512 | |||
Options granted | (357 | ) | ||
Options cancelled/forfeited | 127 | |||
Balances, at December 31, | 970 | |||
Options granted | - | |||
Options cancelled/forfeited | 30 | |||
Balances, at December 31, 2023 | 1,000 | |||
2022 Plan Stock Options
Stock options granted under the 2022 Plan may be either incentive stock options (“ISOs”), or nonqualified stock options (“NSOs”). ISOs may be granted only to employees. NSOs may be granted to employees, consultants and directors. Stock options under the 2022 Plan may be granted with a term of up to ten years and at prices no less than fair market value for ISOs and no less than 85%at the time of the fair market value for NSOs.grant. Stock options granted generally vest over one to threefour years.
The following table summarizes the outstanding stock options under the 2022 Plan
for the year ended December 31, 2023.
|
| Outstanding Options |
| |||||
|
| Number of Shares |
|
| Weighted Average Exercise Price |
| ||
Balances at December 31, 2021 |
|
| - |
|
| $ | - |
|
Options granted |
|
| 357 |
|
| $ | 992.00 |
|
Options cancelled/forfeited |
|
| (5 | ) |
| $ | 992.00 |
|
Balances at December 31, 2022 |
|
| 352 |
|
| $ | 992.00 |
|
Options cancelled/forfeited |
|
| (21 | ) |
| $ | 992.00 |
|
Balances at December 31, 2023 |
|
| 331 |
|
| $ | 992.00 |
|
2016 Stock Incentive Plan
In June 2016, the eight months ended December 31, 2015Company adopted the 2016 Stock Incentive Plan (the “2016 Plan”). Under the 2016 Plan, with the approval of the Board’s Compensation Committee, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards. On June 16, 2016, the Company’s stockholders approved the 2016 Plan and authorized for issuance under the fiscal2016 Plan a total of 94 shares of common stock. On June 13, 2019, the Company’s stockholders approved an amendment to the 2016 Plan which increased the number of shares of common stock authorized for issuance under the 2016 Plan to a total of 469 shares, up from 94 shares previously authorized. On June 10, 2021, the Company’s stockholders approved an amendment to the 2016 Plan which increased the number of shares of common stock authorized for issuance under the 2016 Plan to a total of 938 shares, up from 469 shares previously authorized. In June 2022, the 2016 Plan was superseded and replaced by the 2022 Plan and no new awards will be granted under the 2016 Plan going forward. Any awards outstanding under the 2016 Plan on the date of approval of the 2022 Plan remain subject to the 2016 Plan. Upon approval of the 2022 Plan, all shares of common stock remaining authorized and available for issuance under the 2016 Plan and any shares subject to outstanding awards under the 2016 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares automatically become available for issuance under our 2022 Plan.
| F-18 |
| Table of Contents |
2016 Plan Stock Options
Stock options granted under the 2016 Plan could be either ISOs or NSOs. ISOs could be granted only to employees. NSOs could be granted to employees, consultants and directors. Stock options under the 2016 Plan could be granted with a term of up to ten years ended April 30, 2015 and 2014:
Outstanding Options | |||
Number of Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value | |
| Balances, at April 30, 2013 | 11,336 | $57.00 | |
| Options granted | 3,637,822 | $5.64 | |
| Options cancelled | (1,300) | $43.90 | |
| Balances, at April 30, 2014 | 3,647,858 | $5.79 | |
| Options granted | 50,225 | $4.82 | |
| Options cancelled | (4,785) | $63.84 | |
| Balances, at April 30, 2015 | 3,693,298 | $5.70 | |
| Options granted | 315,050 | $3.25 | |
| Options cancelled | (650) | $35.09 | |
| Balances at December 31, 2015 | 4,007,698 | $5.50 | |
| Options granted | 726,000 | $2.12 | |
| Options cancelled | - | $- | |
| Balances at December 31, 2016 | 4,733,698 | $4.98 | $ - (1) |
The following table summarizes allthe outstanding stock options outstanding as ofunder the 2016 Plan for the year ended December 31, 2016:
Options Outstanding at December 31, 2016 | Options Exercisable and Vested at December 31, 2016 | |||
Exercise Price | Number of Options | Weighted Average Remaining Contractual Life (Years) | Number of Options | Weighted Average Exercise Price |
$2.07 to $3.16 | 956,000 | 9.7 | 76,666 | $3.16 |
$3.35 to $4.76 | 124,938 | 7.8 | 124,838 | $3.31 |
$4.82 to $5.65 | 3,647,880 | 3.3 | 1,861,440 | $5.63 |
$14.80 to $138.00 | 4,880 | 4.4 | 4,880 | $54.07 |
4,733,698 | 4.7 | 2,067,824 | $5.54 | |
Number of Option Shares | Weighted Average Exercise Price | Aggregate Intrinsic Value (1) | Weighted Average Remaining Contractual Life (Years) | |
| Vested | 2,067,824 | $5.54 | $- | 3.9 |
| Vested and expected to vest | 2,743,720 | $4.75 | $- | 5.3 |
|
| Outstanding Options |
| |||||
|
| Number of Shares |
|
| Weighted Average Exercise Price |
| ||
Balances at December 31, 2021 |
|
| 415 |
|
| $ | 3,040.00 |
|
Options cancelled/forfeited |
|
| (122 | ) |
| $ | 2,593.60 |
|
Balances at December 31, 2022 |
|
| 293 |
|
| $ | 3,210.40 |
|
Options cancelled/forfeited |
|
| (9 | ) |
| $ | 1,888.00 |
|
Balances at December 31, 2023 |
|
| 284 |
|
| $ | 3,251.77 |
|
The Company chose the “straight-line” attribution method for allocating compensation costs of each stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value.
The Company used the following assumptions to estimate the fair value of options granted under its stock option plansthe 2016 Plan for the yearyears ended December 31, 2022. The Company had no option issuances under the 2016 plan during the eight months endedyear ending December 31, 2015 and the fiscal years ended April 30, 2015 and 2014:
For the year ended December 31, | For the eight months ended December 31, | For the year ended April 30 | ||
2016 | 2015 | 2015 | 2014 | |
| Risk-free interest rate (weighted average) | 2.28% | 1.99% | 2.23% | 1.80% |
| Expected volatility (weighted average) | 83.38% | 85.45% | 98.43% | 98.20% |
| Expected term (in years) | 7 | 7 | 7 | 6 |
| Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
For the year ended December 31, | ||||
2022 | ||||
Risk-free interest rate (weighted average) | 3.08 | % | ||
Expected volatility (weighted average) | 102.01 | % | ||
Expected term (in years) | 7.0 | |||
Expected dividend yield | 0.00 | % | ||
| F-19 |
| Table of Contents |
Risk-Free Interest Rate | The risk-free interest rate assumption was based on U.S. Treasury instruments with a term that is consistent with the expected term of the Company’s stock options. |
Expected Volatility | The expected stock price volatility for the Company’s common stock was determined by examining the historical volatility and trading history for its common stock over a term consistent with the expected term of its options. |
Expected Term | The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. It was calculated based on the Company’s historical experience |
Expected Dividend Yield | The expected dividend yield of 0% is based on the Company’s history and expectation of dividend payouts. The Company has not paid and |
Forfeitures | As stock-based compensation expense recognized in the statement of operations for the |
The Company recorded compensation expense for these stock options grants of $529,708$116,089 and $223,277 for the yearyears ended December 31, 2016.
As of December 31, 2016,2023, there were unrecognized compensation costs of approximately $963,000$73,701 related to non-vested stock option awards under the 2022 Plan that will be recognized on a straight-line basis over the weighted average remaining vesting period of 2.11.42 years. Additionally, there were unrecognized
1999 Stock Plan
In October 2000, the Company adopted the 1999 Stock Plan, as amended and restated on June 17, 2008 (the “1999 Plan”). Under the 1999 Plan, with the approval of the Compensation Committee of the Board of Directors, the Company could grant stock options, restricted stock, stock appreciation rights and new shares of common stock upon exercise of stock options. On March 13, 2014, the Company’s stockholders approved an amendment to the 1999 Plan which increased the number of shares of common stock authorized for issuance under the 1999 Plan to a total of 125 shares, up from 10 previously authorized. On September 15, 2015, the Company’s stockholders approved an additional amendment to the 1999 Plan which increased the number of shares of common stock authorized for issuance under the 1999 Plan to a total of 157 shares, up from 125 previously authorized. The 1999 Plan expired on June 17, 2018 and no new grants may be made under that plan after that date. However, unexpired awards granted under the 1999 Plan remain outstanding and subject to the terms of the 1999 Plan.
1999 Plan Stock Options
Stock options granted under the 1999 Plan may be ISOs or NSOs. ISOs could be granted only to employees. NSOs could be granted to employees, consultants and directors. Stock options under the 1999 Plan could be granted with a term of up to ten years and at prices no less than fair market value for ISOs and no less than 85% of the fair market value for NSOs. Stock options granted generally vest over one to three years.
| F-20 |
| Table of Contents |
The following table summarizes the outstanding stock options under the 1999 Plan for the years ended December 31, 2023 and 2022:
|
| Outstanding Options |
|
|
| |||||||
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Aggregate Intrinsic Value |
| |||
Balances at December 31, 2021 |
|
| 23 |
|
| $ | 67,616.00 |
|
|
|
| |
Options cancelled |
|
| (11 | ) |
| $ | 44,667.20 |
|
|
|
| |
Balances at December 31, 2022 |
|
| 12 |
|
| $ | 89,820.00 |
|
|
|
| |
Options cancelled |
|
| (3 | ) |
| $ | 100,165.31 |
|
|
|
| |
Balances at December 31, 2023 |
|
| 9 |
|
| $ | 86,108.80 |
|
| $ | - |
|
The Company chose the “straight-line” attribution method for allocating compensation costs of approximately $8.1 millioneach stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value.
The Company had no compensation expense for stock options grants for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, there were no unrecognized compensation costs related to non-vested stock option awards subjectunder the 1999 Plan.
In connection with the retirement of the Company’s former Chief Executive Officer (“CEO”), effective July 13, 2021 (the “Modification Date”), the Company modified the terms of the former CEO’s outstanding stock awards to: (1) accelerate the 1,906 unvested shares underlying his outstanding stock awards immediately as of the Modification Date and (2) extend the period during which his outstanding stock awards for an aggregate of 2,734 shares may be exercised through the earlier of the stock award’s original termination date or the five-year anniversary of the Modification Date.
The Company determined that the extension of the period during which the vested shares may be exercised was a Type 1 modification pursuant to performance-basedASC 718, Compensation-Stock Compensation. However, acceleration of vesting milestones withand extension of the exercise period for the remaining Stock Awards was a weighted average remaining lifeType 3 modification pursuant to ASC 718 because absent the modification terms, those Stock Awards would have been forfeited as of 3.3 years. Asthe former CEO’s retirement date.
On the Modification Date, the Company recognized approximately $187,000 of compensation expense, which is included in General and administrative expense for the year ended December 31, 2016, none of2022, with respect to these milestones have been achieved.
Inducement Stock Options
The table below summarizes theCompany granted two employment inducement stock option awardawards, one for 25,00063 shares of common stock madeand the other for 156 shares of common stock, to our Chief Medical Officerits new CEO on February 15, 2015. ThisJuly 6, 2021.
The employment inducement stock option for 63 shares of common stock was awarded in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. The option award willwas to vest overas follows: 50% upon initiation of a three year period, with one-third vesting per year, beginning one year from the grant date.Phase 3 trial for levosimendan by June 30, 2022; and 50% upon initiation of a Phase 3 trial for imatinib by June 30, 2022. The options havehad a 10-year term and an exercise price of $3.22$3,152.00 per share, the February 13, 2015July 6, 2021 closing price of the Company’sour common stock.
Number of Shares | Weighted Average Exercise Price | |
| Inducement Stock Options outstanding at April 30, 2014 | - | $- |
| Options granted | 25,000 | 3.22 |
| Options exercised | - | - |
| Options forfeited or expired | - | - |
| Inducement Stock Options outstanding at April 30, 2015 | 25,000 | $3.22 |
| Options granted | - | - |
| Options exercised | - | - |
| Options forfeited or expired | - | - |
| Inducement Stock Options outstanding at December 31, 2015 | 25,000 | $3.22 |
| Options granted | - | - |
| Options exercised | - | - |
| Options forfeited or expired | (16,666) | 3.22 |
| Inducement Stock Options outstanding at December 31, 2016 | 8,334 | $3.22 |
| Options exercisable at December 31, 2016 | 8,334 | $3.22 |
| F-21 |
| Table of Contents |
The employment inducement stock option award for 156 shares of common stock also was awarded in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. The option award will vest as follows: 25% on the one-year anniversary of the CEO’s employment start date and an additional 25% on each of the following three anniversaries of the CEO’s employment start date, subject to continued employment. The options have a weighted average10-year term and an exercise price of $3,152 per share, the July 6, 2021 closing price of our common stock. As of December 31, 2023, half of the vesting milestones have been achieved.
The estimated fair value of this inducement stock option award was $403,180 using a Black-Scholes option pricing model based on market prices and the following assumptions at the date of inducement option grant: risk-free interest rate of 1.13%, dividend yield of 0%, volatility factor for our common stock of 99.36% and an expected life of 7 yearsyears.
The Company granted an employment inducement stock option award for 156 shares of common stock to our Chief Medical Officer on January 15, 2021. This employment inducement optionsstock option was awarded in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not forfeited.
Inducement stock option compensation expense totaled $74,761 for the year ended December 31, 2016,
Outstanding Restricted Stock | ||
Number of Shares | Weighted Average Grant Date Fair Value | |
| Balances, at April 30, 2013 | 1,917 | $48.40 |
| Restricted stock granted | 135,662 | $3.00 |
| Restricted stock vested | (50,235) | $2.30 |
| Restricted stock cancelled | (31,503) | $1.67 |
| Restricted stock forfeited | (13,363) | $4.49 |
| Balances, at April 30, 2014 | 42,478 | $6.39 |
| Restricted stock granted | 2,624 | $4.90 |
| Restricted stock vested | (29,957) | $5.99 |
| Restricted stock cancelled | (15,055) | $6.95 |
| Balances, at April 30, 2015 | 90 | $4.01 |
| Restricted stock granted | 610 | $3.37 |
| Restricted stock vested | (174) | $3.61 |
| Restricted stock cancelled | (132) | $3.57 |
| Balances, at December 31, 2015 | 394 | $3.34 |
| Restricted stock granted | 430 | $2.72 |
| Restricted stock vested | (327) | $3.11 |
| Restricted stock cancelled | (283) | $3.13 |
| Balances, at December 31, 2016 | 214 | $2.72 |
NOTE F—COMMITMENTS AND CONTINGENCIES
Operating Leases
In January 2011, the non-vested restricted stock grantsCompany entered into a lease (the “Lease”) with Concourse Associates, LLC (the “Landlord”) for its headquarters located at ONE Copley Parkway, Suite 490, Morrisville, North Carolina (the “Premises”). The Lease was amended in August 2015, March 2016 and April 2021 to extend the term for the 5,954 square foot rental. Pursuant to the Amendment dated April 2021, the existing lease term was extended through June 30, 2024 and the annual base rent of $125,034 would increase 2.5% annually for lease years two and three. On February 7, 2023, the Company entered into a Lease Termination Agreement with the Landlord, with respect to the Premises. As consideration for the Landlord’s entry into the Lease Termination Agreement, including a release of any claims the Landlord may have had against the Company under the Lease, the Company paid the Landlord $169,867. Pursuant to the Lease Termination Agreement, effective February 8, 2023, the Company has no remaining rent or further obligations to the Landlord pursuant to the Lease.
The Company performed an evaluation of its other contracts with customers and suppliers in accordance with ASC 842, Leases, and determined that, will be recognized on a straight-line basis overexcept for the remaining vesting period.
The balance sheet classification of up to 3,000,000 shares of common stock. Under the 2016 Plan, with the approval of the Compensation Committee of the Board of Directors, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards.
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Current portion included in accrued liabilities |
| $ | - |
|
| $ | 119,393 |
|
Long term lease liability |
|
| - |
|
|
| 64,196 |
|
|
| $ | - |
|
| $ | 183,589 |
|
The Company leases itsowns no real property. Beginning November 1, 2022, we maintain a membership providing dedicated office space, under an operating lease that includes fixed annual increasesas well as shared services and expires in June 2021. Totalshared space for meetings, catering, and other business activities, at our principal executive office relocated to 101 Glen Lennox Drive, Suite 300, Chapel Hill, North Carolina 27517.
The current rent expense was $91,208 for the year ended December 31, 2016. Total rent expense was $75,933 for the eight months ended December 31, 2015.
| Year ending December 31, | |
| 2017 | $112,431 |
| 2018 | 115,220 |
| 2019 | 118,117 |
| 2020 | 121,084 |
| 2021 | 61,803 |
$528,655 |
| F-22 |
| Table of Contents |
Simdax license agreement
On November 13, 2013, the Company acquired, through its wholly-owned subsidiary, Life Newco, that certain License Agreement, dated September 20, 2013, as amended on October 9, 2020 and January 25, 2022, by and between Phyxius and Orion (as amended, the “License”), and that certain Side Letter, dated October 15, 2013 by and between Phyxius and Orion. On February 19, 2024, the Company and Orion entered into a further amendment to the license, which terms are described below under “Note I—Subsequent Events”.
The License which granted itgrants the Company an exclusive, sublicenseablesublicensable right to develop and commercialize pharmaceutical
products containing Levosimedanlevosimendan in the United Statesterritory and, Canada.pursuant to the October 9, 2020 amendment, also includes two product dose forms containing levosimendan, in capsule and solid dosage form, and a subcutaneously administered product containing levosimendan, subject to specified limitations in the License. Pursuant to the License, the Company must use Orion’s “Simdax®”and Orion will agree to a new trademark to commercialize the Product. when commercializing levosimendan in either of these forms.
The License also grants to the Company a right of first refusal to commercialize new developments of the Product, including developments as to the formulation, presentation, means of delivery, route of administration, dosage or indication.
Orion’s ongoing role under the License includes sublicense approval, serving as the sole source of manufacture, holding a first right to enforce intellectual property rights in the Territory,territory, and certain regulatory participation rights. Orion must notify the Company before the end of 2024 if it chooses not to exercise its right to supply oral formulations of levosimendan to the Company for commercialization in the territory. Additionally, the Company must grant back to Orion a broad non-exclusive license to any patents or clinical trial data related to the Product developed by the Company under the License. The term of the License has a fifteen (15) year term,extends until 10 years after the launch of the Product in the territory, provided however, that the License will continue after the end of the fifteen year term in each country in the Territoryterritory until the expiration of Orion’s patent rights in the Product in such country. Orion hadIn the event that no regulatory approval for the Product has been granted in the United States on or before September 20, 2030, however, either party will have the right to terminate the License ifwith immediate effect.
Pursuant to the Study is not started by July 31, 2014. Whileterms of the License, on November 13, 2013, the Company did not commencepaid to Orion a non-refundable up-front payment in the trial by that date, on September 9, 2014, Orion notified the Company in writing that it did not intend to terminate theamount of $1.0 million. The License so long as the trial was commenced on or before October 31, 2014. The Company subsequently commenced the human clinical trial for levosimendan on September 18, 2014 when the first patient was enrolled.
As of December 31, 2016,2023, the Company has not met any of the developmental milestones under the License and, accordingly, has not recorded any liability for the contingent payments due to Orion.
Litigation
The Company is subject to litigation in the normal course of business, none of which management believes will have a material adverse effect on the Company’s Consolidated Financial Statements.
| F-23 |
| Table of Contents |
NOTE I—G—401(k) BENEFIT PLAN
The Company sponsors a 401(k) Retirement Savings Plan (the “401(k) Plan”) for all eligible employees. Full-time employees over the age of 18eighteen are eligible to participate in the 401(k) Plan after 90 days of continuous employment. Participants may elect to defer earnings into the 401(k) Plan up to the annual IRS limits and the Company provides a matching contribution up to 5% of the participants’ annual salary in accordance with the 401(k) Plan documents. TheA third-party trustee manages the 401(k) Plan is managed by a third-party trustee.
For the yearyears ended December 31, 2016, the eight months ended December 31, 2015, the fiscal year ended April 30, 20152023 and the fiscal year ended April 30, 2014,2022, the Company recorded $83,589, $57,352, $82,185$66,196 and $47,087$90,873 for matching contributions expense, respectively.
NOTE J—H—INCOME TAXES
The Company has not recorded anany income tax benefit of $7,962,100expense (benefit) for the period ended December 31,2016.
December 31, | ||
2016 | 2015 | |
| Current federal income tax expense | $- | $- |
| Deferred federal income tax benefit | (7,139,565) | - |
| Provision for federal income taxes: | (7,139,565) | - |
| Current state income tax expense | - | - |
| Deferred state income tax benefit | (822,535) | - |
| Provision for state income taxes: | (822,535) | - |
| Total | $(7,962,100) | $- |
The reconciliation of income tax expenses (benefit) at the statutory federal income tax rate of 34%21% for the periods ended December 31, 20162023 and December 31, 20152022 is as follows:
December 31, | ||
2016 | 2015 | |
| U.S. federal taxes (benefit) at statutory rate | $(17,641,231) | $(3,423,108) |
| State income tax benefit, net of federal benefit | (2,031,238) | (394,142) |
| Stock compensation | 141,807 | 37,264 |
| Other nondeductible, including goodwill impairment | 4,160,717 | (15,287) |
| Change in state tax rate | 241,518 | - |
| Other, including effect of tax rate brackets | (57,490) | (72,808) |
| Change in valuation allowance | 7,223,817 | 3,868,081 |
$(7,962,100) | $- | |
|
| December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
U.S. federal tax benefit at statutory rate |
| $ | (1,619,241 | ) |
| $ | (2,320,057 | ) |
State income tax benefit, net of federal benefit |
|
| (33,357 | ) |
|
| (218,196 | ) |
Stock compensation |
|
| 43,148 |
|
|
| 79,090 |
|
Other nondeductible |
|
| 428 |
|
|
| - |
|
Change in state tax rate |
|
| - |
|
|
| 116,392 |
|
Expiration of NOL Carryforward |
|
| 458,930 |
|
|
| - |
|
Federal and state net operating loss adjustments |
|
| 909 |
|
|
| 423,066 |
|
Other, including effect of tax rate brackets |
|
| (7,152 | ) |
|
| 8,850 |
|
Change in realizability of IPR&D |
|
| - |
|
|
| - |
|
Change in valuation allowance |
|
| 1,156,336 |
|
|
| 1,910,855 |
|
The tax effects of temporary differences and carry forwards that give rise to significant portions of the deferred tax assets are as follows:
December 31, | ||
| Deferred Tax Assets | 2016 | 2015 |
| Net operating loss carryforwards | $46,227,681 | $39,190,436 |
| Accruals and other | 902,546 | 691,341 |
| Capital loss carryforwards | 12,395 | - |
| Valuation allowance | (47,086,442) | (39,862,626) |
| Net deferred tax assets | 56,180 | 19,151 |
| Deferred Tax Liabilities | ||
| IPR&D | - | (7,962,100) |
| Other liabilities | (56,180) | (19,151) |
| Net Deferred Tax Liabilities | $- | $(7,962,100) |
|
| December 31, |
| |||||
Deferred Tax Assets |
| 2023 |
|
| 2022 |
| ||
Net operating loss carryforwards |
| $ | 36,835,386 |
|
| $ | 36,106,727 |
|
Accruals and other |
|
| 307,305 |
|
|
| 300,353 |
|
Capitalized R&D |
|
| 1,532,640 |
|
|
| 1,111,914 |
|
Contributions carryforwards |
|
| 2,258 |
|
|
| 2,258 |
|
Valuation allowance |
|
| (38,677,587 | ) |
|
| (37,521,252 | ) |
Net deferred tax assets |
|
| - |
|
|
| - |
|
Deferred Tax Liabilities |
|
|
|
|
|
|
|
|
Other liabilities |
|
| - |
|
|
| - |
|
Net Deferred Tax Liabilities |
| $ | - |
|
| $ | - |
|
The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The Company periodically evaluates the recoverability of the deferred tax assets. At such time that it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced.
| F-24 |
| Table of Contents |
As of December 31, 2016,2023, the Company had Federal and State net operating loss carryforwards of approximately $124.0$166.7 million and $101.8$130.8 million available to offset future federal and state taxable income, respectively. The federal and stateFederal net operating loss carryforwardslosses of $120.7 million begin to expire in 2018 and valuation allowances have been provided.
Utilization of the net operating loss carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions. The annual limitations may result in the expiration of the net operating losses before utilization.
We have U.S. federal net operating loss carryforwards, or NOLs, which expire in various years if not utilized. Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We have not performed a formal study to determine whether any of our NOLs are subject to these limitations. We have recorded deferred tax assets for our NOLs and research and development credits and have recorded a full valuation allowance against these deferred tax assets. In the event that it is determined that we have in the past experienced additional ownership changes, or if we experience one or more ownership changes as a result of future transactions in our stock, then we may be further limited in our ability to use our NOLs and other tax positionsassets to reduce taxes owed on the net taxable income that could have a significant effectwe earn in the event that we attain profitability. Any such limitations on the ability to use our NOLs and other tax assets could adversely impact our business, financial condition, and operating results in the event that we attain profitability.
The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and determined the Company hadprescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There were no uncertain income tax positions atas of December 31, 2016.
The Company files U.S. and state income tax returns with varying statutes of limitations. The tax years 20012004 and forward remain open to examination due to the carryover of unused net operating losses or tax credits.
NOTE K—TRANSITION PERIOD COMPARATIVE BALANCES
i. | The Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Amendment”) with the Secretary of State of Delaware for the purpose of effecting the Reverse Stock Split of the outstanding shares of the Company’s common stock at a ratio of one share for every 80 shares outstanding, so that every 80 outstanding shares of common stock before the Reverse Stock Split represents one share of common stock after the Reverse Stock Split. The Reverse Stock Split was approved by the Company’s stockholders at the special meeting of stockholders held on November 30, 2023 and the Company’s Board of Directors approved the Certificate of Amendment with a 1-for-80 ratio on December | |
ii. | On January 11, 2024, the Company received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) regarding compliance with Nasdaq Listing Rule 5550(a)(4) (the “Public Float Rule”) which requires the Company to have a minimum of 500,000 publicly held shares. The letter from Nasdaq indicated that according to its calculations, as of January 3, 2024, the day after the Company effected a 1-for-80 reverse split of its common stock, the Company no longer meets the requirements of the Rule. On February 22, 2024, the Company received written notification from the Nasdaq confirming that the Company had over 500,000 publicly held shares of its common stock and that as a result the Company had regained compliance with the Public Float Rule and that the matter was closed. |
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iii. | On January 18, 2024, the Company received written notification from Nasdaq confirming that the Company’s common stock had a closing price of $1.00 or greater for the ten consecutive trading days from January 3, 2024 to January 17, 2024 and that as a result the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was closed. | |
iv. | On February 6, 2024, the Company received a notice of allowance from the United States Patent and Trademark Office (USPTO) of a patent with claims covering the use of TNX-103 (oral levosimendan), TNX-102 (subcutaneous levosimendan), TNX-101 (IV levosimendan), the active metabolites of levosimendan (OR1896 and OR18955) and various combinations of cardiovascular drugs with levosimendan when used to improve exercise performance in PH-HFpEF patients. | |
v. | On February 8, 2024, the Company, entered into a placement agency agreement with Roth Capital Partners, LLC and a securities purchase agreement with certain purchasers for the purchase and sale, in a registered public offering by the Company, of (i) an aggregate of 421,260 shares of its common stock, par value $0.0001 per share and pre-funded warrants to purchase an aggregate of 1,178,740 shares of common stock and (ii) accompanying warrants to purchase up to an aggregate of 3,200,000 shares of its common stock at a combined offering price of $5.65 per share of common stock and associated warrant, or $5.649 per pre-funded warrant and associated warrant, resulting in gross proceeds of approximately $9.0 million. Net proceeds of the Offering were approximately $8.0 million, after deducting the placement agent fees and estimated offering expenses payable by the Company. The offering closed on February 12, 2024. |
vi. | On February 19, 2024, the Company and Orion entered into an amendment (the “Amendment”) to the License. The Amendment broadened the geographic scope of the original License, granting the Company the exclusive right to develop and commercialize certain levosimendan-based products worldwide, formerly rights limited to Canada and the United States, but excluded the treatment of neurological conditions from the Company’s right of first refusal under the Agreement to obtain rights to develop and commercialize new formulations, routes of administration, dosages, or indications of levosimendan-based products. The Amendment also reduced the tiered royalties based on worldwide net sales of the product by the Company and its sublicensees, increased the Agreement’s existing milestone payment due to Orion upon the grant of United States Food and Drug Administration approval of a levosimendan-based product to $10.0 million and added a milestone payment to Orion of $5.0 million due upon the grant of regulatory approval for a levosimendan-based product in Japan. The Amendment also (i) increased the Company’s obligations to make certain non-refundable commercialization milestone payments to Orion, aggregating to up to $45.0 million, contingent upon achievement of certain cumulative worldwide sales of the product by the Company, and (ii) reduced the maximum price per capsule payable by the Company to Orion, under a yet-to-be-negotiated supply agreement, for the commercial supply of oral levosimendan-based product. |
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