TENAX THERAPEUTICS, INC.
10-Ks and 10-Qs
SECURITIES AND
EXCHANGE COMMISSION
Washington D.C.,
20549
FORM
10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal
year ended December 31, 2019
Commission File
No. 001-34600
TENAX THERAPEUTICS, INC.
(Exact name of
registrant as specified in its charter)
|
Delaware
|
26-2593535
|
|
(State or other
jurisdiction of Incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
ONE Copley
Parkway, Suite 490, Morrisville, NC 27560
(Address of
Principal Executive Offices) (Zip Code)
Registrant’s
Telephone Number and area code:
(919) 855-2100
Securities
registered pursuant to Section 12(b) of the
Act:
|
Title of Each
Class
|
Trading
Symbol(s)
|
Name of Each
Exchange on Which Registered
|
|
Common Stock, $0.0001 par value per
share
|
TENX
|
The Nasdaq Stock Market
LLC
|
Securities
registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act. Yes ☐ No
☒
Indicate by check mark if the
registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
☐ No ☒
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
No ☐
Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File
required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated
filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer
|
☐ |
Accelerated filer
|
☐
|
|
Non-accelerated filer
|
☒
|
Smaller reporting company
|
☒
|
|
|
|
Emerging
growth company
|
☐
|
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act. ☐
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ☐ No ☒
State the aggregate market value of
the voting and non-voting common equity held by non-affiliates
computed by reference to the price at which the common equity was
last sold as of June 30, 2019, the last business day of the
registrant’s most recently completed second fiscal quarter:
$9,167,013.
The number of shares outstanding of
the registrant’s class of $0.0001 par value common stock as
of March 25, 2020 was 7,608,243.
DOCUMENTS INCORPORATED BY
REFERENCE:
Portions of the
registrant’s proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A in connection
with the registrant’s 2020 Annual Meeting of Stockholders,
which will be filed subsequent to the date hereof, are incorporated
by reference into Part III of this Form 10-K. Such proxy statement
will be filed with the Securities and Exchange Commission not later
than 120 days following the end of the registrant’s fiscal
year ended December 31,
2019.
TABLE
OF CONTENTS
|
1
|
|
|
1
|
|
|
7
|
|
|
20
|
|
|
20
|
|
|
20
|
|
|
20
|
|
|
21
|
|
|
21
|
|
|
21
|
|
|
21
|
|
|
29
|
|
|
29
|
|
|
53
|
|
|
53
|
|
|
54
|
|
|
55
|
|
|
56
|
PART I
FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, which are subject to the
“safe harbor” created by those sections.
Forward-looking statements are based on our management’s
beliefs and assumptions and on information currently available to
them. In some cases, you can identify forward-looking statements by
terminology such as “may”, “will”,
“should”, “expects”, “plans”,
“anticipates”, “believes”,
“estimates”, “predicts”,
“potential” or “continue” or the negative
of such terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties
and other factors, including, but not limited to, progress in our
product development activities, obtaining financing for operations,
development of new technologies and other competitive pressures,
legal and regulatory initiatives affecting our products, conditions
in the capital markets, the risks discussed in Item 1A –
“Risk Factors,” and the risks discussed elsewhere in
this report that may cause our or our industry’s actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of activities,
performance or achievements expressed or implied by such
forward-looking statements.
Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Moreover, neither
we nor any other person assumes responsibility for the accuracy and
completeness of such statements. We are under no duty to update any
of the forward-looking statements after the date of filing of this
report or to conform such statements to actual results, except as
may be required by law.
All
references in this Annual Report to “Tenax
Therapeutics”, “we”, “our” and
“us” means Tenax Therapeutics, Inc.
I
TEM 1—BUSINESS
Tenax
Therapeutics 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. Effective June 30, 2008, we changed the domiciliary state of
the corporation to Delaware and changed the company name to Oxygen
Biotherapeutics, Inc. On September 19, 2014, we changed the company
name to Tenax Therapeutics, Inc.
We are
a specialty pharmaceutical company focused on identifying,
developing and commercializing products
that address
cardiovascular and pulmonary diseases of high unmet medical
need
. On November 13, 2013, through our wholly owned
subsidiary, Life Newco, Inc., or Life Newco, we acquired a license
granting Life Newco an exclusive, sublicenseable 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
.
Business Strategy
Our
principal business objective is to identify, develop, and
commercialize novel therapeutic products for disease indications
that represent significant areas of clinical need and commercial
opportunity. The key elements of our business strategy are outlined
below.
Efficiently conduct clinical development to establish clinical
proof of concept with our current product candidate.
Levosimendan represents novel therapeutic modalities for the
treatment of pulmonary hypertension and other
cardiovascular and
pulmonary diseases of high unmet medical need.
We are
conducting clinical development with the intent to establish proof
of concept in several important disease areas where these
therapeutics would be expected to have benefit. Our focus is on
conducting well-designed studies to establish a robust foundation
for subsequent development, partnership and expansion into
complementary areas.
Efficiently explore new high potential therapeutic applications,
leveraging third-party research collaborations and our results from
related areas
. Our product candidate has shown promise in
multiple disease areas. 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.
In order to achieve this goal, we have established collaborative
research relationships with investigators from research and
clinical institutions and our strategic partners. These
collaborative relationships have enabled us to cost effectively
explore where our product candidates may have therapeutic
relevance, and how it may be utilized to advance treatment over
current clinical care. Additionally, we believe we will be able to
leverage clinical safety data and preclinical results from some
programs to support accelerated clinical development efforts in
other areas, saving substantial development time and resources
compared to traditional drug development.
1
Continue to expand our intellectual property portfolio
. Our
intellectual property is important to our business and we take
significant steps to protect its value. We have ongoing research
and development efforts, both through internal activities and
through collaborative research activities with others, which aim to
develop new intellectual property and enable us to file patent
applications that cover new applications of our existing
technologies or product candidates.
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, reduce our
development costs, and broaden our commercialization capabilities.
We believe this strategy will help us to 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.
Our Current Programs
Levosimendan Background
Levosimendan
was discovered and developed by Orion Corporation, a Finnish
company, or Orion. Levosimendan is a
calcium sensitizer/K-ATP activator
developed for intravenous use in hospitalized patients with acutely
decompensated heart failure. It is currently approved in over 60
countries for this indication and not available in the United
States or Canada. It is estimated that to date over 1.5 million
patients have been treated worldwide with levosimendan
.
Levosimendan
is a novel, first in class
calcium
sensitizer/K-ATP activator
. The therapeutic effects of
levosimendan are mediated through:
●
Increased cardiac
contractility by calcium sensitization of troponin C, resulting in
a positive inotropic effect which is not associated with
substantial increases in oxygen demand.
●
Opening of
potassium channels in the vasculature smooth muscle, resulting in a
vasodilatory effect on all vascular beds.
●
Opening of
mitochondrial potassium channels in cardiomyocytes, resulting in a
cardioprotective effect.
This
triple mechanism of action helps to preserve heart function during
cardiac surgery. Several studies have demonstrated that
levosimendan protects the heart and improves tissue perfusion while
minimizing tissue damage during cardiac surgery.
In
2013, we acquired certain assets of Phyxius Pharma, Inc., or
Phyxius, including its North American rights to develop and
commercialize levosimendan for any indication in the United States
and Canada. In the countries where levosimendan is marketed,
levosimendan is indicated for the short-term treatment of acutely
decompensated severe chronic heart failure in situations where
conventional therapy is not sufficient, and in cases where
inotropic support is considered appropriate.
In acute decompensated heart failure patients,
levosimendan has been shown to significantly improve
patients’ symptoms as well as acute hemodynamic measurements
such as increased cardiac output, reduced preload and reduced
afterload.
The European Society of Cardiology, or the ESC, recommends
levosimendan as a preferable agent over dobutamine to reverse the
effect of beta blockade if it is thought to be contributing to
hypotension. The ESC guidelines also state that levosimendan is not
appropriate for patients with systolic blood pressure less than
85mmHg or in patients in cardiogenic shock unless it is used in
combination with other inotropes or vasopressors
.
Other unique properties of
levosimendan include sustained efficacy through the formation of a
long acting metabolite, lack of impairment of diastolic function,
and evidence of better compatibility with beta blockers than
dobutamine.
Levosimendan Development for Pulmonary Hypertension
Patients
We are
currently conducting a Phase 2 clinical trial of levosimendan in
North America for the treatment of patients with pulmonary
hypertension associated with heart failure with preserved ejection
fraction, or PH-HFpEF. PH-HFpEF is defined hemodynamically by
a pulmonary artery pressure, or mPAP, ≥25 mmHg, a pulmonary
capillary wedge pressure, or PCWP, >15 mmHg, and a diastolic
pressure gradient, or diastolic PAP – PCWP, >7mmHg.
Pulmonary hypertension in these patients initially develops from a
passive backward transmission of elevated filling pressures from
left-sided heart failure. These mechanical components of pulmonary
venous congestion may trigger pulmonary vasoconstriction, decreased
nitric oxide availability, increased endothelin expression,
desensitization to natriuretic peptide induced vasodilation, and
vascular remodeling. Finally, these changes often lead to
advanced pulmonary vascular disease, increased right ventricle, or
RV, afterload, and RV failure.
2
PH-HFpEF
is a common form of pulmonary hypertension with an estimated US
prevalence exceeding 1.5 million patients. Currently, no
pharmacologic therapies are approved for treatment of
PH-HFpEF. Despite the fact that many therapies have been
studied in PH-HFpEF patients, including therapies approved to treat
pulmonary arterial hypertension patients, no therapies have been
shown to be effective in treating PH-HFpEF patients.
Published
pre-clinical and clinical studies indicate that levosimendan may
provide important benefits to patients with pulmonary hypertension.
Data from these published trials indicate that levosimendan may
reduce pulmonary vascular resistance and improve important
cardiovascular hemodynamics such as reduced pulmonary capillary
wedge pressure in patients with pulmonary hypertension. In
addition, several published studies provide evidence that
levosimendan may improve right ventricular dysfunction which is a
common comorbidity in patients with pulmonary hypertension. While
none of these studies have focused specifically on PH-HFpEF
patients, the general hemodynamic improvements in these published
studies of various types of pulmonary hypertension provide an
indication that levosimendan may be beneficial in PH-HFpEF
patients.
In
March 2018, we met with the United States Food and Drug
Administration, or FDA, to discuss development of levosimendan in
PH-HFpEF patients. The FDA agreed with our planned Phase 2 design,
patient entry criteria, and endpoints. It was agreed the study
could be conducted under the existing investigational new drug
application with no additional nonclinical studies required to
support full development. The FDA recognized there were no approved
drug therapies to treat PH-HFpEF patients and acknowledged this
provided an opportunity for a limited Phase 3 clinical program.
This topic will be discussed further at the End-of-Phase 2 Meeting
following completion of the Phase 2 study in PH-HFpEF patients,
which is known as the HELP Study –
H
emodynamic
E
valuation of
L
evosimendan in
P
H-HFpEF. We initiated the first of our
expected 10-12 HELP Study clinical sites in November 2018 and the
first of 36 patients was enrolled in the HELP Study in March 2019.
Enrollment in the HELP Study was completed in March 2020. The
primary endpoint of the HELP Study is based on change in PCWP vs
baseline compared to placebo. The HELP Study utilizes a
double-blind randomized design following five weekly infusions of
levosimendan. The primary endpoint data will be available once the
HELP Study data is unblinded.
The
HELP Study design is novel in several respects. To date, no other
multi-center levosimendan study has evaluated levosimendan in heart
failure patients with preserved ejection fraction (HFpEF) or
pulmonary hypertension patients with heart failure and preserved
ejection fraction (PH-HFpEF). Instead, all previous levosimendan
heart failure studies have enrolled heart failure patients with
reduced ejection fraction (HFrEF), which specifically excluded
HFpEF patients. Also, the HELP Study utilizes a unique 24-hour
weekly infusion regimen of 0.075- 0.1µm/kg/min. Finally, the
HELP Study employs a unique home-based IV infusion administration
via an ambulatory infusion pump. This home-based weekly IV
administration is unlike all other chronic dosing studies of
levosimendan that have typically employed a shorter duration and
less frequent infusion regimen administered in a hospital
setting. Despite the unique patient population, weekly
dosing, and home-based administration, there have been no reported
serious adverse events reported for the first 30 randomized
patients.
Investigator
reported open-label data from the HELP Study has provided
encouraging preliminary signs of efficacy during the initial
lead-in infusion phase of the trial. The open-label lead-in
infusion phase is designed to identify responders prior to
randomization. To date, 80-85% of patients have met the lead
infusion responder criteria. Analysis of investigator reported data
following the 24-hour open-label levosimendan lead-in infusion for
the first 30 evaluable responders indicated the following mean
changes in exercise hemodynamics: PCWP of –7.5mm Hg, exercise
right atrial pressure of -5.0mm Hg, mean pulmonary arterial
pressure (mPAP) of -5.1 mm Hg and an increase in cardiac output of
0.6 liter/min. All of these improvements in exercise hemodynamics
were found to be statistically significant via paired t-test
P<0.01.
We
believe that the combination of the unique HELP Study patient
population, innovative weekly 24-hour dosing, unique home-based
site of administration, and novel findings of efficacy and safety
in PH-HFpEF patients represent unique discoveries and significant
intellectual property. These discoveries, among others from the
HELP Study, form the basis for a U.S. patent application that we
have filed.
Levosimendan Development for Cardiac Surgery Patients
Low
cardiac output syndrome, or LCOS, is generally defined as a
patient’s inability to maintain a cardiac index >2.2
L/min/m2 and hence requiring use of inotropic agents and/or
mechanical assist devices such as an intra-aortic balloon pump or a
left ventricular assistance device. LCOS in the cardiac surgery
setting is reported to occur in 5-10% of patients undergoing
cardiac surgery and is associated with 10-15-fold higher mortality
or severe sequelae as a result of poor organ
perfusion.
3
Currently,
no pharmacologic therapies are approved for management or
prevention of post-cardiotomy LCOS. While conventional inotropes
are used to manage cardiac hemodynamics in the peri-operative
setting, none have been shown to improve outcomes.
Substantial
published scientific research indicates that levosimendan may
provide important benefits to cardiac surgery patients, including
35 published prospectively designed clinical trials and multiple
published meta-analyses. Many of these publications indicate that
levosimendan provides substantial mortality and or morbidity
benefits to cardiac surgery patients, particularly those at risk of
developing LCOS.
In
2014, we initiated a Phase 3 trial (LEVO-CTS) to investigate the
safety and efficacy of pre-operative administration of levosimendan
treatment to reduce the mortality and morbidity in cardiac surgery
patients at risk for developing LCOS. The Phase 3 trial was
conducted under an FDA approved Special Protocol Assessment, or
SPA, and with FDA granted Fast Track status for the development of
levosimendan to reduce mortality and morbidity in cardiac surgery
patients at risk of LCOS. Pursuant to our license to levosimendan,
we are required to use the “Simdax
®
”
trademark to commercialize this product.
The
LEVO-CTS trial design was guided by the published literature,
including important dosing refinements and inclusion of patients
with low preoperative ejection fraction. In addition, we relied
heavily on the input of European clinicians who have significant
personal clinical experience with the use of levosimendan in
treating cardiac surgery patients.
Current
data in cardiac surgery suggest that levosimendan is superior to
traditional inotropes (dobutamine, phosphodiesterase
[PDE]-inhibitors) as it achieves:
●
sustained
hemodynamic improvement;
●
diminished
myocardial injury;
●
improved tissue
perfusion;
●
better outcomes and
fewer hospital days;
●
effects most
favorable in patients with low left ventricular ejection fraction
(LVEF) (< 40%); and
●
opportunity to
initiate therapy pre-operatively due to increased cardiac
contractility without increasing intracellular calcium, without
increasing oxygen consumption, or affecting cardiac rhythm and
relaxation.
The
Phase 3 trial was conducted in approximately 60 major cardiac
surgery centers in North America. The trial enrolled patients
undergoing coronary artery bypass grafts, or CABG, and/or mitral
valve surgery, and CABG with aortic valve surgery who are at risk
for developing LCOS. The trial was designed as a double blind,
randomized, placebo-controlled study seeking to enroll 760
patients. During 2016, we made the decision to increase enrollment
in the LEVO-CTS trial to 880 patients. These additional patients
were necessary to ensure sufficient powering and were necessary due
to:
●
a small percentage
of patients who were randomized but did not receive the study
drug;
●
a small percentage
of patients who were missing one or more component measurements of
the primary endpoint; and
●
a slightly lower
primary endpoint event rate than we originally
projected.
Enrollment began in the third quarter of calendar year 2014 and was
completed in December of 2016. On January 31, 2017, we announced
top-line results from the Phase 3 LEVO-CTS trial. Levosimendan,
given prophylactically prior to cardiac surgery to patients with
reduced left ventricular function, had no effect on the co-primary
outcomes. The study did not achieve statistically significant
reductions in the dual endpoint of death or use of a mechanical
assist device at 30 days, nor in the quad endpoint of death,
myocardial infarction, need for dialysis, or use of a mechanical
assist device at 30 days.
4
However, the study results demonstrated statistically significant
reductions in two of three secondary endpoints including reduction
in LCOS and a reduction in postoperative use of secondary
inotropes. Additionally, levosimendan was found to be safe with no
clinically significant increases in hypotension or cardiac
arrhythmias and the clinical data showed a non-significant
numerical reduction in 90-day mortality.
A post hoc analysis on patients in whom isolated CABG surgery was
performed (66% of the patients) revealed that levosimendan improved
90-day survival significantly (p=0.0017). This was accompanied with
a significant improvement in postoperative cardiac index, in the
frequency of LCOS and in the need for further inotropic support.
Accordingly, the reductions in the incidence of LCOS were
associated with a substantial improvement in mortality. However,
there was essentially no effect on any of these endpoints in those
LEVO-CTS patients receiving valve surgeries.
In the second and third quarters of 2017 we explored the
opportunity for submitting a new drug application, or NDA, for use
of levosimendan in CABG surgery patients on the basis of the robust
reduction in 90-day mortality observed in the LEVO-CTS trial.
However, the FDA advised that another study in CABG surgery
patients would be required that prospectively tests
levosimendan’s effectiveness in improving
mortality.
Accordingly, we have suspended development of levosimendan for use
in CABG patients due to the scope of the repeat study, as required
by the FDA. The incidence of 90-day mortality in CABG surgery
patients is low (~8%). The repeat study would need to randomize
approximately 1200 CABG surgery patients with low LVEF (<35%) to
demonstrate a >50% risk reduction in mortality. Based on this
analysis, we determined the cost and timing of this study would
outweigh the likely benefit.
Suppliers
Pursuant
to the terms of our license for levosimendan, Orion is our sole
manufacturing source for levosimendan.
Intellectual Property
We rely
on a combination of patent applications, patents, trade secrets,
proprietary know-how, trademarks, and contractual provisions to
protect our proprietary rights. We believe that to have a
competitive advantage, we must develop and maintain the proprietary
aspects of our technologies. Currently, we require our officers,
employees, consultants, contractors, manufacturers, outside
scientific collaborators and sponsored researchers, and other
advisors to execute confidentiality agreements in connection with
their employment, consulting, or advisory relationships with us,
where appropriate. We also require our employees, consultants, and
advisors who we expect to work on our products to agree to disclose
and assign to us all inventions conceived during the workday,
developed using our property, or which relate to our
business.
To
date, we own or in-license the rights to six U.S. and foreign
patents. In addition, we have one U.S. patent application pending
related to a product candidate and proprietary process, method and
technology. Our issued and in-licensed patents, as well as our
pending patents, expire between 2023 and 2038.
We
have:
●
one U.S. patent
(8,404,752), one Australian Patent (209,271,530) and one European
patent (EPO9798325.8) held jointly with Virginia Commonwealth
University Intellectual Property Foundation for the treatment of
traumatic brain injury;
●
one Israeli patent
(215516) and numerous patent applications, including one U.S.
patent application, for the formulation of perfluorocarbon emulsion
with an average remaining life of approximately 13 years;
and
●
two U.S. patents
(6,730,673 and 6,943,164) for the intravenous formulation of
levosimendan as in-licensed patent rights for our development and
commercialization of levosimendan in the United States and
Canada.
Our
patent and patent applications include claims covering all various
uses of levosimendan, our lead product candidate currently under
development, as well as the manufacturing and use of our
perfluorocarbon emulsion formulation. We have filed a patent
application for a subcutaneous formulation of levosimendan that we
have developed in collaboration with a formulation development
partner. In addition, we have filed a provisional patent
application for the use of levosimendan in the treatment of
PH-HFpEF patients based on several discoveries that have emerged
from the HELP Study. The HELP Study is the first and only trial to
evaluate the use of levosimendan to treat PH-HFpEF patients, a
patient population where all previously tested therapies have
failed to show effectiveness.
5
The
U.S. trademark registration for Simdax
®
is owned by
Orion and is licensed to us for sales and marketing purposes for
any pharmaceutical products containing levosimendan that are
commercialized in the United States and Canada.
Competition
The
pharmaceutical and biotechnology industries are intensely
competitive. Many companies, including biotechnology, chemical and
pharmaceutical companies, are actively engaged in activities
similar to ours, including research and development of drugs for
the treatment of rare medical conditions. Many of these companies
have substantially greater financial and other resources, larger
research and development staffs, and more extensive marketing and
manufacturing organizations than we do. In addition, some of them
have considerable experience in preclinical testing, clinical
trials and other regulatory approval procedures. There are also
academic institutions, governmental agencies and other research
organizations that are conducting research in areas in which we are
working. We expect to encounter significant competition for any of
the pharmaceutical products we plan to develop.
We
believe the concept of using levosimendan to treat patients with
PH-HFpEF is novel. Because no therapies are approved to treat
PH-HFpEF, our ability to succeed in the market is dependent on our
ability to change the established practice paradigm, which is never
an easy task. Key factors on which we will compete with regards to
the development and marketing of levosimendan for the treatment of
pulmonary hypertension include, among others, the ability to obtain
adequate efficacy data, safety data, cost effectiveness data and
hospital formulary approval, as well as sufficient distribution and
handling. Furthermore, while we believe the mechanism of action of
levosimendan is novel, other low-priced, generically available
products possess some similar qualities, which could present
competition in the form of therapeutic substitution.
In
order to compete successfully in this and other therapeutic areas,
we must develop proprietary positions in patented drugs for
therapeutic markets that have not been satisfactorily addressed by
conventional research strategies. Our product candidates, even if
successfully tested and developed, may not be adopted by physicians
over other products and may not offer economically feasible
alternatives to other therapies.
Government Regulation
The
manufacture and distribution of levosimendan will require the
approval of United States government authorities as well as those
of foreign countries. In the United States, the FDA regulates
medical products. The Federal Food, Drug and Cosmetic Act and the
Public Health Service Act govern the testing, manufacture, safety,
effectiveness, labeling, storage, record keeping, approval,
advertising and promotion of our medical products. In addition to
FDA regulations, we are also subject to other federal and state
regulations, such as the Occupational Safety and Health Act and the
Environmental Protection Act. Product development and approval
within this regulatory framework requires a number of years and
involves the expenditure of substantial funds.
Preclinical
tests include evaluation of product chemistry and studies to assess
the safety and effectiveness of the product and its formulation.
The results of the preclinical tests are submitted to the FDA as
part of the application. The goal of clinical testing is the
demonstration in adequate and well-controlled studies of
substantial evidence of the safety and effectiveness of the product
in the setting of its intended use. The results of preclinical and
clinical testing are submitted to the FDA from time to time
throughout the trial process. In addition, before approval for the
commercial sale of a product can be obtained, results of the
preclinical and clinical studies must be submitted to the FDA. The
testing and approval process requires substantial time and effort
and there can be no assurance that any approval will be granted on
a timely basis, if at all. The approval process is affected by a
number of factors, including the severity of the condition being
treated, the availability of alternative treatments and the risks
and benefits demonstrated in clinical trials. Additional
preclinical studies or clinical trials may be requested during the
FDA review process and may delay product approval. After FDA
approval for its initial indications, further clinical trials may
be necessary to gain approval for the use of a product for
additional indications. The FDA may also require post-marketing
testing, which can involve significant expense, to monitor for
adverse effects.
The HELP Study in PH-HFpEF patients incorporates FDA advice. An End
of Phase 2 Meeting with the FDA is planned in 2020 to review
results of the HELP Study and Phase 3 study design in development
of levosimendan for treatment of PH-HFpEF patients.
6
Employees
We
believe that our success will be based on, among other things, the
quality of our clinical programs, our ability to invent and develop
superior and innovative technologies and products, and our ability
to attract and retain capable management and other personnel. We
have assembled a high-quality team of clinical development managers
and executives with significant experience in the biotechnology and
pharmaceutical industries.
As of
December 31, 2019, we had nine full-time employees and one
part-time employee. In addition to our employees, we also use the
service and support of outside consultants and advisors. None of
our employees are represented by a union, and we believe
relationships with our employees are good.
Available Information
Our
website address is www.tenaxthera.com, and our investor relations
website is located at http://investors.tenaxthera.com. Information
on our website is not incorporated by reference herein. Copies of
our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and our Proxy Statements for our annual
meetings of stockholders, and any amendments to those reports, as
well as Section 16 reports filed by our insiders, are available
free of charge on our website as soon as reasonably practicable
after we file the reports with, or furnish the reports to, the
Securities and Exchange Commission, or the SEC. Our SEC filings are
also publicly available on the SEC’s website located at
www.sec.gov, which contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the SEC.
I
TEM 1A—RISK FACTORS
Risks Related to Our Financial Position and Need for Additional
Capital
We have a limited operating history, and we expect a number of
factors to cause our operating results to fluctuate on a quarterly
and annual basis, which may make it difficult to predict our future
performance.
Our
operations, to date, have been primarily limited to organizing and
staffing our company, licensing our technology from Orion and
undertaking preclinical studies and clinical trials of our product
candidates. We have not yet obtained regulatory approvals for any
of our clinical product candidates. Consequently, any predictions
you make about our future success or viability may not be as
accurate as they could be if we had a longer operating
history.
Specifically,
our financial condition and operating results have varied
significantly in the past and will continue to fluctuate from
quarter-to-quarter and year-to-year in the future due to a variety
of factors, many of which are beyond our control. Factors relating
to our business that may contribute to these fluctuations include
the following factors, among others:
-
our ability to
obtain additional funding to develop our product candidates, and
any further product candidate which we may develop or in license in
the future;
-
the need to obtain
regulatory approval of our product candidates;
-
potential risks
related to any collaborations we may enter into for our product
candidates;
-
delays in the
commencement, enrollment and completion of clinical testing, as
well as the analysis and reporting of results from such clinical
testing;
-
the success of
clinical trials of our product candidates;
-
any delays in
regulatory review and approval of product candidates in
development;
-
our ability to
establish an effective sales and marketing
infrastructure;
-
competition from
existing products or new products that may emerge;
-
the ability to
receive regulatory approval or commercialize our
products;
-
potential side
effects of our product candidates that could delay or prevent
commercialization;
-
potential product
liability claims and adverse events;
-
potential
liabilities associated with hazardous materials;
-
our ability to
maintain adequate insurance policies;
-
our dependency on
third-party manufacturers to supply or manufacture our
products;
-
our ability to
establish or maintain collaborations, licensing or other
arrangements;
-
our ability, our
partners’ abilities, and third parties’ abilities to
protect and assert intellectual property rights;
-
costs related to
and outcomes of potential litigation;
-
compliance with
obligations under intellectual property licenses with third
parties;
-
our ability to
adequately support future growth; and
-
our ability to
attract and retain key personnel to manage our business
effectively.
7
Due to
the various factors mentioned above, and others, the results of any
prior quarterly or annual periods should not be relied upon as
indications of our future operating performance.
We may need additional funding and if we are unable to raise
capital when needed, we would be forced to delay, reduce or
eliminate our product development programs.
Developing
biopharmaceutical products, including conducting preclinical
studies and clinical trials and establishing manufacturing
capabilities, is expensive. We expect our research and development
expenses to increase in connection with our ongoing activities. In
addition, our expenses could increase beyond expectations if
applicable regulatory authorities, including the FDA, require that
we perform additional studies to those that we currently
anticipate, in which case the timing of any potential product
approval may be delayed. As of December 31, 2019, we had $4.9
million of cash and cash equivalents, including the fair value of
our marketable securities on hand. On March 13, 2020, we received
$2.75 million in gross proceeds in exchange for the issuance of
common stock, pre-funded warrants, and common stock warrants, or
the March 2020 offering, as described further in Item 7 –
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations”. Based on our current
operating plans, we believe that our existing cash and cash
equivalents, including the proceeds from our March 2020 offering,
will be sufficient to fund our projected operating requirements
through the third quarter of calendar year 2020. We will need
substantial additional capital in the future in order to complete
the regulatory approval and commercialization of levosimendan and
to fund the development and commercialization of 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. As a result of our historical operating losses and
expected future negative cash flows from operations, we have
concluded that there is substantial doubt about our ability to
continue as a going concern. Similarly, the report of our
independent registered public accounting firm on our December 31,
2019 Consolidated Financial Statements includes an explanatory
paragraph indicating that there is substantial doubt about our
ability to continue as a going concern. Substantial doubt about our
ability to continue as a going concern may materially and adversely
affect the price per share of our common stock and make it more
difficult to obtain financing.
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 to 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 at that time. We may also consider strategic
alternatives, including a sale of our company, merger, other
business combination or recapitalization.
Our
forecast of the period of time through which our financial
resources will be adequate to support our operations is a
forward-looking statement and involves risks and uncertainties, and
actual results could vary as a result of a number of factors,
including the factors discussed elsewhere in this “Risk
Factors” section. We have based this estimate on assumptions
that may prove to be wrong, and we could utilize our available
capital resources sooner than we currently expect. Our future
funding requirements will depend on many factors, including, but
not limited to:
-
the scope, rate of
progress and cost of our clinical trials and other research and
development activities;
-
the costs and
timing of regulatory approval;
-
the costs of
filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
-
the effect of
competing technological and market developments;
-
the terms and
timing of any collaboration, licensing or other arrangements that
we may establish;
-
the cost and timing
of completion of clinical and commercial-scale manufacturing
activities; and
-
the costs of
establishing sales, marketing and distribution capabilities for any
product candidates for which we may receive regulatory
approval.
8
Risks Related to Commercialization and Product
Development
A pandemic, epidemic, or outbreak of an infectious disease, such as
COVID-19, or coronavirus, may materially and adversely affect our
business and our financial results.
The spread of COVID-19 has affected segments of the global economy
and may affect our operations, including the potential interruption
of our clinical trial activities and our supply chain. The recent
outbreak of COVID-19 originated in Wuhan, China, in December 2019
and has since spread to multiple countries. The continued spread of
COVID-19 may result in a period of business disruption, including
delays in our clinical trials or delays or disruptions in our
supply chain. In addition, there could be a potential effect of
COVID-19 to the business at FDA or other health authorities, which
could result in delays of reviews and approvals, including with
respect to our product candidates.
The continued spread of COVID-19 globally could adversely affect
our clinical trial operations in the United States and elsewhere,
including our ability to recruit and retain patients and principal
investigators and site staff who, as healthcare providers, may have
heightened exposure to COVID-19 if an outbreak occurs in their
geography. Further, some patients may be unable to comply with
clinical trial protocols if quarantines or travel restrictions
impede patient movement or interrupt healthcare services, or if the
patients become infected with COVID-19 themselves, which would
delay our ability to conduct clinical trials or release clinical
trial results. COVID-19 may also affect our employees or employees
of third-party contract research organizations, or CROs, located in
affected geographies that we rely upon to carry out our clinical
trials, which could result in inefficiencies due to reductions in
staff and disruptions to work environments.
The spread of COVID-19, or another infectious disease, could also
negatively affect the operations at our third-party manufacturers,
which could result in delays or disruptions in the supply of our
product candidates. In addition, we may take temporary
precautionary measures intended to help minimize the risk of the
virus to our employees, including temporarily requiring all
employees to work remotely, suspending all non-essential travel
worldwide for our employees, and discouraging employee attendance
at industry events and in-person work-related meetings, which could
negatively affect our business.
We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions. If we or any of the third
parties with whom we engage, however, were to experience shutdowns
or other business disruptions, our ability to conduct our business
in the manner and on the timelines presently planned could be
materially and negatively affected, which could have a material
adverse impact on our business and our results of operation and
financial condition.
We are limited in the number of products we can simultaneously
pursue and therefore our survival depends on our success with a
small number of product opportunities.
We have
limited financial resources, so at present we are primarily
focusing these resources on developing levosimendan for the
treatment of pulmonary hypertension, in addition to exploring
strategic alternatives in order to maximize stockholder value. On
January 31, 2017, we announced top-line results from the Phase 3
LEVO-CTS trial for the treatment of LCOS. The study did not achieve
statistically significant reductions in the dual endpoint of death
or use of a mechanical assist device at 30 days, nor in the quad
endpoint of death, myocardial infarction, need for dialysis, or use
of a mechanical assist device at 30 days. Nevertheless, the study
demonstrated statistically significant reductions in two of three
secondary endpoints including reduction in LCOS and a reduction in
postoperative use of secondary inotropes. Additionally, we observed
a non-significant numerical reduction in 90-day mortality. At
present, we intend to commit most of our resources to advancing
levosimendan to the point it receives regulatory approval for the
treatment of pulmonary hypertension. If as a consequence of the
results of our Phase 3 LEVO-CTS trial or our current Phase 2 trial
in PH-HFpEF, we are unable to receive regulatory approval of
levosimendan, then we may not have resources to pursue development
of any other products and our business could
terminate.
We currently have no approved drug products for sale, and we cannot
guarantee that we will ever have marketable drug
products.
We
currently have no approved drug products for sale. The research,
testing, manufacturing, labeling, approval, selling, marketing, and
distribution of drug products are subject to extensive regulation
by the FDA and other regulatory authorities in the United States
and other countries, with regulations differing from country to
country. We are not permitted to market our product candidates in
the United States until we receive approval of an NDA from the FDA
for each product candidate. We have not submitted an NDA or
received marketing approval for any of our product candidates, and
obtaining approval of an NDA is a lengthy, expensive and uncertain
process. In addition, markets outside of the United States also
have requirements for approval of drug candidates which we must
comply with prior to marketing. Accordingly, we cannot guarantee
that we will ever have marketable drug products.
9
Prior
to obtaining approval to commercialize a product candidate in the
United States or abroad, we or our collaborators must demonstrate
with substantial evidence from well-controlled clinical trials, and
to the satisfaction of the FDA, that such product candidates are
safe and effective for their intended uses. Results from
preclinical studies and clinical trials can be interpreted in
different ways. Even if we believe the preclinical or clinical data
for our product candidates are promising, such data may not be
sufficient to support approval by the FDA and other regulatory
authorities. Additionally, the FDA may also require us to conduct
additional preclinical studies or clinical trials for our product
candidates either prior to or post-approval, or it may object to
elements of our clinical development program.
The development of levosimendan is subject to a high level of
technological risk.
We have
devoted a substantial portion of our financial and managerial
resources to pursue Phase 3 clinical trials for levosimendan. The
biomedical field has undergone rapid and significant technological
changes. Technological developments may result in our products
becoming obsolete or non-competitive before we are able to recover
any portion of the research and development and other expenses we
have incurred to develop and clinically test levosimendan. As our
opportunity to generate substantial product revenues within the
next three to four years is most likely dependent on successful
testing and commercialization of levosimendan for pulmonary
hypertension, any such occurrence would have a material adverse
effect on our operations and could result in the cessation of our
business.
We are required to conduct additional clinical trials in the
future, which are expensive and time consuming, and the outcome of
the trials is uncertain.
We
expect to commit a substantial portion of our financial and
business resources over the next three years to clinical testing of
levosimendan and advancing this product to regulatory approval for
use in one or more medical applications. All of these clinical
trials and testing will be expensive and time consuming and the
timing of the regulatory review process is uncertain. The
applicable regulatory agencies may suspend clinical trials at any
time if they believe that the subjects participating in such trials
are being exposed to unacceptable health risks. We cannot ensure
that we will be able to complete our clinical trials successfully
or obtain FDA or other governmental or regulatory approval of
levosimendan, or that such approval, if obtained, will not include
limitations on the indicated uses for which levosimendan may be
marketed. Our business, financial condition and results of
operations are critically dependent on obtaining capital to advance
our testing program and receiving FDA and other governmental and
regulatory approvals of our products. A significant delay in or
failure of our planned clinical trials or a failure to achieve
these approvals would have a material adverse effect on us and
could result in major setbacks or jeopardize our ability to
continue as a going concern.
The market may not accept our products.
Even if
regulatory approval is obtained, there is a risk that the efficacy
and pricing of our products, considered in relation to our
products’ expected benefits, will not be perceived by health
care providers and third-party payers as cost-effective, and that
the price of our products will not be competitive with other new
technologies or products. Our results of operations may be
adversely affected if the price of our products is not considered
cost-effective or if our products do not otherwise achieve market
acceptance.
Any collaboration we enter with third parties to develop and
commercialize any future product candidates may place the
development of our product candidates outside our control, may
require us to relinquish important rights or may otherwise be on
terms unfavorable to us.
We may
enter into collaborations with third parties to develop and
commercialize future product candidates. Our dependence on future
partners for development and commercialization of our product
candidates would subject us to a number of risks,
including:
-
we may not be able
to control the amount and timing of resources that our partners may
devote to the development or commercialization of our product
candidates or to their marketing and distribution;
-
partners may delay
clinical trials, provide insufficient funding for a clinical trial
program, stop a clinical trial or abandon a product candidate,
repeat or conduct new clinical trials or require a new formulation
of a product candidate for clinical testing;
10
-
disputes may arise
between us and our partners that result in the delay or termination
of the research, development or commercialization of our product
candidates or that result in costly litigation or arbitration that
diverts management’s attention and resources;
-
partners may
experience financial difficulties;
-
partners may not
properly maintain or defend our intellectual property rights, or
may use our proprietary information, in such a way as to invite
litigation that could jeopardize or invalidate our intellectual
property rights or proprietary information or expose us to
potential litigation;
-
business
combinations or significant changes in a partner’s business
strategy may adversely affect a partner’s willingness or
ability to meet its obligations under any arrangement;
-
a partner could
independently move forward with a competing product candidate
developed either independently or in collaboration with others,
including our competitors; and
-
the collaborations
with our partners may be terminated or allowed to expire, which
would delay the development and may increase the cost of developing
our product candidates.
Delays in the enrollment and completion of clinical testing could
result in increased costs to us and delay or limit our ability to
obtain regulatory approval for our product candidates.
Delays
in the enrollment and completion of clinical testing could
significantly affect our ability to gain FDA approval of
levosimendan and any other future product development costs. The
completion of clinical trials requires us to identify and maintain
a sufficient number of trial sites, many of which may already be
engaged in other clinical trial programs for the same indication as
our product candidates or may be required to withdraw from our
clinical trial as a result of changing standards of care or may
become ineligible to participate in clinical studies. The
enrollment and completion of clinical trials can be delayed for a
variety of other reasons, including delays related to:
-
reaching agreements
on acceptable terms with prospective trial sites, the terms of
which can be subject to extensive negotiation and may vary
significantly among trial sites;
-
obtaining
institutional review board, or IRB, approval to conduct a clinical
trial at numerous prospective sites;
-
recruiting and
enrolling patients to participate in clinical trials for a variety
of reasons, including meeting the enrollment criteria for our study
and competition from other clinical trial programs for the same
indication as our product candidates;
-
maintaining and
supplying clinical trial material on a timely basis;
and
-
collecting,
analyzing and reporting final data from the clinical
trials.
In
addition, a clinical trial may be suspended or terminated by us,
the FDA or other regulatory authorities due to a number of factors,
including:
-
failure to conduct
the clinical trial in accordance with regulatory requirements or
our clinical protocols;
-
inspection of the
clinical trial operations or trial sites by the FDA or other
regulatory authorities resulting in the imposition of a clinical
hold;
-
unforeseen safety
issues or any determination that a trial presents unacceptable
health risks; and
-
lack of adequate
funding to continue the clinical trial, including unforeseen costs
due to enrollment delays, requirements to conduct additional trials
and studies and increased expenses associated with the services of
our CROs and other third parties.
Changes
in regulatory requirements and guidance may occur and we may need
to amend clinical trial protocols to reflect these changes with
appropriate regulatory authorities. Amendments may require us to
resubmit our clinical trial protocols to IRBs for re-examination,
which may impact the costs, timing or successful completion of a
clinical trial. If we experience delays in the completion of, or if
we terminate, our clinical trials, the commercial prospects for our
product candidates will be harmed, and our ability to generate
product revenues will be delayed. In addition, many of the factors
that cause, or lead to, a delay in the commencement or completion
of clinical trials may also ultimately lead to the denial of
regulatory approval of a product candidate. Even if we are able to
ultimately commercialize our product candidates, other therapies
for the same or similar indications may have been introduced to the
market and established a competitive advantage.
11
Risks Relating to Regulatory Matters
Our activities are and will continue to be subject to extensive
government regulation, which is expensive and time consuming, and
we will not be able to sell our products without regulatory
approval.
Our
development, marketing and distribution of levosimendan is, and
will continue to be, subject to extensive regulation, monitoring
and approval by the FDA and other regulatory agencies. There are
significant risks at each stage of the regulatory
scheme.
Product approval stage
During
the product approval stage, we attempt to prove the safety and
efficacy of our product for its indicated uses. There are numerous
problems that could arise during this stage,
including:
-
the data obtained
from laboratory testing and clinical trials are susceptible to
varying interpretations, which could delay, limit or prevent FDA
and other regulatory approvals;
-
adverse events
could cause the FDA and other regulatory authorities to halt
trials;
-
at any time, the
FDA and other regulatory agencies could change policies and
regulations that could result in delay and perhaps rejection of our
products;
-
if a prolonged
government shutdown occurs, it could significantly impact the
ability of the FDA to timely review and process our regulatory
submissions; and
-
even after
extensive testing and clinical trials, there is no assurance that
regulatory approval will ever be obtained for any of our
products.
Post-commercialization stage
Discovery
of previously unknown problems with our products, or unanticipated
problems with our manufacturing arrangements, even after FDA and
other regulatory approvals of our products for commercial sale may
result in the imposition of significant restrictions, including
withdrawal of the product from the market.
Additional
laws and regulations may also be enacted that could prevent or
delay regulatory approval of our products, including laws or
regulations relating to the price or cost-effectiveness of medical
products. Any delay or failure to achieve regulatory approval of
commercial sales of our products is likely to have a material
adverse effect on our financial condition, results of operations
and cash flows.
The FDA
and other regulatory agencies continue to review products even
after they receive agency approval. If and when the FDA or another
regulatory agency outside the United States approves one of our
products, its manufacture and marketing will be subject to ongoing
regulation, which could include compliance with current good
manufacturing practices, adverse event reporting requirements and
general prohibitions against promoting products for unapproved or
“off-label” uses. We are also subject to inspection and
market surveillance by the FDA for compliance with these and other
requirements. Any enforcement action resulting from failure, even
by inadvertence, to comply with these requirements could affect the
manufacture and marketing of levosimendan or our other products. In
addition, the FDA or other regulatory agencies could withdraw a
previously approved product from the market upon receipt of newly
discovered information. The FDA or another regulatory agency could
also require us to conduct additional, and potentially expensive,
studies in areas outside our approved indicated uses.
We must continually monitor the safety of our products once
approved and marketed for signs that their use may elicit serious
and unexpected side effects and adverse events, which could
jeopardize our ability to continue marketing the products. We may
also be required to conduct post-approval clinical studies as a
condition to licensing a product.
As with
all pharmaceutical products, the use of our products could
sometimes produce undesirable side effects or adverse reactions or
events (referred to cumulatively as adverse events). For the most
part, we would expect these adverse events to be known and occur at
some predicted frequency. When adverse events are reported to us,
we will be required to investigate each event and circumstances
surrounding it to determine whether it was caused by our product
and whether it implies that a previously unrecognized safety issue
exists. We will also be required to periodically report summaries
of these events to the applicable regulatory
authorities.
In
addition, the use of our products could be associated with serious
and unexpected adverse events, or with less serious reactions at a
greater than expected frequency. This may be especially true when
our products are used in critically ill or otherwise compromised
patient populations. When these unexpected events are reported to
us, we will be required to make a thorough investigation to
determine causality and implications for product safety. These
events must also be specifically reported to the applicable
regulatory authorities. If our evaluation concludes, or regulatory
authorities perceive, that there is an unreasonable risk associated
with the product, we would be obligated to withdraw the impacted
lot(s) of that product. Furthermore, an unexpected adverse event of
a new product could be recognized only after extensive use of the
product, which could expose us to product liability risks,
enforcement action by regulatory authorities and damage to our
reputation and public image.
12
A
serious adverse finding concerning the risk of our products by any
regulatory authority could adversely affect our reputation,
business and financial results.
When a
new product is approved, the FDA or other regulatory authorities
may require post-approval clinical trials, sometimes called Phase 4
clinical trials. If the results of such trials are unfavorable,
this could result in the loss of the license to market the product,
with a resulting loss of sales.
After our products are commercialized, we expect to spend
considerable time and money complying with federal and state laws
and regulations governing their sale, and, if we are unable to
fully comply with such laws and regulations, we could face
substantial penalties.
Health
care providers, physicians and others will play a primary role in
the recommendation and prescription of our clinical products. Our
arrangements with third-party payers and customers may expose us to
broadly applicable fraud and abuse and other health care laws and
regulations that may constrain the business or financial
arrangements and relationships through which we will market, sell
and distribute our products. Applicable federal and state health
care laws and regulations are expected to include, but not be
limited to, the following:
-
the federal
anti-kickback statute is a criminal statute that makes it a felony
for individuals or entities knowingly and willfully to offer or
pay, or to solicit or receive, direct or indirect remuneration, in
order to induce the purchase, order, lease, or recommending of
items or services, or the referral of patients for services, that
are reimbursed under a federal health care program, including
Medicare and Medicaid;
-
the federal False
Claims Act imposes liability on any person who knowingly submits,
or causes another person or entity to submit, a false claim for
payment of government funds, with penalties that include three
times the government’s damages plus civil penalties for each
false claim; in addition, the False Claims Act permits a person
with knowledge of fraud, referred to as a qui tam plaintiff, to
file a lawsuit on behalf of the government against the person or
business that committed the fraud, and, if the action is
successful, the qui tam plaintiff is rewarded with a percentage of
the recovery;
-
Health Insurance
Portability and Accountability Act imposes obligations, including
mandatory contractual terms, with respect to safeguarding the
privacy, security and transmission of individually identifiable
health information;
-
the Social Security
Act contains numerous provisions allowing the imposition of a civil
money penalty, a monetary assessment, exclusion from the Medicare
and Medicaid programs, or some combination of these penalties;
and
-
many states have
analogous state laws and regulations, such as state anti-kickback
and false claims laws, which, in some cases, these state laws
impose more strict requirements than the federal laws and may
require pharmaceutical companies to comply with certain price
reporting and other compliance requirements.
Our
failure to comply with any of these federal and state health care
laws and regulations, or health care laws in foreign jurisdictions,
could have a material adverse effect on our business, financial
condition, result of operations and cash flows.
Health care reform and controls on health care spending may limit
the price we can charge for our products and the amount we can
sell.
As a
result of the Patient Protection and Affordable Care Act and the
Health Care and Education Affordability Reconciliation Act of 2010,
collectively, the ACA, enacted in March 2010, substantial changes
have occurred and are expected to continue to occur in the system
for paying for health care in the United States, including changes
made in order to extend medical benefits to those who currently
lack insurance coverage. This comprehensive health care reform
legislation also included provisions to control health care costs
and improve health care quality. Together with ongoing statutory
and budgetary policy developments at a federal level, this health
care reform legislation could include changes in Medicare and
Medicaid payment policies and other health care delivery
administrative reforms that could potentially negatively impact our
business. Because not all the administrative rules implementing
health care reform under the legislation have been finalized, and
because of ongoing federal fiscal budgetary pressures not yet
resolved for federal health programs, the full impact of the ACA
and of further statutory actions to reform healthcare payment on
our business is unknown, but there can be no assurances that health
care reform legislation will not adversely impact either our
operational results or the manner in which we operate our business.
There have been judicial and Congressional challenges to the ACA
and there may be additional challenges and amendments to the ACA in
the future, particularly in light of the current presidential
administration and U.S. Congress. We expect that the ACA, as well
as other healthcare reform measures that may be adopted in the
future, may result in more rigorous coverage criteria and lower
reimbursement, and in additional downward pressure on the price
that we receive for any approved product. Cost of care could be
reduced by reducing the level of reimbursement for medical services
or products (including those biopharmaceuticals that we intend to
produce and market), or by restricting coverage (and, thereby,
utilization) of medical services or products. In either case, a
reduction in the utilization of, or reimbursement for, our products
could have a materially adverse impact on our financial
performance. Moreover, recently there has been heightened
governmental scrutiny over the manner in which manufacturers set
prices for their commercial products. We cannot predict what
healthcare reform initiatives may be adopted in the
future.
13
Uncertainty of third-party reimbursement could affect our future
results of operations.
Sales
of medical products largely depend on the reimbursement of
patients’ medical expenses by governmental health care
programs and private health insurers. We will be required to report
detailed pricing information, net of included discounts, rebates
and other concessions, to the Centers for Medicare and Medicaid
Services, or CMS, for the purpose of calculating national
reimbursement levels, certain federal prices, and certain federal
rebate obligations. If we report pricing information that is not
accurate to the federal government, we could be subject to fines
and other sanctions that could adversely affect our business. In
addition, the government could change its calculation of
reimbursement, federal prices, or federal rebate obligations which
could negatively impact us. There is no guarantee that government
health care programs or private health insurers will reimburse for
the sales of our products or permit us to sell our products at high
enough prices to generate a profit.
Governments outside the United States tend to impose strict price
controls and reimbursement approval policies, which may adversely
affect our prospects for generating revenue outside the United
States.
Although
we only have distribution rights in the United States and Canada
for levosimendan, in some countries, particularly European Union
countries and Canada, the pricing of prescription pharmaceuticals
is subject to governmental control. In these countries, pricing
negotiations with governmental authorities can take considerable
time after the receipt of marketing approval for a product. In
addition, there can be considerable pressure by governments and
other stakeholders on prices and reimbursement levels, including as
part of cost containment measures. Political, economic and
regulatory developments may further complicate pricing
negotiations, and pricing negotiations may continue after
reimbursement has been obtained. To obtain or maintain
reimbursement or pricing approval in some countries with respect to
any product candidate that achieves regulatory approval, we may be
required to conduct a clinical trial that compares the
cost-effectiveness of our product candidate to other available
therapies. If reimbursement of our products upon approval, if at
all, is unavailable or limited in scope or amount, or if pricing is
set at unsatisfactory levels, our prospects for generating revenue,
if any, could be adversely affected which would have a material
adverse effect on our business and results of operations. Further,
if we achieve regulatory approval of any product, we must
successfully negotiate product pricing for such product in
individual countries. As a result, the pricing of our products, if
approved, in different countries may vary widely, thus creating the
potential for third-party trade in our products in an attempt to
exploit price differences between countries. This third-party trade
of our products could undermine our sales in markets with higher
prices.
Risks Relating to Our Dependence on Third Parties
We depend on third parties to manufacture our
products.
We do
not own or operate any manufacturing facilities for the
commercial-scale production of our products. Pursuant to the terms
of our license for levosimendan, Orion is our sole manufacturing
source for levosimendan. Accordingly, our business is
susceptible to disruption, and our results of operations can be
adversely affected, by any disruption in supply or other adverse
developments in our relationship with Orion. If supply from
Orion is delayed or terminated, or if its facilities suffer any
damage or disruption, we may need to successfully qualify an
alternative supplier in a timely manner in order to not disrupt our
business. If we cannot obtain an alternate manufacturer in a
timely manner, we would experience a significant interruption in
supply of levosimendan, which could negatively affect our financial
condition, results of operations and cash flows.
In June 2019, Orion filed a request for arbitration against us
seeking
a declaration regarding
the correct interpretation of the line extension provisions of the
license and whether or not such provisions apply to the oral form
of levosimendan recently developed by Orion. Additionally,
Orion requested we reimburse Orion for all legal fees associated
with the arbitration. We submitted our response to the request for
arbitration and rejected Orion’s position that the oral
formation was not a line extension product under the
license.
While the operations under the license have generally continued in
their ordinary course during the dispute and filing for
arbitration, the disagreement leading to the arbitration may result
in a strain to our relationship with Orion. We cannot assure you
that these tensions and disagreements will be resolved when the
arbitration is concluded. Orion may also have economic or business
interests or goals that are inconsistent with ours. If our
relationship with Orion were to deteriorate, it could have a
material adverse effect on our results of operations and financial
condition
.
14
We depend on the services of a limited number of key
personnel.
Our
success is highly dependent on the continued services of a limited
number of scientists and support personnel. The loss of any of
these individuals could have a material adverse effect on us. In
addition, our success will depend, among other factors, on the
recruitment and retention of additional highly skilled and
experienced management and technical personnel. There is a risk
that we will not be able to retain existing employees or to attract
and retain additional skilled personnel on acceptable terms given
the competition for such personnel among numerous large and
well-funded pharmaceutical and health care companies, universities,
and non-profit research institutions, which could negatively affect
our financial condition, results of operations and cash
flows.
We have no experience in the sale and marketing of medical
products.
We have
no experience in the sale and marketing of approved medical
products and marketing the licensing of such products before FDA or
other regulatory approval. We have not decided upon a
commercialization strategy in these areas. We do not know of any
third party that is prepared to distribute our products should they
be approved. If we decide to establish our own commercialization
capability, we will need to recruit, train and retain a marketing
staff and sales force with sufficient technical expertise. We do
not know whether we can establish a commercialization program at a
cost that is acceptable in relation to revenue or whether we can be
successful in commercializing our product. Factors that may inhibit
our efforts to commercialize our products directly and without
strategic partners include:
-
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 products to be offered by sales personnel, which may
put us at a competitive disadvantage relative to companies with
more extensive product lines; and
-
unforeseen costs
and expenses associated with creating and sustaining an independent
sales and marketing organization.
Failure
to successfully commercialize our products or to do so on a
cost-effective basis would likely result in failure of our
business.
We may enter into distribution arrangements and marketing alliances
for certain products and any failure to successfully identify and
implement these arrangements on favorable terms, if at all, may
impair our ability to commercialize our product
candidates.
We do
not anticipate having the resources in the foreseeable future to
develop sales and marketing capabilities for all of the products 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.
We may
need to enter into additional co-promotion arrangements with third
parties where our own sales force is neither well situated nor
large enough to achieve maximum penetration in the market. We may
not be successful in entering into any co-promotion arrangements,
and the terms of any co-promotion arrangements we enter into may
not be favorable to us.
15
Risks Relating to Intellectual Property
It is difficult and costly to protect our proprietary rights, and
we may not be able to ensure their protection.
Our
commercial success will depend in part on obtaining and maintaining
patent protection and trade secret protection of our future product
candidates, if any, 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 is 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 Orion that covers our
product candidate levosimendan. The principal United States patents
that we license from Orion expire in September 2020. We rely on
Orion to file, prosecute and maintain patent applications and
otherwise protect the intellectual property to which we have a
license, and we have not had and do not have primary control over
these activities 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. 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. Further, if any of our patents are
deemed invalid and unenforceable, it could impact our ability to
commercialize or license our technology.
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 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:
16
-
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.
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 do 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 18 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 Office, or USPTO, 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.
Our collaborations with outside scientists and consultants may be
subject to restriction and change.
We work
with chemists, biologists and other scientists at academic and
other institutions, and consultants who assist us in our research,
development, regulatory and commercial efforts, including the
members of our scientific advisory board. These scientists and
consultants have provided, and we expect that they will continue to
provide, valuable advice on our programs. These scientists and
consultants are not our employees, may have other commitments that
would limit their future availability to us and typically will not
enter into non-compete agreements with us. If a conflict of
interest arises between their work for us and their work for
another entity, we may lose their services. In addition, we will be
unable to prevent them from establishing competing businesses or
developing competing products. For example, if a key scientist
acting as a principal investigator in any of our clinical trials
identifies a potential product or compound that is more
scientifically interesting to his or her professional interests,
his or her availability to remain involved in our clinical trials
could be restricted or eliminated.
17
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.
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 USPTO 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.
Many 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.
Product liability lawsuits against us could cause us to incur
substantial liabilities, limit sales of our existing products and
limit commercialization of any products that we may
develop.
Our
business exposes us to the risk of product liability claims that
are inherent in the manufacturing, distribution, and sale of
biotechnology products. We face an inherent risk of product
liability exposure related to the testing of our product candidates
in human clinical trials and an even greater risk when we
commercially sell any products. If we cannot successfully defend
ourselves against claims that our product candidates or products
caused injuries, we could incur substantial liabilities. Regardless
of merit or eventual outcome, liability claims may result
in:
-
decreased demand
for our products and any product candidates that we may
develop;
-
injury to our
reputation;
-
withdrawal of
clinical trial participants;
-
costs to defend the
related litigation;
-
substantial
monetary awards to trial participants or patients;
-
loss of revenue;
and
-
the inability to
commercialize any products that we may develop.
18
We
currently maintain limited product liability insurance coverage for
our clinical trials in the total amount of $3 million. However, our
profitability will be adversely affected by a successful product
liability claim in excess of our insurance coverage. There can be
no assurance that product liability insurance will be available in
the future or be available on reasonable terms.
Our business and operations would suffer in the event of computer
system failures, cyber-attacks or deficiencies in our
cyber-security.
Despite
the implementation of security measures, our internal computer
systems, and those of third parties on which we rely, are
vulnerable to damage from computer viruses, malware, natural
disasters, terrorism, war, telecommunication and electrical
failures, cyber-attacks or cyber-intrusions over the Internet,
attachments to emails, persons inside our organization, or persons
with access to systems inside our organization. The risk of a
security breach or disruption, particularly through cyber-attacks
or cyber intrusion, including by computer hackers, foreign
governments, and cyber terrorists, has generally increased as the
number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased. If such an event
were to occur and cause interruptions in our operations, it could
result in a material disruption of our product development
programs. For example, the loss of clinical trial data from
completed or ongoing or planned clinical trials could result in
delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach was to result in a loss of
or damage to our data or
applications, or inappropriate
disclosure of confidential or proprietary information, we could
incur material legal claims and liability, and damage to our
reputation, and the further development of our product candidates
could be delayed.
Our
disclosure controls and procedures address cybersecurity and
include elements intended to ensure that there is an analysis of
potential disclosure obligations arising from security breaches. We
also maintain compliance programs to address the potential
applicability of restrictions against trading while in possession
of material, nonpublic information generally and in connection with
a cyber-security breach. However, a
breakdown in existing controls and
procedures around our cyber-security environment may prevent us
from
detecting, reporting or responding to cyber incidents
in a timely manner and
could have a material adverse effect
on our financial position and value of our
stock.
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 has experienced
extreme volatility that has often been unrelated to the operating
performance of particular companies. 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 stock
may be influenced by many factors, including:
-
actual or
anticipated fluctuations in our financial condition and operating
results;
-
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 pandemics,
epidemics, or outbreaks of an infectious disease, such as COVID-19,
or coronavirus.
19
Some
companies that have had volatile market prices for their securities
have had securities class action lawsuits filed against them. Such
lawsuits, should they be filed against us in the future, could
result in substantial costs and a diversion of management’s
attention and resources. This could have a material adverse effect
on our business, results of operations and financial
condition.
Our failure to maintain compliance with Nasdaq’s continued
listing requirements could result in the delisting of our common
stock.
Our
common stock is currently listed on The Nasdaq Capital Market. In
order to maintain this listing, we must satisfy minimum financial
and other requirements. In the past, we have received a
notification letter from Nasdaq indicating that we were not in
compliance with listing requirements because the minimum bid price
of our common stock closed below $1.00 per share for 30 consecutive
business days. As part of our plan to regain compliance with the
minimum bid price requirement, we effected a 1-for-20 reverse stock
split on February 23, 2018. If we fail to satisfy Nasdaq’s
listing requirements in the future, we expect to take actions to
regain compliance, but we can provide no assurance that any such
action would prevent our common stock from dropping below the
Nasdaq minimum bid price requirement or prevent future
non-compliance with Nasdaq’s listing requirements. If our
common stock is delisted from Nasdaq, the delisting could
substantially decrease trading in our common stock and adversely
affect the market liquidity of our common stock; adversely affect
our ability to obtain financing on acceptable terms, if at all; and
may result in the potential loss of confidence by investors,
suppliers, customers, and employees and fewer business development
opportunities. Additionally, the market price of our common stock
may decline further, and stockholders may lose some or all of their
investment.
We are likely to attempt to raise additional capital through
issuances of debt or equity securities, which may cause our stock
price to decline, dilute the ownership interests of our existing
stockholders, and/or limit our financial flexibility.
Historically
we have financed our operations through the issuance of equity
securities and debt financings, and we expect to continue to do so
for the foreseeable future. As of December 31, 2019, we had $4.9
million of cash and cash equivalents on hand. Based on our current
operating plans, we believe our existing cash and cash equivalents,
including the $2.75 million in gross proceeds from our March 2020
offering, are sufficient to continue to fund operations through the
third quarter of calendar year 2020. 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, the market price of our existing common stock may
decline. There can be no assurance that we will be successful in
obtaining any additional capital resources in a timely manner, on
favorable terms, or at all.
I
TEM 1B—UNRESOLVED STAFF COMMENTS
Not
applicable.
I
TEM 2—PROPERTIES
We own
no real property. We lease our principal executive office at ONE
Copley Parkway, Suite 490, Morrisville, North Carolina 27560. The
current rent is approximately $9,900 per month for the
facility.
I
TEM 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
our Consolidated Financial Statements.
I
TEM 4— MINE SAFETY DISCLOSURES
Not
applicable
20
PART II
I
TEM 5—MARKET FOR THE REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information and Number of Stockholders
Our
common stock is listed on the Nasdaq Capital Market under the
symbol “TENX.”
As of
March 25, 2020, there were 1,343 holders of record of our common
stock. In addition, we believe that a significant number of
beneficial owners 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.
Dividend Policy
Since
our inception, we have not paid dividends on our common stock. We
intend to retain any earnings for use in our business activities,
so it is not expected that any dividends on our common stock will
be declared and paid in the foreseeable future.
Repurchases of Common Stock
None.
Unregistered Sales of Equity Securities
During
the year ended December 31, 2019, we did not issue or sell any
unregistered securities not previously disclosed in a Quarterly
Report on Form 10-Q or in a Current Report on Form
8-K.
I
TEM 6—SELECTED FINANCIAL DATA
Not
applicable.
I
TEM 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 Statements and the related notes to
those statements included in Item 8 – “Consolidated
Financial Statements and Supplementary 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.
Results of operations- Comparison of the years ended December 31,
2019 and 2018
Overview
Strategy
We are
currently conducting a Phase 2 clinical trial of levosimendan in
North America for the treatment of patients with pulmonary
hypertension associated with heart failure with preserved ejection
fraction, or PH-HFpEF. PH-HFpEF is defined hemodynamically by
a pulmonary artery pressure, or mPAP, ≥25 mmHg, a pulmonary
capillary wedge pressure, or PCWP, >15 mmHg, and a diastolic
pressure gradient, or diastolic PAP – PCWP, >7mmHg.
Pulmonary hypertension in these patients initially develops from a
passive backward transmission of elevated filling pressures from
left-sided heart failure. These mechanical components of pulmonary
venous congestion may trigger pulmonary vasoconstriction, decreased
nitric oxide availability, increased endothelin expression,
desensitization to natriuretic peptide induced vasodilation, and
vascular remodeling. Finally, these changes often lead to
advanced pulmonary vascular disease, increased right ventricle, or
RV, afterload, and RV failure.
PH-HFpEF
is a common form of pulmonary hypertension with an estimated US
prevalence exceeding 1.5 million patients. Currently, no
pharmacologic therapies are approved for treatment of
PH-HFpEF. Despite the fact that many therapies have been
studied in PH-HFpEF patients, including therapies approved to treat
pulmonary arterial hypertension patients, no therapies have been
shown to be effective in treating PH-HFpEF patients.
Published
pre-clinical and clinical studies indicate that levosimendan may
provide important benefits to patients with pulmonary hypertension.
Data from these published trials indicate that levosimendan may
reduce pulmonary vascular resistance and improve important
cardiovascular hemodynamics such as reduced pulmonary capillary
wedge pressure in patients with pulmonary hypertension. While none
of these studies have focused specifically on PH-HFpEF patients,
the general hemodynamic improvements in these published studies of
various types of pulmonary hypertension provide an indication that
levosimendan may be beneficial in PH-HFpEF patients.
21
In
March 2018, we met with the United States Food and Drug
Administration, or FDA, to discuss development of levosimendan in
PH-HFpEF patients. The FDA agreed with our planned Phase 2 design,
patient entry criteria, and endpoints. It was agreed the study
could be conducted under the existing investigational new drug
application with no additional nonclinical studies required to
support full development. The FDA recognized there were no approved
drug therapies to treat PH-HFpEF patients and acknowledged this
provided an opportunity for a limited Phase 3 clinical program.
This topic will be discussed further at the End-of-Phase 2 Meeting
following completion of the Phase 2 study in PH-HFpEF patients,
which is known as the HELP Study –
H
emodynamic
E
valuation of
L
evosimendan in
P
H-HFpEF. We initiated the first of our
expected 10-12 HELP Study clinical sites in November 2018 and the
first of 36 patients was enrolled in the HELP Study in March 2019.
Enrollment in the HELP Study was completed in March 2020. The
primary endpoint of the HELP Study is based on change in PCWP vs
baseline compared to placebo. The HELP Study utilizes a
double-blind randomized design following five weekly infusions of
levosimendan. The primary endpoint data will be available once the
HELP Study data is unblinded.
The
HELP Study design is novel in several respects. To date, no other
multi-center levosimendan study has evaluated levosimendan in heart
failure patients with preserved ejection fraction (HFpEF) or
pulmonary hypertension patients with heart failure and preserved
ejection fraction (PH-HFpEF). Instead, all previous levosimendan
heart failure studies have enrolled heart failure patients with
reduced ejection fraction (HFrEF), which specifically excluded
HFpEF patients. Also, the HELP Study utilizes a unique 24-hour
weekly infusion regimen of 0.075- 0.1µm/kg/min. Finally, the
HELP Study employs a unique home-based IV infusion administration
via an ambulatory infusion pump. This home-based weekly IV
administration is unlike all other chronic dosing studies of
levosimendan that have typically employed a shorter duration and
less frequent infusion regimen administered in a hospital
setting. Despite the unique patient population, weekly
dosing, and home-based administration, there have been no reported
serious adverse events reported for the first 30 randomized
patients.
Investigator
reported open-label data from the HELP Study has provided
encouraging preliminary signs of efficacy during the initial
lead-in infusion phase of the trial. The open-label lead-in
infusion phase is designed to identify responders prior to
randomization. To date, 80-85% of patients have met the lead
infusion responder criteria. Analysis of investigator reported data
following the 24-hour open-label levosimendan lead-in infusion for
the first 30 evaluable responders indicated the following mean
changes in exercise hemodynamics: PCWP of –7.5mm Hg, exercise
right atrial pressure of -5.0mm Hg, mean pulmonary arterial
pressure (mPAP) of -5.1 mm Hg and an increase in cardiac output of
0.6 liter/min. All of these improvements in exercise hemodynamics
were found to be statistically significant via paired t-test
P<0.01.
We
believe that the combination of the unique HELP Study patient
population, innovative weekly 24-hour dosing, unique home-based
site of administration, and novel findings of efficacy and safety
in PH-HFpEF patients represent unique discoveries and significant
intellectual property. These discoveries, among others from the
HELP Study, form the basis for a US patent application that we have
filed.
Additionally,
our Board of Directors continues to review strategic alternatives
focused on maximizing stockholder value. This process may not
result in any transaction and we do not intend to disclose
additional details unless and until we determine further disclosure
is appropriate or required.
Opportunities and Trends
The continued spread of COVID-19 globally could adversely affect
our ability to recruit and retain patients, principal investigators
and site staff who, as healthcare providers, may have heightened
exposure to COVID-19 if an outbreak occurs in their geography.
Further, some patients may be unable to comply with clinical trial
protocols if quarantines or travel restrictions impede patient
movement or interrupt healthcare services, or if the patients
become infected with COVID-19 themselves, which would delay our
ability to complete our phase 2 clinical trial or release clinical
trial results.
As we focus on the development of our existing product candidate,
we also continue to position ourselves to execute upon licensing
and other partnering opportunities. To do so, we will need to
continue to maintain our strategic direction, manage and deploy our
available cash efficiently and strengthen our collaborative
research development and partner relationships.
During 2020, we are focused on the following
initiatives:
-
Working
with collaborators and partners to accelerate product development,
reduce our development costs, and broaden our commercialization
capabilities; and
-
Identifying
strategic alternatives, including, but not limited to, the
potential acquisition of additional products or product
candidates.
22
Financial Overview
General and Administrative Expenses
General
and administrative expenses consist primarily of compensation for
executive, finance, legal and administrative personnel, including
stock-based compensation. Other general and administrative expenses
include facility costs not otherwise included in research and
development expenses, legal and accounting services, other
professional services, and consulting fees. General and
administrative expenses and percentage changes for the years ended
December 31, 2019 and 2018, respectively, are as
follows:
|
|
For the year ended December 31,
|
Increase/
|
% Increase/
|
|
|
|
2019
|
2018
|
(Decrease)
|
(Decrease)
|
|
Personnel
costs
|
$
2,782,798
|
$
3,473,068
|
$
(690,270
)
|
(20
)%
|
|
Legal
and professional fees
|
1,545,890
|
1,386,299
|
159,591
|
12
%
|
|
Other
costs
|
602,611
|
650,513
|
(47,902
)
|
(7
)%
|
|
Facilities
|
152,812
|
144,100
|
8,712
|
6
%
|
Personnel costs:
Personnel
costs decreased approximately $690,000 for the
year ended December 31, 2019
compared to
the prior year. This decrease was due primarily to a reduction of
approximately $473,000 in bonuses paid in the prior year that were
not incurred in the current year as well as a reduction of
approximately $386,000 for the vested value of stock-based
compensation in the current year as compared to the prior year,
partially offset by an increase of approximately $169,000 in
salaries and benefits paid due primarily to the salary of the CEO
not incurred in the prior year.
Legal and professional fees:
Legal
and professional fees consist of the costs incurred for legal fees,
accounting fees, recruiting costs, consulting fees and investor
relations services, as well as fees paid to our Board of Directors.
Legal and professional fees increased approximately $160,000 for
the
year ended December 31,
2019
compared to the prior year. This increase was due
primarily to increases in costs incurred for legal fees and
investor relations services, partially offset by a reduction in
consulting costs, accounting fees, and Board of Directors
costs.
-
Legal fees
increased approximately $227,000 in the current year as compared to
the prior year. This increase was due primarily to approximately
$273,000 in costs incurred for arbitration in the current year that
were not incurred in the prior year, partially offset by a
reduction in fees paid for filings associated with our Special
Meeting of Stockholders and registration statements in the prior
year that were not incurred in the current year.
-
Investor relations
costs increased approximately $146,000 in the current year as
compared to the prior year. This increase was primarily due to fees
paid to a third-party investor relations firm in the current year
that was not engaged during the prior year as well as fees paid for
communication and shareholder outreach efforts in the current year
that were not incurred in the prior year.
-
Accounting fees
decreased approximately $24,000 in the current year as compared to
the prior year. This decrease was due primarily to the costs
incurred for the filings associated with our registration
statements in the prior year that were not incurred in the current
year.
-
Consulting costs
decreased approximately $85,000 in the current year as compared to
the prior year. This decrease was due primarily to recruiting costs
of approximately $28,000, approximately $39,000 in costs associated
with market research and approximately $18,000 in payments to our
scientific advisory board members in the prior year which were not
incurred in the current year.
-
Capital market
expenses decreased approximately $71,000 in the current year as
compared to the prior year. This decrease was due primarily to the
Special Meeting of Shareholders and the costs associated with the
proxy solicitation services in the prior year that were not
incurred in the current year.
-
Board of Directors
fees decreased approximately $34,000 in the current year as
compared to the prior year. This decrease was due primarily the
transition of a director to CEO and a reduction in the recognized
expense for the vesting of outstanding stock options in the current
year as compared to the prior year.
23
Other costs:
Other
costs include costs incurred for franchise and other taxes, travel,
supplies, insurance, depreciation and other miscellaneous charges.
The approximately $48,000 decrease in other costs for the current
year as compared to the prior year
was
due primarily to
decreases of approximately $34,000 in
travel costs, approximately $30,000 in relocation costs and
approximately $20,000 for bank fees in the current year as compared
to the prior year, partially offset by an increase of approximately
$19,000 in franchise taxes paid and general increases in costs
incurred for information technology and other miscellaneous
expenses in the current year as compared to the prior
year.
Facilities:
Facilities
expenses include costs paid for rent and utilities at our corporate
headquarters in North Carolina. Facilities costs remained
relatively consistent for the years
ended December 31, 2019 and
2018.
Research and Development
Expenses
Research
and development expenses 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 pre-clinical studies; (ii) the cost
of 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, and other supplies. All research and
development expenses are expensed as incurred. Research and
development expenses and percentage changes for the years ended
December 31, 2019 and 2018, respectively, are as
follows:
|
|
For the year ended December 31,
|
Increase/
|
% Increase/
|
|
|
|
2019
|
2018
|
(Decrease)
|
(Decrease)
|
|
Clinical
and preclinical development
|
$
3,217,596
|
$
1,022,035
|
$
2,195,561
|
215
%
|
|
Personnel
costs
|
215,907
|
193,036
|
22,871
|
12
%
|
|
Other
costs
|
21,050
|
17,295
|
3,755
|
22
%
|
|
Consulting
|
16,600
|
6,934
|
9,666
|
139
%
|
Clinical and preclinical development:
Clinical
and preclinical development costs include, primarily, the costs
associated with our Phase 2 HELP Study for levosimendan, which was
initiated during fiscal year 2018. The increase of approximately
$2.2 million in clinical and preclinical development costs for the
year ended December 31, 2019 compared to the prior year was
primarily due to an increase of approximately $875,000 in
expenditures for CRO costs and clinical research associates to
manage the Phase 2 HELP Study, as well as an increase of
approximately $1.4 million in the direct costs associated with
clinical site activations and enrolled patient costs, partially
offset by a decrease of approximately $82,000 in formulation
development incurred in the prior year that was not incurred in the
current year.
Personnel costs:
Personnel
costs increased approximately $23,000 for the year ended December
31, 2019 primarily due to an increase in headcount in the current
year as compared to the prior year.
Other costs:
Other
costs remained relatively consistent for the years
ended December 31, 2019 and
2018.
Consulting fees:
Consulting
fees remained relatively consistent for the years
ended December 31, 2019 and
2018.
24
Other income, net
Other
income and expense include non-operating income and expense items
not otherwise recorded in our
consolidated statement of
comprehensive loss
. These items
include, but are not limited to, changes in the fair value of
financial assets and derivative liabilities, interest income earned
and fixed asset disposals. Other income for the
years ended December 31, 2019
and 2018,
respectively, is as follows:
|
|
For the year ended December 31,
|
(Increase)/
|
|
|
|
2019
|
2018
|
Decrease
|
|
Other
income, net
|
$
(160,901
)
|
$
(79,835
)
|
$
(81,066
)
|
Other
income increased approximately $81,000 for the year ended December
31, 2019 compared to the prior year. This increase is due primarily
to an increase in the interest earned on our investment in
marketable securities.
During
the year ended December 31, 2019, we recorded interest income of
approximately $146,000 from our investments in marketable
securities. This income is derived from approximately $144,000 in
bond interest paid and approximately $2,000 in fair-value
adjustments for the year, which compares to approximately $171,000
in bond interest paid, partially offset by approximately $91,000 in
charges for amortization of premiums paid and fair-value
adjustments during the prior year.
Liquidity, capital resources and plan of operation
We have
incurred losses since our inception and as of December 31, 2019, we
had an accumulated deficit of approximately $236 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 for pulmonary 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.
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 $6,180,829 and $13,320,240 and working
capital of $3,648,434 and $11,754,571 as of December 31, 2019 and
December 31, 2018, 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
currently conducting a Phase 2 clinical trial of levosimendan in
North America for the treatment of pulmonary hypertension. Our
ability to continue to pursue development of our product beyond the
third quarter of calendar year 2020 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.
The continued spread of COVID-19 globally could adversely affect
our ability to recruit and retain patients and principal
investigators and site staff who, as healthcare providers, may have
heightened exposure to COVID-19 if an outbreak occurs in their
geography. Further, some patients may be unable to comply with
clinical trial protocols if quarantines or travel restrictions
impede patient movement or interrupt healthcare services, or if the
patients become infected with COVID-19 themselves, which would
delay our ability to complete our clinical trials or release
clinical trial results. See ITEM 1A – RISK FACTORS above for
additional discussion.
Financings
On
March 11, 2020, we entered into a definitive agreement with a
single healthcare-focused institutional investor for the issuance
and sale of 750,000 shares of our common stock at a purchase price
of $1.1651 per share and pre-funded warrants to purchase up to
1,610,313 shares of common stock, at a purchase price of $1.1650
per pre-funded warrant (which represents the per share offering
price for the common stock less $0.0001, the exercise price of each
pre-funded warrant), for gross proceeds of approximately $2.75
million, in a registered direct offering priced at-the-market under
Nasdaq rules. Additionally, in a concurrent private placement, we
also agreed to issue to the investor unregistered warrants to
purchase up to 2,360,313 shares of common stock. The unregistered
warrants have an exercise price of $1.04 per share and exercise
period commencing immediately upon the issuance date and a term of
five and one-half years. The offering closed on March 13,
2020.
25
We
agreed to pay H.C. Wainwright & Co., LLC, or the Placement
Agent, a cash fee equal to 7.5% of the gross proceeds of the March
2020 offering, totaling approximately $206,250. We also agreed to
pay the Placement Agent $75,000 for non-accountable expenses, a
management fee equal to 1.0% of the gross proceeds and up to
$12,900 for clearing fees. In addition, we issued designees of the
Placement Agent warrants to purchase 177,023 shares of common stock
(representing 7.5% of the aggregate number of shares of common
stock (or common stock equivalents) sold in the March 2020
offering). The Placement Agent warrants have substantially the same
terms as the unregistered warrants, except that the Placement Agent
warrants have an exercise price equal to $1.4564, or 125% of the
offering price per share of common stock, and will be exercisable
for five years from the effective date of the March 2020
offering.
The
shares of common stock and pre-funded warrants offered in the
registered direct offering (including the shares of common stock
underlying the pre-funded warrants) were offered and sold pursuant
to a “shelf” registration statement on Form S-3, which
was declared effective by the Securities and Exchange Commission
(SEC) on May 23, 2018. The unregistered warrants described above
were offered in a private placement under Section 4(a)(2) of the
Securities Act, and Regulation D promulgated thereunder and, along
with the shares of common stock underlying the warrants, have not
been registered under the Securities Act, or applicable state
securities laws. The net proceeds from the March 2020 offering,
after deducting placement agent fees and other direct offering
expenses, were approximately $2.125 million. We intend to use the
net proceeds to further our clinical trials of levosimendan, for
research and development and general corporate purposes, including
working capital and potential acquisitions.
On December 7, 2018, we entered into an underwriting agreement with
Ladenburg Thalmann & Co. Inc., or the Underwriter,
pursuant to which we agreed to issue and sell 5,181,346 units, or
the Units, with each Unit consisting of (a) one share of
Series A convertible preferred stock, par value $0.0001 per
share, or the Series A Preferred Stock, (b)
a two-year warrant to
purchase one share of common stock, exercisable at a price of
$1.93, or the Series 1 Warrants, and (c) a five-year warrant to
purchase one share of common stock, exercisable at a price of
$1.93, or the Series 2 Warrants
, with each Unit to be offered at an offering
price of $1.93 per Unit. The initial conversion price of the Series
A Preferred Stock is $1.93 per share. We agreed to pay the
Underwriter an aggregate fee equal to 8.0% of the gross proceeds
received in the offering and to reimburse the Underwriter for up to
$95,000 of expenses incurred by the Underwriter in connection with
the offering. The offering closed on December 11,
2018.
We offered the Units pursuant to a registration statement
on Form S-1, which was declared effective by the SEC on
December 7, 2018.
The net proceeds from the offering, after deducting Underwriter
fees and other direct offering expenses was approximately
$9 million. We have been using the net proceeds to
further our clinical trials and efforts to obtain regulatory
approval of levosimendan, for research and development and for
general corporate purposes,
including working capital and
potential acquisitions.
We have an effective shelf registration statement on Form S-3 on
file with the SEC that allows us to periodically offer and sell,
individually or in any combination, shares of common stock, shares
of preferred stock, debt securities, warrants to purchase shares of
common stock or preferred stock or debt securities, and units
consisting of any combination of the foregoing types of securities,
up to a total of $75.0 million (of which approximately $72.3
million remains available), but not to exceed one-third of our
public float in any 12-month period. As of March 25, 2020, our
public float (which is the aggregate market value of our
outstanding common stock held by non-affiliates) is $4.1 million.
Our ability to issue securities under the shelf registration
statement is also subject to market conditions
.
Cash Flows
The
following table shows a summary of our cash flows for the periods
indicated:
|
|
For the year ended December 31,
|
|
|
|
2019
|
2018
|
|
Net
cash used in operating activities
|
$
(7,556,177
)
|
$
(5,499,461
)
|
|
Net
cash (used in) provided by investing activities
|
(1,651
)
|
7,354,798
|
|
Net
cash provided by financing activities
|
96,500
|
8,907,174
|
26
Net cash used in operating activities.
Net cash used
in operating activities was approximately $7.6 million for the year
ended December 31, 2019 compared to net cash used in operating
activities of approximately $5.5 million for the year ended
December 31, 2018. The increase in cash used for operating
activities was due primarily to an increase in our accrued costs
related to the Phase 2 clinical trial for levosimendan in the
current period.
Net cash (used in) provided by investing
activities
. Net cash used in investing activities was
approximately $2,000 for the year ended December 31, 2019 compared
to approximately $7.4 million provided for the year ended December
31, 2018. The decrease in cash provided by investing activities was
primarily due to a decrease in the sale of marketable securities in
the current period.
Net cash provided by financing activities
. Net cash
provided by financing activities was approximately $97,000 for the
year ended December 31, 2019 compared to approximately $9 million
for the year ended December 31, 2018. The decrease in cash provided
by financing activities resulted from the closing of the offering
of Series A Preferred Stock, the Series 1 Warrants and the Series 2
Warrants in the prior year compared to an exercise of warrants in
the current 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 candidate and potential product
candidates;
|
|
-
|
the
outcome, timing and cost of regulatory approvals and the regulatory
approval process;
|
|
-
|
delays
that may be caused by the global coronavirus pandemic. The
continued spread of COVID-19 globally could adversely affect our
ability to recruit and retain patients and principal investigators
and site staff who, as healthcare providers, may have heightened
exposure to COVID-19 if an outbreak occurs in their geography.
Further, some patients may be unable to comply with clinical trial
protocols if quarantines or travel restrictions impede patient
movement or interrupt healthcare services, or if the patients
become infected with COVID-19 themselves, which would delay our
ability to complete our phase 2 clinical trial or release clinical
trial results
;
|
|
-
|
delays
that may be caused by changing regulatory
requirements;
|
|
-
|
the
number of product candidates that 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; and
|
|
-
|
the
possible costs of litigation.
|
Based
on our working capital at December 31, 2019 and the net proceeds
from our March 2020 offering, we believe we have sufficient capital
on hand to continue to fund operations through the third quarter of
calendar year 2020.
We will
need substantial additional capital in the future in order to
complete the regulatory approval and commercialization of
levosimendan and to fund the development and commercialization of
other 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. As a result of our
historical operating losses and expected future negative cash flows
from operations, we have concluded that there is substantial doubt
about our ability to continue as a going concern. Similarly, the
report of our independent registered public accounting firm on our
December 31, 2019 Consolidated Financial Statements includes an
explanatory paragraph indicating that there is substantial doubt
about our ability to continue as a going concern. Substantial doubt
about our ability to continue as a going concern may materially and
adversely affect the price per share of our common stock and make
it more difficult to obtain financing.
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 at that time. We may also consider strategic
alternatives, including a sale of our company, merger, other
business combination or recapitalization.
27
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 accompanying
Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States of America, or
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.
Preclinical 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 ASC, 718, Compensation — Stock Compensation,
which provides 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 our 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.
We
account for equity instruments issued to non-employees in
accordance with ASC 505-50, Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services. Equity instruments issued to
non-employees are recorded at their fair value on the measurement
date and are subject to periodic adjustment as the underlying
equity instruments vest.
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board
(“FASB”) issued an accounting standard intended to
simplify accounting for income taxes. It removes certain exceptions
to the general principles in Topic 740, Income Taxes and amends
existing guidance to improve consistent application. This guidance
is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2020 and early adoption
is permitted. We are currently evaluating this standard, but we do
not believe the adoption of the new guidance will have a material
impact on our consolidated financial statements.
In February 2016, the FASB issued an accounting standard intended
to improve financial reporting regarding leasing transactions. The
standard requires us to recognize on our balance sheet the assets
and liabilities for the rights and obligations created by all
leased assets. The standard also requires us to provide enhanced
disclosures designed to enable users of financial statements to
understand the amount, timing, and uncertainty of cash flows
arising from all leases, operating and capital, with lease terms
greater than 12 months. The standard was effective for financial
statements beginning after December 15, 2018, and interim periods
within those annual periods. Early adoption was
permitted.
We adopted this standard on January 1, 2019, using the
required modified-retrospective approach as of the effective date.
We elected the package of practical expedients permitted under the
transition guidance within the new standard, which among other
things, allows us to carryforward the historical lease
classification. We made an accounting policy election to account
for leases with an initial term of 12 months or less similar to
previous guidance for operating leases, under which we recognize
those lease payments in the consolidated statements of operations
and comprehensive loss on a straight-line basis over the lease
term. Results for the year ended December 31, 2018 continue to be
reported in accordance with historical accounting under previous
lease guidance, the ASC Topic 840, Leases
.
In June 2016, the FASB issued an accounting standard that amends
how credit losses are measured and reported for certain financial
instruments that are not accounted for at fair value through net
income. This standard requires that credit losses be presented as
an allowance rather than as a write-down for available-for-sale
debt securities and will be effective for interim and annual
reporting periods beginning January 1, 2023, with early
adoption permitted. A modified retrospective approach is to be used
for certain parts of this guidance, while other parts of the
guidance are to be applied using a prospective approach. We do not
believe the adoption of this standard will have a material impact
on our consolidated financial statements and related
disclosures.
28
I
TEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not applicable.
I
TEM 8—CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
31
|
|
|
32
|
|
|
33
|
|
|
34
|
|
|
35
|
29
TENAX THERAPEUTICS, INC.
R
eport of Independent Registered Public
Accounting Firm
To the
Board of Directors and Stockholders
Tenax
Therapeutics, Inc.
Raleigh,
North Carolina
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of Tenax
Therapeutics, Inc. and Subsidiary (the “Company”) as of
December 31, 2019 and 2018, and the related consolidated statements
of operations and comprehensive loss, stockholders’ equity,
and cash flows for each of the years in the two-year period ended
December 31, 2019, and the related notes (collectively referred to
as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018,
and the results of its operations and its cash flows for each of
the years in the two-year period ended December 31, 2019, in
conformity with accounting principles generally accepted in the
United States of America.
Going Concern Uncertainty
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
A and Note B to the 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 financial statements. The 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 audits to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, 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 the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
/s/
Cherry Bekaert LLP
We have
served as the Company’s auditor since 2009.
Raleigh,
North Carolina
March
30, 2020
30
TENAX THERAPEUTICS, INC.
C
ONSOLIDATED BALANCE SHEETS
|
|
December 31,
2019
|
December 31,
2018
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash
and cash equivalents
|
$
4,905,993
|
$
12,367,321
|
|
Marketable
securities
|
493,884
|
494,633
|
|
Prepaid
expenses
|
780,952
|
458,286
|
|
Total
current assets
|
6,180,829
|
13,320,240
|
|
Right
of use asset
|
169,448
|
-
|
|
Property
and equipment, net
|
6,559
|
8,525
|
|
Other
assets
|
8,435
|
8,435
|
|
Total
assets
|
$
6,365,271
|
$
13,337,200
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$
1,661,054
|
$
749,814
|
|
Accrued
liabilities
|
871,341
|
815,855
|
|
Total
current liabilities
|
2,532,395
|
1,565,669
|
|
Lease
liability
|
60,379
|
-
|
|
Total
liabilities
|
2,592,774
|
1,565,669
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies; see Note E
|
|
|
|
Stockholders'
equity
|
|
|
|
Preferred
stock, undesignated, authorized 4,818,654 shares; See Note
D
|
|
|
|
Series
A Preferred stock, par value $.0001, issued 5,181,346 shares;
outstanding 38,606 and 2,854,593, respectively
|
4
|
285
|
|
Common stock, par
value $.0001 per share; authorized 400,000,000 shares; issued and
outstanding 6,741,860 and 3,792,249, respectively
|
674
|
379
|
|
Additional
paid-in capital
|
239,939,797
|
239,572,094
|
|
Accumulated
other comprehensive gain
|
458
|
516
|
|
Accumulated
deficit
|
(236,168,436
)
|
(227,801,743
)
|
|
Total
stockholders’ equity
|
3,772,497
|
11,771,531
|
|
Total
liabilities and stockholders' equity
|
$
6,365,271
|
$
13,337,200
|
The
accompanying notes are an integral part of these Consolidated
Financial Statements
31
TENAX THERAPEUTICS, INC.
C
ONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
|
|
Year ended December 31,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
General
and administrative
|
$
5,084,111
|
$
5,653,980
|
|
Research
and development
|
3,471,153
|
1,239,300
|
|
Total
operating expenses
|
8,555,264
|
6,893,280
|
|
|
|
|
|
Net
operating loss
|
8,555,264
|
6,893,280
|
|
|
|
|
|
Other
income, net
|
(160,901
)
|
(79,835
)
|
|
Deemed
dividend on preferred stock
|
-
|
7,330,604
|
|
Net
loss
|
$
8,394,363
|
$
14,144,049
|
|
|
|
|
|
Unrealized
loss (gain) on marketable securities
|
58
|
(16,709
)
|
|
Total
comprehensive loss
|
$
8,394,421
|
$
14,127,340
|
|
|
|
|
|
Net
loss per share, basic and diluted
|
$
(1.35
)
|
$
(9.04
)
|
|
Weighted
average number of common shares outstanding, basic and
diluted
|
6,195,444
|
1,564,773
|
The
accompanying notes are an integral part of these Consolidated
Financial Statements
32
TENAX THERAPEUTICS, INC.
C
ONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY
|
|
Preferred Stock
|
Common Stock
|
Additional
|
Accumulated
other
comprehensive
|
|
Total
|
||
|
|
Number of
|
|
Number of
|
|
paid-in
|
gain
|
Accumulated
|
stockholders'
|
|
|
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
(loss)
|
deficit
|
equity
|
|
Balance at
December 31, 2017
|
-
|
$
-
|
1,411,840
|
$
141
|
$
222,397,198
|
$
(16,193
)
|
$
(213,499,285
)
|
$
8,881,861
|
|
Preferred
stock sold, net of offering costs
|
5,181,346
|
518
|
|
|
8,906,656
|
|
|
8,907,174
|
|
Common stock
issued for convertible preferred stock
|
(2,326,753
)
|
(233
)
|
2,326,753
|
233
|
|
|
|
-
|
|
Compensation
on options and restricted stock issued
|
|
|
37,420
|
4
|
645,193
|
|
|
645,197
|
|
Common stock
issued for services rendered
|
|
|
10,241
|
1
|
100,361
|
|
|
100,362
|
|
Deemed
dividend on preferred stock
|
|
|
|
|
7,330,604
|
|
|
7,330,604
|
|
Unrealized
gain on marketable securities
|
|
|
|
|
|
16,709
|
|
16,709
|
|
Fractional
shares of common stock due to reverse stock
split
|
|
|
5,995
|
|
|
|
|
-
|
|
Adoption of
ASU 2017-11: Reclassification of equity related financial
instruments
|
|
|
|
|
192,082
|
|
(158,409
)
|
33,673
|
|
Net
loss
|
|
|
|
|
|
|
(14,144,049
)
|
(14,144,049
)
|
|
Balance at
December 31, 2018
|
2,854,593
|
$
285
|
3,792,249
|
$
379
|
$
239,572,094
|
$
516
|
$
(227,801,743
)
|
$
11,771,531
|
|
Compensation
on options and restricted stock issued
|
|
|
12,195
|
1
|
171,215
|
|
|
171,216
|
|
Common stock
issued for services rendered
|
|
|
71,429
|
7
|
99,993
|
|
|
100,000
|
|
Common stock
issued for convertible preferred stock
|
(2,815,987
)
|
(281
)
|
2,815,987
|
282
|
|
|
|
1
|
|
Exercise of
warrants
|
|
|
50,000
|
5
|
96,495
|
|
|
96,500
|
|
Adoption of
ASC Topic 842: Leases
|
|
|
|
|
|
|
27,670
|
27,670
|
|
Unrealized
loss on marketable securities
|
|
|
|
|
|
(58
)
|
|
(58
)
|
|
Net
loss
|
|
|
|
|
|
|
(8,394,363
)
|
(8,394,363
)
|
|
Balance at
December 31, 2019
|
38,606
|
$
4
|
6,741,860
|
$
674
|
$
239,939,797
|
$
458
|
$
(236,168,436
)
|
$
3,772,497
|
The
accompanying notes are an integral part of these Consolidated
Financial Statements
33
TENAX THERAPEUTICS, INC.
C
ONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
Year ended December 31,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net
Loss
|
$
(8,394,363
)
|
$
(14,144,049
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
|
Depreciation
and amortization
|
5,017
|
9,016
|
|
Amortization
of right of use asset
|
102,262
|
-
|
|
Loss
(gain) on disposal of property and equipment
|
522
|
-
|
|
Issuance
and vesting of compensatory stock options and warrants
|
171,216
|
316,260
|
|
Issuance
of common stock as compensation
|
-
|
190,083
|
|
Issuance
of common stock for services rendered
|
100,000
|
100,362
|
|
Deemed
dividend on preferred stock
|
-
|
7,330,604
|
|
Amortization
of premium on marketable securities
|
(1,230
)
|
91,511
|
|
Changes
in operating assets and liabilities
|
|
|
|
Accounts
receivable, prepaid expenses and other assets
|
(322,666
)
|
(122,605
)
|
|
Accounts
payable and accrued liabilities
|
883,042
|
729,357
|
|
Long
term portion of lease liability
|
(99,977
)
|
-
|
|
Net
cash used in operating activities
|
(7,556,177
)
|
(5,499,461
)
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
Purchase
of marketable securities
|
(618,100
)
|
(493,822
)
|
|
Sale
of marketable securities
|
620,023
|
7,856,215
|
|
Purchase
of property and equipment
|
(3,574
)
|
(7,595
)
|
|
Net
cash (used in) provided by investing activities
|
(1,651
)
|
7,354,798
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Proceeds
from the exercise of warrants
|
96,500
|
-
|
|
Proceeds
for issuance of convertible preferred stock, net of issuance
costs
|
-
|
8,907,174
|
|
Net
cash provided by financing activities
|
96,500
|
8,907,174
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
(7,461,328
)
|
10,762,511
|
|
Cash
and cash equivalents, beginning of period
|
12,367,321
|
1,604,810
|
|
Cash
and cash equivalents, end of period
|
$
4,905,993
|
$
12,367,321
|
|
|
|
|
|
Non-cash
financing activity
|
|
|
|
Adoption
of ASU 2017-11: Reclassification of equity related financial
instruments
|
$
-
|
$
33,673
|
The
accompanying notes are an integral part of these Consolidated
Financial Statements
34
TENAX THERAPEUTICS, INC.
N
OTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE A—DESCRIPTION OF BUSINESS
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. 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 to one share of Oxygen Biotherapeutics common stock. On
September 19, 2014, the Company changed its name to Tenax
Therapeutics, Inc.
On October 18, 2013, the Company created a wholly owned subsidiary,
Life Newco, Inc., a Delaware corporation (“Life
Newco”), to acquire 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”). On November 13, 2013, under the terms and
subject to the conditions of the Asset Purchase Agreement, Life
Newco acquired certain assets, including a license granting Life
Newco an exclusive, sublicenseable 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.
Reverse Stock Split
The
Company initiated a 1-for-20 reverse stock split effective February
23, 2018 at 5:00 p.m. All shares and per share amounts in these
Consolidated Financial Statements and notes thereto have been
retroactively adjusted to give effect to the reverse stock
split.
Going Concern
Management
believes the accompanying financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States of America (“GAAP”), which contemplate
continuation of the Company as a going concern. The Company has an
accumulated deficit of $236,168,436 and $227,801,743 at December
31, 2019 and 2018, respectively, and used cash in operations of
$7,556,177 and $5,499,461 during the years ended December 31, 2019
and 2018, respectively. The Company requires substantial additional
funds to complete clinical trials and pursue regulatory approvals.
Management is actively seeking additional sources of equity and/or
debt financing; however, there is no assurance that any additional
funding will be available.
In view
of the matters described above, recoverability of a major portion
of the recorded asset amounts shown in the accompanying December
31, 2019 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.
NOTE B—SUMMARY OF CRITICAL 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.
35
Principles of Consolidation
The
accompanying consolidated financial statements include the accounts
and transactions of Tenax Therapeutics, Inc. and
Life Newco, Inc. All material intercompany
transactions and balances have been eliminated in
consolidation
.
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 are $250,000 per depositor per insured bank. The
Company had cash balances of $4,533,976 and $11,876,765 uninsured
by the FDIC as of December 31, 2019 and 2018,
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 $6,180,829
and $13,320,240 and working capital of $3,648,434 and $11,754,571
as of December 31, 2019 and 2018, respectively.
Cash
resources, including the fair value of the Company’s
available for sale marketable securities as of December 31, 2019
were approximately $5.4 million, compared to approximately $12.9
million as of December 31, 2018.
The
Company expects to continue to incur expenses related to
development of levosimendan for pulmonary hypertension and other
potential indications, as well as identifying and developing other
potential product candidates. Based on its resources at December
31, 2019, and including the net proceeds from its March 2020
offering, the Company believes that it has sufficient capital to
fund its planned operations through the third quarter of calendar
year 2020. 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 assure that it will be able to secure such
additional financing, or if available, that it will be sufficient
to meet its needs.
The continued spread of COVID-19 globally could adversely affect
the Company’s clinical trial operations, including its
ability to recruit and retain patients, principal investigators and
site staff who, as healthcare providers, may have heightened
exposure to COVID-19 if an outbreak occurs in their geography.
Further, some patients may be unable to comply with clinical trial
protocols if quarantines or travel restrictions impede patient
movement or interrupt healthcare services, or if the patients
become infected with COVID-19 themselves, which would delay the
Company’s ability to complete its phase 2 clinical trial or
release its clinical trial results.
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.
Deferred financing costs
Deferred
financing costs represent legal, due diligence and other direct
costs incurred to raise capital or obtain debt. Direct costs
include only “out-of-pocket” or incremental costs
directly related to the effort, such as a finder’s fee and
accounting and legal fees. These costs will be capitalized if the
efforts are successful or expensed when unsuccessful. Indirect
costs are expensed as incurred. Deferred financing costs related to
debt are amortized over the life of the debt. Deferred financing
costs related to issuing equity are charged to Additional Paid-in
Capital.
Derivative financial instruments
The
Company does not use derivative instruments to hedge exposures to
cash flow, market or foreign currency risk. Terms of convertible
promissory note instruments and other convertible equity
instruments are reviewed to determine whether or not they contain
embedded derivative instruments that are required under Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 815, Derivatives and
Hedging (“ASC 815”) to be accounted for separately from
the host contract and recorded on the balance sheet at fair value.
The fair value of derivative liabilities, if any, is required to be
revalued at each reporting date, with corresponding changes in fair
value recorded in current period operating results.
36
Freestanding
warrants issued by the Company in connection with the issuance or
sale of debt and equity instruments are considered to be derivative
instruments and are evaluated and accounted for in accordance with
the provisions of ASC 815.
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 conduct and manage preclinical and
clinical trials on its 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.
|
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 following estimated useful lives:
|
Laboratory
equipment
|
3
– 5 years
|
|
Office
equipment
|
5
years
|
|
Office
furniture and fixtures
|
7
years
|
|
Computer
equipment and software
|
3
years
|
|
Leasehold
improvements
|
Shorter
of useful life or remaining lease term
|
Maintenance
and repairs are charged to expense as incurred, and improvements to
leased facilities and equipment are capitalized.
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; (ii) the cost of 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) depreciation and other
allocated expenses, which include direct and allocated expenses for
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 awards to employees in accordance
with ASC 718, Compensation — Stock Compensation, which
provides 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.
37
The
Company accounts for equity instruments issued to non-employees in
accordance with ASC 505-50, Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services. Equity instruments issued to
non-employees are recorded at their fair value on the measurement
date and are subject to periodic adjustment as the underlying
equity instruments vest.
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
preferred 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,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
Warrants
to purchase common stock
|
10,519,945
|
10,690,718
|
|
Options
to purchase common stock
|
244,206
|
241,735
|
|
Convertible
preferred shares outstanding
|
38,606
|
2,854,593
|
|
Restricted
stock grants
|
-
|
19,914
|
Operating Leases
The
Company determines 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, 2019. 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, under which
the Company will recognize those lease payments in the consolidated
statements of operations and comprehensive loss on a straight-line
basis over the lease term.
Prior
period amounts continue to be reported in accordance with the
Company’s historic accounting under previous lease guidance,
see “Recent Accounting Pronouncements” below, for more
information about the impact of the adoption of the new lease
standard.
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board
(“FASB”) issued an accounting standard intended to
simplify accounting for income taxes. It removes certain exceptions
to the general principles in Topic 740, Income Taxes and amends
existing guidance to improve consistent application. This guidance
is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2020 and early adoption
is permitted. The Company is currently evaluating this standard,
but it does not believe the adoption of the new guidance will have
a material impact on its consolidated financial
statements.
In June 2016, the FASB issued an accounting standard that amends
how credit losses are measured and reported for certain financial
instruments that are not accounted for at fair value through net
income. This standard requires that credit losses be presented as
an allowance rather than as a write-down for available-for-sale
debt securities and will be effective for interim and annual
reporting periods beginning January 1, 2023, with early
adoption permitted. A modified retrospective approach is to be used
for certain parts of this guidance, while other parts of the
guidance are to be applied using a prospective approach. The
Company does not believe the adoption of this standard will have a
material impact on its consolidated financial statements and
related disclosures.
38
In February 2016, the FASB issued an accounting standard intended
to improve financial reporting regarding leasing transactions. The
standard requires the Company to recognize on its balance sheet the
assets and liabilities for the rights and obligations created by
all leased assets. The standard also requires it to provide
enhanced disclosures designed to enable users of financial
statements to understand the amount, timing, and uncertainty of
cash flows arising from all leases, operating and capital, with
lease terms greater than 12 months. The standard was effective for
financial statements beginning after December 15, 2018, and interim
periods within those annual periods. Early adoption was
permitted.
The Company adopted this standard on January 1, 2019, using
the required modified-retrospective approach as of the effective
date. The Company elected the package of practical expedients
permitted under the transition guidance within the new standard,
which among other things, allows it to carryforward the historical
lease classification. The Company made an accounting policy
election to account for leases with an initial term of 12 months or
less similar to previous guidance for operating leases, under which
the Company recognizes those lease payments in the consolidated
statements of operations and comprehensive loss on a straight-line
basis over the lease term. Results for the year ended December 31,
2018 continue to be reported in accordance with historical
accounting under previous lease guidance, ASC Topic 840,
Leases.
The Company recorded a net reduction of $27,670 to opening
accumulated deficit as of January 1, 2019, due to the cumulative
impact of adopting the new leasing standard, with the impact
relating to a change in the classification of the Company’s
office space. The adoption of the lease standard did not have a
material impact on the Company’s condensed consolidated
balance sheets. The table below summarizes the impact of adopting
the new standard on its condensed consolidated balance sheet as of
January 1, 2019.
|
|
As Previously Reported
|
New Lease Standard Adjustment
|
As Adjusted
|
|
Operating
lease right-of-use asset
|
$
-
|
$
271,710
|
$
271,710
|
|
Operating
lease liabilites
|
$
-
|
$
271,710
|
$
271,710
|
|
Deferred
lease liabilities
|
$
27,670
|
$
(27,670
)
|
$
-
|
Fair Value
The
Company determines the fair value of its financial assets and
liabilities in accordance with the ASC 820, Fair Value
Measurements. The Company’s balance sheet includes the
following financial instruments: cash and cash equivalents,
investments in marketable securities and warrant liabilities. 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.” 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.
39
Investments in Marketable Securities
The
Company classifies all of its investments as available-for-sale.
Unrealized gains and losses on investments are recognized in
comprehensive income/(loss), unless an unrealized loss is
considered 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.
The
Company recognized a gain of $66 and a loss of $10,439 for the
years ended December 31, 2019 and 2018, respectively.
Investments
with original maturities at date of purchase beyond three months
and which mature at or less than 12 months from the balance sheet
date are classified as current. Investments with a maturity beyond
12 months from the balance sheet date are classified as long-term.
At December 31, 2019, the Company believes that the costs of its
investments are recoverable in all material respects.
The
following tables summarize the fair value of the Company’s
investments by type. The estimated fair value of the
Company’s fixed income investments is classified as Level 2
in the fair value hierarchy as defined in GAAP. These fair values
are obtained from independent pricing services which utilize Level
2 inputs:
|
|
December 31, 2019
|
||||
|
|
Amortized Cost
|
Accrued Interest
|
Gross Unrealized Gains
|
Gross Unrealized losses
|
Estimated Fair Value
|
|
Corporate
debt securities
|
$
490,741
|
$
2,687
|
$
555
|
$
(99
)
|
$
493,884
|
|
Total
investments
|
$
490,741
|
$
2,687
|
$
555
|
$
(99
)
|
$
493,884
|
The
following table summarizes the scheduled maturity for the
Company’s investments at December 31, 2019 and 2018,
respectively:
|
|
December 31, 2019
|
December 31, 2018
|
|
Maturing
in one year or less
|
$
493,884
|
$
494,633
|
|
Maturing
after one year through three years
|
-
|
-
|
|
Total
investments
|
$
493,884
|
$
494,633
|
40
The
following tables summarize information regarding assets and
liabilities measured at fair value on a recurring basis as of
December 31, 2019 and December 31, 2018:
|
|
|
Fair Value Measurements at Reporting Date Using
|
||
|
|
Balance as of
December 31,
2019
|
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
|
$
4,905,993
|
$
4,905,993
|
$
-
|
$
-
|
|
Marketable
securities
|
$
493,884
|
$
-
|
$
493,884
|
$
-
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||
|
|
Balance as of
December 31,
2018
|
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
|
$
12,367,321
|
$
12,367,321
|
$
-
|
$
-
|
|
Marketable
securities
|
$
494,633
|
$
-
|
$
494,633
|
$
-
|
There
were no significant transfers between levels during the year ended
December 31, 2019.
NOTE C—BALANCE SHEET COMPONENTS
Property and equipment, net
Property
and equipment consist of the following:
|
|
December 31,
2019
|
December 31,
2018
|
|
Office
furniture and fixtures
|
$
130,192
|
$
130,192
|
|
Computer
equipment and software
|
80,669
|
96,593
|
|
Laboratory
equipment
|
-
|
354,861
|
|
|
210,861
|
581,646
|
|
Less:
Accumulated depreciation
|
(204,302
)
|
(573,121
)
|
|
|
$
6,559
|
$
8,525
|
41
Depreciation
and amortization expense were $5,017 and $9,015 for the years ended
December 31, 2019 and 2018, respectively.
Accrued liabilities
Accrued
liabilities consist of the following:
|
|
December 31,
2019
|
December 31,
2018
|
|
Operating
costs
|
$
426,115
|
$
244,456
|
|
Lease
liability
|
111,353
|
-
|
|
Employee
related
|
333,873
|
571,399
|
|
|
$
871,341
|
$
815,855
|
NOTE D—STOCKHOLDERS’ EQUITY
Preferred Stock
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 A Stock
On
December 11, 2018, the Company closed its underwritten offering of
5,181,346 units for net proceeds of approximately $9 million. Each
unit consists of (a) one share of the Company’s Series A
convertible preferred stock, par value $0.0001 per share (the
“Series A Stock”), (b) a two-year warrant to purchase
one share of common stock at an exercise price of $1.93 (the
“Series 1 Warrants”), and (c) a five-year warrant to
purchase one share of common stock at an exercise price of $1.93
(the “Series 2 Warrants”).
In accordance with
ASC 480, the estimated fair-value of $1,800,016 for the beneficial
conversion feature was recognized as a deemed dividend on the
Series A Stock during the year ended December 31, 2018
.
The
table below sets forth a summary of the designation, powers,
preferences and rights of the Series A Stock.
|
Conversion
|
Subject to the ownership limitations described below, the Series A
Stock is convertible at any time at the option of the holder into
shares of the Company’s common stock at a conversion ratio
determined by dividing the stated value of the Series A Stock by a
conversion price of $1.93 per share. The conversion price is
subject to adjustment in the case of stock splits, stock dividends,
combinations of shares and similar recapitalization
transactions.
The
Company will not affect any conversion of the
Series A Stock
, nor shall a holder convert
its shares of
Series A Stock
,
to the extent that such conversion would cause the holder to have
acquired, through conversion of the
Series A
Stock or otherwise, beneficial
ownership of a number shares of common stock in excess of 4.99%
(or, at the election of the holder prior to the issuance of any
shares of Series A Stock, 9.99%) of the common stock outstanding
after giving effect to such exercise.
|
|
Dividends
|
In the event the Company pays dividends on its shares of common
stock, the holders of the Series A Stock will be entitled to
receive dividends on shares of Series A Stock equal, on an
as-if-converted basis, to and in the same form as paid on the
common stock. No other dividends will be paid on the shares of
Series A Stock.
|
|
Liquidation
|
Upon any liquidation, dissolution or winding up of the Company
after payment or provision for payment of debts and other
liabilities of the Company, the holders of Series A Stock shall be
entitled to be paid out of the assets of the Company available for
distribution to its stockholders an amount equal to the amount that
a holder of common stock would receive if the Series A Stock were
fully converted to common stock, which amounts will be paid pari
passu with all holders of common stock.
|
|
Voting rights
|
Shares
of Series A Stock will generally have no voting rights, except as
required by law and except that the consent of holders of a
majority of the then outstanding Series A Stock will be required to
amend the terms of the Series A Stock or to take other action that
adversely affects the rights of the holders of Series A
Stock
.
|
42
During
the years ended December 31, 2019 and 2018, 2,815,987 and 2,326,753
shares of
Series A Stock
were
converted into 2,815,987 and 2,326,753 shares of common stock,
respectively.
As of
December 31, 2019, there were 38,606 shares of
Series A
Stock outstanding.
Common Stock
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, 2019, and December 31, 2018 there were 6,741,860 and
3,792,249 shares of common stock issued and outstanding,
respectively.
Warrants
Series 1 Warrants
As part of the offering of Series A Stock, the Company issued
5,181,346 Series 1 Warrants at an exercise price of $1.93 per share
and contractual term of two years
. In accordance with ASC
480, these warrants are classified as equity and their relative
fair-value of $2,621,809 was recognized as a deemed dividend on the
Series A Stock during the year ended December 31, 2018
. 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.
During the year ended December 31, 2019, the Company received
$96,500 and issued 50,000 shares upon the exercise of outstanding
Series 1 Warrants.
As of December 31, 2019, there were 5,131,346 Series 1 Warrants
outstanding .
Series 2 Warrants
As part of the offering of Series A Stock, the Company issued
5,181,346 Series 2 Warrants at an exercise price of $1.93 per share
and contractual term of five years
. In accordance with ASC
480, these warrants are classified as equity and their relative
fair-value of $2,908,778 was recognized as a deemed dividend on the
Series A Stock during the year ended December 31, 2018
. 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.
As of December 31, 2019, all 5,181,349 Series 2 Warrants remain
outstanding.
Warrants Issued for Services
In connection with the offering of Series A Stock described above,
the Company entered into an Underwriting Agreement (the
“Underwriting Agreement”) with Ladenburg Thalmann &
Co. Inc. (the “Underwriter”) pursuant to which, on
December 7, 2018, the Company issued to the Underwriter a warrant
to purchase 207,253 shares of common stock at an exercise price of
$2.4125 per share and contractual term of five years
. In
accordance with ASC 815, this warrant is classified as equity and
its relative fair-value of $183,433 was recognized as additional
paid in capital during the year ended December 31, 2018
. 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 warrant, risk-free interest rates, expected
dividends and expected volatility of the price of the underlying
common stock.
As of December 31, 2019, all 207,253 of these Underwriter warrants
remain outstanding.
On
November 11, 2014, the Company issued common stock warrants in
connection with the execution of a service agreement for investor
relations and corporate communications. As part of the compensation
under the agreement, the Company issued up to 8,750 warrants at an
exercise price of $80.00 per share and contractual term of five
years. The warrants were initially exercisable for 1,250 shares of
common stock, and the number of shares of common stock exercisable
under these warrants would be automatically increased by 2,500 upon
the first occurrence of market price goals of $120.00, $160.00 and
$200.00, respectively, during the 18-month period beginning on the
effective date. Effective May 11, 2016, the additional 7,500
warrants were no longer exercisable as none of the market price
goals were achieved. In accordance with ASC 815, these warrants are
classified as equity and their estimated fair-value of $478,115 was
recorded as an operating expense in the consolidated statement of
operations and as additional paid in capital during the fiscal year
ended April 30, 2015. The estimated fair value was 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.
43
During
the year ended December 31, 2019, all of the 1,250 previously
outstanding service agreement warrants expired
unexercised.
Series D Warrant
On August 22, 2013, the Company closed its private placement of an
aggregate of $4.6 million 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 117,949 shares of common stock at an exercise price
equal to $52.00 and contractual term of six years
. In
accordance with ASC 815, these warrants are classified as equity
and their relative fair-value of $1,531,167 was recognized as a
deemed dividend on the Series D Stock during the prior fiscal year
ended April 30, 2014
. 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.
The
Series D
Warrant was
exercisable beginning on the date of issuance and expired on August
22, 2019. The exercise price and the number of shares
issuable upon exercise of
Series D
Warrant was subject to appropriate adjustment in
the event of recapitalization events, stock dividends, stock
splits, stock combinations, reclassifications, reorganizations or
similar events affecting the Company’s common stock, and also
upon any distributions of assets, including cash, stock or other
property to the Company’s stockholders. In
addition, if stockholder approval for the transaction was obtained,
the
Series D
Warrant would be
subject to anti-dilution provisions until such time that for 25
trading days during any 30 consecutive trading day period, the
volume weighted average price of the Company’s common stock
exceeded $130.00 and the daily dollar trading volume exceeds
$350,000 per trading day.
The
Series D
Warrant was issued
and sold without registration under the Securities Act in reliance
on the exemptions provided by Section 4(a)(2) of the Securities Act
and/or Regulation D promulgated thereunder and in reliance on
similar exemptions under applicable state
laws. Accordingly, OXBT Fund could exercise the Series D
Warrant and sell the
Series D
Stock and underlying shares only pursuant to an
effective registration statement under the Securities Act covering
the resale of those securities, an exemption under Rule 144 under
the Securities Act or another applicable exemption under the
Securities Act.
During
the year ended December 31, 2019, all of the 107,488 previously
outstanding Series D Warrants expired unexercised.
Series C Warrants
On July 23, 2013, as part of the offering of Series C Stock, the
Company issued 137,668 Series C Warrants at an exercise price of
$52.00 per share and contractual term of six years
. In
accordance with ASC 815, these warrants are classified as equity
and their relative fair-value of $1,867,991 was recognized as a
deemed dividend on the Series C Stock during the prior fiscal year
ended April 30, 2014
. 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.
During
the year ended December 31, 2019, all of the 12,035 previously
outstanding Series C Warrants expired unexercised
The
following table summarizes the Company’s warrant activity for
the years ended December 31, 2019 and December 31,
2018:
|
|
Warrants
|
Weighted Average
Exercise Price
|
|
Outstanding
at December 31, 2017
|
120,773
|
$
52.29
|
|
Issued
|
10,569,945
|
1.94
|
|
Outstanding
at December 31, 2018
|
10,690,718
|
$
2.45
|
|
Exercised
|
(50,000
)
|
1.93
|
|
Expired
|
(120,773
)
|
47.30
|
|
Outstanding
at December 31, 2019
|
10,519,945
|
$
1.94
|
44
Stock Options
The
following table summarizes all options outstanding as of December
31, 2019:
|
|
Options Outstanding at December 31, 2019
|
Options Exercisable and Vested at December 31, 2019
|
||
|
Exercise Price
|
Number of Options
|
Weighted Average Remaining Contractual Life (Years)
|
Number of Options
|
Weighted Average Exercise Price
|
|
$1.72
to $11.20
|
68,500
|
8.2
|
23,500
|
$
7.78
|
|
$41.40
to $96.40
|
40,251
|
5.4
|
35,377
|
$
58.25
|
|
$113.00
to $860.00
|
135,413
|
0.3
|
68,423
|
$
114.68
|
|
$1,012.00
to $2,580.00
|
42
|
0.5
|
42
|
$
1,580.00
|
|
|
244,206
|
3.4
|
127,342
|
$
79.76
|
The
following table summarizes options outstanding that have vested and
are expected to vest based on options outstanding as of December
31, 2019:
|
|
Number of Option Shares
|
Weighted Average Exercise Price
|
Aggregate Intrinsic Value (1)
|
Weighted Average Remaining Contractual Life (Years)
|
|
Vested
|
127,342
|
$
79.76
|
$
-
|
3.4
|
|
Vested
and expected to vest
|
231,355
|
$
74.91
|
$
-
|
3.5
|
(1)
Amount represents
the difference between the exercise price and $1.41, the closing
price of Tenax Therapeutics’ stock on December 31, 2019, as
reported on the Nasdaq Capital Market, for all in-the-money options
outstanding.
2016 Stock Incentive Plan
In June
2016, the Company adopted the 2016 Stock Incentive Plan (the
“2016 Plan”). 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.
On June 16, 2016, the Company’s stockholders approved the
2016 Plan and authorized for issuance under the 2016 Plan a total
of 150,000 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 750,000 shares, up from
150,000 previously authorized.
45
The
following table summarizes the shares available for grant under the
Plan for the years ended December 31, 2019 and 2018:
|
|
Shares Available for Grant
|
|
Balances, at December 31, 2017
|
150,000
|
|
Options
granted
|
(50,000
)
|
|
Balances, at December 31, 2018
|
100,000
|
|
Additional
shares reserved
|
600,000
|
|
Options
granted
|
(2,500
)
|
|
Balances, at December 31, 2019
|
697,500
|
2016 Plan Stock Options
Stock
options granted under the 2016 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 2016 Plan may be granted with a term of up to ten
years and at prices no less than fair market value at the time of
grant. Stock options granted generally vest over three to four
years.
The following table summarizes the outstanding stock options under
the 2016 Plan
for the years ended December 31, 2019 and
2018:
|
|
Outstanding Options
|
|
|
|
|
Number of Shares
|
Weighted Average Exercise Price
|
Aggregate Intrinsic Value
|
|
Balances at December 31, 2017
|
-
|
$
-
|
|
|
Options
granted
|
50,000
|
$
6.10
|
|
|
Balances at December 31, 2018
|
50,000
|
$
6.10
|
|
|
Options
granted
|
2,500
|
$
1.72
|
|
|
Balances at December 31, 2019
|
52,500
|
$
5.89
|
$
-(1)
|
(1)
Amount represents
the difference between the exercise price and $1.41, the closing
price of Tenax Therapeutics’ stock on December 31, 2019, as
reported on the Nasdaq Capital Market, for all in-the-money options
outstanding.
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.
46
The
Company used the following assumptions to estimate the fair value
of options granted under the 2016 Plan for the years ended December
31, 2019 and 2018:
|
|
For the year ended December 31,
|
|
|
|
2019
|
2018
|
|
Risk-free
interest rate (weighted average)
|
2.39
%
|
2.85
%
|
|
Expected
volatility (weighted average)
|
106.74
%
|
102.37
%
|
|
Expected
term (in years)
|
7
|
7
|
|
Expected
dividend yield
|
0.00
%
|
0.00
%
|
|
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 with
its stock option grants.
|
|
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 does not anticipate paying any dividends in the near
future.
|
|
Forfeitures
|
As
stock-based compensation expense recognized in the statement of
operations for the years ended December 31, 2019 and 2018 is based
on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. ASC 718 requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.
Forfeitures were estimated based on the Company’s historical
experience.
|
The
weighted-average grant-date fair value of options granted during
the years ended December 31, 2019 and 2018 was $1.47 and $5.20,
respectively.
The Company recorded compensation expense for these stock options
grants of $92,919 and $89,194 for the years ended December 31, 2019
and 2018, respectively.
As of
December 31, 2019, there were unrecognized compensation costs of
approximately $72,000 related to non-vested stock option awards
under the 2016 Plan that will be recognized on a straight-line
basis over the weighted average remaining vesting period of 1.35
years.
1999 Amended 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 200,000
shares, up from 15,000 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 250,000 shares, up from 200,000 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.
47
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.
The following table summarizes the outstanding stock options under
the 1999 Plan
for the years ended December 31, 2019 and
2018:
|
|
Outstanding Options
|
|
|
|
|
Number of Shares
|
Weighted Average Exercise Price
|
Aggregate Intrinsic Value
|
|
Balances at December 31, 2017
|
188,744
|
$
95.24
|
|
|
Options
granted
|
3,000
|
$
6.23
|
|
|
Options
cancelled
|
(9
)
|
$
2,760.00
|
|
|
Balances at December 31, 2018
|
191,735
|
$
93.72
|
|
|
Options
cancelled
|
(29
)
|
$
2,203.00
|
|
|
Balances at December 31, 2019
|
191,706
|
$
93.40
|
$
-(1)
|
(1)
Amount represents
the difference between the exercise price and $1.41, the closing
price of Tenax Therapeutics’ stock on December 31, 2019, as
reported on the Nasdaq Capital Market, for all in-the-money options
outstanding.
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 the 1999 Plan for the year ended December
31, 2018:
|
|
For the year ended December 31,
2018
|
|
|
|
|
Risk-free
interest rate (weighted average)
|
2.91
%
|
|
Expected
volatility (weighted average)
|
102.63
%
|
|
Expected
term (in years)
|
7
|
|
Expected
dividend yield
|
0.00
%
|
|
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 historical experience that the Company has
had with its stock option grants.
|
|
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 do not anticipate paying any dividends in the near
future.
|
|
Forfeitures
|
As
stock-based compensation expense recognized in the statement of
operations for the years ended December 31, 2019 and 2018 is based
on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. ASC 718 requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.
Forfeitures were estimated based on the Company’s historical
experience.
|
48
The
weighted-average grant-date fair value of options granted during
the year ended December 31, 2018 was $5.19.
The Company recorded compensation expense for these stock options
grants of $78,297 and $227,066 for the years ended December 31,
2019 and 2018, respectively.
As of
December 31, 2019, there were unrecognized compensation costs of
approximately $40,000 related to non-vested stock option awards
that will be recognized on a straight-line basis over the weighted
average remaining vesting period of 0.9 years. Additionally, there
were unrecognized compensation costs of approximately $5.9 million
related to non-vested stock option awards subject to
performance-based vesting milestones with a weighted average
remaining life of four months. As of December 31, 2019, none of
these milestones have been achieved.
Restricted Stock Grants
The following table summarizes the outstanding restricted stock
under the 1999 Plan for the years ended December 31, 2019 and
2018
:
|
|
Outstanding Restricted Stock Grants
|
|
|
|
Number of Shares
|
Weighted Average Grant Date Fair Value
|
|
Balances, at December 31, 2017
|
-
|
$
-
|
|
Restricted
stock granted
|
85,900
|
$
5.82
|
|
Restricted
stock vested
|
(37,420
)
|
$
5.69
|
|
Restricted
stock cancelled
|
(28,566
)
|
$
5.66
|
|
Balances, at December 31, 2018
|
19,914
|
$
6.29
|
|
Restricted
stock vested
|
(12,195
)
|
$
6.28
|
|
Restricted
stock cancelled
|
(7,719
)
|
$
6.27
|
|
Balances at December 31, 2019
|
-
|
$
-
|
The Company recorded no compensation expense for these restricted
stock grants for the year ended December 31, 2019, and $250,009 for
the year ended December 31, 2018.
As of
December 31, 2019, there were no unrecognized compensation costs
related to the non-vested restricted stock grants.
NOTE E—COMMITMENTS AND CONTINGENCIES
Operating Leases
As
described above in “NOTE B- SUMMARY OF CRITICAL ACCOUNTING
POLICIES”, the Company adopted ASC 842 as of January 1, 2019.
Prior period amounts have not been adjusted and continue to be
reported in accordance with the Company’s historic accounting
under ASC 840.
In
January 2011, the Company entered into the Lease with Concourse
Associates, LLC for office facilities located at the premises in
Morrisville, North Carolina (the “Lease”). The
Lease was amended in August 2015 to extend the term for the 5,954
square foot rental. The current term began on March 1, 2016
and continues for 64 months to September 30, 2021. Rent payments
began on July 1, 2016, following the conclusion of a four-month
rent abatement period. The Company has two five-year options
to extend the Lease and a one-time option to terminate the Lease 36
months after the commencement of the initial term if no additional
space (“Expansion Space”) became available; none of
these optional periods have been considered in the determination of
the right-of-use asset or the lease liability for the Lease as the
Company did not consider it reasonably certain that it would
exercise any such options. The Lease further provides that
the Company is obligated to pay to the landlord certain variable
costs, including taxes and operating expenses. The Company also has
a right of first offer to lease the Expansion Space, of no less
than 1,000 square feet, as that additional space becomes available
adjacent to the premises over the remainder of the initial term of
the Lease, at the same rate per square foot as the current
premises, with an extension of the term of 60 additional months
starting at the commencement date of acquiring the Expansion
Space.
49
The
Company performed an evaluation of its other contracts with
customers and suppliers in accordance with ASC 842 and determined
that, except for the Lease described above, none of the
Company’s contracts contain a lease.
The
balance sheet classification of our lease liabilities was as
follows:
|
|
December 31,
2019
|
December 31,
2018
|
|
Current
portion included in accrued liabilities
|
$
111,353
|
$
-
|
|
Long
term lease liability
|
60,379
|
-
|
|
|
$
171,732
|
$
-
|
As of
December 31, 2019, the maturities of our operating lease
liabilities were as follows:
|
Year ending December 31,
|
|
|
2020
|
$
121,084
|
|
2021
|
61,803
|
|
Total
lease payments
|
$
182,887
|
|
Less:
Imputed interest
|
(11,155
)
|
|
Operating lease liability
|
$
171,732
|
Simdax license agreement
On November 13, 2013, the Company acquired,
through its
wholly owned subsidiary, Life Newco,
that certain
License Agreement (the
“License”), dated September 20, 2013 by and between
Phyxius and Orion Corporation, a global healthcare company
incorporated under the laws of Finland (“Orion”), and
that certain Side Letter, dated October 15, 2013 by and between
Phyxius and Orion. The License grants the Company
an exclusive, sublicenseable right to develop and
commercialize pharmaceutical products containing levosimendan (the
“Product”) in the United States and Canada (the
“Territory”) from Orion. Pursuant to the
License, the Company must use Orion’s
“Simdax®” trademark to commercialize the
Product. 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, i.e.
line extension products. 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, and certain
regulatory participation rights. 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 License has a
fifteen-year term, provided, however, that the License will
continue after the end of the 15-year term in each country in the
Territory until the expiration of Orion’s patent rights in
the Product in such country.
Pursuant to the terms of the License, the Company paid to Orion a
non-refundable up-front payment in the amount of $1.0
million. The License also includes the following
development milestones for which the Company shall make
non-refundable payments to Orion no later than 28 days after the
occurrence of the applicable milestone event: (i) $2.0 million upon
the grant of FDA approval, including all registrations, licenses,
authorizations and necessary approvals, to develop and/or
commercialize the Product in the United States; and (ii) $1.0
million upon the grant of regulatory approval for the Product in
Canada. Once commercialized, the Company is obligated to make
certain non-refundable commercialization milestone payments to
Orion, aggregating up to $13.0 million, contingent upon achievement
of certain cumulative net sales amounts in the
Territory. The Company must also pay Orion tiered
royalties based on net sales of the Product in the Territory made
by the Company and its sublicensees. After the end of the term of
the License, the Company must pay Orion a royalty based on net
sales of the Product in the Territory for as long as the Company
sells the Product in the Territory
.
As of
December 31, 2019, the Company has not met any of the developmental
milestones and, accordingly, has not recorded any liability for the
contingent payments due to Orion.
50
In June
2019, Orion filed a request for arbitration against the Company
seeking
a
declaration regarding the correct interpretation of the line
extension provisions of the License and whether or not such
provisions apply to the oral form of levosimendan recently
developed by Orion. Additionally, Orion requested the Company
reimburse Orion for all legal fees associated with the arbitration.
The Company submitted its response to the request for arbitration
and rejected Orion’s position that the oral formation was not
a line extension product under the License and requested Orion
reimburse the Company for all legal fees associated with the
arbitration.
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.
NOTE F—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 18 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. The 401(k) Plan is managed by a third-party
trustee.
For the
years ended December 31, 2019 and 2018, the Company recorded
$68,587 and $63,647 for matching contributions expense,
respectively.
NOTE G—INCOME TAXES
The
Company has not recorded any income tax expense (benefit) for the
period ended December 31, 2019 due to its history of net operating
losses.
The
reconciliation of income tax expense (benefit) at the statutory
federal income tax rate of 21% for the periods ended December 31,
2019 and December 31, 2018 is as follows:
|
|
December 31,
|
|
|
|
2019
|
2018
|
|
U.S.
federal tax benefit at statutory rate
|
$
(1,762,816
)
|
$
(2,970,250
)
|
|
State
income tax benefit, net of federal benefit
|
(165,789
)
|
(246,376
)
|
|
Stock
compensation
|
37,761
|
68,249
|
|
Interest
|
-
|
1,667,118
|
|
Other
nondeductible, including goodwill impairment
|
1,373
|
1,257
|
|
Change
in state tax rate
|
27,945
|
45,864
|
|
Change
in the federal tax rate
|
-
|
-
|
|
Federal
and state net operating loss adjustments
|
234,659
|
451,652
|
|
Other,
including effect of tax rate brackets
|
(17,043
)
|
(31,810
)
|
|
Change
in valuation allowance
|
1,643,910
|
1,014,296
|
|
|
$
-
|
$
-
|
51
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
|
2019
|
2018
|
|
Net
operating loss carryforwards
|
$
34,933,500
|
$
33,283,250
|
|
Accruals
and other
|
498,572
|
509,069
|
|
Capital
loss carryforwards
|
16,908
|
16,708
|
|
Valuation
allowance
|
(35,440,205
)
|
(33,796,295
)
|
|
Net
deferred tax assets
|
8,775
|
12,732
|
|
Deferred
Tax Liabilities
|
|
|
|
Other
liabilities
|
(8,775
)
|
(12,732
)
|
|
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. The net
increase in the valuation allowance during 2019 was approximately
$1.6 million.
As of
December 31, 2019, the Company had federal and state net operating
loss carryforwards of approximately $145.1 million and $117.5
million available to offset future federal and state taxable
income, respectively. Federal net operating losses of $130.4
million begin to expire in 2021, while the remaining $14.7 million
carryforward indefinitely. State net operating losses begin to
expire in 2024.
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 and similar state
provisions. The annual limitations may result in the expiration of
the net operating losses before utilization.
Management
has evaluated all other tax positions that could have a significant
effect on the financial statements and determined the Company had
no uncertain income tax positions at December 31,
2019.
The
Company files U.S. and state income tax returns with varying
statutes of limitations. The tax years 2001 and forward remain open
to examination due to the carryover of unused net operating losses
or tax credits.
NOTE H—SUBSEQUENT EVENTS
On
March 11, 2020, the Company entered into a definitive agreement
with a single healthcare-focused institutional investor for the
issuance and sale of 750,000 shares of its common stock at a
purchase price of $1.1651 per share and pre-funded warrants to
purchase up to 1,610,313 shares of its common stock, at a purchase
price of $1.1650 per pre-funded warrant (which represents the per
share offering price for the common stock less the $0.0001, the
exercise price of each pre-funded warrant), for gross proceeds of
approximately $2.75 million, in a registered direct offering priced
at-the-market under Nasdaq rules. Additionally, in a concurrent
private placement, the Company also agreed to issue to the investor
unregistered warrants to purchase up to 2,360,313 shares of its
common stock. The unregistered warrants have an exercise price of
$1.04 per share and exercise period commencing immediately upon the
issuance date and a term of five and one-half years. The offering
closed on March 13, 2020.
The
Company agreed to pay H.C. Wainwright & Co., LLC (the
“Placement Agent”), a cash fee equal to 7.5% of the
gross proceeds of the offerings, totaling approximately $206,250.
The Company also agreed to pay the Placement Agent $75,000 for
non-accountable expenses, a management fee equal to 1.0% of the
gross proceeds and up to $12,900 for clearing fees. In addition,
the Company issued designees of the Placement Agent warrants to
purchase 177,023 shares of common stock (representing 7.5% of the
aggregate number of shares of common stock (or common stock
equivalents) sold in the offerings). The Placement Agent warrants
have substantially the same terms as the unregistered warrants,
except that the Placement Agent warrants have an exercise price
equal to $1.4564, or 125% of the offering price per share of common
stock, and will be exercisable for five years from the effective
date of the offerings.
52
The
shares of common stock and pre-funded warrants offered in the
registered direct offering (including the shares of common stock
underlying the pre-funded warrants) were offered and sold by the
Company pursuant to a “shelf” registration statement on
Form S-3, which was declared effective by the Securities and
Exchange Commission (the “SEC”) on May 23, 2018. The
unregistered warrants described above were offered in a private
placement under Section 4(a)(2) of the Securities Act of 1933, as
amended (the “Securities Act”), and Regulation D
promulgated thereunder and, along with the shares of common stock
underlying the warrants, have not been registered under the
Securities Act, or applicable state securities laws.
The net
proceeds from the offerings, after deducting placement agent fees
and other direct offering expenses were approximately $2.125
million. The Company intends to use the net proceeds to further its
clinical trials of levosimendan, for research and development and
general corporate purposes, including working capital and potential
acquisitions.
I
TEM 9—CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
I
TEM 9A—CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our
disclosure controls and procedures, as defined in Rule 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, are designed to ensure that
information required to be disclosed in reports filed or submitted
under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in rules and forms
adopted by the SEC, and that such information is accumulated and
communicated to management, including the Chief Executive Officer
and Chief Financial Officer, to allow timely decisions regarding
required disclosures.
Management,
with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period
covered by this Form 10-K. Based on such evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of
December 31, 2019, our disclosure controls and procedures were
effective at the reasonable assurance level.
Changes in Internal Controls over Financial Reporting
From time to time,
we may review and make changes to our internal control over
financial reporting that are intended to enhance the effectiveness
of our internal control over financial reporting and which do not
have a material effect on our overall internal control over
financial reporting. During the three months ended December 31,
2019, we made no changes to our internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act, that we believe materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
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 rules promulgated under the
Exchange Act, is a process designed by, or under the supervision
of, our Chief Executive Officer and 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 Consolidated 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 Consolidated 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 Consolidated Financial
Statements.
|
53
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, 2019. In making its
assessment, management used the criteria established by the
Committee of Sponsoring Organizations of the Treadway Commission,
or COSO, 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,
2019.
I
TEM 9B—OTHER INFORMATION
There
is no information to report under this item for the quarter ended
December 31, 2019.
54
PART III
I
TEM 10— DIRECTORS, EXECUTIVE OFFICERS, AND
CORPORATE GOVERNANCE
The
information required by this item is incorporated by reference to
our Proxy Statement for our 2020 Annual Meeting of Stockholders,
which will be filed with the SEC within 120 days after the end of
fiscal 2019.
I
TEM 11— EXECUTIVE COMPENSATION
The
information required by this item is incorporated by reference to
our Proxy Statement for our 2020 Annual Meeting of Stockholders,
which will be filed with the SEC within 120 days after the end of
fiscal 2019.
I
TEM 12— SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
information required by this item is incorporated by reference to
our Proxy Statement for our 2020 Annual Meeting of Stockholders,
which will be filed with the SEC within 120 days after the end of
fiscal 2019.
I
TEM 13— CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE
The
information required by this item is incorporated by reference to
our Proxy Statement for our 2020 Annual Meeting of Stockholders,
which will be filed with the SEC within 120 days after the end of
fiscal 2019.
I
TEM 14— PRINCIPAL ACCOUNTANT FEES AND
SERVICES
The
information required by this item is incorporated by reference to
our Proxy Statement for our 2020 Annual Meeting of Stockholders,
which will be filed with the SEC within 120 days after the end of
fiscal 2019.
55
PART IV
I
TEM 15—EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(A)(1)
The Consolidated Financial Statements and information listed below
are included in this report in Part II, Item 8.
|
-
|
Report
of Independent Registered Public Accounting Firm.
|
|
-
|
Consolidated
Balance Sheets as of December 31, 2019 and December 31,
2018.
|
|
-
|
Consolidated
Statements of Operations and Comprehensive Loss for the years ended
December 31, 2019 and 2018.
|
|
-
|
Consolidated
Statements of Stockholders’ Equity for the years ended
December 31, 2019 and 2018.
|
|
-
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2019 and
2018.
|
|
-
|
Notes
to the Consolidated Financial Statements.
|
(A)(2)
No schedules have been included because they are not applicable, or
the required information is shown in our Consolidated Financial
Statements or our notes thereto.
(A)(3)
The following exhibits have been or are being filed herewith and
are numbered in accordance with Item 601 of Regulation
S-K:
|
Exhibit No.
|
|
Exhibits Required by Item 601 of Regulation S-K
|
|
|
Agreement and Plan
of Merger between Synthetic Blood International, Inc. and Oxygen
Biotherapeutics, Inc. dated April 28, 2008 (incorporated herein by
reference to Exhibit 2.01 to our current report on Form 8-K filed
with the SEC on June 30, 2008)
|
|
|
|
|
|
|
|
Asset
Purchase Agreement by and between Oxygen Biotherapeutics, Inc.,
Life Newco, Inc., Phyxius Pharma, Inc., and the stockholders of
Phyxius Pharma, Inc. dated October 21, 2013 (incorporated herein by
reference to Exhibit 2.1 to our current report on Form 8-K filed
with the SEC on October 25, 2013)
|
|
|
|
|
|
|
|
Certificate of
Incorporation (incorporated herein by reference to Exhibit 3.01 to
our current report on Form 8-K filed with the SEC on June 30,
2008)
|
|
|
|
|
|
|
|
Certificate of
Amendment of the Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1 to our current report on Form 8-K filed
with the SEC on November 13, 2009)
|
|
|
|
|
|
|
|
Certificate of
Amendment of the Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1 to our
current report on Form 8-K filed with the SEC on
May 15, 2013
)
|
|
|
|
|
|
|
|
Certificate of
Amendment of the Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.4 to our quarterly report on Form 10-Q
filed with the SEC on December 15, 2014)
|
|
|
|
|
|
|
|
Certificate of
Amendment of the Certificate of Incorporation (incorporated herein
by reference to Exhibit 3.1 to our current report on Form 8-K filed
with the SEC on February 23, 2018)
|
|
|
|
|
|
|
|
Certificate of
Designation of Series A Convertible Preferred Stock (incorporated
herein by reference to Exhibit 4.1 to our current report on Form
8-K filed with the SEC on December 11, 2018)
|
56
|
|
|
|
|
|
Third
Amended and Restated Bylaws (incorporated herein by reference to
Exhibit 3.1 to our quarterly report on Form 10-Q filed with the SEC
on September 9, 2015)
|
|
|
|
|
|
|
|
Specimen Stock
Certificate (incorporated herein by reference to Exhibit 4.1 to our
annual report on Form 10-K filed with the SEC on July 23,
2010)
|
|
|
|
|
|
|
|
Agreement with
Leland C. Clark, Jr., Ph.D. dated November 20, 1992 with
amendments, Assignment of Intellectual Property/ Employment
(incorporated herein by reference to Exhibit 10.1 to our annual
report on Form 10-K filed with the SEC on August 13,
2004)
|
|
|
|
|
|
|
|
Agreement between
the Registrant and Keith R. Watson, Ph.D. Assignment of Invention
(incorporated herein by reference to Exhibit 10.2 to our annual
report on Form 10-K filed with the SEC on August 13,
2004)
|
|
|
|
|
|
|
|
Children’s
Hospital Research Foundation License Agreement dated February 28,
2001 (incorporated herein by reference to Exhibit 10.3 to our
annual report on Form 10-K filed with the SEC on August 13,
2004)
|
|
|
|
|
|
|
|
1999
Amended Stock Plan (as amended and restated in 2008) (incorporated
herein by reference to Exhibit 10.15 to our annual report on Form
10-K with the SEC on August 13, 2008) +
|
|
|
|
|
|
|
|
Amendment No. 1 to
Oxygen Biotherapeutics, Inc. 1999 Amended Stock Plan (incorporated
herein by reference to Exhibit 10.19 to our annual report on Form
10-K filed with the SEC on July 29, 2014) +
|
|
|
|
|
|
|
|
Amendment No. 2 to
Oxygen Biotherapeutics, Inc. 1999 Amended Stock Plan (incorporated
herein by reference to Exhibit 10.20 to our annual report on Form
10-K filed with the SEC on July 29, 2014) +
|
|
|
|
|
|
|
|
Form of
Option issued to Executive Officers and Directors (incorporated
herein by reference to Exhibit 10.5 to our annual report on Form
10-K filed with the SEC on August 13, 2004) +
|
|
|
|
|
|
|
|
Form of
Option issued to Employees (incorporated herein by reference to
Exhibit 10.6 to our annual report on Form 10-K filed with the SEC
on August 13, 2004) +
|
|
|
|
|
|
|
|
Form of
Option Agreement with Form of Notice of Grant (incorporated herein
by reference to Exhibit 10.9 to our annual report on Form 10-K
filed with the SEC on March 16, 2017) +
|
|
|
|
|
|
|
|
2016
Stock Incentive Plan (incorporated herein by reference to Exhibit
10.1 to our quarterly report on Form 10-Q filed with the SEC on
August 9, 2016) +
|
|
|
|
|
|
|
|
Amendment No. 1 to
2016 Stock Incentive Plan (incorporated herein by reference to
Exhibit 10.1 to our quarterly report on Form 10-Q filed with the
SEC on August 14, 2019) +
|
|
|
|
|
|
|
|
Form of
Option issued to Non-Employee Directors under 2016 Stock Incentive
Plan (incorporated herein by reference to Exhibit 10.2 to our
quarterly report on Form 10-Q filed with the SEC on August 14,
2018) +
|
57
|
|
|
|
|
|
Form of
Option issued to Employees and Contractors under 2016 Stock
Incentive Plan (incorporated herein by reference to Exhibit 10.3 to
our quarterly report on Form 10-Q filed with the SEC on August 14,
2018) +
|
|
|
|
|
|
|
|
Form of
Incentive Stock Option Agreement under 2016 Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.4 to our quarterly
report on Form 10-Q filed with the SEC on August 14, 2018)
+
|
|
|
|
|
|
|
|
Second
Amended and Restated Employment Agreement with Michael Jebsen dated
November 13, 2013 (incorporated herein by reference to Exhibit 10.2
to our current report on Form 8-K filed with the SEC on November
19, 2013) +
|
|
|
|
|
|
|
|
First
Amendment to Second Amended and Restated Employment Agreement with
Michael Jebsen dated June 18, 2015 (incorporated herein by
reference to Exhibit 10.2 to our current report on Form 8-K filed
with the SEC on June 19, 2015) +
|
|
|
|
|
|
|
|
Employment
Agreement with Anthony DiTonno dated June 1, 2018 (incorporated
herein by reference to Exhibit 10.36 to our annual report on Form
10-K filed with the SEC on July 15, 2011) +
|
|
|
|
|
|
|
|
Form of
Indemnification Agreement (incorporated herein by reference to
Exhibit 10.36 to our annual report on Form 10-K filed with the SEC
on July 15, 2011) +
|
|
|
|
|
|
|
|
Description of
Non-Employee Director Compensation, effective June 15, 2015
(incorporated herein by reference to Exhibit 10.1 to our quarterly
report on Form 10-Q filed with the SEC on September 9, 2015)
+
|
|
|
|
|
|
|
|
Lease
Agreement for North Carolina corporate office (incorporated herein
by reference to Exhibit 10.6 to our quarterly report on Form 10-Q
filed with the SEC on March 21, 2011)
|
|
|
|
|
|
|
|
First
Amendment to Lease Agreement for North Carolina corporate office
(incorporated herein by reference to Exhibit 10.74 to our
transition report on Form 10-KT filed with the SEC on March 14,
2016)
|
|
|
|
|
|
|
|
Task
Order between the Company and NextPharma, dated November 15, 2011
(incorporated herein by reference to Exhibit 10.2 to our current
report on Form 8-K filed with the SEC on November 16,
2011)
|
|
|
|
|
|
|
|
Fluoromed Supply
Agreement (incorporated herein by reference to Exhibit 10.62 to our
annual report on Form 10-K filed with the SEC on July 25,
2012)
|
|
|
|
|
|
|
|
License
and Supply Agreement dated February 5, 2013, between Oxygen
Biotherapeutics, Inc. and Valor SA (incorporated herein by
reference to Exhibit 10.60 to our annual report on Form 10-K filed
with the SEC on July 29, 2014)
|
|
|
|
|
|
|
|
License
Agreement dated September 20, 2013 by and between Phyxius Pharma,
Inc. and Orion Corporation (incorporated herein by reference to
Exhibit 10.3 to our quarterly report on Form 10-Q filed with the
SEC on March 17, 2014)**
|
|
|
|
|
|
|
|
Sales
Agreement dated as of February 23, 2015, between Tenax
Therapeutics, Inc. and Cowen and Company, LLC (incorporated herein
by reference to Exhibit 10.72 to our annual report on Form 10-K
filed with the SEC on July 14, 2015)
|
|
|
|
|
|
58
|
|
Representative’s
Warrant to Purchase Shares of Common Stock (incorporated herein by
reference to Exhibit 4.2 to our current report on Form 8-K filed
with the SEC on December 11, 2018)
|
|
|
|
|
|
|
|
Form of
Warrant to Purchase Shares of Common Stock (incorporated herein by
reference to Exhibit 4.3 to our current report on Form 8-K filed
with the SEC on December 11, 2018)
|
|
|
|
|
|
|
|
Warrant
Agency Agreement (incorporated herein by reference to Exhibit 4.4
to our current report on Form 8-K filed with the SEC on December
11, 2018)
|
|
|
|
|
|
|
|
Subsidiaries of
Tenax Therapeutics, Inc. (incorporated herein by reference to
Exhibit 21.1 to our annual report on Form 10-K filed with the SEC
on July 14, 2015)
|
|
|
|
|
|
|
|
Consent
of Independent Registered Public Accounting Firm*
|
|
|
|
|
|
|
|
Power
of Attorney (contained on signature page)*
|
|
|
|
|
|
|
|
Certification of
Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
|
|
Certification of
Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
|
|
Certification of
Principal Executive Officer Pursuant to 18 U.S.C. Section
1350*
|
|
|
|
|
|
| 32.2 |
|
Certification of
Principal Financial Officer Pursuant to 18 U.S.C. Section
1350*
|
|
|
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
|
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
*
Filed
herewith.
**
Asterisks
located
within the exhibit denote information which has been redacted
pursuant to a request for confidential treatment filed with the
SEC.
+
Management contract
or compensatory plan or arrangement.
I
TEM 16—FORM 10-K
SUMMARY
None.
59
S
IGNATURES
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.
|
|
TENAX THERAPEUTICS, INC.
|
|
|
|
|
|
|
|
|
Date: March 30,
2020
|
By:
|
/s/ Michael
B. Jebsen
|
|
|
|
|
Michael B.
Jebsen
|
|
|
|
|
President and Chief Financial Officer
(On behalf of the Registrant and as Principal Financial
Officer)
|
|
60
P
OWER OF ATTORNEY
KNOW
ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Michael B. Jebsen his true
and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to
this report, and to file the same, with all exhibits thereto, and
all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
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/
Anthony DiTonno
|
|
Chief
Executive Officer and Director
|
|
March
30, 2020
|
|
|
Anthony
DiTonno
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Michael B. Jebsen
|
|
Chief
Financial Officer
|
|
March
30, 2020
|
|
|
Michael
B. Jebsen
|
|
(Principal
Financial Officer and Principal Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Ronald R. Blanck
|
|
Director
|
|
March
30, 2020
|
|
|
Ronald
R. Blanck, DO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Gregory Pepin
|
|
Director
|
|
March
30, 2020
|
|
|
Gregory
Pepin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
James Mitchum
|
|
Director
|
|
March
30, 2020
|
|
|
James
Mitchum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Chris A. Rallis
|
|
Director
|
|
March
30, 2020
|
|
|
Chris
A. Rallis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Gerald Proehl
|
|
Director
|
|
March
30, 2020
|
|
|
Gerald
Proehl
|
|
|
|
|
|
61
TABLE OF CONTENTS
Part IItem 1 BusinessItem 1A Risk FactorsItem 1B Unresolved Staff CommentsItem 2 PropertiesItem 3 Legal ProceedingsItem 4 Mine Safety DisclosuresPart IIItem 5 Market For The Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6 Selected Financial DataItem 7 Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A Quantitative and Qualitative Disclosures About Market RiskItem 8 Consolidated Financial Statements and Supplementary DataItem 9 Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A Controls and ProceduresItem 9B Other InformationPart IIIItem 10 Directors, Executive Officers, and Corporate GovernanceItem 11 Executive CompensationItem 12 Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13 Certain Relationships and Related Transactions and Director IndependenceItem 14 Principal Accountant Fees and ServicesPart IVItem 15 Exhibits and Financial Statement SchedulesItem 16 Form 10-k Summary