Nuo Therapeutics, Inc 10-Q for FY2024 Q2
Nuo Therapeutics, Inc. (AURX)
About this 10-Q
Nuo Therapeutics, Inc filed this 10-Q on August 12, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $364.77K
- up 208.7% from $118.17K a year earlier
- Net loss
- $540.09K
- compared with a net loss of $871.89K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission file number
Nuo Therapeutics, Inc.
(Exact Name of Registrant as Specified in its Charter)
| | |
| (State or Other Jurisdiction of | (IRS Employer |
(Address of Principal Executive Offices) (Zip Code)
(
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
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.
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).
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 ☐ |
| | 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
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 12, 2024, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was
NUO THERAPEUTICS, INC.
TABLE OF CONTENTS
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
NUO THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current portion of operating lease liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 6) | ||||||||
| Stockholders' equity | ||||||||
| Common stock; $ par value, shares authorized, and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
NUO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months ended June 30, 2024 |
Three Months ended June 30, 2023 |
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| Revenue |
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| Product sales |
$ | $ | ||||||
| Total revenue |
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| Costs of sales |
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| Gross profit |
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| Operating expenses |
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| Selling, general and administrative |
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| Total operating expenses |
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| Loss from operations |
( |
) | ( |
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| Other income (expense) |
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| Interest income (expense), net |
( |
) | ||||||
| Other income |
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| Total other income (expenses) |
( |
) | ||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Loss per common share |
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| Basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| Weighted average common shares outstanding |
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| Basic and diluted |
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See accompanying notes to unaudited consolidated financial statements.
NUO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Six Months ended June 30, 2024 |
Six Months ended June 30, 2023 |
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| Revenue |
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| Product sales |
$ | $ | ||||||
| Total revenue |
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| Costs of sales |
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| Gross profit |
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| Operating expenses |
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| Selling, general and administrative |
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| Total operating expenses |
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| Loss from operations |
( |
) | ( |
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| Other income (expense) |
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| Interest expense, net |
( |
) | ||||||
| Other income |
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| Total other income (expenses) |
( |
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| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Loss per common share |
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| Basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| Weighted average common shares outstanding |
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| Basic and diluted |
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See accompanying notes to unaudited consolidated financial statements.
NUO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
For the Three and Six Months Ended June 30, 2024 and 2023
| Common Stock | ||||||||||||||||||||
| Shares | Amount (par $0.0001) | Additional Paid-In Capital | Accumulated Deficit | Stockholders' Equity | ||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation expense | - | - | - | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock for cash proceeds | ||||||||||||||||||||
| Issuance of common stock for warrant exercise | ||||||||||||||||||||
| Issuance of common stock for cashless warrant exercise | ( | ) | ||||||||||||||||||
| Stock compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | ||||||||||||||||||||
| Shares | Amount (par $0.0001) | Additional Paid-In Capital | Accumulated Deficit | Stockholders’ Equity | ||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation expense | - | - | - | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
NUO THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, |
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| 2024 |
2023 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation expense |
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| Stock-based compensation |
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| Provision for credit losses |
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| Amortization of operating lease right of use assets |
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| Changes in operating assets and liabilities: |
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| Accounts receivable, net |
( |
) | ( |
) | ||||
| Inventory, net |
( |
) | ||||||
| Prepaid expenses and other current assets |
( |
) | ||||||
| Right of use assets |
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| Accounts payable |
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| Accrued expenses |
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| Operating lease liabilities |
( |
) | ( |
) | ||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Net proceeds from issuance of common stock |
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| Net proceeds from warrant exercise |
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| Net cash provided by financing activities |
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| NET DECREASE IN CASH AND CASH EQUIVALENTS |
( |
) | ( |
) | ||||
| Cash and cash equivalents, beginning of period |
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| Cash and cash equivalents, end of period |
$ | $ | ||||||
| RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
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| Cash and cash equivalents |
$ | $ | ||||||
| Restricted cash |
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| Cash, cash equivalents, and restricted cash, beginning of period |
$ | $ | ||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Restricted cash |
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| Cash, cash equivalents, and restricted cash, end of period |
$ | $ | ||||||
| SUPPLEMENTAL INFORMATION |
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| Cash paid during the period for: |
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| Interest expense |
$ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
NUO THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Description of Business
Description of Business
Nuo Therapeutics, Inc. (“Nuo,” the “Company,” “we,” “us,” or “our”) is a Delaware corporation organized in 1998 under the name Informatix Holdings, Inc. In 1999, Autologous Wound Therapy, Inc., an Arkansas Corporation, merged with and into Informatix Holdings, Inc. and the name of the surviving corporation was changed to Autologous Wound Therapy, Inc. In 2000, Autologous Wound Therapy, Inc. changed its name to Cytomedix, Inc. (“Cytomedix”). In 2001, Cytomedix, filed for bankruptcy from which it emerged in 2002 under a Plan of Reorganization. In September 2007, Cytomedix received 510(k) clearance for the Aurix System (“Aurix”), formerly known as the AutoloGel™ System, from the U. S. Food and Drug Administration (“FDA”). In April 2010, Cytomedix acquired the Angel Whole Blood Separation System (“Angel”) and the Angel Business, from Sorin Group USA, Inc. In February 2012, Cytomedix, acquired Aldagen, Inc. (“Aldagen”), a privately held developmental cell-therapy company located in Durham, NC. In 2014, Cytomedix changed its name to Nuo Therapeutics, Inc. In 2016, Nuo filed for and emerged from bankruptcy under Chapter 11. Effective May 1, 2019, we furloughed our remaining employees and ceased standard operational activities as we awaited developments concerning our reconsideration request with the Centers for Medicare & Medicaid Services (“CMS”) regarding Medicare coverage for Aurix. Based on a favorable National Coverage Determination issued in April 2021, we initiated restart activities for the business beginning in October 2021. Aldagen is a non-operational, wholly owned subsidiary of Nuo.
Note 2 – Liquidity and Summary of Significant Accounting Principles
Liquidity
Since our inception, we have financed our operations by raising debt, issuing equity and equity-linked instruments, and executing licensing arrangements, and to a lesser extent by generating royalties and product revenues. In mid-2019, we ceased ongoing operational activities as we worked to reach a favorable outcome to Medicare reimbursement coverage for the Aurix System. In April 2021 CMS issued an NCD mandating national reimbursement coverage for Aurix when used in chronic non-healing wounds where a diabetes clinical diagnosis exists for the patient. During the six months ended June 30, 2024, the Company raised proceeds of (i) $
We have incurred, and continue to incur, recurring losses and negative cash flows. As of June 30, 2024, we have an accumulated deficit of approximately $
The accompanying unaudited consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations, and potential other funding sources, including cash on hand, to meet our obligations as they become due.
We believe based on the operating cash requirements and capital expenditures expected for the next twelve months that our current resources and projected revenue from sales of Aurix products are insufficient to support our operations for the next 12 months. As such, we believe that substantial doubt about our ability to continue as a going concern exists. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Even assuming we succeed in raising sufficient additional funds in the near future, we anticipate requiring additional capital and will seek to continue financing our operations with external capital. Any equity financing may cause further substantial dilution to our stockholders and could involve the issuance of securities with rights senior to the common stock. Any debt financing may require us to comply with additional onerous financial covenants and restrict our business operations. Our ability to complete additional financings is dependent on, among other things, market reception of the Company and perceived likelihood of success of our business model, the state of the capital markets at the time of any proposed equity or debt offering, state of the credit markets at the time of any proposed loan financing, and on the relevant transaction terms, among other things. We may not be able to obtain additional capital as required to finance our efforts, through equity or debt financing, other transactions, or any combination thereof, on satisfactory terms or at all. Additionally, any such financing, if at all obtained, may not be adequate to meet our capital needs and to support our operations.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the accompanying unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations and cash flows. The consolidated balance sheet at December 31, 2023, has been derived from audited financial statements of the Company as of that date. The interim unaudited consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules and regulations prescribed by the SEC. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited consolidated financial statements are read in conjunction with the audited financial statements and notes previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The unaudited consolidated financial statements include the accounts of the Company and its wholly owned, controlled, and inactive subsidiary Aldagen, Inc. (“Aldagen”). All significant inter-company accounts and transactions are eliminated in consolidation. The Company operates its business in one operating segment consisting of one reporting unit.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying unaudited consolidated financial statements, estimates are used for, but not limited to stock-based compensation, recoverability and depreciable lives of long-lived assets, deferred taxes, and associated valuation allowance and allowances for inventory obsolescence and credit losses. Actual results could differ from those estimates.
Credit Concentration
We generate accounts receivable from the sale of our products. Specific customer receivable balances in excess of 10% of total receivables at June 30, 2024 and December 31, 2023 is listed below.
| June 30, 2024 | December 31, 2023 | |||||||
| Customer A | * | |||||||
| Customer B | * | |||||||
| Customer C | * | |||||||
| Customer D | * | |||||||
* less than 10%
Revenue from significant customers exceeding 10% of total revenues for the three and six months ended June 30, 2024 and 2023 is listed below. All our revenue for both periods was generated within the U.S.
| Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||||||||
| Customer A | * | |||||||||||||||
| Customer C | * | * | * | |||||||||||||
| Customer E | * | |||||||||||||||
| Customer F | * | |||||||||||||||
* less than 10%
Historically, we used single suppliers for several components of the Aurix product line. We outsource the manufacturing of various product components to contract manufacturers. While we believe these manufacturers demonstrate competency, reliability and stability, there is no assurance that one or more of them will not experience an interruption or inability to provide us with the products needed to satisfy customer demand. Additionally, while most of the components of Aurix are generally readily available on the open market, a reagent, bovine thrombin, is available exclusively through Pfizer, with whom we have an established vendor relationship.
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents potentially subject us to a concentration of credit risk, as approximately $
Accounts Receivable, net
We generate accounts receivable from the sale of Aurix products and accounts receivable as of June 30, 2024 and December 31, 2023 reflects customer receivables from commercial sales activities since the re-initiation of such sales beginning in the three months ended September 30, 2022.
We provide for an allowance against receivables for estimated losses that may result from a customer’s inability or unwillingness to pay. We estimate credit losses expected over the life of our trade receivables and contract assets based on historical information combined with current conditions that may affect a customer’s ability to pay and reasonable and supportable forecasts. While the Company uses various credit quality metrics, it primarily monitors collectability by reviewing the duration of collection pursuits on its delinquent trade receivables and historical write-off trends. Based on the Company’s experience, the customer's delinquency status, which is analyzed periodically, is the strongest indicator of the credit quality of the underlying trade receivables. Accounts are written off against the allowance for credit losses when we determine that amounts are not collectable. Recoveries of previously written-off accounts are recorded when collected. For the six-month period ending June 30, 2024, we recorded a provision for credit losses of $
Inventory, net
Our inventory is produced by third-party manufacturers and consists of raw materials and finished goods. Inventory cost is determined on a first-in, first-out basis and is stated at the lower of cost or net realizable value. We maintain an inventory of kits, reagents, and other disposables having shelf-lives that generally range from 12 months to two years.
As of June 30, 2024, our inventory consisted of approximately $
We provide for an allowance against inventory for estimated losses that may result in excess and obsolete inventory (i.e., from the expiration of products). Our allowance for expired inventory is estimated based upon the inventory’s remaining shelf-life and our anticipated ability to sell such inventory, which is estimated using past experience and future forecasts, within its remaining shelf life. Expired products are segregated and used for demonstration purposes only; we will record the associated expense for this reserve to cost of sales in the consolidated statements of operations. For the year ended December 31, 2023, we established an allowance for expired inventory of approximately $
Property and Equipment, net
Property and equipment is stated at cost less accumulated depreciation. Assets are depreciated, using the straight-line method, over their estimated useful life ranging from to years. Maintenance and repairs are charged to operations as incurred.
Leases
At the inception of a contract, we determine if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.
We have made certain accounting policy elections whereby we (i) do not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12-months or less) and (ii) combine lease and non-lease elements of any operating leases.
Revenue Recognition
We analyze our revenue arrangements to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers; (ii) identification of distinct performance obligations in the contract; (iii) determination of contract transaction price; (iv) allocation of contract transaction price to the performance obligations; and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation. We recognize revenues upon the satisfaction of the performance obligations (upon transfer of control of promised goods or services to customers) in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. In certain instances where the revenue is variable and we cannot estimate the amount of consideration to which we expect to be entitled, we are constrained from initially recognizing revenue. In these cases, once the estimate is no longer constrained, we recognize revenue in the amount of consideration to which we expect to be entitled.
We provide for the sale of our products, including disposable processing sets and supplies to customers. Revenue from the sale of products is recognized upon shipment of products to the customers. We do not maintain a reserve for returned products, as in the past those returns have not been material and are not expected to be material in the future. Direct costs associated with product sales are recorded at the time that revenue is recognized.
Stock-Based Compensation
The fair value of employee stock options is measured at the date of grant. Expected volatilities for the 2016 Omnibus Plan options are based on the equally weighted average historical volatility from five comparable public companies with an expected term consistent with ours. Expected years until exercise represents the period of time that options are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. We assume that the dividend rate on our common stock will be zero. There were no options granted during the six months ended June 30, 2024 and June 30, 2023. We recognize forfeitures of stock-based awards as they occur.
Income Taxes
We account for income taxes using the asset and liability method. Under the asset and liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. Tax rate changes are reflected in income during the period such changes are enacted. We measure our deferred tax assets and liabilities using the enacted tax rates that we believe will apply in the years in which the temporary differences are expected to be recovered or paid. We expect that recent tax law changes contained in the Inflation Reduction Act and CHIPS Act will not have a material impact on the provision for income taxes.
A deferred income tax asset or liability is recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. All of our tax years remain subject to examination by the tax authorities.
Our policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. There were no such items in the six months ended June 30, 2024 and 2023.
Basic and Diluted Loss per Share
In periods of net loss, basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. In periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti-dilutive.
For periods of net income, diluted earnings per share is computed using the more dilutive of the “treasury method” or “two class method.” Dilutive earnings per share under the “treasury method” is calculated by dividing net income available to common stockholders by the weighted- average number of shares outstanding plus the dilutive impact of all potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method, and convertible notes using the if-converted method. Because none of the Company’s equity-linked financial instruments contain non-forfeitable rights to dividends, the “two class” method results in the same diluted earnings per share as the “treasury method.”
All of our potential dilutive securities are considered anti-dilutive for the three and six months ended June 30, 2024 and 2023. The following table sets forth the potential dilutive securities excluded from the calculation of diluted loss per share for the periods presented.
| Six months ended June 30, 2024 | Six months ended June 30, 2023 | |||||||
| Shares underlying: | ||||||||
| Common stock options | ||||||||
| Stock purchase warrants | ||||||||
| Financing participation right and contingent warrant | ||||||||
| Performance shares | ||||||||
Recent Accounting Standards
In December 2023, the FASB issued final guidance in ASU No. 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures requiring entities to provide additional information in the rate reconciliation and disclosures about income taxes paid. For public business entities, the guidance is effective for annual periods beginning after December 15, 2024. We do not expect this ASU to have a material impact on the consolidated financial statements.
We have evaluated all other issued and unadopted Accounting Standards Updates and believe the adoption of these standards will not have a material impact on our results of operations, financial position, or cash flows.
Note 3 – Property and Equipment
Property and equipment, net consisted of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| Medical equipment | $ | $ | ||||||
| Office/warehouse equipment | ||||||||
| Warehouse/production equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense was $
Note 4 – Stock Purchase Warrants
The following schedule reflects outstanding stock purchase warrants as of June 30, 2024 and 2023:
| Description | June 30, 2024 | June 30, 2023 | ||||||
| 2022 Sales incentive warrants | ||||||||
| Total | ||||||||
During the year ended December 31, 2022, we issued two warrants to purchase (i)
Note 5 – Equity and Stock-Based Compensation
Under the Second Amended and Restated Certificate of Incorporation, we have the authority to issue a total of
Pacific Medical Common Stock and Warrant Purchase Agreement
On August 24, 2022, Nuo entered into a Common Stock and Warrant Purchase Agreement (the “Agreement”) with Pacific Medical, Inc. (“Pacific Med”) for the sale and issuance of shares of common stock and warrants to purchase shares of common stock. Pacific Med is the exclusive distributor for the Aurix products within a territory that covers the states of Washington, Oregon, Idaho, Montana, Wyoming, most of California, the northern half of Nevada, plus Alaska.
Pursuant to the Agreement, Pacific Med purchased
As part of the Agreement and as additional incentive compensation with respect to Pacific Med’s performance under its existing sales and distribution arrangement, we also provided to Pacific Med two compensatory performance-based stock purchase warrants and certain contingently issuable performance shares. The first warrant entitles Pacific Med to purchase up to
2024 Private Placement Equity Issuance
We sold
2023 Private Placement Equity Issuances
We sold
Stock-Based Compensation
In July 2016, the Board of Directors approved the 2016 Omnibus Incentive Plan (the “2016 Omnibus Plan” or “Plan”), and in November 2016, holders of a majority of our capital stock approved the 2016 Omnibus Plan, as amended and restated, which provides for the grant of equity and cash incentive awards to officers, directors and employees of, and consultants to, Nuo Therapeutics and its subsidiaries. Further, in March 2022, the Board approved an amendment to the 2016 Omnibus Plan to increase the shares available under the Plan to
A summary of stock option activity under the 2016 Omnibus Plan during the six months ended June 30, 2024 is presented below:
| Stock Options – 2016 Omnibus Plan | Shares | Weighted Average | Weighted | |||||||||
| Outstanding at January 1, 2024 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited or expired | - | |||||||||||
| Outstanding at June 30, 2024 | $ | |||||||||||
| Exercisable at June 30, 2024 | $ | |||||||||||
There were
For the three months ended June 30, 2024 and 2023, we recorded stock-based compensation expense of $
Note 6 – Commitments and Contingencies
Lease Agreements
In January 2022, we entered into a commercial operating lease agreement for office space in Florida, expiring on December 31, 2024. The lease required us to pay for insurance, taxes, and our share of common operating expenses. The lease resulted in an increase in right of use assets and lease liabilities of $
In February 2022, we entered into a commercial operating lease for our primary office and warehouse/distribution space in Texas. The lease requires us to pay for insurance, taxes, and our share of common operating expenses. This lease expires in March 2027. The space remained under buildout and landlord control during the three months ended March 31, 2022 with Nuo acquiring control of the lease space effective April 1, 2022; as a result, a right of use asset and lease liability was recognized of $
Total operating lease costs were approximately $
Future undiscounted cash flows under this lease are:
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total operating lease payments | ||||
| Discount factor | ( | ) | ||
| Present value of operating lease liabilities | ||||
| Current portion of operating lease liabilities | ( | ) | ||
| Non-current portion of operating lease liabilities | $ |
Note 7 – Subsequent Events
On July 17, 2024,
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations of Nuo Therapeutics, Inc. ("Nuo," the "Company," "we," "us," or "our") should be read in conjunction with the financial statements and related notes appearing elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), filed with the U.S. Securities and Exchange Commission (the "SEC") on April 19, 2024.
Special Note Regarding Forward Looking Statements
Certain statements, other than purely historical information in this Quarterly Report (including this section) constitute “forward-looking statements”. Forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “will be,” “will continue,” “will likely result,” “could,” “may” and words of similar import. These statements reflect the Company’s current view of future events and are subject to certain risks and uncertainties as noted in this Quarterly Report and in other reports filed by us with the SEC, including Forms 8-K, 10-Q, and 10-K. These risks and uncertainties include, among others, the following:
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our limited revenue base and sources of working capital; |
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our limited operating experience; |
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our ability to continue as a going concern |
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the dilutive impact of raising additional equity or debt; |
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our ability to timely and accurately report our financial results and prevent fraud if we are unable to maintain effective disclosure and internal controls; |
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acceptance of our product by the medical community and patients; |
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our ability to obtain adequate reimbursement from third-party payors; |
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our ability to contract with healthcare providers; |
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our reliance on several single source suppliers and our ability to source raw materials at affordable costs; |
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our ability to protect our intellectual property; |
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our compliance with governmental regulations; |
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our ability to successfully sell and market the Aurix System; |
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our ability to attract and retain key personnel, including both our executive officers; and |
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our ability to successfully pursue strategic collaborations to help develop, support, or commercialize our current and future products. |
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results could differ materially from those anticipated in these forward-looking statements.
In addition to the risks identified under the heading “Risk Factors” in our Annual Report and the other filings referenced above, other sections of this report may include additional factors which could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business, or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
The Company undertakes no obligation and does not intend to update, revise or otherwise publicly release any revisions to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.
Business Overview
We are a regenerative therapies company focused on developing and marketing products for chronic wound care primarily within the U.S. We commercialize innovative cell-based technologies that harness the regenerative capacity of the human body to trigger natural healing. The use of autologous (i.e., from self, the patient’s own) biological therapies for tissue repair and regeneration is part of a clinical strategy designed to improve long-term recovery in inherently complex chronic conditions with significant unmet medical needs.
Our current commercial offering consists of point of care technology for the safe and effective separation of autologous blood to produce a platelet-based therapy for the chronic wound care market. This offering is known as “Aurix” or the “Aurix System”. The FDA cleared the Aurix System for marketing in 2007 as a device under Section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FDCA”). Aurix is one of two platelet derived products cleared by the FDA for chronic wound care use and is indicated for most exuding wounds. The advanced wound care market, within which Aurix competes, is composed of advanced wound care dressings, wound care devices, and wound care biologics, and is estimated to be an approximate $10.8 billion global market in 2021 with the North American market estimated at approximately $4.15 billion in 2020. Estimates remain that 1-2% of population in the developed countries will suffer from a chronic wound at least once in their lifetime. According to the National Institute of Health, treatment of diabetic foot ulcers cost an estimated $9-$13 billion annually in the U.S. alone. An aging population and the still increasing prevalence of diabetes suggests a continued increase in the patient population at risk of developing chronic, non-healing wounds.
The Aurix System produces a platelet rich plasma (“PRP”) gel at the point of care using the patient’s own platelets and plasma sourced from a small draw of peripheral blood. Aurix comprises a natural, endogenous complement of protein and non-protein signal molecules that contribute to effective healing. During treatment, the patient’s platelets are activated and release hundreds of growth factor proteins and other signaling molecules that form a biologically active hematogel. Aurix delivers concentrations of the natural complement of cytokines, growth factors and chemokines that are known to regulate angiogenesis (i.e., the development of new blood vessels), cell growth, and the formation of new tissue. Once applied to the prepared wound bed, the biologically active Aurix hematogel can restore the balance in the wound environment to transform a non-healing wound to a wound that heals naturally.
In 2012, a Medicare National Coverage Determination (“NCD”) from CMS reversed a twenty-year old non-coverage decision for autologous blood derived products used in wound care. This NCD allowed for Medicare coverage under the Coverage with Evidence Development (“CED”) program. CED programs have been employed for a selected number variety of other therapies. Under the CED program, CMS provides reimbursement for items or services on the condition that they be furnished in approved clinical protocols or in the collection of additional clinical data. Under the CED program, a facility treating a patient with Aurix was reimbursed by Medicare when health outcomes data were collected to inform future coverage decisions. The intent of the CED program is to evaluate the outcomes of Aurix therapy for the broader Medicare population when it is used in a “real world” continuum of care.
In May 2019, we transmitted a letter memorandum to CMS’ Coverage and Analysis Group (“CAG”) in support of our complete formal request for reconsideration of the then existing national coverage determination based on clinical data collected and published under the CED program. The complete formal public request for reconsideration was made on May 8, 2019 in accordance with the applicable requirements.
On April 13, 2021, CMS issued a final coverage decision memo indicating that Medicare would nationally cover autologous PRP for the treatment of chronic non-healing diabetic wounds for a duration of 20 weeks under Section 1862(a)(1)(A) of the Social Security Act. This coverage applies when using devices whose FDA-cleared indications include the management of exuding cutaneous wounds, such as diabetic ulcers. Coverage of autologous PRP beyond 20 weeks for diabetic foot ulcers and for the treatment of all other chronic, non-diabetic, non-healing wounds will be determined by local Medicare Administrative Contractors.
Although FDA cleared the Aurix System for marketing in 2007 under Section 510(k) of the FDCA, CMS only established economically viable reimbursement for the product beginning in 2016 in conjunction with the CED program and its requirements and limitations. For 2024, the Medicare national average reimbursement rate for the Aurix System is $1,739 per treatment, which we believe provides adequate payment to facilities for product usage. Under the proposed rule for Hospital Outpatient Prospective Payment System (OPPS) released in July 2024, the national average reimbursement rate will increase to $1,822 per treatment effective January 1, 2025. We market the Aurix System at an approximate cost of $800 per treatment to wound care providers in the hospital outpatient setting.
Our Strategy
Our current commercial focus is establishing engagement with providers treating chronic non-healing wounds to demonstrate the clinical benefits we believe result from the use of Aurix in the treatment of complex wounds. Increasing physician awareness of the differentiating attributes of Aurix will be key to establishing a base of product revenues upon which to grow. We anticipate developing these relationships with clinical providers and treatment facilities primarily by establishing a variety of distributor arrangements throughout the United States. Our commercial team consists of three senior employees who are leveraging their current and historical relationships to establish distributor arrangements. As of June 30, 2024, we had established contractual relationships with more than 200 individual distributor representatives including. a multi-state agreement with Pacific Medical, Inc. covering multiple large markets in the western United States. The number of distributor representatives may continue to expand modestly but the current focus is establishing commercial customer relationships with wound care providers in primarily hospital outpatient wound care clinics and ensuring that the reimbursement mechanisms are appropriately administered by the local Medicare Administrative Contractors in support of the April 2021 NCD.
Commercially available Aurix product was first available in late May 2022 for demonstration and evaluation purposes. Through a growing distributor network, Aurix is presently being evaluated by various hospital/facility Value Analysis Committees (VACs) as part of the process of approving its clinical use. While limited commercial revenues were recorded during the second half of 2022 and revenues increased to approximately $610,000 in 2023 and approximately $599,000 for the six months ended June 30, 2024, we reasonably expect revenues to exhibit continued growth in future periods.
The Science Underlying Aurix/Platelet Rich Plasma
Normal Wound Healing
The science underlying wound healing is well-established. An immediate early event critical for wound healing is the influx of platelets to the wound site. Platelets bind to elements within damaged tissue such as collagen fragments and endogenous thrombin molecules and are activated to release a diversity of growth factors and other biomolecules from their alpha and dense granules (Reed 2000, Nieswandt, 2003). These biomolecules provide signals essential for biological responses regulating hemostasis and effective tissue regeneration.
Chronic Wounds
Dysregulation of numerous cellular and biological responses contribute to the chronic wound phenotype. Chronic wounds have reduced levels of growth factors and concomitant decreases in cellular proliferation (Mast 1996). There is increased cellular senescence (Telgenhoff 2005), and there generally is a lack of perfusion that can inhibit the delivery of nutrients and cells required for regeneration (Guo 2010). As the body attempts to stave off infection, elevated concentrations of free radicals accumulate in the chronic wound and further damage surrounding tissue (Moseley 2004, James 2003).
Aurix Therapy
Aurix has been cleared by FDA as safe and effective with an indication for chronic wounds such as leg ulcers, pressure ulcers, and diabetic ulcers and other exuding wounds such as mechanically or surgically debrided wounds. The Aurix therapeutic is formed by mixing a sample of a patient’s platelets and plasma with pharmaceutical grade thrombin and ascorbic acid. The thrombin activates platelets while ascorbic acid drives the synthesis of high tensile strength collagen, clears damaging free radicals and controls gel consistency. The topical dermal application of Aurix gel bypasses the lack of local perfusion to provide immediate signals for new tissue formation and ultimately healing.
The Efficacy of Aurix Relates to Biological Activity Released by Platelets
Regenerative Capacity
More than 300 proteins are released by human platelets in response to thrombin activation (Coppinger 2004). Important examples include vascular endothelial cell growth factor (“VEGF”), platelet derived growth factor (“PDGF”), epidermal growth factor (“EGF”), fibroblast growth factor (“FGF”) and transforming growth factor-beta (“TGF-B”) (Eppley 2004, Everts 2006). These proteins are critical for organized wound healing, regulating responses such as vascularization, cell proliferation, cell differentiation, and deposition of new extracellular matrix (Goldman 2004). Platelets also release chemokines such as Interleukin-8 (“IL-8”), stromal cell derived factor-1 (“SDF-1”), and platelet factor-4 (“PF-4”) (Chatterjee 2011, Gear 2003) that control the mobilization and migration of stem cells and fibroblasts (Werner 2003 and Gillitzer 2001), which contribute to tissue regeneration.
Anti-infective Activity
Populations of bioburden in chronic wounds vary over time and wounds invariably retain or become re-infected with some level of bacteria that is detrimental to healing (Howell-Jones 2005). In addition to regenerative capacity, platelets release anti-microbial peptides effective against a broad range of pathogens including Methicillin Resistant Staphylococcus Aureus (“MRSA”) (Moojen 2007, Jia 2010, Tang 2002, Bielecki 2007).
Clinical Efficacy
Multiple efficacy and effectiveness studies have been published in peer reviewed journals documenting the impact of using Aurix to treat chronic wounds. Key data include:
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In the published study of the clinical data collected during the CED program for diabetic foot ulcers, Aurix demonstrated a significant time to heal advantage compared to wounds treated with usual and customary care (including any available advanced therapy). A higher percentage of healing was observed across all wound severities (Wagner Grade 1-4) and in a patient population with significant comorbidities. (Gude W, Hagan D, Abood F, Clausen P: Aurix Gel is an Effective Intervention for Chronic Diabetic Foot Ulcers: A Pragmatic Randomized Controlled Trial. Advances in Skin and Wound Care, 2019; 32(9): 416-426.) |
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In a double blinded randomized controlled trial, 81% of the most common-sized diabetic foot ulcers healed with Aurix compared with 42% of control wounds. Mean time to healing was six weeks. (Driver V, Hanft J, Fylling, C et al.: A Prospective, Randomized, Controlled Trial of Autologous Platelet-Rich Plasma Gel for the Treatment of Diabetic Foot Ulcers. Ostomy Wound Management, 2006; 52(6): 68-87.) |
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In 285 chronic wounds in 200 patients, 96.5% of the wounds had a positive response within an average of 2.2 weeks with an average of 2.8 Aurix treatments (de Leon J, Driver VR, Fylling CP, Carter MJ, Anderson C, Wilson J, et al.: The Clinical Relevance of Treating Chronic Wounds with an Enhanced Near-physiological Concentration of Platelet-Rich Plasma (PRP) Gel. Advances in Skin and Wound Care, 2011; 24(8), 357-368.) |
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In a retrospective, longitudinal study of 40 Wagner grade II through IV diabetic foot ulcers, most with critical limb ischemia, wounds increased in size in the approximate 100 days prior to the initiation of comprehensive wound care treatment. Upon treatment with debridement, revascularization, antibiotics and off-loading, the wounds continued to increase in size over a subsequent 75-day period. Once they were then treated with Aurix, the wounds immediately changed healing trajectory and 83% of the wounds healed with an average of 6.1 Aurix treatments per wound (Sakata, J., Sasaki, S., Handa, K., et al. A Retrospective, Longitudinal Study to Evaluate Healing Lower Extremity Wounds in Patients with Diabetes Mellitus and Ischemia Using Standard Protocols of Care and Platelet-Rich Plasma Gel in a Japanese Wound Care Program. Ostomy Wound Management, 2012; 58(4):36-49.) |
Results of Operations
Comparison of Three Months Ended June 30, 2024 and 2023
The amounts presented in this comparison section are rounded to the nearest thousand.
Revenue and Gross Profit
Product revenues for the three months ended June 30, 2024 totaled approximately $365,000 in comparison to product revenues of approximately $118,000 in the three months ended June 30, 2023. Associated gross profit was approximately $299,000 in the three months ended June 30, 2024 in comparison to approximately $98,000 of gross profit in the three months ended June 30, 2023. The increase in revenues and gross profit was due to an expanding customer base over the past year as hospital wound care facilities and providers become incrementally aware of the Aurix product and the 2021 Medicare NCD.
Operating Expenses
Total operating expenses decreased approximately $128,000 to approximately $841,000 comparing the three months ended June 30, 2024 to the three months ended June 30, 2023. The decrease from the prior year was due primarily to a decrease in (i) compensation and benefits expense of approximately $101,000 and (ii) external consulting and professional fees of approximately $73,000 which was partially offset by an increase in sales infrastructure costs including distributor commissions of approximately $48,000.
Other Income (Expense)
Other income net for the three months ended June 30, 2024 represents interest income on cash balances in excess of interest expense associated with the financing of insurance premiums and a nominal other income gain. Other expense, net for the three months ending June 30, 2023 primarily represents the same interest expense type charges in excess of nominal interest income.
Comparison of Six Months Ended June 30, 2024 and 2023
The amounts presented in this comparison section are rounded to the nearest thousand.
Revenue and Gross Profit
Product revenues for the six months ended June 30, 2024 totaled approximately $599,000 in comparison to product revenues of approximately $179,000 in the six months ended June 30, 2023. Associated gross profit was approximately $483,000 in the six months ended June 30, 2024 in comparison to approximately $148,000 of gross profit in the six months ended June 30, 2023. In line with the three-month comparison above, the increase in revenues and gross profit was due to an expanding customer base as hospital wound care facilities and providers become incrementally aware of the Aurix product and the 2021 Medicare NCD.
Operating Expenses
Total operating expenses decreased approximately $140,000 to approximately $1,735,000 comparing the six months ended June 30, 2024 to the six months ended June 30, 2023. The decrease from the prior year was due primarily to decreases in (i) compensation and benefits expense of approximately $189,000 and (ii) external consulting and professional fees of approximately $40,000 which was partially offset by an increase in sales infrastructure costs including distributor commissions of approximately $71,000.
Other Income (Expense)
Other income, net for the six months ended June 30, 2024 represents interest income on cash balances in excess of interest expense associated with the financing of insurance premiums and a nominal other income gain. Other expense, net for the six months ending June 30, 2023 primarily represents the same interest expense type charges in excess of nominal interest income.
Liquidity and Capital Resources
Overview
As of June 30, 2024, we had cash, cash equivalents, and restricted cash of approximately $0.5 million, total current assets of approximately $1.2 million and total current liabilities of approximately $0.7 million. As an operational business, we have a history of losses and are not currently profitable. For the years ended December 31, 2023, and 2022, we incurred net losses of approximately $3.2 million in each year. As of June 30, 2024, our accumulated deficit was approximately $31.2 million and our stockholders’ equity was approximately $0.6 million.
During the six months ended June 30, 2024, we sold 867,833 shares of common stock to certain accredited investors pursuant to a Securities Purchase Agreement in a private placement which closed in May 2024 for total proceeds of $650,875. Additionally, during the six months ended June 30, 2024, we received proceeds of $151,200 from the exercise of warrants by Pacific Med.
In 2023, we sold 2,442,500 shares of common stock to certain accredited investors pursuant to Securities Purchase Agreements in two private placements which closed in August and December 2023 for total proceeds of $1,997,500.
Our continuing losses and limited cash resources raise substantial doubt about our ability to continue as a going concern, and we need to raise substantial additional funds to continue to conduct our business. If we are unable to secure sufficient capital to fund our operating activities, we may be forced to delay further the completion of, or significantly reduce the scope of, our current business plan. It is uncertain whether we will be able to obtain such financing on satisfactory terms or at all. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We may not be able to obtain additional capital as required to finance our efforts, through equity or debt financing or any combination thereof, on satisfactory terms or at all. Additionally, any such financing, if at all obtained, may not be adequate to meet our capital needs and to support our operations.
We maintain our cash deposits primarily in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). We have not experienced any losses related to amounts in excess of FDIC limits.
Cash Flows
Net cash provided by (used in) operating, investing, and financing activities for the periods presented were as follows:
| Six months ended June 30, 2024 |
Six months ended June 30, 2023 |
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| Cash flows used in operating activities |
$ | (1,253,616 | ) | $ | (1,727,641 | ) | ||
| Cash flows used in investing activities |
$ | (4,100 | ) | $ | (5,343 | ) | ||
| Cash flow provided by financing activities |
$ | 802,075 | $ | - | ||||
Operating Activities
Cash used in operating activities for the six months ended June 30, 2024 of approximately $1,254,000 primarily reflects our net loss of approximately $1,249,000 adjusted by (i) approximately $76,000 net change in operating assets and liabilities, (ii) approximately $53,600 total depreciation and amortization expense and stock-based compensation expense and (iii) a provision for credit losses of $17,500.
Cash used in operating activities for the six months ended June 30, 2023 of approximately $1.7 million primarily reflects our net loss of approximately $1,728,000 adjusted by (i) approximately $33,000 net change in operating assets and liabilities and (ii) approximately $59,000 total depreciation and amortization expense and stock-based compensation expense.
Investing Activities
We had limited investing activities for the six months ended June 30, 2024 and 2023.
Financing Activities
Cash flows from financing activities for the six months ended June 30, 2024 reflects proceeds of (i) $650,875 from the sale of 867,833 shares of common stock in a private placement closed in May 2024 and (ii) $151,200 from the exercise of 270,000 warrants in June 2024. We did not have any financing activities for the six months ended June 30, 2023.
Inflation
The Company believes that the rates of inflation in recent years have not had a significant impact on its operations.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Critical Accounting Policies
Our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report are prepared in conformity with U.S. GAAP, which require us to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and accompanying notes. We base these estimates on our experience and assumptions regarding future events we believe to be reasonable under the circumstances. Actual results could differ from those estimates and such differences may be material to the unaudited consolidated financial statements. We have described our most critical accounting policies in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our critical accounting policies or estimates since December 31, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management has carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of June 30, 2024. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective due to the un-remediated material weakness previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”) as described below under “Material Weaknesses” and “Remediation Plan.” In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the preparation of the Annual Report and the consolidated financial statements and related disclosures therein, management identified the following material weaknesses.
Beginning in mid-2019, we ceased ongoing operational activities and terminated all our financial accounting and reporting resources as we worked to reach a favorable outcome to Medicare reimbursement coverage for the Aurix System. When we re-started commercial operations in 2022 and as disclosed since our Annual Report for the year ended December 31, 2021, the Company had not hired and did not maintain a sufficient complement of accounting and financial reporting resources. The lack of sufficient accounting and financial reporting resources also prevented the Company from maintaining appropriately designed, and monitoring the effectiveness of, internal control over financial reporting.
Remediation Plan
Beginning in 2022, the Company engaged outside consultants to assist with various accounting and financial reporting matters and will continue assessing the need for hiring additional internal accounting and third-party financial reporting resources. As additional financial resources are obtained and we increase our operating activity, management, under the oversight of the Audit Committee of the Board of Directors, will continue to implement measures designed to improve our internal control over financial reporting to remediate the identified material weaknesses, namely, to identify and engage, through internal hiring and the use of external third parties, a sufficient complement of accounting and financial reporting resources and to periodically assess the design and operating effectiveness of our internal controls.
While we believe that these efforts will improve our internal control over financial reporting, the implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We cannot assure you that the measures we have taken to date, or that we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
There are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results of operations, financial condition, or cash flows.
There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
On August 9, 2024, the Company entered into Change in Control Agreements with four employees, including executive officers David Jorden and Peter Clausen.
The Change in Control Agreements were approved on August 8, 2024 by the Compensation, Nominating and Governance Committee of the Board of Directors of the Company to provide additional financial incentive to the employees to maximize stockholder value in connection with any future change in control transaction.
Management and the Board of Directors of the Company are not aware of any currently pending offer to effectuate a change in control of the Company.
Pursuant to the Change in Control Agreements, upon a change in control by which any person or group of persons becomes beneficial owner of at least 80% of the then outstanding voting securities of the Company or a sale of all or substantially all the assets of the Company, the employees will receive lump sum cash payments in the aggregate of up to $3,000,000 depending on the change in control acquisition value.
In particular, for each of Mr. Jorden and Mr. Clausen, unless he does not significantly participate in effectuating the change in control, he will receive a payment of 0.15% of a change in control acquisition value between $40,000,000 and $60,000,000, approximately 0.35% of a change in control acquisition value between $60,000,001 and $85,000,000, or a maximum of $300,000 for a change in control acquisition value above $85,000,000. Acquisition value, including deductions, will be determined as described in the Change in Control Agreements.
The Change in Control Agreements terminate on December 31, 2025, unless otherwise extended by the parties, and contains other customary provisions.
The description above of the Change in Control Agreements with Mr. Jorden and Mr. Clausen is qualified by reference to the full text of such agreements filed as Exhibits 10.2 and 10.3 to this Quarterly Report on Form 10-Q.
| Exhibit Number |
Description |
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| 3.1 |
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| 3.2 |
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| 3.3 |
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| 3.4 |
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| 10.1 |
Securities Purchase Agreement entered into May 17, 2024 (previously filed on May 21, 2024 as Exhibit 10.1 to the registrant’s Current Report on Form 8-K and incorporated by reference herein) | |
| 10.2 | Change in Control Agreement between David Jorden and Nuo Therapeutics, Inc. dated August 9, 2024 | |
| 10.3 | Change in Control Agreement between Peter Clausen and Nuo Therapeutics, Inc. dated August 9, 2024 | |
| 31 |
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| 32 |
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| 101 |
The following materials from Nuo Therapeutics, Inc. Form 10-Q for the quarter ended June 30, 2024, formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) Consolidated Balance Sheets at June 30, 2024 and December 31, 2023, (ii) Consolidated Statements of Operations for the three and six month periods ended June 30, 2024 and 2023, (iii) Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six month periods ended June 30, 2024 and 2023, (iv) Consolidated Statements of Cash Flows for the six month periods ended June 30, 2024 and 2023 and (v) Notes to the Unaudited Consolidated Financial Statements. |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NUO THERAPEUTICS, INC. |
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| Date: August 12, 2024 |
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| By: |
/s/ David E. Jorden |
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| David E. Jorden Chief Executive and Financial Officer |
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| (Principal Executive and Financial Officer) |
Exhibit 10.2
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (“Agreement”) effective as of August 9, 2024 (the “Effective Date”) is by and between Nuo Therapeutics, Inc., a Delaware corporation (the “Company”), and David Jorden (the “Employee”).
WHEREAS, the Employee presently serves at the pleasure of the Board of Directors of the Company (the “Board”) as the Chief Executive and Chief Financial Officer of the Company and performs substantial management duties necessary to the continued conduct of the Company’s business and operations;
WHEREAS, the Employee entered into an Employment Agreement, dated as of May 9, 2022 (the “Employment Agreement”);
WHEREAS, the Board believes that it is in the best interest of the Company and its stockholders to provide the Employee with additional financial incentive to maximize stockholder value in a Change in Control (as defined herein) transaction and to remain employed with the Company during the period prior to and in connection with a Change in Control; and
WHEREAS, the Board has approved this Agreement to provide a financial incentive payment upon a Change in Control to the Employee in pursuit of the foregoing objectives.
NOW THEREFORE in consideration of the mutual covenants contained herein as well as other good and valuable consideration, the Company and the Employee hereby agree as follows:
1. Term of Employment
The Company and the Employee acknowledge that at any time while the Employee is employed by the Company, the Company may terminate the Employee’s employment for any reason and the Employee may resign from the Company’s employment for any reason, subject to the terms of this Agreement and Section 4 of the Employment Agreement.
2. Payment Upon a Change in Control
Upon the occurrence of a Change in Control, the Company shall provide the Employee a lump-sum cash payment not later than 30 days following the Change in Control; provided, however, that such payment shall not be provided if a majority of the independent members of the Board prior to the Change in Control determine that the Employee did not significantly participate within the scope of his employment in effectuating the Change in Control; provided further, however, that such payment shall not be provided unless the Employee (A) has timely executed and not revoked a usual and customary general release of all known and unknown claims that the Employee may then have against the Company or persons affiliated with the Company in the form acceptable to the Company, and (B) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The lump-sum cash payment payable to the Employee under this Agreement shall be calculated based on the following schedule:
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Acquisition Value up to $40,000,000 $40,000,001 to $60,000,000 $60,000,001 to $85,000,000 more than $85,000,000 |
Payment 0% of Acquisition Value 0.15% of Acquisition Value 0.352941175% of Acquisition Value $300,000 |
For example, assume that a Change in Control results in an Acquisition Value of $50 million; in such case, the Employee will receive a lump-sum cash payment equal to $75,000 [$50,000,000 x 0.15%]. For example, assume that a Change in Control results in an Acquisition Value of $85 million; in such case, the Employee will receive a lump-sum cash payment equal to $300,000 [$85,000,000 x 0.352941175%]. For example, assume that a Change in Control results in an Acquisition Value of $100 million; in such case, the Employee will receive a lump-sum cash payment equal to $300,000.
For purposes of this Agreement, “Change in Control” shall mean the occurrence of (i) a transaction (or series of related transactions) by which any “person” (as such term is used in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), other than a corporation or other entity beneficially owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company immediately prior to such transaction, shall have become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing of at least 80% of the combined voting power of the then outstanding voting securities of the Company, or (ii) a sale, lease, transfer, or other disposition transaction of all or substantially all of the assets of the Company, unless a majority of the independent members of the Board prior to such sale, lease, transfer, or other disposition transaction determines it is not a Change in Control for purposes of this Agreement.
For purposes of this Agreement, “Acquisition Value” shall mean the amount equal to the total gross non-contingent consideration paid or payable (regardless of whether such consideration is paid or payable in cash, stock, by assumption of debt, or otherwise) by the acquirer (or its designees, successors, or assigns), with such amount reduced by any Deduction. For purposes of determining Acquisition Value, the valuation of any securities or other non-cash assets paid or payable as consideration shall be determined by reference to the operative transaction agreement(s); provided, however, that if no such valuation is readily determinable from such operative transaction agreement(s), then the value shall be determined by a majority of the independent members of the Board prior to the Change in Control.
For purposes of this Agreement, “Deduction” shall mean all change in control payments made to employees of the Company, payments made to a third party to pay off indebtedness, liquidation preference payments, and amounts placed into escrow or a similar holdback; provided, however, that if any such Deduction or its amount is not readily determinable from the operative transaction agreement(s), then such Deduction and its amount as applicable shall be determined by a majority of the independent members of the Board prior to the Change in Control.
3. Termination
This Agreement shall terminate at 11:59 p.m., New York City time, on December 31, 2025, unless extended by mutual agreement of the parties in writing; provided, however, that this Agreement shall automatically terminate and shall become null and void without any further action by the parties immediately upon the Employee’s termination of employment for any reason prior to a Change in Control.
4. Section 409A
The parties intend for this Agreement to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or in compliance with Section 409A, and the provisions of this Agreement shall be administered, interpreted, and construed accordingly. Without limiting the generality of the foregoing, the term “termination of employment” or any similar term under this Agreement shall be interpreted to mean “separation from service” within the meaning of Section 409A to the extent necessary to comply with Section 409A. If this Agreement is not exempt from the application of Section 409A or fails to satisfy the requirements of Section 409A, then the parties hereby agree to amend or to clarify this Agreement in a timely manner so that this Agreement either satisfies the requirements of Section 409A or is exempt from the application of Section 409A.
5. Section 280G
Notwithstanding any other provision of this Agreement or any other plan, arrangement, or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise (the “Covered Payments”) constitute parachute payments (the “Parachute Payments”) within the meaning of Section 280G of the Code and would, but for this Section 5 be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit to the Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to the Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). For purposes of this Agreement, “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes. The Covered Payments shall be reduced in a manner that maximizes the Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. The calculations and determinations under this Section 5 shall be provided by an accounting firm selected by the Company (and reasonably acceptable to the Employee) prior to the Change in Control (the “Accounting Firm”) and the Company shall pay the cost of such Accounting Firm. The parties shall use commercially reasonable efforts to cause the Accounting Firm to provide such calculations prior to the consummation of the Change in Control and its determinations shall be binding on the Employee and the Company absent manifest error.
6. Withholding Tax
The Company shall be entitled to deduct and withhold from any amounts owing to the Employee any federal, state, city, local, or foreign withholding taxes, payroll tax, excise taxes, or employment taxes imposed with respect to any payment from the Company.
7. Successors
(a) Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business or assets, whether or not this Agreement is expressly assigned to the successor, shall assume the obligations under this Agreement and shall perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business or assets which executes and delivers an assumption agreement or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee’s Successors. The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.
8. Assignment
(a) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment.
(b) No Assignment by Employee. The rights of the Employee to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including, without limitation, bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this subsection (b) shall be void.
9. Governing Law
This Agreement shall be governed by and construed under the laws of the State of Texas.
10. Dispute Resolution
All disputes between the parties arising from the construction or performance of, or otherwise in connection with this Agreement, shall be finally settled in Texas, before one arbitrator pursuant to the rules of the American Arbitration Association. The arbitration procedure and all decisions made by the arbitrator shall be kept confidential, unless the parties expressly consent to the publication thereof in whole or in part. Unless oral hearings are requested by a party, the arbitrator shall make any award on the basis of written submissions. In the event of any proceeding between the Company and the Employee with respect to the subject matter of this Agreement and the enforcement of the rights hereunder and such proceeding results in final judgment or order in favor of one of the parties, which judgment or order is substantially inconsistent with the positions asserted by the other party in such litigation or proceeding, the losing party in such event shall reimburse the prevailing party for all of its reasonable costs and expenses relating to such litigation or other proceeding, including, without limitation, its reasonable attorneys’ fees and expenses. Such payments shall be made no later than sixty days after the final judgment or order is entered.
11. Notices
All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if physically delivered, delivered by express mail, or other expedited service or upon receipt if mailed, postage prepaid, via registered mail, return receipt requested. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing or to such other person and address as the Employee shall have specified in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
12. Miscellaneous
(a) Severability. In case any one or more of the provision(s) or part(s) of provision(s) contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality, or unenforceability shall be deemed not to affect any other jurisdiction or any other provision or part of a provision of this Agreement, nor shall such invalidity, illegality, or unenforceability affect the validity, legality, or enforceability of this Agreement or any provision or provisions hereof in any other jurisdiction; and this Agreement shall be reformed and construed in such jurisdiction as if such provision or part of a provision held to be invalid or illegal or unenforceable had never been contained herein and such provision or part reformed so that it would be valid, legal, and enforceable in such jurisdiction to the maximum extent possible. If, in any judicial proceeding, a court shall refuse to enforce any of such separate covenants, then such unenforceable covenants shall be deemed eliminated from the provisions hereof for the purpose of such proceedings to the extent necessary to permit the remaining separate covenants to be enforced in such proceedings. If, in any judicial proceeding, a court shall refuse to enforce any one or more of such separate covenants because the total time, scope, or area thereof is deemed to be excessive or unreasonable, then it is the intent of the parties hereto that such covenants, which would otherwise be unenforceable due to such excessive or unreasonable period of time, scope, or area, be enforced for such lesser period of time, scope, or area as shall be deemed reasonable and not excessive by such court.
(b) Entire Agreement. Except with respect to the terms of any written agreement, if any, by and between the Company and the Employee, no agreements, representations, or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof.
(c) Further Instruments and Documents. Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other party may reasonably require in order to effectuate the terms and purposes of this Agreement.
(d) Amendment. This Agreement may not be amended, waived, changed, modified, or discharged except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, or discharge is sought. No course of conduct or dealing shall be construed to modify, amend, or otherwise affect any of the provisions hereof.
(e) Waiver. Any waiver of any breach of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.
(f) Headings. The paragraph headings and subheadings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Change in Control Agreement as of the Effective Date.
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COMPANY: |
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NUO THERAPEUTICS, INC. |
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By: |
/s / Scott Pittman | |
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Name: |
Scott M. Pittman |
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Title: |
Chairman, Compensation, Nominating and Governance Committee, on behalf of the Board of Directors |
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EMPLOYEE: |
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| /s/ David Jorden | ||
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Name: |
David Jorden |
Exhibit 10.3
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement (“Agreement”) effective as of August 9, 2024 (the “Effective Date”) is by and between Nuo Therapeutics, Inc., a Delaware corporation (the “Company”), and Peter Clausen (the “Employee”).
WHEREAS, the Employee presently serves at the pleasure of the Board of Directors of the Company (the “Board”) as the Chief Scientific and Chief Operating Officer of the Company and performs substantial management duties necessary to the continued conduct of the Company’s business and operations;
WHEREAS, the Employee entered into an Employment Agreement, dated as of May 9, 2022 (the “Employment Agreement”);
WHEREAS, the Board believes that it is in the best interest of the Company and its stockholders to provide the Employee with additional financial incentive to maximize stockholder value in a Change in Control (as defined herein) transaction and to remain employed with the Company during the period prior to and in connection with a Change in Control; and
WHEREAS, the Board has approved this Agreement to provide a financial incentive payment upon a Change in Control to the Employee in pursuit of the foregoing objectives.
NOW THEREFORE in consideration of the mutual covenants contained herein as well as other good and valuable consideration, the Company and the Employee hereby agree as follows:
1. Term of Employment
The Company and the Employee acknowledge that at any time while the Employee is employed by the Company, the Company may terminate the Employee’s employment for any reason and the Employee may resign from the Company’s employment for any reason, subject to the terms of this Agreement and Section 4 of the Employment Agreement.
2. Payment Upon a Change in Control
Upon the occurrence of a Change in Control, the Company shall provide the Employee a lump-sum cash payment not later than 30 days following the Change in Control; provided, however, that such payment shall not be provided if a majority of the independent members of the Board prior to the Change in Control determine that the Employee did not significantly participate within the scope of his employment in effectuating the Change in Control; provided further, however, that such payment shall not be provided unless the Employee (A) has timely executed and not revoked a usual and customary general release of all known and unknown claims that the Employee may then have against the Company or persons affiliated with the Company in the form acceptable to the Company, and (B) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The lump-sum cash payment payable to the Employee under this Agreement shall be calculated based on the following schedule:
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Acquisition Value up to $40,000,000 $40,000,001 to $60,000,000 $60,000,001 to $85,000,000 more than $85,000,000 |
Payment 0% of Acquisition Value 0.15% of Acquisition Value 0.352941175% of Acquisition Value $300,000 |
For example, assume that a Change in Control results in an Acquisition Value of $50 million; in such case, the Employee will receive a lump-sum cash payment equal to $75,000 [$50,000,000 x 0.15%]. For example, assume that a Change in Control results in an Acquisition Value of $85 million; in such case, the Employee will receive a lump-sum cash payment equal to $300,000 [$85,000,000 x 0.352941175%]. For example, assume that a Change in Control results in an Acquisition Value of $100 million; in such case, the Employee will receive a lump-sum cash payment equal to $300,000.
For purposes of this Agreement, “Change in Control” shall mean the occurrence of (i) a transaction (or series of related transactions) by which any “person” (as such term is used in Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), other than a corporation or other entity beneficially owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company immediately prior to such transaction, shall have become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing of at least 80% of the combined voting power of the then outstanding voting securities of the Company, or (ii) a sale, lease, transfer, or other disposition transaction of all or substantially all of the assets of the Company, unless a majority of the independent members of the Board prior to such sale, lease, transfer, or other disposition transaction determines it is not a Change in Control for purposes of this Agreement.
For purposes of this Agreement, “Acquisition Value” shall mean the amount equal to the total gross non-contingent consideration paid or payable (regardless of whether such consideration is paid or payable in cash, stock, by assumption of debt, or otherwise) by the acquirer (or its designees, successors, or assigns), with such amount reduced by any Deduction. For purposes of determining Acquisition Value, the valuation of any securities or other non-cash assets paid or payable as consideration shall be determined by reference to the operative transaction agreement(s); provided, however, that if no such valuation is readily determinable from such operative transaction agreement(s), then the value shall be determined by a majority of the independent members of the Board prior to the Change in Control.
For purposes of this Agreement, “Deduction” shall mean all change in control payments made to employees of the Company, payments made to a third party to pay off indebtedness, liquidation preference payments, and amounts placed into escrow or a similar holdback; provided, however, that if any such Deduction or its amount is not readily determinable from the operative transaction agreement(s), then such Deduction and its amount as applicable shall be determined by a majority of the independent members of the Board prior to the Change in Control.
3. Termination
This Agreement shall terminate at 11:59 p.m., New York City time, on December 31, 2025, unless extended by mutual agreement of the parties in writing; provided, however, that this Agreement shall automatically terminate and shall become null and void without any further action by the parties immediately upon the Employee’s termination of employment for any reason prior to a Change in Control.
4. Section 409A
The parties intend for this Agreement to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or in compliance with Section 409A, and the provisions of this Agreement shall be administered, interpreted, and construed accordingly. Without limiting the generality of the foregoing, the term “termination of employment” or any similar term under this Agreement shall be interpreted to mean “separation from service” within the meaning of Section 409A to the extent necessary to comply with Section 409A. If this Agreement is not exempt from the application of Section 409A or fails to satisfy the requirements of Section 409A, then the parties hereby agree to amend or to clarify this Agreement in a timely manner so that this Agreement either satisfies the requirements of Section 409A or is exempt from the application of Section 409A.
5. Section 280G
Notwithstanding any other provision of this Agreement or any other plan, arrangement, or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Company or its affiliates to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise (the “Covered Payments”) constitute parachute payments (the “Parachute Payments”) within the meaning of Section 280G of the Code and would, but for this Section 5 be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit to the Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to the Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). For purposes of this Agreement, “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes. The Covered Payments shall be reduced in a manner that maximizes the Employee’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. The calculations and determinations under this Section 5 shall be provided by an accounting firm selected by the Company (and reasonably acceptable to the Employee) prior to the Change in Control (the “Accounting Firm”) and the Company shall pay the cost of such Accounting Firm. The parties shall use commercially reasonable efforts to cause the Accounting Firm to provide such calculations prior to the consummation of the Change in Control and its determinations shall be binding on the Employee and the Company absent manifest error.
6. Withholding Tax
The Company shall be entitled to deduct and withhold from any amounts owing to the Employee any federal, state, city, local, or foreign withholding taxes, payroll tax, excise taxes, or employment taxes imposed with respect to any payment from the Company.
7. Successors
(a) Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business or assets, whether or not this Agreement is expressly assigned to the successor, shall assume the obligations under this Agreement and shall perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business or assets which executes and delivers an assumption agreement or which becomes bound by the terms of this Agreement by operation of law.
(b) Employee’s Successors. The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.
8. Assignment
(a) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment.
(b) No Assignment by Employee. The rights of the Employee to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including, without limitation, bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this subsection (b) shall be void.
9. Governing Law
This Agreement shall be governed by and construed under the laws of the State of Texas.
10. Dispute Resolution
All disputes between the parties arising from the construction or performance of, or otherwise in connection with this Agreement, shall be finally settled in Texas, before one arbitrator pursuant to the rules of the American Arbitration Association. The arbitration procedure and all decisions made by the arbitrator shall be kept confidential, unless the parties expressly consent to the publication thereof in whole or in part. Unless oral hearings are requested by a party, the arbitrator shall make any award on the basis of written submissions. In the event of any proceeding between the Company and the Employee with respect to the subject matter of this Agreement and the enforcement of the rights hereunder and such proceeding results in final judgment or order in favor of one of the parties, which judgment or order is substantially inconsistent with the positions asserted by the other party in such litigation or proceeding, the losing party in such event shall reimburse the prevailing party for all of its reasonable costs and expenses relating to such litigation or other proceeding, including, without limitation, its reasonable attorneys’ fees and expenses. Such payments shall be made no later than sixty days after the final judgment or order is entered.
11. Notices
All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if physically delivered, delivered by express mail, or other expedited service or upon receipt if mailed, postage prepaid, via registered mail, return receipt requested. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing or to such other person and address as the Employee shall have specified in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
12. Miscellaneous
(a) Severability. In case any one or more of the provision(s) or part(s) of provision(s) contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality, or unenforceability shall be deemed not to affect any other jurisdiction or any other provision or part of a provision of this Agreement, nor shall such invalidity, illegality, or unenforceability affect the validity, legality, or enforceability of this Agreement or any provision or provisions hereof in any other jurisdiction; and this Agreement shall be reformed and construed in such jurisdiction as if such provision or part of a provision held to be invalid or illegal or unenforceable had never been contained herein and such provision or part reformed so that it would be valid, legal, and enforceable in such jurisdiction to the maximum extent possible. If, in any judicial proceeding, a court shall refuse to enforce any of such separate covenants, then such unenforceable covenants shall be deemed eliminated from the provisions hereof for the purpose of such proceedings to the extent necessary to permit the remaining separate covenants to be enforced in such proceedings. If, in any judicial proceeding, a court shall refuse to enforce any one or more of such separate covenants because the total time, scope, or area thereof is deemed to be excessive or unreasonable, then it is the intent of the parties hereto that such covenants, which would otherwise be unenforceable due to such excessive or unreasonable period of time, scope, or area, be enforced for such lesser period of time, scope, or area as shall be deemed reasonable and not excessive by such court.
(b) Entire Agreement. Except with respect to the terms of any written agreement, if any, by and between the Company and the Employee, no agreements, representations, or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof.
(c) Further Instruments and Documents. Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other party may reasonably require in order to effectuate the terms and purposes of this Agreement.
(d) Amendment. This Agreement may not be amended, waived, changed, modified, or discharged except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, or discharge is sought. No course of conduct or dealing shall be construed to modify, amend, or otherwise affect any of the provisions hereof.
(e) Waiver. Any waiver of any breach of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.
(f) Headings. The paragraph headings and subheadings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Change in Control Agreement as of the Effective Date.
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COMPANY: |
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NUO THERAPEUTICS, INC. |
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By: |
/s/ Scott M. Pittman | |
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Name: |
Scott M. Pittman |
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Title: |
Chairman, Compensation, Nominating and Governance Committee, on behalf of the Board of Directors |
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EMPLOYEE: |
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| /s/ Peter Clausen | ||
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Name: |
Peter Clausen |
Exhibit 31
Certification of Principal Executive and Principal Financial Officer Pursuant to Exchange Act Rule
13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, David E. Jorden, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q of Nuo Therapeutics, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 12, 2024
/s/ David E. Jorden
David E. Jorden
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)
Exhibit 32
Certification of Principal Executive and Principal Financial Officer Pursuant to
18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. §1350 and in connection with the Quarterly Report on Form 10-Q of Nuo Therapeutics, Inc. (the “Company”) for the period ended June 30, 2024 (the “Report”), I, David E. Jorden, Chief Executive and Chief Financial Officer of the Company, hereby certify that to my knowledge:
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 12, 2024
/s/ David E. Jorden
David E. Jorden
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)
This certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Act of 1934 (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.