Tenax Therapeutics, Inc 10-Q for FY2021 Q2

Tenax Therapeutics, Inc. (TENX)

10-Q 2021-08-16 For: 2021-06-30

Added on April 11, 2026

About this 10-Q

Tenax Therapeutics, Inc filed this 10-Q on August 16, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net income: $1.72M; down 20.0% from net income of $2.15M a year earlier

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Delaware		26-2593535
(State of incorporation)		(I.R.S. Employer Identification No.)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	TENX	The Nasdaq Stock Market LLC

Large Accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020	3
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 5.	Other Information	32
Item 6.	Exhibits	32

	June 30, 2021			December 31, 2020
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,671,422		$	6,250,241
Marketable securities		510,943			462,687
Prepaid expenses		349,862			82,578
Total current assets		2,532,227			6,795,506
Right of use asset		338,698			58,778
Property and equipment, net		5,821			5,972
Other assets		8,435			8,435
Total assets	$	2,885,181		$	6,868,691

LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Accounts payable	$	791,947		$	757,856
Accrued liabilities		383,063			1,240,616
Note payable		-			120,491
Total current liabilities		1,175,010			2,118,963
Long term liabilities
Lease liability		239,039			-
Note payable		-			124,166
Total long term liabilities		239,039			124,166
Total liabilities		1,414,049			2,243,129


Commitments and contingencies; see Note 8
Stockholders' equity
Preferred stock, undesignated, authorized 9,999,790 shares; See Note 9 Series A Preferred stock, par value $.0001, issued 5,181,346 shares; outstanding 210, respectively		-			-
Common stock, par value $.0001 per share; authorized 400,000,000 shares; issued and outstanding 25,201,312 and 12,619,369 respectively		2,520			1,262
Additional paid-in capital		272,953,869			250,644,197
Accumulated other comprehensive loss		(274	)		(70	)
Accumulated deficit		(271,484,983	)		(246,019,827	)
Total stockholders equity		1,471,132			4,625,562
Total liabilities and stockholders' equity	$	2,885,181		$	6,868,691

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Operating expenses
General and administrative	$	1,271,278		$	869,206		$	2,644,738		$	2,192,165
Research and development		693,222			1,274,837			23,069,424			2,617,363
Total operating expenses		1,964,500			2,144,043			25,714,162			4,809,528

Net operating loss		1,964,500			2,144,043			25,714,162			4,809,528

Interest expense		336			406			949			406
Other (income) expense, net		(247,820	)		2,101			(249,955	)		(8,740	)
Net loss	$	1,717,016		$	2,146,550		$	25,465,156		$	4,801,194

Unrealized (gain) loss on marketable securities		(128	)		(3,238	)		204			(1,616	)
Total comprehensive loss	$	1,716,888		$	2,143,312		$	25,465,360		$	4,799,578

Net loss per share, basic and diluted	$	(0.10	)	$	(0.23	)	$	(1.60	)	$	(0.59	)
Weighted average number of common shares outstanding, basic and diluted		17,218,103			9,339,309			15,874,062			8,156,848

														Accumulated
	Preferred Stock						Common Stock				Additional			other						Total
	Number of Shares			Amount			Number of Shares		Amount		paid-in capital			comprehensive gain (loss)			Accumulated deficit			stockholders' equity

Balance at December 31, 2019		38,606		$	4			6,741,860	$	674	$	239,939,797		$	458		$	(236,168,436	)	$	3,772,497
Common stock and pre-funded warrants sold, net of offering costs								750,000		75		2,129,930									2,130,005
Compensation on options issued										-		72,376									72,376
Common stock issued for services rendered								77,987		8		99,992									100,000
Common stock issued for convertible preferred stock		(38,396	)		(4	)		38,396		4		-									-
Exercise of pre-funded warrants								400,000		40		-									40
Unrealized loss on marketable securities															(1,622	)					(1,622	)
Net loss																		(2,654,644	)		(2,654,644	)
Balance at March 31, 2020		210		$	-			8,008,243	$	801	$	242,242,095		$	(1,164	)	$	(238,823,080	)	$	3,418,652
Compensation on options issued										-		63,166									63,166
Exercise of warrants								2,087,515		209		1,690,455									1,690,664
Unrealized gain on marketable securities															3,238						3,238
Net loss																		(2,146,550	)		(2,146,550	)
Balance at June 30, 2020		210		$	-			10,095,758	$	1,010	$	243,995,716		$	2,074		$	(240,969,630	)	$	3,029,170

Balance at December 31, 2020		210		$	-			12,619,369	$	1,262	$	250,644,197		$	(70	)	$	(246,019,827	)	$	4,625,562
Common stock and preferred stock issued for asset acquisition		10,232			1			1,892,905		189		21,582,141									21,582,331
Compensation on options issued												91,609									91,609
Exercise of warrants								457,038		46		544,605									544,651
Unrealized loss on marketable securities															(332	)					(332	)
Net loss																		(23,748,140	)		(23,748,140	)
Balance at March 31, 2021		10,442		$	1			14,969,312	$	1,497	$	272,862,552		$	(402	)	$	(269,767,967	)	$	3,095,681
Common stock issued for convertible preferred stock		(10,232	)		(1	)		10,232,000		1,023		(1,022	)								-
Compensation on options issued												92,339									92,339
Unrealized gain on marketable securities															128						128
Net loss																		(1,717,016	)		(1,717,016	)
Balance at June 30, 2021		210		$	-			25,201,312	$	2,520	$	272,953,869		$	(274	)	$	(271,484,983	)	$	1,471,132

Level one	Quoted market prices in active markets for identical assets or liabilities;

Level two	Inputs other than level one inputs that are either directly or indirectly observable; and

Level three	Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

	June 30, 2021
	Amortized Cost		Accrued Interest		Gross Unrealized Gains		Gross Unrealized losses			Estimated Fair Value
Corporate debt securities	$	506,530	$	4,690	$	46	$	(323	)	$	510,943
Total investments	$	506,530	$	4,690	$	46	$	(323	)	$	510,943

			Fair Value Measurements at Reporting Date Using
	Balance as of June 30, 2021		Quoted prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Current Assets
Cash and cash equivalents	$	1,671,422	$	1,671,422	$	-	$	-
Marketable securities	$	510,943	$	-	$	510,943	$	-

			Fair Value Measurements at Reporting Date Using
	Balance as of December 31, 2020		Quoted prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Current Assets
Cash and cash equivalents	$	6,250,241	$	6,250,241	$	-	$	-
Marketable securities	$	462,687	$	-	$	462,687	$	-

	June 30, 2021			December 31, 2020
Office furniture and fixtures	$	43,033		$	43,033
Computer equipment and software		23,631			23,307
		66,664			66,340
Less: Accumulated depreciation		(60,843	)		(60,368	)
	$	5,821		$	5,972

	June 30, 2021		December 31, 2020
Employee related	$	127,551	$	860,629
Operating costs		154,051		319,608
Lease liability		101,461		60,379
	$	383,063	$	1,240,616

	June 30, 2021		December 31, 2020
Current portion included in accrued liabilities	$	101,461	$	60,379
Long term lease liability		239,039		-
	$	340,500	$	60,379

Year ending December 31,
2021	$	62,517
2022		126,612
2023		129,797
2024		65,702
Total lease payments	$	384,628
Less: Imputed interest		(44,128	)
Operating lease liability	$	340,500

Conversion	Subject to the ownership limitations described below, the Series A Stock is convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion ratio determined by dividing the stated value of the Series A Stock by a conversion price of $1.93 per share. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The Company will not affect any conversion of the Series A Stock, nor shall a holder convert its shares of Series A Stock, to the extent that such conversion would cause the holder to have acquired, through conversion of the Series A Stock or otherwise, beneficial ownership of a number shares of common stock in excess of 4.99% (or, at the election of the holder prior to the issuance of any shares of Series A Stock, 9.99%) of the common stock outstanding after giving effect to such exercise.

Dividends	In the event the Company pays dividends on its shares of common stock, the holders of the Series A Stock will be entitled to receive dividends on shares of Series A Stock equal, on an as-if-converted basis, to and in the same form as paid on the common stock. No other dividends will be paid on the shares of Series A Stock.

Liquidation	Upon any liquidation, dissolution or winding up of the Company after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount equal to the amount that a holder of common stock would receive if the Series A Stock were fully converted to common stock, which amounts will be paid pari passu with all holders of common stock.

Voting rights	Shares of Series A Stock will generally have no voting rights, except as required by law and except that the consent of holders of a majority of the then outstanding Series A Stock will be required to amend the terms of the Series A Stock or to take other action that adversely affects the rights of the holders of Series A Stock.

Fair value of shares of Common Stock issued	$	3,369,371
Fair Value of Series B Convertible Preferred Stock issued at closing		18,212,960
Total fair value of consideration transferred	$	21,582,331

Tangible assets acquired	$	-
Accounts payable assumed		(150,000	)
Total identifiable net assets		(150,000	)
IPR&D expense recognized		21,732,331
Total fair value of consideration	$	21,582,331

	Warrants			Weighted Average Exercise Price
Outstanding at December 31, 2020		16,599,079		$	1.29
Exercised		(801,576	)		1.54
Outstanding at June 30, 2021		15,797,503		$	1.27

	Shares Available for Grant
Balances, at December 31, 2020		356,500
Additional shares reserved		750,000
Options granted		(328,750	)
Balances, at June 30, 2021		777,750

	Outstanding Options
	Number of Shares		Weighted Average Exercise Price
Balances at December 31, 2020		393,500	$	1.81
Options granted		328,750	$	1.86
Balances at June 30, 2021		722,250	$	1.83

	For the six months ended June 30,
	2021			2020
Risk-free interest rate (weighted average)		0.70	%		1.03	%
Expected volatility (weighted average)		99.47	%		97.61	%
Expected term (in years)		7			7
Expected dividend yield		0.00	%		0.00	%

Risk-Free Interest Rate	The risk-free interest rate assumption was based on U.S. Treasury instruments with a term that is consistent with the expected term of the Company’s stock options.

Expected Volatility	The expected stock price volatility for the Company’s common stock was determined by examining the historical volatility and trading history for its common stock over a term consistent with the expected term of its options.

Expected Term	The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. It was calculated based on the Company’s historical experience with its stock option grants.

Expected Dividend Yield	The expected dividend yield of 0% is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not anticipate paying any dividends in the near future.

Forfeitures	Stock compensation expense recognized in the statements of operations for the six months ended June 30, 2021 is based on awards ultimately expected to vest, and it has been reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on the Company’s historical experience.

	-	Increased cardiac contractility by calcium sensitization of troponin C, resulting in a positive inotropic effect which is not associated with substantial increases in oxygen demand.

	-	Opening of potassium channels in the vasculature smooth muscle, resulting in a vasodilatory effect on all vascular beds.

	-	Opening of mitochondrial potassium channels in cardiomyocytes, resulting in a cardioprotective effect.

	·	Cash and cash equivalents, including the fair-value of our marketable securities, were $2.2 million on June 30, 2021.

	·	Our net loss from operations was $2.0 million for the second quarter of fiscal 2021 compared to $2.1 million for the three months ended June 30, 2020.

	·	Net cash used in operating activities was $1.9 million and $2.2 million for the three months ended June 30, 2021 and 2020, respectively.

	-	Working with collaborators and partners to accelerate product development, reduce our development costs, and broaden our developmental capabilities; and
	-	Identifying strategic alternatives, including, but not limited to, the potential acquisition of additional products or product candidates.

	Three months ended June 30,					Increase/			% Increase/
	2021		2020			(Decrease)			(Decrease)
Personnel costs	$	711,174	$	700,737		$	10,437			1	%
Legal and professional fees		343,122		(32,879	)		376,001			1,144	%
Other costs		176,223		160,409			15,814			10	%
Facilities		40,759		40,939			(180	)		(0	)%

	-	Board of Director fees increased approximately $40,000 in the current period due primarily to fees paid to new directors that were not incurred during the same period in the prior year.
	-	Capital market fees increased approximately $35,000 in the current period. This increase was due primarily to an increase in proxy related costs incurred in the current period as compared to the same period in the prior year.
	-	Investor relations costs decreased approximately $21,000 in the current period. This decrease was primarily due to fees paid to third-party investor relations firms for direct outreach and communications in the prior year that were not incurred in the current period.

	Three months ended June 30,					(Increase)/
	2021			2020		Decrease
Other (income) expense, net	$	(247,820	)	$	2,101	$	(249,921	)

	-	Legal fees increased approximately $311,000 in the current period. This increase was due primarily to the reimbursement of approximately $358,000 in legal fees associated with arbitration proceedings in the prior year, as well as an increase in fees paid associated with the PHPM acquisition and our intellectual property portfolio, partially offset by costs incurred for arbitration in the prior year.

	-	Accounting fees increased approximately $42,000 in the current period due primarily to fees associated with the PHPM transaction that were not incurred during the same period in the prior year.

	-	Board of Director fees increased approximately $51,000 in the current period due primarily to fees paid to new directors that were not incurred during the same period in the prior year.

	-	Capital market fees increased approximately $25,000 in the current period. This increase was due primarily to an increase in proxy related costs incurred in the current period as compared to the same period in the prior year

	-	Investor relations costs decreased approximately $33,000 in the current period. This decrease was primarily due to fees paid to third-party investor relations firms for direct outreach and communications in the prior year that were not incurred in the current period.

	-	the initiation, progress, timing and completion of clinical trials for our product candidate and potential product candidates;
	-	the outcome, timing and cost of regulatory approvals and the regulatory approval process;
	-	the impacts of COVID-19, including delays that may be caused by COVID-19;
	-	delays that may be caused by changing regulatory requirements;
	-	the number of product candidates that we pursue;
	-	the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
	-	the timing and terms of future collaboration, licensing, consulting or other arrangements that we may enter into;
	-	the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities;
	-	the cost of procuring clinical and commercial supplies of our product candidates;
	-	the extent to which we acquire or invest in businesses, products or technologies; and
	-	the possible costs of litigation.

No.		Description
10.1		Amendment No. 2 to 2016 Stock Incentive Plan*+
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*		Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
104*		Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.

	TENAX THERAPEUTICS, INC.

Date: August 16, 2021	By:	/s/ Michael B. Jebsen
		Michael B. Jebsen
		President and Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial Officer)