Attached files
| file | filename |
|---|---|
| EX-4.4 - WARRANT - TENAX THERAPEUTICS, INC. | tnx_ex44.htm |
| EX-4.3 - CERTIFICATE OF DESIGNATION - TENAX THERAPEUTICS, INC. | tnx_ex43.htm |
| EX-23.1 - CONSENTS OF EXPERTS AND COUNSEL - TENAX THERAPEUTICS, INC. | tenx_ex231.htm |
As filed with the Securities and
Exchange Commission on December 3,
2018
Registration No. 333-228212
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment
No. 2 to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TENAX THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
|
Delaware
|
|
8731
|
|
26-2593535
|
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification No.)
|
ONE Copley Parkway, Suite 490
Morrisville, NC 27560
(919) 855-2100
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive
offices)
Anthony DiTonno
Chief Executive Officer
Tenax Therapeutics, Inc.
ONE Copley Parkway, Suite 490
Morrisville, NC 27560
(919) 855-2100
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
With copies to:
|
Margaret Rosenfeld
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P.
Wells Fargo Capitol Center, Suite 2300
150 Fayetteville Street
Raleigh, NC 27601
(919) 821-1220
|
|
Michael F. Nertney
Ellenoff Grossman & Schole, LLP
1345 Avenue of the Americas
New York, NY 10105
Tel: (212) 370-1300
Fax: (212) 370-7889
|
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after this registration statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following
box. ☑
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth
company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer ☐
|
|
Accelerated
filer ☐
|
|
Non-accelerated
filer ☑
|
|
Smaller
reporting company ☑
|
|
|
|
Emerging
growth company ☐
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities Act.
☐
CALCULATION OF REGISTRATION FEE
|
Title of each
class of securities to be registered
|
Proposed
maximum
aggregate offering price
(1)
|
Amount
of
registration fee (2)
|
|
|
Units consisting
of:
|
|
|
|
|
(i)
|
Series A Convertible Preferred
Stock, $0.0001 par value per share(3)
|
$ 10,000,000
|
$ 1,212
|
|
(ii)
|
Common Stock issuable upon
conversion of Series A Convertible Preferred Stock
(3) (5)
|
|
|
|
(iii)
|
Series 1 Warrants to
purchase Common Stock (3) (4)
|
|
|
|
(iv)
|
Series 2 Warrants to purchase Common Stock
(3) (4)
|
|
|
|
(v)
|
Common stock issuable upon exercise
of Warrants (3)
|
$ 20,000,000
|
$ 2,424
|
|
Total
|
$ 30,000,000
|
$ 3,636(6)
|
|
|
(1)
|
Estimated solely
for the purpose of computing the registration fee pursuant to Rule
457(o) under the Securities Act of 1933, as amended (the
“Act”).
|
|
(2)
|
Calculated pursuant
to Rule 457(o) based on an estimate of the proposed maximum
aggregate offering price of all securities being
registered.
|
|
(3)
|
Pursuant
to Rule 416 under the Act, the securities being registered
hereunder include such indeterminate number of additional shares of
common stock as may be issued after the date hereof as a result of
stock splits, stock dividends or similar transactions.
|
|
(4)
|
No
separate fee is required pursuant to Rule 457(g) under the
Act.
|
|
(5)
|
No
separate fee is required pursuant to Rule 457(i) under the
Act.
|
|
(6)
|
Of
this amount, $2,788 was previously paid.
|
The
registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933, as
amended, or until the registration statement shall become effective
on such date as the Commission acting pursuant to said Section
8(a), may determine.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED December 3,
2018
PRELIMINARY PROSPECTUS
Tenax Therapeutics, Inc.
4,444,444 shares of Series A Convertible Preferred
Stock
(and 4,444,444 shares of Common Stock underlying the Series A
Convertible Preferred Stock)
Warrants to purchase up to 8,888,888 shares of Common
Stock
(and 8,888,888 shares of Common Stock issuable upon exercise of the
Warrants)
We are offering 4,444,444 shares of Series A Convertible Preferred
Stock, par value $0.0001 per share, or the Series A Preferred
Stock, and 8,888,888 warrants each exercisable for one share of
our common stock, which number of warrants equals 200% of the
number of shares of our common stock issuable upon conversion of a
share of Series A Preferred Stock at the assumed initial
conversion price, at an assumed exercise price per share equal to
$2.25. This prospectus also covers up to 4,444,444 shares of
common stock issuable upon conversion of the Series A Preferred
Stock and up to 8,888,888 shares of common stock issuable upon
exercise of the warrants.
Each share of
Series A Preferred Stock will be sold as a unit with one warrant to
purchase one share of our common stock that expires on the second
anniversary of the date of issuance, which we refer to Series 1
Warrants, and one warrant to purchase one share of our common stock
that expires on the fifth anniversary of the date of issuance,
which we refer to as Series 2 Warrants (together with the shares of
common stock underlying such shares of Series A Preferred Stock and
such warrants, are referred to herein as the Units) at an assumed
public offering price of $2.25 per Unit. Subject to certain
ownership limitations, the Series A Preferred Stock is convertible
at any time at the option of the holder into shares of our common
stock at an assumed initial conversion price per share equal to
$2.25. Subject to certain ownership limitations, the warrants are
immediately exercisable and entitles its holder to purchase one
share of common stock at an assumed exercise price of $2.25 per
share.
The Units have no
stand-alone rights and will not be certificated and the shares of
Series A Preferred Stock and warrants comprising such units are
immediately separable and will be issued separately in this
offering.
The price of our
common stock on the Nasdaq Capital Market during recent periods was
only one of many factors in determining the public offering price.
Other factors we considered in determining the public offering
price included our history, our prospects, the industry in which we
operate, our past and present operating results, the previous
experience of our executive officers and the general condition of
the securities markets at the time of this offering. All share
numbers included in this prospectus are based upon an assumed
public offering price of $2.25 per share (the last reported sale
price of our common stock on the Nasdaq Capital Market on November
28, 2018).
Our common stock is
listed on the Nasdaq Capital Market under the symbol
“TENX.” On November 28, 2018 the last reported sale
price of our common stock on the Nasdaq Capital Market was $2.25
per share. We do not intend to list the warrants or preferred stock
to be sold in this offering on any securities exchange or trading
system.
Investing in our securities involves a
high degree of risk. See “Risk Factors” beginning on
page 7 of this prospectus and
elsewhere in this prospectus for a discussion of information that
should be considered in connection with an investment in our
securities.
|
|
Per Unit
|
Total
|
|
Public offering
price (1)
|
$
|
$
|
|
Underwriting
discounts and commissions (2)
|
$
|
$
|
|
Proceeds, before
expenses, to us
|
$
|
$
|
(1)
The public offering price and
underwriting discount corresponds to (i) a public offering price
per share of Series A Preferred Stock of $
(or $
after deducting the underwriting discount), (ii) a public offering
price per Series 1 Warrant of $
(or $
after deducting the underwriting discount) and (iii) a public
offering price per Series 2 Warrant of $
(or $
after deducting the underwriting
discount).
(2)
See “Underwriting” beginning on page 34 of this
prospectus for additional information regarding compensation
payable to the underwriter.
Neither the United States Securities and Exchange Commission nor
any state securities commission has approved or disapproved of the
common stock that may be offered under this prospectus, nor have
any of these regulatory authorities determined if this prospectus
is truthful or complete. Any representation to the contrary is a
criminal offense.
The
underwriter expects to deliver the securities to purchasers on or
about
,
2018.
Ladenburg Thalmann
The
date of this prospectus is
,
2018
Prospectus
|
PROSPECTUS SUMMARY
|
1
|
|
RISK FACTORS
|
7
|
|
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
22
|
|
USE OF PROCEEDS
|
23
|
|
CAPITALIZATION
|
24
|
|
DILUTION
|
25
|
|
MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
|
26
|
|
DIVIDEND POLICY
|
26
|
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
27
|
|
DESCRIPTION OF SECURITIES
|
28
|
|
UNDERWRITING
|
34
|
|
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
|
37
|
|
LEGAL MATTERS
|
43
|
|
EXPERTS
|
43
|
|
WHERE YOU CAN FIND ADDITIONAL INFORMATION
|
43
|
|
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
|
43
|
You
should rely only on the information contained in this prospectus
and any free-writing prospectus that we authorize to be distributed
to you. We have not, and the underwriter has not, authorized anyone
to provide you with information different from or in addition to
that contained in this prospectus or any related free-writing
prospectus. If anyone provides you with different or inconsistent
information, you should not rely on it. We are offering to sell,
and are seeking offers to buy, the Units only in jurisdictions
where offers and sales are permitted. The information contained in
this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any
sale of the Units. Our business, financial conditions, results of
operations and prospects may have changed since that
date.
The
registration statement we filed with the Securities and Exchange
Commission, or the SEC, includes exhibits that provide more detail
of the matters discussed in this prospectus. You should read this
prospectus and the related exhibits filed with the SEC, together
with the additional information described under the heading
“Where You Can Find
Additional Information,”
before making your investment decision. You should rely only on the
information provided or incorporated by reference in this
prospectus or any amendment thereto. We have not, and the
underwriter has not, authorized anyone to provide any information
or to make any representations other than those contained in this
prospectus or in any free writing prospectuses prepared by or on
behalf of us or to which we have referred you. We take no
responsibility for, and can provide no assurance as to the
reliability of, any other information that others may give you. The
information contained in this prospectus or in any applicable free
writing prospectus is current only as of its date, and that any
information incorporated by reference is accurate only as of the
date of the document incorporated by reference, unless we indicate
otherwise, regardless of its time of delivery or any sale of our
securities. Our business, financial condition, results of
operations and prospects may have changed since that
date.
This
prospectus is an offer to sell only the securities offered hereby,
and only under circumstances and in jurisdictions where it is
lawful to do so. We are not, and the underwriter is not, making an
offer to sell these securities in any state or jurisdiction where
the offer or sale is not permitted. For investors outside the
United States: We have not, and the underwriter has not, done
anything that would permit this offering or possession or
distribution of this prospectus in any jurisdiction where action
for that purpose is required, other than in the United States.
Persons outside the United States who come into possession of this
prospectus must inform themselves about, and observe any
restrictions relating to, the offering of the securities and the
distribution of this prospectus outside the United
States.
Unless
otherwise indicated, information contained in this prospectus
concerning our industry and the markets in which we operate,
including our general expectations and market position, market
opportunity and market size, is based on information from various
sources, including independent industry publications. In presenting
this information, we have also made assumptions based on such data
and other similar sources, and on our knowledge of, and our
experience to date in, the markets for our products. This
information involves a number of assumptions and limitations, and
you are cautioned not to give undue weight to such estimates. We
believe that the information from these industry publications that
is included in this prospectus is reliable. The industry in which
we operate is subject to a high degree of uncertainty and risk due
to a variety of factors, including those described in “Risk Factors.” These and other factors could cause
results to differ materially from those expressed in the estimates
made by the independent parties and by us.
Unless
the context otherwise requires, references in this prospectus to
“Tenax
Therapeutics,”
“the Company,” “we,” “us” and “our” or similar terms refer to Tenax
Therapeutics, Inc.
i
|
|
|
|
|
|
PROSPECTUS
SUMMARY
This summary is not complete and does not contain all of the
information you should consider before investing in the securities
offered by this prospectus. You should read this summary together
with the entire prospectus, including our financial statements, the
notes to those financial statements, and the other documents
identified under the headings “Where You Can Find More
Information” and “Documents Incorporated by
Reference” in this prospectus before making an investment
decision. See the Risk Factors section of this prospectus on page 7
for a discussion of the risks involved in investing in our
securities.
Tenax Therapeutics, Inc.
Overview
We are
a specialty pharmaceutical company focused on identifying and
developing products that address diseases with high unmet medical
needs. On November 13, 2013, through our wholly owned subsidiary,
Life Newco, Inc., or Life Newco, we acquired a license granting
Life Newco an exclusive, sublicenseable right to develop and
commercialize pharmaceutical products containing levosimendan, 2.5
mg/ml concentrate for solution for infusion / 5ml vial in the
United States and Canada.
Business Strategy
Our
principal business objective is to identify, develop, and
commercialize novel therapeutic products for disease indications
that represent significant areas of clinical need and commercial
opportunity. The key elements of our business strategy are outlined
below.
Efficiently conduct clinical development to establish clinical
proof of concept with our current product candidate.
Levosimendan represents novel therapeutic modalities for the
treatment of pulmonary hypertension and other critical care
conditions. We are conducting clinical development with the intent
to establish proof of concept in several important disease areas
where these therapeutics would be expected to have benefit. Our
focus is on conducting well-designed studies to establish a robust
foundation for subsequent development, partnership and expansion
into complementary areas.
Efficiently explore new high potential therapeutic applications,
leveraging third-party research collaborations and our results from
related areas. Our product candidate has shown promise in
multiple disease areas. We are committed to exploring potential
clinical indications where our therapies may achieve best-in-class
profile, and where we can address significant unmet medical needs.
In order to achieve this goal, we have established collaborative
research relationships with investigators from research and
clinical institutions and our strategic partners. These
collaborative relationships have enabled us to cost effectively
explore where our product candidates may have therapeutic
relevance, and how it may be utilized to advance treatment over
current clinical care. Additionally, we believe we will be able to
leverage clinical safety data and preclinical results from some
programs to support accelerated clinical development efforts in
other areas, saving substantial development time and resources
compared to traditional drug development.
Continue to expand our intellectual property portfolio. Our
intellectual property is important to our business and we take
significant steps to protect its value. We have ongoing research
and development efforts, both through internal activities and
through collaborative research activities with others, which aim to
develop new intellectual property and enable us to file patent
applications that cover new applications of our existing
technologies or product candidates.
Enter into licensing or product co-development arrangements in
certain areas, while out-licensing opportunities in non-core
areas. In addition to our internal development efforts, an
important part of our product development strategy is to work with
collaborators and partners to accelerate product development,
reduce our development costs, and broaden our commercialization
capabilities. We believe this strategy will help us to develop a
portfolio of high quality product development opportunities,
enhance our clinical development and commercialization
capabilities, and increase our ability to generate value from our
proprietary technologies.
|
|
|
|
|
|
1
|
|
|
|
|
|
Our
Current Program
Levosimendan Background
Levosimendan
was discovered and developed by Orion Corporation, a Finnish
company, or Orion. Levosimendan is a calcium sensitizer/K-ATP
activator developed for intravenous use in hospitalized
patients with acutely decompensated heart failure. It is currently
approved in over 60 countries for this indication and not available
in the United States or Canada. It is estimated that to date over
1,000,000 patients have been treated worldwide with
levosimendan.
Levosimendan
is a novel, first in class calcium sensitizer/K-ATP
activator. The therapeutic effects of levosimendan are
mediated through:
●
Increased cardiac
contractility by calcium sensitization of troponin C, resulting in
a positive inotropic effect which is not associated with
substantial increases in oxygen demand.
●
Opening of
potassium channels in the vasculature smooth muscle, resulting in a
vasodilatory effect on all vascular beds.
●
Opening of
mitochondrial potassium channels in cardiomyocytes, resulting in a
cardioprotective effect.
This
triple mechanism of action helps to preserve heart function during
cardiac surgery. Several studies have demonstrated that
levosimendan protects the heart and improves tissue perfusion while
minimizing tissue damage during cardiac surgery.
In
2013, we acquired certain assets of Phyxius Pharma, Inc., or
Phyxius, including its North American rights to develop and
commercialize levosimendan for any indication in the United States
and Canada. In the countries where levosimendan is marketed,
levosimendan is indicated for the short-term treatment of acutely
decompensated severe chronic heart failure in situations where
conventional therapy is not sufficient, and in cases where
inotropic support is considered appropriate. In acute decompensated
heart failure patients, levosimendan has been shown to
significantly improve patients’ symptoms as well as acute
hemodynamic measurements such as increased cardiac output, reduced
preload and reduced afterload.
The
European Society of Cardiology, or the ESC, recommends levosimendan
as a preferable agent over dobutamine to reverse the effect of beta
blockade if it is thought to be contributing to hypotension. The
ESC guidelines also state that levosimendan is not appropriate for
patients with systolic blood pressure less than 85mmHg or in
patients in cardiogenic shock unless it is used in combination with
other inotropes or vasopressors. Other unique properties of
levosimendan include sustained efficacy through the formation of a
long acting metabolite, lack of impairment of diastolic function,
and evidence of better compatibility with beta blockers than
dobutamine.
Levosimendan Development for Pulmonary Hypertension
Patients
We are currently initiating a Phase 2 clinical trial of
levosimendan in North America for the treatment of patients
with pulmonary hypertension associated with heart failure with
preserved ejection fraction, or PH-HFpEF. PH-HFpEF is defined hemodynamically
by a pulmonary artery pressure, or mPAP, ≥25 mmHg, a pulmonary capillary wedge
pressure, or PCWP, >15 mmHg, and a diastolic pressure gradient,
or diastolic PAP – PCWP,
>7mmHg. Pulmonary hypertension in these patients initially
develops from a passive backward transmission of elevated filling
pressures from left-sided heart failure. These mechanical
components of pulmonary venous congestion may trigger pulmonary
vasoconstriction, decreased nitric oxide availability, increased
endothelin expression, desensitization to natriuretic peptide
induced vasodilation, and vascular remodeling. Finally, these changes often lead to
advanced pulmonary vascular disease, increased right ventricle, or
RV, afterload, and RV failure.
PH-HFpEF
is a common form of pulmonary hypertension with an estimated US
prevalence exceeding 1.5 million patients. Currently, no
pharmacologic therapies are approved for treatment of
PH-HFpEF. Despite the
fact that many therapies have been studied in PH-HFpEF patients,
including therapies approved to treat pulmonary arterial
hypertension patients, no therapies have been shown to be effective
in treating PH-HFpEF patients.
|
|
|
|
|
|
2
3
|
|
|
|
|
|
Recent Developments
As of
November 28, 2018, we believe that our existing cash
and cash equivalents, along with our investment in marketable
securities, will be sufficient to fund our projected operating
requirements through the first quarter of calendar year 2019. We
will need substantial additional capital in the future in order to
complete the development and commercialization of levosimendan and
to fund the development and commercialization of other future
product candidates. Until we can generate a sufficient amount of
product revenue, if ever, we expect to finance future cash needs
through public or private equity offerings, debt financings or
corporate collaboration and licensing arrangements. Such funding
may not be available on favorable terms, if at all. In the event we
are unable to obtain additional capital, we may delay or reduce the
scope of our current research and development programs and other
expenses.
Corporate and Other Information
Tenax
Therapeutics was originally formed as a New Jersey corporation in
1967 under the name Rudmer, David & Associates, Inc., and
subsequently changed its name to Synthetic Blood International,
Inc. Effective June 30, 2008, we changed the domiciliary state of
the corporation to Delaware and changed the company name to Oxygen
Biotherapeutics, Inc. On September 19, 2014, we changed the company
name to Tenax Therapeutics, Inc.
Our
principal executive offices are located at ONE Copley Parkway,
Suite 490, Morrisville, North Carolina 27560, and our telephone
number is (919) 855-2100.
Available Information
Our
website address is www.tenaxthera.com, and our investor relations
website is located at http://investors.tenaxthera.com. Information
on, or that can be accessed through, our website is not
incorporated by reference into this prospectus, and you should not
consider it part of this prospectus. Copies of our annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and our Proxy Statements for our annual meetings of
stockholders, and any amendments to those reports, as well as
Section 16 reports filed by our insiders, are available free of
charge on our website as soon as reasonably practicable after we
file the reports with, or furnish the reports to, the SEC.
The SEC maintains an Internet site
(http://www.sec.gov) containing reports, proxy and information
statements, and other information regarding issuers that file
electronically with the SEC.
The
information in or accessible through the websites referred to above
are not incorporated into, and are not considered part of, this
filing.
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
The Offering
|
|
||
|
|
|
|
|
|
|
|
Issuer
|
|
Tenax Therapeutics,
Inc.
|
|
|
|
|
|
|
|
|
|
Securities Offered by
us
|
|
We are
offering 4,444,444 shares of Series A Preferred Stock. Each share
will be sold as a unit with (a) one Series 1 Warrant to purchase a
number of shares of common stock equal to 100% of the shares of
common stock initially issuable upon conversion of the Series A
Preferred Stock, as described below, and (b) one Series 2 Warrant
to purchase a number of shares of common stock equal to 100% of the
shares of common stock initially issuable upon conversion of the
Series A Preferred Stock, as described below. This prospectus also
relates to the offering of the shares of common stock issuable upon
conversion of the Series A Preferred Stock and exercise of the
Series 1 Warrants and Series 2 Warrants.
|
|
|
|
|
|
|
|
|
|
Assumed Offering Price per Unit
|
|
$2.25 per
Unit.
|
|
|
|
|
|
|
|
|
|
Description of Series A Preferred Stock
|
|
The Series A
Preferred Stock has full ratchet price based anti-dilution
protection and is subject to certain ownership limitations. In
addition, we have the right to require holders to convert the
Series A Preferred Stock if certain equity conditions are met and
if the volume weighted average price of our common stock exceeds
300% of the conversion price for any 30 consecutive trading days
and the daily dollar trading volume during such period exceeds
$175,000 per trading day. See the section entitled
“Description of Securities—Description of Series A
Preferred Stock” beginning on page 28. This prospectus
also relates to the offering of shares of common stock issuable
upon conversion of the Series A Preferred Stock at its initial
conversion price.
|
|
|
|
|
|
|
|
|
|
Assumed Conversion price of Series A
Preferred Stock
|
|
$2.25 per share (subject to
adjustment as described in this prospectus). Until the volume
weighted average price of our common stock exceeds 300% of the
conversion price of the Series A Preferred Stock for any 30
consecutive trading days and the daily dollar trading volume for
each trading day during such period exceeds $175,000 per trading
day, the Series A Preferred Stock has full ratchet price based
anti-dilution protection, subject to customary carve-outs, in the
event of a down-round financing below the conversion
price.
|
|
|
|
|
|
|
|
|
|
Shares of common stock underlying the Series A Preferred
Stock
|
|
4,444,444 (Based on an assumed
Series A Preferred Stock conversion price of $2.25 per share, which
was 100% of the closing bid price of our common stock on the Nasdaq
Capital Market on November 28,
2018.)
|
|
|
|
|
|
|
|
|
|
Limitations on beneficial ownership
|
|
Notwithstanding
anything herein to the contrary, no holder will be permitted to
convert its Series A Preferred Stock or exercise its warrants if,
after such conversion or exercise, such holder would beneficially
own more than 4.99% (or, at the election of a holder prior to the
date of issuance, 9.99%) of the shares of common stock then
outstanding (subject to the right of the holder to increase such
beneficial ownership limitation upon not less than 61 days prior
notice provided that such limitation can never exceed 9.99% and
such 61 day period cannot be
waived).
|
|
|
|
|
|
|
|
|
|
Series
1 Warrants
|
|
We are offering Series 1 Warrants
to purchase up to 4,444,444 shares of common stock. Each Series 1
Warrant will have an assumed initial exercise price of
$2.25 per share, subject to appropriate adjustment in the
event of recapitalization events, stock dividends, stock splits,
stock combinations, reclassifications, reorganizations or similar
events affecting our common stock, will be exercisable upon
issuance and will expire on the second anniversary of the date of
issuance. This prospectus also relates to the offering of the
shares of common stock issuable upon exercise of the Series 1
Warrants.
|
|
|
|
|
|
|
|
|
|
Series
2 Warrants
|
|
We are
offering Series 2 Warrants to purchase up to 4,444,444
shares of common stock. Each Series 2
Warrant will have an assumed initial exercise price of $2.25 per
share, subject to appropriate adjustment in the event of
recapitalization events, stock dividends, stock splits, stock
combinations, reclassifications, reorganizations or similar events
affecting our common stock, will be exercisable upon issuance and
will expire on the fifth anniversary of the date of issuance. This
prospectus also relates to the offering of the shares of common
stock issuable upon exercise of the Series 2
Warrants.
Series 1
Warrants and the Series 2 Warrants are collectively referred to as
the “warrants.” The form of warrant is filed as an
exhibit to the registration statement of which this prospectus is a
part.
|
|
|
|
|
|
|
|
|
|
Shares of common stock underlying the warrants offered
hereby
|
|
8,888,888
shares.
|
|
|
|
|
|
|
|
|
|
Shares of common stock outstanding before this
offering
|
|
1,465,496 shares as of November
28, 2018.
|
|
|
|
|
|
|
|
|
|
Shares of common stock to be outstanding after this
offering
|
|
1,465,496 shares
(5,909,940 shares on an
as-converted basis, assuming the conversion in full of the Series A
Preferred Stock.)
|
|
|
|
|
|
|
|
|
|
Shares of Series A Preferred Stock outstanding before this
offering
|
|
None.
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
Shares of Series A Preferred Stock to be outstanding after this
offering
|
4,444,444
shares.
|
|
|
|
|
|
|
|
|
Market for the Common Stock
|
Our common stock is
listed on the Nasdaq Capital Market under the symbol “TENX”.
|
|
|
|
|
|
|
|
|
No listing of warrants
|
We do not intend to
apply for listing of the warrants on any securities exchange or
trading system.
|
|
|
|
|
|
|
|
|
No listing of Series A Preferred Stock
|
We do not intend to
apply for listing of the Series A Preferred Stock on any securities
exchange or trading system.
|
|
|
|
|
|
|
|
|
Use of proceeds
|
Assuming all Units
are sold, we estimate that the net proceeds to us from this
offering will be approximately $9 million. We currently intend
to use the net proceeds of this offering to further our clinical
trials and efforts to obtain regulatory approval of levosimendan,
for research and development and for general corporate purposes,
including working capital and potential acquisitions. See
“Use of Proceeds.”
|
|
|
|
|
|
|
|
|
Risk Factors
|
See “Risk Factors” beginning on page 7 and other
information included in this prospectus for a discussion of factors
that you should consider carefully before deciding to invest this
offering.
|
|
|
|
|
|
|
|
|
The number of
shares of our common stock that will be outstanding immediately
before and after this offering is based on 1,465,496 shares
outstanding as of November 28, 2018 and
excludes:
|
|
|
|
|
●
120,773
shares of common stock issuable upon the exercise of outstanding
warrants with a weighted average exercise price of $52.29 per
share;
●
241,744
shares of common stock issuable upon the exercise of outstanding
options with a weighted average exercise price of $75.70 per
share;
●
19,914
shares of common stock issuable upon the vesting of outstanding
restricted stock grants with a weighted average grant date fair
value of $6.28 per share;
●
100,000
shares of common stock reserved for future grants and awards under
our 2016 Stock Incentive Plan;
●
8,888,888 shares of common
stock issuable upon the exercise of the warrants to be sold as part
of this offering; and
●
additional shares
of common stock that may be issuable upon conversion of Series A
Preferred Stock pursuant to the anti-dilution provisions
thereof.
|
|
|
|
|
|
|
|
6
RISK FACTORS
Investing in our securities involves a high degree of risk. You
should consider the following risk factors, as well as other
information contained in this prospectus, before deciding to invest
in our securities. If any of the following risks actually occur,
our business, results of operations, financial condition and cash
flows could be materially adversely affected, the trading price of
our common stock could decline significantly, and you might lose
all or part of your investment. Additional risks and uncertainties
that we are unaware of or that we believe are not material at this
time could also materially adversely affect our business, financial
condition or results of operations. In any case, the value of our
securities could decline, and you could lose all or part of your
investment, or our use of the offering proceeds may not yield a
favorable return on your investment.
Risks Related to Our Financial Position and Need for Additional
Capital
We have a limited operating history, and we expect a number of
factors to cause our operating results to fluctuate on a quarterly
and annual basis, which may make it difficult to predict our future
performance.
Our
operations, to date, have been primarily limited to organizing and
staffing our company, licensing our technology from Orion and
undertaking preclinical studies and clinical trials of our product
candidate. We have not yet obtained regulatory approvals for our
clinical product candidate. Consequently, any predictions you make
about our future success or viability may not be as accurate as
they could be if we had a longer operating history.
Specifically,
our financial condition and operating results have varied
significantly in the past and will continue to fluctuate from
quarter-to-quarter and year-to-year in the future due to a variety
of factors, many of which are beyond our control. Factors relating
to our business that may contribute to these fluctuations include
the following factors, among others:
●
our ability to
obtain additional funding to develop our product candidates, and
any further product candidate which we may develop or in license in
the future;
●
the need to obtain
regulatory approval of our product candidates;
●
potential risks
related to any collaborations we may enter into for our product
candidates;
●
delays in the
commencement, enrollment and completion of clinical testing, as
well as the analysis and reporting of results from such clinical
testing;
●
the success of
clinical trials of our product candidates;
●
any delays in
regulatory review and approval of product candidates in
development;
●
our ability to
establish an effective sales and marketing
infrastructure;
●
competition from
existing products or new products that may emerge;
●
the ability to
receive regulatory approval or commercialize our
products;
●
potential side
effects of our product candidates that could delay or prevent
commercialization;
●
potential product
liability claims and adverse events;
●
potential
liabilities associated with hazardous materials;
●
our ability to
maintain adequate insurance policies;
●
our dependency on
third-party manufacturers to supply or manufacture our
products;
●
our ability to
establish or maintain collaborations, licensing or other
arrangements;
●
our ability, our
partners’ abilities, and third parties’ abilities to
protect and assert intellectual property rights;
●
costs related to
and outcomes of potential litigation;
●
compliance with
obligations under intellectual property licenses with third
parties;
●
our ability to
adequately support future growth; and
●
our ability to
attract and retain key personnel to manage our business
effectively.
Due to
the various factors mentioned above, and others, the results of any
prior quarterly or annual periods should not be relied upon as
indications of our future operating performance.
7
We will need additional funding and if we are unable to raise
capital when needed, we would be forced to delay, reduce or
eliminate our product development programs.
Developing
biopharmaceutical products, including conducting preclinical
studies and clinical trials and establishing manufacturing
capabilities, is expensive. We expect our research and development
expenses to increase in connection with our ongoing activities. In
addition, our expenses could increase beyond expectations if
applicable regulatory authorities, including the FDA, require that
we perform additional studies to those that we currently
anticipate, in which case the timing of any potential product
approval may be delayed. As of September 30, 2018, we had $5.2
million of cash and cash equivalents, including the fair value of
our marketable securities on hand. Based on our current operating
plans, we believe that our existing cash and cash equivalents will
be sufficient to fund our projected operating requirements through
the first quarter of calendar year 2019. We will need substantial
additional capital in the future in order to complete the
regulatory approval and commercialization of levosimendan and to
fund the development and commercialization of future product
candidates. Until we can generate a sufficient amount of product
revenue, if ever, we expect to finance future cash needs through
public or private equity offerings, debt financings or corporate
collaboration and licensing arrangements. Such funding, if needed,
may not be available on favorable terms, if at all.
In the
event we are unable to obtain additional capital, we may delay or
reduce the scope of our current research and development programs
and other expenses. As a result of our historical operating losses
and expected future negative cash flows from operations, we have
concluded that there is substantial doubt about our ability to
continue as a going concern. Similarly, the report of our
independent registered public accounting firm on our December 31,
2017 Consolidated Financial Statements includes an explanatory
paragraph indicating that there is substantial doubt about our
ability to continue as a going concern. Substantial doubt about our
ability to continue as a going concern may materially and adversely
affect the price per share of our common stock and make it more
difficult to obtain financing.
If
adequate funds are not available, we may also be required to
eliminate one or more of clinical trials, delaying approval of
levosimendan or our commercialization efforts. To the extent that
we raise additional funds by issuing equity securities, our
stockholders may experience additional significant dilution, and
debt financing, if available, may involve restrictive covenants. To
the extent that we raise additional funds through collaboration and
licensing arrangements, it may be necessary to relinquish some
rights to our technologies or our product candidates or to grant
licenses on terms that may not be favorable to us. We may seek to
access the public or private capital markets whenever conditions
are favorable, even if we do not have an immediate need for
additional capital at that time. We may also consider strategic
alternatives, including a sale of the Company, merger, other
business combination or recapitalization.
Our
forecast of the period of time through which our financial
resources will be adequate to support our operations is a
forward-looking statement and involves risks and uncertainties, and
actual results could vary as a result of a number of factors,
including the factors discussed elsewhere in this “Risk
Factors” section. We have based this estimate on assumptions
that may prove to be wrong, and we could utilize our available
capital resources sooner than we currently expect. Our future
funding requirements will depend on many factors, including, but
not limited to:
●
the scope, rate of
progress and cost of our clinical trials and other research and
development activities;
●
the costs and
timing of regulatory approval;
●
the costs of
filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
●
the effect of
competing technological and market developments;
●
the terms and
timing of any collaboration, licensing or other arrangements that
we may establish;
●
the cost and timing
of completion of clinical and commercial-scale manufacturing
activities; and
●
the costs of
establishing sales, marketing and distribution capabilities for our
cosmetic products and any product candidates for which we may
receive regulatory approval.
8
Risks Related to Commercialization and Product
Development
We are limited in the number of products we can simultaneously
pursue and therefore our survival depends on our success with a
small number of product opportunities.
We have
limited financial resources, so at present we are primarily
focusing these resources on developing levosimendan for the
treatment of pulmonary hypertension, in addition to exploring
strategic alternatives in order to maximize stockholder value. If
as a consequence of the results of our Phase 2 trial in PH-HFpEF
that we plan to conduct, we are unable to receive regulatory
approval of levosimendan, then we may not have resources to pursue
development of any other products and our business could
terminate.
We currently have no approved drug products for sale and we cannot
guarantee that we will ever have marketable drug
products.
We
currently have no approved drug products for sale. The research,
testing, manufacturing, labeling, approval, selling, marketing, and
distribution of drug products are subject to extensive regulation
by the FDA and other regulatory authorities in the United States
and other countries, with regulations differing from country to
country. We are not permitted to market our product candidate in
the United States until we receive approval of an NDA from the FDA
for such product candidate, or any future product candidates. We
have not submitted an NDA or received marketing approval for our
product candidate, and obtaining approval of an NDA is a lengthy,
expensive and uncertain process. In addition, markets outside of
the United States also have requirements for approval of drug
candidates which we must comply with prior to marketing.
Accordingly, we cannot guarantee that we will ever have marketable
drug products.
Prior
to obtaining approval to commercialize a product candidate in the
United States or abroad, we or our collaborators must demonstrate
with substantial evidence from well-controlled clinical trials, and
to the satisfaction of the FDA, that such product candidates are
safe and effective for their intended uses. Results from
preclinical studies and clinical trials can be interpreted in
different ways. Even if we believe the preclinical or clinical data
for our product candidates are promising, such data may not be
sufficient to support approval by the FDA and other regulatory
authorities. Additionally, the FDA may also require us to conduct
additional preclinical studies or clinical trials for our product
candidates either prior to or post-approval, or it may object to
elements of our clinical development program. For example, we held
a meeting with the FDA to review the preliminary trial data for our
Phase 3 LEVO-CTS trial and discuss a path forward to file an NDA
for levosimendan. We explored the opportunity for submitting an NDA
for use in CABG surgery patients on the basis of the robust
reduction in 90-day mortality observed in the LEVO-CTS trial.
However, the FDA advised that another study in CABG surgery
patients would be required that prospectively tests
levosimendan’s effectiveness in improving mortality.
Accordingly, we have suspended development of levosimendan use in
CABG due to the scope of the repeat study, as required by the
FDA.
The development of levosimendan is subject to a high level of
technological risk.
We have
devoted a substantial portion of our financial and managerial
resources to pursue Phase 3 clinical trials for levosimendan. The
biomedical field has undergone rapid and significant technological
changes. Technological developments may result in our products
becoming obsolete or non-competitive before we are able to recover
any portion of the research and development and other expenses we
have incurred to develop and clinically test levosimendan. As our
opportunity to generate substantial product revenues within the
next three to four years is most likely dependent on successful
testing and commercialization of levosimendan for pulmonary
hypertension, any such occurrence would have a material adverse
effect on our operations and could result in the cessation of our
business.
We are required to conduct additional clinical trials in the
future, which are expensive and time consuming, and the outcome of
the trials is uncertain.
We
expect to commit a substantial portion of our financial and
business resources over the next three years to clinical testing of
levosimendan and advancing this product to regulatory approval for
use in one or more medical applications. All of these clinical
trials and testing will be expensive and time consuming and the
timing of the regulatory review process is uncertain. The
applicable regulatory agencies may suspend clinical trials at any
time if they believe that the subjects participating in such trials
are being exposed to unacceptable health risks. We cannot ensure
that we will be able to complete our clinical trials successfully
or obtain FDA or other governmental or regulatory approval of
levosimendan, or that such approval, if obtained, will not include
limitations on the indicated uses for which levosimendan may be
marketed. For example, the top-line results of our Phase 3 LEVO-CTS
trial for levosimendan did not achieve statistically significant
reductions in dual or quad primary endpoints but did meet two
secondary endpoints with statistically significant reduction in
incidence of LCOS and use of postoperative secondary inotropes. Our
business, financial condition and results of operations are
critically dependent on obtaining capital to advance our testing
program and receiving FDA and other governmental and regulatory
approvals of levosimendan. A significant delay in or failure of our
planned clinical trials or a failure to achieve these approvals
would have a material adverse effect on us and could result in
major setbacks or jeopardize our ability to continue as a going
concern. For instance, based on the results of our LEVO-CTS
clinical trial and subsequent FDA feedback, we do not anticipate
undertaking further development with levosimendan in the LCOS
indication.
9
The market may not accept our products.
Even if
regulatory approval is obtained, there is a risk that the efficacy
and pricing of our products, considered in relation to our
products’ expected benefits, will not be perceived by health
care providers and third-party payers as cost-effective, and that
the price of our products will not be competitive with other new
technologies or products. Our results of operations may be
adversely affected if the price of our products is not considered
cost-effective or if our products do not otherwise achieve market
acceptance.
Any collaboration we enter with third parties to develop and
commercialize any future product candidates may place the
development of our product candidates outside our control, may
require us to relinquish important rights or may otherwise be on
terms unfavorable to us.
We may
enter into collaborations with third parties to develop and
commercialize future product candidates. Our dependence on future
partners for development and commercialization of our product
candidates would subject us to a number of risks,
including:
●
we may not be able
to control the amount and timing of resources that our partners may
devote to the development or commercialization of our product
candidates or to their marketing and distribution;
●
partners may delay
clinical trials, provide insufficient funding for a clinical trial
program, stop a clinical trial or abandon a product candidate,
repeat or conduct new clinical trials or require a new formulation
of a product candidate for clinical testing;
●
disputes may arise
between us and our partners that result in the delay or termination
of the research, development or commercialization of our product
candidates or that result in costly litigation or arbitration that
diverts management’s attention and resources;
●
partners may
experience financial difficulties;
●
partners may not
properly maintain or defend our intellectual property rights, or
may use our proprietary information, in such a way as to invite
litigation that could jeopardize or invalidate our intellectual
property rights or proprietary information or expose us to
potential litigation;
●
business
combinations or significant changes in a partner’s business
strategy may adversely affect a partner’s willingness or
ability to meet its obligations under any arrangement;
●
a partner could
independently move forward with a competing product candidate
developed either independently or in collaboration with others,
including our competitors; and
●
the collaborations
with our partners may be terminated or allowed to expire, which
would delay the development and may increase the cost of developing
our product candidates.
Delays in the enrollment and completion of clinical testing could
result in increased costs to us and delay or limit our ability to
obtain regulatory approval for our product candidates.
Delays
in the enrollment and completion of clinical testing could
significantly affect our ability to gain FDA approval of
levosimendan and any other future product development costs. The
completion of clinical trials requires us to identify and maintain
a sufficient number of trial sites, many of which may already be
engaged in other clinical trial programs for the same indication as
our product candidates or may be required to withdraw from our
clinical trial as a result of changing standards of care or may
become ineligible to participate in clinical studies. The
enrollment and completion of clinical trials can be delayed for a
variety of other reasons, including delays related to:
●
reaching agreements
on acceptable terms with prospective trial sites, the terms of
which can be subject to extensive negotiation and may vary
significantly among trial sites;
●
obtaining
institutional review board, or IRB, approval to conduct a clinical
trial at numerous prospective sites;
●
recruiting and
enrolling patients to participate in clinical trials for a variety
of reasons, including meeting the enrollment criteria for our study
and competition from other clinical trial programs for the same
indication as our product candidates;
●
maintaining and
supplying clinical trial material on a timely basis;
and
●
collecting,
analyzing and reporting final data from the clinical
trials.
10
In
addition, a clinical trial may be suspended or terminated by us,
the FDA or other regulatory authorities due to a number of factors,
including:
●
failure to conduct
the clinical trial in accordance with regulatory requirements or
our clinical protocols;
●
inspection of the
clinical trial operations or trial sites by the FDA or other
regulatory authorities resulting in the imposition of a clinical
hold;
●
unforeseen safety
issues or any determination that a trial presents unacceptable
health risks; and
●
lack of adequate
funding to continue the clinical trial, including unforeseen costs
due to enrollment delays, requirements to conduct additional trials
and studies and increased expenses associated with the services of
our contract research organizations, or CROs, and other third
parties.
Changes
in regulatory requirements and guidance may occur and we may need
to amend clinical trial protocols to reflect these changes with
appropriate regulatory authorities. Amendments may require us to
resubmit our clinical trial protocols to IRBs for re-examination,
which may impact the costs, timing or successful completion of a
clinical trial. If we experience delays in the completion of, or if
we terminate, our clinical trials, the commercial prospects for our
product candidates will be harmed, and our ability to generate
product revenues will be delayed. In addition, many of the factors
that cause, or lead to, a delay in the commencement or completion
of clinical trials may also ultimately lead to the denial of
regulatory approval of a product candidate. Even if we are able to
ultimately commercialize our product candidates, other therapies
for the same or similar indications may have been introduced to the
market and established a competitive advantage.
Risks Relating to Regulatory Matters
Our activities are and will continue to be subject to extensive
government regulation, which is expensive and time consuming, and
we will not be able to sell our products without regulatory
approval.
Our
development, marketing and distribution of levosimendan is, and
will continue to be, subject to extensive regulation, monitoring
and approval by the FDA and other regulatory agencies. There are
significant risks at each stage of the regulatory
scheme.
Product approval stage
During
the product approval stage, we attempt to prove the safety and
efficacy of our product for its indicated uses. There are numerous
problems that could arise during this stage,
including:
●
the data obtained
from laboratory testing and clinical trials are susceptible to
varying interpretations, which could delay, limit or prevent FDA
and other regulatory approvals;
●
adverse events
could cause the FDA and other regulatory authorities to halt
trials;
●
at any time the FDA
and other regulatory agencies could change policies and regulations
that could result in delay and perhaps rejection of our products;
and
●
even after
extensive testing and clinical trials, there is no assurance that
regulatory approval will ever be obtained for any of our
products.
Post-commercialization stage
Discovery
of previously unknown problems with our products, or unanticipated
problems with our manufacturing arrangements, even after FDA and
other regulatory approvals of our products for commercial sale may
result in the imposition of significant restrictions, including
withdrawal of the product from the market.
Additional
laws and regulations may also be enacted that could prevent or
delay regulatory approval of our products, including laws or
regulations relating to the price or cost-effectiveness of medical
products. Any delay or failure to achieve regulatory approval of
commercial sales of our products is likely to have a material
adverse effect on our financial condition, results of operations
and cash flows.
The FDA
and other regulatory agencies continue to review products even
after they receive agency approval. If and when the FDA or another
regulatory agency outside the United States approves one of our
products, its manufacture and marketing will be subject to ongoing
regulation, which could include compliance with current good
manufacturing practices, adverse event reporting requirements and
general prohibitions against promoting products for unapproved or
“off-label” uses. We are also subject to inspection and
market surveillance by the FDA for compliance with these and other
requirements. Any enforcement action resulting from failure, even
by inadvertence, to comply with these requirements could affect the
manufacture and marketing of levosimendan or our other products. In
addition, the FDA or other regulatory agencies could withdraw a
previously approved product from the market upon receipt of newly
discovered information. The FDA or another regulatory agency could
also require us to conduct additional, and potentially expensive,
studies in areas outside our approved indicated uses.
11
We must continually monitor the safety of our products once
approved and marketed for signs that their use may elicit serious
and unexpected side effects and adverse events, which could
jeopardize our ability to continue marketing the products. We may
also be required to conduct post-approval clinical studies as a
condition to licensing a product.
As with
all pharmaceutical products, the use of our products could
sometimes produce undesirable side effects or adverse reactions or
events (referred to cumulatively as adverse events). For the most
part, we would expect these adverse events to be known and occur at
some predicted frequency. When adverse events are reported to us,
we will be required to investigate each event and circumstances
surrounding it to determine whether it was caused by our product
and whether it implies that a previously unrecognized safety issue
exists. We will also be required to periodically report summaries
of these events to the applicable regulatory
authorities.
In
addition, the use of our products could be associated with serious
and unexpected adverse events, or with less serious reactions at a
greater than expected frequency. This may be especially true when
our products are used in critically ill or otherwise compromised
patient populations. When these unexpected events are reported to
us, we will be required to make a thorough investigation to
determine causality and implications for product safety. These
events must also be specifically reported to the applicable
regulatory authorities. If our evaluation concludes, or regulatory
authorities perceive, that there is an unreasonable risk associated
with the product, we would be obligated to withdraw the impacted
lot(s) of that product. Furthermore, an unexpected adverse event of
a new product could be recognized only after extensive use of the
product, which could expose us to product liability risks,
enforcement action by regulatory authorities and damage to our
reputation and public image.
A
serious adverse finding concerning the risk of our products by any
regulatory authority could adversely affect our reputation,
business and financial results.
When a
new product is approved, the FDA or other regulatory authorities
may require post-approval clinical trials, sometimes called Phase 4
clinical trials. If the results of such trials are unfavorable,
this could result in the loss of the license to market the product,
with a resulting loss of sales.
After our products are commercialized, we expect to spend
considerable time and money complying with federal and state laws
and regulations governing their sale, and, if we are unable to
fully comply with such laws and regulations, we could face
substantial penalties.
Health
care providers, physicians and others will play a primary role in
the recommendation and prescription of our clinical products. Our
arrangements with third-party payers and customers may expose us to
broadly applicable fraud and abuse and other health care laws and
regulations that may constrain the business or financial
arrangements and relationships through which we will market, sell
and distribute our products. Applicable federal and state health
care laws and regulations are expected to include, but not be
limited to, the following:
●
the federal
anti-kickback statute is a criminal statute that makes it a felony
for individuals or entities knowingly and willfully to offer or
pay, or to solicit or receive, direct or indirect remuneration, in
order to induce the purchase, order, lease, or recommending of
items or services, or the referral of patients for services, that
are reimbursed under a federal health care program, including
Medicare and Medicaid;
●
the federal False
Claims Act imposes liability on any person who knowingly submits,
or causes another person or entity to submit, a false claim for
payment of government funds, with penalties that include three
times the government’s damages plus civil penalties of $5,500
to $11,000 per false claim; in addition, the False Claims Act
permits a person with knowledge of fraud, referred to as a qui tam
plaintiff, to file a lawsuit on behalf of the government against
the person or business that committed the fraud, and, if the action
is successful, the qui tam plaintiff is rewarded with a percentage
of the recovery;
●
Health Insurance
Portability and Accountability Act imposes obligations, including
mandatory contractual terms, with respect to safeguarding the
privacy, security and transmission of individually identifiable
health information;
●
the Social Security
Act contains numerous provisions allowing the imposition of a civil
money penalty, a monetary assessment, exclusion from the Medicare
and Medicaid programs, or some combination of these penalties;
and
●
many states have
analogous state laws and regulations, such as state anti-kickback
and false claims laws, which, in some cases, these state laws
impose more strict requirements than the federal laws and may
require pharmaceutical companies to comply with certain price
reporting and other compliance requirements.
12
Our
failure to comply with any of these federal and state health care
laws and regulations, or health care laws in foreign jurisdictions,
could have a material adverse effect on our business, financial
condition, result of operations and cash flows.
Health care reform and controls on health care spending may limit
the price we can charge for our products and the amount we can
sell.
As a
result of Patient Protection and Affordable Care Act and the Health
Care and Education Affordability Reconciliation Act of 2010,
collectively, the ACA, enacted in March 2010, substantial changes
have occurred and are expected to continue to occur in the system
for paying for health care in the United States, including changes
made in order to extend medical benefits to those who currently
lack insurance coverage. This comprehensive health care reform
legislation also included provisions to control health care costs
and improve health care quality. Together with ongoing statutory
and budgetary policy developments at a federal level, this health
care reform legislation could include changes in Medicare and
Medicaid payment policies and other health care delivery
administrative reforms that could potentially negatively impact our
business. Because not all the administrative rules implementing
health care reform under the legislation have been finalized, and
because of ongoing federal fiscal budgetary pressures not yet
resolved for federal health programs, the full impact of the ACA
and of further statutory actions to reform healthcare payment on
our business is unknown, but there can be no assurances that health
care reform legislation will not adversely impact either our
operational results or the manner in which we operate our business.
There have been judicial and Congressional challenges to the ACA
and there may be additional challenges and amendments to the ACA in
the future, particularly in light of the current presidential
administration and U.S. Congress. For example, the Tax Cuts and
Jobs Act enacted on December 22, 2017, repealed the shared
responsibility payment for individuals who fail to maintain minimum
essential coverage under section 5000A of the Internal Revenue
Code, commonly referred to as the individual mandate, beginning in
2019, and on October 13, 2017, President Trump signed an executive order terminating the
cost-sharing subsidies that reimburse the insurers under the ACA.
We expect that the ACA, as well as other healthcare reform measures
that may be adopted in the future, may result in more rigorous
coverage criteria and lower reimbursement, and in additional
downward pressure on the price that we receive for any approved
product. Cost of care could be reduced by reducing the level of
reimbursement for medical services or products (including those
biopharmaceuticals that we intend to produce and market), or by
restricting coverage (and, thereby, utilization) of medical
services or products. In either case, a reduction in the
utilization of, or reimbursement for, our products could have a
materially adverse impact on our financial performance. Moreover,
recently there has been heightened governmental scrutiny over the
manner in which manufacturers set prices for their commercial
products. We cannot predict what healthcare reform initiatives may
be adopted in the future.
Uncertainty of third-party reimbursement could affect our future
results of operations.
Sales
of medical products largely depend on the reimbursement of
patients’ medical expenses by governmental health care
programs and private health insurers. We will be required to report
detailed pricing information, net of included discounts, rebates
and other concessions, to the Centers for Medicare and Medicaid
Services, or CMS, for the purpose of calculating national
reimbursement levels, certain federal prices, and certain federal
rebate obligations. If we report pricing information that is not
accurate to the federal government, we could be subject to fines
and other sanctions that could adversely affect our business. In
addition, the government could change its calculation of
reimbursement, federal prices, or federal rebate obligations which
could negatively impact us. There is no guarantee that government
health care programs or private health insurers will reimburse for
the sales of our products, or permit us to sell our products at
high enough prices to generate a profit.
Governments outside the United States tend to impose strict price
controls and reimbursement approval policies, which may adversely
affect our prospects for generating revenue outside the United
States.
Although
we only have distribution rights in the United States and Canada
for levosimendan, in some countries, particularly European Union
countries and Canada, the pricing of prescription pharmaceuticals
is subject to governmental control. In these countries, pricing
negotiations with governmental authorities can take considerable
time after the receipt of marketing approval for a product. In
addition, there can be considerable pressure by governments and
other stakeholders on prices and reimbursement levels, including as
part of cost containment measures. Political, economic and
regulatory developments may further complicate pricing
negotiations, and pricing negotiations may continue after
reimbursement has been obtained. To obtain or maintain
reimbursement or pricing approval in some countries with respect to
any product candidate that achieves regulatory approval, we may be
required to conduct a clinical trial that compares the
cost-effectiveness of our product candidate to other available
therapies. If reimbursement of our products upon approval, if at
all, is unavailable or limited in scope or amount, or if pricing is
set at unsatisfactory levels, our prospects for generating revenue,
if any, could be adversely affected which would have a material
adverse effect on our business and results of operations. Further,
if we achieve regulatory approval of any product, we must
successfully negotiate product pricing for such product in
individual countries. As a result, the pricing of our products, if
approved, in different countries may vary widely, thus creating the
potential for third-party trade in our products in an attempt to
exploit price differences between countries. This third-party trade
of our products could undermine our sales in markets with higher
prices.
13
Risks Relating to Our Dependence on Third Parties
We depend on third parties to manufacture our
products.
We do
not own or operate any manufacturing facilities for the
commercial-scale production of our products. Pursuant to the terms
of our license for levosimendan, Orion is our sole manufacturing
source for levosimendan. Accordingly, our business is
susceptible to disruption, and our results of operations can be
adversely affected, by any disruption in supply or other adverse
developments in our relationship with Orion. If supply from
Orion is delayed or terminated, or if its facilities suffer any
damage or disruption, we may need to successfully qualify an
alternative supplier in a timely manner in order to not disrupt our
business. If we cannot obtain an alternate manufacturer in a
timely manner, we would experience a significant interruption in
supply of levosimendan, which could negatively affect our financial
condition, results of operations and cash flows.
We depend on the services of a limited number of key
personnel.
Our
success is highly dependent on the continued services of a limited
number of scientists and support personnel. The loss of any of
these individuals, in particular, Anthony DiTonno, our Chief
Executive Officer, and Michael Jebsen, our Chief Financial Officer,
could have a material adverse effect on us. In addition, our
success will depend, among other factors, on the recruitment and
retention of additional highly skilled and experienced management
and technical personnel. There is a risk that we will not be able
to retain existing employees or to attract and retain additional
skilled personnel on acceptable terms given the competition for
such personnel among numerous large and well-funded pharmaceutical
and health care companies, universities, and non-profit research
institutions, which could negatively affect our financial
condition, results of operations and cash flows.
We have no experience in the sale and marketing of medical
products.
We have
no experience in the sale and marketing of approved medical
products and marketing the licensing of such products before FDA or
other regulatory approval. We have not decided upon a
commercialization strategy in these areas. We do not know of any
third party that is prepared to distribute our products should they
be approved. If we decide to establish our own commercialization
capability, we will need to recruit, train and retain a marketing
staff and sales force with sufficient technical expertise. We do
not know whether we can establish a commercialization program at a
cost that is acceptable in relation to revenue or whether we can be
successful in commercializing our product. Factors that may inhibit
our efforts to commercialize our products directly and without
strategic partners include:
●
our inability to
recruit and retain adequate numbers of effective sales and
marketing personnel;
●
the inability of
sales personnel to obtain access to or persuade adequate numbers of
physicians to prescribe our products;
●
the lack of
complementary products to be offered by sales personnel, which may
put us at a competitive disadvantage relative to companies with
more extensive product lines; and
●
unforeseen costs
and expenses associated with creating and sustaining an independent
sales and marketing organization.
Failure
to successfully commercialize our products or to do so on a cost
effective basis would likely result in failure of our
business.
14
We may enter into distribution arrangements and marketing alliances
for certain products and any failure to successfully identify and
implement these arrangements on favorable terms, if at all, may
impair our ability to commercialize our product
candidates.
We do
not anticipate having the resources in the foreseeable future to
develop global sales and marketing capabilities for all of the
products we develop, if any. We may pursue arrangements regarding
the sales and marketing and distribution of one or more of our
product candidates and our future revenues may depend, in part, on
our ability to enter into and maintain arrangements with other
companies having sales, marketing and distribution capabilities and
the ability of such companies to successfully market and sell any
such products. Any failure to enter into such arrangements and
marketing alliances on favorable terms, if at all, could delay or
impair our ability to commercialize our product candidates and
could increase our costs of commercialization. Any use of
distribution arrangements and marketing alliances to commercialize
our product candidates will subject us to a number of risks,
including the following:
●
we may be required
to relinquish important rights to our products or product
candidates;
●
we may not be able
to control the amount and timing of resources that our distributors
or collaborators may devote to the commercialization of our product
candidates;
●
our distributors or
collaborators may experience financial difficulties;
●
our distributors or
collaborators may not devote sufficient time to the marketing and
sales of our products; and
●
business
combinations or significant changes in a collaborator’s
business strategy may adversely affect a collaborator’s
willingness or ability to complete its obligations under any
arrangement.
We may
need to enter into additional co-promotion arrangements with third
parties where our own sales force is neither well situated nor
large enough to achieve maximum penetration in the market. We may
not be successful in entering into any co-promotion arrangements,
and the terms of any co-promotion arrangements we enter into may
not be favorable to us.
Risks Relating to Intellectual Property
It is difficult and costly to protect our proprietary rights, and
we may not be able to ensure their protection.
Our
commercial success will depend in part on obtaining and maintaining
patent protection and trade secret protection of our future product
candidates, if any, and the methods used to manufacture them, as
well as successfully defending these patents against third-party
challenges. Our ability to stop third parties from making, using,
selling, offering to sell or importing our products is dependent
upon the extent to which we have rights under valid and enforceable
patents or trade secrets that cover these activities.
We license certain intellectual property from Orion that covers our
product candidate levosimendan. The two principal United States
patents which we license from Orion expire in September 2020. We
rely on Orion to file, prosecute and maintain patent applications
and otherwise protect the intellectual property to which we have a
license, and we have not had and do not have primary control over
these activities for certain of these patents or patent
applications and other intellectual property rights. We cannot be
certain that such activities by third parties have been or will be
conducted in compliance with applicable laws and regulations or
will result in valid and enforceable patents and other intellectual
property rights. Our enforcement of certain of these licensed
patents or defense of any claims asserting the invalidity of these
patents would also be subject to the cooperation of the third
parties.
The
patent positions of pharmaceutical and biopharmaceutical companies
can be highly uncertain and involve complex legal and factual
questions for which important legal principles remain unresolved.
No consistent policy regarding the breadth of claims allowed in
biopharmaceutical patents has emerged to date in the United States.
The biopharmaceutical patent situation outside the United States is
even more uncertain. Changes in either the patent laws or in
interpretations of patent laws in the United States and other
countries may diminish the value of our intellectual property.
Accordingly, we cannot predict the breadth of claims that may be
allowed or enforced in the patents we own or to which we have a
license from a third-party. Further, if any of our patents are
deemed invalid and unenforceable, it could impact our ability to
commercialize or license our technology.
15
The
degree of future protection for our proprietary rights is uncertain
because legal means afford only limited protection and may not
adequately protect our rights or permit us to gain or keep our
competitive advantage. For example:
●
others may be able
to make compositions or formulations that are similar to our
product candidates but that are not covered by the claims of our
patents;
●
we might not have
been the first to make the inventions covered by our issued patents
or pending patent applications;
●
we might not have
been the first to file patent applications for these
inventions;
●
others may
independently develop similar or alternative technologies or
duplicate any of our technologies;
●
it is possible that
our pending patent applications will not result in issued
patents;
●
our issued patents
may not provide us with any competitive advantages, or may be held
invalid or unenforceable as a result of legal challenges by third
parties;
●
we may not develop
additional proprietary technologies that are patentable;
or
●
the patents of
others may have an adverse effect on our business.
We also
may rely on trade secrets to protect our technology, especially
where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect.
Although we use reasonable efforts to protect our trade secrets,
our employees, consultants, contractors, outside scientific
collaborators and other advisors may unintentionally or willfully
disclose our information to competitors. Enforcing a claim that a
third party illegally obtained and is using any of our trade
secrets is expensive and time consuming, and the outcome is
unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets. Moreover, our
competitors may independently develop equivalent knowledge, methods
and know-how.
We rely on confidentiality agreements that, if breached, may be
difficult to enforce and could have a material adverse effect on
our business and competitive position.
Our
policy is to enter agreements relating to the non-disclosure and
non-use of confidential information with third parties, including
our contractors, consultants, advisors and research collaborators,
as well as agreements that purport to require the disclosure and
assignment to us of the rights to the ideas, developments,
discoveries and inventions of our employees and consultants while
we employ them. However, these agreements can be difficult and
costly to enforce. Moreover, to the extent that our contractors,
consultants, advisors and research collaborators apply or
independently develop intellectual property in connection with any
of our projects, disputes may arise as to the proprietary rights to
the intellectual property. If a dispute arises, a court may
determine that the right belongs to a third party, and enforcement
of our rights can be costly and unpredictable. In addition, we rely
on trade secrets and proprietary know-how that we seek to protect
in part by confidentiality agreements with our employees,
contractors, consultants, advisors or others. Despite the
protective measures we employ, we still face the risk
that:
●
these agreements
may be breached;
●
these agreements
may not provide adequate remedies for the applicable type of
breach; or
●
our trade secrets
or proprietary know-how will otherwise become known.
Any
breach of our confidentiality agreements or our failure to
effectively enforce such agreements would have a material adverse
effect on our business and competitive position.
We may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property
rights and we may be unable to protect our rights to, or use, our
technology.
If we
or our partners choose to go to court to stop someone else from
using the inventions claimed in our patents, that individual or
company has the right to ask the court to rule that these patents
are invalid and/or should not be enforced against that third party.
These lawsuits are expensive and would consume time and other
resources even if we were successful in stopping the infringement
of these patents. In addition, there is a risk that the court will
decide that these patents are not valid and that we do not have the
right to stop the other party from using the inventions. There is
also the risk that, even if the validity of these patents is
upheld, the court will refuse to stop the other party on the ground
that such other party’s activities do not infringe our rights
to these patents.
16
Furthermore,
a third party may claim that we or our manufacturing or
commercialization partners are using inventions covered by the
third party’s patent rights and may go to court to stop us
from engaging in our normal operations and activities, including
making or selling our product candidates. These lawsuits are costly
and could affect our results of operations and divert the attention
of managerial and technical personnel. There is a risk that a court
would decide that we or our commercialization partners are
infringing the third party’s patents and would order us or
our partners to stop the activities covered by the patents. In
addition, there is a risk that a court will order us or our
partners to pay the other party damages for having violated the
other party’s patents. We have agreed to indemnify certain of
our commercial partners against certain patent infringement claims
brought by third parties. The biotechnology industry has produced a
proliferation of patents, and it is not always clear to industry
participants, including us, which patents cover various types of
products or methods of use. The coverage of patents is subject to
interpretation by the courts, and the interpretation is not always
uniform. If we are sued for patent infringement, we would need to
demonstrate that our products or methods of use either does not
infringe the patent claims of the relevant patent and/or that the
patent claims are invalid, and we may not be able to do this.
Proving invalidity, in particular, is difficult since it requires a
showing of clear and convincing evidence to overcome the
presumption of validity enjoyed by issued patents.
Because
some patent applications in the United States may be maintained in
secrecy until the patents are issued, because patent applications
in the United States and many foreign jurisdictions are typically
not published until eighteen months after filing and because
publications in the scientific literature often lag behind actual
discoveries, we cannot be certain that others have not filed patent
applications for technology covered by our issued patents or our
pending applications, or that we were the first to invent the
technology. Our competitors may have filed, and may in the future
file, patent applications covering technology similar to ours. Any
such patent application may have priority over our patent
applications or patents, which could further require us to obtain
rights to issued patents by others covering such technologies. If
another party has filed a U.S. patent application on inventions
similar to ours, we may have to participate in an interference
proceeding declared by the U.S. Patent and Trademark Office, or
USPTO, to determine priority of invention in the United States. The
costs of these proceedings could be substantial, and it is possible
that such efforts would be unsuccessful if, unbeknownst to us, the
other party had independently arrived at the same or similar
invention prior to our own invention, resulting in a loss of our
U.S. patent position with respect to such inventions.
Some of
our competitors may be able to sustain the costs of complex patent
litigation more effectively than we can because they have
substantially greater resources. In addition, any uncertainties
resulting from the initiation and continuation of any litigation
could have a material adverse effect on our ability to raise the
funds necessary to continue our operations.
Our collaborations with outside scientists and consultants may be
subject to restriction and change.
We work
with chemists, biologists and other scientists at academic and
other institutions, and consultants who assist us in our research,
development, regulatory and commercial efforts, including the
members of our scientific advisory board. These scientists and
consultants have provided, and we expect that they will continue to
provide, valuable advice on our programs. These scientists and
consultants are not our employees, may have other commitments that
would limit their future availability to us and typically will not
enter into non-compete agreements with us. If a conflict of
interest arises between their work for us and their work for
another entity, we may lose their services. In addition, we will be
unable to prevent them from establishing competing businesses or
developing competing products. For example, if a key scientist
acting as a principal investigator in any of our clinical trials
identifies a potential product or compound that is more
scientifically interesting to his or her professional interests,
his or her availability to remain involved in our clinical trials
could be restricted or eliminated.
Under current law, we may not be able to enforce all
employees’ covenants not to compete and therefore may be
unable to prevent our competitors from benefiting from the
expertise of some of our former employees.
We have
entered into non-competition agreements with certain of our
employees. These agreements prohibit our employees, if they cease
working for us, from competing directly with us or working for our
competitors for a limited period. Under current law, we may be
unable to enforce these agreements against certain of our employees
and it may be difficult for us to restrict our competitors from
gaining the expertise our former employees gained while working for
us. If we cannot enforce our employees’ non-compete
agreements, we may be unable to prevent our competitors from
benefiting from the expertise of our former employees.
17
We may infringe or be alleged to infringe intellectual property
rights of third parties.
Our
products or product candidates may infringe on, or be accused of
infringing on, one or more claims of an issued patent or may fall
within the scope of one or more claims in a published patent
application that may be subsequently issued and to which we do not
hold a license or other rights. Third parties may own or control
these patents or patent applications in the United States and
abroad. These third parties could bring claims against us or our
collaborators that would cause us to incur substantial expenses
and, if successful against us, could cause us to pay substantial
damages. Further, if a patent infringement suit were brought
against us or our collaborators, we or they could be forced to stop
or delay research, development, manufacturing or sales of the
product or product candidate that is the subject of the
suit.
If we
are found to infringe the patent rights of a third party, or in
order to avoid potential claims, we or our collaborators may choose
or be required to seek a license from a third party and be required
to pay license fees or royalties or both. These licenses may not be
available on acceptable terms, or at all. Even if we or our
collaborators were able to obtain a license, the rights may be
nonexclusive, which could result in our competitors gaining access
to the same intellectual property. Ultimately, we could be
prevented from commercializing a product, or be forced to cease
some aspect of our business operations, if, as a result of actual
or threatened patent infringement claims, we or our collaborators
are unable to enter into licenses on acceptable terms.
There
have been substantial litigation and other proceedings regarding
patent and other intellectual property rights in the pharmaceutical
and biotechnology industries. In addition to infringement claims
against us, we may become a party to other patent litigation and
other proceedings, including interference proceedings declared by
the USPTO and opposition proceedings in the European Patent Office,
regarding intellectual property rights with respect to our
products. Our products, after commercial launch, may become subject
to Paragraph IV certification under the Hatch-Waxman Act, thus
forcing us to initiate infringement proceedings against such
third-party filers. The cost to us of any patent litigation or
other proceeding, even if resolved in our favor, could be
substantial. Some of our competitors may be able to sustain the
costs of such litigation or proceedings more effectively than we
can because of their substantially greater financial resources.
Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could have a material
adverse effect on our ability to compete in the marketplace. Patent
litigation and other proceedings may also absorb significant
management time.
Many of
our employees were previously employed at universities or other
biotechnology or pharmaceutical companies, including our
competitors or potential competitors. We try to ensure that our
employees do not use the proprietary information or know-how of
others in their work for us. We may, however, be subject to claims
that we or these employees have inadvertently or otherwise used or
disclosed intellectual property, trade secrets or other proprietary
information of any such employee’s former employer.
Litigation may be necessary to defend against these claims and,
even if we are successful in defending ourselves, could result in
substantial costs to us or be distracting to our management. If we
fail to defend any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or
personnel.
Product liability lawsuits against us could cause us to incur
substantial liabilities, limit sales of our existing products and
limit commercialization of any products that we may
develop.
Our
business exposes us to the risk of product liability claims that
are inherent in the manufacturing, distribution, and sale of
biotechnology products. We face an inherent risk of product
liability exposure related to the testing of our product candidates
in human clinical trials and an even greater risk when we
commercially sell any products. If we cannot successfully defend
ourselves against claims that our product candidates or products
caused injuries, we could incur substantial liabilities. Regardless
of merit or eventual outcome, liability claims may result
in:
●
decreased demand
for our products and any product candidates that we may
develop;
●
injury to our
reputation;
●
withdrawal of
clinical trial participants;
●
costs to defend the
related litigation;
●
substantial
monetary awards to trial participants or patients;
●
loss of revenue;
and
●
the inability to
commercialize any products that we may develop.
18
We
currently maintain limited product liability insurance coverage for
our clinical trials in the total amount of $3 million. However, our
profitability will be adversely affected by a successful product
liability claim in excess of our insurance coverage. There can be
no assurance that product liability insurance will be available in
the future or be available on reasonable terms.
Our business and operations would suffer in the event of computer
system failures, cyber-attacks or deficiencies in our
cyber-security.
Despite
the implementation of security measures, our internal computer
systems, and those of third parties on which we rely, are
vulnerable to damage from computer viruses, malware, natural
disasters, terrorism, war, telecommunication and electrical
failures, cyber-attacks or cyber-intrusions over the Internet,
attachments to emails, persons inside our organization, or persons
with access to systems inside our organization. The risk of a
security breach or disruption, particularly through cyber-attacks
or cyber intrusion, including by computer hackers, foreign
governments, and cyber terrorists, has generally increased as the
number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased. If such an event
were to occur and cause interruptions in our operations, it could
result in a material disruption of our product development
programs. For example, the loss of clinical trial data from
completed or ongoing or planned clinical trials could result in
delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach was to result in a loss of
or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur material
legal claims and liability, and damage to our reputation, and the
further development of our product candidates could be
delayed.
Our
disclosure controls and procedures address cybersecurity and
include elements intended to ensure that there is an analysis of
potential disclosure obligations arising from security breaches. We
also maintain compliance programs to address the potential
applicability of restrictions against trading while in possession
of material, nonpublic information generally and in connection with
a cyber-security breach. However, a breakdown in existing controls
and procedures around our cyber-security environment may prevent us
from detecting, reporting or responding to cyber incidents in a
timely manner and could have a material adverse effect on our
financial position and value of our stock.
Risks Related to Owning Our Common Stock
Our share price has been volatile and may continue to be volatile
which may subject us to securities class action litigation in the
future.
Our
stock price has in the past been, and is likely to be in the
future, volatile. The stock market in general has experienced
extreme volatility that has often been unrelated to the operating
performance of particular companies. As a result of this
volatility, our existing stockholders may not be able to sell their
stock at a favorable price. The market price for our common stock
may be influenced by many factors, including:
●
actual or
anticipated fluctuations in our financial condition and operating
results;
●
status and/or
results of our clinical trials;
●
status of ongoing
litigation;
●
results of clinical
trials of our competitors’ products;
●
regulatory actions
with respect to our products or our competitors’
products;
●
actions and
decisions by our collaborators or partners;
●
actual or
anticipated changes in our growth rate relative to our
competitors;
●
actual or
anticipated fluctuations in our competitors’ operating
results or changes in their growth rate;
●
competition from
existing products or new products that may emerge;
●
issuance of new or
updated research or reports by securities analysts;
●
fluctuations in the
valuation of companies perceived by investors to be comparable to
us;
●
share price and
volume fluctuations attributable to inconsistent trading volume
levels of our shares;
●
market conditions
for biopharmaceutical stocks in general;
●
status of our
search and selection of future management and leadership;
and
●
general economic
and market conditions.
19
On
December 31, 2017 the last closing price of our common stock was
$9.80, as compared to $5.26, as of September 30, 2018. During the
first nine months of the year ending December 31, 2018 the lowest
closing price for our common stock was $4.41 and the highest
closing price was $12.63 All stock prices are as adjusted for the
1-for-20 reverse stock split effective on February 23, 2018 at 5:00
p.m.
Some
companies that have had volatile market prices for their securities
have had securities class action lawsuits filed against them. Such
lawsuits, should they be filed against us in the future, could
result in substantial costs and a diversion of management’s
attention and resources. This could have a material adverse effect
on our business, results of operations and financial
condition.
Our failure to maintain compliance with Nasdaq’s continued
listing requirements could result in the delisting of our common
stock.
Our common stock is currently listed on the Nasdaq
Capital Market. In order to maintain this listing, we must satisfy
minimum financial and other requirements. In the past, we have
received a notification letter from Nasdaq indicating that we were
not in compliance with listing requirements because the minimum bid
price of our common stock closed below $1.00 per share for 30
consecutive trading days. However, Nasdaq subsequently notified us
that we had regained compliance with the minimum bid price
requirement. If we fail to satisfy Nasdaq’s listing
requirements in the future, we expect to take actions to regain
compliance, but we can provide no assurance that any such action
would prevent our common stock from dropping below the Nasdaq
minimum bid price requirement or prevent future non-compliance with
Nasdaq’s listing requirements. If our common stock is
delisted from Nasdaq, the delisting could substantially decrease
trading in our common stock and adversely affect the market
liquidity of our common stock; adversely affect our ability to
obtain financing on acceptable terms, if at all; and may result in
the potential loss of confidence by investors, suppliers,
customers, and employees and fewer business development
opportunities. Additionally, the market price of our common stock
may decline further, and stockholders may lose some or all of their
investment.
We are likely to attempt to raise additional capital through
issuances of debt or equity securities, which may cause our stock
price to decline, dilute the ownership interests of our existing
stockholders, and/or limit our financial flexibility.
Historically
we have financed our operations through the issuance of equity
securities and debt financings, and we expect to continue to do so
for the foreseeable future. As of September 30, 2018, we had $5.2
million of cash and cash equivalents, including the fair value of
our marketable securities on hand. Based on our current operating
plans, we believe our existing cash and cash equivalents are
sufficient to continue to fund operations through the first quarter
of calendar year 2019. To the extent that we raise additional funds
by issuing equity securities, our stockholders may experience
significant dilution of their ownership interests. Debt financing,
if available, may involve restrictive covenants that limit our
financial flexibility or otherwise restrict our ability to pursue
our business strategies. Additionally, if we issue shares of common
stock, or securities convertible or exchangeable for common stock,
the market price of our existing common stock may decline. There
can be no assurance that we will be successful in obtaining any
additional capital resources in a timely manner, on favorable
terms, or at all.
Risks Relating to this Offering
Our use of the offering proceeds may not yield a favorable return
on your investment.
We
currently intend to use the net proceeds of this offering to
further our clinical trials and efforts to obtain regulatory
approval of levosimendan, for research and development and for
general corporate purposes, including working capital and potential
acquisitions. Our management has broad
discretion over how these proceeds are used and could spend the
proceeds in ways with which you may not agree. Pending the use of
the proceeds in this offering, we intend to invest them. However,
the proceeds may not be invested in a manner that yields a
favorable or any return. The failure of our management to use such
funds effectively could have a material adverse effect on
our business, results of operations and financial
condition.
20
If you purchase Units in this offering, you may incur substantial
dilution in the net tangible book value of your shares of Series A
Preferred Stock as a result of this offering and future equity
issuances, and as result, our stock price could
decline.
Investors in this
offering may experience immediate dilution in their net tangible
book value per share to the extent of the difference between the
conversion price per share of common stock and the
“adjusted” net tangible book value per share after
giving effect to the offering. Our net tangible book value as of
September 30, 2018 was approximately $4,937,961, or $3.37 per share
of our common stock. Assuming that we issue 4,444,444 shares of
Series A Preferred Stock at a price of $2.25 per share and the
Series A Preferred Stock sold in this offering has an assumed
conversion price of $2.25 per share, and assuming the conversion of
all the shares of Series A Preferred Stock sold in the offering
(not taking into account any anti-dilution adjustments in the
Series A Preferred Stock), and after deducting the commissions and
estimated offering expenses payable by us, our net tangible book
value as of September 30, 2018 would have been approximately
$13,952,961, or $2.36 per share of our common stock. This
calculation excludes the proceeds, if any, from the exercise of the
warrants issued in this offering. This amount represents an
immediate decrease in net tangible book value of $1.01 per share to
our existing stockholders and an immediate increase in net tangible
book value of $0.11 per share to new investors in this offering. If
outstanding options and warrants to purchase our common stock are
exercised, you may experience dilution. See
“Dilution”.
In
addition to this offering,
subject to market conditions and other factors, it is likely that
we will pursue additional financings in the future, as we continue
to build our business. In future years, we will likely need to
raise significant additional capital to finance our operations and
to fund clincial trials, regulatory submissions and the
development, manufacture and marketing of other products under
development and new product opportunities. Accordingly, we may
conduct substantial future offerings of equity or debt securities.
The exercise of outstanding options and warrants and future equity
issuances, including future private placements of equity securities
and any additional shares issued in the connection with
acquisitions, could result in dilution to investors. In addition,
the market price of our common stock could fall as a result of
reslaes of any of these shares of common stock due to an increased
number of shares available for sale in the
market.
In addition, our board of directors has the authority to establish
the designation of additional shares of preferred stock that may be
convertible into common stock without any action by our
stockholders, and to fix the rights, preferences, privileges and
restrictions, including voting rights, of such shares. Any such
additional shares of preferred stock may have rights, preferences
and privileges senior to those of outstanding common stock, and the
issuance and conversion of any such preferred stock would further
dilute the percentage ownership of our stockholders.
There is no public market for the Series A Preferred Stock or
warrants to purchase common stock in this offering.
There
is no established public trading market for the Series A Preferred
Stock or the warrants being offered in this offering, and we do not
expect a market to develop. In addition, neither the Series A
Preferred Stock nor the warrants are listed, and we do not intend
to apply for listing of the Series A Preferred Stock or the
warrants on any securities exchange or trading system. Without an
active market, the liquidity of the Series A Preferred Stock and
the warrants is limited, and investors may be unable to liquidate
their investments in the Series A Preferred Stock or the
warrants.
The value of our Series A Preferred Stock is directly tied to the
value of our common stock, and any change in the value of our
common stock will be reflected in the value of our Series A
Preferred Stock.
There is no
established public trading market for the Series A Preferred Stock,
and we do not expect a market to develop. In addition, we do not
intend to apply for listing of the Series A Preferred Stock on any
national securities exchange or other nationally recognized trading
system. As a result, because each share of Series A Preferred Stock
is convertible at any time at the option of the holder into shares
of our common stock at an assumed initial conversion price per
share equal to $2.25, subject to certain beneficial ownership
limitations, we expect the value of the Series A Preferred Stock to
have a value directly tied to the value of our common stock.
Accordingly, any change in the trading price of our common stock
will be reflected in the value of our Series A Preferred Stock, and
the price of our common stock may be volatile as described
above.
The conversion of shares of our Series A Preferred Stock into
common stock, or the perception that such conversions may occur,
could cause the market price of our common stock to
decline.
Each share of our
Series A Preferred Stock is convertible at any time at the option
of the holder into shares of our common stock at an assumed initial
conversion price per share equal to $2.25, subject to certain
limitations. See “Description of Securities.” The
conversion of substantial amounts of our Series A Preferred Stock
would result in the issuance by us of a substantial number of
additional shares of our common stock, which, subject to certain
limitations, could be traded publicly. Such conversions, or the
perception that such conversions may occur, could cause the market
price of our common stock to decline.
The warrants may not have any value.
The Series 1
Warrants will be exercisable for two years from the closing date at
an assumed initial exercise price of $2.25 per share. The Series 2
warrants will be exercisable for five years from the closing date
at an assumed initial exercise price of $2.25 per share. In the
event that the price of a share of our common stock does not exceed
the exercise price of the warrants during the period when the
warrants are exercisable, the warrants may not have any
value.
The warrants purchased in this offering do not entitle the holder
to any rights as common stockholders until the holder exercises the
warrant for shares of our common stock.
Until
you acquire shares of our common stock upon exercise of your
warrants purchased in this offering, such warrants will not provide
you any rights as a common stockholder, except as set forth in the
warrants. Upon exercise of your warrants purchased in this
offering, you will be entitled to exercise the rights of a common
stockholder only as to matters for which the record date occurs on
or after the exercise date.
21
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information
set forth in this prospectus and the information it incorporates by
reference may contain various “forward-looking
statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. All information relative to future
markets for our products and trends in and anticipated levels of
revenue, gross margins and expenses, as well as other statements
containing words such as “believe,”
“project,” “may,” “will,”
“anticipate,” “target,” “plan,”
“estimate,” “expect” and
“intend” and other similar expressions constitute
forward-looking statements. These forward-looking statements are
subject to business, economic and other risks and uncertainties,
both known and unknown, and actual results may differ materially
from those contained in the forward-looking statements. Examples of
risks and uncertainties that could cause actual results to differ
materially from historical performance and any forward-looking
statements include, but are not limited to, the risks described
under the heading “Risk Factors” on page 7 of this
prospectus, in our most recent Annual Report on Form 10-K, our
most recent Quarterly Report on Form 10-Q, as well as any
subsequent filings with the SEC. Given these risks, uncertainties
and other factors, you should not place undue reliance on these
forward-looking statements. Also, these forward-looking statements
represent our estimates and assumptions only as of the date such
forward-looking statements are made. You should read carefully this
prospectus and any related free writing prospectuses that we have
authorized for use in connection with this offering, together with
the information incorporated herein or therein by reference as
described under the heading “Where You Can Find Additional
Information,” completely and with the understanding that our
actual future results may be materially different from what we
expect. We hereby qualify all of our forward-looking statements by
these cautionary statements. Except as required by law, we assume
no obligation to update these forward-looking statements publicly
or to update the reasons actual results could differ materially
from those anticipated in these forward-looking statements, even if
new information becomes available in the future.
22
USE OF PROCEEDS
We estimate that
the net proceeds to us from this offering will be approximately
$9 million, based on an assumed
offering price of $2.25 per Unit, after deducting the underwriting
discounts and commissions and estimated offering expenses payable
by us. We will not receive any
additional proceeds from any future conversions of the Series A
Preferred Stock. We will only receive additional proceeds from the
exercise of the warrants issuable in connection with this offering
if the warrants are exercised and the holders of such warrants pay
the exercise price in cash upon such exercise and do not utilize
the cashless exercise provision of the
warrants.
We
currently intend to use the net proceeds of this offering to
further our clinical trials and efforts to obtain regulatory
approval of levosimendan, for research and development and for
general corporate purposes, including working capital and potential
acquisitions. We currently do not have any arrangements or
agreements for any acquisitions. We cannot precisely estimate the
allocation of the net proceeds from this offering. Accordingly, our
management will have broad discretion in the application of the net
proceeds of this offering. Pending the use of net proceeds, we
intend to invest these net proceeds in short-and intermediate-term,
interest-bearing obligations, investment-grade instruments, demand
deposits, certificates of deposit or direct or guaranteed
obligations of the U.S. government.
In
addition, our existing resources, together with the proceeds from
this offering, will not be adequate to permit us to complete such
clinical development or fund our operations over the longer term.
We will need to secure significant additional resources to complete
such development and to support our continued
operations.
.
23
The
following table sets forth our actual cash and cash equivalents and
our capitalization as of September 30, 2018 adjusted to give effect
to the sale of the securities offered hereby and the use of
proceeds, as described in the section entitled “Use of Proceeds:”
●
on an actual basis;
and
●
on an as adjusted
basis to give effect to the sale of
4,444,444
Units in this offering, at an assumed public offering price of
$2.25, the
application of the net proceeds of this offering and after
deducting the underwriting discounts and commissions and estimated
offering expenses payable by us.
The pro
forma as adjusted information set forth in the table below is
illustrative only and will be adjusted based on the actual public
offering price and other terms of this offering determined at
pricing.
You
should read this information in conjunction with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and our financial statements and
related notes appearing in our Annual Report on Form 10-K for the
year ended December 31, 2017 and our Form 10-Q for the quarters
ended March 31, 2018, June 30, 2018 and September 30, 2018, which
are incorporated by reference into this prospectus.
|
|
As of
September 30, 2018
|
||
|
|
Actual
|
Pro Forma
|
Pro Forma As Adjusted
|
|
|
(unaudited)
|
|
|
|
Cash and cash
equivalents
|
$ 3,347,183
|
9,015,000
|
12,362,183
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
|
|
Preferred stock, no
par value; 10,000,000 shares authorized; none and
4,444,444
Series A shares issued and outstanding,
respectively
|
--
|
--
|
--
|
|
Common stock,
$0.0001 par value, 400,000,000 shares authorized;1,465,496
and 1,465,496 shares issued and outstanding,
respectively
|
147
|
--
|
147
|
|
Additional paid-in
capital
|
223,029,293
|
9,015,000
|
232,044,293
|
|
Accumulated
deficit
|
(218,081,498)
|
--
|
(218,081,498)
|
|
Total liabilities
and stockholders’
equity
|
5,454,119
|
9,015,000
|
14,469,119
|
The
information in the table above is based on 1,465,496 shares of
common stock outstanding as of September 30, 2018, and does not
take into account any of the following:
●
120,773 shares of
common stock issuable upon the exercise of outstanding warrants
with a weighted average exercise price of $52.29 per
share;
●
241,744 shares of
common stock issuable upon the exercise of outstanding options with
a weighted average exercise price of $75.70 per share;
●
19,914 shares of common
stock issuable upon the vesting of outstanding restricted stock
grants with a weighted average grant date fair value of $6.28 per
share;
●
100,000 shares of
common stock reserved for future grants and awards under our 2016
Stock Incentive Plan;
●
8,888,888
shares of common stock issuable upon the exercise of the warrants
to be sold as part of this offering; and
●
additional
shares of common stock that may be issuable upon conversion of
Series A Preferred Stock pursuant to the anti-dilution provisions
thereof.
24
DILUTION
Our net tangible
book value as of September 30, 2018 was approximately $4,937,961 or
approximately $3.37 per share of common stock. Net tangible book
value per share is equal to our total tangible assets less our
total liabilities, with this amount divided by the number of shares
of common stock outstanding as of September 30, 2018. After giving
effect to the sale in this offering of shares of Series A Preferred
Stock, and assuming the issuance of the shares of common stock that
the Series A Preferred Stock to be issued is convertible into, at
an assumed public offering price of $2.25 per Unit and after
deducting underwriting discounts and commissions and estimated
offering expenses payable by us, our as adjusted net tangible book
value would have been $13,952,961, or $2.36 per share of common
stock. Assuming the completion of this offering, this represents an
immediate decrease in net tangible book value of $1.01 per share to
our existing stockholders and an immediate increase of $0.11 per
share to anyone who purchases securities in this offering. The
following table illustrates this calculation on a per share
basis:
|
Assumed
conversion price per share of Series A Preferred
Stock
|
|
$ 2.25
|
|
Net Tangible book value per share as
of September 30, 2018, before this offering
|
3.37
|
|
|
Decrease
per share attributable to investors purchasing securities in this
offering
|
(1.01)
|
|
|
Adjusted net tangible book value per
share as of September 30, 2018 after giving effect to this
offering
|
|
2.36
|
|
Accretion
per share to new
investors in this offering
|
|
$ 0.11
|
The
dilution information set forth in the table above is illustrative
only and will be adjusted based on the actual public offering price
and other terms of this offering determined at
pricing.
The foregoing table is based on
1,465,496 shares of common stock outstanding as of September 30,
2018. The foregoing discussion and table does not take into account
further dilution to investors in this offering that could occur
upon the exercise of outstanding options and warrants, including
the warrants offered in this offering, having a per share exercise
price less than the public offering price per share in this
offering. To the extent that options or warrants outstanding as of
September 30, 2018, have been or may be exercised or other shares
issued, investors purchasing securities in this offering may
experience further dilution. In addition, we may seek to raise
additional capital in the future through the sale of equity or
convertible debt securities. To the extent that additional capital
is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in
further dilution to our stockholders. In addition, the calculation
in the foregoing table does not take into account any of the
following:
|
|
●
|
|
120,773 shares of common stock
issuable upon the exercise of outstanding warrants with a weighted
average exercise price of $52.29 per share;
|
|
|
●
|
|
241,744 shares of common stock
issuable upon the exercise of outstanding options with a weighted
average exercise price of $75.70 per share;
|
|
|
●
|
|
19,914 shares of common stock
issuable upon the vesting of outstanding restricted stock grants
with a weighted average grant date fair value of $6.28 per
share;
|
|
|
●
|
|
100,000 shares of common stock
reserved for future grants and awards under our 2016 Stock
Incentive Plan;
|
|
|
●
|
|
8,888,888 shares of common stock issuable
upon the exercise of the warrants to be sold as part of this
offering; and
|
|
|
●
|
|
additional
shares of common stock that may be issuable upon conversion of
Series A Preferred Stock pursuant to the anti-dilution provisions
thereof.
|
25
MARKET PRICE OF OUR COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Our
common stock is listed on the Nasdaq Capital Market under the
ticker symbol “TENX”. The following table sets forth,
for the periods indicated, the range of high and low sales prices
in each fiscal quarter for our common stock, all as adjusted for
the 1-for-20 reverse stock split effective February 23, 2018 at
5:00 p.m.
|
Year-Ended December 31, 2016
|
High
|
Low
|
|
First
Quarter
|
$67.40
|
$38.80
|
|
Second
Quarter
|
$58.80
|
$40.00
|
|
Third
Quarter
|
$55.40
|
$43.20
|
|
Fourth
Quarter
|
$48.58
|
$24.20
|
|
Year-Ended December 31, 2017
|
High
|
Low
|
|
First
Quarter
|
$53.00
|
$8.30
|
|
Second
Quarter
|
$15.80
|
$8.28
|
|
Third
Quarter
|
$15.50
|
$6.20
|
|
Fourth
Quarter
|
$11.96
|
$7.02
|
|
Year-Ended December 31, 2018
|
High
|
Low
|
|
First
Quarter
|
$12.63
|
$4.41
|
|
Second
Quarter
|
$11.92
|
$5.17
|
|
Third
Quarter
|
$7.20
|
$5.00
|
|
Fourth
Quarter (through November 28, 2018)
|
$6.39
|
$2.10
|
As of November 28,
2018, there were 1,343 holders of record of our common stock. In
addition, we believe that a significant number of beneficial owners
of our common stock hold their shares in nominee or in
“street name” accounts through brokers, and any such
beneficial owners are not included in this number of holders of
record. On November 28, 2018, the last sale price reported on the
Nasdaq Capital Market for our common stock was $2.25 per
share.
DIVIDEND POLICY
Since
our inception, we have not paid dividends on our common stock. We
intend to retain any earnings for use in our business activities,
so it is not expected that any dividends on our common stock will
be declared and paid in the foreseeable future.
26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth, as of November 28, 2018,
the number and percentage of the outstanding shares of common stock
and warrants and options that, according to the information
supplied to us, were beneficially owned by (i) each person who is
currently a director, (ii) our named executive officers, (iii) all
current directors and executive officers as a group and (iv) each
person who, to our knowledge, is the beneficial owner of more than
five percent of the outstanding common stock. Except as otherwise
indicated, the persons named in the table have sole voting and
dispositive power with respect to all shares beneficially owned,
subject to community property laws where applicable.
|
Beneficial Owner
Name and Address(1)
|
Amount and Nature of Beneficial
Ownership(2)
|
Percent of Class
|
|
Principal Stockholders
|
|
|
|
JP SPC3 OXBT FUND(3)
|
109,033
|
6.93%
|
|
Rue
Du Mont-Blanc
Geneva,
Switzerland 1201
|
|
|
|
Doug Randall(4)
|
87,095
|
5.85%
|
|
Douglas Hay(4)
|
71,407
|
4.80%
|
|
Officers and Directors
|
|
|
|
Gregory Pepin(5)
|
111,775
|
7.62%
|
|
Michael B. Jebsen, CPA(6)
|
61,478
|
4.08%
|
|
Ronald R. Blanck, DO(6)
|
3,845
|
*
|
|
James Mitchum(6)
|
3,550
|
*
|
|
Anthony DiTonno(6)
|
2,865
|
*
|
|
Chris A. Rallis(6)
|
3,348
|
*
|
|
Gerald T. Proehl(6)
|
4,245
|
*
|
|
All officers and directors as a group (7
persons)(6)
|
191,106
|
11.73%
|
* Less
than 1%
|
(1)
|
Unless
otherwise noted, all addresses are in care of Tenax Therapeutics,
Inc. at ONE Copley Parkway, Suite 490, Morrisville, North Carolina
27560.
|
|
(2)
|
Based
upon 1,465,496 shares of
common stock outstanding on November 28, 2018. The
number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Exchange Act and the information
is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares
as to which the person has sole or shared voting power or
investment power and also any shares that the person has the right
to acquire within 60 days of November 28,
2018 through the exercise
of any stock options or other rights. Any shares that a person has
the right to acquire within 60 days are deemed to be outstanding
for the purpose of computing the percentage ownership of such
person but are not deemed outstanding for the purpose of computing
the percentage ownership of any other person.
|
|
(3)
|
Includes
1,545 shares of common stock, and 107,488 shares of common stock
subject to warrants that are exercisable or convertible, as
applicable within 60 days of November 28, 2018.
|
|
(4)
|
With
respect to Mr. Randall, includes 23,081 shares of common stock
subject to options that are vested, vesting, exercisable or
convertible, as applicable, within 60 days of November
28, 2018;
With
respect to Mr. Hay, includes 23,081 shares of common stock subject
to options that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of November 28,
2018.
|
|
(5)
|
Includes
742 shares of restricted common stock and 2,000 shares of common
stock subject to options that are vested, vesting, exercisable or
convertible, as applicable, within 60 days of November
28, 2018. Mr. Pepin is a co-founder of EOS, an
investment company, which serves as the Investment Manager and
Managing Director for JP SPC3 OXBT Fund (“OXBT Fund”), and consequently he may be deemed
to be the beneficial owner of shares held by OXBT Fund. Mr. Pepin
disclaims beneficial ownership of the shares held by OXBT Fund
except to the extent of his pecuniary interest
therein.
|
|
(6)
|
With
respect to Dr. Blanck, includes 257 shares of common stock subject
to warrants and 2,526 shares of common stock subject to options
that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of November 28,
2018;
With
respect to Mr. DiTonno, includes 129 shares of common stock subject
to warrants and 2,576 shares of common stock subject to options
that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of November 28,
2018;
With
respect to Mr. Rallis, includes 129 shares of common stock subject
to warrants and 2,576 shares of common stock subject to options
that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of November 28, 2018;
With
respect to Mr. Jebsen, includes 40,843 shares of common stock
subject to options and restricted stock grants that are vested,
vesting, exercisable or convertible, as applicable, within 60 days
of November 28, 2018;
With
respect to Mr. Proehl, includes 2,750 shares of common stock
subject to options that are vested, vesting, exercisable or
convertible, as applicable, within 60 days of November
28, 2018 and 1,495 shares for which voting, and
investment power is shared with Mr. Proehl’s spouse;
With
respect to Mr. Mitchum, includes 2,250 shares of common stock
subject to options that are vested, vesting, exercisable or
convertible, as applicable, within 60 days of November
28, 2018 and 3,050 shares for which voting, and
investment power is shared with Mr. Mitchum’s spouse; and
With
respect to all officers and directors as a group, includes 515
shares of common stock subject to warrants and 55,435 shares of
common stock subject to options and restricted stock grants that
are vested, vesting, convertible, or exercisable, as applicable,
within 60 days of November 28, 2018.
|
27
DESCRIPTION OF SECURITIES
Description of Units
We are offering
4,444,444 shares of Series A Preferred Stock and 8,888,888 warrants
exercisable for one share of our common stock. Each share of Series
A Preferred Stock will be sold as a unit with one Series 1 Warrant
to purchase one share of our common stock that expires on the
second anniversary of the date of issuance, and one Series 2
Warrant that expires on the fifth anniversary of the date of
issuance (together with the shares of common stock underlying such
shares of Series A Preferred Stock and such warrants, are referred
to herein as the Units) at an assumed public offering price of
$2.25 per Unit.
The securities of
which the Units are composed, or the underlying
securities, are being sold in
this offering only as part of the Units. However, the Units will
not be certificated and the underlying securities comprising such
Units are immediately separable and issued separately. Each
underlying security purchased in this offering will be issued
independent of each other underlying security and not as part of a
Unit. Upon issuance, each underlying security may be transferred
independent of any other underlying security, subject to applicable
law and transfer restrictions.
Description of Series A Preferred Stock.
Our Certificate of
Incorporation has authorized 10,000,000 shares of preferred stock,
none of which are currently issued and outstanding. The preferences
and rights of the Series A Preferred Stock will be as set forth in
a Certificate of Designation, or the Series A Certificate of
Designation, filed as an
exhibit to the registration statement of which this prospectus is a
part.
In the event of a
liquidation, the holders of Series A Preferred Stock are entitled
to participate on an as-converted-to-common stock basis with
holders of the common stock in any distribution of assets of the
Company to the holders of the common stock. The Series A
Certificate of Designation provides, among other things, that we
shall not pay any dividends on shares of common stock (other than
dividends in the form of common stock) unless and until such time
as we pay dividends on each Series A Preferred Share on an
as-converted basis. Other than as set forth in the previous
sentence, the Series A Certificate of Designation provides that no
other dividends shall be paid on Series A Preferred Stock and that
we shall pay no dividends (other than dividends in the form of
common stock) on shares of common stock unless we simultaneously
comply with the previous sentence. The Series A Certificate of
Designation does not provide for any restriction on the repurchase
of Series A Preferred Stock by us while there is any arrearage in
the payment of dividends on the Series A Preferred Stock. There are
no sinking fund provisions applicable to the Series A Preferred
Stock.
28
With certain
exceptions, as described in the Series A Certificate of
Designation, the Series A Preferred Stock has no voting rights.
However, as long as any shares of Series A Preferred Stock remain
outstanding, the Series A Certificate of Designation provides that
we shall not, without the affirmative vote of holders of a majority
of the then-outstanding Series A Preferred Stock, (a) alter or
change adversely the powers, preferences or rights given to the
Series A Preferred Stock or alter or amend the Series A Certificate
of Designation, (b) increase the number of authorized shares of
Series A Preferred Stock or (c) amend our Certificate of
Incorporation or other charter documents in any manner that
adversely affects any rights of holders of Series A Preferred
Stock.
Each share of
Series A Preferred Stock is convertible, at any time at the
holder’s option into one
share of common stock (based on an assumed stated value of $2.25
per share of Series A Preferred Stock and an assumed conversion
price of $2.25) which conversion ratio will be subject to
adjustment as described below. This right to convert is limited by
the beneficial ownership limitation described
below.
Notwithstanding the
foregoing, the Series A Certificate of Designation further provides
that we shall not effect any conversion of Series A Preferred
Stock, with certain exceptions, to the extent that, after giving
effect to an attempted conversion, the holder of Series A Preferred
Stock (together with such holder’s affiliates, and any persons acting
as a group together with such holder or any of such
holder’s affiliates)
would beneficially own a number of shares of Common Stock in excess
of 4.99% (or, at the election of the holder prior to the issuance
date, 9.99%) of the shares of our Common Stock then outstanding
after giving effect to such exercise, which we refer to as the
Preferred Stock Beneficial
Ownership Limitation; provided,
however, that upon notice to the Company, the holder may increase
or decrease the Preferred Stock Beneficial Ownership Limitation,
provided that in no event shall the Preferred Stock Beneficial
Ownership Limitation exceed 9.99% and any increase in the Preferred
Stock Beneficial Ownership Limitation will not be effective until
61 days following notice of such increase from the holder to
us.
Additionally,
subject to certain exceptions, at any time after the issuance of
the Series A Preferred Stock, and subject to the Preferred Stock
Beneficial Ownership Limitation, we will have the right to cause
each holder of the Series A Preferred Stock to convert all or part
of such holder’s Series A
Preferred Stock in the event that (i) the volume weighted average
price of our common stock for any 30 consecutive trading days, or
the Measurement Period, exceeds
300% of the initial conversion price of the Series A Preferred
Stock (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and similar transactions), (ii)
the average daily trading volume for such Measurement Period
exceeds $175,000 per trading day and (iii) the holder is not in
possession of any information that constitutes or might constitute,
material non-public information which was provided by the Company.
Our right to cause each holder of the Series A Preferred Stock to
convert all or part of such holder’s Series A Preferred Stock shall be
exercised ratably among the holders of the then outstanding
preferred stock.
We do not intend to
apply for listing of the Series A Preferred Stock on any securities
exchange or other trading system.
Until
such time as 85% of the aggregate shares of Series A Preferred
Stock issued to all holders on the original issue date have been
converted to common stock, the Series A Preferred Stock has full
ratchet price based anti-dilution protection, subject to customary
carve outs, in the event of a down-round financing at a price per
share below the conversion price of the Series A Preferred Stock.
If during any 30 consecutive trading days the volume weighted
average price of our common stock exceeds 300% of the
then-effective conversion price of the Series A Preferred Stock and
the daily dollar trading volume for each trading day during such
period exceeds $175,000, the anti-dilution protection in the Series
A Preferred Stock will expire and cease to
apply.
If
we pay a stock dividend or otherwise make a distribution payable in
shares of common stock on shares of common stock or any other
common stock equivalents, subdivide or combine outstanding common
stock, or reclassify common stock, the conversion price will be
adjusted by multiplying the then conversion price by a fraction,
the numerator of which shall be the number of shares of common
stock outstanding immediately before such event, and the
denominator of which shall be the number of shares outstanding
immediately after such event.
If
we effect a fundamental transaction in which we are the surviving
entity, then upon any subsequent conversion of Series A Preferred
Stock, the holder thereof shall have the right to receive, for each
share of common stock that would have been issuable upon such
conversion immediately prior to the occurrence of such fundamental
transaction, the number of shares of our common stock and any
additional consideration receivable as a result of such fundamental
transaction by a holder of the number of shares of common stock
into which Series A Preferred Stock is convertible immediately
prior to such fundamental transaction. If we effect a fundamental
transaction in which we are not the surviving entity or a reverse
merger in which we are the surviving entity, then the surviving
entity shall purchase the outstanding Series A Preferred Stock by
paying and issuing, in the event that such consideration given to
common stockholders is non-cash consideration, as the case may be,
to such holder (or canceling such holder's outstanding Series A
Preferred Stock and converting it into the right to receive) an
amount equal to the cash consideration plus the non-cash
consideration (in the form issuable to the holders of common stock)
per share of the common stock in the fundamental transaction
multiplied by the number of conversion shares underlying the shares
of Series A Preferred Stock held by the holder on the date of the
consummation of the fundamental transaction. Such amount shall be
paid in the same form and mix (be it securities, cash or property,
or any combination of the foregoing) as the consideration received
by the common stock in such fundamental transaction. A fundamental
transaction means: (i) our merger or consolidation with or into
another entity, (ii) any sale or other disposition of all or
substantially all of our assets in one transaction or a series of
related transactions, (iii) any tender offer or exchange offer
allowing holders of our common stock to tender or exchange their
shares for cash, property or securities, and has been accepted by
the holders of 50% or more of the outstanding common stock(iv) any
reclassification of our common stock or any compulsory share
exchange by which common stock is effectively converted into or
exchanged for other securities, cash or property, or (v)
consummation of a stock or share purchase agreement or other
business combination with another person whereby such other person
acquires more than 50% of the outstanding shares of common
stock.
29
Description of Warrants Included in the Units
The
material terms and provisions of the warrants being offered
pursuant to this prospectus are summarized below. This summary of
some provisions of the warrants is not complete. For the complete
terms of the warrants, you should refer to the form of warrant
filed as an exhibit to the registration statement of which this
prospectus is a part.
Each share of Series A Preferred Stock
will be issued with: (a) the number of Series 1 Warrants equal to
100% of the number of shares of our common stock initially issuable
upon conversion of the shares of Series A Preferred Stock, which
will be immediately exercisable and expire on the second
anniversary of the date of issuance, and (b) the number of Series 2
Warrants equal to 100% of the number of shares of our common stock
initially issuable upon conversion of the shares of Series A
Preferred Stock, which will be immediately exercisable and expire
on the fifth anniversary of the date of issuance. Each whole
warrant is exercisable to purchase one share of our common stock at
an assumed exercise price of $2.25 per share at any time prior to
expiration. The warrants issued in this offering will each be
governed by the terms of a global warrant certificate deposited
with DTC. The holder of a warrant will not be deemed a holder of
our underlying common stock until the warrant is exercised, except
as set forth in the warrant.
Subject
to limited exceptions, a holder of warrants will not have the right
to exercise any portion of its warrants if the holder (together
with such holder’s
affiliates, and any persons acting as a group together with such
holder or any of such holder’s affiliates) would beneficially own
a number of shares of common stock in excess of 4.99% (or, at the
election of the holder prior to the issuance date, 9.99%) of the
shares of our common stock then outstanding after giving effect to
such exercise, or the Beneficial Ownership Limitation; provided,
however, that upon notice to the Company, the holder may increase
or decrease the Beneficial Ownership Limitation, provided that in
no event shall the Beneficial Ownership Limitation exceed 9.99% and
any increase in the Beneficial Ownership Limitation will not be
effective until 61 days following notice of such increase from the
holder to us.
The
exercise price and the number of shares issuable upon exercise of
the warrants is subject to appropriate adjustment in the event of
recapitalization events, stock dividends, stock splits, stock
combinations, reclassifications, reorganizations or similar events
affecting our common stock. The warrant holders must pay the
exercise price in cash upon exercise of the warrants, unless such
warrant holders are utilizing the cashless exercise provision of
the warrants, which is only available in certain circumstances such
as if the underlying shares are not registered with the SEC
pursuant to an effective registration statement. We intend to use
commercially reasonable efforts to have the registration statement
of which this prospectus forms a part, effective when the warrants
are exercised.
In
addition, in the event we consummate a merger or consolidation with
or into another person or other reorganization event in which our
common stock is converted or exchanged for securities, cash or
other property, or we sell, lease, license, assign, transfer,
convey or otherwise dispose of all or substantially all of our
assets or we or another person acquire 50% or more of our
outstanding shares of common stock, or a fundamental transaction,
then following such event, the holders of the warrants will be
entitled to receive upon exercise of the warrants the same kind and
amount of securities, cash or property which the holders would have
received had they exercised the warrants immediately prior to such
fundamental transaction. Any successor to us or surviving entity is
required to assume the obligations under the warrants.
Notwithstanding the foregoing, in the event of a fundamental
transaction, the holders will have the option, which may be
exercised within 30 days after the consummation of the fundamental
transaction, to require the company or the successor entity
purchase the warrant from the holder by paying to the holder an
amount of cash equal to the Black Scholes value of the remaining
unexercised portion of the warrant on the date of the consummation
of the fundamental transaction. However, if the fundamental
transaction is not within the company’s control, including not approved by
the company’s Board of
Directors or the consideration is not in all stock of the successor
entity, the holder will only be entitled to receive from the
company or any successor entity, as of the date of consummation of
such fundamental transaction, the same type or form of
consideration (and in the same proportion), at the Black Scholes
value of the unexercised portion of the warrant, that is being
offered and paid to the holders of common stock of the company in
connection with the fundamental transaction, whether that
consideration be in the form of cash, stock or any combination
thereof, or whether the holders of common stock are given the
choice to receive from among alternative forms of consideration in
connection with the fundamental transaction.
Upon
the holder’s exercise of
a warrant, we will issue the shares of common stock issuable upon
exercise of the warrant within two trading days following our
receipt of a notice of exercise, provided that payment of the
exercise price has been made (unless exercised via the “cashless” exercise provision).
Prior
to the exercise of any warrants to purchase common stock, holders
of the warrants will not have any of the rights of holders of the
common stock purchasable upon exercise, including the right to
vote, except as set forth therein.
Warrant
holders may exercise warrants only if the issuance of the shares of
common stock upon exercise of the warrants is covered by an
effective registration statement, or an exemption from registration
is available under the Securities Act and the securities laws of
the state in which the holder resides. We intend to use
commercially reasonable efforts to have the registration statement
of which this prospectus forms a part effective when the warrants
are exercised. The warrant holders must pay the exercise price in
cash upon exercise of the warrants unless there is not an effective
registration statement or, if required, there is not an effective
state law registration or exemption covering the issuance of the
shares underlying the warrants (in which case, the warrants may
only be exercised via a “cashless” exercise provision).
If a
warrant is exercised via the “cashless” exercise provision, the holder will
receive the number of shares of common stock determined pursuant to
the formula set forth in the warrants.
30
Pursuant to a
warrant agency agreement between us and Issuer Direct Corporation,
as warrant agent, the warrants will be issued in book-entry form
and shall initially be represented only by one or more global
certificates deposited with the Depository Trust Company, or DTC,
and registered in the name of Cede & Co., a nominee of DTC, or
as otherwise directed by DTC.
We do
not intend to apply for listing of the warrants on any securities
exchange or other trading system.
Description of Capital Stock
The
following descriptions are summaries of the material terms that are
included in our Certificate of Incorporation, as amended, which we
will refer to hereafter as our Certificate of Incorporation, our
Amended and Restated Bylaws, which we will refer to hereafter as
our Bylaws, and applicable provisions of law. We have summarized
certain portions of the Certificate of Incorporation and Bylaws
below. The summary is not complete. The Certificate of
Incorporation and Bylaws are incorporated by reference as exhibits
to the registration statement of which this prospectus forms a
part. You should read the Certificate of Incorporation and Bylaws
for the provisions that are important to you.
Overview
Authorized Capital Stock
As of
November 28, 2018, our authorized capital
stock consists of 400,000,000 shares of common stock, $0.0001 par
value per share, and 10,000,000 shares of preferred stock in one or
more series, $0.0001 par value per share.
Common Stock
As of
November 28, 2018 , there were 1,465,496 shares of our
common stock outstanding held of record by 1,343 stockholders. In
addition, there are outstanding options, warrants and rights to
acquire up to an additional 382,431 shares of common
stock.
Holders
of the common stock are entitled to one vote per share on all
matters submitted to the stockholders for a vote. There are no
cumulative voting rights in the election of directors. The shares
of common stock are entitled to receive such dividends as may be
declared and paid by our board of directors out of funds legally
available therefor and to share, ratably, in the net assets, if
any, of Tenax Therapeutics upon liquidation. The stockholders have
no preemptive rights to purchase any shares of our capital
stock.
The
transfer agent for the common stock is Issuer Direct Corporation,
Morrisville, NC. Our common stock is traded on the Nasdaq Capital
Market and is quoted under the symbol TENX.
Preferred Stock
Under
the terms of our Certificate of Incorporation, our board of
directors is authorized to provide for the issuance of shares of
preferred stock in one or more series without stockholder approval.
Our board of directors has the discretion to determine the rights,
preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and
liquidation preferences, of each series of preferred stock. The
preferred stock may have voting or conversion rights that could
have the effect of restricting dividends on our common stock,
diluting the voting power of our shares of common stock, impairing
the rights of our common stock in the event of our dissolution,
liquidation or winding-up or otherwise adversely affect the rights
of holders of our common stock. The holders of preferred stock are
not entitled to vote at or receive notice of any meeting of
stockholders, except as otherwise provided in the rights and
restrictions attached to the shares by our board of
directors.
Anti-Takeover Effects of Delaware Law and Our Certificate of
Incorporation and Bylaws
Certificate of Incorporation and Bylaws;
Indemnification
The
following provisions will make it more difficult for our existing
stockholders to replace our board of directors as well as for
another party to obtain control of the Company by replacing our
board of directors. Since our board of directors has the power to
retain and discharge our officers, these provisions could also make
it more difficult for existing stockholders or another party to
effect a change in management or could otherwise impede the success
of any attempt to change the control of the Company.
31
These
provisions are intended to enhance the likelihood of continued
stability in the composition of our board of directors and its
policies and to discourage certain types of transactions that may
involve an actual or threatened acquisition of the Company. These
provisions are also designed to reduce our vulnerability to an
unsolicited acquisition proposal and to discourage certain tactics
that may be used in proxy fights. However, these provisions could
have the effect of discouraging others from making tender offers
for our shares and may have the effect of deterring hostile
takeovers or delaying changes in control of the Company or
management. As a consequence, these provisions also may inhibit
fluctuations in the market price of our stock that could result
from actual or rumored takeover attempts.
No Cumulative Voting. Because our stockholders do not have
cumulative voting rights, our stockholders holding a majority of
the voting power of our shares of common stock outstanding will be
able to elect all of our directors.
Special Meetings of Stockholders. Our Bylaws provide that
special meetings of stockholders may be called only by the
Chairman, President or by a majority of our board of directors, or
by a person designated by our board of directors. Stockholders are
not permitted to call a special meeting of stockholders or to
require that the Chairman, the President or our board of directors
request the calling of a special meeting of
stockholders.
Advance Notice Requirement. Stockholder proposals to be
brought before an annual meeting of our stockholders must comply
with advance notice procedures. These advance notice procedures
require timely notice and apply in several situations, including
stockholder proposals relating to the nomination of persons for
election to our board of directors. Generally, to be timely, notice
must be received at our principal executive offices not less than
120 days nor more than 150 days prior to the first anniversary of
the previous year’s annual meeting of
stockholders.
Blank Check Preferred Stock. Our board of directors is
authorized by our Certificate of Incorporation to issue, without
further stockholder action, up to 10,000,000 shares of designated
preferred stock with rights and preferences, including voting
rights, designated by our board of directors. The existence of the
authorized but unissued shares of preferred stock enables our board
of directors to render more difficult or to discourage an attempt
to obtain control of the Company by means of a merger, tender
offer, proxy contest or otherwise.
Limitation of Liability and Indemnification of Officers and
Directors. Pursuant to the Certificate of Incorporation and
under Delaware law, directors and executive officers are not liable
to the Company or its stockholders for monetary damages for breach
of fiduciary duty, except liability in connection with a breach of
duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
dividend payments or stock repurchases illegal under Delaware law,
or any transaction in which a director has derived an improper
personal benefit.
Our
Certificate of Incorporation and Bylaws also provide that we will
indemnify our directors and officers to the fullest extent
permitted by law against liabilities and expenses incurred in
connection with litigation in which such person may be involved by
reason of the fact that such person was our director or officer if
such person acted in good faith or in a manner reasonably believed
to be in or not opposed to our best interests. To the extent that a
director or officer has been successful in defense of any
proceeding, our Bylaws provide that he shall be indemnified against
reasonable expenses incurred in connection therewith.
The
limitations of liability and indemnification provisions in our
Certificate of Incorporation and Bylaws may discourage stockholders
from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against directors
and officers, even though such an action, if successful, might
otherwise benefit our stockholders and us. In addition, your
investment may be adversely affected to the extent we pay the costs
of settlement and damage awards against directors and officers
pursuant to these indemnification provisions.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been
advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
There
is currently no pending material litigation or proceeding involving
any of our directors, officers or employees for which
indemnification is sought.
Exclusive Forum. Our Bylaws provides that, unless we consent
in writing to the selection of an alternative forum, any North
Carolina state court that has jurisdiction or the Court of Chancery
of the State of Delaware will be the sole and exclusive forum for:
(i) any derivative action or proceeding brought on behalf of us;
(ii) any action asserting a claim of breach of a fiduciary duty
owed by any of our directors, officers or other employees to us or
our stockholders; (iii) any action asserting a claim against us
arising pursuant to any provision of the Delaware General
Corporation Law; or (iv) any action asserting a claim against us
governed by the internal affairs doctrine. The enforceability of
similar choice of forum provisions in other companies’ organizational documents has been
challenged in legal proceedings, and it is possible that, in
connection with any action, a court could find the choice of forum
provisions contained in our Bylaws to be inapplicable or
unenforceable in such action.
32
Section 203 of the Delaware General Corporation Law
We are
subject to Section 203 of the General Corporation Law of the State
of Delaware, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware
corporation for three years following the date these persons become
interested stockholders unless the business combination is, or the
transaction in which the person became an interested stockholder
was, approved in a prescribed manner or another prescribed
exception applies. Generally, an “interested stockholder” is a person who, together with
affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status did own, 15% or more
of a corporation’s voting
stock. Generally, a “business combination” includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to the
interested stockholder. The existence of this provision may have an
anti-takeover effect with respect to transactions not approved in
advance by our board of directors.
Disclosure of SEC Position on Indemnification for Securities Act
Liabilities
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted for directors, officers or persons controlling our
company, we understand that it is the SEC’s opinion that such indemnification
is against public policy as expressed in the Securities Act and may
therefore be unenforceable.
33
UNDERWRITING
We have
entered into an underwriting agreement dated
, 2018 with Ladenburg Thalmann & Co. Inc., as the
representative of the underwriter, or the representative, named
below and the sole book-running manager of this offering. Subject
to the terms and conditions of the underwriting agreement, the
underwriter has agreed to purchase the number of our securities set
forth opposite its name below.
|
Underwriter
|
Units
|
|
Ladenburg Thalmann
& Co. Inc.
|
|
|
|
|
|
Total
|
|
|
|
|
A copy
of the underwriting agreement will be filed as an exhibit to the
registration statement of which this prospectus is
part.
We have been
advised by the underwriter that it proposes to offer the units
directly to the public at the public offering price set forth on
the cover page of this prospectus. Any securities sold by the
underwriter to securities dealers will be sold at the public
offering price less a selling concession not in excess of $
per Unit.
The
underwriting agreement provides that subject to the satisfaction or
waiver by the representative of the conditions contained in the
underwriting agreement, the underwriter is obligated to purchase
and pay for all of the units offered by this prospectus. No action
has been taken by us or the underwriter that would permit a public
offering of the units, or the shares, of common stock, shares of
preferred stock and warrants included in the units, in any
jurisdiction outside the United States where action for that
purpose is required. None of our securities included in this
offering may be offered or sold, directly or indirectly, nor may
this prospectus or any other offering material or advertisements in
connection with the offer and sales of any of the securities
offering hereby be distributed or published in any jurisdiction
except under circumstances that will result in compliance with the
applicable rules and regulations of that jurisdiction. Persons who
receive this prospectus are advised to inform themselves about and
to observe any restrictions relating to this offering of securities
and the distribution of this prospectus. This prospectus is neither
an offer to sell nor a solicitation of any offer to buy the
securities in any jurisdiction where that would not be permitted or
legal.
The
underwriter has advised us that it does not intend to confirm sales
to any account over which it exercises discretionary
authority.
Underwriting Discount and Expenses
The
following table summarizes the underwriting discount and commission
to be paid to the underwriter by us.
|
|
Per Unit(1)
|
Total
|
|
Public offering
price
|
$-
|
|
|
Underwriting
discount to be paid to the underwriter by us (8.0%)
|
|
|
|
Proceeds to us
(before expenses)
|
$
|
|
|
(1)
|
The
public offering price and underwriting discount corresponds to (i)
a public offering price per share of Series A Preferred Stock of $
(or $
after deducting the underwriting discount) and (ii) a public
offering price per warrant of $
(or $
after deducting the underwriting discount).
|
34
We
estimate the total expenses payable by us for this offering to be
approximately $985,000 which amount includes (i) the
underwriting discount of $800,000, (ii) reimbursement
of the accountable expenses of the representative equal to $95,000
including the legal fees of the representative being paid by us,
and (iii) other estimated company expenses of approximately
$90,000 which includes legal, accounting and printing costs
and various fees associated with the registration and listing of
our shares.
The
securities we are offering are being offered by the underwriter
subject to certain conditions specified in the underwriting
agreement.
Representative Warrants
We have agreed to issue to the
representative warrants to purchase 4% of the aggregate number of
shares of common stock sold in this offering (including the shares
of common stock issuable upon conversion of the Series A Preferred
Stock). The representative warrants will have a term of five years
from the effective date of this prospectus and an exercise price
per share equal to 125% of the public offering price for the Units
sold in this offering. Pursuant to FINRA Rule 5110(g), the
representative warrants and any shares issued upon exercise of the
representative warrants shall not be sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short
sale, derivative, put or call transaction that would result in the
effective economic disposition of the securities by any person for
a period of 180 days immediately following the date of
effectiveness or commencement of sales of this offering, except the
transfer of any security: (i) by operation of law or by reason of
our reorganization; (ii) to any FINRA member firm participating in
the offering and the officers or partners thereof, if all
securities so transferred remain subject to the lock-up restriction
set forth above for the remainder of the time period; (iii) if the
aggregate amount of our securities held by the underwriter or
related persons do not exceed 1% of the securities being offered;
(iv) that is beneficially owned on a pro rata basis by all equity
owners of an investment fund, provided that no participating member
manages or otherwise directs investments by the fund and the
participating members in the aggregate do not own more than 10% of
the equity in the fund; or (v) the exercise or conversion of any
security, if all securities remain subject to the lock-up
restriction set forth above for the remainder of the time
period.
Determination of Offering Price
The assumed public offering price per Unit we are
offering is $2.25. The assumed conversion price per share of the
Series A Preferred Stock is $2.25, and the assumed exercise price
per share of the warrants is $2.25. The public
offering price of the securities offered by this
prospectus, the conversion price
and other terms of the Series A Preferred Stock and the exercise
price and other terms of the warrants were determined by
negotiation between us and the underwriter based on the trading of
our common stock prior to the offering, among other factors,
including:
|
|
●
|
|
our
history and our prospects;
|
|
|
●
|
|
the
industry in which we operate;
|
|
|
●
|
|
our
past and present operating results;
|
|
|
●
|
|
the
previous experience of our executive officers; and
|
|
|
●
|
|
the
general condition of the securities markets at the time of this
offering.
|
The offering price
stated on the cover page of this prospectus should not be
considered an indication of the actual value of the securities sold
in this offering. That price is subject to change as a result of
market conditions and other factors and we cannot assure you that
the securities sold in this offering can be resold at or above the
public offering price.
Lock-up Agreements
Our
officers, directors, each of their respective affiliates and
associated partners, and certain existing shareholders have agreed
with the underwriter to be subject to a lock-up period of 90 days
following the date of this prospectus. This means that, during the
applicable lock-up period, such persons may not offer for sale,
contract to sell, sell, distribute, grant any option, right or
warrant to purchase, pledge, hypothecate or otherwise dispose of,
directly or indirectly, any shares of our common stock or any
securities convertible into, or exercisable or exchangeable for,
shares of our common stock. Certain limited transfers are permitted
during the lock-up period if the transferee agrees to these lock-up
restrictions. We have also agreed, in the underwriting agreement,
to similar lock-up restrictions on the issuance and sale of our
securities for 90 days following the closing of this offering,
although we will be permitted to issue stock options or stock
awards to directors, officers and employees under our existing
plans. The lock-up period is subject to an additional extension to
accommodate for our reports of financial results or material news
releases. The representative may, in its sole discretion and
without notice, waive the terms of any of these lock-up
agreements.
35
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is Issuer Direct
Corporation.
Stabilization, Short Positions and Penalty Bids
The
underwriter may engage in syndicate covering transactions
stabilizing transactions and penalty bids or purchases for the
purpose of pegging, fixing or maintaining the price of our common
stock;
●
Syndicate
covering
transactions involve purchases of securities in the open market
after the distribution has been completed in order to cover
syndicate short positions. Such a naked short position would be
closed out by buying securities in the open market. A naked short
position is more likely to be created if the underwriter is
concerned that there could be downward pressure on the price of the
securities in the open market after pricing that could adversely
affect investors who purchase in the offering.
●
Stabilizing
transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specific
maximum.
●
Penalty
bids permit the underwriter to reclaim a selling concession from a
syndicate member when the securities originally sold by the
syndicate member are purchased in a stabilizing or syndicate
covering transaction to cover syndicate short
positions.
These
syndicate covering transactions, stabilizing transactions, and
penalty bids may have the effect of raising or maintaining the
market prices of our securities or preventing or retarding a
decline in the market prices of our securities. As a result the
price of our common stock may be higher than the price that might
otherwise exist in the open market. Neither we nor the underwriter
makes any representation or prediction as to the effect that the
transactions described above may have on the price of our common
stock. These transactions may be effected on the Nasdaq Capital
Market, in the over-the-counter market or on any other trading
market and, if commenced, may be discontinued at any
time.
In
connection with this offering, the underwriter also may engage in
passive market making transactions in our common stock in
accordance with Regulation M during a period before the
commencement of offers or sales of hares of our common stock in
this offering and extending through the completion of the
distribution. In general, a passive market maker must display its
bid at a price not in excess of the highest independent bid for
that security.
However,
if all independent bids are lowered below the passive market
maker’s bid that bid must
then be lowered when specific purchase limits are exceeded. Passive
market making may stabilize the market price of the securities at a
level above that which might otherwise prevail in the open market
and, if commenced, may be discontinued at any time.
Neither
we, nor the underwriter makes any representation or prediction as
to the direction or magnitude of any effect that the transactions
described above may have on the prices of our securities. In
addition, neither we nor the underwriter make any representation
that the underwriter will engage in these transactions or that any
transactions, once commenced will not be discontinued without
notice.
Indemnification
We have
agreed to indemnify the underwriter against certain liabilities,
including certain liabilities arising under the Securities Act or
to contribute to payments that the underwriter may be required to
make for these liabilities.
36
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following discussion is a summary of the material U.S. federal
income tax consequences of the purchase, ownership and disposition
of the shares of common stock, Series A Preferred Stock or warrants
or components thereof, which we refer to collectively as the
Securities, issued pursuant to this offering, but does not purport
to be a complete analysis of all potential tax effects. The effects
of other U.S. federal tax laws, such as estate and gift tax laws,
and any applicable state, local or non-U.S. tax laws are not
discussed. This discussion is based on the U.S. Internal Revenue
Code of 1986, as amended, or the Code, Treasury Regulations
promulgated thereunder, judicial decisions, and published rulings
and administrative pronouncements of the U.S. Internal Revenue
Service (the “IRS”), in each case in effect as of the
date hereof. These authorities may change or be subject to
differing interpretations. Any such change or differing
interpretation may be applied retroactively in a manner that could
adversely affect a holder of the Securities. We have not sought and
will not seek any rulings from the IRS regarding the matters
discussed below. There can be no assurance the IRS or a court will
not take a contrary position to that discussed below regarding the
tax consequences of the purchase, ownership and disposition of the
Securities.
This
discussion is limited to holders that hold the Securities as a
“capital asset” within the meaning of Section 1221
of the Code (generally, property held for investment). This
discussion does not address all U.S. federal income tax
consequences relevant to a holder’s particular circumstances,
including the impact of the Medicare contribution tax on net
investment income. In addition, it does not address consequences
relevant to holders subject to special rules, including, without
limitation:
●
U.S.
expatriates and
former citizens or long-term residents of the United
States;
●
persons
subject to the alternative minimum tax;
●
persons
holding the Securities as part of a hedge, straddle or other risk
reduction strategy or as part of a conversion transaction or other
integrated investment;
●
banks,
insurance companies, and other financial institutions;
●
brokers, dealers or
traders in securities;
●
real
estate investment trusts or regulated investment
companies;
●
“controlled
foreign corporations,” “passive foreign investment
companies,” and corporations that accumulate earnings to
avoid U.S. federal income tax;
●
partnerships or
other entities or arrangements treated as partnerships for U.S.
federal income tax purposes (and investors therein);
●
tax-exempt
organizations or governmental organizations;
●
persons
deemed to sell the Securities under the constructive sale
provisions of the Code;
●
persons
for whom our common stock constitutes “qualified small
business stock” within the meaning of Section 1202 of the
Code;
●
persons
who hold or receive the Securities pursuant to the exercise of any
employee stock option or otherwise as compensation;
and
●
tax-qualified
retirement plans.
If an
entity or arrangement treated as a partnership for U.S. federal
income tax purposes holds the Securities, the tax treatment of a
partner in the partnership will depend on the status of the
partner, the activities of the partnership and certain
determinations made at the partner level. Accordingly, partnerships
holding the Securities and the partners in such partnerships should
consult their tax advisors regarding the U.S. federal income tax
consequences to them.
37
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX
ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE SECURITIES ARISING UNDER
THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY
STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY
APPLICABLE INCOME TAX TREATY.
Each
share of common stock and accompanying warrant or share of Series A
Preferred Stock and accompanying warrant will be treated for U.S.
federal income tax purposes as an investment unit consisting of one
share of our common stock and a warrant to purchase one share of
our common stock, or consisting of one share of our Series A
Preferred Stock and a warrant to purchase one share of our common
stock. In determining their tax basis for the common stock or
Series A Preferred Stock, as applicable, and the warrant
constituting a unit, holders of Securities should allocate their
purchase price for the unit between the common stock or Series A
Preferred Stock, as applicable, and the warrant on the basis of
their relative fair market values at the time of issuance. The
Company does not intend to advise holders of the Securities with
respect to this determination, and holders of the Securities are
advised to consult their tax and financial advisors with respect to
the relative fair market values of the common stock and the
warrants for U.S. federal income tax purposes.
Tax Considerations Applicable to U.S. Holders
Definition of a U.S. Holder
For
purposes of this discussion, a “U.S. Holder” is any
beneficial owner of the Securities that, for U.S. federal income
tax purposes, is:
●
an
individual who is a citizen or resident of the United
States;
●
a
corporation (or other entity treated as a corporation for U.S.
federal income tax purposes) created or organized under the laws of
the United States, any state thereof, or the District of
Columbia;
●
an
estate, the income of which is subject to U.S. federal income tax
regardless of its source; or
●
a trust
that (1) is subject to the primary supervision of a U.S. court and
the control of one or more United States persons (within the
meaning of Section 7701(a)(30) of the Code), or (2) has made a
valid election under applicable Treasury Regulations to continue to
be treated as a United States person.
Distributions on Common Stock or Series A Preferred
Stock
As
described in the section entitled “Dividend Policy,” we
do not anticipate declaring or paying dividends to holders of our
common stock in the foreseeable future. However, if we do make
distributions on our common stock or Series A Preferred Stock
(including constructive distributions as described below under the
heading “—Certain Adjustments to the Warrants or Series
A Preferred Stock”), such distributions of cash or property
will constitute dividends to the extent paid out of our current or
accumulated earnings and profits, as determined for U.S. federal
income tax purposes. Dividends received by a corporate U.S. Holder
may be eligible for a dividends received deduction, subject to
applicable limitations. Dividends received by certain non-corporate
U.S. Holders, including individuals, are generally taxed at the
lower applicable capital gains rate provided certain holding period
and other requirements are satisfied. Distributions in excess of
our current and accumulated earnings and profits will constitute a
return of capital and first be applied against and reduce a U.S.
Holder’s adjusted tax basis in its common stock or Series A
Preferred Stock, but not below zero. Any excess will be treated as
capital gain and will be treated as described below in the section
entitled “—Sale, Exchange or Other Taxable Disposition
of Common Stock or Series A Preferred Stock.”
Cash
distributions paid on the warrants, on an
“as-converted” basis, if any, are subject to
substantially the same tax consequences as described in the
preceding paragraph for common stock and Series A Preferred Stock;
however, distributions received in respect of a warrant may not
qualify for the lower tax rates applicable to qualified dividend
income. U.S. Holders should consult their own tax advisors
regarding the property treatment of any distributions paid on the
warrants
38
Sale, Exchange or Other Taxable Disposition of Common Stock or
Series A Preferred Stock
Upon
the sale, exchange or other taxable disposition of the common stock
or Series A Preferred Stock, a U.S. Holder generally will recognize
capital gain or loss equal to the difference between (i) the
amount of cash and the fair market value of any property received
upon the sale, exchange or other taxable disposition and
(ii) such U.S. Holder’s adjusted tax basis in such
shares of common stock or Series A Preferred Stock sold or
otherwise disposed of. Such capital gain or loss will be long-term
capital gain or loss if the U.S. Holder’s holding period in
such shares of common stock or Series A Preferred Stock is more
than one year at the time of the sale, exchange or other taxable
disposition. Long-term capital gains recognized by certain
non-corporate U.S. Holders, including individuals, generally will
be subject to reduced rates of U.S. federal income tax. The
deductibility of capital losses is subject to certain
limitations.
Sale or Other Disposition, Exercise or Expiration of
Warrants
Upon
the sale or other disposition of a warrant (other than by
exercise), a U.S. Holder will generally recognize capital gain or
loss equal to the difference between the amount realized on the
sale or other disposition and the U.S. Holder’s tax basis in
the warrant. This capital gain or loss will be long-term capital
gain or loss if the U.S. Holder’s holding period in such
warrant is more than one year at the time of the sale or other
disposition. The deductibility of capital losses is subject to
certain limitations.
In
general, a U.S. Holder will not be required to recognize income,
gain or loss upon exercise of a warrant for its exercise price. A
U.S. Holder’s tax basis in a share of common stock received
upon exercise of warrants will be equal to the sum of (i) the
U.S. Holder’s tax basis in the warrants exchanged therefor
and (ii) the exercise price of such warrants. A U.S.
Holder’s holding period in the shares of common stock
received upon exercise will commence on the day after such U.S.
Holder exercises the warrants. Although there is no direct legal
authority as to the U.S. federal income tax treatment of an
exercise of a warrant on a cashless basis, we intend to take the
position that such exercise will not be taxable, either because the
exercise is not a gain realization event or because it qualifies as
a tax-free recapitalization. In the former case, the holding period
of the shares of common stock received upon exercise of warrants
should commence on the day after the warrants are exercised. In the
latter case, the holding period of the shares of common stock
received upon exercise of warrants would include the holding period
of the exercised warrants. However, our position is not binding on
the IRS and the IRS may treat a cashless exercise of a warrant as a
taxable exchange. U.S. Holders are urged to consult their tax
advisors as to the consequences of an exercise of a warrant on a
cashless basis, including with respect to their holding period and
tax basis in the common stock received.
If a
warrant expires without being exercised, a U.S. Holder will
recognize a capital loss in an amount equal to such holder’s
tax basis in the warrant. Such loss will be long-term capital loss
if, at the time of the expiration, the U.S. Holder’s holding
period in such warrant is more than one year. The deductibility of
capital losses is subject to certain limitations.
Conversion of Series A Preferred Stock
A U.S.
Holder generally will not recognize gain or loss upon the
conversion of a share of Series A Preferred Stock into common
stock. A U.S. Holder’s initial tax basis in the shares of our
common stock received upon the conversion of a share of Series A
Preferred Stock will be equal to such U.S. Holder’s tax basis
in the share of Series A Preferred Stock. A U.S. Holder’s
holding period for the shares of our common stock received upon the
conversion of a share of Series A Preferred Stock will include the
U.S. Holder’s holding period in such share of Series A
Preferred Stock.
Certain Adjustments to the Warrants or Series A Preferred
Stock
As
described in the section entitled “Dividend Policy,” we
do not anticipate declaring or paying dividends to holders of our
common stock in the foreseeable future. However, an adjustment to
the number of shares of our common stock that will be issued upon
the exercise of a warrant or conversion of a share of Series A
Preferred Stock, or an adjustment to the exercise price of a
warrant, may be treated as a constructive distribution to a U.S.
Holder of the warrant or share depending on the circumstances of
such adjustment. Adjustments to the exercise price of warrants or
conversion price of Series A Preferred Stock made pursuant to a
bona fide reasonable adjustment formula that has the effect of
preventing dilution of the interest of the holders thereof
generally should not be considered to result in a constructive
distribution. However, an adjustment made to compensate for a
distribution of cash or other property to our stockholders will
generally not be considered to be made pursuant to a bona fide
adjustment formula and therefore may result in a constructive
distribution. Any such constructive distribution would be taxable
whether or not there is an actual distribution of cash or other
property. See the more detailed discussion of the rules applicable
to distributions made by us under the heading
“—Distributions on Common Stock or Series A Preferred
Stock.”
39
Information Reporting and Backup Withholding
A U.S.
Holder may be subject to information reporting and backup
withholding when such holder receives payments on the common stock
or warrants (including constructive dividends) or receives proceeds
from the sale or other taxable disposition of common stock or
warrants. Certain U.S. Holders are exempt from backup withholding,
including corporations and certain tax-exempt organizations. A U.S.
Holder will be subject to backup withholding if such holder is not
otherwise exempt and such holder:
●
fails
to furnish the holder’s taxpayer identification number, which
for an individual is ordinarily his or her social security
number;
●
furnishes an
incorrect taxpayer identification number;
●
is
notified by the IRS that the holder previously failed to properly
report payments of interest or dividends; or
●
fails
to certify under penalties of perjury that the holder has furnished
a correct taxpayer identification number and that the IRS has not
notified the holder that the holder is subject to backup
withholding.
Backup
withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be allowed as a refund or a credit
against a U.S. Holder’s U.S. federal income tax liability,
provided the required information is timely furnished to the IRS.
U.S. Holders should consult their tax advisors regarding their
qualification for an exemption from backup withholding and the
procedures for obtaining such an exemption.
Tax Considerations Applicable to Non-U.S. Holders
Definition of a Non-U.S. Holder
For
purposes of this discussion, a “Non-U.S. Holder” is any
Holder who is neither an entity treated as a partnership for U.S.
federal income tax purposes, nor a U.S. Holder.
Distributions
As
described in the section entitled “Dividend Policy,” we
do not anticipate declaring or paying dividends to holders of our
common stock in the foreseeable future. However, if we do make
distributions of cash or property on our common stock or Series A
Preferred Stock (including constructive distributions as described
above under the heading “—Certain Adjustments to the
Warrants or Series A Preferred Stock”), such distributions
will constitute dividends for U.S. federal income tax purposes to
the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax
principles.
Amounts
not treated as dividends for U.S. federal income tax purposes will
constitute a return of capital and first be applied against and
reduce a Non-U.S. Holder’s adjusted tax basis in its common
stock or Series A Preferred Stock, but not below zero. Any excess
will be treated as capital gain and will be treated as described
below under “Tax Considerations Applicable to Non-U.S.
Holders—Sale or Other Taxable Disposition of common stock or
Series A Preferred Stock.”
Subject
to the discussion below on effectively connected income, dividends
paid to a Non-U.S. Holder of our common stock or Series A Preferred
Stock will be subject to U.S. federal withholding tax at a rate of
30% of the gross amount of the dividends (or such lower rate
specified by an applicable income tax treaty, provided the Non-U.S.
Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other
applicable documentation) certifying qualification for the lower
treaty rate). A Non-U.S. Holder that does not timely furnish the
required documentation, but that qualifies for a reduced treaty
rate, may obtain a refund of any excess amounts withheld by timely
filing an appropriate claim for refund with the IRS. Non-U.S.
Holders should consult their tax advisors regarding their
entitlement to benefits under any applicable income tax
treaty.
If
dividends paid to a Non-U.S. Holder are effectively connected with
the Non-U.S. Holder’s conduct of a trade or business within
the United States (and, if required by an applicable income tax
treaty, the Non-U.S. Holder maintains a permanent establishment in
the United States to which such dividends are attributable), the
Non-U.S. Holder will be exempt from the U.S. federal withholding
tax described above. To claim the exemption, the Non-U.S. Holder
must furnish to the applicable withholding agent a valid IRS Form
W-8ECI, certifying that the dividends are effectively connected
with the Non-U.S. Holder’s conduct of a trade or business
within the United States.
40
Any
such effectively connected dividends will be subject to U.S.
federal income tax on a net income basis at the regular graduated
rates. A Non-U.S. Holder that is a corporation also may be subject
to a branch profits tax at a rate of 30% (or such lower rate
specified by an applicable income tax treaty) on such effectively
connected dividends, as adjusted for certain items. Non-U.S.
Holders should consult their tax advisors regarding any applicable
tax treaties that may provide for different rules.
Sale or Other Taxable Disposition of Common Stock or Series A
Preferred Stock
A
Non-U.S. Holder will not be subject to U.S. federal income tax on
any gain realized upon the sale or other taxable disposition of our
common stock or Series A Preferred Stock unless:
●
the
gain is effectively connected with the Non-U.S. Holder’s
conduct of a trade or business within the United States (and, if
required by an applicable income tax treaty, the Non-U.S. Holder
maintains a permanent establishment in the United States to which
such gain is attributable);
●
the
Non-U.S. Holder is a nonresident alien individual present in the
United States for 183 days or more during the taxable year of the
disposition and certain other requirements are met; or
●
our
common stock constitutes a U.S. real property interest
(“USRPI”) by reason of our status as a U.S. real
property holding corporation (“USRPHC”) for U.S.
federal income tax purposes.
Gain
described in the first bullet point above generally will be subject
to U.S. federal income tax on a net income basis at the regular
graduated rates. A Non-U.S. Holder that is a corporation also may
be subject to a branch profits tax at a rate of 30% (or such lower
rate specified by an applicable income tax treaty) on such
effectively connected gain, as adjusted for certain
items.
Gain
described in the second bullet point above will be subject to U.S.
federal income tax at a rate of 30% (or such lower rate specified
by an applicable income tax treaty), which may be offset by U.S.
source capital losses of the Non-U.S. Holder (even though the
individual is not considered a resident of the United States),
provided the Non-U.S. Holder has timely filed U.S. federal income
tax returns with respect to such losses.
With
respect to the third bullet point above, we believe we currently
are not, and do not anticipate becoming, a USRPHC. Because the
determination of whether we are a USRPHC depends, however, on the
fair market value of our USRPIs relative to the fair market value
of our non-U.S. real property interests and our other business
assets, there can be no assurance we currently are not a USRPHC or
will not become one in the future. Even if we are or were to become
a USRPHC, (i) gain arising from the sale or other taxable
disposition by a Non-U.S. Holder of our common stock will not be
subject to U.S. federal income tax if our common stock is
“regularly traded,” as defined by applicable Treasury
Regulations, on an established securities market, and such Non-U.S.
Holder owned, actually and constructively, 5% or less of our common
stock throughout the shorter of the five-year period ending on the
date of the sale or other taxable disposition or the Non-U.S.
Holder’s holding period and (ii) gain arising from the sale
or other taxable disposition by a non-U.S. Holder of a warrant
generally will not be subject to U.S. federal income tax if our
common stock is “regularly traded,” as defined by
applicable Treasury Regulations, on an established securities
market, and on the non-U.S. Holder’s acquisition date for
such warrants, the warrants held by such non-U.S. Holder had a fair
market value equal to or less than the fair market value on that
date of 5% of our common stock.
Non-U.S.
Holders should consult their tax advisors regarding potentially
applicable income tax treaties that may provide for different
rules.
Exercise of Warrants
A
non-U.S. Holder generally will not be subject to U.S. federal
income tax on the exercise of warrants into shares of common stock.
However, if a cashless exercise of warrants results in a taxable
exchange, as described in “— Tax Considerations
Applicable to U.S. Holders—Sale or Other Disposition,
Exercise or Expiration of Warrants,” the rules described
under “— Tax Considerations Applicable to Non-U.S.
Holders—Sale or Other Taxable Disposition of Common Stock or
Series A Preferred Stock” would apply.
41
Certain Adjustments to the Warrants or Series A Preferred
Stock
As
described in the section entitled “Dividend Policy,” we
do not anticipate declaring or paying dividends to holders of our
common stock in the foreseeable future. However, an adjustment to
the number of shares of our common stock that will be issued upon
the exercise of a warrant or conversion of a share of Series A
Preferred Stock, or an adjustment to the exercise price of a
warrant, may be treated as a constructive distribution to a
non-U.S. Holder of the warrant or share depending on the
circumstances of such adjustment (for example, if such adjustment
is to compensate for a distribution of cash or other property to
our shareholders). Adjustments to the exercise price of warrants or
conversion price of Series A Preferred Stock made pursuant to a
bona fide reasonable adjustment formula that has the effect of
preventing dilution of the interest of the holders thereof
generally should not be considered to result in a constructive
distribution. Any such constructive distribution would be taxable
whether or not there is an actual distribution of cash or other
property. Any resulting withholding tax attributable to deemed
dividends may be collected from other amounts payable or
distributable to the non-U.S. Holder. Non-U.S. Holders should
consult their tax advisors regarding the proper treatment of any
adjustments to the warrants.
Information Reporting and Backup Withholding
Payments
of dividends on our common stock will not be subject to backup
withholding, provided the applicable withholding agent does not
have actual knowledge or reason to know the holder is a United
States person and the holder either certifies its non-U.S. status,
such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI,
or otherwise establishes an exemption. However, information returns
are required to be filed with the IRS in connection with any
dividends on our common stock paid to the Non-U.S. Holder,
regardless of whether any tax was actually withheld. In addition,
proceeds of the sale or other taxable disposition of our common
stock within the United States or conducted through certain
U.S.-related brokers generally will not be subject to backup
withholding or information reporting, if the applicable withholding
agent receives the certification described above and does not have
actual knowledge or reason to know that such holder is a United
States person, or the holder otherwise establishes an exemption.
Proceeds of a disposition of our common stock conducted through a
non-U.S. office of a non-U.S. broker generally will not be subject
to backup withholding or information reporting.
Copies
of information returns that are filed with the IRS may also be made
available under the provisions of an applicable treaty or agreement
to the tax authorities of the country in which the Non-U.S. Holder
resides or is established.
Backup
withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be allowed as a refund or a credit
against a Non-U.S. Holder’s U.S. federal income tax
liability, provided the required information is timely furnished to
the IRS.
Additional Withholding Tax on Payments Made to Foreign
Accounts
Withholding
taxes may be imposed under Sections 1471 to 1474 of the Code (such
Sections commonly referred to as the Foreign Account Tax Compliance
Act, or “FATCA”) on certain types of payments made to
non-U.S. financial institutions and certain other non-U.S.
entities. Specifically, a 30% withholding tax may be imposed on
dividends on, or gross proceeds from the sale or other disposition
of, our common stock paid to a “foreign financial
institution” or a “non-financial foreign entity”
(each as defined in the Code), unless (1) the foreign
financial institution undertakes certain diligence and reporting
obligations, (2) the non-financial foreign entity either
certifies it does not have any “substantial United States
owners” (as defined in the Code) or furnishes identifying
information regarding each substantial United States owner, or
(3) the foreign financial institution or non-financial foreign
entity otherwise qualifies for an exemption from these rules. If
the payee is a foreign financial institution and is subject to the
diligence and reporting requirements in (1) above, it must
enter into an agreement with the U.S. Department of the Treasury
requiring, among other things, that it undertake to identify
accounts held by certain “specified United States
persons” or “United States-owned foreign
entities” (each as defined in the Code), annually report
certain information about such accounts, and withhold 30% on
certain payments to non-compliant foreign financial institutions
and certain other account holders. Foreign financial institutions
located in jurisdictions that have an intergovernmental agreement
with the United States governing FATCA may be subject to different
rules.
42
Under
the applicable Treasury Regulations and administrative guidance,
withholding under FATCA generally applies to payments of dividends
on our common stock, and will apply to payments of gross proceeds
from the sale or other disposition of such stock on or after
January 1, 2019.
Prospective
investors should consult their tax advisors regarding the potential
application of withholding under FATCA to their investment in our
common stock.
LEGAL MATTERS
Smith,
Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.,
Raleigh, North Carolina, will issue a legal opinion as to the
validity of the securities offered by this prospectus. Ellenoff
Grossman & Schole LLP, New York, New York, is acting as counsel
for the underwriter in connection with certain legal matters in
connection with this offering.
EXPERTS
The
consolidated financial statements of Tenax Therapeutics, Inc. as of
December 31, 2017 and 2016, and for each of the years in the
two-year period ended December 31, 2017, included in our Annual
Report on Form 10-K, have been incorporated by reference herein in
reliance upon the report of Cherry Bekaert LLP, independent
registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have
filed a registration statement on Form S-1 with the SEC under the
Securities Act. This prospectus is part of the registration
statement but the registration statement includes additional
information and exhibits. Statements contained in this prospectus
as to the contents of any contract or any other document referred
to are not necessarily complete, and in each instance, we refer you
to the copy of the contract or other document filed as an exhibit
to the registration statement. Each of these statements is
qualified in all respects by this reference. The SEC maintains a
web site that contains reports, proxy and information statements
and other information regarding companies, such as ours, that file
documents electronically with the SEC. The website address is
www.sec.gov. The information on the SEC’s website is not part of this
prospectus, and any references to this website or any other website
are inactive textual references only.
Our
Internet address is www.tenaxthera.com.
There we make available free of charge, on or through the investor
relations section of our website, annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed pursuant to Section 13(a) or
15(d) of the Exchange Act as soon as reasonably practicable after
we electronically file such material with the SEC. The
information found on our website is not part of this prospectus and
investors should not rely on any such information in deciding
whether to invest.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” in this
prospectus the information we file with the SEC, which means that
we can disclose important information to you by referring you to
those documents. The following documents filed with the SEC are
hereby incorporated by reference in this prospectus:
(a)
Our Annual Report
on Form 10-K for the fiscal year ended December 31, 2017, filed
with the SEC on April 2, 2018;
43
(b)
Our Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2018,
filed with the SEC on May 15, 2018, our Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2018, filed with the
SEC on August 14, 2018, and our Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2018, filed with the SEC
on November 14, 2018; and
(c)
Our Current Reports
on Form 8-K filed with the SEC on February 15, 2018, February 23,
2018, March 14, 2018. June 5, 2018 and June 13, 2018.
In
addition, all documents subsequently filed by Tenax Therapeutics
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act, including those made after the date of filing of the initial
registration statement and prior to effectiveness of the
registration statement, until we file a post-effective amendment
which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this prospectus and to be a part
hereof from the date of filing of such documents.
However, any documents or portions thereof, whether specifically
listed above or filed in the future, that are not deemed
“filed” with the SEC, including without limitation any
information furnished pursuant to Item 2.02 or 7.01 of Form 8-K or
certain exhibits furnished pursuant to Item 9.01 of Form 8-K, shall
not be deemed to be incorporated by reference in this
prospectus.
Any
statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to
be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a
part of this prospectus.
We will
furnish without charge to you, upon written or oral request, a copy
of any or all of the documents incorporated by reference herein,
other than exhibits to such documents that are not specifically
incorporated by reference therein. All requests should be sent to
the attention of Nancy Hecox, Vice President of Legal Affairs and
General Counsel, Tenax Therapeutics, Inc., ONE Copley Parkway,
Suite 490, Morrisville, North Carolina 27560 or made via telephone
at (919) 855-2100.
Copies
of the documents incorporated by reference may also be found on our
website at http://www.tenaxthera.com.
44
4,444,444 shares of Series A Convertible Preferred
Stock
(and 4,444,444 shares of Common Stock underlying the Series A
Convertible Preferred Stock)
Warrants to purchase up to 8,888,888 shares of Common
Stock
(and 8,888,888 shares of Common Stock issuable upon exercise of the
Warrants)
________________________________
PROSPECTUS
________________________________
Ladenburg Thalmann
, 2018
Part
II
Information Not Required in the Prospectus
Item 13.
Other Expenses of Issuance and Distribution
The
following table sets forth an itemization of the various estimated
expenses in connection with the issuance and distribution of the
securities being registered, all of which we will pay, in
connection with the issuance and distribution of the securities
being registered, other than the underwriting discounts and
commissions. All of the amounts shown are estimated except the SEC
registration fee and the FINRA filing fee.
|
SEC
registration fee
|
$3,636
|
|
FINRA
filing fee
|
1,700
|
|
Printing
expenses
|
10,000
|
|
Legal fees and
expenses
|
145,000
|
|
Accounting fees and
expenses
|
30,000
|
|
Miscellaneous
|
*
|
|
Total
|
$190,336
|
*To be
included by amendment.
Item 14.
Indemnification of Directors and Officers
Section
145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer,
employee or agent of the corporation and certain other persons
serving at the request of the corporation in related capacities
against amounts paid and expenses incurred in connection with an
action or proceeding to which he is or is threatened to be made a
party by reason of such position, if such person shall have acted
in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, in any
criminal proceeding, if such person had no reasonable cause to
believe his conduct was unlawful; provided that, in the case of
actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to
which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the adjudicating
court determines that such indemnification is proper under the
circumstances.
Our
Certificate of Incorporation and Bylaws provide that our directors
and officers will be indemnified by us to the fullest extent
authorized by Delaware General Corporation Law. In addition, the
Certificate of Incorporation provides, as permitted by Section
102(b)(7) of the Delaware General Corporation Law, that our
directors will not be liable for monetary damages to us for
breaches of their fiduciary duty as directors, unless they (i)
violated their duty of loyalty to us or our stockholders, (ii)
acted, or failed to act, in good faith, (iii) acted with
intentional misconduct, (iv) knowingly or intentionally violated
the law, (v) authorized unlawful payments of dividends, unlawful
stock purchases or unlawful redemptions, or (vi) derived an
improper personal benefit from their actions as
directors.
Our
Bylaws also permit us to secure insurance on behalf of any officer,
director or employee for any liability arising out of his or her
actions, regardless of whether Delaware General Corporation Law
would permit indemnification. We have purchased a policy of
directors’ and officers’ liability insurance that
insures our directors and officers.
In
addition, we have also entered into an indemnification agreement
with certain of our directors and officers. The indemnification
agreements require us to indemnify and hold harmless and advance
expenses to each indemnitee with regards to acts or omissions
occurring prior to the time the indemnitee ceases to be an officer
and/or director of the Company to the fullest extent provided under
our Certificate of Incorporation in effect as of the date of the
agreement or to such greater extent as provided in any amendment to
our Certificate of Incorporation and to the fullest extent
permitted by applicable law in effect as of the date of the
agreement or to such greater extent as applicable law may
subsequently permit. The rights provided in the indemnification
agreements are in addition to the rights provided in our
Certificate of Incorporation, Bylaws, and the Delaware General
Corporation Law.
II-1
The
limitations of liability and indemnification provisions in our
Certificate of Incorporation and Bylaws may discourage stockholders
from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against directors
and officers, even though such an action, if successful, might
otherwise benefit our stockholders and us. In addition, your
investment may be adversely affected to the extent we pay the costs
of settlement and damage awards against directors and officers
pursuant to these indemnification provisions. We believe that these
provisions, the insurance and the indemnity agreements are
necessary to attract and retain talented and experienced directors
and officers.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been
advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
Item 16.
Exhibits
The
following exhibits have been or are being filed herewith and are
numbered in accordance with Item 601 of Regulation
S-K:
|
Exhibit No.
|
|
Description
|
|
1.1
|
|
Form of
Underwriting Agreement (44)
|
|
|
|
|
|
|
Agreement
and Plan of Merger dated April 28, 2008 (1)
|
|
|
|
|
|
|
|
Asset
Purchase Agreement by and between Oxygen Biotherapeutics, Inc.,
Life Newco, Inc., Phyxius Pharma, Inc., and the stockholders of
Phyxius Pharma, Inc. dated October 21, 2013 (31)
|
|
|
|
|
|
|
|
Certificate
of Incorporation (1)
|
|
|
|
|
|
|
|
Certificate
of Amendment of the Certificate of Incorporation (12)
|
|
|
|
|
|
|
|
Certificate
of Amendment of the Certificate of Incorporation (28)
|
|
|
|
|
|
|
|
Certificate
of Amendment of the Certificate of Incorporation (35)
|
|
|
|
|
|
|
|
Certificate
of Amendment of the Certificate of Incorporation (41)
|
|
|
|
|
|
|
|
Third
Amended and Restated Bylaws (37)
|
|
|
|
|
|
|
|
Specimen
Stock Certificate (17)
|
|
|
|
|
|
|
4.2
|
|
Form of
Series A Preferred Stock Certificate (44)
|
|
|
|
|
|
|
Form of
Certificate of Designation for Series A Preferred
Stock*
|
|
|
|
|
|
|
|
Form of
Warrant to Purchase Shares of Common
Stock*
|
|
|
|
|
|
|
4.5
|
|
Form of Representative’s Warrant to Purchase Shares of Common
Stock (44)
|
|
|
|
|
|
5.1
|
|
Opinion
of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P
(44)
|
|
|
|
|
|
|
Agreement
with Leland C. Clark, Jr., Ph.D. dated November 20, 1992 with
amendments, Assignment of Intellectual Property/ Employment
(2)
|
|
|
|
|
|
II-2
|
|
Agreement
between the Registrant and Keith R. Watson, Ph.D. Assignment of
Invention (2)
|
|
|
|
|
|
|
|
Children’s
Hospital Research Foundation License Agreement dated February 28,
2001 (2)
|
|
|
|
|
|
|
|
Form of
Option issued to Executive Officers and Directors (2)
+
|
|
|
|
|
|
|
|
Form of
Option issued to Employees (2) +
|
|
|
|
|
|
|
|
Form of
Option Agreement with Form of Notice of Grant (43) +
|
|
|
|
|
|
|
|
Form of
Inducement Stock Option Award (38) +
|
|
|
|
|
|
|
|
Restricted
Stock Award Agreement (20) +
|
|
|
|
|
|
|
|
Form of
Warrant issued to Unsecured Note Holders 2006-2007 (3)
|
|
|
|
|
|
|
|
Form of
Convertible Note – 2008 (4)
|
|
|
|
|
|
|
|
Form of
Warrant issued to Convertible Note Holders (4)
|
|
|
|
|
|
|
|
Form of
Purchase Agreement – US Purchase (without exhibits, which are
included as exhibits 10.16 and 10.17, above) (4)
|
|
|
|
|
|
|
|
Form of
Purchase Agreement – Non-US Purchase (without exhibits, which
are included as exhibits 10.16 and 10.17, above) (4)
|
|
|
|
|
|
|
|
Form of
Purchase Agreement – US Note Exchange (without exhibits,
which are included as exhibits 10.16 and 10.17, above)
(4)
|
|
|
|
|
|
|
|
Form of
Purchase Agreement – Non-US Note Exchange (without exhibits,
which are included as exhibits 10.16 and 10.17, above)
(4)
|
|
|
|
|
|
|
|
Form of
Warrant issued to Financing Consultants (5)
|
|
|
|
|
|
|
|
1999
Amended Stock Plan (amended 2008) (5) +
|
|
|
|
|
|
|
|
Amendment
No. 1 to Oxygen Biotherapeutics, Inc. 1999 Amended Stock Plan (36)
+
|
|
|
|
|
|
|
|
Amendment
No. 2 to Oxygen Biotherapeutics, Inc. 1999 Amended Stock Plan (36)
+
|
|
|
|
|
|
|
|
2016
Stock Incentive Plan (39) +
|
|
|
|
|
|
|
|
Employment
Agreement with John Kelley dated November 13, 2013 (32)
+
|
|
|
|
|
|
II-3
|
|
First
Amendment to Employment Agreement with John Kelley dated June 18,
2015 (34) +
|
|
|
|
|
|
|
|
Amended
and Restated Employment Agreement with Michael B. Jebsen dated May
19, 2011 (18) +
|
|
|
|
|
|
|
|
Second
Amended and Restated Employment Agreement with Michael Jebsen dated
November 13, 2013 (32) +
|
|
|
|
|
|
|
|
First
Amendment to Second Amended and Restated Employment Agreement with
Michael Jebsen dated June 18, 2015 (34) +
|
|
|
|
|
|
|
|
Separation
and General Release Agreement dated April 7, 2017 between Tenax
Therapeutics, Inc. and John Kelley (42) +
|
|
|
|
|
|
|
|
Form of
Indemnification Agreement (18) +
|
|
|
|
|
|
|
|
Description
of Non-Employee Director Compensation (23) +
|
|
|
|
|
|
|
|
Description
of Non-Employee Director Compensation, effective June 15, 2015 (37)
+
|
|
|
|
|
|
|
|
Securities
Purchase Agreement (including exhibits) between Oxygen
Biotherapeutics and Vatea Fund, Segregated Portfolio dated June 8,
2009 (6)
|
|
|
|
|
|
|
|
Amendment
no. 1 to the Securities Purchase Agreement between Oxygen
Biotherapeutics and Vatea Fund, Segregated Portfolio
(9)
|
|
|
|
|
|
|
|
Amendment
no. 2 to the Securities Purchase Agreement between Oxygen
Biotherapeutics and Vatea Fund, Segregated Portfolio
(10)
|
|
|
|
|
|
|
|
Amendment
no. 3 to the Securities Purchase Agreement between Oxygen
Biotherapeutics and Vatea Fund, Segregated Portfolio
(21)
|
|
|
|
|
|
|
|
Form of
Exchange Agreement dated July 20, 2009 (7)
|
|
|
|
|
|
|
|
Waiver—Convertible
Note (8)
|
|
|
|
|
|
|
|
Amendment—Common
Stock Purchase Warrant (8)
|
|
|
|
|
|
|
|
Form of
Warrant for May 2010 offering (11)
|
|
|
|
|
|
|
|
Form of
Subscription Agreement for May 2010 offering (11)
|
|
|
|
|
|
|
|
Warrant
issued to Blaise Group International, Inc. (12)
|
|
|
|
|
|
|
|
Note
Purchase Agreement between Oxygen Biotherapeutics and JP SPC 1
Vatea, Segregated Portfolio (13)
|
|
|
|
|
|
|
|
Form of
Promissory Note under Note Purchase Agreement between Oxygen
Biotherapeutics and JP SPC 1 Vatea, Segregated Portfolio
(13)
|
|
|
|
|
|
II-4
|
|
First
Amendment to Note Purchase Agreement between Oxygen Biotherapeutics
and JP SPC 1 Vatea, Segregated Portfolio (15)
|
|
|
|
|
|
|
|
Lease
Agreement for North Carolina corporate office (16)
|
|
|
|
|
|
|
|
Task
Order between the Company and NextPharma, dated November 15, 2011
(21)
|
|
|
|
|
|
|
10.45
|
|
Form of
Convertible Note for July 2011 offering (included in exhibit
10.47)
|
|
|
|
|
|
10.46
|
|
Form of
Warrant for July 2011 offering (included in exhibit
10.47)
|
|
|
|
|
|
|
Form of
Convertible Note and Warrant Purchase Agreement for July 2011
offering (19)
|
|
|
|
|
|
|
|
Placement
Agency Agreement, dated December 8, 2011, between Oxygen
Biotherapeutics, Inc. and William Blair & Company, L.L.C., as
placement agent (22)
|
|
|
|
|
|
|
|
Form of
Warrant for December 2011 offering (22)
|
|
|
|
|
|
|
|
Form of
Securities Purchase Agreement for December 2011 offering
(22)
|
|
|
|
|
|
|
|
Form of
Amendment Agreement for December 2011 offering (24)
|
|
|
|
|
|
|
|
Form of
Lock-up Agreement for December 2011 offering (22)
|
|
|
|
|
|
|
|
Form of
Amendment Agreement for December 2011 offering (25)
|
|
|
|
|
|
|
|
Fluoromed
Supply Agreement (26)
|
|
|
|
|
|
|
|
Form of
Warrant for February 2013 offering (27)
|
|
|
|
|
|
|
|
Placement
Agency Agreement, dated February 22, 2013, between Oxygen
Biotherapeutics, Inc. and Ladenburg Thalmann & Co. Inc., as
placement agent (27)
|
|
|
|
|
|
|
|
Form of
Securities Purchase Agreement for February 2013 offering
(27)
|
|
|
|
|
|
|
|
Form of
Registration Rights Agreement for February 2013 offering
(27)
|
|
|
|
|
|
|
|
Form of
Warrant Exchange Agreement, dated February 21, 2013, between Oxygen
Biotherapeutics, Inc. and certain institutional investors party to
the Securities Purchase Agreement for December 2011 Offering
(27)
|
|
|
|
|
|
|
|
License
and Supply Agreement dated February 5, 2013, between Oxygen
Biotherapeutics, Inc. and Valor SA (36)
|
|
|
|
|
|
|
|
Settlement
Agreement, dated March 14, 2013, among Oxygen Biotherapeutics,
Inc., Tenor Opportunity Master Fund Ltd., Aria Opportunity Fund,
Ltd., and Parsoon Opportunity Fund, Ltd. (36)
|
|
|
|
|
|
|
|
Form of
Warrant for Series C 8% Convertible Preferred Stock Offering
(29)
|
|
|
|
|
|
|
|
Placement
Agency Agreement, dated July 21, 2013, between Oxygen
Biotherapeutics, Inc. and Ladenburg Thalmann & Co. Inc., as
placement agent (29)
|
|
|
|
|
|
II-5
|
|
Form of
Securities Purchase Agreement for Series C 8% Convertible Preferred
Stock Offering (29)
|
|
|
|
|
|
|
|
Lock-Up
Agreement, dated August 16, 2013, between Oxygen Biotherapeutics,
Inc. and JPS SPC 3 obo OXBT Fund, SP (30)
|
|
|
|
|
|
|
|
Warrant
for Series D 8% Convertible Preferred Stock Offering
(30)
|
|
|
|
|
|
|
|
Form of
February Warrant Amendment (30)
|
|
|
|
|
|
|
|
Form of
July Warrant Amendment (30)
|
|
|
|
|
|
|
|
Form of
Securities Purchase Agreement for Series D 8% Convertible Preferred
Stock Offering (31)
|
|
|
|
|
|
|
|
License
Agreement dated September 20, 2013 by and between Phyxius Pharma,
Inc. and Orion Corporation (33)
|
|
|
|
|
|
|
|
Amendment
to Common Stock Purchase Agreement (33)
|
|
|
|
|
|
|
|
Sales
Agreement dated as of February 23, 2015, between Tenax
Therapeutics, Inc. and Cowen and Company, LLC (38)
|
|
|
|
|
|
|
|
First
Amendment to Lease Agreement for North Carolina corporate office
(40)
|
|
|
|
|
|
|
21.1
|
|
Subsidiaries
of Tenax Therapeutics, Inc.(38)
|
|
|
|
|
|
|
Consent
of Independent Registered Public Accounting Firm*
|
|
|
|
|
|
|
23.2
|
|
Consent
of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P. (contained in Exhibit 5.1)
|
|
|
|
|
|
24.1
|
|
Power
of Attorney (contained in signature pages hereto)
|
(1)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on June 30, 2008, and are
incorporated herein by this reference.
(2)
These
documents were filed as exhibits to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on August 13, 2004, and
are incorporated herein by this reference.
(3)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on September 6, 2006, and
are incorporated herein by this reference.
(4)
These
documents were filed as exhibits to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on March 21, 2008,
and are incorporated herein by this reference.
(5)
These
documents were filed as exhibits to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on August 13, 2008, and
are incorporated herein by this reference.
(6)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on June 8, 2009, and is
incorporated herein by this reference.
(7)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on July 21, 2009, and is
incorporated herein by this reference.
(8)
These
documents were filed as exhibits to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on March 19, 2010,
and are incorporated herein by this reference.
(9)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on September 2, 2009, and
is incorporated herein by this reference.
(10)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on April 28, 2010, and are
incorporated herein by this reference.
(11)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on May 4, 2010, and are
incorporated herein by this reference.
(12)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on November 13, 2009, and
are incorporated herein by reference.
II-6
(13)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on October 13, 2010, and
are incorporated herein by this reference.
(14)
These
documents were filed as exhibits to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on December 9, 2010,
and are incorporated herein by this reference.
(15)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on December 30, 2010, and
is incorporated herein by this reference.
(16)
These
documents were filed as exhibits to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on March 21, 2011,
and are incorporated herein by this reference.
(17)
These
documents were filed as exhibits to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on July 23, 2010, and are
incorporated herein by this reference.
(18)
This
document was filed as an exhibit to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on July 15, 2011, and is
incorporated herein by this reference.
(19)
This document was filed as an exhibit to the
current report on Form 8-K/A filed by Tenax Therapeutics
with the SEC on July 1, 2011, and is
incorporated herein by this reference.
(20)
This
document was filed as an exhibit to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on December 15, 2011,
and is incorporated herein by this reference.
(21)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on November 16, 2011, and
are incorporated herein by this reference.
(22)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on December 9, 2011, and
are incorporated herein by this reference.
(23)
This
document was filed as an exhibit to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on March 15, 2012,
and is incorporated herein by this reference.
(24)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on June 15, 2012, and is
incorporated herein by this reference.
(25)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on June 15, 2012, and is
incorporated herein by reference.
(26)
These
documents were filed as exhibits to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on July 25, 2012, and are
incorporated herein by this reference.
(27)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on February 25, 2013, and
are incorporated herein by this reference.
(28)
This document was filed as an exhibit to the
current report on Form 8-K filed by Tenax Therapeutics
with the SEC on May 15, 2013, and is
incorporated herein by this reference.
(29)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on July 25, 2013, and are
incorporated herein by reference.
(30)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on August 26, 2013, and
are incorporated herein by reference.
(31)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on October 25, 2013, and
is incorporated herein by reference.
(32)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on November 19, 2013, and
are incorporated herein by reference
(33)
These
documents were filed as exhibits to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on March 17, 2014,
and are incorporated herein by this reference.
(34)
These
documents were filed as exhibits to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on June 19, 2015, and are
incorporated herein by reference.
(35)
This
document was filed as an exhibit to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on December 15, 2014,
and is incorporated herein by this reference.
(36)
These
documents were filed as exhibits to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on July 29, 2014, and are
incorporated herein by this reference.
(37)
These
documents were filed as exhibits to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on September 9, 2015,
and are incorporated herein by this reference.
(38)
These
documents were filed as exhibits to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on July 14, 2015, and are
incorporated herein by this reference.
(39)
This
document was filed as an exhibit to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on August 9, 2016,
and is incorporated herein by this reference.
(40)
This
document was filed as an exhibit to the transition report on Form
10-KT filed by Tenax Therapeutics with the SEC on March 14, 2016,
and is incorporated herein by this reference.
(41)
This
document was filed as an exhibit to the current report on Form 8-K
filed by Tenax Therapeutics with the SEC on February 23, 2018, and
is incorporated herein by this reference.
(42)
This
document was filed as an exhibit to the quarterly report on Form
10-Q filed by Tenax Therapeutics with the SEC on August 9, 2017,
and is incorporated herein by this reference.
(43)
This
document was filed as an exhibit to the annual report on Form 10-K
filed by Tenax Therapeutics with the SEC on March 16, 2017, and is
incorporated herein by this reference.
(44)
To be
filed by amendment or as an exhibit to a current report on Form 8-K
and incorporated herein by reference, if applicable.
*
Filed
herewith.
+
Management contract
or compensatory plan or arrangement.
II-7
Item 17.
Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
i. to
include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
ii. to
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the
effective registration statement; and
iii. to
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That,
for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That,
for the purpose of determining liability under the Securities Act
of 1933 to any purchaser in the initial distribution of the
securities: the undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser: (i) any preliminary prospectus or prospectus of
the undersigned registrant relating to the offering required to be
filed pursuant to Rule 424; (ii) any free writing prospectus
relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant; (iii) the portion of any other free writing prospectus
relating to the offering containing material information about the
undersigned registrant or its securities provided by or on behalf
of the undersigned registrant; and (iv) any other communication
that is an offer in the offering made by the undersigned registrant
to the purchaser.
(5) The
undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(6) Insofar
as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(7) the
undersigned registrant hereby undertakes that:
i. For
purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
ii. For
the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-8
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Morrisville, State of North
Carolina, on December 3,
2018.
|
|
TENAX THERAPEUTICS, INC.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Anthony DiTonno
|
|
|
|
|
Anthony DiTonno |
|
|
|
|
Chief Executive Officer |
|
POWER OF ATTORNEY
Pursuant to the
requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
Anthony DiTonno
|
|
Chief Executive Officer and Director
|
|
December
3, 2018
|
|
Anthony DiTonno
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Michael B. Jebsen
|
|
President and Chief Financial Officer
|
|
December
3, 2018
|
|
Michael B. Jebsen
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/
Michael B. Jebsen
|
|
Chairman and Director
|
|
December
3, 2018
|
|
Michael B. Jebsen
|
|
|
|
|
|
Attorney-in-fact
|
|
|
|
|
|
Ronald R. Blanck, DO
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Michael B. Jebsen
|
|
Director
|
|
December
3, 2018
|
|
Michael B. Jebsen
|
|
|
|
|
|
Attorney-in-fact
|
|
|
|
|
|
Gregory Pepin
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Michael B. Jebsen
|
|
Director
|
|
December
3, 2018
|
|
Michael B. Jebsen
|
|
|
|
|
|
Attorney-in-fact
|
|
|
|
|
|
James Mitchum
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Michael B. Jebsen
|
|
Director
|
|
December
3, 2018
|
|
Michael B. Jebsen
|
|
|
|
|
|
Attorney-in-fact
|
|
|
|
|
|
Chris A. Rallis
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Michael B. Jebsen
|
|
Director
|
|
December
3, 2018
|
|
Michael B.
Jebsen
|
|
|
|
|
|
Attorney-in-fact
|
|
|
|
|
|
Gerald Proehl
|
|
|
|
|