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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-29 · 123 added, 125 removed, 413 unchanged (38% of the section changed)

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Risks Related to Our Financial Position and Need for Additional Capital

Our independent registered public accounting firm auditors ’ report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern .

Our independent registered public accounting firm’s report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern .

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 consolidated financial statements included in this Annual Report on Form 10-K includes an explanatory paragraph indicating 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 consolidated financial statements included elsewhere in this Annual Report on Form 10-K includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to achieve sustainable revenues and profitable operations.

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.

Our consolidated financial statements included in this Annual Report on Form 10-K have been prepared assuming we will continue as a going concern and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern.

We have incurred losses since our inception, expect to continue to incur losses in the foreseeable future, and may never become profitable.

We have incurred losses since inception.

For the years ended December 31, 2021 and 2020, we incurred net operating losses of $32.7 million and $9.9 million, respectively.

As of December 31, 2021, we had an accumulated deficit of $278.5 million.

We have funded our operations since September 1990 principally through the issuance of debt and equity securities and loans from stockholders.

We will continue to incur losses until we generate sufficient revenue to offset our expenses, and we anticipate that we will continue to incur net losses for at least the next several years.

We expect to incur additional expenses related to our development and potential commercialization of levosimendan for pulmonary hypertension, imatinib for PAH, and other potential indications, as well as identifying and developing other potential product candidates, and as a result, we will need to generate significant net product sales, royalty and other revenues to achieve profitability.

We will require substantial additional funding for further development of our product candidates.

Failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development efforts and other operations.

Our consolidated financial statements for the fiscal year ended December 31, 2022 have been prepared assuming we will continue as a going concern and do not include any adjustments that might result from uncertainty about our ability to continue as a going concern.

We will require substantial additional funding to further develop our product candidates, including to complete Phase 3 testing of levosimendan in PH-HFpEF or to initiate or complete the imatinib Phase 3 trial.

Failure to obtain this necessary capital when needed on acceptable terms, or at all, or execute on alternative strategic paths, could force us to delay, limit, reduce or terminate our clinical trials, product development efforts and business operations.

Developing biopharmaceutical products, including conducting preclinical studies and clinical trials and establishing manufacturing and sales and marketing 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.

In addition, our expenses could increase beyond expectations if applicable regulatory authorities, including the FDA, require that we perform studies additional to those we currently anticipate, in which case the timing of any potential product approval may be delayed.

As of December 31, 2022, we had $2.1 million of cash and cash equivalents on hand.

We will need substantial additional capital in the future in order to complete the regulatory approval and commercialization of levosimendan and imatinib 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.

If adequate funds are not available, we may also be required to eliminate one or more of our clinical trials, delaying approval of levosimendan and imatinib 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.

We will need substantial additional capital in order to develop our product candidates, including to complete a Phase 3 trial, and to complete the regulatory approval process and commercialization of levosimendan, imatinib, or any future product candidates.

As a result, we continue to evaluate strategic alternatives, including pursuing additional 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 addition, to the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution;

debt financing, if available, may involve restrictive covenants.

To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates or to grant licenses on terms that may not be favorable to us.

We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

We may also consider strategic alternatives, including a sale of our company, merger, other business combination or recapitalization.

Our 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 number of investigator sites and patients who participate, the rate of enrollment and the potential impact the COVID-19 pandemic could have on the expected timelines for each of our clinical programs;

the number of investigator sites and patients who participate and the impact that factors such as the rate of patient recruitment, the standard deviation of treatment effect, and the number of patients who have events or withdraw from therapy have on the expected timelines and the eventual required number of patients enrolled for each of our clinical programs;

the costs and timing of regulatory approval;

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the costs of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval.

We also expect to continue our evaluation of additional strategic alternatives, including a sale of our Company, merger, other business combination or recapitalization.

In the event we are unable to obtain additional capital as needed or execute on other strategic alternatives, we may further delay, limit, reduce or terminate our current development efforts and business operations.

Our ongoing exploration of alternative strategic paths may not result in entering into or completing transactions, when necessary, and the process of reviewing alternative strategic paths or their conclusion could adversely affect our stock price.

We continue to evaluate strategic paths to provide the resources necessary to complete our product development and maximize stockholder value.

Potential strategic paths may include multiple capital raises, a sale of our Company, merger, one or more license agreements, a co-development agreement, a combination of these, or other strategic transactions.

There can be no assurance, however, that our evaluation will result in transactions or other alternatives, even when deemed necessary.

There is no set timetable for our strategic process and we do not intend to provide updates unless or until the Board of Directors approves a specific action or otherwise determines that disclosure is appropriate or necessary.

We have shifted the anticipated launch of the imatinib Phase 3 trial in PAH beyond 2023, and the initiation of that trial and continued development of our product candidates, including completion of a Phase 3 trial of levosimendan in PH-HFpEF, depend on the outcome of our ongoing strategic process.

There can be no assurance any transaction will result from the Company’s ongoing evaluation of strategic paths.

Any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us, obtaining stockholder approval and the availability of financing to third parties in a potential transaction with us on reasonable terms.

The process of reviewing alternative strategic paths may be time consuming and may involve the dedication of significant resources and may require us to incur significant costs and expenses.

It could negatively impact our ability to attract, retain and motivate employees, and expose us to potential litigation in connection with this process or any resulting transaction.

If we are unable to effectively manage the process, our financial condition and results of operations could be adversely affected.

In addition, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our Company could cause our stock price to fluctuate significantly.

Further, any alternative strategic paths that may be pursued and completed ultimately may not deliver the anticipated benefits or enhance stockholder value.

There can be no guarantee that the process of evaluating alternative strategic paths will result in our Company entering into or completing potential transactions within the anticipated timing or at all.

In the event we do not successfully complete a strategic transaction, should this be deemed necessary, our Board of Directors may decide to pursue a dissolution and liquidation of our Company.

In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no guarantee that the process to identify strategic transactions will result in successfully completed transactions when necessary.

If additional transactions are not completed that enable us to continue the development of our product candidates and sustain our business operations, our Board of Directors may decide that it is in the best interest of our stockholders to dissolve our Company and liquidate our assets.

In that event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation since the amount of cash available for distribution continues to decrease as we fund our operations and evaluate our strategic alternatives.

In addition, if our Board were to approve and recommend, and our stockholders were to approve, a dissolution of our Company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders.

As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations.

In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of our Company.

If a dissolution and liquidation were pursued, our Board, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve.

Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a dissolution, liquidation or winding up of our Company.

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.

On March 29, 2023, we received a notification letter from the Nasdaq Stock Market LLC (“Nasdaq”) indicating that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the minimum bid price of our common stock on the Nasdaq Capital Market closed below $1.00 per share for 30 consecutive business days.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a compliance period of 180 calendar days, or until September 25, 2023, to regain compliance with the Bid Price Rule.

If at any time before September 25, 2023, the bid price of the Company's common stock closes at $1.00 per share or more for a minimum of ten consecutive business days, Nasdaq will provide the Company with a written confirmation of compliance with the Bid Price Rule.

While we intend to engage in efforts to regain compliance, and thus maintain our listing, there can be no assurance that we will be successful or continue to meet all applicable Nasdaq Capital Market requirements in the future.

If our common stock were to be removed from listing with the Nasdaq Capital Market, it may be subject to the so-called “penny stock” rules.

The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange, which is the exception on which we currently rely.

For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions.

If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock on the secondary market.

If our common stock is delisted and there is no longer an active trading market for our shares, it may, among other things:

cause stockholders difficulty in selling our shares without depressing the market price for the shares or selling our shares at all;

substantially impair our ability to raise additional funds;

result in a loss of institutional investor interest and fewer financing opportunities for us;

result in potential breaches of representations or covenants of agreements pursuant to which we made representations or covenants relating to our compliance with applicable listing requirements.

Claims related to any such breaches, with or without merit, could result in costly litigation, significant liabilities and diversion of our management’s time and attention and could have a material adverse effect on our financial condition, business and results of operations.

A delisting would also reduce the value of our equity compensation plans, which could negatively impact our ability to retain employees.

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.

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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;

delays in the commencement, enrollment and completion of clinical testing, as well as the analysis and reporting of results from such clinical testing;

our ability to raise additional money to fund our operations for at least the next 12 months as a going concern;

our ongoing evaluation of strategic alternatives;

our ability to develop our current product candidates, and any product candidate which we may develop or in-license in the future;

delays in the commencement, recruitment and initiation of sites, enrollment of patients, 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;

the need to obtain regulatory approval of our product candidates;

potential risks related to any collaborations we may enter into for our product candidates;

the success of clinical trials of our product candidates;

any delays in regulatory review and approval of product candidates in development;

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our ability to maintain adequate insurance policies;

our dependency on third-party manufacturers and clinical research organizations, or CROs;

our dependency on third-party manufacturers and CROs;

our ability to establish or maintain collaborations, licensing or other arrangements;

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our ability to adequately support future growth;

our ability to attract and retain key personnel, including advisors and members of our Board of Directors;

volatility and uncertainty in the global economy and financial markets in light of the evolving COVID-19 pandemic and geopolitical uncertainties, including tensions in Ukraine.

our ability to attract and retain personnel, including our executive team, advisors and members of our Board of Directors;

volatility and uncertainty in the global economy and financial markets in light of the possibility of pandemics, global financial and geopolitical uncertainties, including the Russian invasion of and war against the country of Ukraine.

Due to the various factors mentioned above, and others, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance.

We have incurred losses since our inception, expect to continue to incur losses in the foreseeable future, and may never become profitable.

We have incurred losses since inception.

For the years ended December 31, 2022 and 2021, we incurred net operating losses of $11.0 million and $32.7 million, respectively.

We have funded our operations since September 1990 principally through the issuance of debt and equity securities and loans from stockholders.

We will continue to incur losses until we generate sufficient revenue to offset our expenses, and we anticipate that we will continue to incur net losses for at least the next several years.

We expect to incur additional expenses related to our development and potential commercialization of levosimendan for pulmonary hypertension and other potential indications,, imatinib for PAH, as well as identifying and developing other potential product candidates, and as a result, we will need to generate significant net product sales, royalty and other revenues to achieve profitability.

Risks Related to Our Business Strategy and Operations

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 PH-HFpEF and imatinib for the treatment of PAH, in addition to exploring strategic alternatives in order to maximize stockholder value.

At present, we intend to commit most of our resources to advancing our existing product candidates to the point they receive regulatory approval for the treatment of various pulmonary hypertension indications.

If as a consequence of the results of our planned Phase 3 trials, or the results of prior clinical trials performed using levosimendan or imatinib, we are unable to receive regulatory approval of one or both of our existing product candidates, then we may not have resources to pursue development of any other products and our business could terminate.

We have limited financial resources, so at present we are primarily focusing our resources on developing levosimendan for the treatment of PH-HFpEF, while imatinib for the treatment of PAH remains part of our portfolio.

We intend to commit most of our resources to advancing levosimendan to the point it receives regulatory approval for the treatment of pulmonary hypertension in patients with associated HFpEF.

Depending on the funds raised and timing of the funding, as well as on decisions made by USPTO, clinical trial results and other information revealed by competitors, and other factors, we will prioritize our funding and other resources.

Pending the outcome of our strategic process, if as a consequence of the results of our planned Phase 3 trials, or the results of prior clinical trials performed using levosimendan or imatinib, we are unable to receive regulatory approval of one or both of our existing product candidates, then we may not have resources to pursue development of any other products and our business could terminate.

A pandemic, epidemic, or outbreak of an infectious disease, such as COVID-19, or another coronavirus or similar disrupting illness, may materially and adversely affect our business and our financial results.

The spread of COVID-19, including variant strains, has affected segments of the global economy and may affect our operations, including the potential interruption of our clinical trial activities and our supply chain.

The continued spread of COVID-19 may result in a period of continued or recurring business disruption in these and other areas impacting our business, including the establishment of contractual relationships with investigators enrolling subjects in our clinical trials, the continuity of care provided by these institutions to the patients we seek to enroll and their ability to support industry-funded research as a means of caring for their patients, supply of these sites with study materials, and the enrolment of subjects and their adherence with study requirements.

In addition, there could be a potential effect of COVID-19 to the business at FDA or other health authorities, which could result in delays of reviews and approvals, including with respect to our product candidates.

The continued spread of COVID-19 globally could adversely affect our clinical trial operations in the United States and elsewhere, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography.

Further, some patients may be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services, or if the patients become infected with COVID-19 themselves, which would delay our ability to initiate and/or complete planned clinical and preclinical studies in the future.

COVID-19 may also affect employees of third-party CRO, located in affected geographies that we rely upon to carry out our clinical trials, which could result in inefficiencies due to reductions in staff and disruptions to work environments.

The spread of COVID-19, including variant strains, has affected segments of the global economy and healthcare systems and has previously had an adverse impact on our business operations.

COVID-19 or a similar global pandemic could in the future, directly or indirectly, materially and adversely affect our operations, including the potential interruption of our clinical trial activities and our supply chain.

There could be continuing or new effects of COVID-19 or similar disrupting illnesses to the processes, timelines, resourcing, and other aspects of operations at FDA or other health authorities, which could result in delays of reviews and approvals, including with respect to our product candidates.

Additionally, the continued spread of COVID-19 or similar disrupting illnesses could adversely affect our future clinical trial operations in the United States and elsewhere, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to respiratory illnesses if an outbreak occurs in their geography.

The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our product candidates.

In addition, we have taken temporary precautionary measures intended to help minimize the risk of the virus to our employees, including reducing non-essential travel worldwide for our employees and discouraging employee attendance at healthcare and investment industry events, which could negatively affect our business.

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions.

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We have historically operated with a limited number of employees.

As of the date of this report, we have eight full-time employees and one part-time employee.

As of the date of this report, we have five full-time employees and one part-time employee.

Therefore, institutional knowledge is concentrated within a small number of employees.

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The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of our product candidates.

We face intense competition from other companies and organizations for qualified personnel.

We face competition from other companies and organizations for qualified personnel.

Other companies and organizations with which we compete for personnel may have greater financial and other resources and different risk profiles than we do, and a history of successful development and commercialization of their product candidates.

Replacing key employees and attracting sufficiently skilled new employees may be difficult and costly, and we may not have other personnel with the capacity to assume all the responsibilities of a key employee upon his or her departure or to take on the duties necessary to continue growing our company and pursuing our business strategy.

Replacing employees and attracting sufficiently skilled new employees may be difficult and costly, and we may not have other personnel with the capacity to assume all the responsibilities of an existing employee upon his or her departure or to take on the duties necessary to continue growing our company and pursuing our business strategy.

If we cannot attract and retain skilled personnel, as needed, we may not achieve our development and other goals.

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If we cannot develop and maintain such relationships, as needed, the rate and success at which we can develop and commercialize product candidates may be limited.

In addition, our outsourcing strategy, which has included engaging consultants to manage core administrative and operational functions, may subject us to scrutiny under labor laws and regulations, which may divert management time and attention and have an adverse effect on our business and financial condition.

In addition, our insourcing and outsourcing strategies, which have included engaging consultants to manage core administrative and operational functions, may subject us to scrutiny under labor laws and regulations, which may divert management time and attention and have an adverse effect on our business and financial condition.

Risks Related to Drug Development and Commercialization

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The research, testing, manufacturing, labeling, approval, selling, marketing, and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, with regulations differing from country to country.

We are not permitted to market our product candidates in the United States until we receive approval of a New Drug Application, or NDA, from the FDA for each product candidate.

We are not permitted to market our product candidates in the United States until we receive approval of a New Drug Application (“NDA”) from the FDA for each product candidate.

We have not submitted an NDA or received marketing approval for any of our product candidates, and obtaining approval of an NDA is a lengthy, expensive and uncertain process.

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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.

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 four years to clinical testing of our product candidates and advancing these products to regulatory approval for use in one or more medical applications.

We are required to conduct additional clinical trials, 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 in the short-term to completing a Phase 3 trial of levosimendan and advancing this product to regulatory approval for use in PH-HFpEF, and potentially other indications.

We may in future commit resources to clinical trials for our other product candidates, including imatinib.

All of these clinical trials and testing will be expensive and time consuming and the timing of the regulatory review process is uncertain.

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any restrictions on the use of our products together with other medications.

Interim “top-line” and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available, and these results are subject to audit and verification procedures that could result in material changes in the final data.

Nonfinal results from our clinical trials announced or published from time to time on an interim, preliminary, or “top-line” basis, and conclusions that may be drawn from such results, may change as more patient data become available, and these results are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish interim, top-line or preliminary results from our clinical trials.

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Preliminary or top-line results also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

As a result, interim and preliminary data should be viewed with caution until the final data are available.

As a result, interim and preliminary data should be viewed with caution until the final and complete data are available.

Differences between preliminary or interim data and final data could significantly harm our business prospects and may cause the trading price of our common stock to fluctuate significantly.

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.

Pending the outcome of our strategic process, 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 the following:

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The enrollment and completion of clinical trials can be delayed for a variety of other reasons, including delays related to:

the evolving COVID-19 pandemic, which might cause site closures because of infected staff or cause patients to avoid or be unable to travel to healthcare facilities and physicians’ offices unless due to a health emergency;

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;

obtaining institutional review board (“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;

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collecting, analyzing and reporting final data from the clinical trials;

an epidemic which might cause site closures because of infected staff or cause patients to avoid or be unable to travel to healthcare facilities and physicians’ offices unless due to a health emergency;

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:

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Intense competition might render our cardiovascular and pulmonary product candidates noncompetitive or obsolete.

Competition in the pharmaceutical industry in general and in our therapeutic sectors in particular is intense and characterized by extensive research efforts and rapid technological progress.

Competition in the pharmaceutical industry in general and in our therapeutic areas in particular is intense and characterized by extensive research efforts and rapid technological progress.

Technological developments by competitors, regulatory approval for marketing competitive products, including potential generic or over-the-counter products, or superior marketing resources possessed by competitors could adversely affect the commercial potential of our cardiovascular and pulmonary disease product candidates and could have a material adverse effect on our future revenue and results of operations.

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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 and imatinib are, and will continue to be, subject to extensive regulation, monitoring and approval by the FDA and other regulatory agencies.

Our development, marketing and distribution of levosimendan and, potentially in the future, imatinib, are, 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.

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The FDA or another regulatory agency could also require us to conduct additional, and potentially expensive, studies in areas outside our approved indicated uses.

We may not receive all of the anticipated market exclusivity benefits of imatinib’s orphan drug designation.

TNX-201, Tenax’s proprietary formulation of imatinib mesylate, a kinase inhibitor, received Orphan Drug Designation from the FDA in the second quarter of 2020.

We may not receive all of the anticipated market exclusivity benefits of imatinib’s orphan drug designation, if we prioritize imatinib development in the future.

TNX-201, our proprietary formulation of imatinib mesylate, a kinase inhibitor, received Orphan Drug Designation from the FDA in the second quarter of 2020.

Orphan Drug Designation may provide market exclusivity in the United States for seven years if (i) imatinib receives market approval before a competitor using a similar mechanism for the same indication, (ii) we are able to produce sufficient supply to meet demand in the marketplace, and (iii) another product with the same active ingredient is not subsequently deemed clinically superior.

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Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

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.

Pending the outcome of our ongoing strategic process, even after products are commercialized, we would 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 would 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.

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We are subject to uncertainty relating to healthcare reform measures and reimbursement policies that, if not favorable to our products, could hinder or prevent our products’ commercial success, if any of our product candidates are approved.

Our ability to successfully commercialize our products will depend in part on the extent to which governmental authorities, such as Medicare, private health insurers and other organizations establish what we believe to be appropriate coverage and reimbursement for our approved products.

Pending the outcome of our ongoing strategic process, our ability to successfully commercialize our products will depend in part on the extent to which governmental authorities, such as Medicare, private health insurers and other organizations establish what we believe to be appropriate coverage and reimbursement for our approved products.

The unavailability or inadequacy of third-party payer coverage and reimbursement could negatively affect the market acceptance of our product candidates and the future revenues we may expect to receive from any approved products.

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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.

We have distribution rights in the United States and Canada for levosimendan and worldwide distribution rights to imatinib, and in some countries, particularly European Union countries and Canada, the pricing of prescription pharmaceuticals is subject to governmental control.

We have distribution rights in the United States and Canada for levosimendan and worldwide distribution rights to our formulation of imatinib, and 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.

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Risks Related to Our Dependence on Third Parties

We currently rely significantly on third parties to conduct our nonclinical testing and clinical studies and other aspects of our development programs.

We have historically, and pending the outcome of our ongoing strategic process, we will continue to rely significantly on third parties to conduct our nonclinical testing and clinical studies and other aspects of our development programs.

If those third parties do not satisfactorily perform their contractual obligations or meet anticipated deadlines, the development of our product candidates could be adversely affected.

We do not currently employ personnel or possess the facilities necessary to conduct many of the activities associated with our development programs.

We engage consultants, advisors, CROs and others to assist in the design and conduct of nonclinical and clinical studies of our product candidates, with interpretation of the results of those studies and with regulatory activities and expect to continue to outsource all or a significant amount of such activities.

We have historically, and pending the outcome of our strategic process, we will continue to engage consultants, advisors, CROs and others to assist in the design and conduct of nonclinical and clinical studies of our product candidates, with interpretation of the results of those studies and with regulatory activities and expect to continue to outsource all or a significant amount of such activities.

As a result, many important aspects of our development programs are and will continue to be outside our direct control and our third-party service providers may not perform their activities as required or expected, including the maintenance of Good Laboratory Practices (“GLP”) or Good Clinical Practices (“GCP”) compliance, which are ultimately our responsibility to ensure.

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We do not own or operate any manufacturing facilities for the clinical- or commercial-scale production of our products.

To manufacture imatinib, we have contracted with various third-party suppliers and clinical manufacturing organizations, or CMOs, making us highly dependent on these CMOs.

Currently, we do not have alternative CMOs to back up our primary vendors of clinical trial material or, if approved, commercial supply material.

Identification of and discussions with other CMOs may be protracted and/or unsuccessful, or these new CMOs may be unsuccessful in producing the same results as the current primary CMOs producing the material.

Therefore, if our primary CMOs become unable or unwilling to perform their required activities, we could experience protracted delays or interruptions in the supply of clinical trial material and, ultimately, product for commercial sale, which would materially and adversely affect our development programs, commercial activities, operating results and financial condition.

In addition, the FDA or regulatory authorities outside of the United States may require us to have an alternate manufacturer of a drug product before approving any product candidate for marketing and sale in the United States or abroad.

Securing such alternate manufacturer, if possible, could result in considerable additional time and cost prior to approval.

Pursuant to the terms of our license for levosimendan, Orion is at present our sole manufacturing source for TNX-103;

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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.

To potentially manufacture imatinib in the future, we have contracted with various third-party suppliers and clinical manufacturing organizations (“CMOs”) making us highly dependent on these CMOs.

We do not at present have alternative CMOs planned or contracted to back up our primary vendors of clinical trial material or, if approved, commercial supply material.

Securing such alternate manufacturer, if possible, could result in considerable additional time and cost prior to approval.

We currently have no marketing capabilities and no sales organization.

If we are unable to establish sales and marketing capabilities on our own or through third parties, we will be unable to successfully commercialize our products, if approved, or generate product revenue.

To commercialize our products, if approved, in the United States and other jurisdictions in which we may seek approvals, we must build our marketing, sales, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so.

Pending the outcome of our ongoing strategic process, if we are unable to establish sales and marketing capabilities on our own or through third parties, we will be unable to successfully commercialize our products, if approved, or generate product revenue.

Pending the outcome of our strategic process, to commercialize our products, if approved, in the United States and other jurisdictions in which we may seek approvals, we must build our marketing, sales, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so.

We have not decided upon a commercialization strategy in these areas.

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We are pursuing a multi-faceted IP strategy for levosimendan that includes filing patent applications in the U.S.

and Canada that, if granted, could protect the use of levosimendan for subcutaneous administration, levosimendan use in the treatment of PH-HFpEF patients, as well as levosimendan use in combination with various approved drugs to treat cardiovascular conditions.

In January 2022, the USPTO granted Tenax Therapeutics a patent protecting the subcutaneous administration of various cyclodextrin based formulations of levosimendan.

Our other patent applications are in various stages of review.

and Canada that, if granted, could protect various uses and formulations of levosimendan In January 2022, the USPTO granted Tenax Therapeutics a patent protecting claims for different uses of various cyclodextrin-based subcutaneous formulations of levosimendan, including a claim for its use in the treatment of PH-HFpEF patients.

In addition, we received in March 2023 another patent protecting the use of levosimendan in treatment of PH-HFpEF.

Our strategy to maximize market exclusivity for imatinib relies on two forms of exclusivity.

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if our imatinib formulation is the first to receive FDA approval for PAH.

In addition, we expect to file one or more applications for patent to cover our imatinib development.

In addition, we expect to file one or more patent applications to cover patentable subject matter that may result from our imatinib development.

If granted, a patent would provide protection for 20 years from its filing date.

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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.

Patent and Trademark Office (the “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.

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Risks Related to Owning Our Common Stock

Future sales and issuances of shares of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

Additional capital will be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company.

As of December 31, 2021, we had $5.6 million of cash and cash equivalents.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to achieve sustainable revenues and profitable operations.

To raise capital, we may, among other things, sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time to time.

Additionally, as of December 31, 2021, we had exercisable outstanding options and warrants (excluding out-of-the-money stock options and warrants) that if exercised would result in the issuance of 20.2 million shares of our common stock.

Further, we are authorized to grant equity awards, including stock grants and stock options, to our employees, directors and consultants.

As of December 31, 2021, there were 819,750 shares available for future issuance under the 2016 Stock Incentive Plan, as amended.

Future sales or issuances of common stock, convertible securities or other equity securities, may cause investors to be materially diluted, and new investors could gain rights, preferences and privileges senior to our existing stockholders.

Our share price has been volatile, and may continue to be volatile, which may subject us to securities class action litigation in the future.

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actual or anticipated fluctuations in our financial condition and operating results;

share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

status and/or results of our clinical trials;

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status of our search and selection of future management and leadership;

general economic and market conditions, including as a result of pandemics, epidemics, or outbreaks of an infectious disease, such as COVID-19, or other similar disrupting illnesses, and as a result of geopolitical uncertainties, including tensions in Ukraine.

general economic and market conditions, including as a result of epidemics or other disruptive events broadly affecting society, and as a result of geopolitical uncertainties, including the Russian invasion of and war against the country of Ukraine.

Some companies that have had volatile market prices for their securities have had securities class action lawsuits filed against them.

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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.

On February 17, 2022, we received a notification letter from Nasdaq’s Listing Qualifications Department indicating that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the minimum bid price of our common stock on the Nasdaq Capital Market closed below $1.00 per share for 30 consecutive business days.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days to regain compliance with the minimum bid requirement, or until August 16, 2022, to achieve compliance with the minimum bid price requirement.

To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for at least ten consecutive business days before August 16, 2022.

In addition, on September 9, 2021, we notified Nasdaq that as a result of James Mitchum’s resignation from the Company’s Board of Directors and the Audit and Compliance Committee of the Board, the Company was no longer in compliance with Nasdaq Listing Rule 5605(c)(2)(A), which requires the company’s Audit Committee to be composed of at least three independent directors.

The resignation of Mr.

Mitchum left the Audit Committee with two independent directors.

On September 10, 2021, the Company received a response from Nasdaq acknowledging the Company’s non-compliance with Nasdaq Listing Rule 5605(c)(2)(A).

Such letter further provided that pursuant to Nasdaq Listing Rule 5605(c)(4)(B), the Company was entitled to a cure period to regain compliance with Nasdaq Listing Rule 5605(c)(2)(A) through the earlier of the Company’s next annual stockholders’ meeting or September 8, 2022.

Effective January 28, 2022, the Board appointed Robyn M.

Hunter as a member of the Board and as a member and Chair of the Audit and Compliance Committee.

As a result of her appointment, on February 17.

2022, we received a letter from Nasdaq notifying us that Nasdaq determined that we had regained compliance with Nasdaq Listing Rule 5605(c)(2)(A).

While we intend to engage in efforts to maintain compliance, and thus maintain our listing, there can be no assurance that we will continue to meet all applicable Nasdaq Capital Market requirements in the future.

If our common stock were removed from listing with The Nasdaq Capital Market, it may be subject to the so-called “penny stock” rules.

For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions.

If our common stock is delisted and there is no longer an active trading market for our shares, it may, among other things:

cause stockholders difficulty in selling our shares without depressing the market price for the shares or selling our shares at all;

substantially impair our ability to raise additional funds;

result in a loss of institutional investor interest and fewer financing opportunities for us;

result in potential breaches of representations or covenants of agreements pursuant to which we made representations or covenants relating to our compliance with applicable listing requirements.

A delisting would also reduce the value of our equity compensation plans, which could negatively impact our ability to retain key employees.

We have a significant security holder, which could exert substantial influence over our business.

As of March 28, 2022, to our knowledge, Armistice Capital, LLC, or Armistice, held 2,019,995 shares of our common stock, warrants to purchase up to 4,773,269 shares of our common stock at an exercise price of $1.97 per share, warrants to purchase up to 2,072,538 shares of our common stock at an exercise price of $1.93 per share, warrants to purchase up to 2,360,313 shares of our common stock at an exercise price of $1.04 per share, warrants to purchase up to 7,783,616 shares of our common stock at an exercise price of $0.903 per share, and pre-funded warrants to purchase up to 10,033,274 shares of our common stock at an exercise price of $0.0001 per share.

In addition, two members of our Board of Directors are affiliates of Armistice.

Under the terms of the warrants and pre-funded warrants issued to Armistice, Armistice is not permitted to exercise such warrants to the extent that such exercise would result in Armistice (and its affiliates) beneficially owning more than 9.99% (or 4.99% in the case of the warrants with the $1.04 and $1.93 exercise prices per share) of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants.

After giving effect to the beneficial ownership limitations currently in effect with respect to the warrants and pre-funded warrants held by Armistice to our knowledge, as of March 28, 2022, Armistice beneficially owned 9.99% of our outstanding common stock.

If the warrants and pre-funded warrants held by Armistice could be exercised without the beneficial ownership limitations, then as of March 28, 2022, Armistice would have beneficially owned 53.5% of our common stock.

Additionally in connection with a sale of the Company, Armistice would be entitled to receive, with respect to each share of common stock issuable upon exercise of the warrants then held by it and without regard to the beneficial ownership limitations imposed on the conversion or exercise of such securities, the same amount and kind of securities, cash or property as it would have been entitled to receive if such securities had been converted into or exercised for shares of our common stock immediately prior to such sale of our company.

Because Armistice would receive this sale consideration with respect to warrants not included in its reported beneficial ownership of our common stock, in the event of a sale of our Company, it would be entitled to receive a significantly larger portion of the total proceeds distributable to the holders of our securities than is represented by its reported beneficial ownership of our common stock.

Although there are contractual limitations on the beneficial ownership of Armistice, if Armistice were to exercise its warrants for common stock, it could be able to exert substantial influence over our business, including, for example, the ability to delay, defer or prevent a change of control, entrench our management and our Board of Directors or delay or prevent a merger, consolidation or other business combination.

Anti-takeover provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult, which could discourage takeover attempts and lead to management entrenchment, and the market price of our common stock may be lower as a result.

Certain provisions in our certificate of incorporation and bylaws may make it difficult for a third party to acquire, or attempt to acquire, control of the Company, even if a change in control was considered favorable by the stockholders.

Certain provisions in our Certificate of Incorporation, as amended (the “Charter”), and our Third Amended and Restated Bylaws (the “Bylaws”) may make it difficult for a third party to acquire, or attempt to acquire, control of the Company, even if a change in control was considered favorable by the stockholders.

For example, our Board of Directors has the authority to issue up to 10,000,000 shares of preferred stock.

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Our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, any North Carolina state court that has jurisdiction, or the Delaware Court of Chancery shall, to the fullest extent permitted by law, be the sole and exclusive forum for any internal corporate claims, including without limitation (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, and (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said court having personal jurisdiction over the indispensable parties named as defendants in such action.

This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or the Securities Act, or any other claim for which federal courts have exclusive jurisdiction.

This provision would not apply to suits brought to enforce a duty or liability created by the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) or the Securities Act of 1933, as amended (the “Securities Act”), or any other claim for which federal courts have exclusive jurisdiction.

This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

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Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the near future.

The payment of dividends on our common stock will depend on our earnings and financial condition and other business and economic factors affecting us at such time as the Board of Directors may consider relevant.

If we do not pay dividends, our common stock may be less valuable because a return on investment will only occur if our stock price appreciates.

We have never declared or paid any cash dividends on shares of our common stock and do not intend to pay any cash dividends in the foreseeable future.

We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes.

Any determination to pay dividends in the future will be at the discretion of our Board of Directors.

Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income may be subject to certain limitations.

federal net operating loss carryforwards, or NOLs, which expire in various years if not utilized.

federal net operating loss carryforwards (“NOLs”), which expire in various years if not utilized.

In addition, we have federal research and development credit carryforwards.

The federal research and development credit carryforwards expire in various years if not utilized.

Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited.

Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited.

In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors