TENAX THERAPEUTICS, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS TENAX THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2023 December 31, 2022 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 11,141,136 $ 2,123,682 Prepaid expenses 474,866 738,927 Other current assets 267,084 345,856 Total current assets 11,883,086 3,208,465 Right of use asset - 179,503 Property and equipment, net 4,706 7,189 Other assets 1,117 9,552 Total assets $ 11,888,909 $ 3,404,709 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 134,787 $ 448,425 Accrued liabilities 292,961 775,045 Note Payable 174,466 624,302 Total current liabilities 602,214 1,847,772 Long term liabilities Lease liability - 64,196 Total long term liabilities - 64,196 Total liabilities 602,214 1,911,968 Commitments and contingencies; see Note 6 Stockholders' equity Preferred stock, undesignated, authorized 4,818,654 shares; See Note 7 Series A Preferred stock, par value $ 0.0001 , authorized 259,068 shares; issued and outstanding 210 , as of September 30, 2023 and December 31, 2022, respectively - - Common stock, par value $ 0.0001 per share; authorized 400,000,000 shares; issued and outstanding 23,862,434 as of September 30, 2023 and 2,291,809 as of December 31, 2022, respectively 2,386 229 Additional paid-in capital 305,311,462 291,034,592 Accumulated deficit ( 294,027,153 ) ( 289,542,080 ) Total stockholders’ equity 11,286,695 1,492,741 Total liabilities and stockholders' equity $ 11,888,909 $ 3,404,709 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents TENAX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended September 30, Nine months ended September 30, 2023 2022 2023 2022 Operating expenses General and administrative $ 1,051,524 $ 1,377,283 $ 3,363,511 $ 4,255,454 Research and development 1,065,855 1,540,205 1,529,493 4,242,565 Total operating expenses 2,117,379 2,917,488 4,893,004 8,498,019 Net operating loss 2,117,379 2,917,488 4,893,004 8,498,019 Interest expense 5,337 372 21,813 4,443 Interest income ( 150,741 ) - ( 366,877 ) - Other expense (income), net - ( 1,323 ) ( 62,866 ) ( 3,368 ) Net loss $ 1,971,975 $ 2,916,537 $ 4,485,074 $ 8,499,094 Net loss per share, basic and diluted $ ( 0.08 ) $ ( 2.22 ) $ ( 0.24 ) $ ( 6.64 ) Weighted average number of common shares outstanding, basic and diluted 23,862,434 1,316,504 18,532,270 1,279,271 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents TENAX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Preferred Stock Common Stock Additional Total Number of Shares Amount Number of Shares Amount paid-in capital Accumulated deficit stockholders' equity Balance at December 31, 2021 210 $ - 1,260,346 $ 126 $ 282,738,727 $ ( 278,494,185 ) $ 4,244,668 Compensation on options issued - - - - 83,069 83,069 Net loss - - - - - ( 2,721,536 ) ( 2,721,536 ) Balance at March 31, 2022 210 $ - 1,260,346 $ 126 $ 282,821,796 $ ( 281,215,721 ) $ 1,606,201 Pre-funded warrants and warrants sold, net of offering costs - - - - 7,928,591 - 7,928,591 Compensation on options issued - - - - 110,031 - 110,031 Net loss - - - - - ( 2,861,021 ) ( 2,861,021 ) Balance at June 30, 2022 210 $ - 1,260,346 $ 126 $ 290,860,418 $ ( 284,076,742 ) $ 6,783,802 Exercise of pre-funded warrants - - 4,773,269 477 - 477 Compensation on options issued - - - - 86,109 - 86,109 Net loss - - - - - ( 2,916,537 ) (2,916,537 ) Balance at September 30, 2022 210 $ - 6,033,615 $ 603 $ 290,946,527 $ ( 286,993,279 ) $ 3,953,851 Balance at December 31. 2022 210 $ - 2,291,809 $ 230 $ 291,034,591 $ ( 289,542,080 ) $ 1,492,741 Public offering sale of common stock and warrants, net of offering costs - - 6,959,444 696 13,895,829 - 13,896,525 Offering costs - - - - ( 282,647 ) - ( 282,647 ) Exercise of pre-funded warrants for cash - - 1,446,110 145 511,166 - 511,311 Exercise of pre-funded warrants, cashless - - 260,722 26 ( 26 ) - - Exercise of warrants, cashless - - 10,805,503 1,081 ( 1,081 ) - - Stock split and fractional shares issued - - 13,846 - - - - Compensation on options issued - - - - 66,543 - 66,543 Net loss - - - - - ( 1,406,760 ) ( 1,406,760 ) Balance at March 31, 2023 210 $ - 21,777,434 $ 2,178 $ 305,224,375 $ ( 290,948,840 ) $ 14,277,713 Exercise of warrants, cashless - - 2,085,000 208 ( 208 ) - Compensation on options issued - - - - 50,283 - 50,283 Net loss - - - - - ( 1,106,338 ) ( 1,106,338 ) Balance at June 30, 2023 210 $ - 23,862,434 $ 2,386 $ 305,274,450 $ ( 292,055,178 ) $ 13,221,658 Compensation on options issued - - - - 37,012 - 37,012 Net loss - - - - - ( 1,971,975 ) (1,971,975 ) Balance at September 30, 2023 210 $ - 23,862,434 $ 2,386 $ 305,311,462 $ ( 294,027,153 ) $ 11,286,695 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents TENAX THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended September 30, 2023 2022 (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ ( 4,485,074 ) $ ( 8,499,094 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 2,864 3,798 Interest on debt instrument 21,151 4,443 Amortization of right of use asset - 80,332 Gain on sale of equipment 1,125 - Issuance and vesting of compensatory stock options and warrants 153,838 279,686 Changes in operating assets and liabilities Accounts receivable, prepaid expenses and other assets 342,834 ( 606,559 ) Accounts payable and accrued liabilities ( 765,730 ) ( 874,156 ) Long term portion of lease liability - ( 88,241 ) Net cash used in operating activities ( 4,728,992 ) ( 9,699,791 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase (proceeds) from sale of property and equipment 2,843 ( 6,323 ) Net cash provided by (used in) investing activities 2,843 ( 6,323 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock, warrants and pre-funded warrants, net of issuance costs 14,193,439 7,928,591 Proceeds from the issuance of note payable - 364,546 Payments on short-term note ( 449,836 ) ( 364,546 ) Net cash provided by financing activities 13,743,603 7,928,591 Net change in cash and cash equivalents 9,017,454 ( 1,777,523 ) Cash and cash equivalents, beginning of period 2,123,682 5,583,922 Cash and cash equivalents, end of period $ 11,141,136 $ 3,806,399 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents TENAX THERAPEUTICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. DESCRIPTION OF BUSINESS Tenax Therapeutics, Inc. (the “Company”) was originally formed as a New Jersey corporation in 1967 under the name Rudmer, David & Associates, Inc., and subsequently changed its name to Synthetic Blood International, Inc. On June 17, 2008, the stockholders of Synthetic Blood International approved the Agreement and Plan of Merger dated April 28, 2008, between Synthetic Blood International and Oxygen Biotherapeutics, Inc., a Delaware corporation. Synthetic Blood International formed Oxygen Biotherapeutics on April 17, 2008 to participate in the merger for the purpose of changing the state of domicile of Synthetic Blood International from New Jersey to Delaware. Certificates of Merger were filed with the states of New Jersey and Delaware and the merger was effective June 30, 2008. Under the Plan of Merger, Oxygen Biotherapeutics was the surviving corporation and each share of Synthetic Blood International common stock outstanding on June 30, 2008 was converted into one share of Oxygen Biotherapeutics common stock. On September 19, 2014, the Company changed its name to Tenax Therapeutics, Inc. On November 13, 2013, the Company, through its wholly-owned subsidiary, Life Newco, Inc., a Delaware corporation (“Life NewCo”), acquired certain assets of Phyxius Pharma, Inc., a Delaware corporation (“Phyxius”) pursuant to an Asset Purchase Agreement dated October 21, 2013 (the “Asset Purchase Agreement”), by and among the Company, Life Newco, Phyxius and the stockholders of Phyxius. Among these assets was a license with Orion Corporation, a global healthcare company incorporated under the laws of Finland (“Orion”) for the 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 (the “Territory”). On October 9, 2020 and January 25, 2022, the Company amended the license (as amended, the “License”), to include two new oral product dose forms containing levosimendan in capsule and solid dosage form, and a subcutaneously administered product containing levosimendan, subject to certain limitations (together, the “Product”). Pursuant to the License, the Company and Orion will agree to a new trademark when commercializing levosimendan in either of these forms. The term of the License has been extended until 10 years after the launch of the Product in the Territory, provided that the License will continue after the end of the term in each country in the Territory until the expiration of Orion’s patent rights in the Product in such country. In the event that no regulatory approval for the Product has been granted in the United States on or before September 20, 2030, however, either party will have the right to terminate the License with immediate effect. The Company intends to conduct two upcoming Phase 3 studies in pulmonary hypertension patients utilizing one of these oral formulations. See “Note 6 - Commitments and Contingencies” below for a further discussion of the License. On January 15, 2021, the Company, Life Newco II, Inc., a Delaware corporation and a wholly-owned, subsidiary of the Company (“Life Newco II”), PHPrecisionMed Inc., a Delaware corporation (“PHPM”) and Dr. Stuart Rich, solely in his capacity as holders’ representative, entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which the Company acquired all of the equity of PHPM, a company developing pharmaceutical products containing imatinib for the treatment of pulmonary arterial hypertension (“PAH”) in the United States and the rest of the world. Under the terms of the Merger Agreement, Life Newco II merged with and into PHPM, with PHPM surviving as a wholly-owned subsidiary of the Company. Going Concern Management believes the accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern. The Company has an accumulated deficit of approximately $ 294 .0 million at September 30, 2023, and used cash in operations of approximately $ 4.7 million during the nine months ended September 30, 2023. The Company requires substantial additional funds to complete clinical trials and pursue regulatory approvals. Management is actively seeking additional sources of equity and/or debt financing as part of its ongoing strategic process; however, there is no assurance that any additional funding will be available. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying September 30, 2023 balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, to maintain present financing, and to generate cash from future operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. 7 Table of Contents The accompanying unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the unaudited condensed consolidated financial statements have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Form 10-K, which was filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2023, from which the Company derived the balance sheet data at December 31, 2022. Use of Estimates The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates to ensure that these estimates appropriately reflect changes in the Company’s business and new information as it becomes available. If historical experience and other factors used by management to make these estimates do not reasonably reflect future activity, the Company’s results of operations and financial position could be materially impacted. Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts and transactions of Tenax Therapeutics, Inc., Life Newco, Inc. and PHPM. All material intercompany transactions and balances have been eliminated in consolidation. Reverse Stock Split The Company has adjusted the financial statements to reflect that on January 4, 2023, the Company effected a 1-for-20 reverse stock split of its outstanding common stock (the “Reverse Stock Split”). The Reverse Stock Split did not change the number of authorized shares of capital stock or cause an adjustment to the par value of its capital stock. Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under the Company’s outstanding stock options and warrants. The number of shares authorized for issuance pursuant to the Company’s equity incentive plans have also been adjusted proportionately to reflect the Reverse Stock Split. Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity date of three months or less, when acquired, to be cash equivalents. Cash Concentration Risk The Federal Deposit Insurance Corporation (the “FDIC”) insurance limits are $ 250,000 per depositor per insured bank. The Company had cash balances of $ 345,000 and $ 1.9 million uninsured by the FDIC as of September 30, 2023 and December 31, 2022, respectively. In August 2023, the Company, through its commercial bank, began to utilize the IntraFi network of commercial banks. IntraFi deposits $ 250,000 in each of its member banks to maintain the FDIC insurance limit. On September 30, 2023, the Company had $ 10.5 million deposited in the network which is fully FDIC insured. Liquidity and Capital Resources The Company has financed its operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. The Company had total current assets of approximately $ 11.9 million and $ 3.2 million and working capital of $ 11.3 million and $ 1.4 million as of September 30, 2023 and December 31, 2022, respectively. The Company’s cash resources were approximately $ 11.1 million as of September 30, 2023, compared to cash resources of approximately $ 2.1 million as of December 31, 2022. The Company expects to continue to incur expenses related to the development of oral levosimendan to treat pulmonary hypertension and heart failure with preserved ejection fraction (PH-HFpEF) in the Phase 3 LEVEL trial, and, potentially for other indications of levosimendan and imatinib for PAH, as well as identifying and developing other potential product candidates. Based on its resources on September 30, 2023, the Company believes that it has sufficient capital to fund its planned operations through to the first quarter of calendar year 2024. However, the Company will need substantial additional financing in order to fund its operations beyond such period and thereafter until it can achieve profitability, if ever. The Company depends on its ability to raise additional funds through various potential sources, such as equity and debt financing, or to license its product candidates to another pharmaceutical company. The Company intends to continue to fund operations from cash on hand and through sources of capital similar to those previously described. The Company cannot provide assurance that it will be able to secure such additional financing on reasonable terms, or if available, that it will be sufficient to meet its needs. 8 Table of Contents To the extent that the Company raises additional funds by issuing shares of its common stock or other securities convertible or exchangeable for shares of common stock, stockholders will experience dilution, which may be significant. In the event the Company raises additional capital through debt financings, the Company may incur significant interest expense and become subject to restrictive covenants in the related transaction documentation that may affect the manner in which the Company conducts its business. To the extent that the Company raises additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to its technologies or product candidates or grant licenses on terms that may not be favorable to the Company. The COVID-19 pandemic or a similar societal healthcare disruption could in the future, directly or indirectly, adversely affect the Company’s clinical trial operations, including its ability to recruit and retain patients, principal investigators and site staff who, as healthcare providers, may have heightened exposure to or impact from infectious diseases 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 coronavirus or a similar virus themselves, which would delay the Company’s ability to initiate and/or complete planned clinical and preclinical studies in the future. In May 2023, the World Health Organization declared that COVID-19 was no longer a global health emergency, however, any lingering impact or resurgence of COVID-19 cannot be estimated. Any or all of the foregoing may have a material adverse effect on the Company’s business and financial performance. Stock-Based Compensation The Company accounts for stock-based awards to employees in accordance with Accounting Standards Codification (“ASC”) 718, Compensation — Stock Compensation, which provides for the use of the fair value-based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Fair values of equity securities are determined by management based predominantly on the trading price of the Company’s common stock. The values of these awards are based upon their grant-date fair value. That cost is recognized over the period during which the employee is required to provide service in exchange for the reward. The Company accounts for equity instruments issued to non-employees in accordance with ASC 505-50, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. Equity instruments issued to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustment as the underlying equity instruments vest. Warrants for Common Shares and Derivative Financial Instruments Warrants for our shares of common stock and other derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as equity or liabilities. The Company assesses classification of its warrants for shares of common stock and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required. Loss Per Share Basic loss per share, which excludes antidilutive securities, is computed by dividing net loss by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, restricted stock and warrants. The following outstanding options, restricted stock grants, convertible preferred shares and warrants were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect. Nine months ended September 30, 2023 2022 Warrants to purchase common stock 1,722,240 1,576,240 Pre-funded warrants to purchase common stock - 792,802 Options to purchase common stock 74,873 77,911 Convertible preferred shares outstanding 210 210 Recent Accounting Pronouncements In June 2016, the FASB issued ASU-2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends how credit losses are measured and reported for certain financial instruments that are not accounted for at fair value through net income. This standard requires that credit losses be presented as an allowance rather than as a write-down for available-for-sale debt securities and is effective for interim and annual reporting periods beginning January 1, 2023, with early adoption permitted. A modified retrospective approach is to be used for certain parts of this guidance, while other parts of the guidance are to be applied using a prospective approach. The adoption of this standard has not had a material impact on its condensed consolidated financial statements and related disclosures. 9 Table of Contents NOTE 3. BALANCE SHEET COMPONENTS Property and equipment, net Property and equipment primarily consist of office furniture and fixtures. Depreciation expense was $ 1,000 and $ 1,200 for the three months ended September 30, 2023 and 2022, respectively. For the nine months ended September 30, 2023 and 2022, depreciation expense was $ 2,900 and $ 3,800 , respectively. Accrued liabilities Accrued liabilities consist of the following: September 30, 2023 December 31, 2022 Operating costs $ 245,545 $ 245,391 Lease liability - 119,393 Employee related 47,416 410,261 $ 292,961 $ 775,045 NOTE 4. NOTE PAYABLE Premium Finance Agreement On December 31, 2022, the Company executed a premium finance note agreement (the “Note”) with AFCO Credit Corporation. The Note financed the Company’s Directors and Officers Insurance Policy as well as the Errors and Omissions policy. The total amount financed was $ 693,669 . The Company paid a down payment of $ 69,367 at execution leaving a balance of $ 624,302 payable in monthly installments of $ 58,873 through December 1, 2023. The Note has an interest rate of 7.39 %. The Company recorded interest expense on the Note in the amount of $ 5,337 and $ 21,151 for the three and nine months ended September 30, 2023. The balance on the Note as of September 30, 2023 and December 31, 2022 was $ 174,466 and $ 624,302 , respectively. NOTE 5. LEASE In January 2011, the Company entered into a lease (the “Lease”) with Concourse Associates, LLC (the “Landlord”) for its headquarters located at ONE Copley Parkway, Suite 490, Morrisville, North Carolina (the “Premises”). The Lease was amended in August 2015, March 2016 and April 2021 to extend the term for the 5,954 square foot rental. Pursuant to the Amendment dated April 2021, the existing lease term was extended through June 30, 2024 and the annual base rent of $ 125,034 would increase 2.5 % annually for lease years two and three. On February 7, 2023, the Company entered into a Lease Termination Agreement with the Landlord, with respect to the Premises. As consideration for the Landlord’s entry into the Lease Termination Agreement, including a release of any claims the Landlord may have had against the Company under the Lease, the Company paid the Landlord $ 169,867 . Pursuant to the Lease Termination Agreement, effective February 8, 2023, the Company has no remaining rent or further obligations to the Landlord pursuant to the Lease. The Company performed an evaluation of its other contracts with customers and suppliers in accordance with ASC 842, Leases, and determined that, except for the Lease described above, none of the Company’s contracts contain a lease. The Company owns no real property. Beginning November 1, 2022, we maintain a membership providing dedicated office space, as well as shared services and shared space for meetings, catering, and other business activities, at our principal executive office relocated to 101 Glen Lennox Drive, Suite 300, Chapel Hill, North Carolina 27517. The current rent is approximately $ 750 per month. NOTE 6. COMMITMENTS AND CONTINGENCIES Simdax license agreement On November 13, 2013, the Company acquired, through its wholly-owned subsidiary, Life Newco, that certain License, dated September 20, 2013, as amended on October 9, 2020 and January 25, 2022, by and between Phyxius and Orion, and that certain Side Letter, dated October 15, 2013, by and between Phyxius and Orion. The License grants the Company an exclusive, sublicensable right to develop and commercialize pharmaceutical products containing levosimendan in the Territory and, pursuant to the October 9, 2020 and January 25, 2022 amendments, also includes two product dose forms containing levosimendan, in capsule and solid dosage form, and a subcutaneously administered product containing levosimendan, subject to specified limitations in the License. Pursuant to the License, the Company and Orion will agree to a new trademark when commercializing levosimendan in either of these forms. 10 Table of Contents The License also grants the Company a right of first refusal to commercialize new developments of the Product, including developments as to the formulation, presentation, means of delivery, route of administration, dosage or indication (i.e., line extension products). As of September 30, 2023, the Company has not met any of the developmental milestones under the License and, accordingly, has not recorded any liability for the contingent payments due to Orion. Litigation The Company is subject to litigation in the normal course of business, none of which management believes will have a material adverse effect on the Company’s consolidated financial statements. NOTE 7. STOCKHOLDERS’ EQUITY Under the Company’s Certificate of Incorporation, the Board is authorized, without further stockholder action, to provide for the issuance of up to 10,000,000 shares of preferred stock, par value $ 0.0001 per share, in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. Series A Stock On December 11, 2018, the Company closed its underwritten offering of 259,068 units for net proceeds of approximately $ 9.0 million (the “2018 Offering”). Each unit consisted of (i) 20 shares of the Company’s Series A convertible preferred stock, par value $0.0001 per share (the “Series A Stock”), (ii) a two-year warrant to purchase one share of common stock at an exercise price of $ 38.60 , and (iii) a five-year warrant to purchase one share of common stock at an exercise price of $38.60. In accordance with ASC 480, Distinguishing Liabilities from Equity, the estimated fair value of $ 1,800,016 for the beneficial conversion feature was recognized as a deemed dividend on the Series A Stock during the year ended December 31, 2020. As of September 30, 2023, there were 210 shares of Series A Stock outstanding. Common Stock and Pre-Funded Warrants The Company’s Certificate of Incorporation authorizes it to issue 400,000,000 shares of $ 0.0001 par value common stock. As of September 30, 2023, and December 31, 2022, there were 23,862,434 and 2,291,809 shares of common stock issued and outstanding, respectively. As of September 30, 2023 and December 31, 2022, there were no pre-funded warrants outstanding. The Company has adjusted the financial statements to reflect the January 4, 2023, 1-for-20 Reverse Stock Split. The Reverse Stock Split did not change the number of authorized shares of capital stock or cause an adjustment to the par value of our capital stock. Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under our outstanding stock options and warrants. The number of shares authorized for issuance pursuant to our equity incentive plans have also been adjusted proportionately to reflect the Reverse Stock Split. February 2023 Registered Public Offering (the “February 2023 Offering”) On February 3, 2023, the Company entered into a securities purchase agreement with certain purchasers for the purchase and sale, in a registered public offering by the Company of (i) an aggregate of 6,959,444 shares of its common stock, and pre-funded warrants to purchase an aggregate of 1,707,222 shares of common stock and (ii) accompanying warrants to purchase up to an aggregate of 17,333,332 shares of its common stock at a combined offering price of $ 1.80 per share of common stock and associated common warrant, or $ 1.799 per pre-funded warrant and associated common warrant, resulting in gross proceeds of approximately $ 15.6 million. The net proceeds of the February 2023 Offering after deducting placement agent fees and direct offering expenses were approximately $ 13.7 million. The fair value allocated to the common stock, pre-funded warrants and warrants was $ 5.0 million, $ 1.2 million and $ 9.4 million, respectively. May 2022 Private Placement (the “May 2022 Offering”) On May 17, 2022, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company agreed to sell and issue to the investor 529,802 units in a private placement at a purchase price of $ 15.50 per unit. Each unit consisted of (i) one unregistered pre-funded warrant to purchase one share of common stock and (ii) one unregistered warrant to purchase one share of common stock (together with the pre-funded warrants, the “2022 Warrants”). In the aggregate, 1,059,603 shares of the Company’s common stock are underlying the 2022 Warrants. The net proceeds from the private placement, after direct offering expenses, were approximately $ 7.9 million. The fair value allocated to the pre-funded warrants and warrants was $ 4.2 million and $ 3.8 million, respectively. Also, on May 17, 2022 and in connection with the May 2022 Offering, the Company entered into a registration rights agreement (the “May 2022 Registration Rights Agreement”) with the investor, pursuant to which the Company agreed to register for resale the shares of common stock issuable upon exercise of the 2022 Warrants within 120 days following the effective date of the May 2022 Registration Rights Agreement. Pursuant to the May 2022 Registration Rights Agreement, on May 25, 2022, the Company filed a resale registration statement on Form S-3 with the SEC, which went effective on June 3, 2022. 11 Table of Contents Additionally, in connection with the May 2022 Offering, the Company entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with the investor, in consideration for the investor’s purchase of units in the May 2022 Offering, pursuant to which the Company agreed to amend certain previously issued warrants held by the investor. The terms of the amended and restated warrants are described further below under “Note 8—Stockholders Equity—Warrants”. Warrants As of September 30, 2023, the Company has 1,722,240 warrants outstanding. The following table summarizes the Company’s warrant activity for the nine months ended September 30, 2023: Warrants Weighted Average Exercise Price Outstanding at December 31, 2022 1,576,240 $ 17.13 Issued 17,333,332 2.25 Exercised ( 17,187,332 ) 2.25 Outstanding at September 30, 2023 1,722,240 $ 15.87 February 2023 Warrants As described above, as a part of the February 2023 Offering, the Company issued unregistered warrants to purchase 17,333,332 shares of its common stock at an exercise price of $ 2.25 per share and contractual term of five years. The unregistered warrants were offered in a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder. In accordance with ASC 815, Derivatives and Hedging , these warrants are classified as equity and their relative fair value of approximately $ 10.6 million was recognized as additional paid in capital. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock. The assumptions used in the Black-Scholes Option Pricing model were as follows: Remaining contractual term 5 Years Risk free interest rate 2.23 % Expected dividends - Expected Volatility 105.69 % May 2022 Warrants As described above, as a part of the May 2022 Offering, the Company issued unregistered warrants to purchase 529,802 shares of its common stock at an exercise price of $ 12.60 per share and contractual term of five and one-half years. The unregistered warrants were offered in a private placement under Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. In accordance with ASC 815, Derivatives and Hedging , these warrants are classified as equity and their relative fair value of approximately $ 3.8 million was recognized as additional paid in capital. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock. Stock Options 2022 Stock Incentive Plan On June 9, 2022, the Company’s stockholders approved the Tenax Therapeutics. Inc. 2022 Stock Incentive Plan (the “2022 Plan”), which authorizes for issuance a total of 55,000 shares of common stock. Under the 2022 Plan, with the approval of the Board’s Compensation Committee, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards. The 2022 Plan superseded and replaced the Tenax Therapeutics, Inc. 2016 Stock Incentive Plan, as amended (the “2016 Plan”) and all shares of common stock remaining authorized and available for issuance under the 2016 Plan and any shares subject to outstanding awards under the 2016 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares automatically become available for issuance under the 2022 Plan. At September 30, 2023 there were 51,487 shares that rolled over from the 2016 Plan and 28,488 shares remaining under the 2022 Plan resulting in an aggregate of 79,975 shares available for issuance under the 2022 Plan. 12 Table of Contents The following table summarizes the shares available for grant under the 2022 Plan for the nine months ended September 30, 2023. Shares Available for Grant Balances, at December 31, 2022 77,616 Options cancelled/forfeited 2,359 Balances, at September 30, 2023 79,975 2022 Plan Stock Options Stock options granted under the 2022 Plan may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to employees. NSOs may be granted to employees, consultants and directors. Stock options under the 2022 Plan may be granted with a term of up to ten years and at prices no less than fair market value at the time of grant. Stock options granted generally vest over one to four years. The following table summarizes the outstanding stock options under the 2022 Plan for the nine months ended September 30, 2023. Outstanding Options Number of Shares Weighted Average Exercise Price Balances at December 31, 2022 28,163 $ 12.40 Options cancelled/forfeited ( 1,650 ) $ 12.40 Balances at September 30, 2023 26,513 $ 12.40 The Company chose the “straight-line” attribution method for allocating compensation costs of each stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value. The Company recorded compensation expense for stock option grants of $ 16,089 and $ 68,586 for the three and nine months ended September 30, 2023, respectively. No compensation expense was recorded for the nine months ended September 30, 2022. As of September 30, 2023, there were unrecognized compensation costs of approximately $ 91,779 related to non-vested stock option awards under the 2022 Plan that will be recognized on a straight-line basis over the weighted average remaining vesting period of 1.69 years. 13 Table of Contents 2016 Stock Incentive Plan On June 16, 2016, the Company’s stockholders approved the 2016 Plan and authorized for issuance under the 2016 Plan a total of 7,500 shares of common stock. Under the 2016 Plan, with the approval of the Board’s Compensation Committee, the Company could grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards. On June 13, 2019, the Company’s stockholders approved an amendment to the 2016 Plan which increased the number of shares of common stock authorized for issuance under the 2016 Plan to a total of 37,500 shares, up from 7,500 previously authorized. On June 10, 2021, the Company’s stockholders approved an additional amendment to the 2016 Plan which increased the number of shares of common stock authorized for issuance under the 2016 Plan to a total of 75,000 shares, up from 37,500 previously authorized. In June 2022, the 2016 Plan was superseded and replaced by the 2022 Plan and no new awards will be granted under the 2016 Plan going forward. Any awards outstanding under the 2016 Plan on the date of approval of the 2022 Plan remain subject to the 2016 Plan. Upon approval of the 2022 Plan, all shares of common stock remaining authorized and available for issuance under the 2016 Plan and any shares subject to outstanding awards under the 2016 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares automatically become available for issuance under our 2022 Plan. 2016 Plan Stock Options Stock options granted under the 2016 Plan could be either ISOs or NSOs. ISOs could be granted only to employees. NSOs could be granted to employees, consultants and directors. Stock options under the 2016 Plan could be granted with a term of up to ten years and at prices no less than fair market value at the time of grant. Stock options granted generally vest over three to four years. The following table summarizes the outstanding stock options under the 2016 Plan for the nine months ended September 30, 2023. Outstanding Options Number of Shares Weighted Average Exercise Price Balances at December 31, 2022 23,373 $ 40.13 Options cancelled/forfeited ( 709 ) $ 23.60 Balances at September 30, 2023 22,664 $ 40.64 The Company chose the “straight-line” attribution method for allocating compensation costs of each stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value. The Company recorded compensation expense for these stock options grants of $ 7,840 and $ 23,574 for the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, there were unrecognized compensation costs of approximately $ 8,805 related to non-vested stock option awards under the 2016 Plan that will be recognized on a straight-line basis over the weighted average remaining vesting period of 0.27 years. 1999 Stock Plan, as Amended and Restated In October 2000, the Company adopted the 1999 Stock Plan, as amended and restated on June 17, 2008 (the “1999 Plan”). Under the 1999 Plan, with the approval of the Compensation Committee of the Board of Directors, the Company could grant stock options, restricted stock, stock appreciation rights and new shares of common stock upon exercise of stock options. On March 13, 2014, the Company’s stockholders approved an amendment to the 1999 Plan which increased the number of shares of common stock authorized for issuance under the 1999 Plan to a total of 10,000 shares, up from 750 previously authorized. On September 15, 2015, the Company’s stockholders approved an additional amendment to the 1999 Plan which increased the number of shares of common stock authorized for issuance under the 1999 Plan to a total of 12,500 shares, up from 10,000 previously authorized. The 1999 Plan expired on June 17, 2018 and no new grants may be made under that plan after that date. However, unexpired awards granted under the 1999 Plan remain outstanding and subject to the terms of the 1999 Plan. 14 Table of Contents 1999 Plan Stock Options Stock options granted under the 1999 Plan may be ISOs or NSOs. ISOs could be granted only to employees. NSOs could be granted to employees, consultants and directors. Stock options under the 1999 Plan could be granted with a term of up to ten years and at prices no less than fair market value for ISOs and no less than 85% of the fair market value for NSOs. Stock options granted generally vest over one to three years. The following table summarizes the outstanding stock options under the 1999 Plan for the nine months ended September 30, 2023: Outstanding Options Number of Shares Weighted Average Exercise Price Balances at December 31, 2022 936 $ 1,122.75 Options cancelled/forfeited ( 240 ) $ 1,253.83 Balances at September 30, 2023 696 $ 1,076.36 The Company chose the “straight-line” attribution method for allocating compensation costs of each stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value. The Company recorded no compensation expense for these stock option grants for the three and nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there were no unrecognized compensation costs related to non-vested stock option awards under the 1999 Plan. Inducement Stock Options The Company granted two employment inducement stock option awards, one for 5,000 shares of common stock and the other for 12,500 shares of common stock, to its new CEO on July 6, 2021. The employment inducement stock option for 5,000 shares of common stock was awarded in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. The option award was to vest as follows: 50% upon initiation of a Phase 3 trial for levosimendan by June 30, 2022; and 50% upon initiation of a Phase 3 trial for imatinib by June 30, 2022. The options had a 10-year term and an exercise price of $39.40 per share, the July 6, 2021 closing price of our common stock. None of the vesting milestones were achieved and the options were subsequently cancelled. The estimated fair value of this inducement stock option award was $ 178,291 using a Black-Scholes option pricing model based on market prices and the following assumptions at the date of inducement option grant: risk-free interest rate of 1.37 %, dividend yield of 0 %, volatility factor for our common stock of 103.50 % and an expected life of 10 years. The employment inducement stock option award for 12,500 shares of common stock also was awarded in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. The option award will vest as follows: 25% on the one-year anniversary of the CEO’s employment start date and an additional 25% on each of the following three anniversaries of the CEO’s employment start date, subject to continued employment. The options have a 10-year term and an exercise price of $39.40 per share, the July 6, 2021 closing price of our common stock. 15 Table of Contents The estimated fair value of this inducement stock option award was $ 403,180 using a Black-Scholes option pricing model based on market prices and the following assumptions at the date of inducement option grant: risk-free interest rate of 1.13 %, dividend yield of 0 %, volatility factor for our common stock of 99.36 % and an expected life of 7 years. The Company granted an employment inducement stock option award for 12,500 shares of common stock to our chief medical officer on January 15, 2021. This employment inducement stock option was awarded in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. The option award will vest as follows: 25% upon initiation of a Phase 3 trial; 25% upon database lock; 25% upon acceptance for review of an investigational NDA; and 25% upon approval. The options have a 10-year term and an exercise price of $35.60 per share, the January 15, 2021 closing price of our common stock . The estimated fair value of the inducement stock option award granted was $402,789 using a Black-Scholes option pricing model based on market prices and the following assumptions at the date of inducement option grant: risk-free interest rate of 11 %, dividend yield of 0 %, volatility factor for our common stock of 103.94 % and an expected life of 10 years. Inducement stock option compensation expense totaled $ 13,083 and $ 61,678 for the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, there was $ 371,384 of remaining unrecognized compensation expense related to these inducement stock options. NOTE 8. SUBSEQUENT EVENTS None. 16 Table of Contents