Filing identity and period
Important mismatch: The supplied text is an Oxygen Biotherapeutics, Inc. Form 10-Q, not a TENAX THERAPEUTICS, INC. filing. It reports the three months ended July 31, 2013 (the company’s first quarter of fiscal 2014), with balance-sheet comparisons to April 30, 2013. It does not provide a Tenax 2012 Q1 report.
Oxygen Biotherapeutics described itself as a development-stage biomedical company developing intravenous and topical oxygen-carrying products, including Oxycyte and Dermacyte.
Financial results and liquidity
| Metric | Quarter ended July 31, 2013 | Comparable 2012 quarter |
|---|---|---|
| Product revenue | $35,394 | $11,458 |
| Government grant revenue | $157,920 | $266,549 |
| Total net revenue | $165,804 | $272,096 |
| Product gross profit / margin | $7,884 / 22% | $5,547 / 48% |
| Operating expenses | $1,755,414 | $1,947,538 |
| Operating loss | $1,589,610 | $1,675,442 |
| Interest expense | $655,803 | $1,925,903 |
| Net loss | $2,245,272 | $3,586,542 |
| Net loss attributable to common stockholders | $4,339,823 | $3,586,542 |
| Basic / diluted loss per share | $(2.06) / $(3.36) | $(2.38) / $(4.30) |
| Net cash used in operations | $1,563,142 | $1,612,878 |
Cash and cash equivalents were $4,073,041 at July 31, up from $783,528 at April 30, primarily reflecting $4.9 million in net proceeds from the Series C preferred-stock offering. Current assets were $4,586,583 and current liabilities were $4,714,826, leaving negative working capital of $128,243. Total liabilities were $4,758,554; notes payable, net, were $3,425,942 and classified as current, including the $4.9 million convertible notes less unamortized discount. Stockholders’ equity was $1,130,124, versus a $1,778,036 deficit at April 30.
Net cash used in investing was $33,156 and financing provided $4,885,811. The company reported an accumulated deficit of approximately $119.3 million. The filing stated it expected available resources, including the subsequent debt exchange, to fund operations through February 28, 2014; it also said continued operations beyond that date depended on licensing income or external financing.
Material changes and developments
- Product revenue increased by $23,936, mainly due to Dermacyte distribution-agreement license fees; product gross margin fell to 22% from 48%, partly because product costs were credited against license fees.
- Grant revenue declined by $108,629, primarily because multiple studies had been completed in the prior year.
- Operating expenses fell by about $192,000. Lower legal and professional fees, marketing costs, and facility costs were partly offset by increased clinical and preclinical development costs, including Oxycyte trial activity.
- Interest expense fell by about $1.27 million, mainly because the prior-year quarter included noncash charges related to Series A preferred stock.
- The company raised approximately $4.9 million net from Series C 8% convertible preferred stock, convertible at $1.95 per share, and issued warrants for 2,753,348 common shares at $2.60 per share. Preferred dividends and potential conversions create dilution exposure.
- After quarter-end, on August 22, 2013, the company exchanged $4.6 million of convertible notes for Series D preferred stock and a warrant. On August 23, it amended certain outstanding warrant terms.
- The company effected a 1-for-20 reverse stock split in May 2013; reported share and per-share data reflect the split.
Outlook, risks, and unusual items
Management reported progress on the Phase II-b STOP-TBI program: four of five planned Israeli sites were activated, the first patient was enrolled in the second cohort, and FDA-requested immunocompetency studies were completed. The company planned to continue Oxycyte development and preclinical work, but did not provide specific revenue or earnings guidance.
The financial statements disclose substantial doubt about the company’s ability to continue as a going concern. Management said substantial additional funding would be required for clinical trials and regulatory approvals, and there was no assurance financing would be available on acceptable terms or at all. The company anticipated ongoing losses and substantial research and development spending.
- Financing through additional equity or debt could cause significant dilution or impose restrictive covenants; licensing or collaboration deals could require giving up product or technology rights.
- As of September 16, the company estimated that outstanding convertible or exercisable instruments could represent approximately 9.19 million shares, or about 65% of then-outstanding common shares.
- NASDAQ had granted extensions for listing compliance. The company said it had regained the minimum bid-price requirement and believed it met the stockholders’ equity requirement, but had not received confirmation from NASDAQ.
- The August Series D exchange involved an investor whose investment manager was a company director, a related-party connection disclosed in the filing.
- No legal proceedings were reported. Management stated disclosure controls were effective and reported no significant changes in internal control over financial reporting.
Key facts for investors to verify
- Confirm the filing identity and period: the source is Oxygen Biotherapeutics’ quarter ended July 31, 2013, not a Tenax 2012 Q1 filing.
- Review the company’s cash runway assumptions and funding needs, especially the stated February 28, 2014 funding horizon and going-concern warning.
- Examine the conversion, dividend, warrant, and anti-dilution terms of the Series C and subsequent Series D financings, and their potential dilution.
- Check the status of the Oxycyte Phase II-b trials, regulatory requirements, and whether further financing was secured.
- Verify NASDAQ listing compliance and the status and potential dilution of outstanding convertible and warrant instruments.