Filing and period
Important identification mismatch: The supplied filing is Oxygen Biotherapeutics, Inc.’s Form 10-Q for the three months ended July 31, 2012 (fiscal Q1 2013), not a Tenax Therapeutics, Inc. filing for 2011 Q1. The summary below reflects the filing text provided.
Oxygen Biotherapeutics described itself as a development-stage biomedical company developing oxygen-carrying intravenous and topical products, with Dermacyte cosmetic products generating commercial sales and Oxycyte in clinical development.
Financial results and position
| Metric | Three months ended July 31, 2012 | Prior-year quarter |
|---|---|---|
| Product revenue | $11,458 | $59,477 |
| Government grant revenue | $266,549 | $0 |
| Total net revenue | $272,096 | $24,873 |
| Product gross profit / margin | $5,547 / 48% | $24,873 / 42% |
| Operating loss | $1,675,442 | $2,428,077 |
| Net loss | $3,586,542 | $2,869,308 |
| Net loss per share, basic | $0.12 | $0.12 |
| Cash used in operating activities | $1,612,878 | $2,053,805 |
At July 31, 2012, cash and cash equivalents were $2.69 million, total current assets were $3.65 million, and working capital was negative $344,641. Total liabilities were $5.77 million, including $2.04 million of convertible preferred stock and $1.79 million of net notes payable. Accumulated deficit was $111.2 million and stockholders’ deficit was $638,299. Interest expense was $1.93 million, up from $436,000, largely reflecting noncash costs associated with preferred stock and convertible-note discounts.
Changes and notable items
- Product revenue declined 81%, primarily because of reduced sales staffing and the termination of distribution agreements; a prior-year distributor sale contributed $26,000.
- Grant revenue of $266,549 was recognized in the quarter; $235,265 of deferred grant revenue remained on the balance sheet.
- Operating loss improved versus the prior-year quarter, while net loss increased, principally because of sharply higher interest expense.
- In May 2012, the company consolidated operations and relocated R&D from California to North Carolina. It recorded about $47,000 of restructuring charges and expected approximately $174,000 of additional charges.
- The June preferred-stock financing generated approximately $2.3 million net proceeds. Preferred shares carry a 7% annual dividend and scheduled amortization; the company made an installment payment in common shares, creating dilution.
Outlook, risks and contingencies
Management expected existing cash to fund operations through December 31, 2012, but stated that continued product development beyond that date depended on licensing income or external financing. A further offering installment of up to $1.5 million was planned for September 2012, subject to conditions including minimum share-price and trading-volume requirements; as of September 14, the stock was below the stated minimum price. The filing says substantial additional capital is needed and raises substantial doubt about the company’s ability to continue as a going concern.
Management’s priorities included continuing Oxycyte development, resuming Phase II-B work for severe traumatic brain injury, conducting safety-related preclinical studies, and pursuing collaborations and licensing. The filing also noted a completed proof-of-concept clinical trial for topical PFC gel and a new U.S. Navy research agreement.
In the Tenor lawsuit, the court found the company breached a right-of-first-offer agreement; a jury trial was scheduled to determine damages. The company warned that a significant award could materially harm its finances. Other risks included possible Nasdaq delisting, dependence on future financing, clinical and regulatory uncertainty, and potential inventory obsolescence. A $532,350 estimate for potential Section 409A-related liability was accrued.
Investor verification points
- Confirm the issuer and reporting period: this document is for Oxygen Biotherapeutics, not Tenax Therapeutics, and covers the quarter ended July 31, 2012.
- Verify cash runway, subsequent financing, and whether the planned September offering installment closed.
- Review the Tenor litigation outcome and any resulting damages or costs.
- Assess preferred-stock repayment, dividend, conversion, and dilution terms, along with outstanding convertible-note obligations.
- Track clinical and regulatory progress for Oxycyte and the company’s ability to secure funding to continue development.