TENAX THERAPEUTICS, INC. (Form: 10-KT, Received: 03/14/2016 16:36:00)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C., 20549

FORM 10-K

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from May 1, 2015 to December 31, 2015

Commission File No. 001-34600

TENAX THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-2593535
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

ONE Copley Parkway, Suite 490, Morrisville, NC 27560

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number and area code: (919) 855-2100

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KT or any amendment to the this Form 10-KT. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	x	Non-accelerated filer	o	Smaller reporting company	o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, taking into account the registrant's change in fiscal year: $89,157,573.

The number of shares outstanding of the registrant’s class of $0.0001 par value common stock as of March 9, 2016 was 28,119,771.

DOCUMENTS INCORPORATED BY REFERENCE:

Proxy Statement for the 2016 Annual Meeting of Stockholders is incorporated by reference in Part III to the extent described therein.

TABLE OF CONTENTS

PART I
ITEM 1—BUSINESS	3
ITEM 1A—RISK FACTORS	10
ITEM 1B—UNRESOLVED STAFF COMMENTS	22
ITEM 2—PROPERTIES	22
ITEM 3—LEGAL PROCEEDINGS	22
ITEM 4— MINE SAFETY DISCLOSURES	22
PART II
ITEM 5—MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	23
ITEM 6—SELECTED FINANCIAL DATA	24
ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
ITEM 8—CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	42
ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	80
ITEM 9A—CONTROLS AND PROCEDURES	80
ITEM 9B—OTHER INFORMATION	80
PART III	81
PART IV	82

PART I

FORWARD-LOOKING STATEMENTS

All statements contained in this report, other than statements of historical fact, which address activities, actions, goals, prospects, or new developments, that we expect or anticipate will or may occur in the future, including plans for clinical tests and other such matters pertaining to testing and development products, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, progress in our product development and testing activities, obtaining financing for operations, development of new technologies and other competitive pressures, legal and regulatory initiatives affecting our products, conditions in the capital markets, the risks discussed in Item 1A – “Risk Factors,” and the risks discussed elsewhere in this report that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance or achievements expressed or implied by such forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We are under no duty to update any of the forward-looking statements after the date of filing of this report or to conform such statements to actual results, except as may be required by law.

All references in this Transition Report to “Tenax Therapeutics”, “we”, “our” and “us” means Tenax Therapeutics, Inc.

ITEM 1—BUSINESS

Tenax Therapeutics was originally formed as a New Jersey corporation in 1967 under the name Rudmer, David & Associates, Inc., and subsequently changed its name to Synthetic Blood International, Inc. Effective June 30, 2008, we changed the domiciliary state of the corporation to Delaware and changed the company name to Oxygen Biotherapeutics, Inc. On September 19, 2014, we changed the company name to Tenax Therapeutics, Inc.

Tenax Therapeutics, Inc. is a specialty pharmaceutical company focused on identifying, developing and commercializing products for the critical care market. On November 13, 2013, through our wholly owned subsidiary, Life Newco, Inc., or Life Newco, we acquired a license granting Life Newco an exclusive, sublicenseable right in the United States and Canada to develop and commercialize pharmaceutical products containing levosimendan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial, for use in the reduction of morbidity and mortality in cardiac surgery patients at risk for developing Low Cardiac Output Syndrome, or LCOS. We initiated a Phase III trial with levosimendan in that indication and activated the initial sites during the third quarter of calendar year 2014.

We were previously developing Oxycyte®, a systemic perfluorocarbon, or PFC, product we believed to be a safe and effective oxygen carrier for use in situations of acute ischemia. In addition, we previously developed a family of perfluorocarbon-based oxygen carriers for use in personal care, topical wound healing, and other topical indications. During 2014, we suspended the development of these PFC products while we evaluate strategic alternatives for future development and commercialization of these product candidates.

On April 9, 2015, our Board of Directors approved a change in our fiscal year to a fiscal year beginning on January 1 and ending on December 31 of each year, such change beginning as of January 1, 2016. This form 10-KT is a transition report and includes financial information for May 1, 2015 to December 31, 2015, or the Transition Period 2015. For comparative purposes, an unaudited consolidated statement of operations and comprehensive income have been included for May 1, 2014 to December 31, 2014, or the Transition Period 2014. The Transition Period 2014 has not been audited and is derived from our books and records. In the opinion of management, the Transition Period 2014 reflects all adjustments necessary to present the financial position and results of operations in accordance with generally accepted accounting principles. Prior to the year-end change, our fiscal year ended on April 30 of each year.

Business Strategy

Our principal business objective is to identify, develop, and commercialize novel therapeutic products for disease indications that represent significant areas of clinical need and commercial opportunity. The key elements of our business strategy are outlined below.

Efficiently conduct clinical development to establish clinical proof of concept with our lead product candidates. Levosimendan represents novel therapeutic modalities for the treatment of LCOS, septic shock and other critical care conditions. We are conducting clinical development with the intent to establish proof of concept in a number of important disease areas where these therapeutics would be expected to have benefit. Our focus is on conducting well-designed studies to establish a robust foundation for subsequent development, partnership and expansion into complementary areas.

Efficiently explore new high potential therapeutic applications, leveraging third-party research collaborations and our results from related areas . Our product candidates have shown promise in multiple disease areas. We are committed to exploring potential clinical indications where our therapies may achieve best-in-class profile, and where we can address significant unmet medical needs. In order to achieve this goal, we have established collaborative research relationships with investigators from research and clinical institutions and our strategic partners. These collaborative relationships have enabled us to cost effectively explore where our product candidates may have therapeutic relevance, and how it may be utilized to advance treatment over current clinical care. Additionally, we believe we will be able to leverage clinical safety data and preclinical results from some programs to support accelerated clinical development efforts in other areas, saving substantial development time and resources compared to traditional drug development.

Continue to expand our intellectual property portfolio . Our intellectual property is important to our business and we take significant steps to protect its value. We have ongoing research and development efforts, both through internal activities and through collaborative research activities with others, which aim to develop new intellectual property and enable us to file patent applications that cover new applications of our existing technologies or product candidates.

Enter into licensing or product co-development arrangements in certain areas, while out-licensing opportunities in non-core areas . In addition to our internal development efforts, an important part of our product development strategy is to work with collaborators and partners to accelerate product development, reduce our development costs, and broaden our commercialization capabilities. We believe this strategy will help us to develop a portfolio of high quality product development opportunities, enhance our clinical development and commercialization capabilities, and increase our ability to generate value from our proprietary technologies.

Our Current Programs

Levosimendan Background

Levosimendan was discovered and developed by Orion Pharma, a Finnish company. Levosimendan is a calcium sensitizer/K-ATP activator developed for intravenous use in hospitalized patients with acutely decompensated heart failure. It is currently approved in over 60 countries for this indication and not available in the United States or Canada. It is estimated that to date over 1,000,000 patients have been treated worldwide with levosimendan .

Levosimendan is a novel, first in class calcium sensitizer/K-ATP activator . The therapeutic effects of levosimendan are mediated through:

●	Increased cardiac contractility by calcium sensitization of troponin C, resulting in a positive inotropic effect which is not associated with substantial increases in oxygen demand.

●	Opening of potassium channels in the vasculature smooth muscle, resulting in a vasodilatory effect on all vascular beds.

●	Opening of mitochondrial potassium channels in cardiomyocytes, resulting in a cardioprotective effect.

This triple mechanism of action helps to preserve heart function during cardiac surgery. Several studies have demonstrated that levosimendan protects the heart and improves tissue perfusion while minimizing tissue damage during cardiac surgery.

In 2013, we acquired certain assets of Phyxius Pharma, Inc., or Phyxius, including its North American rights to develop and commercialize levosimendan in the United States and Canada.

In 2014, we initiated a Phase III trial (LEVO-CTS) to investigate the safety and efficacy of pre-operative administration of levosimendan treatment to reduce the mortality and morbidity in cardiac surgery patients at risk for developing LCOS. The Phase III trial is being conducted under a United States Food and Drug Administration, or FDA, approved Special Protocol Assessment, or SPA, and with FDA granted Fast Track status for the development of levosimendan in cardiac surgery patients at risk of LCOS.

We announced a collaboration with Imperial College London in August of 2014 which provided supplemental funding to support the accelerated enrollment and completion of the ongoing LeoPARDS Trial (Levosimendan for the Prevention of Acute oRgan Dysfunction in Sepsis). The LeoPARDS trial is designed to determine whether levosimendan reduces the incidence and severity of acute organ dysfunction in adult patients who have septic shock, as well as evaluate its safety profile.

Levosimendan Development for Cardiac Surgery Patients

Levosimendan is under development in North America for reduction in morbidity and mortality of cardiac surgery patients at risk of LCOS. We have the exclusive rights in the United States and Canada to develop and commercialize intravenous levosimendan.

The FDA has granted Fast Track status for the development of levosimendan to reduce mortality and morbidity in cardiac surgery patients at risk of LCOS and has agreed to an SPA which represents agreement with the Phase III clinical trial’s study protocol. The FDA has also provided guidance that a single successful trial will be sufficient to support approval of levosimendan in this indication. Pursuant to our license to levosimendan, we are required to use the “Simdax®” trademark to commercialize this product.

Substantial published scientific research indicates that levosimendan may provide important benefits to cardiac surgery patients, including 35 published prospectively designed clinical trials and multiple published meta-analyses. Many of these publications indicate that levosimendan provides substantial mortality and or morbidity benefits to cardiac surgery patients, particularly those at risk of developing LCOS.

LCOS is generally defined as a patient’s inability to maintain a cardiac index >2.2 L/min/m2 and hence requiring use of inotropic agents and/or mechanical assist devices such as an intra-aortic balloon pump or a left ventricular assistance device. LCOS in the cardiac surgery setting is reported to occur in 5-10% of patients undergoing cardiac surgery and is associated with 10-15 fold higher mortality or severe sequelae as a result of poor organ perfusion.

Currently, no pharmacologic therapies are approved for management or prevention of post-cardiotomy LCOS. While conventional inotropes are used to manage cardiac hemodynamics in the peri-operative setting, none have been shown to improve outcomes.

The LEVO-CTS trial design has been guided by the published literature, including important dosing refinements and inclusion of patients with low preoperative ejection fraction. In addition, we have relied heavily on the input of European clinicians who have significant personal clinical experience with the use of levosimendan in treating cardiac surgery patients.

Current data in cardiac surgery suggest that levosimendan is superior to traditional inotropes (dobutamine, phosphodiesterase [PDE]-inhibitors) as it achieves:

●	sustained hemodynamic improvement;

●	diminished myocardial injury;

●	improved tissue perfusion;

●	better outcomes and fewer hospital days;

●	effects most favorable in patients with low left ventricular ejection fraction (LVEF) (< 40%); and

●	opportunity to initiate therapy pre-operatively due to increased cardiac contractility without increasing intracellular calcium, without increasing oxygen consumption, or affecting cardiac rhythm and relaxation.

We have selected Duke University’s Duke Clinical Research Institute, or DCRI, to conduct the Phase III trial of levosimendan. DCRI is the world’s largest academic clinical research organization, with substantial experience in conducting cardiac surgery trials. The Phase III trial is being conducted in approximately 60-70 major cardiac surgery centers in North America. The trial is enrolling patients undergoing coronary artery bypass graphs, or CABG, and/or mitral valve surgery, and CABG with aortic valve surgery who are at risk for developing LCOS. The trial is designed as a double blind, randomized, placebo controlled study seeking to enroll 760 patients. Enrollment began in the third quarter of calendar year 2014, and will take approximately twenty-four months to complete. The protocol of the Phase III trial has been submitted to ClinicalTrials.gov.

Levosimendan Development for Septic Shock Patients

Septic shock is a serious life-threatening condition with high unmet medical need. Despite widespread adoption of international sepsis treatment guidelines, patients often experience acute organ dysfunction typically resulting in prolonged ICU care and hospitalization. Mortality in these patients can be as high as 30-50%. Data from the Agency for Healthcare Research and Quality indicate that inpatient stays for sepsis exceed 1,500,000 annually in the United States and ICD-9 codes indicate that as many 400,000-500,000 of these patients progress to septic shock.

Small clinical studies suggest that levosimendan may provide important benefits to septic shock patients in the form of improved cardiac function, renal function, organ perfusion, and mitochondrial function.

●

Evidence that Levosimendan Improves Cardiac Function in Septic Shock Patients . Results from a small trial of 28 patients with septic shock and echocardiographically proven acute left ventricular dysfunction indicate that levosimendan improved several parameters of cardiac function (Morelli 2005). Similar improvements in right ventricular function have been reported in a randomized placebo controlled trial of 35 patients that evaluated the use of levosimendan in patients suffering from septic shock and acute respiratory distress syndrome (Morelli 2006). Other similar studies have demonstrated levosimendan improvements in microcirculatory flow (Morelli 2010), improved hemodynamics with reduced requirements for additional catecholamines (Alhashemi 2009) and improvements in cardiac output and mixed venous oxygen saturation (Vaitsis 2009).

●

Evidence that Levosimendan Improves Renal Function in Septic Shock Patients. In a study of 28 patients with septic shock levosimendan increased creatinine clearance by 64% compared to dobutamine (Morelli 2005). Similarly, a retrospective analysis of 99 patients with septic shock who received levosimendan within 36 hours of admission to the ICU (Morelli 2009), showed levosimendan-treated patients demonstrated a 24% increase in glomerular filtration rate at 96 hours together with a reduced peak serum creatinine, when compared to matched controls.

●

Evidence that Levosimendan Improves Splanchnic/ Liver Perfusion . One trial of 28 septic shock patients indicated that levosimendan compared to dobutamine increase gastric mucosal blood flow (Morelli 2005). Another trial of 30 patients showed improved hepatic perfusion as measured by indocyanine green clearance, with levosimendan compared to dobutamine (Memis 2012).

●	Evidence that Levosimendan Improves Mitochondrial Function . A study of 26 septic shock patients provides evidence that the unique K-ATP channel mechanism of levosimendan may protect mitochondria from the significant oxidative stress that can occur in septic shock patients (Morelli 2014).

To date, no randomized controlled trials have been large enough to determine if levosimendan may reduce mortality in septic shock patients. However, a 2015 meta-analysis of several small trials conducted by Zangrillo et al concluded that levosimendan reduced mortality in patients with severe sepsis and septic shock.

The LeoPARDS Trial is designed to evaluate the efficacy and safety of levosimendan in septic shock patients. The trial plans to enroll a total of 516 patients across approximately 35 clinical trial sites in the UK. While the LeoPARDS trial was not designed by us, we expect to learn a lot about the potential utility of levosimendan in the management of septic shock once the results are available. Furthermore, we initiated discussions with the FDA in a meeting in November 2014 to discuss the LeoPARDS trial design and to seek guidance on how the LeoPARDS trial data might be analyzed to support a regulatory filing.

Should levosimendan successfully progress in clinical testing and if it appears regulatory approval for one or more medical uses is likely, we intend to evaluate our options for commercializing the product. These options include licensing levosimendan to a third party for distribution, selling the product ourselves, or establishing some other form of strategic relationship for making and distributing levosimendan with a participant in the pharmaceutical industry. We are currently investigating and evaluating all options.

Other Products

In addition to levosimendan described above, we have previously developed Oxycyte, a PFC-based oxygen carrier, our Dermacyte® line of topical cosmetic products, which contained our PFC technology and other known cosmetic ingredients to promote the appearance of skin health and other desirable cosmetic benefits, as well as Wundecyte™, a novel gel developed under a contract agreement with a lab in Virginia that was designed to be used as a wound-healing gel. As we have suspended the development of these PFC products while we evaluate strategic alternatives, we do not expect that Oxycyte, Dermacyte or Wundecyte constitute a material portion of our business going forward.

Suppliers

Pursuant to the terms of our license for levosimendan, Orion Corporation is our sole manufacturing source for levosimendan.

Intellectual Property

We rely on a combination of patent applications, patents, trade secrets, proprietary know-how, trademarks, and contractual provisions to protect our proprietary rights. We believe that to have a competitive advantage, we must develop and maintain the proprietary aspects of our technologies. Currently, we require our officers, employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers, and other advisors to execute confidentiality agreements in connection with their employment, consulting, or advisory relationships with us, where appropriate. We also require our employees, consultants, and advisors who we expect to work on our products to agree to disclose and assign to us all inventions conceived during the work day, developed using our property, or which relate to our business.

To date, we own or in-license the rights to seven U.S. and foreign patents. In addition, we have numerous U.S. patent applications pending that are complemented by the appropriate foreign patent applications related to our product candidates and proprietary processes, methods and technologies. Our issued and in-licensed patents, as well as our pending patents, expire between 2015 and 2030.

We have:

–	three U.S. patents (5,824,703; 5,840,767; 6,167,887), and one Australian patents (759,557) pertaining to the use and application of PFCs as gas transport agents in blood substitutes and liquid ventilation with an average remaining life of approximately 2 years;

–	exclusive in-licenses to three fundamental gas transport patent applications that represent the core technology used in our products and product candidates (other than levosimendan) with an average remaining life of approximately 14 years; and

–	one U.S. patent (8,513,309) and numerous patent applications for treatment of several medical and dermatological conditions such as TBI, acne, burns and wounds with an average remaining life of approximately 15 years.

Our patent and patent applications include claims covering:

–	methods to treat certain diseases and conditions and for biological gas exchange;

–	therapies for burn and wound victims;

–	delivery of oxygenated PFC;

–	various formulations containing PFC; and

–	methods and compositions for controlled and sustained production and delivery of peroxide and/or oxygen for biological and industrial applications.

We have received U.S. trademark registrations for Oxycyte®, Dermacyte®, Defense Medicine® and Oxygen Biotherapeutics, Employing O2, Preserving Life®. We have trademark applications pending for the following marks: Acnecyte™, Wundecyte™ and Vitavent™. Simdax® is owned by Orion and is licensed to us for sales and marketing purposes in the United States and Canada.

In September 2014, we discontinued the development of our Oxycyte product candidates. As part of the this change in business strategy, on May 5, 2015 we provided the Virginia Commonwealth University Intellectual Property Foundation (“VCUIPF”) their 90 day notice terminating the Exclusive License Agreement entered into between the two organizations, whose effective date was May 21, 2008. The Exclusive License Agreement gave the Company exclusive rights to intellectual property that was used for the development and commercialization of Oxycyte and is therefore no longer needed.

In addition, we own numerous domain names relevant to our business, such as www.tenaxthera.com, and others.

Competition

The pharmaceutical and biotechnology industries are intensely competitive. Many companies, including biotechnology, chemical and pharmaceutical companies, are actively engaged in activities similar to ours, including research and development of drugs for the treatment of rare medical conditions. Many of these companies have substantially greater financial and other resources, larger research and development staffs, and more extensive marketing and manufacturing organizations than we do. In addition, some of them have considerable experience in preclinical testing, clinical trials and other regulatory approval procedures. In addition, there are also academic institutions, governmental agencies and other research organizations that are conducting research in areas in which we are working. We expect to encounter significant competition for any of the pharmaceutical products we plan to develop.

LCOS: We believe the concept of using a medication preoperatively to prevent low cardiac output syndrome is novel. Because no therapies are currently approved or commonly used to prevent LCOS, our ability to succeed in the market is dependent on our ability to change the established practice paradigm, which is never an easy task. Key factors on which we will compete with regards to the development and marketing of levosimendan for the prevention of LCOS include, among others, the ability to obtain adequate efficacy data, safety data, cost effectiveness data and hospital formulary approval, as well as sufficient distribution and handling. Furthermore, while we believe the mechanism of action of levosimendan is novel, other low priced generically available products possess some similar qualities, which could present competition in the form of therapeutic substitution.

Septic Shock: Historically, pharmaceutical products developed or approved to treat sepsis or septic shock have resulted in product failures. Therefore, we believe that any product marketed for septic shock will face significant inherent market skepticism. Key factors on which we will compete with regards to the development and marketing of levosimendan for the treatment of sepsis or septic shock include, among others, the ability to obtain adequate efficacy data, safety data, cost effectiveness data and hospital formulary approval, as well as sufficient distribution and handling. In addition, classical inotropes such as dobutamine have been reserved as somewhat of a last resort alternative due to safety concerns. We believe our ability to successfully compete in the market for the treatment of sepsis or septic shock will depend on our ability to both differentiate levosimendan from dobutamine and ultimately displace dobutamine which is well establish in the current treatment guidelines

In order to compete successfully in these and other therapeutic areas, we must develop proprietary positions in patented drugs for therapeutic markets that have not been satisfactorily addressed by conventional research strategies. Our product candidates, even if successfully tested and developed, may not be adopted by physicians over other products and may not offer economically feasible alternatives to other therapies.

Government regulation

The manufacture and distribution of levosimendan will require the approval of United States government authorities as well as those of foreign countries. In the United States, the FDA regulates medical products. The Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our medical products. In addition to FDA regulations, we are also subject to other federal and state regulations, such as the Occupational Safety and Health Act and the Environmental Protection Act. Product development and approval within this regulatory framework requires a number of years and involves the expenditure of substantial funds.

Preclinical tests include evaluation of product chemistry and studies to assess the safety and effectiveness of the product and its formulation. The results of the preclinical tests are submitted to the FDA as part of the application. The goal of clinical testing is the demonstration in adequate and well-controlled studies of substantial evidence of the safety and effectiveness of the product in the setting of its intended use. The results of preclinical and clinical testing are submitted to the FDA from time to time throughout the trial process. In addition, before approval for the commercial sale of a product can be obtained, results of the preclinical and clinical studies must be submitted to the FDA. The testing and approval process requires substantial time and effort and there can be no assurance that any approval will be granted on a timely basis, if at all. The approval process is affected by a number of factors, including the severity of the condition being treated, the availability of alternative treatments and the risks and benefits demonstrated in clinical trials. Additional preclinical studies or clinical trials may be requested during the FDA review process and may delay product approval. After FDA approval for its initial indications, further clinical trials may be necessary to gain approval for the use of a product for additional indications. The FDA may also require post-marketing testing, which can involve significant expense, to monitor for adverse effects.

Our regulatory strategy is to pursue Phase III clinical testing for levosimendan in the United States. We then intend to use the results of these tests to pursue FDA marketing approval of levosimendan in the United States.

Research and Development

Our research and development efforts are focused on the development and commercialization of levosimendan for its use in clinical indications, primarily LCOS. Previously, we were also focused on furthering the development and manufacture of Oxycyte for its use in clinical indications, primarily TBI, spinal cord injury, and decompression sickness. However, we have suspended the development of Oxycyte while we evaluate strategic alternatives. We spent approximately $6.5 million on research and development during the eight months ended December 31, 2015.

During each of the fiscal years ended April 30, 2015, 2014 and 2013 we spent approximately $6.7 million, $3.0 million and $2.5 million, respectively, on research and development.

Employees

We believe that our success will be based on, among other things, the quality of our clinical programs, our ability to invent and develop superior and innovative technologies and products, and our ability to attract and retain capable management and other personnel. We have assembled a high quality team of scientists, clinical development managers, and executives with significant experience in the biotechnology and pharmaceutical industries.

As of December 31, 2015, we had ten full-time employees and one part-time employee. In addition to our employees, we also use the service and support of outside consultants and advisors. None of our employees are represented by a union, and we believe relationships with our employees are good.

Financial Information by Geographic Area

For the Transition Period 2015 and the years ended April 30, 2015, 2014 and 2013, all revenues from external customers were attributed to United States customers. As of December 31, 2015 and April 30, 2015, 2014, and 2013, all long-lived assets with a net book value were located in the United States.

Available Information

Our website address is www.tenaxthera.com, and our investor relations website is located at http://investors.tenaxthera.com. Information on our website is not incorporated by reference herein. Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and our Proxy Statements for our annual meetings of stockholders, and any amendments to those reports, as well as Section 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicable after we file the reports with, or furnish the reports to, the Securities and Exchange Commission, or the SEC. Our SEC filings are also available for reading and copying at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

ITEM 1A—RISK FACTORS

Risks Related to Our Financial Position and Need for Additional Capital

We have a limited operating history, and we expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

Our operations, to date, have been primarily limited to organizing and staffing our company, developing our technology and undertaking preclinical studies and clinical trials of our product candidates. We have not yet obtained regulatory approvals for any of our clinical product candidates. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

Specifically, our financial condition and operating results have varied significantly in the past and will continue to fluctuate from quarter-to-quarter and year-to-year in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, among others:

-	our ability to obtain additional funding to develop our product candidates;

-	the need to obtain regulatory approval of our most advanced product candidates;

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

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

-	the success of clinical trials of our levosimendan product candidates or future product candidates;

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

-	our ability to establish an effective sales and marketing infrastructure;

-	competition from existing products or new products that may emerge;

-	the ability to receive regulatory approval or commercialize our products;

-	potential side effects of our product candidates that could delay or prevent commercialization;

-	potential product liability claims and adverse events;

-	potential liabilities associated with hazardous materials;

-	our ability to maintain adequate insurance policies;

-	our dependency on third-party manufacturers to supply or manufacture our products;

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

-	our ability, our partners’ abilities, and third parties’ abilities to protect and assert intellectual property rights;

-	costs related to and outcomes of potential litigation;

-	compliance with obligations under intellectual property licenses with third parties;

-	our ability to adequately support future growth; and

-	our ability to attract and retain key personnel to manage our business effectively.

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

We may need additional funding and if we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our product development programs.

Developing biopharmaceutical products, including conducting preclinical studies and clinical trials and establishing manufacturing capabilities, is expensive. We expect our research and development expenses to increase in connection with our ongoing activities, particularly as we focus on and proceed with our Phase III clinical program. In addition, our expenses could increase beyond expectations if applicable regulatory authorities, including the FDA, require that we perform additional studies to those that we currently anticipate, in which case the timing of any potential product approval may be delayed. As of December 31, 2015, we had $38.2 million of cash, including the fair value of our marketable securities on hand. Based on our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our projected operating requirements through the calendar year 2017. We will need substantial additional capital in the future in order to complete the commercialization of levosimendan and to fund the development and commercialization of future product candidates. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Such funding, if needed, may not be available on favorable terms, if at all. In the event we are unable to obtain additional capital, we may delay or reduce the scope of our current research and development programs and other expenses.

If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates or to grant licenses on terms that may not be favorable to us. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements will depend on many factors, including, but not limited to:

-	the scope, rate of progress and cost of our clinical trials and other research and development activities;

-	the costs and timing of regulatory approval;

-	the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

-	the effect of competing technological and market developments;

-	the terms and timing of any collaboration, licensing or other arrangements that we may establish;

-	the cost and timing of completion of clinical and commercial-scale manufacturing activities; and

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

Risks Related to Commercialization and Product Development

We are limited in the number of products we can simultaneously pursue and therefore our survival depends on our success with a small number of product opportunities.

We have limited financial resources, so at present we are primarily focusing these resources on developing levosimendan for the treatment of low cardiac output syndrome. At present we intend to commit most of our resources to advancing levosimendan to the point it receives regulatory approval for one or more medical uses, and if this effort is unsuccessful we may not have resources to pursue development of our other products and our business would terminate. Furthermore, by delaying development of Oxycyte, this technology may become obsolete by the time we have sufficient capital to resume development and testing, so the funds expended on this product to date would be lost, as well as our opportunity to benefit if the product could be successfully developed.

We currently have no approved drug products for sale and we cannot guarantee that we will ever have marketable drug products.

We currently have no approved drug products for sale. The research, testing, manufacturing, labeling, approval, selling, marketing, and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, with regulations differing from country to country. We are not permitted to market our product in the United States until we receive approval of a new drug application, or an NDA, from the FDA for each product candidate. We have not submitted an NDA or received marketing approval for any of our product candidates. Obtaining approval of an NDA is a lengthy, expensive and uncertain process. Markets outside of the United States also have requirements for approval of drug candidates which we must comply with prior to marketing. Accordingly, we cannot guarantee that we will ever have marketable drug products.

The development of levosimendan is subject to a high level of technological risk.

We expect to devote a substantial portion of our financial and managerial resources to pursuing Phase III clinical trials for levosimendan over the next two years. The biomedical field has undergone rapid and significant technological changes. Technological developments may result in our products becoming obsolete or non-competitive before we are able to recover any portion of the research and development and other expenses we have incurred to develop and clinically test levosimendan. As our opportunity to generate substantial product revenues within the next three to four years is most likely dependent on successful testing and commercialization of levosimendan for surgical applications, any such occurrence would have a material adverse effect on our operations and could result in the cessation of our business.

We may be 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 two years to clinical testing of levosimendan and advancing this product to regulatory approval for use in one or more medical applications. All of these clinical trials and testing will be expensive and time consuming and the timing of the regulatory review process is uncertain. The applicable regulatory agencies may suspend clinical trials at any time if they believe that the subjects participating in such trials are being exposed to unacceptable health risks. We cannot ensure that we will be able to complete our clinical trials successfully or obtain FDA or other governmental or regulatory approval of our products, or that such approval, if obtained, will not include limitations on the indicated uses for which our products may be marketed. Our business, financial condition and results of operations are critically dependent on obtaining capital to advance our testing program and receiving FDA and other governmental and regulatory approvals of our products. A significant delay in or failure of our planned clinical trials or a failure to achieve these approvals would have a material adverse effect on us and could result in major setbacks or jeopardize our ability to continue as a going concern.

The market may not accept our products.

Even if regulatory approval is obtained, there is a risk that the efficacy and pricing of our products, considered in relation to our products’ expected benefits, will not be perceived by health care providers and third-party payers as cost-effective, and that the price of our products will not be competitive with other new technologies or products. Our results of operations may be adversely affected if the price of our products are not considered cost-effective or if our products do not otherwise achieve market acceptance.

Any collaboration we enter with third parties to develop and commercialize our 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 our product candidates. Our dependence on future partners for development and commercialization of our product candidates would subject us to a number of risks, including:

-	we may not be able to control the amount and timing of resources that our partners may devote to the development or commercialization of our product candidates or to their marketing and distribution;

-	partners may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

-	disputes may arise between us and our partners that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management’s attention and resources;

-	partners may experience financial difficulties;

-	partners may not properly maintain or defend our intellectual property rights, or may use our proprietary information, in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or proprietary information or expose us to potential litigation;

-	business combinations or significant changes in a partner’s business strategy may adversely affect a partner’s willingness or ability to meet its obligations under any arrangement;

-	a partner could independently move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; and

-	the collaborations with our partners may be terminated or allowed to expire, which would delay the development and may increase the cost of developing our product candidates.

Delays in the enrollment and completion of clinical testing could result in increased costs to us and delay or limit our ability to obtain regulatory approval for our product candidates.

Delays in the enrollment and completion of clinical testing could significantly affect our product development costs. We do not know whether clinical trials for levosimendan will be completed on schedule, if at all. The completion of clinical trials requires us to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs for the same indication as our product candidates or may be required to withdraw from our clinical trial as a result of changing standards of care or may become ineligible to participate in clinical studies. The enrollment and completion of clinical trials can be delayed for a variety of other reasons, including delays related to:

-	reaching agreements on acceptable terms with prospective trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among trial sites;

-	obtaining institutional review board, or IRB, approval to conduct a clinical trial at numerous prospective sites;

-	recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including meeting the enrollment criteria for our study and competition from other clinical trial programs for the same indication as our product candidates;

-	maintaining and supplying clinical trial material on a timely basis; and

-	collecting, analyzing and reporting final data from the clinical trials.

In addition, a clinical trial may be suspended or terminated by us, the FDA or other regulatory authorities due to a number of factors, including:

-	failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

-	inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

-	unforeseen safety issues or any determination that a trial presents unacceptable health risks; and

-	lack of adequate funding to continue the clinical trial, including unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of our contract research organizations, or CROs, and other third parties.

Changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes with appropriate regulatory authorities. Amendments may require us to resubmit our clinical trial protocols to IRBs for re-examination, which may impact the costs, timing or successful completion of a clinical trial. If we experience delays in the completion of, or if we terminate, our clinical trials, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Even if we are able to ultimately commercialize our product candidates, other therapies for the same or similar indications may have been introduced to the market and established a competitive advantage.

Risks Relating to Regulatory Matters

Our activities are and will continue to be subject to extensive government regulation, which is expensive and time consuming, and we will not be able to sell our products without regulatory approval.

Our research, development, testing, manufacturing, marketing and distribution of levosimendan is, and will continue to be, subject to extensive regulation, monitoring and approval by the FDA and other regulatory agencies. There are significant risks at each stage of the regulatory scheme.

Product approval stage

During the product approval stage we attempt to prove the safety and efficacy of our product for its indicated uses. There are numerous problems that could arise during this stage, including:

-	the data obtained from laboratory testing and clinical trials are susceptible to varying interpretations, which could delay, limit or prevent FDA and other regulatory approvals;

-	adverse events could cause the FDA and other regulatory authorities to halt trials;

-	at any time the FDA and other regulatory agencies could change policies and regulations that could result in delay and perhaps rejection of our products; and

-	even after extensive testing and clinical trials, there is no assurance that regulatory approval will ever be obtained for any of our products.

Post-commercialization stage

Discovery of previously unknown problems with our products, or unanticipated problems with our manufacturing arrangements, even after FDA and other regulatory approvals of our products for commercial sale may result in the imposition of significant restrictions, including withdrawal of the product from the market.

Additional laws and regulations may also be enacted that could prevent or delay regulatory approval of our products, including laws or regulations relating to the price or cost-effectiveness of medical products. Any delay or failure to achieve regulatory approval of commercial sales of our products is likely to have a material adverse effect on our financial condition, results of operations and cash flows.

The FDA and other regulatory agencies continue to review products even after they receive agency approval. If and when the FDA or another regulatory agency outside the United States approves one of our products, its manufacture and marketing will be subject to ongoing regulation, which could include compliance with current good manufacturing practices, adverse event reporting requirements and general prohibitions against promoting products for unapproved or “off-label” uses. We are also subject to inspection and market surveillance by the FDA for compliance with these and other requirements. Any enforcement action resulting from failure, even by inadvertence, to comply with these requirements could affect the manufacture and marketing of levosimendan or our other products. In addition, the FDA or other regulatory agencies could withdraw a previously approved product from the market upon receipt of newly discovered information. The FDA or another regulatory agency could also require us to conduct additional, and potentially expensive, studies in areas outside our approved indicated uses.

We must continually monitor the safety of our products once approved and marketed for signs that their use may elicit serious and unexpected side effects and adverse events, which could jeopardize our ability to continue marketing the products. We may also be required to conduct post-approval clinical studies as a condition to licensing a product.

As with all pharmaceutical products, the use of our products could sometimes produce undesirable side effects or adverse reactions or events (referred to cumulatively as adverse events). For the most part, we would expect these adverse events to be known and occur at some predicted frequency. When adverse events are reported to us, we will be required to investigate each event and circumstances surrounding it to determine whether it was caused by our product and whether it implies that a previously unrecognized safety issue exists. We will also be required to periodically report summaries of these events to the applicable regulatory authorities.

In addition, the use of our products could be associated with serious and unexpected adverse events, or with less serious reactions at a greater than expected frequency. This may be especially true when our products are used in critically ill or otherwise compromised patient populations. When these unexpected events are reported to us, we will be required to make a thorough investigation to determine causality and implications for product safety. These events must also be specifically reported to the applicable regulatory authorities. If our evaluation concludes, or regulatory authorities perceive, that there is an unreasonable risk associated with the product, we would be obligated to withdraw the impacted lot(s) of that product. Furthermore, an unexpected adverse event of a new product could be recognized only after extensive use of the product, which could expose us to product liability risks, enforcement action by regulatory authorities and damage to our reputation and public image.

A serious adverse finding concerning the risk of our products by any regulatory authority could adversely affect our reputation, business and financial results.

When a new product is approved, the FDA or other regulatory authorities may require post-approval clinical trials, sometimes called Phase IV clinical trials. If the results of such trials are unfavorable, this could result in the loss of the license to market the product, with a resulting loss of sales.

After our products are commercialized, we expect to spend considerable time and money complying with federal and state laws and regulations governing their sale, and, if we are unable to fully comply with such laws and regulations, we could face substantial penalties.

Health care providers, physicians and others will play a primary role in the recommendation and prescription of our clinical products. Our arrangements with third-party payers and customers may expose us to broadly applicable fraud and abuse and other health care laws and regulations that may constrain the business or financial arrangements and relationships through which we will market, sell and distribute our products. Applicable federal and state health care laws and regulations are expected to include, but not be limited to, the following:

the federal anti-kickback statute is a criminal statute that makes it a felony for individuals or entities knowingly and willfully to offer or pay, or to solicit or receive, direct or indirect remuneration, in order to induce the purchase, order, lease, or recommending of items or services, or the referral of patients for services, that are reimbursed under a federal health care program, including Medicare and Medicaid;

the federal False Claims Act imposes liability on any person who knowingly submits, or causes another person or entity to submit, a false claim for payment of government funds. Penalties include three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim. In addition, the False Claims Act permits a person with knowledge of fraud, referred to as a qui tam plaintiff, to file a lawsuit on behalf of the government against the person or business that committed the fraud, and, if the action is successful, the qui tam plaintiff is rewarded with a percentage of the recovery;

-	health Insurance Portability and Accountability Act imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

-	the Social Security Act contains numerous provisions allowing the imposition of a civil money penalty, a monetary assessment, exclusion from the Medicare and Medicaid programs, or some combination of these penalties; and

many states have analogous state laws and regulations, such as state anti-kickback and false claims laws. In some cases, these state laws impose more strict requirements than the federal laws. Some state laws also require pharmaceutical companies to comply with certain price reporting and other compliance requirements.

Our failure to comply with any of these federal and state health care laws and regulations, or health care laws in foreign jurisdictions, could have a material adverse effect on our business, financial condition, result of operations and cash flows.

Health care reform and controls on health care spending may limit the price we can charge for our products and the amount we can sell.

As a result of Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010, collectively, the ACA, enacted in March 2010, substantial changes have occurred and are expected to continue to occur in the system for paying for health care in the United States, including changes made in order to extend medical benefits to those who currently lack insurance coverage. This comprehensive health care reform legislation also included provisions to control health care costs and improve health care quality. Together with ongoing statutory and budgetary policy developments at a federal level, this health care reform legislation could include changes in Medicare and Medicaid payment policies and other health care delivery administrative reforms that could potentially negatively impact our business. Because not all the administrative rules implementing health care reform under the legislation have been finalized, and because of ongoing federal fiscal budgetary pressures not yet resolved for federal health programs, the full impact of the ACA and of further statutory actions to reform healthcare payment on our business is unknown, but there can be no assurances that health care reform legislation will not adversely impact either our operational results or the manner in which we operate our business. Cost of care could be reduced by reducing the level of reimbursement for medical services or products (including those biopharmaceuticals that we intend to produce and market), or by restricting coverage (and, thereby, utilization) of medical services or products. In either case, a reduction in the utilization of, or reimbursement for, our products could have a materially adverse impact on our financial performance.

Uncertainty of third-party reimbursement could affect our future results of operations.

Sales of medical products largely depend on the reimbursement of patients’ medical expenses by governmental health care programs and private health insurers. We will be required to report detailed pricing information, net of included discounts, rebates and other concessions, to the Centers for Medicare and Medicaid Services, or CMS, for the purpose of calculating national reimbursement levels, certain federal prices, and certain federal rebate obligations. If we report pricing information that is not accurate to the federal government, we could be subject to fines and other sanctions that could adversely affect our business. In addition, the government could change its calculation of reimbursement, federal prices, or federal rebate obligations which could negatively impact us. There is no guarantee that government health care programs or private health insurers will reimburse for the sales of our products, or permit us to sell our products at high enough prices to generate a profit.

Governments outside the United States tend to impose strict price controls and reimbursement approval policies, which may adversely affect our prospects for generating revenue outside the United States.

In some countries, particularly European Union countries and Canada, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. To obtain or maintain reimbursement or pricing approval in some countries with respect to any product candidate that achieves regulatory approval, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products upon approval, if at all, is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our prospects for generating revenue, if any, could be adversely affected which would have a material adverse effect on our business and results of operations. Further, if we achieve regulatory approval of any product, we must successfully negotiate product pricing for such product in individual countries. As a result, the pricing of our products, if approved, in different countries may vary widely, thus creating the potential for third-party trade in our products in an attempt to exploit price differences between countries. This third-party trade of our products could undermine our sales in markets with higher prices.

Risks Relating to Our Dependence on Third Parties

We depend on third parties to manufacture our products.

We do not own or operate any manufacturing facilities for the commercial-scale production of our products. Instead, we rely on third party manufacturers. For example, pursuant to the terms of our license for levosimendan, Orion Corporation is our sole manufacturing source for levosimendan. Accordingly, our business is susceptible to disruption, and our results of operations can be adversely affected, by any disruption in supply or other adverse developments in our relationship with Orion Corporation. If supply from Orion Corporation is delayed or terminated, or if its facilities suffer any damage or disruption, we may need to successfully qualify an alternative supplier in a timely manner in order to not disrupt our business. If we cannot obtain an alternate manufacturer in a timely manner, we would experience a significant interruption in supply of levosimendan, which could negatively affect our financial condition, results of operations and cash flows.

We depend on the services of a limited number of key personnel.

Our success is highly dependent on the continued services of a limited number of scientists and support personnel. The loss of any of these individuals, in particular, John P. Kelley, our Chief Executive Officer, could have a material adverse effect on us. In addition, our success will depend, among other factors, on the recruitment and retention of additional highly skilled and experienced management and technical personnel. There is a risk that we will not be able to retain existing employees or to attract and retain additional skilled personnel on acceptable terms given the competition for such personnel among numerous large and well-funded pharmaceutical and health care companies, universities, and non-profit research institutions, which could negatively affect our financial condition, results of operations and cash flows.

We have limited experience in the sale and marketing of medical products.

We have limited experience in the sale and marketing of approved medical products and marketing the licensing of such products before FDA or other regulatory approval. We have not decided upon a commercialization strategy in these areas. We do not know of any third party that is prepared to distribute our products should they be approved. If we decide to establish our own commercialization capability, we will need to recruit, train and retain a marketing staff and sales force with sufficient technical expertise. We do not know whether we can establish a commercialization program at a cost that is acceptable in relation to revenue or whether we can be successful in commercializing our product. Factors that may inhibit our efforts to commercialize our products directly and without strategic partners include:

-	our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

-	the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe our products;

-	the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

-	unforeseen costs and expenses associated with creating and sustaining an independent sales and marketing organization.

Failure to successfully commercialize our products or to do so on a cost effective basis would likely result in failure of our business.

We may enter into distribution arrangements and marketing alliances for certain products and any failure to successfully identify and implement these arrangements on favorable terms, if at all, may impair our ability to commercialize our product candidates.

We do not anticipate having the resources in the foreseeable future to develop global sales and marketing capabilities for all of the products we develop, if any. We may pursue arrangements regarding the sales and marketing and distribution of one or more of our product candidates and our future revenues may depend, in part, on our ability to enter into and maintain arrangements with other companies having sales, marketing and distribution capabilities and the ability of such companies to successfully market and sell any such products. Any failure to enter into such arrangements and marketing alliances on favorable terms, if at all, could delay or impair our ability to commercialize our product candidates and could increase our costs of commercialization. Any use of distribution arrangements and marketing alliances to commercialize our product candidates will subject us to a number of risks, including the following:

-	we may be required to relinquish important rights to our products or product candidates;

-	we may not be able to control the amount and timing of resources that our distributors or collaborators may devote to the commercialization of our product candidates;

-	our distributors or collaborators may experience financial difficulties;

-	our distributors or collaborators may not devote sufficient time to the marketing and sales of our products; and

-	business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement.

We may need to enter into additional co-promotion arrangements with third parties where our own sales force is neither well situated nor large enough to achieve maximum penetration in the market. We may not be successful in entering into any co-promotion arrangements, and the terms of any co-promotion arrangements we enter into may not be favorable to us.

Risks Relating to Intellectual Property

It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our product candidates and the methods used to manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using, selling, offering to sell or importing our products is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

We license certain intellectual property from third parties that covers our product candidates. We rely on certain of these third parties to file, prosecute and maintain patent applications and otherwise protect the intellectual property to which we have a license, and we have not had and do not have primary control over these activities for certain of these patents or patent applications and other intellectual property rights. We cannot be certain that such activities by third parties have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. Our enforcement of certain of these licensed patents or defense of any claims asserting the invalidity of these patents would also be subject to the cooperation of the third parties.

The patent positions of pharmaceutical and biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biopharmaceutical patents has emerged to date in the United States. The biopharmaceutical patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the patents we own or to which we have a license from a third-party. Further, if any of our patents are deemed invalid and unenforceable, it could impact our ability to commercialize or license our technology.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

-	others may be able to make compositions or formulations that are similar to our product candidates but that are not covered by the claims of our patents;

-	we might not have been the first to make the inventions covered by our issued patents or pending patent applications;

-	we might not have been the first to file patent applications for these inventions;

-	others may independently develop similar or alternative technologies or duplicate any of our technologies;

-	it is possible that our pending patent applications will not result in issued patents;

-	our issued patents may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges by third parties;

-	we may not develop additional proprietary technologies that are patentable; or

-	the patents of others may have an adverse effect on our business.

We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

We rely on confidentiality agreements that, if breached, may be difficult to enforce and could have a material adverse effect on our business and competitive position.

Our policy is to enter agreements relating to the non-disclosure and non-use of confidential information with third parties, including our contractors, consultants, advisors and research collaborators, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them. However, these agreements can be difficult and costly to enforce. Moreover, to the extent that our contractors, consultants, advisors and research collaborators apply or independently develop intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to the intellectual property. If a dispute arises, a court may determine that the right belongs to a third party, and enforcement of our rights can be costly and unpredictable. In addition, we rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ, we still face the risk that:

-	these agreements may be breached;

-	these agreements may not provide adequate remedies for the applicable type of breach; or

-	our trade secrets or proprietary know-how will otherwise become known.

Any breach of our confidentiality agreements or our failure to effectively enforce such agreements would have a material adverse effect on our business and competitive position.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use, our technology.

If we or our partners choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or company has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to these patents.

Furthermore, a third party may claim that we or our manufacturing or commercialization partners are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we or our commercialization partners are infringing the third party’s patents and would order us or our partners to stop the activities covered by the patents. In addition, there is a risk that a court will order us or our partners to pay the other party damages for having violated the other party’s patents. We have agreed to indemnify certain of our commercial partners against certain patent infringement claims brought by third parties. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either does not infringe the patent claims of the relevant patent and/or that the patent claims are invalid, and we may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications, or that we were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our patent applications or patents, which could further require us to obtain rights to issued patents by others covering such technologies. If another party has filed a U.S. patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful if, unbeknownst to us, the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such inventions.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

Our collaborations with outside scientists and consultants may be subject to restriction and change.

We work with chemists, biologists and other scientists at academic and other institutions, and consultants who assist us in our research, development, regulatory and commercial efforts, including the members of our scientific advisory board. These scientists and consultants have provided, and we expect that they will continue to provide, valuable advice on our programs. These scientists and consultants are not our employees, may have other commitments that would limit their future availability to us and typically will not enter into non-compete agreements with us. If a conflict of interest arises between their work for us and their work for another entity, we may lose their services. In addition, we will be unable to prevent them from establishing competing businesses or developing competing products. For example, if a key scientist acting as a principal investigator in any of our clinical trials identifies a potential product or compound that is more scientifically interesting to his or her professional interests, his or her availability to remain involved in our clinical trials could be restricted or eliminated.

Under current law, we may not be able to enforce all employees’ covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

We have entered into non-competition agreements with certain of our employees. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. Under current law, we may be unable to enforce these agreements against certain of our employees and it may be difficult for us to restrict our competitors from gaining the expertise our former employees gained while working for us. If we cannot enforce our employees’ non-compete agreements, we may be unable to prevent our competitors from benefiting from the expertise of our former employees.

We may infringe or be alleged to infringe intellectual property rights of third parties.

Our products or product candidates may infringe on, or be accused of infringing on, one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued and to which we do not hold a license or other rights. Third parties may own or control these patents or patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

If we are found to infringe the patent rights of a third party, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms.

There have been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products. Our products, after commercial launch, may become subject to Paragraph IV certification under the Hatch-Waxman Act, thus forcing us to initiate infringement proceedings against such third-party filers. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We try to ensure that our employees do not use the proprietary information or know-how of others in their work for us. We may, however, be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee’s former employer. Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management. If we fail to defend any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

Product liability lawsuits against us could cause us to incur substantial liabilities, limit sales of our existing products and limit commercialization of any products that we may develop.

Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, distribution, and sale of biotechnology products. We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and an even greater risk when we commercially sell any products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

-	decreased demand for our products and any product candidates that we may develop;

-	injury to our reputation;

-	withdrawal of clinical trial participants;

-	costs to defend the related litigation;

-	substantial monetary awards to trial participants or patients;

-	loss of revenue; and

-	the inability to commercialize any products that we may develop.

We currently maintain limited product liability insurance coverage for our clinical trials in the total amount of $3 million. However, our profitability will be adversely affected by a successful product liability claim in excess of our insurance coverage. There can be no assurance that product liability insurance will be available in the future or be available on reasonable terms.

Risks Related to Owning Our Common Stock

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

The market price of shares of our common stock has been, and may be in the future, subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:

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

-	status and/or results of our clinical trials;

-	status of ongoing litigation;

-	results of clinical trials of our competitors’ products;

-	regulatory actions with respect to our products or our competitors’ products;

-	actions and decisions by our collaborators or partners;

-	actual or anticipated changes in our growth rate relative to our competitors;

-	actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate;

-	competition from existing products or new products that may emerge;

-	issuance of new or updated research or reports by securities analysts;

-	fluctuations in the valuation of companies perceived by investors to be comparable to us;

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

-	market conditions for biopharmaceutical stocks in general;

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

-	general economic and market conditions.

On December 31, 2015 the closing price of our common stock was $3.28, as compared to $3.42 and $4.88 as of April 30, 2015 and 2014, respectively. During the eight months ended December 31, 2015, the lowest closing price for our common stock was $2.88 and the highest closing price was $3.81. All stock prices are as adjusted for the 1-for-20 reverse stock split effective on May 10, 2013.

Some companies that have had volatile market prices for their securities have had securities class action lawsuits filed against them. Such lawsuits, should they be filed against us in the future, could result in substantial costs and a diversion of management’s attention and resources. This could have a material adverse effect on our business, results of operations and financial condition.

We are likely to attempt to raise additional capital through issuances of debt or equity securities, which may cause our stock price to decline, dilute the ownership interests of our existing stockholders, and/or limit our financial flexibility.

Historically we have financed our operations through the issuance of equity securities and debt financings, and we expect to continue to do so for the foreseeable future. As of December 31, 2015, we had $38.2 million of cash and cash equivalents on hand. Based on our current operating plans, we believe our existing cash and cash equivalents are sufficient to continue to fund operations through the calendar year 2017. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution of their ownership interests. Debt financing, if available, may involve restrictive covenants that limit our financial flexibility or otherwise restrict our ability to pursue our business strategies. Additionally, if we issue shares of common stock, or securities convertible or exchangeable for common stock, the market price of our existing common stock may decline. There can be no assurance that we will be successful in obtaining any additional capital resources in a timely manner, on favorable terms, or at all.

We have issued in the past, and may issue in the future, substantial amounts of instruments that are convertible into or exercisable for common stock, and our existing stockholders may face substantial dilution if such instruments are converted or exercised.

As of March 9, 2016, we had outstanding warrants and options, securities purchase agreements, and other instruments that are exercisable into an aggregate of 6,761,175 shares of our common stock, which, if exercised, would represent approximately 24% of our current outstanding common stock. These instruments carry a wide variety of different terms and prices, and there can be no assurance as to when or whether exercises of these instruments may occur. If all or any substantial portion of these instruments are exercised, our existing stockholders may face substantial dilution of their ownership interests.

Risks Relating to Employee Matters and Managing Growth

We may need to increase the size of our company, and we may experience difficulties in managing growth.

As of March 9, 2016, we had 10 full-time employees. We may need to expand our managerial, operational, administrative, financial and other resources in order to manage and fund our operations and clinical trials, continue our development activities and commercialize our product candidates. To support this growth, we may hire additional employees within the next 12 months. Our management, personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively manage our operations, growth and various projects requires that we continue to improve our operational, financial and management controls, reporting systems and procedures.

We may not be able to attract or retain qualified management and scientific personnel in the future. If we are unable to attract and retain necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede our achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy.

In addition, we have scientific and clinical advisors who assist us in our product development and clinical strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us, or may have arrangements with other companies to assist in the development of products that may compete with ours. Because our business depends on certain key personnel and advisors, the loss of such personnel and advisors could weaken our management team and we may experience difficulty in attracting and retaining qualified personnel and advisors.

ITEM 1B—UNRESOLVED STAFF COMMENTS

None.

ITEM 2—PROPERTIES

We own no real property. We lease our principal executive office at ONE Copley Parkway, Suite 490, Morrisville, North Carolina 27560. The current rent is approximately $9,492 per month for the facility.

ITEM 3—LEGAL PROCEEDINGS

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.

ITEM 4— MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5—MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price and Number of Stockholders

Our common stock is listed on the NASDAQ Capital Market under the symbol “TENX.” The following table sets forth, for the periods indicated, the range of high and low sales prices in each fiscal quarter for our common stock, all as adjusted for the 1-for-20 reverse stock split effective on May 10, 2013.

Year-Ended April 30, 2014	High		Low
First Quarter	$	5.69	$	1.40
Second Quarter	$	3.46	$	1.19
Third Quarter	$	11.40	$	3.04
Fourth Quarter	$	8.35	$	4.46

Year-Ended April 30, 2015	High		Low
First Quarter	$	5.18	$	3.60
Second Quarter	$	4.40	$	3.34
Third Quarter	$	4.76	$	3.01
Fourth Quarter	$	3.54	$	2.88

Transition Period Ended December 31, 2015	High		Low
First Quarter	$	3.88	$	3.26
Second Quarter	$	3.98	$	2.88
Two Month Ended December 31, 2015	$	3.40	$	2.98

As of March 9, 2016 there were 1,352 holders of record of our common stock. In addition, we believe that a significant number of beneficial owners of our common stock hold their shares in nominee or in “street name” accounts through brokers. On March 9, 2016, the last sale price reported on the NASDAQ Capital Market for our common stock was $2.07 per share.

Performance Graph

The following graph compares the percentage change in cumulative total return from April 30, 2010 through December 31, 2015 for (i) our common stock (ii) the Nasdaq Composite Index (iii) the Nasdaq Biotechnology Index and (iv) the Standard & Poor’s Global Healthcare Index. All values assume the investment on April 30, 2010 of $100 at the closing price on such date and reinvestment of the full amount of all dividends (to date, we have not declared any dividends). The stock price performance of the following graph is not necessarily indicative of future stock price performance.

This stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, or subject to Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any of our filings under the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference into such filing.

Comparison of cumulative total return on investment since April 30, 2010:

	4/30/2010		4/30/2011		4/30/2012		4/30/2013		4/30/2014		4/30/2015		12/31/2015
Tenax Therapeutics, Inc.	$	100.00	$	35.40	$	35.60	$	5.00	$	4.88	$	3.42	$	3.28
Nasdaq Composite		100.00		116.75		123.78		135.25		167.18		200.77		203.45
Nasdaq Biotechnology		100.00		117.78		137.44		188.87		252.38		361.71		370.85
S&P Global Healthcare		100.00		116.48		120.12		152.26		181.73		214.33		204.22

Dividend Policy

Since our inception, we have not paid dividends on our common stock. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on our common stock will be declared and paid in the foreseeable future.

Repurchases of Common Stock

None.

Unregistered Sales of Equity Securities

None.

ITEM 6—SELECTED FINANCIAL DATA

The following consolidated financial and operating data set forth below with respect to our consolidated statements of operations and cash flows for Transition Period 2015, fiscal year 2015, fiscal year 2014 and fiscal year 2013, and the consolidated balance sheets as of December 31, 2015, April 30, 2015 and April 30, 2014 are derived from the consolidated financial statements included elsewhere in this report. The consolidated statements of operations and cash flows data for fiscal years 2012 and 2011, and the consolidated balance sheet data as of April 30, 2013, 2012 and 2011 are derived from previously filed consolidated financial statements. The data set forth below should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes beginning on page 42 and other financial information included in this report. Our historical results are not necessarily indicative of the results we may achieve in any future period.

	Eight Months Ended December 31,						Fiscal Year Ended April 30,
	2015			2014			2015			2014			2013			2012			2011
				(Unaudited)
Statements of Operations Data:
Total net revenue	$	-		$	-		$	49,286		$	158,926		$	1,190,928		$	363,781		$	103,167
Operating loss		(10,425,498	)		(8,680,309	)		(14,816,743	)		(16,611,120	)		(5,189,072	)		(8,220,197	)		(10,562,677	)
Net loss		(10,067,964	)		(8,217,625	)		(14,081,812	)		(19,541,839	)		(9,415,800	)		(15,712,410	)		(10,448,296	)
Diluted net loss per share (1)		(0.36	)		(0.29	)		(0.50	)		(2.71	)		(6.68	)		(14.07	)		(8.95	)
Balance Sheet Data:
Cash, short-term and long-term investments		38,208,001			51,388,762			48,101,534			58,320,555			783,528			1,879,872			951,944
Total assets		72,987,078			87,484,111			82,908,344			93,429,440			3,180,643			4,141,934			2,922,356
Long-term liabilities		7,962,100			7,962,100			7,962,100			7,973,032			3,049,102			1,361,110			4,463,635
Accumulated deficit		(160,735,699	)		(144,962,323	)		(150,667,735	)		(136,585,923	)		(117,044,084	)		(107,628,284	)		(91,915,874	)
Total stockholders’ equity (deficit)		60,423,348			76,004,387			70,429,034			82,885,361			(1,778,036	)		(346,046	)		(3,724,523	)
Statements of Cash Flows Data:
Net cash flows from operating activities		(8,950,610	)		(6,632,268	)		(9,748,794	)		(9,261,571	)		(4,921,283	)		(8,278,366	)		(8,403,142	)

(1)	Computed as described in Note B to our consolidated financial statements included in this report.

ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with the Consolidated Financial Statements and the related notes to those statements included in “Item 8 – Consolidated Financial Statements and Supplementary Data.” This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Transition Report on Form 10-KT, our actual results may differ materially from those anticipated in these forward-looking statements.

Change in Fiscal Year

On April 9, 2015, our Board of Directors approved a change in our fiscal year to a fiscal year beginning on January 1 and ending on December 31 of each year, such change beginning as of January 1, 2016. As a result of this change, financial results for the Transition Period 2015, are compared to the unaudited financial results for the Transition Period 2014. When financial results for fiscal year 2015 and fiscal year 2014 are compared to the prior year, the results are presented on the basis of our previous fiscal year-end on a twelve month basis.

Results of operations- Comparison of the eight months ended December 31, 2015 and 2014

General and Administrative Expenses

General and administrative expenses consist primarily of compensation for executive, finance, legal and administrative personnel, including stock-based compensation. Other general and administrative expenses include facility costs not otherwise included in research and development expenses, legal and accounting services, other professional services, and consulting fees. General and administrative expenses and percentage changes for the eight months ended December 31, 2015 and 2014, respectively, are as follows:

	Eight months ended December 31,				Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Personnel costs	$	1,998,627	$	1,715,577	$	283,050			16	%
Legal and professional fees		1,314,303		2,166,977		(852,674	)		(39	) %
Other costs		502,345		369,193		133,152			36	%
Facilities		102,421		110,011		(7,590	)		(7	) %
Depreciation and amortization		22,935		78,084		(55,149	)		(71	) %

Personnel costs:

Personnel costs increased approximately $283,000 for the eight months ended December 31, 2015 compared to the same period in the prior year. The increase was due primarily to approximately $400,000 for annual bonuses accrued and the recognition of approximately $98,000 for the vesting of stock options granted during the period, partially offset by a $215,000 accrual for severance payments in the prior year paid to certain employees following the stoppage of the TBI trials.

Legal and professional fees:

Legal and professional fees consist of the costs incurred for legal fees, accounting fees, recruiting costs and investor relations services, as well as fees paid to our Board of Directors. Legal and professional fees decreased approximately $853,000 for the eight months ended December 31, 2015 compared to the same period in the prior year. This decrease was primarily due to a reduction in costs incurred for investor relations services and the vested value of stock option grants to our Board of Directors, partially offset by an increase in legal and consulting fees paid.

●

Costs associated with investor relations and communications decreased approximately $912,000 in the current period. This decrease was due primarily to the recognition of approximately $475,000 for the fair value of warrants issued to a third party investor relations firm during the same period in the prior year as well as a reduction of approximately $437,000 in fees paid in the prior year to third party investor relations firms for providing marketing and corporate communications services to us in the current period.

●

Board of Directors fees decreased in the current period by approximately $64,000. This decrease was due primarily to a reduction in the recognized expense for the vesting of stock options awarded in the current period as compared to the recognized expense for stock options awarded in the same period of the prior year.

●	Consulting costs increased approximately $87,000 due to the costs incurred for market research and commercial development services during the current period that were not incurred during the same period in the prior year.

Other costs:

Other costs include costs incurred for travel, supplies, insurance and other miscellaneous charges. The approximately $133,000 increase in other costs for the eight months ended December 31, 2015 was due primarily to an approximately $132,000 increase in franchise taxes paid, approximately $20,000 in costs incurred for our sponsorship of the National Sepsis Foundation and approximately $30,000 in legal and proxy-related data services, partially offset by a reductions of approximately $33,000 and $31,000 in travel and employee relocation costs, respectively, as compared to the same period in the prior year.

Facilities:

Facilities include costs paid for rent and utilities at our corporate headquarters in North Carolina. Facilities costs remained relatively consistent for the eight months ended December 31, 2015 and 2014 .

Depreciation and Amortization:

Depreciation and amortization costs decreased approximately $55,000 for the eight months ended December 31, 2015 compared to the same period in the prior year. The decrease in costs was due primarily to amortization costs incurred in the same period of the prior year on our PFC-based intellectual property portfolio that was fully impaired as of April 30, 2015 .

Research and Development Expenses

Research and development expenses include, but are not limited to, (i) expenses incurred under agreements with CROs and investigative sites, which conduct our clinical trials and a substantial portion of our pre-clinical studies; (ii) the cost of manufacturing and supplying clinical trial materials; (iii) payments to contract service organizations, as well as consultants; (iv) employee-related expenses, which include salaries and benefits; and (v) facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities and equipment, depreciation of leasehold improvements, equipment, laboratory and other supplies. All research and development expenses are expensed as incurred. Research and development expenses and percentage changes for the eight months ended December 31, 2015 and 2014 , respectively , are as follows:

	Eight months ended December 31,				Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Clinical and preclinical development	$	5,560,860	$	3,820,196	$	1,740,664			46	%
Consulting		470,335		15,231		455,104			2988	%
Personnel costs		427,873		359,129		68,744			19	%
Other costs		25,799		45,911		(20,112	)		(44	) %

Clinical and preclinical development:

Clinical and preclinical development costs include the costs associated with our Phase III and Phase II clinical trials for levosimendan and Oxycyte. The increase of approximately $1.7 million in clinical and preclinical development costs for the eight months ended December 31, 2015, compared to the same period in the prior year, was primarily due to increased expenditures for CRO costs to manage the Levo-CTS Phase III clinical trial, partially offset by a reduction in costs incurred in the current period for the development and clinical testing of Oxycyte, which development we decided to suspend in the prior year.

Levosimendan

We incurred approximately $5.5 million in research and development costs for levosimendan during the eight months ended December 31, 2015, an increase of approximately $3.1 million compared to the same period in the prior year. The increase in levosimendan development costs is due primarily to the direct costs of our Phase III Levo-CTS clinical trial for LCOS, partially offset by a reduction of approximately $500,000 in costs to support the LeoPARDS trial for septic shock that was conducted during the same period of the prior year. For the eight months ended December 31, 2015, we recorded CRO costs of approximately $5.5 million for the management of the Phase III trial which includes approximately $2.3 million in pass-through site activation and enrolled patient costs, compared to CRO costs of approximately $2.4 million during the same period in the prior year.

Oxycyte

We incurred approximately $25,000 in research and development costs for Oxycyte during the eight months ended December 31, 2015, a decrease of approximately $897,000 compared to the same period in the prior year. The decrease in Oxycyte development costs was due to our decision to suspend development of the Oxycyte product in the prior year and close out all of our sites for the Phase II-B clinical trial for TBI. We do not anticipate any significant additional costs in the future related to this clinical trial or other close-out activities related to the discontinuance of the Oxycyte product development.

Consulting fees:

Consulting fees increased approximately $455,000 for the eight months ended December 31, 2015 compared to the same period in the prior year, primarily due to an increase in fees paid to third party consulting firms for services provided to improve training and communication with active sites in support of our Phase III Levo-CTS clinical trial and to conduct market research for sepsis and cardiac surgery.

Personnel costs:

Personnel costs increased approximately $69,000 for the eight months ended December 31, 2015 compared to the same period in the prior year, primarily due to approximately $75,000 for annual bonuses accrued, partially offset by reduced costs for benefits and payroll taxes paid due to the headcount reductions in positions responsible for the development of our Oxycyte products as compared to the same period in the prior year.

Other costs:

Other costs decreased approximately $20,000 for the eight months ended December 31, 2015 compared to the same period in the prior year. This decrease was due primarily to depreciation of lab equipment and other lab related costs that were written off and disposed of on April 30, 2015.

Interest expense

Interest expense includes the interest payments due under our long-term debt, amortization of debt issuance costs and accretion of discounts recorded against our outstanding convertible notes and noncash interest charges related to our Series A Stock, when it was outstanding. Interest expense and percentage changes for the eight months ended December 31, 2015 and 2014, respectively, are as follows:

	Eight months ended December 31,				Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Interest expense	$	1,507	$	46,736	$	(45,229	)		(97	) %

During the eight months ended December 31, 2015, interest expense decreased approximately $45,000 compared to the same period in the prior year. The decrease was due primarily to the maturity and settlement of our outstanding convertible notes in June 2014.

Other income and expense

Other income and expense includes non-operating income and expense items not otherwise recorded in our consolidated statement of operations. These items include, but are not limited to, revenue earned under sublease agreements for our California facility, changes in the fair value of financial assets and liabilities, interest income earned and fixed asset disposals. Other income for the eight months ended December 31, 2015 and 2014, respectively, is as follows:

	Eight months ended December 31,						(Increase)/ Decrease
	2015			2014
Other (income) expense, net	$	(359,041	)	$	(509,420	)	$	150,379

Other income decreased approximately $150,000 for the eight months ended December 31, 2015 compared to the same period in the prior year. This decrease was primarily due to changes in the recognized fair value of our derivative warrant liability during the current period, partially offset by an increase of approximately $71,000 in interest income earned, net of amortization of premiums and market adjustments.

Results of operations- Comparison of the year ended April 30, 2015 and 2014

Revenue

Product Revenue and Gross Profit

In prior years, we generated revenue from the sale of Dermacyte® through distribution agreements, on-line retailers and direct sales to physician and medical spa facilities. Product revenue, cost of sales and gross profit, as well as corresponding percentage changes, for the years ended April 30, 2015 and 2014 are as follows:

	Year ended April 30,					Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Product revenue	$	-	$	25,731		$	(25,731	)		(100	) %
Cost of sales		-		129,800			(129,800	)		(100	) %
Gross profit	$	-	$	(104,069	)	$	104,069			(100	) %

The decrease in product revenue for the year ended April 30, 2015 was due to our decision to stop producing and selling the Dermacyte product in the year ended April 30, 2014.

Gross profit as a percentage of revenue was (404) % for the year ended April 30, 2014. There was no gross profit during the year ended April 30, 2015 due to the write down of Dermacyte product in the prior year that is no longer being marketed for sale.

Government Grant Revenue

Revenues from a cost-reimbursement grant sponsored by the United States Army, or Grant Revenue, are recognized as milestones under the Grant program are achieved. Grant Revenue is earned through reimbursements for the direct costs of labor, travel, and supplies, as well as the pass-through costs of subcontracts with third-party CROs.

	Year ended April 30,				Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Government grant revenue	$	49,286	$	262,995	$	(213,709	)		(81	) %

For the year ended April 30, 2015, we recorded approximately $49,000 in revenue under the grant program as compared to approximately $263,000 in revenue during the prior year. The decrease in revenue earned under the grant is due primarily to our completion of multiple studies in the prior year.

General and Administrative Expenses

General and administrative expenses and percentage changes for the year ended April 30, 2015 and 2014, respectively, are as follows:

	Year ended April 30,				Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Legal and professional fees	$	3,017,584	$	2,556,643	$	460,941			18	%
Personnel costs		2,986,589		10,593,234		(7,606,645	)		(72	) %
Other costs		890,940		350,855		540,085			154	%
Facilities		160,818		157,449		3,369			2	%
Depreciation and amortization		114,848		115,042		(194	)		(0	) %

Legal and professional fees:

Legal and professional fees increased approximately $460,000 for the year ended April 30, 2015 compared to the year ended April 30, 2014. This increase was primarily due to costs incurred for investor relations services, consulting fees and Board of Directors fees, partially offset by a decrease in legal fees.

Costs associated with investor relations and communication increased approximately $636,000 in the year ended April 30, 2015. This increase was due primarily to the issuance of 175,000 warrants with a calculated fair value of approximately $475,000 and an increase of approximately $161,000 in fees paid to outsourced corporate communication firms for investor relations services and website development.

Board of Directors fees increased in the year ended April 30, 2015 by approximately $420,000. This increase was due primarily to approximately $280,000 in recognized expense for the vesting of stock options awarded and an increase of approximately $140,000 in fees paid due to the addition of a director and the restructuring of directors’ fees in the year ended April 30, 2015.

-	Consulting costs increased approximately $132,000 in the year ended April 30, 2015 due primarily to fees paid for recruiting firms for placement services and contract labor in the year ended April 30, 2015.

Legal, accounting and capital market fees decreased in the year ended April 30, 2015 by approximately $600,000. This decrease was due primarily to a reduction of approximately $530,000 in accounting and legal fees incurred in the year ended April 30, 2014 related to the acquisition of the rights to develop levosimendan and the issuance of our Series C and Series D Preferred Stock and a reduction of approximately $70,000 in fees paid for the listing of additional shares with Nasdaq and SEC filings made during the year ended April 30, 2014.

Personnel costs:

Personnel costs decreased approximately $7.6 million for the year ended April 30, 2015 compared to the prior year. The decrease was due primarily to the recognition of approximately $8.3 million of stock based compensation in the year ended April 30, 2014, partially offset by an increase of approximately $633,000 in salaries and benefits paid during the year ended April 30, 2015.

Stock based compensation and the vested value of issued stock options decreased approximately $8.3 million in the year ended April 30, 2015 due primarily to the expense recognition of approximately $8.3 million for the granting and vesting of stock options and restricted stock in the year ended April 30, 2014. These option grants were made pursuant to employment agreements, which were negotiated in connection with our acquisition of a license for levosimendan in November 2013.

Salaries and benefits increased approximately $633,000 in the year ended April 30, 2015. This increase was due primarily to full-year salaries paid in the year ended April 30, 2015 to our Chief Executive Officer and the two additional management positions added in connection with our acquisition of certain assets of Phyxius, and approximately $210,000 for severance payments related to the stoppage of Oxycyte development programs.

Other costs:

The approximately $540,000 increase in other costs was due primarily to an increase of approximately $320,000 in franchise tax payments made to North Carolina and Delaware in the year ended April 30, 2015, an increase of approximately $100,000 in banking fees paid to manage our investment portfolio, an increase of approximately $45,000 in travel related costs, an increase of approximately $45,000 in insurance costs related to our Phase III clinical study, and approximately $30,000 in relocation costs paid in the year ended April 30, 2015.

Facilities:

Facilities costs remained relatively consistent for the years ended April 30, 2015 and 2014.

Depreciation and Amortization:

Depreciation and amortization costs remained relatively consistent for the years ended April 30, 2015 and 2014 .

Research and Development Expenses

Research and development expenses and percentage changes for the years ended April 30, 2015 and 2014 , respectively , are as follows:

	Year ended April 30,				Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Clinical and preclinical development	$	6,034,702	$	1,947,461	$	4,087,241			210	%
Personnel costs		525,561		818,264		(292,703	)		(36	) %
Consulting		35,106		153,506		(118,400	)		(77	) %
Depreciation		33,292		35,447		(2,155	)		(6	) %
Other costs		27,287		31,780		(4,493	)		(14	) %
Facilities		4,439		10,263		(5,824	)		(57	) %

Clinical and preclinical development:

The increase of approximately $4.1 million in clinical and preclinical development costs for the year ended April 30, 2015 compared to the year ended April 30, 2014 was primarily due to increased expenditures related to levosimendan and additional costs related to the decision to suspend the development of Oxycyte.

Levosimendan

We incurred approximately $4.5 million in research and development costs for levosimendan in the year ended April 30, 2015, an increase of approximately $4.3 million compared to the year ended April 30, 2014. The increase in levosimendan development costs is due primarily to the direct costs of our Phase III Levo-CTS clinical trial for LCOS. In the year ended April 30, 2015, we recorded clinical trial costs of approximately $4.0 million for the management of the Phase III trial and pass-through site activation and enrolled patient costs. In addition to the costs associated with the Phase III trial, we incurred expenses of approximately $516,000 to support the development of levosimendan for septic shock by providing financial support for the LeoPaRDS trial, which is currently being conducted through the Imperial College of London.

Oxycyte

We incurred approximately $1.5 million in research and development costs for Oxycyte in the year ended April 30, 2015, a decrease of approximately $248,000 compared to year ended April 30, 2014. The decrease in Oxycyte development costs was due primarily to our decision to suspend development of the Oxycyte product in the year ended April 30, 2015 and close out all of our sites for the Phase II-B clinical trial for TBI. We recorded costs of approximately $837,000 for these close-out activities and we do not anticipate any significant additional costs in the future related to this clinical trial.

We incurred approximately $98,000 in preclinical research and development costs, a decrease of approximately $147,000 compared to the year ended April 30, 2014. The decrease in preclinical development costs was due primarily to the completion and preparation of the final study reports for the Army funded safety studies and we do not anticipate any significant additional costs in the future related to these preclinical studies.

We incurred approximately $550,000 in manufacturing and stability costs for Oxycyte in the year ended April 30, 2015. These costs were due primarily to early termination fees for API and clinical drug manufacturing supply agreements due to our decision to suspend the development of Oxycyte, and we do not anticipate any significant additional costs in the future related to the manufacture and stability of Oxycyte.

Personnel costs:

Personnel costs decreased approximately $293,000 for the year ended April 30, 2015 compared to the year ended April 30, 2014 primarily due to headcount reductions in the year ended April 30, 2015, partially offset by the addition of our Chief Medical Officer in the fourth quarter of the year ended April 30, 2015. The headcount reductions were primarily in positions responsible for managing the manufacturing of Oxycyte clinical drug material, the preclinical safety studies for Oxycyte and the Phase II-B clinical trial for TBI.

Consulting fees:

Consulting fees decreased approximately $118,000 for the year ended April 30, 2015 compared to the year ended April 30, 2014 primarily due to approximately $142,000 of fees incurred to plan and prepare for clinical trial expansions and other clinical support activities for Oxycyte in the year ended April 30, 2014, partially offset by an increase of approximately $24,000 of consulting fees associated with levosimendan development in the year ended April 30, 2015.

Depreciation:

Depreciation expense remained relatively consistent for the years ended April 30, 2015 and 2014.

Other costs:

Other costs remained relatively consistent for the years ended April 30, 2015 and 2014.

Facilities:

Facilities expense remained relatively consistent for the years ended April 30, 2015 and 2014.

Interest expense

Interest expense and percentage changes for the year ended April 30, 2015 and 2014, respectively, are as follows:

	Year ended April 30,				Increase/ (Decrease)			% Increase/ (Decrease)
	2015		2014
Interest expense	$	49,081	$	2,212,283	$	(2,163,202	)		(98	) %

During the year ended April 30, 2015 , interest expense decreased approximately $2.2 million compared to the year ended April 30, 2014. The decrease was due primarily to noncash interest charges recorded in the year ended April 30, 2014 related to our convertible notes which matured in the first quarter of the year ended April 30, 2015.

Other income and expense

Other expense for the year ended April 30, 2015 and 2014, respectively, is as follows:

	Year ended April 30,					(Increase)/ Decrease
	2015			2014
Other (income) expense, net	$	(784,012	)	$	718,436	$	(1,502,448	)

Other income increased approximately $1.5 million for the year ended April 30, 2015 compared to the year ended April 30, 2014. This increase was primarily due to approximately $393,000 in interest income, net of amortization of premiums and market adjustments, and the reduction of the recognized fair value of our derivative warrant liability during the year ended April 30, 2015.

Results of operations- Comparison of the year ended April 30, 2014 and 2013

Revenue

Product Revenue and Gross Profit

Product revenue, cost of sales and gross profit, as well as corresponding percentage changes, for the years ended April 30, 2014 and 2013 are as follows:

	Year ended April 30,					Increase/ (Decrease)			% Increase/ (Decrease)
	2014			2013
Product revenue	$	25,731		$	92,683	$	(66,952	)		(72	) %
Cost of sales		129,800			43,111		86,689			201	%
Gross profit	$	(104,069	)	$	49,572	$	(153,641	)		(310	) %

The decrease in product revenue for the year ended April 30, 2014 was primarily due to license fees earned in accordance with our distribution agreement for Dermacyte for the year ended April 30, 2013.

Gross profit as a percentage of revenue was (404)% and 53% for year ended April 30, 2014 and 2013, respectively. The decrease for the year ended April 30, 2014, as compared to the year ended April 30, 2013, was due to the write-down of Dermacyte product in the year ended April 30, 2014 that was no longer being marketed for sale.

Government Grant Revenue

Grant Revenue and percentage changes for the years ended April 30, 2014 and 2013, respectively, are as follows:

	Year ended April 30,				Increase/ (Decrease)			% Increase/ (Decrease)
	2014		2013
Government grant revenue	$	262,995	$	1,141,356	$	(878,361	)		(77	) %

For the year ended April 30, 2014, we recorded approximately $263,000 in revenue under the grant program as compared to approximately $1.1 million in revenue during the year ended April 30, 2013. In addition to the revenue earned, we recorded approximately $124,000 in deferred revenue associated with the grant. Deferred revenue under the grant represents pass-through costs that have been reimbursed in advance of performing the studies underlying the subcontracts. The decrease in revenue earned under the grant is due primarily to our completion of multiple studies in the year ended April 30, 2013.

Marketing and Sales Expenses

Marketing and sales expenses consisted primarily of personnel-related costs, including salaries, commissions, and the costs of marketing programs aimed at increasing revenue, such as advertising, trade shows, public relations and other market development programs. Marketing and sales expenses and percentage changes for the years ended April 30, 2014 and 2013, respectively , are as follows:

	Year ended April 30,				Increase/ (Decrease)			% Increase/ (Decrease)
	2014		2013
Marketing and sales expense	$	102	$	108,165	$	(108,063	)		(100	) %

The decrease in marketing and sales expenses for the year ended April 30, 2014 was driven by the elimination of costs incurred for compensation and direct advertising following the execution of the Dermacyte distribution agreement in the year ended April 30, 2013.

General and Administrative Expenses

General and administrative expenses and percentage changes for the years ended April 30, 2014 and 2013, respectively, are as follows:

	Year ended April 30,					Increase/ (Decrease)			% Increase/ (Decrease)
	2014		2013
Personnel costs	$	10,593,234	$	1,490,752		$	9,102,482			611	%
Legal and professional fees		2,556,643		2,005,311			551,332			27	%
Other costs		350,855		(206,788	)		557,643			270	%
Facilities		157,449		167,693			(10,244	)		(6	) %
Depreciation and amortization		115,042		111,012			4,030			4	%

Personnel costs:

Personnel costs increased approximately $9.1 million for the year ended April 30, 2014 compared to the year ended April 30, 2013. The increase was due primarily to the expense recognition of approximately $8.3 million for the granting and vesting of stock options and restricted stock, an increase of approximately $350,000 in salaries paid due to the addition of our new Chief Executive Officer and two other management positions and approximately $550,000 in performance bonuses paid and accrued for in the year ended April 30, 2014 that were not paid in the year ended April 30, 2013. The personnel costs attributable to Mr. Kelley, Mr. Jebsen, Mr. Randall and Dr. Hay reflect option grants made pursuant to their respective employment agreements, which were negotiated in connection with our acquisition of a license for levosimendan. In addition, Mr. Jebsen was paid a discretionary bonus consisting of $225,000 in cash and 32,143 shares of restricted common stock in recognition of his service as interim Chief Executive Officer from August 2011 through November 2013.

Legal and professional fees:

Legal and professional fees increased approximately $550,000 for the year ended April 30, 2014 compared to the year ended April 30, 2013. This increase was primarily due to costs incurred for investor relations services and audit fees, partially offset by a decrease in legal and recruiting fees.

-	Audit and accounting fees increased approximately $55,000 due to the costs incurred for valuation services related to the Phyxius acquisition and the filing of registration statements in the year ended April 30, 2014.

-	Investor relation fees increased approximately $560,000 for the costs of outsourced corporate communications firms, road shows and attending investor conferences.

Legal fees decreased approximately $40,000 due primarily to approximately $285,000 in fees incurred in the year ended April 30, 2013 for litigation defense costs, partially offset by an increase of approximately $245,000 in fees related to the Phyxius acquisition and the filing of registration statements in the year ended April 30, 2014.

-	Recruiting fees decreased approximately $25,000 due to headcount additions in the year ended April 30, 2013.

Other costs:

The approximately $558,000 increase in other costs was due primarily to the reversal of a contingent liability in the year ended April 30, 2013 related to potential liabilities in connection with non-compliance with Section 409A of the Internal Revenue Code.

Facilities:

The approximately $10,000 reduction compared to the prior year was the result of the elimination of allocated costs from the closure of the California lab facility in the prior year.

Depreciation and Amortization:

Depreciation and amortization costs remained relatively consistent for the years ended April 30, 2014 and 2013.

Research and Development Expenses

Research and development expenses and percentage changes for the years ended April 30, 2014 and 2013, respectively, are as follows:

	Year ended April 30,				Increase/			% Increase/
	2014		2013		(Decrease)			(Decrease)
Clinical and preclinical development	$	1,947,461	$	1,569,594	$	377,867			24	%
Personnel costs		818,264		637,685		180,579			28	%
Consulting		153,506		117,211		36,295			31	%
Depreciation		41,199		42,968		(1,769	)		(4	) %
Other costs		26,028		32,652		(6,624	)		(20	) %
Facilities		10,263		55,706		(45,443	)		(82	) %

Clinical and preclinical development:

Clinical and preclinical development costs include the costs associated with our Phase III and Phase II clinical trials for levosimendan and Oxycyte and development costs for Dermacyte. The increase of approximately $378,000 in clinical and preclinical development costs for the year ended April 30, 2014 compared to the year ended April 30, 2013 was primarily due to increases of $634,000 associated with the Phase II-b trials for Oxycyte and $214,000 in clinical development costs of levosimendan, partially offset by a decrease of $477,000 in costs incurred for preclinical safety studies for Oxycyte.

Personnel costs:

Personnel costs increased approximately $181,000 for the year ended April 30, 2014 compared to the year ended April 30, 2013 primarily due to headcount increases and employee bonuses paid in the year ended April 30, 2014.

Consulting fees:

Consulting fees increased approximately $36,000 for the year ended April 30, 2014 compared to the year ended April 30, 2013 primarily due to approximately $131,000 of fees incurred to plan and prepare for regulatory submissions, clinical trial expansions and other clinical support activities, partially offset by a reduction of approximately $95,000 of consulting fees associated with Oxycyte development.

Depreciation:

Depreciation expense remained relatively consistent for the year ended April 30, 2014 and 2013.

Other costs:

Other costs decreased approximately $7,000 for the year ended April 30, 2014 compared to the year ended April 30, 2013 primarily due to a decrease in expenses associated with travel and supplies.

Facilities:

Facilities expense decreased approximately $45,000 for the year ended April 30, 2014 compared to the year ended April 30, 2013 primarily due to the closure of our California facility.

Restructuring expense

	Year ended April 30,				Increase/			% Increase/
	2014		2013		(Decrease)			(Decrease)
Restructuring expense	$	-	$	220,715	$	(220,715	)		—	%

During the year ended April 30, 2013, the Company recorded one-time charges of approximately $54,000 for severance and benefits related charges, $135,000 for net future lease obligations and $31,000 for other exit costs related to the closure of our California facility that were not incurred in the year ended April 30, 2014.

Interest expense

Interest expense and percentage changes for the years ended April 30, 2014 and 2013, respectively, are as follows:

	Year ended April 30,				Increase/			% Increase/
	2014		2013		(Decrease)			(Decrease)
Interest expense	$	2,212,283	$	4,238,456	$	(2,026,173	)		(48	) %

During the year ended April 30, 2014, interest expense decreased approximately $2.0 million compared to the year ended April 30, 2013. The decrease was due primarily to approximately $1.7 million of noncash interest charges recorded in the year ended April 30, 2013 related to our previously outstanding Series A Stock, and a decrease of approximately $326,000 in interest charges incurred on our convertible notes in the year ended April 30, 2014.

Other income and expense

Other expense for the years ended April 30, 2014 and 2013, respectively, is as follows:

	Year ended April 30,					Increase/
	2014		2013			(Decrease)
Other expense (income), net	$	718,436	$	(11,683	)	$	730,119

Other expense increased approximately $730,000 for the year ended April 30, 2014 compared to the year ended April 30, 2013 primarily due to the change in the recognized fair value of our warrant liability in the year ended April 30, 2014.

Liquidity, capital resources and plan of operation

We have incurred losses since our inception and as of December 31, 2015 we had an accumulated deficit of approximately $161 million. 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 increased expenses related to our development and potential commercialization of levosimendan for LCOS and other product candidates, and, as a result, we will need to generate significant net product sales, royalty and other revenues to achieve profitability.

Liquidity

We have financed our operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. We had total current assets of $20,560,353 and $17,511,176 and working capital of $15,958,723 and $12,993,966 as of December 31, 2015 and April 30, 2015, respectively. Our practice is to invest excess cash, where available, in short-term money market investment instruments and high quality corporate and government bonds.

Clinical and Preclinical Product Development

We are in the clinical trial stage in the development of our product candidates. We are currently conducting a Phase III clinical trial for levosimendan. We expect our primary focus will be on completing the Phase III clinical trials for levosimendan. Our ability to continue to pursue testing and development of our products beyond the calendar year 2017 may depend on obtaining license income or outside financial resources. There is no assurance that we will obtain any license agreement or outside financing or that we will otherwise succeed in obtaining any necessary resources.

Financings

During the years ended April 30, 2015 and 2014, we received approximately $544,000 and $7.1 million and issued 209,230 and 3,161,145 shares of common stock, respectively upon the exercise of our outstanding warrants. We did not complete any financings during the eight months ended December 31, 2015.

On March 21, 2014, we sold 9,285,714 shares of common stock for net proceeds of approximately $55 million.

On July 23, 2013, we sold 5,369 shares of Series C 8% convertible preferred stock and warrants for net proceeds of approximately $4.9 million. Additionally, on August 22, 2013 we issued 4,600 shares of Series D convertible preferred stock and warrants in exchange for $4.6 million of convertible notes that were scheduled to mature in June 2014.

Cash Flows

The following table shows a summary of our cash flows for the periods indicated:

	Eight months ended December 31,
	2015			2014
Net cash used in operating activities	$	(8,950,610	)	$	(6,632,268	)
Net cash used in investing activities		4,784,732			(40,356,616	)
Net cash provided by financing activities		(100,160	)		344,654

Net cash used in operating activities. Net cash used in operating activities was $8.95 million for the eight months ended December 31, 2015 compared to net cash used in operating activities of $6.6 million for the eight months ended December 31, 2014. The increase in cash used for operating activities of $3.3 million was due primarily to cost incurred for the Phase III clinic trials for LCOS, partially offset by a decrease in legal and professional fees paid.

Net cash used in investing activities . Net cash provided by investing activities was $4.8 million for the eight months ended December 31, 2015 compared to net cash used in investing activities of $40.4 million for the eight months ended December 31, 2014. The increase in cash provided by investing activities was due primarily to the sales of marketable securities that were purchased during the prior period.

Net cash provided by financing activities . Net cash used in financing activities was $100,160 for the eight months ended December 31, 2015 compared to net cash provided by financing activities of $344,654 for the eight months ended December 31, 2014. The increase in net cash used in financing activities was due primarily to proceeds received from the exercise of warrants in the prior period.

	Year ended April 30,
	2015			2014
Net cash used in operating activities	$	(9,748,794	)	$	(9,261,571	)
Net cash provided by (used in) investing activities		(40,925,860	)		(147,038	)
Net cash (used in) provided by financing activities		280,590			66,945,636

Net cash used in operating activities. Net cash used in operating activities was $9.75 million for the year ended April 30, 2015 compared to net cash used in operating activities of $9.26 million for the year ended April 30, 2014. The increase in cash used for operating activities was due primarily to an increase in our costs incurred for the Phase III clinical trials for LCOS and an increase in personnel costs, partially offset by the payment of approximately $1.25 million in assumed liabilities during the prior year.

Net cash used in investing activities . Net cash used in investing activities was $40.93 million for the year ended April 30, 2015 compared to net cash used in investing activities of $147,038 for the year ended April 30, 2014. The increase in cash used for investing activities was due primarily to our investment in marketable securities throughout the year.

Net cash provided by financing activities . Net cash provided by financing activities was $280,590 for the year ended April 30, 2015 compared to net cash provided by financing activities of $66.9 million for the year ended April 30, 2014. The decrease of net cash provided by financing activities was due primarily to net proceeds of $55 million received from the issuance of common stock, $4.9 million received from the issuance of Series C 8% Convertible Preferred Stock and proceeds of $7 million received from the exercise of certain warrants in the prior year.

	Year ended April 30,
	2014			2013
Net cash used in operating activities	$	(9,261,571	)	$	(4,921,283	)
Net cash provided by (used in) investing activities		(147,038	)		(147,987	)
Net cash (used in) provided by financing activities		66,945,636			3,972,926

Net cash used in operating activities. Net cash used in operating activities was $9.26 million for the year ended April 30, 2014 compared to net cash used in operating activities of $4.92 million for the year ended April 30, 2013. The increase in cash used for operating activities was due primarily to an increase in our costs incurred for the Phase II-b TBI clinical trials, the costs incurred to initiate the Phase III clinical trials for LCOS, the payment of approximately $1.25 million in assumed liabilities during the year, the increase in personnel costs, and the costs associated with the Phyxius asset acquisition.

Net cash used in investing activities . Net cash used in investing activities was $147,038 for the year ended April 30, 2014 compared to net cash used in investing activities of $147,987 for the year ended April 30, 2013. The cash used for investing activities, primarily capitalized legal fees incurred for filing and maintaining our patent portfolio, remained relatively consistent compared to the same period in the prior year.

Net cash provided by financing activities . Net cash provided by financing activities was $66.9 million for the year ended April 30, 2014 compared to net cash provided by financing activities of $4.0 million for the year ended April 30, 2013. The increase of net cash provided by financing activities was due primarily to net proceeds of $55 million received from the issuance of common stock on March 21, 2014, $4.9 million received from the issuance of Series C 8% Convertible Preferred Stock on July 23, 2013 and proceeds of $7 million received from the exercise of certain warrants as compared to the $2.5 million received from the issuance Series A Preferred Stock and $1.9 million received from the issuance of Series B Preferred Stock in the prior year.

Operating Capital and Capital Expenditure Requirements

Our future capital requirements will depend on many factors that include, but are not limited to the following:

-	The initiation, progress, timing and completion of clinical trials for our product candidates and potential product candidates;
-	The outcome, timing and cost of regulatory approvals and the regulatory approval process;
-	Delays that may be caused by changing regulatory requirements;
-	The number of product candidates that we pursue;
-	The costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
-	The timing and terms of future in-licensing and out-licensing transactions;
-	The cost and timing of establishing sales, marketing, manufacturing and distribution capabilities;
-	The cost of procuring clinical and commercial supplies of our product candidates;
-	The extent to which we acquire or invest in businesses, products or technologies; and
-	The possible costs of litigation.

Based on our working capital at December 31, 2015 we believe we have sufficient capital on hand to continue to fund operations through the calendar year 2017.

We will need substantial additional capital in the future in order to complete the commercialization of levosimendan, as well as to fund the development and commercialization of our 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.

To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates or 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.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent contractual liabilities for which we cannot reasonably predict future payment, including contingencies related to potential future development, financing, contingent royalty payments and/or scientific, regulatory or commercial milestone payments under development agreements. The following table summarizes our contractual obligations as of December 31, 2015:

	Payments Due by Period
				Less than								More than
	Total			1 Year		1-3 Years			3-5 Years			5 Years
Operating Lease Obligations		$	602,713	$	74,058		$	345,768		$	182,887		$	-

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

Summary of Critical Accounting Policies

Use of Estimates —The preparation of the accompanying Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, or 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 Consolidated Financial Statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Preclinical Study and Clinical Accruals —We estimate our preclinical study and clinical trial expenses based on the services received pursuant to contracts with several research institutions and CROs that conduct and manage preclinical and clinical trials on our behalf. The financial terms of the agreements vary from contract to contract and may result in uneven expenses and payment flows. Preclinical study and clinical trial expenses include the following:

-	Fees paid to CROs in connection with clinical trials,
-	Fees paid to research institutions in conjunction with preclinical research studies, and
-	Fees paid to contract manufacturers and service providers in connection with the production and testing of active pharmaceutical ingredients and drug materials for use in preclinical studies and clinical trials.

Revenue Recognition —Revenues from merchandise sales are recognized upon transfer of ownership, including passage of title to the customer and transfer of the risk of loss related to those goods. Revenues are reported on a net sales basis, which is computed by deducting from gross sales the amount of actual product returns received, discounts, incentive arrangements with retailers and an amount established for anticipated product returns.

Grant Revenue is recognized as milestones under the Grant program are achieved. Grant Revenue is earned through reimbursements for the direct costs of labor, travel, and supplies, as well as the pass-through costs of subcontracts with third-party CROs.

Stock-Based Compensation —We account for stock-based awards to employees in accordance with Accounting Standards Codification, or 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 our 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.

We account 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.

Impairment Testing —In accordance with GAAP, goodwill impairment testing is performed at the reporting unit level annually, or more frequently if indicated by events or conditions. We performed an evaluation and determined that there is only one reporting unit. In the course of the evaluation of the potential impairment of goodwill, either a qualitative or a quantitative assessment may be performed. If a qualitative evaluation determines that no impairment exists, then no further analysis is performed. If a qualitative evaluation is unable to determine whether impairment has occurred, a quantitative evaluation is performed. The quantitative impairment test first identifies potential impairments by comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the carrying amount, goodwill is not impaired. If the carrying value exceeds the fair value, the implied fair value of goodwill is calculated and an impairment is recorded if the implied fair value is less than the carrying amount. The determination of goodwill impairment is highly subjective. It considers many factors both internal and external and is subject to significant changes from period to period. No goodwill impairment charges have resulted from this analysis for the eight months ended December 31, 2015, or the years ended April 30, 2015 and 2014.

Fair market value accounting (derivative warrant liability) —The most significant estimate that could have a material effect on net (loss) gain is the fair market value accounting for our derivative liability. Our derivative liability consists of free standing warrants that are recorded as liabilities due to the price protection anti-dilution provisions in the event of a subsequent equity sale. As a result, the warrants must be recorded as a liability at fair value. The changes in fair value are posted in other (income) expense. We utilize the Monte Carlo method to estimate the fair value of our warrants. The three most significant factors in the Monte Carlo method are (i) our stock price, (ii) the volatility of our stock price and (iii) the remaining term of the warrants. During the eight months ending December 31, 2015, a $0.14 decrease in the value of our stock was the primary cause of the $48,105 derivative gain.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or FASB, issued a new accounting standard intended to improve financial reporting about leasing transactions. The new standard will require us to recognize on the balance sheet the assets and liabilities for the rights and obligations created by all leased assets. The new standard will also require us to provide enhanced disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from all leases, operating and capital, with lease terms greater than 12 month. The new standard is effective for financial statements beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. See Note I for our current lease commitments. We are currently evaluating the impact that this new standard will have on our financial statements and related disclosures.

In January 2016, the FASB issued a new accounting standard that will enhance our reporting for financial instruments. The new standard is effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Earlier adoption is permitted for interim and annual reporting periods as of the beginning of the fiscal year of adoption. We do not believe the adoption of this standard will have a material impact on our consolidated financial statements.

In November 2015, the FASB issued a new accounting standard that changes the balance sheet classifications of deferred income taxes. This standard amends existing guidance to require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. It is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. We do not expect adoption of this standard will have a material impact on our consolidated financial statements.

In April 2015, the FASB issued a new accounting standard that will change the reporting of debt issuance costs. This standard amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. We do not expect adoption of this standard will have a material impact on our consolidated financial statements.

In August 2014, the FASB issued a new accounting standard that will require management to assess and evaluate whether conditions or events exist, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements issue date. It is effective for annual periods beginning after December 15, 2016 and for annual and interim periods thereafter; early adoption is permitted. We do not believe the adoption of this new standard to have a material effect on our consolidated financial statements.

In May 2014, the FASB issued a new accounting standard that supersedes nearly all existing revenue recognition guidance under GAAP. The new standard is principles-based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. In July 2015, the FASB agreed to defer the effective date of the standard from annual periods beginning after December 15, 2016, to annual periods beginning after December 15, 2017, with an option that permits companies to adopt the standard as early as the original effective date. Early application prior to the original effective date is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We have not yet selected a transition method and we do not believe adoption of this standard will have a material impact on our consolidated financial statements and related disclosures.

ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are subject to interest rate risk on our investment portfolio.

We invest in marketable securities in accordance with our investment policy. The primary objectives of our investment policy are to preserve capital, maintain proper liquidity to meet operating needs and maximize yields. Our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer or type of investment. We place our excess cash with high credit quality financial institutions, commercial companies, and government agencies in order to limit the amount of credit exposure. Some of the securities we invest in may have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate.

Our investment exposure to market risk for changes in interest rates relates to the increase or decrease in the amount of interest income we can earn on our portfolio, changes in the market value due to changes in interest rates and other market factors as well as the increase or decrease in any realized gains and losses. Our investment portfolio includes only marketable securities and instruments with active secondary or resale markets to help ensure portfolio liquidity. A hypothetical 100 basis point drop in interest rates along the entire interest rate yield curve would not significantly affect the fair value of our interest sensitive financial instruments. We generally have the ability to hold our fixed-income investments to maturity and therefore do not expect that our operating results, financial position or cash flows will be materially impacted due to a sudden change in interest rates. However, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if forced to sell securities which have declined in market value due to changes in interest rates or other factors, such as changes in credit risk related to the securities’ issuers. To minimize this risk, we schedule our investments to have maturities that coincide with our expected cash flow needs, thus avoiding the need to redeem an investment prior to its maturity date. Accordingly, we do not believe that we have material exposure to interest rate risk arising from our investments. Generally, our investments are not collateralized. We have not realized any significant losses from our investments.

We do not use interest rate derivative instruments to manage exposure to interest rate changes. We ensure the safety and preservation of invested principal funds by limiting default risk, market risk and reinvestment risk. We reduce default risk by investing in investment grade securities.

ITEM 8—CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS		43
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS		44
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY		45
CONSOLIDATED STATEMENTS OF CASH FLOWS		46
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued		47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		48

TENAX THERAPEUTICS, INC.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Tenax Therapeutics, Inc.

Morrisville, North Carolina

We have audited the accompanying consolidated balance sheets of Tenax Therapeutics, Inc. and Subsidiary, formerly, Oxygen Biotherapeutics, Inc. (the “Company”) as of December 31, 2015 and April 30, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the eight months ended December 31, 2015 and each of the years in the three-year period ended April 30, 2015. We also have audited the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting included in Item 9A - Controls and Procedures in the Company’s December 31, 2015 Annual Report on Form 10-KT. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and April 30, 2015 and 2014, and the results of its operations and its cash flows for the eight months ended December 31, 2015 and each of the years in the three-year period ended April 30, 2015, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As discussed in Note B to the consolidated financial statements, the Company changed their fiscal year to a fiscal year beginning on January 1 and ending on December 31 of each year.

For the period ended December 31, 2015, the Company recognized a net loss of approximately $10.1 million and as of December 31, 2015, the Company had incurred cumulative net losses of approximately $160.7 million. Management’s plans with regard to liquidity and capital resources are described in Note B.

/s/ CHERRY BEKAERT LLP

Raleigh, North Carolina

March 14, 2016

TENAX THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

	December 31, 2015			April 30, 2015			April 30, 2014

ASSETS
Current assets
Cash and cash equivalents	$	3,660,453		$	7,926,491		$	58,320,555
Marketable securities		16,528,494			9,200,082			-
Accounts receivable		49,448			76,475			36,358
Government grant receivable		-			-			29,750
Prepaid expenses		321,958			249,505			401,964
Other current assets		-			58,623			177,406
Total current assets		20,560,353			17,511,176			58,966,033
Marketable securities		18,019,054			30,974,961			-
Property and equipment, net		35,786			50,322			124,374
Debt issuance costs, net		-			-			21,427
Intangible assets, net		22,000,000			22,000,000			22,999,744
Goodwill		11,265,100			11,265,100			11,265,100
Other assets		1,106,785			1,106,785			52,762
Total assets	$	72,987,078		$	82,908,344		$	93,429,440

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	972,483		$	1,183,939		$	411,145
Accrued liabilities		3,104,807			2,660,666			858,136
Warrant liabilities		524,340			572,445			954,876
Notes payable, net		-			100,160			346,890
Total current liabilities		4,601,630			4,517,210			2,571,047
Other liabilities		-			-			10,932
Deferred tax liability		7,962,100			7,962,100			7,962,100
Total liabilities		12,563,730			12,479,310			10,544,079


Commitments and contingencies; see Note I
Stockholders' equity
Preferred stock, undesignated, authorized 10,000,000 and 10,000,000 and 9,947,439 shares; respectively, See Note G.		-			-			-
Common stock, par value $.0001 per share; authorized 400,000,000 shares; issued and outstanding 28,119,694 and 28,119,520 and 27,858,000, respectively		2,812			2,812			2,786
Additional paid-in capital		221,285,677			221,067,239			219,468,498
Accumulated other comprehensive (loss) gain		(129,442	)		26,718			-
Accumulated deficit		(160,735,699	)		(150,667,735	)		(136,585,923	)
Total stockholders’ equity		60,423,348			70,429,034			82,885,361
Total liabilities and stockholders' equity	$	72,987,078		$	82,908,344		$	93,429,440

The accompanying notes are an integral part of these Consolidated Financial Statements.

TENAX THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	Eight months ended December 31,			Year ended April 30,
	2015			2015			2014			2013

Product revenue	$	-		$	-		$	25,731		$	92,683
Cost of sales		-			-			129,800			43,111
Net product revenue		-			-			(104,069	)		49,572
Government grant revenue		-			49,286			262,995			1,141,356
Total net revenue		-			49,286			158,926			1,190,928

Operating expenses
General and administrative		3,940,631			7,170,779			13,773,325			3,676,145
Research and development		6,484,867			6,660,387			2,996,721			2,455,816
Restructuring expense		-			-			-			220,715
Loss on impairment of long-lived assets		-			1,034,863			-			27,279
Total operating expenses		10,425,498			14,866,029			16,770,046			6,379,955

Net operating loss		10,425,498			14,816,743			16,611,120			5,189,027

Interest expense		1,507			49,081			2,212,283			4,238,456
Other (income) expense		(359,041	)		(784,012	)		718,436			(11,683	)
Net loss	$	10,067,964		$	14,081,812		$	19,541,839		$	9,415,800

Unrealized loss (gain) on marketable securities		156,160			(26,718	)		-			-
Total comprehensive loss	$	10,224,124		$	14,055,094		$	19,541,839		$	9,415,800

Reconciliation of net loss to net loss attributable to common stockholders
Net loss	$	10,067,964		$	14,081,812		$	19,541,839		$	9,415,800
Preferred stock dividend		-			-			5,803,362			958,071
Net loss attributable to common stockholders	$	10,067,964		$	14,081,812		$	25,345,201		$	10,373,871


Net loss per share, basic	$	(0.36	)	$	(0.50	)	$	(2.71	)	$	(6.29	)
Weighted average number of common shares outstanding, basic		28,119,597			28,077,963			9,362,031			1,650,280
Net loss per share, diluted	$	(0.36	)	$	(0.50	)	$	(2.71	)	$	(6.68	)
Weighted average number of common shares outstanding, diluted		28,119,597			28,077,963			9,362,031			1,759,025

The accompanying notes are an integral part of these Consolidated Financial Statements.

TENAX THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Preferred Stock					Common Stock						Accumulated other comprehensive gain		Accumulated			Total stockholders'
	Number of Shares			Amount		Number of Shares		Amount		Additional paid-in capital		(loss)		deficit			equity

Balance at April 30, 2012		-		$	-		1,470,890	$	2,942	$	107,279,296	$	-	$	(107,628,284	)	$	(346,046	)
Preferred stock sold, net of offering costs		2,100			1						1,851,149							1,851,150
Common stock issued for convertible preferred stock		(1,113	)				400,708		804		4,509,184							4,509,988
Common stock issued as interest on convertible debt