TENAX THERAPEUTICS, INC.

NOTE 1—DESCRIPTION OF BUSINESS

Tenax Therapeutics, Inc., together with its subsidiaries (collectively "Tenax" or the “Company”), is a Phase 3, development-stage pharmaceutical company using clinical insights to develop novel cardiopulmonary therapies.

The Company is incorporated in Delaware and is headquartered in Chapel Hill, North Carolina.

Liquidity and Capital Resources

The Company has financed its operations since September 1990 primarily through the sale of equity and debt securities and loans from stockholders. The Company had an accumulated deficit of $314.9 million at December 31, 2024 and incurred losses of $17.6 million and $7.7 million during the years ended December 31, 2024 and 2023, respectively. The Company expects to continue to incur expenses related to the development of levosimendan for pulmonary hypertension and other potential indications and, over the long term, imatinib for pulmonary arterial hypertension ("PAH"), as well as identifying and developing other potential product candidates. At December 31, 2024, the Company had cash and cash equivalents of $94.9 million. Based on its resources on December 31, 2024, Company management believes that it has sufficient funds for the Company to continue its operations over at least the next 12 months from the date these consolidated financial statements were available to be issued.

To the extent that the Company raises additional funds by issuing shares of its common stock or other securities convertible or exchangeable for shares of common stock, stockholders will experience dilution, which may be significant. In the event the Company raises additional capital through debt financings, the Company may incur significant interest expense and become subject to restrictive covenants in the related transaction documents that may affect the manner in which the Company conducts its business. To the extent that the Company raises additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to its technologies or product candidates or grant licenses on terms that may not be favorable to the Company. Any or all of the foregoing may have a material adverse effect on the Company’s business and financial performance.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The Company has prepared its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) promulgated by the Financial Accounting Standards Board (“FASB”).

The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. 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.

On an ongoing basis, management reviews its estimates to ensure that these estimates appropriately reflect changes in the Company’s business and new information as it becomes available. If historical experience and other factors used by management to make these estimates do not reasonably reflect future activity, the Company’s results of operations and financial position could be materially impacted.

Reverse Stock Splits

The Company has adjusted the financial statements to reflect that on January 2, 2024, it effected a 1-for-80 reverse stock split (the “Reverse Stock Split”). The Company has also adjusted the financial statements to reflect that on January 4, 2023, we effected a 1-for-20 reverse stock split (the “Prior Reverse Stock Split”, together with the Reverse Stock Split, the “Reverse Stock Splits”). The Reverse Stock Splits did not change the number of authorized shares of capital stock or cause an adjustment to the par value of our capital stock. Pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under our outstanding stock options and warrants. The number of shares authorized for issuance pursuant to our equity incentive plans have also been adjusted proportionately to reflect the Reverse Stock Splits.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity date of three months or less, when acquired, to be cash equivalents. The Company’s cash and cash equivalents include holdings in checking and overnight sweep accounts. The Company’s cash equivalents are comprised primarily of bank certificates of deposit through CDARS (Certificate of Deposit Account Registry Service), as well as money market funds, are measured at fair value on a recurring basis. As of December 31, 2024 and 2023, the balances of cash and cash equivalents were$94.9 million and$9.8 million, respectively, which approximate fair value and were determined based upon Level 1 inputs. The sweep account is valued using quoted market prices with no valuation adjustments applied. Accordingly, these financial instruments are categorized as Level 1.

Concentrations of Credit Risk and Off-Balance Sheet Risk

The Federal Deposit Insurance Corporation (the “FDIC”) insurance limits are $250 thousand per depositor per insured bank. The Company's holdings of cash and cash equivalents in CDARS limits the exposure of amounts greater than $250 thousand. The Company had cash balances of$1.0 million and$2.4 million uninsured by the FDIC as of December 31, 2024 and 2023, respectively.

Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents. The Company mitigates its risk with respect to cash and cash equivalents by maintaining its deposits and investments at high-quality financial institutions. The Company invests any excess cash in money market funds and certificates of deposit, and the management of these investments is not discretionary on the part of the financial institution. Substantially all of the Company's cash and cash equivalents are held at First Horizon Bank, and the amounts frequently exceed federally insured limits.

The Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

Preclinical Study and Clinical Accruals

The Company estimates its preclinical study and clinical trial expenses based on the services received pursuant to contracts with several research institutions and contract research organizations (“CROs”) that do or may conduct and manage preclinical and clinical trials on its behalf. The financial terms of the agreements vary from contract to contract, may be estimated by the Company and outside advisors prior to contracting with a CRO, 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 and clinical 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.

Research and Development Costs

Research and development costs include, but are not limited to, (i) expenses incurred under agreements with CROs and investigative sites, which conduct our clinical trials; (ii) the cost of 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) depreciation and other allocated expenses, which include direct and allocated expenses for equipment, laboratory and other supplies. All research and development expenses are expensed as incurred.

Income Taxes

Deferred tax assets and liabilities are recorded for differences between the financial statement and tax bases of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

Stock-Based Compensation

The Company accounts for stock-based awards to employees in accordance with ASC 718, Compensation — Stock Compensation, which provides for the use of the fair value-based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Fair values of equity securities are determined by management based predominantly on the trading price of the Company’s common stock. The values of these awards are based upon their grant-date fair value. That cost is recognized over the period during which the employee is required to provide service in exchange for the reward.

The Company accounts for equity instruments issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The Company records equity instruments at their fair value on the measurement date and periodically adjust them as the underlying equity instruments vest.

Warrants for Common Shares and Derivative Financial Instruments

Warrants for shares of common stock and other derivative financial instruments are classified as equity if the contracts: (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). Contracts are classified as equity or liabilities if the contracts: (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions that do not qualify for the scope exception. The Company assesses the classification of its warrants for shares of common stock and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.

Offering Costs

Offering costs consists of the costs incurred with the issuance of common stock. warrants, and pre-funded warrants. Costs include placement agent, legal, advisory, accounting and filing fees.

Loss Per Share

Basic loss per share, which excludes antidilutive securities, is computed by dividing net loss by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, restricted stock and warrants.

The following outstanding options, convertible preferred shares and warrants were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease. Leases with a term greater than one year are recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and current and non-current lease liabilities, as applicable. The Company has made an accounting policy election, known as the short-term lease recognition exemption, which allows the Company to not recognize ROU assets and lease liabilities that arise from short-term leases (12 months or less); The Company has applied this election to all classes of underlying assets. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew or options to cancel a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew or will not cancel, respectively. The Company monitors its material leases on a quarterly basis.

Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected remaining lease term. Lease cost for operating leases is recognized on a straight-line basis over the lease term as an operating expense. Certain adjustments to the ROU asset may be required for items such as lease prepayments or incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. The Company has elected to account for the lease and non-lease components together for all leases.

Fair Value

The Company determines the fair value of its financial assets and liabilities in accordance with ASC 820, Fair Value Measurements. The Company’s balance sheet includes the following financial instruments: cash and cash equivalents, investments in marketable securities, and short-term notes payable. The Company considers the carrying amount of its cash and cash equivalents and short-term notes payable to approximate fair value due to the short-term nature of these instruments.

Accounting for fair value measurements involves a single definition of fair value, along with a conceptual framework to measure fair value, with a fair value defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. The fair value measurement hierarchy consists of three levels:

The Company applies valuation techniques that (1) place greater reliance on observable inputs and less reliance on unobservable inputs and (2) are consistent with the market approach, the income approach and/or the cost approach, and include enhanced disclosures of fair value measurements in the Company’s consolidated financial statements.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified. These reclassifications had no effect on the financial position or reported results of operations for the periods presented. In the Consolidated Statements of Stockholders Equity for the year ended December 31, 2023, the presentation of the public offering sale of common stock and warrants was presented as proceeds, net of broker fees, of $13.9 million in additional paid-in capital and $0.5 million attributed to the exercise of pre-funded warrants, with $0.3 million of additional offering costs presented separately. In the current presentation, this is now presented as $14.1 million, net of offering costs of $1.5 million for the public offering of common stock and warrants.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhanced segment disclosures. The standard will require disclosures about significant segment expenses and other segment items and identifying the Chief Operating Decision Maker ("CODM") and how they use the reported segment profitability measures to assess segment performance and allocate resources. These enhanced disclosures are required for all entities on an interim and annual basis, even if they have only a single reportable segment. The standard is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Theadoption of this standard for the year ended December 31, 2024 didnot have a material impact on the Company’s consolidated financial results, but resulted in enhanced disclosures as included in Note 9, Segments. The Company operates inone reportable segment, which is focused on identifying and developing therapeutics that address cardiovascular and pulmonary diseases with high unmet medical need. The determination of a single reportable segment is consistent with the consolidated financial information regularly provided to the Company’s CODM, which is its president and chief executive officer, who reviews and evaluates consolidated net income (loss) for purposes of assessing performance, making operating decisions, allocating resources and planning and forecasting for future periods. The measure of segment assets is reported on the balance sheet as total assets.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Topic 220-40), which addresses the disaggregation of income statement expenses. This standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements.

NOTE 3—ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):

NOTE 4—NOTE PAYABLE

On December 31, 2023, the Company executed a premium finance note agreement (the “Note”) with a third party to finance the Company’s Directors and Officers Insurance Policy as well as the Errors and Omissions policy. The total amount financed was $549 thousand. The Company paid a down payment of $48 thousand at execution leaving a balance of $501 thousand payable in monthly installments of $48 thousand through December 1, 2024. The Note had an interest rate of 9.95%. During the quarter ended September 30, 2024, the Company repaid the entire outstanding balance of the Note. The Company recorded interest expense on the Note in the amount of $23 thousand during the year ended December 31, 2024. The balance on the Note as of December 31, 2024 and December 31, 2023, waszero and $501 thousand, respectively.

NOTE 5—STOCKHOLDERS’ EQUITY

Common Stock and Preferred Stock

Common Stock

The Company’s Certificate of Incorporation, as amended, authorizes it to issue 400,000,000 shares of $0.0001 par value common stock. As of December 31, 2024, and December 31, 2023, there were 3,420,906 and 298,281 shares of common stock issued and outstanding, respectively.

Preferred Stock

Under the Company’s Certificate of Incorporation, as amended, the Board is authorized, without further stockholder action, to provide for the issuance of up to 10,000,000 shares of preferred stock, par value $0.0001 per share, in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof. Of the potential 10,000,000 shares of preferred stock,5,181,346 are designated as Series A Stock and 4,818,654 remain undesignated. As of December 31, 2024 and 2023, there were 210 shares of Series A Stock outstanding, convertible intoone share of common stock.

Common Stock and Pre-Funded Warrants

August 2024 Private Placement Financing (the “August 2024 Offering”)

On August 6, 2024, the Company entered into a securities purchase agreement with certain accredited investors for the purchase and sale, in a private placement financing by the Company, of (i) an aggregate of 1,450,661 shares of its common stock, and pre-funded warrants to purchase an aggregate of 31,882,671 shares of common stock and (ii) accompanying warrants to purchase up to an aggregate of 16,666,666 shares of its common stock (or, in lieu thereof, additional pre-funded warrants) at a combined offering price of $3.00 per share of common stock and accompanying warrant, or $2.99 per pre-funded warrant and accompanying warrant, resulting in gross proceeds of $99.7 million. The pre-funded warrants do not expire and have an exercise price of $0.01. The net proceeds of the August 2024 Offering after deducting placement agent fees and direct offering expenses were $92.3 million. The relative fair value allocated to the common stock, pre-funded warrants, and warrants was $3.2 million, $69.4 million, and $27.1 million, respectively. At December 31, 2024,31,882,671 pre-funded warrants remained outstanding.

Also, on August 6, 2024 and in connection with the August 2024 Offering, the Company entered into a registration rights agreement (the “August 2024 Registration Rights Agreement”) with the purchasers, pursuant to which the Company agreed to register for resale the shares of common stock issued in the August 2024 Offering and the shares of common stock issuable upon exercise of the warrants issued in the August 2024 Offering within 60 days following the effective date of the August 2024 Registration Rights Agreement. Pursuant to the August 2024 Registration Rights Agreement, on August 30, 2024, the Company filed a resale registration statement on Form S-3 with the SEC, which went effective on September 12, 2024.

The August 2024 Registration Rights Agreement includes liquidated damages provisions that meet the definition of a registration payment arrangement that is within the scope of ASC 825-20. The Company determined at the initial issuance of the pre-funded warrants and accompanying warrant that it is not probable that a payment would be required as it has both the intent and ability to satisfy the August 2024 Registration Rights Agreement. Therefore, the Company did not record a liability at inception but will evaluate the contingency at each reporting period. As of December 31, 2024 no events have occurred that would change our initial assessment of this provision.

February 2024 Registered Public Offering (the “February 2024 Offering”)

On February 8, 2024, the Company entered into a securities purchase agreement with certain purchasers for the purchase and sale, in a registered public offering by the Company, of (i) an aggregate of 421,260 shares of its common stock, and pre-funded warrants to purchase an aggregate of 1,178,740 shares of common stock and (ii) accompanying warrants to purchase up to an aggregate of 3,200,000 shares of its common stock at a combined offering price of $5.65 per share of common stock and associated warrant, or $5.649 per pre-funded warrant and associated warrant, resulting in gross proceeds of $9.0 million. The net proceeds of the February 2024 Offering after deducting placement agent fees and direct offering expenses were $8.0 million. The relative fair value allocated to the common stock, pre-funded warrants and warrants was $0.9 million, $2.4 million, and $5.7 million, respectively.

February 2023 Registered Public Offering (the “February 2023 Offering”)

On February 3, 2023, the Company entered into a securities purchase agreement with certain purchasers for the purchase and sale, in a registered public offering by the Company of (i) an aggregate of 86,994 shares of its common stock, and pre-funded warrants to purchase an aggregate of 21,341 shares of common stock and (ii) accompanying warrants to purchase up to an aggregate of 216,667 shares of its common stock at a combined offering price of $144 per share of common stock and associated common warrant, or $143.92 per pre-funded warrant and associated common warrant, resulting in gross proceeds of $15.6 million. The net proceeds of the February 2023 Offering after deducting placement agent fees and direct offering expenses were $14.1 million. The relative fair value allocated to the common stock, pre-funded warrants and warrants was $5.0 million, $1.2 million and $9.4 million, respectively.

At December 31, 2024, the Company had pre-funded warrants outstanding to purchase a total of 31,882,671 shares of common stock, exercisable at $0.01 per share.

Warrants

The following table summarizes the Company’s warrant activity for the years ended December 31, 2024 and 2023, not including pre-funded warrants:

August 2024 Warrants

As described above, as part of the August 2024 Offering, the Company issued unregistered warrants to purchase 16,666,666 shares of its common stock at an exercise price of $4.50 per share. The warrants expire at the earlier of (i) 30 trading days following the date of the Company’s initial public announcement of topline data from its Phase 3 LEVEL trial (the “Topline Data Announcement”), (ii) immediately upon the exercise of the August 2024 pre-funded warrants if such exercise is prior to the Topline Data Announcement, provided that if the pre-funded warrant is not exercised in full, the warrant expires proportionally to the extent the pre-funded warrant is exercised, and (iii) August 8, 2029. The warrants have an estimated term of 1.8 years. The unregistered warrants were offered in a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder. In accordance with ASC 815, Derivatives and Hedging, these warrants are classified as equity and their relative fair value of $27.1 million was recognized as additional paid in capital. The estimated fair value is determined using the Black-Scholes option pricing model using the following assumptions: remaining estimated term of 1.8 years, risk free interest rate of 3.83%, expected dividends ofzero, and expected volatility of 177.27%.

February 2024 Warrants

As described above, as a part of the February 2024 Offering, the Company issued registered warrants to purchase 3,200,000 shares of its common stock at an exercise price of $5.65 per share and contractual term of five years. In accordance with ASC 815, Derivatives and Hedging, these warrants are classified as equity and their relative fair value of $5.7 million was recognized as additional paid in capital. The estimated fair value was determined using the Black-Scholes option pricing model using the following assumptions: remaining estimated term of 5.0 years, risk free interest rate of 4.12%, expected dividends ofzero, and expected volatility of 131.87%.

February 2023 Warrants

As described above, as a part of the February 2023 Offering, the Company issued registered warrants to purchase 216,667 shares of its common stock at an exercise price of $180.00 per share and contractual term of five years. In accordance with ASC 815, Derivatives and Hedging, these warrants are classified as equity and their relative fair value of $9.4 million was recognized as additional paid in capital. The estimated fair value was determined using the Black-Scholes option pricing model using the following assumptions: remaining estimated term of 5.0 years, risk free interest rate of 2.23%, expected dividends ofzero, and expected volatility of 105.69%.

Stock-Based Compensation

Stock Incentive Plans

In June 2022, the Company adopted the 2022 Stock Incentive Plan, as amended on June 7, 2024, (the "2022 Plan"), with the outstanding shares available for future grants under prior plans, as well as outstanding awards under prior plans that subsequently expire, terminate or are surrendered or forfeited, generally being assumed by the 2022 Plan. Unexpired awards granted under certain prior plans may be subject to the terms of such prior plans.

Under the 2022 Plan, with the approval of the Board’s Compensation Committee, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards. Stock options granted under the 2022 Plan may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to employees. NSOs may be granted to employees, consultants and directors. Stock options under the 2022 Plan may be granted with a term of up to ten years and at prices no less than fair market value at the time of grant. Stock options granted generally vest over one to four years.

Upon approval of the Company’s stockholders in October 2024, the number of shares of common stock authorized for issuance under the 2022 Plan was increased to a total of 8,337,252 shares. A total of 5,211,121 shares remained available for issuance as of December 31, 2024.

Summary of Stock Option Activity

Transactions during the years ended December 31, 2024 and 2023 related to stock options granted to employees and directors under Company option plans were as follows:

The following table summarizes all options issued under the Company's stock plans that are outstanding as of December 31, 2024:

The Company used the following assumptions to estimate the fair value of options granted for the year ended December 31, 2024. The Company had no option issuances during the year ending December 31, 2023.

The Company recorded compensation expense for non-inducement stock options of$998 thousand and $116 thousand for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, there were unrecognized compensation costs of$15.3 million related to non-vested stock option awards that will be recognized on a straight-line basis over the weighted average remaining vesting period of 1.28 years.

Inducement Stock Options

The Company granted an employment inducement stock option award for 157 shares of common stock, to its then-new President and Chief Executive Officer on July 6, 2021. The employment inducement stock option award was granted in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. This award vests as follows: 25% on the one-year anniversary of the Chief Executive Officer's employment start date and an additional 25% on each of the following three anniversaries of the Chief Executive Officer's employment start date, subject to continued employment. The option has a 10-year term and an exercise price of $3,152 per share, the July 6, 2021 closing price of our common stock. As of December 31, 2024,75% of the vesting milestones have been achieved. The estimated fair value of this inducement stock option award was $403 thousand using the Black-Scholes option pricing model based on market prices and the following assumptions at the date of inducement option grant: risk-free interest rate of 1.13%, dividend yield of 0%, volatility factor for our common stock of 99.36% and an expected life of 7 years.

The Company also granted an employment inducement stock option award for 157 shares of common stock to its then-new Chief Medical Officer on January 15, 2021. This employment inducement stock option was awarded in accordance with the employment inducement award exemption provided by Nasdaq Listing Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. The option award will vest as follows:

25%upon initiation of a Phase 3 trial; 25% upon database lock; 25% upon acceptance for review of an investigational NDA; and 25% upon approval. The options have a 10-year term and an exercise price of $2,848 per share, the January 15, 2021 closing price of our common stock. As of December 31, 2024, two of the vesting milestones have been achieved. The estimated fair value of the inducement stock option award granted was $403 thousand using the Black-Scholes option pricing model based on market prices and the following assumptions at the date of inducement option grant: risk-free interest rate of 11%, dividend yield of 0%, volatility factor for our common stock of 103.94% and an expected life of 10 years.

Inducement stock option compensation expense totaled $127 thousand and $75 thousand for the years ended December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024, there was $214 thousand of remaining unrecognized compensation expense related to these inducement stock options.

NOTE 6—COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company owns no real property. Beginning November 1, 2022, the Company maintains a membership providing dedicated office space, as well as shared services and shared space for meetings, catering, and other business activities, at its' principal executive office. The current rent is approximately $1 thousand per month.

Previously, the Company was party to a lease agreement (the “Lease”) with Concourse Associates, LLC (the “Landlord”) for its prior headquarters (the “Premises”). As of April 2021, the Lease's term extended through June 30, 2024 and the annual base rent of $125 thousand would increase 2.5% annually for lease yearstwo andthree. On February 7, 2023, the Company entered into a Lease Termination Agreement with the Landlord, with respect to the Premises. As consideration for the Landlord’s entry into the Lease Termination Agreement, including a release of any claims the Landlord may have had against the Company under the Lease, the Company paid the Landlord $170 thousand. Pursuant to the Lease Termination Agreement, effective February 8, 2023, the Company hadno remaining rent or further obligations to the Landlord pursuant to the Lease.

Simdax License Agreement

On November 13, 2013, the Company acquired certain assets of Phyxius pursuant to the Asset Purchase Agreement by and among the Company, Phyxius and the stockholders of Phyxius. Among these assets was a license with Orion for the exclusive, sublicensable right to develop and commercialize pharmaceutical products containing levosimendan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial in the United States and Canada (the "License"). On October 9, 2020 and January 25, 2022, the Company entered into an amendment to the License to include in the scope of the License two new oral Product formulations containing levosimendan, in capsule and solid dosage form (TNX-103) and a subcutaneously administered dosage form (TNX-102), subject to specified limitations.

On February 19, 2024, the Company entered into an additional amendment to the License providing global rights to oral and subcutaneous formulations of levosimendan used in the treatment of PH-HFpEF. The amendment also reduced the tiered royalties based on worldwide net sales of the product by the Company and its sublicensees, increased the License’s existing milestone payment due to Orion upon the grant of United States Food and Drug Administration approval of a levosimendan-based product to $10.0 million and added a milestone payment to Orion of $5.0 million due upon the grant of regulatory approval for a levosimendan-based product in Japan. The amendment also (i) increased the Company’s obligations to make certain non-refundable commercialization milestone payments to Orion, aggregating to up to $45.0 million, contingent upon achievement of certain cumulative worldwide sales of the product by the Company, and (ii) reduced the maximum price per capsule payable by the Company to Orion, under a yet-to-be-negotiated supply agreement, for the commercial supply of oral levosimendan-based product. Pursuant to the License, the Company and Orion will agree to a new trademark when commercializing levosimendan in either of the dosage forms.

The term of the License extends until 10 years after the launch of the Product in the territory, provided that the License will continue after the end of the term in each country in the territory until the expiration of Orion’s patent rights in the Product in such country. In the event that no regulatory approval for the Product has been granted in the United States on or before September 20, 2030, however, either party will have the right to terminate the License with immediate effect.

The License also grants the Company a right of first refusal to commercialize new developments of the Product, including developments as to the formulation, presentation, means of delivery, route of administration, dosage or indication but, pursuant to the February 2024 amendment, excluding new applications of levosimendan for neurological diseases and disorders developed by Orion.

As of December 31, 2024, the Company has not met any of the developmental milestones under the License and, accordingly, has not recorded any liability for the contingent payments due to Orion.

Litigation

The Company is subject to litigation in the normal course of business, none of which management believes will have a material adverse effect on the Company’s consolidated financial statements.

NOTE 7—401(k) BENEFIT PLAN

The Company sponsors a 401(k) Retirement Savings Plan (the “401(k) Plan”) for all eligible employees. Full-time employees over the age of eighteen are eligible to participate in the 401(k) Plan after 90 days of continuous employment. Participants may elect to defer earnings into the 401(k) Plan up to the annual IRS limits and the Company provides a matching contribution up to 5% of the participants’ annual salary in accordance with the 401(k) Plan documents. A third-party trustee manages the 401(k) Plan.

For the years ended December 31, 2024 and 2023, the Company recorded$63 thousand and $66 thousand for matching contributions expense, respectively.

NOTE 8—INCOME TAXES

The Company has not recorded any income tax expense (benefit) for the period ended December 31, 2024 due to its history of net operating losses.

The reconciliation of income tax expenses (benefit) at the statutory federal income tax rate of 21% for the periods ended December 31, 2024 and December 31, 2023 is as follows (in thousands):

The tax effects of temporary differences and carry forwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):

The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The Company periodically evaluates the recoverability of the deferred tax assets. At such time that it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced. The net increase in the valuation allowance during 2024 was approximately $3.0 million.

As of December 31, 2024, the Company had Federal and State net operating loss carryforwards of approximately $170.5 million and $137.1 million available to offset future federal and state taxable income, respectively. Federal net operating losses of $118.0 million begin to expire in 2025, while the remaining $52.5 million carryforward indefinitely. State net operating losses begin to expire in 2025.

Utilization of the net operating loss carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of the net operating losses before utilization or substantial restrictions on the use of such net operating losses.

We have U.S. federal net operating loss carryforwards, or NOLs, which expire in various years if not utilized. Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited. In general, an “ownership change” occursif there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We have not performed a formal study to determine whether any of our NOLs are subject to these limitations. We have recorded deferred tax assets for our NOLs and research and development credits and have recorded a full valuation allowance against these deferred tax assets. In the event that it is determined that we have in the past experienced additional ownership changes, or if we experience one or more ownership changes as a result of future transactions in our stock, then we may be further limited in our ability to use our NOLs and other tax assets to reduce taxes owed on the net taxable income that we earn in the event that we attain profitability. Any such limitations on the ability to use our NOLs and other tax assets could adversely impact our business, financial condition, and operating results in the event that we attain profitability.

The Company follows the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This topic also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. There were no uncertain tax positions as of December 31, 2024 and 2023.

The Company files U.S. and state income tax returns with varying statutes of limitations. The tax years 2005 and forward remain open to examination due to the carryover of unused net operating losses or tax credits.

NOTE 9—SEGMENTS

Operating segments are identified as components of an entity about which separate discrete financial information is available for evaluation by the CODM, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company's CODM, the President and Chief Executive Officer, views the Company's operations asone operating segment, which is focused on identifying and developing therapeutics that address cardiovascular and pulmonary diseases with high unmet medical need, with an initial therapeutic focus on pulmonary hypertension. The Company doesnot have revenue in the current comparative period, incurs expenses primarily in North America and manages the business activities on a consolidated basis.

The accounting policies of the cardiovascular and pulmonary therapeutics segment are the same as those described in the summary of significant accounting policies.

The CODM assesses performance for the cardiovascular and pulmonary therapeutics segment and decides how to allocate resources based on net loss that also is reported on the income statement as consolidated net loss. The measure of segment assets is reported on the balance sheet as cash and cash equivalents.

The Company hasnot generated any product revenue in the current period and expects to continue to incur significant expenses and operating losses for the foreseeable future as the Company advances its product candidates through all stages of development and clinical trials.

As such, the CODM uses cash forecast models in deciding how to invest into the cardiovascular and pulmonary therapeutics segment. Such cash forecast models are reviewed to assess the entity-wide operating results and performance. Net loss is used to monitor budget versus actual results. Monitoring budgeted versus actual results, net cash used in operating activities for the period and cash on hand are used in assessing performance of the segment.

The table below summarizes the significant expense categories regularly reviewed by the CODM for the years ended December 31, 2024 and 2023 (in thousands).

(a) Other segment items included in segment loss includes interest income and interest expense.

(b) The Company is a single operating segment and therefore the measure of segment net loss is the same as consolidated net loss and does not require reconciliation.

For the year ended December 31, 2024 and 2023, the net cash used in operating activities was$14.8 million and$5.9 million, respectively. The table below summarizes the significant asset categories regularly reviewed by the CODM for the years ended December 31, 2024 and 2023 (in thousands).

NOTE 10—SUBSEQUENT EVENTS

On March 4, 2025, the Company entered into a securities purchase agreement with certain accredited investors for the purchase and sale, in a private placement financing by the Company, of (i)378,346 shares of its common stock, and pre-funded warrants to purchase 3,760,726 shares of common stock at a combined offering price of $6.04 per share of common stock and $6.03 per pre-funded warrant, resulting in gross proceeds of $25.0 million. The pre-funded warrants do not expire and have an exercise price of $0.01.

Also, on March 5, 2025 and in connection with the March 2025 Offering, the Company entered into a registration rights agreement (the “March 2025 Registration Rights Agreement”) with the purchasers, pursuant to which the Company agreed to register for resale the shares of common stock issued in the March 2025 Offering and the shares of common stock issuable upon exercise of the pre-funded warrants issued in the March 2025 Offering within 45 days of the closing date, and have such registration statement declared effective no later than the earlier of (i) 75 days following the closing date (or 130 days following the closing date, if the U.S. Securities and Exchange Commission (the “SEC”) notifies the Company that it will “review” the registration statement) and (ii) the fifth business day after the date the Company is notified by the SEC that the registration statement will not be reviewed.

Subsequent to December 31, 2024, the Company received a total of $347 thousand from the exercise of pre-funded warrants for 99,189 shares of common stock and warrants for 71,944 shares of common stock.