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 Annual Report to ~~“Oxygen Biotherapeutics”~~“Tenax Therapeutics”, “we”, “our” and “us” means ~~Oxygen Biotherapeutics,~~Tenax Therapeutics, Inc.

ITEM 1—BUSINESS

~~Oxygen Biotherapeutics~~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.

~~Oxygen Biotherapeutics, Inc. is~~We are a specialty pharmaceutical company focused on identifying, developing and commercializing ~~a portfolio of~~ 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~~United States and mortality in cardiac surgery patients at risk for developing Low Cardiac Output Syndrome or LCOS. We plan to start a Phase 3 trial with levosimendan in that indication during the third quarter of calendar year 2014.Canada.

In April 2017, we announced that we would be exploring strategic alternatives in order to maximize stockholder value and that we had formed a strategic committee of three independent board members to supervise management in this review. We ~~are also developing Oxycyte®~~engaged Ladenburg Thalmann & Co. Inc., a ~~systemic perfluorocarbon, or PFC, product we believe is a safe and effective oxygen carrier for use~~subsidiary of Ladenburg Thalmann Financial Services Inc., as our financial advisor to assist in situations of acute ischemia. In addition, we have developed a family of perfluorocarbon-based oxygen carriers for use in personal care, topical wound healing, and other topical indications. Oxycyte has been successful in two clinical trials and is currently being evaluated in a Phase II-b clinical trial for the ~~treatment of traumatic brain injury, or TBI.~~

strategic review process.

Business Strategy

Our principal business objective is to ~~discover,~~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.

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Efficiently conduct clinical development to establish clinical proof of concept with our lead product candidates. Levosimendan ~~and Oxycyte represent~~represents novel therapeutic modalities for the treatment of ~~LCOS, TBI~~pulmonary hypertension and other critical care conditions. We are conducting clinical development ~~in a variety of clinical studies~~ with the intent to establish proof of concept in ~~a number of~~several important disease areas where these therapeutics would be expected to have benefit. Our focus is on conducting well-designed studies ~~early in the clinical development process~~ 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 ~~the United States Army and Navy.~~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 ~~that~~ 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,~~Corporation, a Finnish ~~company.~~company, or Orion. Levosimendan is a calcium ~~sensitizer~~sensitizer/K-ATP activator developed for intravenous use in hospitalized patients with acutely decompensated heart failure. It is currently approved in over 5060 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:

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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.

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

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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 for any indication in the United States and Canada. In the countries where levosimendan is marketed, Levosimendan is indicated for the short-term treatment of acutely decompensated severe chronic heart failure in situations where conventional therapy is not sufficient, and in cases where inotropic support is considered appropriate. In acute decompensated heart failure patients, levosimendan has been shown to significantly improve patients’ symptoms as well as acute hemodynamic measurements such as increased cardiac output, reduced preload and reduced afterload. Other unique properties of levosimendan include sustained efficacy through the formation of a long acting metabolite, lack of impairment of diastolic function, and evidence of better compatibility with beta blockers than dobutamine.

The European Society of Cardiology, or the ESC, recommends levosimendan as a preferable agent over dobutamine to reverse the effect of beta blockade if it is thought to be contributing to hypotension. The ESC guidelines also state that levosimendan is not appropriate for patients with systolic blood pressure less than 85mmHg or in patients in cardiogenic shock unless it is used in combination with other inotropes or vasopressors.

Levosimendan Development for Pulmonary Hypertension Patients

Levosimendan is under development in North America for ~~reduction~~the treatment of patients with pulmonary hypertension associated with heart failure with preserved ejection fraction, or PH-HFpEF. PH-HFpEF is defined hemodynamically by a pulmonary artery pressure, or mPAP, ≥25 mmHg, a pulmonary capillary wedge pressure, or PCWP, >15 mmHg, and a diastolic pressure gradient, or diastolic PAP – PCWP, >7mmHg. Pulmonary hypertension in these patients initially develops from a passive backward transmission of elevated filling pressures from left-sided heart failure. These mechanical components of pulmonary venous congestion may trigger pulmonary vasoconstriction, decreased nitric oxide availability, increased endothelin expression, desensitization to natriuretic peptide induced vasodilation, and vascular remodeling. Finally, these changes often lead to advanced pulmonary vascular disease, increased right ventricle, or RV, afterload, and RV failure.

PH-HFpEF is a common form of pulmonary hypertension with an estimated US prevalence exceeding 1.5 million patients. Currently, no pharmacologic therapies are approved for treatment of PH-HFpEF. Despite the fact that many therapies have been studied in PH-HFpEF patients, including therapies approved to treat pulmonary arterial hypertension patients, no therapies have been shown to be effective in treating PH-HFpEF patients.

Published pre-clinical and clinical studies indicate that levosimendan may provide important benefits to patients with pulmonary hypertension. Data from these published trials indicate that levosimendan may reduce pulmonary vascular resistance and improve important cardiovascular hemodynamics such as reduced pulmonary capillary wedge pressure in patients with pulmonary hypertension. In addition, several published studies provide evidence that levosimendan may improve right ventricular dysfunction which is a common comorbidity in patients with pulmonary hypertension. While none of these studies have focused specifically on PH-HFpEF patients, the general hemodynamic improvements in these published studies of various types of pulmonary hypertension provide an indication that levosimendan may be beneficial in PH-HFpEF patients.

We plan to meet with the United States Food and Drug Administration, or FDA, to discuss the design of a proposed Phase 2 trial in PH-HFpEF patients during the first half of 2018. Following feedback from that meeting, we plan to complete the design of the Phase 2 trial and begin enrollment of the trial in the second half of 2018.

Levosimendan Development for Cardiac Surgery Patients

Low cardiac output syndrome, or 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.

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.

In 2014, we initiated a Phase 3 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 3 trial was conducted under an FDA approved Special Protocol Assessment, or SPA, and with FDA granted Fast Track status for the development of levosimendan to reduce mortality and morbidity in cardiac surgery patients at risk of LCOS. Our acquisition of levosimendan brings to Oxygen Biotherapeutics not only the exclusive rights in the United States and Canada to develop and commercialize levosimendan for the specific indication of prevention and treatment of LCOS, but also the United States Food and Drug Administration’s, or FDA’s, approval of Fast Track status for a Phase 3 trial, and the FDA’s Special Protocol Assessment or 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®~~“Simdax®” trademark to commercialize this product.

The ~~effects~~LEVO-CTS trial design was guided by the published literature, including important dosing refinements and inclusion of patients with low preoperative ejection fraction. In addition, we relied heavily on the input of European clinicians who have significant personal clinical experience with the use of levosimendan ~~are mediated through:~~

-	~~increased cardiac contractility by calcium sensitization of troponin C;~~

-	~~vasodilation through the opening of potassium channels; and~~

-	~~cardioprotection and antiapoptopic effect through the opening of mitochondrial potassium channel.~~

~~The physiologic effects of levosimendan have been very well characterized~~ in ~~clinical trials of acutely decompensated heart failure or ADHF patients and~~treating cardiac surgery patients. ~~The collective findings of these clinical trials form the basis for developing levosimendan in cardiac surgery patients at risk for LCOS.~~

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

-	~~sustained hemodynamic improvement;~~

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sustained hemodynamic improvement;

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diminished myocardial injury;

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improved tissue perfusion;

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better outcomes and fewer hospital days;

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

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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.

-	~~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 3 trial of levosimendan. DCRI is the world’s largest academic clinical research organization, with substantial experience in conducting cardiac surgery trials. The Phase 3 trial ~~will be~~was conducted in approximately 5060 major cardiac surgery centers in North America. The trial ~~will enroll~~enrolled patients undergoing coronary artery bypass ~~graphs~~grafts, or CABG, and/or mitral valve surgery, and CABG with aortic valve surgery who are at risk for developing LCOS. The trial ~~is expected to be~~was designed as a double blind, randomized, ~~placebo controlled~~placebo-controlled study seeking to enroll 760 patients. ~~It is expected that~~During 2016 we made the decision to increase enrollment ~~will begin~~in the LEVO-CTS trial to 880 patients. These additional patients were necessary to ensure sufficient powering and were necessary due to:

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a small percentage of patients who were randomized but did not receive the study drug;

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a small percentage of patients who were missing one or more component measurements of the primary endpoint; and

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a slightly lower primary endpoint event rate than we originally projected.

Enrollment began in the third quarter of calendar year 2014 and ~~will take approximately 18 months to complete. The protocol~~was completed in December of 2016. On January 31, 2017, we announced top-line results from the Phase 3 ~~trial has been submitted~~LEVO-CTS trial. Levosimendan, given prophylactically prior to ~~ClinicalTrials.gov.~~cardiac surgery to patients with reduced left ventricular function, had no effect on the co-primary outcomes. The study did not achieve statistically significant reductions in the dual endpoint of death or use of a mechanical assist device at 30 days, nor in the quad endpoint of death, myocardial infarction, need for dialysis, or use of a mechanical assist device at 30 days.

~~Should~~However, the study results demonstrated statistically significant reductions in two of three secondary endpoints including reduction in LCOS and a reduction in postoperative use of secondary inotropes. Additionally, levosimendan ~~successfully progress~~was found to be safe with no clinically significant increases in hypotension or cardiac arrhythmias and the clinical ~~testing and if it appears regulatory approval for one or more medical uses is likely, we intend to evaluate our options for commercializing~~data showed a non-significant numerical reduction in 90-day mortality.

A post hoc analysis on patients in whom isolated CABG surgery was performed (66% of the ~~product. These options include licensing~~patients) revealed that levosimendan ~~to a third party for distribution, selling the product ourselves, or establishing some other form of strategic relationship for making and distributing levosimendan~~improved 90-day survival significantly (p=0.0017). This was accompanied with a ~~participant~~significant improvement in postoperative cardiac index, in the ~~pharmaceutical industry. We are currently investigating~~frequency of LCOS and ~~evaluating all options.~~

~~Oxycyte~~in the need for further inotropic support. Accordingly, the reductions in the incidence of LCOS were associated with a substantial improvement in mortality. However, there was essentially no effect on any of these endpoints in those LEVO-CTS patients receiving valve surgeries.

Our Oxycyte oxygen carrier product is a PFC-based oil in water emulsion, which is provided to the patient intravenously. The physical-chemical properties of PFCs enable our product to concentrate oxygen from the lungs and transport it through the body releasing it along the way. Over a period of days Oxycyte is gradually exhaled through the lungs during the normal process of respiration. Oxycyte requires no cross matching, so it is immediately available and compatible with all patients’ blood types. Oxycyte has an extended shelf life compared to blood and is provided as a sterile emulsion ready for intravenous administration. Because it contains no biological components, there is reduced risk of transmission of blood-borne viruses from human blood products. Further, since Oxycyte is based on readily available inert compounds, we believe it can be manufactured on a cost-effective basis in amounts sufficient to meet demand.

We received approval of our Investigational New Drug application, or IND, for severe TBI filed with FDA and began Phase I clinical studies in October 2003, which were completed in December 2003. We submitted a report on the results to the FDA along with a Phase II protocol in 2004. Phase II-A clinical studies began in the fourth quarter of 2004, and were completed in 2006. A further Phase II study protocol was filed with the FDA in the spring of 2008, but remained on clinical hold by the FDA due to safety concerns raised by the regulatory agency.

Despite the FDA’s postponement of Oxycyte trials in the United States, we filed a revised protocol as a dose-escalation study with the regulatory authorities in Switzerland and Israel. The relevant Swiss regulatory body approved the protocol in August 2009, and the Israel Ministry of Health approved the protocol in September 2009. The new study began in October 2009. In March 2010, we determined that it is feasible to simplify the trial design and also reduce the number of patients to be enrolled. We have completed the first of three cohorts and we were authorized by the Swiss and Israeli regulatory authorities to initiate the second cohort. Despite their authorization, we stopped enrollment in order to reevaluate the protocol’s patient enrollment parameters, secure our Current Good Manufacturing Practice, or cGMP, supply of Oxycyte, review our contractor and clinical sites, and examine the possibility of opening clinical sites in other countries. In July 2013 we resumed enrollment in the second cohort. Upon completion of the Phase II trials, a Phase III trial will need to be implemented. In that instance, we would seek a partner to either conduct the Phase III trials, or collaborate with us to conduct the trials.

In ~~March 2011,~~the second and third quarters of 2017 we ~~received confirmation~~explored the opportunity for submitting a new drug application, or NDA, for use of ~~a $2.07 million, two-year cost reimbursement award from~~levosimendan in CABG surgery patients on the ~~U.S. Army to conduct safety related studies for Oxycyte. PFC emulsions, as a therapeutic class, are known to interact with the reticuloendothelial system as part~~basis of the ~~clearance mechanism, as well as affect~~robust reduction in 90-day mortality observed in the number of circulating platelets. The studies supported by this grant will examine the effects of Oxycyte on the immune system, platelet function and distribution, as well as the safety and efficacy of platelet transfusion, which can be necessary for patients with TBI and related polytrauma. Additional studies under this grant will be conducted to evaluate the pharmacokinetics of PFCs in relevant species. On September 12, 2013, we submitted toLEVO-CTS trial. However, the FDA ~~results from two series of animal studies designed to address Agency concerns regarding the use of Oxycyte~~advised that another study in treating TBI patients. These studies were conducted to probe both the interactions between Oxycyte and the immune system as well as assess the PFC-based emulsion’s potential to increase the risk of intracerebral hemorrhage (ICH). We expect to complete the remaining studies over the next 12 months.CABG surgery patients would be required that prospectively tests levosimendan’s effectiveness in improving mortality.

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~~On February 28, 2014,~~Accordingly, we ~~were notified that the FDA had completed its review~~have suspended development of the September 2013 nonclinical submission and that we satisfactorily addressed all clinical hold issues identified by the agency. In connection with this notice, the FDA lifted the clinical hold on Oxycyte. Lifting of the clinical hold clears uslevosimendan for use in CABG patients due to ~~proceed with the clinical development program in the United States.~~

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

We believe that important competitive factors in the market for oxygen carrier products will include the relative speed with which competitors can develop their respective products, complete the clinical testing and regulatory approval process, and supply commercial quantities of their products to the market. In addition to these factors, competition is expected to be based on the effectiveness of oxygen carrier products and the scope of the intended uses for which they are approved, the scope and enforceability of patent or other proprietary rights, product price, product supply, and marketing and sales capability. We believe that our competitive position will be significantly influencedrepeat study, as required by the FDA. The incidence of 90-day mortality in CABG surgery patients is low (~8%). The repeat study would need to randomize approximately 1200 CABG surgery patients with low LVEF (<35%) to demonstrate a >50% risk reduction in mortality. Based on this analysis, we determined the cost and timing of this study would outweigh the clinical testing and regulatory filings for Oxycyte, our ability to maintain and enforce our proprietary rights covering Oxycyte and its manufacturing process, and our ability to develop capabilities for manufacturing and distributing the product ourselves or with others, should we obtain regulatory approval.likely benefit.

~~Other Products~~

In addition to our primary products described above, we have also developed our Dermacyte® line of topical cosmetic products, which contain our patented 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 is designed to be used as a wound-healing gel. At this time, we do not expect that 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.

With respect to Oxycyte, we are actively pursuing agreements with multiple manufacturers to ensure we are able to consistently obtain our raw materials and topical products timely, within our defined specifications, and at competitive prices.

Our FtBu PFC currently is manufactured by Fluoromed. We have obtained exclusive manufacturing rights for our PFC, and we strengthened these rights with documentation of the manufacturer’s critical formulations and processes. This documentation is being held in escrow and will revert to us in the event the manufacturer undergoes a change-of-control or fails to remain a going concern.

In September 2011 we entered into a development and supply agreement with Bioserve, Inc. to manufacture our Oxycyte emulsion for clinical use under cGMP standards. In January 2012, Bioserve transferred the manufacturing process from Hospira, our previous supplier, to their cGMP facilities and demonstrated their ability to produce clinical grade Oxycyte.

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 9seven U.S. and foreign patents. In addition, we have ~~numerous~~one U.S. patent ~~applications~~application pending that ~~are~~is complemented by the appropriate foreign patent applications related to ~~our~~a product ~~candidates~~candidate and proprietary ~~processes, methods~~process, method and ~~technologies.~~technology. Our issued and in-licensed patents, as well as our pending patents, expire between ~~2014~~2018 and ~~2030.~~2031.

We have:

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three U.S. patents (5,824,703; 5,840,767; 6,167,887), three Australian patents (690,277; 722,417; 759,557), and two Canadian patents (2,239,170; 2,311,122) 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 3 years;

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one Australian patent (759,557) pertaining to the use and application of perfluorocarbons as gas transport agents in blood substitutes and liquid ventilation which expires in 2018;

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one U.S. patent (8,404,752), one Australian Patent (209,271,530) and one European patent (EPO9798325.8) held jointly with Virginia Commonwealth University Intellectual Property Foundation for the treatment of traumatic brain injury;

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one Israeli patent (215516) and numerous patent applications, including one U.S. patent application, for the formulation of perfluorocarbon emulsion with an average remaining life of approximately 13 years; and

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two U.S. patents (6,730,673 and 6,943,164) for the intravenous formulation of levosimendan as in-licensed patent rights for our development and commercialization of levosimendan in the United States and Canada.

-	~~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 15 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 16 years.

Our patent and patent applications include claims ~~covering:~~covering all various uses of levosimendan, our lead product candidate currently under development, as well as the manufacturing and use of our perfluorocarbon emulsion formulation.

-	~~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~~The U.S. trademark ~~registrations~~registration 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®Simdax® is owned by Orion and is licensed to us for sales and marketing purposes for any pharmaceutical products containing levosimendan that are commercialized in the United States and Canada.

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.

We believe the concept of using a medication to treat pulmonary hypertension is novel. Because therapies are commonly used to treat pulmonary hypertension, 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 treatment of pulmonary hypertension 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.

In ~~addition,~~order to compete successfully in this and other therapeutic areas, we ~~own numerous domain names relevant~~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 ~~our business, such as www.oxygenbiotherapeutics.com, www.DermacyteUS.com, www.oxybiomed.com, and others.~~other therapies.

Government ~~regulation~~Regulation

The manufacture and distribution of levosimendan ~~and Oxycyte, as well as our other products, and the operation of our manufacturing facilities~~ 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.

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~~Our regulatory strategy is~~As noted above, following the announcement of the Phase 3 LEVO-CTS top-line results, we held a meeting with the FDA to ~~pursue Phase III clinical testing~~review the preliminary trial data and discuss a path forward to file a NDA for ~~levosimendan~~levosimendan. We explored the opportunity to submit an NDA for use in CABG patients on the basis of the robust reduction in 90-day mortality observed in the ~~United States. We then intend to use the results of these~~LEVO-CTS trial. The FDA advised that another study in CABG surgery patients would be required that prospectively tests ~~to pursue FDA marketing approval of levosimendan~~levosimendan’s effectiveness in ~~the United States. In addition, we are continuing with our Phase II clinical testing and initial regulatory approval of Oxycyte in Switzerland and Israel.~~improving mortality.

Research and Development

Our research and development efforts ~~will be~~are focused on the development and commercialization of levosimendan for its use in clinical indications, primarily ~~LCOS. We are~~pulmonary hypertension. Previously, we were also ~~focusing~~focused on furthering the development ~~and manufacture~~ of ~~Oxycyte~~levosimendan for its use in clinical indications, primarily ~~TBI, spinal cord injury, and decompression sickness.~~ for the treatment of LCOS. However, we have suspended the development of levosimendan for the treatment of LCOS while we evaluate strategic alternatives.

We spent approximately ~~$3.0~~$3.5 million and ~~$2.5~~$13.1 million on research and development during ~~each of~~ the fiscal years ended ~~April 30, 2014~~December 31, 2017 and ~~2013,~~2016, respectively.

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 ~~April 30, 2014,~~December 31, 2017, we had 14seven full-time ~~employees.~~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

As of December 31, 2017 and 2016, 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;~~

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 Oxycyte and levosimendan product candidates or future product candidates;~~

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

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

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

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

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the success of clinical trials of our product candidates;

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

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our ability to establish an effective sales and marketing infrastructure;

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competition from existing products or new products that may emerge;

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

the ability to receive regulatory approval or commercialize our products;

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

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

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

potential product liability claims and adverse events;

-	~~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

~~Orion may have the right to terminate our license for the levosimendan product, and, if the license is terminated, our business would be materially harmed.~~

The License grants Life Newco an exclusive, sublicenseable right to develop and commercialize pharmaceutical products containing levosimedan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial in the United States and Canada. Under the License, if we do not enroll a randomized patient in a human clinical trial using the levosimedan product by July 31, 2014, Orion will have the right to immediately terminate the License. While we have commenced our clinical trial process, activated trial sites, and expect the enrollment of the first patient at any time, it is possible that the first patient will be enrolled by July 31, 2014. Accordingly, we intend to seek a waiver or amendment to this condition in the License. There can be no assurance that we will obtain such a waiver or amendment before July 31, 2014, or at all, which could potentially result in Orion’s termination of the License. If Orion terminates the License, we would not be able to develop or commercialize the levosimedan product. The loss of our license with Orion with respect to the levosimedan product would have a material adverse effect on our business.

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~~pulmonary hypertension, in addition to exploring strategic alternatives in order to maximize stockholder value. On January 31, 2017, we announced top-line results from the Phase 3 LEVO-CTS trial for the treatment of LCOS. The study did not achieve statistically significant reductions in the dual endpoint of death or use of a mechanical assist device at 30 days, nor in the quad endpoint of death, myocardial infarction, need for dialysis, or use of a mechanical assist device at 30 days. Nevertheless, the study demonstrated statistically significant reductions in two of three secondary endpoints including reduction in LCOS and ~~our Oxycyte oxygen carrier product. We have delayed development on our Wundecyte topical wound product and Vitavent, our oxygen-carrying liquid, until~~a reduction in postoperative use of secondary inotropes. Additionally, we ~~find~~observed a ~~licensing partner willing to pursue development or obtain additional financing to pursue development ourselves.~~non-significant numerical reduction in 90-day mortality. At present, we intend to commit most of our resources to advancing levosimendan ~~and Oxycyte~~ to the point it receives regulatory approval for ~~one~~the treatment of pulmonary hypertension. If as a consequence of the results of our Phase 3 LEVO-CTS trial or ~~more medical uses, and if this effort is unsuccessful~~our Phase 2 trial in PH-HFpEF that we plan to conduct, we are unable to receive regulatory approval of levosimendan, then we may not have resources to pursue development of ~~our~~any other products and our business ~~would~~could terminate. Furthermore, by delaying development of Vitavent, 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.

~~Failure to integrate or realize the expected benefits of the Phyxius asset acquisition could adversely affect our business and results of operations.~~

On November 13, 2013, we completed our acquisition of certain assets of Phyxius Pharma, Inc., or Phyxius. At the same time, three former employees of Phyxius became employees of our company. We conducted this transaction based on certain assumptions regarding our business, markets, cost structures and synergies. If we do not successfully integrate or realize the anticipated benefits of this transaction, instead of resulting in growth for and enhanced value to our company, our strategy may cause us to experience operational issues and expose us to operational and regulatory risk, each of which could have material adverse effects on our reputation, business, financial condition and results of operations.

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 candidates 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~~candidates, and obtaining approval of an NDA is a lengthy, expensive and uncertain process. ~~Markets~~In addition, 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.

Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA, that such product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. Additionally, the FDA may also require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or post-approval, or it may object to elements of our clinical development program. For example, we held a meeting with the FDA to review the preliminary trial data for our Phase 3 LEVO-CTS trial and discuss a path forward to file an NDA for levosimendan. We explored the opportunity for submitting an NDA for use in CABG surgery patients on the basis of the robust reduction in 90-day mortality observed in the LEVO-CTS trial. However, the FDA advised that another study in CABG surgery patients would be required that prospectively tests levosimendan’s effectiveness in improving mortality. Accordingly, we have suspended development of levosimendan use in CABG due to the scope of the repeat study, as required by the FDA.

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

We ~~expect to devote~~have devoted a substantial portion of our financial and managerial resources to ~~pursuing~~pursue Phase ~~III and Phase II~~3 clinical trials for ~~levosimendan and Oxycyte over the next three years.~~levosimendan. 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 and Oxycyte.~~levosimendan. As our opportunity to generate substantial product revenues within the next ~~four~~three to ~~five~~four years is most likely dependent on successful testing and commercialization of levosimendan ~~and Oxycyte~~ for ~~surgical and oxygen delivery applications,~~pulmonary hypertension, any such occurrence would have a material adverse effect on our operations and could result in the cessation of our business.

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We ~~may be~~are 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 three years to clinical testing of levosimendan and ~~Oxycyte and~~ advancing ~~these products~~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. For example, the top-line results of our Phase 3 LEVO-CTS trial for levosimendan did not achieve statistically significant reductions in dual or quad primary endpoints but did meet two secondary endpoints with statistically significant reduction in incidence of LCOS and use of postoperative secondary inotropes. 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. For instance, based on the results of our LEVO-CTS clinical trial and subsequent FDA feedback, we do not anticipate undertaking further development with levosimendan in the LCOS indication.

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~~is 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, including levosimendan and Oxycyte.~~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;

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;

~~Commercialization approval stage~~

We will be required to file a BLA of an NDA with the FDA in order to obtain regulatory approval for the commercial production and sale of our product candidates in the United States and similar applications with regulatory authorities in countries where we seek to commercialize our product candidates. Under FDA guidelines, the FDA may comment upon the acceptability of the applicable application following its submission. After an application is submitted, there is an initial review to be sure that all of the required elements are included in the submission. There can be no assurance that ~~the submission~~regulatory approval will ever be ~~accepted~~obtained for filing or that the FDA may not issue an RTF. If an RTF is issued, there is opportunity for dialogue between the sponsor and the FDA in an effort to resolve all concerns. There can be no assurance that such a dialogue will be successful in leading to the filingany of ~~the BLA or NDA. If the submission is filed, there can be no assurance that the full review will result in product approval.~~our products.

When a new product is approved, the FDA or other regulatory authorities may require post-approval clinical trials, sometimes called Phase IV4 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~~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:

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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 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;

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 ~~(6 to 12 months or longer)~~ 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, Orion produces levosimendan for us, Bioserve currently manufacturers Oxycyte for us and Fluoromed currently produces FtBu for us. Accordingly, a delay in achieving scale-up of commercial manufacturing capabilities when needed will have a material adverse effect on salespursuant to the terms of our ~~products. Additionally, the manufacture~~license for levosimendan, Orion 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 ~~products will be subject~~relationship with Orion. If supply from Orion is delayed or terminated, or if its facilities suffer any damage or disruption, we may need to extensive government regulation. Among the conditions for marketing approval is that our quality control and manufacturing procedures conform to applicable good manufacturing practice regulations. There is a risk that we will not be able to obtain the necessary regulatory clearances or approvals to manufacture our products onsuccessfully qualify an alternative supplier in a timely ~~basis or at all.~~

~~A change~~manner in order to not disrupt our business. If we cannot obtain an alternate manufacturer ~~likely~~in a timely manner, we would require formal approval by the FDA or other regulatory agencies before the new manufacturer could produce commercial supplies of our products. This approval process would likely take at least 12 to 18 months and, during that time, we could faceexperience a ~~shortage of~~significant interruption in supply of ~~our products,~~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,~~Michael Jebsen, our Interim Chief Executive Officer and Chief Financial 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.

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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;~~

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

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;~~

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;

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, or USPTO, 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.

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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~~USPTO 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:

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

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injury to our reputation;

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withdrawal of clinical trial participants;

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

costs to defend the related litigation;

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-	~~Injury to our reputation;~~

substantial monetary awards to trial participants or patients;

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-	~~Withdrawal of clinical trial participants;~~

loss of revenue; and

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-	~~Costs to defend the related litigation;~~

the inability to commercialize any products that we may develop.

-	~~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.

Our business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security.

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, and damage to our reputation, and the further development of our product candidates could be delayed.

Our disclosure controls and procedures address cybersecurity and include elements intended to ensure that there is an analysis of potential disclosure obligations arising from security breaches. We also maintain compliance programs to address the potential applicability of restrictions against trading while in possession of material, nonpublic information generally and in connection with a cyber-security breach. However, a breakdown in existing controls and procedures around our cyber-security environment may prevent us from detecting, reporting or responding to cyber incidents in a timely manner and could have a material adverse effect on our financial position and value of our stock.

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~~.future.

~~The market~~Our stock price ~~of shares of our common stock~~ has in the past been, and ~~may~~is likely to be in the future, ~~subject~~volatile. The stock market in general has experienced extreme volatility that has often been unrelated to ~~wide fluctuations in response~~the operating performance of particular companies. As a result of this volatility, our existing stockholders may not be able to sell their stock at a favorable price. The market price for our common stock may be influenced by many ~~risk~~ factors, ~~listed in this section, and others beyond our control,~~ including:

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

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

-	~~status and/or results of our clinical trials;~~

status and/or results of our clinical trials;

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 ~~July 24, 2014,~~March 26, 2018, we had outstanding warrants and options, securities purchase agreements, and other instruments that are exercisable into an aggregate of ~~6,267,850~~309,517 shares of our common stock, which, if exercised, would represent approximately 18% 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.

~~Certain investors may be able to exercise significant influence over us.~~

As of July 24, 2014, SPC 1 Vatea Segregated Portfolio, or Vatea Fund, held 189,082 shares of our common stock and JP SPC 3 obo OXBT FUND, SP, or OXBT Fund, held 3,192,593 shares of our common stock, representing 12% of our outstanding common stock. As of July 24, 2014, OXBT Fund held warrants that are exercisable into an aggregate of up to 2,251,742 shares of our common stock, which, if exercised, would represent 18.6% of our current outstanding common stock. Mr. Gregory Pepin, one of our directors, is the investment manager of both Vatea Fund and OXBT Fund. In addition, as of July 24, 2014, each of John P. Kelly, Doug Randall and Douglas Hay, PhD, our Chief Executive Officer, Vice President, Business and Commercial Operations and Vice President, Regulatory Affairs, respectively, held 1,166,511 shares of our common stock, individually representing 4.2% of our outstanding common stock. As of July 24, 2014, each of Mr. Kelley, Mr. Randall and Dr. Hay also hold options to purchase 893,220 shares of our common stock, individually representing 3.1% of our outstanding common stock. Accordingly, these parties, either individually or as part of a group, may have a strong ability to influence our business, policies and affairs. We cannot be certain that their interests will be consistent with the interests of other holders of our common stock.

~~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 July 24, 2014, we had 14 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

Not applicable.

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 ~~$9,219~~$9,400 per month for the facility.

21

ITEM 3—LEGAL PROCEEDINGS

~~The Company is~~We are subject to litigation in the normal course of business, none of which management believes will have a material adverse effect on ~~the Company’s~~our Consolidated Financial Statements.

ITEM 4— MINE SAFETY DISCLOSURES

Not applicable

22

PART II

Issuer Purchases of Equity Securities Total Number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Period
February 1, 2014 - February 28, 2014 20 $ 6.18 - $ -
March 1, 2014 - March 31, 2014 20 6.47 - -
April 1, 2014 - April 30, 2014 19 5.55 - -
Total 59 $ 6.08 - $ -

Unregistered Sales of Equity Securities

~~On March 31, 2014 we issued 250 shares of unregistered common stock as payment of $11,275 of interest due on our outstanding convertible notes.~~None.

~~All of the securities described above were issued in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act.~~

ITEM 6—SELECTED FINANCIAL DATA

Not ~~Applicable.~~applicable.

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 Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.

Results of operations- Comparison of the ~~year~~years ended ~~April 30, 2014~~December 31, 2017 and ~~2013~~2016

~~Revenue~~Overview

~~Product Revenue and Gross Profit~~Strategy

We generate revenue through 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,Levosimendan is under development in North America for the ~~years ended April 30, 2014~~treatment of patients with pulmonary hypertension associated with heart failure with preserved ejection fraction, or PH-HFpEF. PH-HFpEF is defined hemodynamically by a pulmonary artery pressure, or mPAP, ≥25 mmHg, a pulmonary capillary wedge pressure, or PCWP, >15 mmHg, 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~~a diastolic pressure gradient, or diastolic PAP – PCWP, >7mmHg. Pulmonary hypertension in ~~product revenue for the year ended April 30, 2014 was primarily due~~these patients initially develops from a passive backward transmission of elevated filling pressures from left-sided heart failure. These mechanical components of pulmonary venous congestion may trigger pulmonary vasoconstriction, decreased nitric oxide availability, increased endothelin expression, desensitization to ~~license fees earned in accordance with our distribution agreement for Dermacyte for the year ended April 30, 2013.~~natriuretic peptide induced vasodilation, and vascular remodeling. Finally, these changes often lead to advanced pulmonary vascular disease, increased right ventricle, or RV, afterload, and RV failure.

~~Gross profit~~

PH-HFpEF is a common form of pulmonary hypertension with an estimated US prevalence exceeding 1.5 million patients. Currently, no pharmacologic therapies are approved for treatment of PH-HFpEF. Despite the fact that many therapies have been studied in PH-HFpEF patients, including therapies approved to treat pulmonary arterial hypertension patients, no therapies have been shown to be effective in treating PH-HFpEF patients.

Published pre-clinical and clinical studies indicate that levosimendan may provide important benefits to patients with pulmonary hypertension. Data from these published trials indicate that levosimendan may reduce pulmonary vascular resistance and improve important cardiovascular hemodynamics such as reduced pulmonary capillary wedge pressure in patients with pulmonary hypertension. While none of these studies have focused specifically on PH-HFpEF patients, the general hemodynamic improvements in these published studies of various types of pulmonary hypertension provide an indication that levosimendan may be beneficial in PH-HFpEF patients.

We plan to meet with the FDA to discuss the design of a ~~percentage~~proposed Phase 2 trial in PH-HFpEF patients during the first half of ~~revenue was (404) %~~2018. Following feedback from that meeting, we plan to complete the design of the Phase 2 trial and ~~53% for year ended April 30, 2014 and 2013, respectively. The decrease for~~begin enrollment of the ~~year ended April 30, 2014, as compared to the same period~~trial in the ~~prior year, was due~~second half of 2018.

Additionally, our Board of Directors is conducting a comprehensive review of strategic alternatives focused on maximizing stockholder value and has formed a strategic committee of three independent board members to ~~the write-down of Dermacyte product~~supervise management in this review. We have engaged Ladenburg Thalmann & Co. Inc. as our financial advisor to assist in the ~~current~~ ~~year that~~strategic review process; including, but not limited to a merger, a business combination, or a purchase, license or other acquisition of assets. This process may not result in any transaction and we do not intend to disclose additional details unless and until we determine further disclosure is ~~no longer being marketed for sale.~~

~~Government Grant Revenue~~appropriate or required.

~~Grant Revenue is recognized as milestones under~~Opportunities and Trends

As we focus on the ~~Grant program~~development of our existing product candidate, we also continue to position ourselves to execute upon licensing and other partnering opportunities. To do so, we will need to continue to maintain our strategic direction, manage and deploy our available cash efficiently and strengthen our collaborative research development and partner relationships.

During 2018, we are ~~achieved. Grant Revenue is earned through reimbursements for~~focused on the ~~direct costs of labor, travel, and supplies, as well as the pass-through costs of subcontracts with third-party CROs.~~following initiatives:

-

Working with collaborators and partners to accelerate product development, reduce our development costs, and broaden our commercialization capabilities; and

24

-

Identifying strategic alternatives, including, but not limited to, the potential acquisition of additional products or product candidates.

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 same period in the prior year. In addition to the revenue earned, we have 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 prior year.

~~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 year 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 prior year.Financial Overview

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 ~~year~~years ended ~~April 30, 2014~~December 31, 2017 and ~~2013,~~2016, 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 %

	Year ended December 31,		Increase/ (Decrease)	% Increase/ (Decrease)
	2017	2016
Personnel costs	$3,315,303	$3,390,457	$(75,154)	(2)%
Legal and professional fees	1,737,574	1,878,032	(140,458)	(7)%
Other costs	472,518	824,307	(351,789)	(43)%
Facilities	142,769	140,575	2,194	2%
Depreciation and amortization	10,417	12,587	(2,170)	(17)%

Personnel costs:

Personnel costs ~~increased~~decreased approximately ~~$9.1 million~~$75,000 for the year ended ~~April 30, 2014~~December 31, 2017 compared to the prior year. The ~~increase~~decrease was due primarily to ~~the expense recognition~~a decrease of approximately ~~$8.3 million for~~$658,000 in the ~~granting~~salaries and ~~vesting of stock options and restricted stock,~~bonuses paid, partially offset by an increase of approximately ~~$350,000~~$71,000 in ~~salaries paid due~~the recognized expense for the vesting of outstanding stock option awards as compared to the ~~addition~~prior year, and an increase of ~~our new Chief Executive Officer and two other management positions and~~ approximately ~~$550,000~~$512,000 in ~~performance bonuses paid and accrued for~~severance costs in the current ~~year that were not paid in the prior~~ year. 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.

25

Legal and professional fees:

Legal and professional fees consist of the costs incurred for legal fees, accounting fees, consulting fees, recruiting costs and investor relations services, as well as fees paid to our Board of Directors. Legal and professional fees ~~increased~~decreased approximately ~~$550,000~~$140,000 for the year ended ~~April 30, 2014~~December 31, 2017 compared to the prior year. This ~~increase~~decrease was due primarily ~~due~~ to decreases in costs incurred for auditing, investor relations services and ~~audit~~consulting fees, and the vested value of stock option grants to our Board of Directors, partially offset by ~~a decrease~~an increase in costs incurred for 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 current year.

-

Audit and accounting fees decreased approximately $53,000 in the current year. This decrease was due primarily to the costs incurred for the change in our fiscal year, which necessitated the filing of our audited transitional financial statements in the prior year which were not incurred in the current period.

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

-

Costs associated with investor relations and communication decreased approximately $47,000 in the current period. This decrease was due primarily to fees paid to a third-party investor relations firm providing marketing and corporate communications services to us in the prior year, which were not incurred in the current year.

-

Legal fees decreased approximately $40,000 due primarily to approximately $285,000 in fees incurred in the prior year 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 current year.

-

Consulting fees decreased approximately $129,000 in the current period. This decrease was due primarily to the fees paid to third-party firms for pre-launch commercialization preparations for LCOS, nationwide registrations for drug distribution and market analysis and research for septic shock in the prior year which were not incurred in the current period, partially offset by an increase in fees paid for medical consulting services in the current period.

-	~~Recruiting fees decreased approximately $25,000 due to headcount additions in the prior year.~~

-

Board of Directors fees decreased in the current period by approximately $77,000. This decrease was due primarily to a reduction in the recognized expense for the vesting of stock options awarded in the current year as compared to the recognized expense for stock options awarded in the prior year.

-

Legal fees increased in the current year by approximately $156,000. This increase was due primarily to additional costs incurred in the current year related to our evaluation of strategic alternatives as directed by our Board of Directors which were not incurred in the prior year.

Other costs:

Other costs include costs incurred for travel, supplies, insurance and other miscellaneous charges. The approximately ~~$558,000 increase~~$352,000 decrease in other costs for the year ended December 31, 2017 was due primarily to a reduction of approximately $184,000 in franchise taxes paid, a reduction of approximately $38,000 in travel related costs, a reduction of approximately $25,000 in costs incurred for online database research subscriptions, a reduction of approximately $51,000 in bank fees associated with the ~~reversal~~management of ~~a contingent liability~~our investments in marketable securities and an overall decrease in supplies expenses, insurance and other miscellaneous charges in the current period as compared to the prior ~~year related to potential liabilities in connection with non-compliance with Section 409A of the Internal Revenue Code.~~year.

Facilities:

Facilities expenses include costs paid for rent and utilities at our corporate headquarters in North Carolina. ~~The approximately $10,000 reduction compared to~~Facilities costs remained relatively consistent for the ~~prior year was the result of the elimination of allocated costs from the closure of the California lab facility in the prior year.~~years ended December 31, 2017 and 2016.

Depreciation and Amortization:

Depreciation and amortization costs remained relatively consistent for the years ended ~~April 30, 2014~~December 31, 2017 and ~~2013.~~2016.

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 years ended ~~April 30, 2014~~December 31, 2017 and ~~2013,~~2016, respectively, are as follows:

	Year ended April 30,				Increase/ (Decrease)			% Increase/ (Decrease)			Year ended December 31,		Increase/ (Decrease)	% Increase/ (Decrease)
	2014		2013								2017	2016
Clinical and preclinical development	$	1,947,461	$	1,569,594	$	377,867			24	%	$3,227,523	$11,681,352	$(8,453,829)	(72)%
Personnel costs		818,264		637,685		180,579			28	%	177,614	785,550	(607,936)	(77)%
Consulting		153,506		117,211		36,295			31	%	113,386	640,088	(526,702)	(82)%
Other costs											5,590	26,326	(20,736)	(79)%
Depreciation		41,199		42,968		(1,769	)		(4	) %	3,204	6,365	(3,161)	(50)%
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~~3 clinical ~~trials~~trial for ~~levosimendan and Oxycyte and development costs for Dermacyte.~~levosimendan. The ~~increase~~decrease of approximately ~~$378,000~~$8.5 million in clinical and preclinical development costs for the year ended ~~April 30, 2014~~December 31, 2017, compared to the prior year, was primarily due to ~~increases of $634,000 associated with~~decreased expenditures for CRO costs to manage the Phase ~~II-b trials for Oxycyte and $214,000~~3 LEVO-CTS clinical trial in ~~clinical development~~the current year. For the year ended December 31, 2017, we recorded CRO costs of ~~levosimendan, partially offset by a decrease~~approximately $3.2 million for the management of ~~$477,000~~the Phase 3 trial, compared to CRO costs of approximately $11.7 million, which includes approximately $4.7 million in pass-through site activation and enrolled patient costs, ~~incurred for preclinical safety studies for Oxycyte.~~

during the prior year.

26

Personnel costs:

Personnel costs ~~increased~~decreased approximately ~~$181,000~~$608,000 for the year ended ~~April 30, 2014~~December 31, 2017 compared to the prior ~~year~~year. This decrease was primarily due to ~~headcount increases and employee bonuses paid~~severance payments of approximately $156,000 incurred in the ~~current~~prior year upon resignation of our prior Chief Medical Officer and a decrease of approximately $452,000 in overall salaries, including payroll taxes and benefits, paid due to a decrease in headcount during the year.

Consulting fees:

Consulting fees ~~increased~~decreased approximately ~~$36,000~~$527,000 for the year ended April 30, 2014 compared to the same period in the prior year 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~~December 31, 2017 compared to the prior year, primarily due to a decrease in ~~expenses associated~~fees paid to a third-party consulting firm for services provided to improve training and communication with ~~travel~~active sites in support of our Phase 3 LEVO-CTS clinical trial and ~~supplies.~~

~~Facilities:~~

~~Facilities expense decreased approximately $45,000~~contract labor for ~~the year ended April 30, 2014 compared to the same period~~additional clinical trial support services in the prior year ~~primarily due to the closure of our California facility.~~

~~Restructuring expense~~

Year ended April 30, Increase/ (Decrease) % Increase/ (Decrease)
2014 2013
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 thatwhich were not incurred ~~in the year ended April 30, 2014~~

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

Year ended April 30, Increase/ (Decrease) % Increase/ (Decrease)
2014 2013
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 prior year. The decrease was due primarily to approximately $1.7 million of noncash interest charges recorded in the prior year 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 current year.

Other ~~income~~costs:

Other costs decreased approximately $21,000 for the year ended December 31, 2017 as compared to the prior year due primarily to a reduction in travel related costs in the current period.

Depreciation:

Depreciation costs remained relatively consistent for the years ended December 31, 2017 and ~~expense~~2016.

Loss on impairment of long lived assets

Impairment losses and percentage changes for the years ended December 31, 2017 and 2016, respectively, are as follows:

	Year ended December 31,		Increase/ (Decrease)	% Increase/ (Decrease)
	2017	2016
Loss on impairment of long-lived assets	$-	$33,265,100	$(33,265,100)	(100)%

During the year ended December 31, 2016, we recognized an impairment of $33.3 million related to our levosimendan product in Phase 3 clinical trial, which represents approximately $22 million for in-process research and development, or IPR&D, assets and approximately $11.3 million for Goodwill.

The LEVO-CTS trial was completed in December of 2016. Based on the data from the trial, levosimendan, given prophylactically prior to cardiac surgery to patients with reduced left ventricular function, had no effect on the co-primary outcomes. The study did not achieve statistically significant reductions in the dual endpoint of death or use of a mechanical assist device at 30 days, nor in the quad endpoint of death, myocardial infarction, need for dialysis, or use of a mechanical assist device at 30 days. Based on the results of the LEVO-CTS trial and subsequent FDA feedback we do not anticipate additional development of levosimendan for the treatment of LCOS in patients undergoing cardiac surgery. As of December 31, 2016, management determined the IPR&D asset, and corresponding Goodwill, was more than temporarily impaired.

Other income, ~~and expense~~net

Other income includes non-operating income and expense items not otherwise recorded in our consolidated statement of ~~operations.~~operations and comprehensive loss. 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 ~~expense~~income for the years ended December 31, 2017 and 2016, respectively, is as follows:

	Year ended December 31,		(Increase)/ Decrease
	2017	2016
Other income, net	$(366,216)	$(764,735)	$398,519

Other income decreased approximately $399,000 for the year ended ~~April 30, 2014 and 2013, respectively, is as follows:~~

27

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

~~Other expense increased approximately $730,000 for the year ended April 30, 2014~~December 31, 2017 compared to the prior ~~year~~year. This decrease is due primarily ~~due~~ to the change in ~~the recognized~~ fair value of our Series C warrant derivative liability in the current year and a reduction in the interest earned on our investment in marketable securities as compared to the prior year.

During the year ended December 31, 2017, we recorded a derivative gain of approximately $192,000 which compared to a derivative gain of approximately $298,000 in the prior year. These charges to income are derived from the free-standing Series C warrants which are measured at their fair market value each period using the Monte Carlo simulation model.

During the year ended December 31, 2017, we recorded interest income of approximately $174,000 from our investments in marketable securities. This income is derived from approximately $353,000 in bond interest paid, partially offset by approximately $188,000 in charges for amortization of premiums paid and fair-value adjustments measured each period, which compares to approximately $992,000 in bond interest paid, partially offset by approximately $603,000 in charges for amortization of premiums paid and fair-value adjustments during the prior year.

Liquidity, capital resources and plan of operation

We have incurred losses since our inception and as of ~~April 30, 2014~~December 31, 2017, we had an accumulated deficit of approximately ~~$137~~$213 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~~additional expenses related to our development and potential commercialization of levosimendan ~~Oxycyte~~for pulmonary hypertension and other potential indications, as well as identifying and developing other potential product candidates, and as a result, we will need to generate significant net product sales, royalty and other revenues to achieve profitability. As noted above, in April 2017, we announced that we would be exploring strategic alternatives in order to maximize stockholder value and that we had formed a strategic committee of three independent board members to supervise management in this review. We engaged Ladenburg Thalmann & Co. Inc., a subsidiary of Ladenburg Thalmann Financial Services Inc., as our financial advisor to assist in the strategic review process.

Liquidity

We have financed our operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. We had ~~$58,966,033 and $1,842,251~~ total current assets of $8,062,893 and $13,628,175 and working capital ~~(deficit)~~ of ~~$56,394,986~~$7,054,053 and ~~$(67,326)~~$7,428,938 as of ~~April 30, 2014~~December 31, 2017 and ~~April 30, 2013,~~December 31, 2016, respectively. Our practice is to invest excess cash, where available, in short-term money market investment ~~instruments.~~instruments and high quality corporate and government bonds.

Clinical and Preclinical Product Development

We are in the ~~preclinical and~~ clinical trial ~~stages~~stage in the development of our product candidates. We ~~are currently initiating~~recently completed a Phase ~~III~~3 clinical trial for ~~levosimendan and we are conducting Phase II-b clinical trials for the use of Oxycyte in the treatment of severe traumatic brain injury.~~levosimendan. We expect our primary focus will be on initiating ~~the Phase III~~additional clinical ~~trials~~and preclinical studies for levosimendan ~~and funding the continued testing of Oxycyte, since these products are the furthest along in the regulatory review process.~~for pulmonary hypertension or other potential indications. Our ability to continue to pursue testing and development of our products beyond ~~April 30, 2017 may~~the first quarter of calendar year 2019 will 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

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.

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

~~During~~We did not complete any financings during the year ended ~~April 30, 2014, we received approximately $7.1 million and issued 3,161,145 shares of common stock upon the exercise of our outstanding warrants.~~December 31, 2017 or 2016.

Cash Flows

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

	Year ended December 31,
	2017	2016
Net cash used in operating activities	$(12,140,517)	$(15,871,300)
Net cash provided by investing activities	3,749,372	22,206,802

28

Year ended April 30,
2014 2013
Net cash used in operating activities $ (9,261,571 ) $ (4,921,283 )
Net cash used in investing activities (147,038 ) (147,987 )
Net cash 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~~$12.1 million for the year ended ~~April 30, 2014~~December 31, 2017 compared to net cash used in operating activities of ~~$4.92~~$15.9 million for the year ended ~~April 30, 2013.~~December 31, 2016. The ~~increase~~decrease in cash used for operating activities of $3.8 million was due primarily to ~~an increase~~a reduction in ~~our~~the costs incurred for the Phase ~~II-b TBI clinical trials, the costs incurred to initiate the Phase III clinical~~3 clinic 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 periodwhich were completed in the ~~prior~~current year.

Net cash provided by ~~financing~~investing activities. Net cash provided by ~~financing~~investing activities was ~~$66.9~~$3.7 million for the year ended ~~April 30, 2014~~December 31, 2017 compared to net cash provided by ~~financing~~investing activities of ~~$4.0~~$22.2 million for the year ended ~~April 30, 2013.~~December 31, 2016. The ~~increase of net~~decrease in cash provided by ~~financing~~investing 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 Stocka reduction in the ~~prior~~sale of marketable securities in the current 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~~ the initiation, progress, timing and completion of clinical trials for our product candidates and potential product candidates;
-	~~The~~ the outcome, timing and cost of regulatory approvals and the regulatory approval process;
-	~~Delays~~ delays that may be caused by changing regulatory requirements;
-	~~The~~ the number of product candidates that we pursue;
-	~~The~~ the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
-	~~The~~ the timing and terms of future ~~in-licensing and out-licensing transactions;~~collaboration, licensing, consulting or other arrangements that we may enter into;
-	~~The~~ the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities;
-	~~The~~ the cost of procuring clinical and commercial supplies of our product candidates;
-	~~The~~ the extent to which we acquire or invest in businesses, products or technologies; and
-	~~The~~the possible costs of litigation.

Based on our working capital at ~~April 30, 2014~~December 31, 2017 we believe we have sufficient capital on hand to continue to fund operations through ~~our fiscal~~the first quarter of calendar year ~~ending April 30, 2017.~~2019.

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

29

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, 2017:

	Payments Due by Period
		Less than			More than
	Total	1 Year	1-3 Years	3-5 Years	5 Years
Operating Lease Obligations	$416,224	$115,220	$301,004	$-	$-

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 ~~Significant~~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~~ fees paid to CROs in connection with clinical ~~trials,~~trials;
-	~~Fees~~ fees paid to research institutions in conjunction with preclinical research ~~studies,~~studies; and
-	~~Fees~~ 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.

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.

Stock-Based Compensation—~~Effective May 1, 2005, we adopted~~We account for stock-based awards to employees in accordance with Accounting Standards Codification, or ASC, 718 Compensation — Stock Compensation, ~~using~~which provides for the ~~prospective transition method, which requires the measurement and recognition~~use of compensation expense for all stock-based payment awards granted, modified and settled to our employees and directors after May 1, 2005. Our Consolidated Financial Statements reflect the impact of ASC 718. We chose the “straight-line” attribution method for allocating compensation costs and recognized the fair value based method to determine compensation for all arrangements where shares of ~~each~~ stock ~~option~~or equity instruments are issued for compensation. Fair values of equity securities are determined by management based predominantly on ~~a straight-line basis~~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 ~~requisite~~period during which the employee is required to provide service ~~period.~~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 annually, or more frequently if indicated by events or conditions. 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.

During the year ended December 31, 2016, we recognized an impairment charge of $33.3 million related to our levosimendan product in Phase 3 clinical trial, which represents approximately $22 million for IPR&D assets and approximately $11.3 million for goodwill.

The LEVO-CTS trial was completed in December of 2016. Based on the data from the trial, levosimendan, given prophylactically prior to cardiac surgery to patients with reduced left ventricular function, had no effect on the co-primary outcomes. The study did not achieve statistically significant reductions in the dual endpoint of death or use of a mechanical assist device at 30 days, nor in the quad endpoint of death, myocardial infarction, need for dialysis, or use of a mechanical assist device at 30 days. Based on the results of the LEVO-CTS trial and subsequent FDA feedback we do not anticipate additional development of levosimendan for the treatment of LCOS in patients undergoing cardiac surgery. As of December 31, 2016, management determined the IPR&D asset, and corresponding Goodwill, was more than temporarily impaired.

Fair market value accounting (derivative warrant liability)—A 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 year ending December 31, 2017, a $0.80 decrease in the value of our stock was the primary cause of the $192,419 derivative gain.

Recent Accounting Pronouncements

In ~~June 2014,~~July 2017, the Financial Accounting Standards Board, or the FASB, issued an accounting standard that changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The standard will be effective on January 1, 2019. Early adoption is permitted, including adoption in an interim period. We do not believe adoption of this standard will have a material impact on our consolidated financial statements and related disclosures.

In January 2017, the FASB issued ~~Accounting Standards Update (“ASU”) 2014-10,~~ ~~Development Stage Entities (Topic 915)~~.an accounting standard that provides guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ~~objective~~guidance provides a screen to determine when an integrated set of assets and activities, or a set, does not qualify to be a business. The screen requires that when substantially all of the ~~amendments~~fair value of the gross assets acquired (or disposed of) is concentrated in an identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the guidance requires a set to be considered a business to include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs and removes the evaluation as to whether a market participant could replace the missing elements. The standard became effective on January 1, 2018 and was adopted on a prospective basis. We do not believe adoption of this ~~update is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities. Users of~~standard will have a material impact on our consolidated financial statements ~~of development stage entities told~~and related disclosures.

In August 2016, the ~~Board~~FASB issued an accounting standard that ~~the development stage entity distinction, the inception-to-date information,~~clarifies how companies present and classify certain ~~other disclosures currently required under U.S. GAAP~~cash receipts and cash payments in the statement of cash flows where diversity in practice exists. The standard is effective in our first quarter of fiscal 2018. We do not believe that adopting this updated standard will have a material impact on our consolidated financial statements ~~of development stage entities provide information~~and related disclosures.

In June 2016, the FASB issued an accounting standard that ~~has limited relevance~~amends how credit losses are measured and ~~is generally~~reported for certain financial instruments that are not ~~decision useful. As~~accounted for at fair value through net income. This standard will require that credit losses be presented as an allowance rather than as a ~~result, the amendments in this update remove all incremental financial reporting requirements from US GAAP~~write-down for ~~development stage entities, thereby improving financial reporting by eliminating the cost~~available-for-sale debt securities and ~~complexity associated with providing that information. The amendments are~~will be effective for interim and annual reporting periods beginning ~~after December 15, 2014, and interim~~January 1, 2020, with early adoption permitted, but not earlier than annual reporting periods beginning ~~after December 15, 2015. Early adoption~~January 1, 2019. A modified retrospective approach is ~~permitted. The Company has elected~~ to ~~early adopt~~be used for certain parts of this guidance, ~~and therefore is no longer presenting~~while other parts of the guidance are to be applied using a prospective approach. We do not believe adoption of this standard will have a material impact on our consolidated financial statements ~~in accordance with ASU 915, with inception to date disclosures.~~and related disclosures.

30

In May 2014, the FASB issued ~~Accounting Standard Update 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(ASU 2014-09) providing a comprehensive new~~an accounting standard that supersedes nearly all existing revenue recognition ~~standard. ASU 2014-09~~guidance under GAAP. The standard is principles-based and provides ~~revised standards~~a five-step model to determine when and how revenue is recognized. The core principle of ~~recognition predicated on~~the standard is that revenue should be recognized when ~~an entity~~a company transfers promised goods or services to customers in an amount that reflects the consideration to which ~~the entity expects~~we expect to be entitled in exchange for those goods or services. ~~ASU 2014-09~~In March 2016, the FASB issued a standard to clarify the implementation guidance on principal versus agent considerations, and in April 2016, the FASB issued a standard to clarify the implementation guidance on identifying performance obligations and licensing. The 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. Early application prior to the original effective date was not permitted. The standard permits the use of either the retrospective or cumulative effect transition method.

We reviewed our current accounting policies and practices to assess the impact of the guidance on our business processes. Based on this evaluation, the adoption of this standard will not have a material impact on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued an accounting standard intended to improve financial reporting regarding leasing transactions. The 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 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 months. The standard is effective for ~~us in our first quarter of fiscal 2018. ASU 2014-09 can be applied retrospectively with a modified retrospective application~~financial statements beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact ~~of our pending adoption of ASU 2014-09~~that this standard will have on our consolidated financial ~~statements.~~statements and related disclosures.

In ~~July 2013,~~January 2016, the FASB issued ~~ASU No. 2013-11,~~ ~~Income Taxes (Topic 740): Presentation of~~ an ~~Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU No. 2013-11 requires entities to present in the consolidated~~accounting standard that will enhance our reporting for financial instruments. The standard is effective for financial statements ~~an unrecognized tax benefit, or a portion of an unrecognized tax benefit as a reduction to a deferred tax asset~~issued for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward except to the extent such items are not available or not intended to be used at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position. In such instances, the unrecognized tax benefit is required to be presented in the consolidated financial statements as a liability and not be combined with deferred tax assets. This guidance is effective prospectively for fiscal years,annual periods beginning after December 15, 2017, and interim periods within those ~~years,~~annual periods. Earlier adoption is permitted for interim and annual reporting periods as of the beginning ~~after December 15, 2013. The~~of the fiscal year of adoption. We do not believe adoption of ~~ASU 2013-11 did not~~this standard will have a material impact on our ~~Consolidated Financial Statements.~~consolidated financial statements and related disclosures.

ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8—CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS	3334
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS	3435
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~	35
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~	36
CONSOLIDATED STATEMENTS OF CASH FLOWS ~~continued~~	37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	38

32

31TENAX THERAPEUTICS, INC.

~~OXYGEN BIOTHERAPEUTICS, INC.~~

Report of Independent Registered Public Accounting Firm

To the Board of Directors and ~~Stockholders~~

~~Oxygen Biotherapeutics,~~Stockholders of Tenax Therapeutics, Inc.

~~Morrisville, North Carolina~~

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ~~Oxygen Biotherapeutics,~~Tenax Therapeutics, Inc. and Subsidiary ~~formerly, Synthetic Blood International, Inc.~~ (the ~~Company),~~“Company”) as of ~~April 30, 2014~~December 31, 2017 and ~~2013,~~2016, and the related consolidated statements of operations ~~stockholders~~and comprehensive loss, stockholders’ equity, ~~(deficit),~~ and cash flows for each of the years in the two-year period ended ~~April 30, 2014.~~ December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The ~~Companys management is responsible~~accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has an accumulated deficit and has experienced negative operating cash flows for the year ended December 31, 2017. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these ~~consolidated~~matters are described in Note B to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on ~~these consolidated~~the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the ~~audits~~audit to obtain reasonable assurance about whether the ~~consolidated~~ financial statements are free of material ~~misstatement.~~misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. ~~Our audit included consideration~~As part of our audits, we are required to obtain an understanding of internal control over financial reporting, ~~as a basis for designing audit procedures that are appropriate in the circumstances,~~ but not for the purpose of expressing an opinion on the effectiveness of the ~~Companys~~Company’s internal control over financial reporting. Accordingly, we express no such opinion. ~~An audit also includes~~

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the ~~consolidated~~ financial ~~statements, assessing~~statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial ~~statement presentation.~~statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the two-year period ended April 30, 2014, in conformity with accounting principles generally accepted in the United States of America.

For the period ended April 30, 2014, the Company recognized a net loss of approximately $19.5 million and, as of April 30, 2014, the Company had incurred cumulative net losses of approximately $136.6 million. Managements plans with regard to liquidity and capital resources are described in Note B.

As discussed in Note B to the consolidated financial statements, the Company has elected to early adopt Accounting Standards Update 2014-10, Development Stage Enterprises. Accordingly, the Company has eliminated inception-to-date information and certain other incremental development stage entity disclosures in the consolidated financial statements referred to above.

/s/ CHERRY BEKAERT LLP

We have served as the Company’s auditor since 2009.

Raleigh, North Carolina

~~July 29, 2014~~

April 2, 2018

33

32

~~OXYGEN BIOTHERAPEUTICS,~~TENAX THERAPEUTICS, INC.

~~CONSOLIDATED BALANCE SHEETS~~

April 30,
2014

April 30,
2013

ASSETS
Current assets
Cash and cash equivalents $ 58,320,555 $ 783,528
Accounts receivable 36,358 445,237
Government grant receivable 29,750 96,226
Inventory - 99,204
Prepaid expenses 401,964 247,646
Other current assets 177,406 170,410
Total current assets 58,966,033 1,842,251
Property and equipment, net 124,374 205,389
Debt issuance costs, net 21,427 150,043
Intangible assets, net 22,999,744 924,698
Goodwill 11,265,100 -
Other assets 52,762 58,262
Total assets $ 93,429,440 $ 3,180,643

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 411,145 $ 977,162
Accrued liabilities 858,136 874,876
Warrant liabilities 954,876 -
Current portion of notes payable, net 346,890 57,539
Total current liabilities 2,571,047 1,909,577
Other liabilities 10,932 54,660
Deferred tax liability 7,962,100 -
Long-term portion of notes payable, net - 2,994,442
Total liabilities 10,544,079 4,958,679

Commitments and contingencies; see Note I.
Stockholders' equity (deficit)
Preferred stock, undesignated, authorized 9,947,439 and 9,990,400 shares; respectively. See Note G.
Series B Preferred stock, par value $.0001, issued 2,100 shares; outstanding 0 and 987, respectively. - 1
Common stock, par value $.0001 per share; authorized 400,000,000 shares; issued and outstanding 27,858,000 and 1,930,078, respectively 2,786 193
Additional paid-in capital 219,468,498 115,265,854
Accumulated deficit (136,585,923 ) (117,044,084 )
Total stockholders’ equity (deficit) 82,885,361 (1,778,036 )
Total liabilities and stockholders' equity (deficit) $ 93,429,440 $ 3,180,643
CONSOLIDATED BALANCE SHEETS

	December 31, 2017	December 31, 2016

ASSETS
Current assets
Cash and cash equivalents	$1,604,810	$9,995,955
Marketable securities	6,122,400	3,284,616
Accounts receivable	50,171	72,599
Prepaid expenses	285,512	275,005
Total current assets	8,062,893	13,628,175
Marketable securities	1,809,428	8,586,110
Property and equipment, net	9,945	19,105
Other assets	8,435	1,106,785
Total assets	$9,890,701	$23,340,175

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$611,861	$727,599
Accrued liabilities	363,306	5,245,546
Warrant liabilities	33,673	226,092
Total current liabilities	1,008,840	6,199,237
Total liabilities	1,008,840	6,199,237


Commitments and contingencies; see Note F
Stockholders' equity
Common stock, par value $.0001 per share; authorized 400,000,000 shares; issued and outstanding 1,411,840 and 1,406,002, respectively	141	2,812
Additional paid-in capital	222,397,198	221,816,447
Accumulated other comprehensive loss	(16,193)	(18,718)
Accumulated deficit	(213,499,285)	(204,659,603)
Total stockholders’ equity	8,881,861	17,140,938
Total liabilities and stockholders' equity	$9,890,701	$23,340,175

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

34

33

TENAX THERAPEUTICS, INC.

~~OXYGEN BIOTHERAPEUTICS, INC.~~

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended April 30,
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 262,995 1,141,356
Total net revenue 158,926 1,190,928

Operating expenses
Selling, general, and administrative 13,773,325 3,676,145
Research and development 2,996,721 2,455,816
Restructuring expense - 220,715
Loss on impairment of long-lived assets - 27,279
Total operating expenses 16,770,046 6,379,955

Net operating loss 16,611,120 5,189,027

Interest expense 2,212,283 4,238,456
Other expense (income) 718,436 (11,683 )
Net loss $ 19,541,839 $ 9,415,800

Preferred stock dividend 5,803,362 958,071
Net loss attributable to common stockholders $ 25,345,201 $ 10,373,871

Net loss per share, basic $ (2.71 ) $ (6.29 )
Weighted average number of common shares outstanding, basic 9,362,031 1,650,280
Net loss per share, diluted $ (2.71 ) $ (6.68 )
Weighted average number of common shares outstanding, diluted 9,362,031 1,759,025
AND COMPREHENSIVE LOSS

	Year ended December 31,
	2017	2016

Operating expenses
General and administrative	5,678,581	6,245,958
Research and development	3,527,317	13,139,681
Loss on impairment of long-lived assets	-	33,265,100
Total operating expenses	9,205,898	52,650,739

Net operating loss	9,205,898	52,650,739

Other income	(366,216)	(764,735)
Income tax benefit	-	(7,962,100)
Net loss	$8,839,682	$43,923,904

Unrealized gain on marketable securities	(2,525)	(110,724)
Total comprehensive loss	$8,837,157	$43,813,180

Net loss per share, basic and diluted	$(6.27)	$(31.24)
Weighted average number of common shares outstanding, basic and diluted	1,410,630	1,405,992

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

35

34

TENAX THERAPEUTICS, INC.

~~OXYGEN BIOTHERAPEUTICS, INC.~~

~~CONOSLIDATED~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

Preferred Stock Common Stock
Number of Shares Amount Number of Shares Amount Additional paid-in capital Accumulated deficit Total stockholders' equity (deficit)
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 sold, net of offering costs -
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 16,524 33 745,175 745,208
Common stock issued as dividend on convertible preferred stock 17,409 32 331,366 331,398
Compensation on options and restricted stock issued 4,465 9 269,522 269,531
Issuance of warrants 656,535 656,535
Exchange of warrants 20,000 40 (380,040 ) (380,000 )
Beneficial conversion feature of convertible debt -
Fractional shares of common stock due to reverse stock split 82 (3,667 ) 3,667 -
Net loss (9,415,800 ) (9,415,800 )

Balance at April 30, 2013 987 $ 1 1,930,078 $ 193 $ 115,265,854 $ (117,044,084 ) $ (1,778,036 )
Preferred stock sold, net of offering costs 5,369 1 4,895,187 4,895,188
Preferred stock issued for convertible debt 4,600 3 4,599,997 4,600,000
Common and preferred stock issued for asset purchase 32,992 3 1,366,844 137 24,046,860 24,047,000
Common stock sold, net of offering costs 10,678,571 1,068 54,907,282 54,908,350
Common stock issued for convertible preferred stock (43,948 ) (8 ) 9,056,415 906 (898 ) -
Common stock issued as interest on convertible debt 4,881 1 220,040 220,041
Common stock issued as dividend on convertible preferred stock 1,407,485 140 (140 ) -
Compensation on options and restricted stock issued 50,144 5 8,131,619 8,131,624
Common stock issued for services rendered 198,668 20 499,980 500,000
Exercise of warrants 3,161,145 316 7,135,753 7,136,069
Reclassification of warrants from equity to derivative liability (233,036 ) (233,036 )
Fractional shares of common stock due to reverse stock split 3,769 -
Net loss (19,541,839 ) (19,541,839 )
Balance at April 30, 2014 - $ - 27,858,000 $ 2,786 $ 219,468,498 $ (136,585,923 ) $ 82,885,361

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

Balance at December 31, 2015	1,405,985	$2,812	$221,285,677	$(129,442)	$(160,735,699)	$60,423,348
Compensation on options and restricted stock issued	17	-	530,770			530,770
Unrealized gain on marketable securities				110,724		110,724
Net loss					(43,923,904)	(43,923,904)
Balance at December 31, 2016	1,406,002	$2,812	$221,816,447	$(18,718)	$(204,659,603)	$17,140,938
Compensation on options and restricted stock issued	5,838	12	578,068			578,080
Unrealized gain on marketable securities				2,525		2,525
Par value adjustment due to reverse stock split		(2,683)	2,683			-
Net loss					(8,839,682)	(8,839,682)
Balance at December 31, 2017	1,411,840	$141	$222,397,198	$(16,193)	$(213,499,285)	$8,881,861

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

36

35

TENAX THERAPEUTICS, INC.

~~OXYGEN BIOTHERAPEUTICS, INC.~~

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended December 31,
	2017	2016

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$(8,839,682)	$(43,923,904)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	13,621	18,952
Loss on impairment, disposal and write down of long-lived assets	-	33,265,100
Loss (Gain) on disposal of property and equipment	76	(74,388)
Issuance and vesting of compensatory stock options and warrants	498,491	529,708
Issuance of common stock as compensation	79,589	1,062
Change in the fair value of warrants	(192,419)	(298,248)
Amortization of premium on marketable securities	187,513	652,861
Deferred income taxes	-	(7,962,100)
Changes in operating assets and liabilities
Accounts receivable, prepaid expenses and other assets	1,110,272	23,801
Accounts payable and accrued liabilities	(4,997,978)	1,895,856
Net cash used in operating activities	(12,140,517)	(15,871,300)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities	(299,172)	(7,255,578)
Sale of marketable securities	4,053,081	29,390,264
Purchase of property and equipment	(4,537)	(2,884)
Proceeds from the sale of property and equipment	-	75,000
Net cash provided by investing activities	3,749,372	22,206,802


Net change in cash and cash equivalents	(8,391,145)	6,335,502
Cash and cash equivalents, beginning of period	9,995,955	3,660,453
Cash and cash equivalents, end of period	$1,604,810	$9,995,955

Year ended April 30,
2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (19,541,839 ) $ (9,415,800 )
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 150,489 148,804
Interest on debt instruments 2,181,955 4,236,332
Loss on impairment, disposal and write down of long-lived assets 2,519 35,673
Issuance and vesting of compensatory stock options and warrants 8,042,662 84,267
Issuance of common stock as compensation 651,460 185,264
Change in the fair value of warrants 721,840 -
Changes in operating assets and liabilities
Accounts receivable, prepaid expenses and other assets 519,255 (245,747 )
Inventory 99,204 (20,228 )
Accounts payable and accrued liabilities (2,089,116 ) 70,152
Net cash used in operating activities (9,261,571 ) (4,921,283 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (9,804 ) (17,199 )
Proceeds from the sale of property and equipment - 4,064
Capitalization of patent costs and license rights (137,234 ) (134,852 )
Net cash used in investing activities (147,038 ) (147,987 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock and exercise of stock options and warrants, net of related expenses and payments 62,044,419 -
Repurchase of outstanding warrants - (380,000 )
Proceeds from issuance of notes payable, net of issuance costs 141,320 102,671
Proceeds for issuance of convertible preferred stock, net of issuance costs 4,895,188 4,351,150
Payments on notes - short-term (135,291 ) (100,895 )
Net cash provided by financing activities 66,945,636 3,972,926

Net change in cash and cash equivalents 57,537,027 (1,096,344 )
Cash and cash equivalents, beginning of period 783,528 1,879,872
Cash and cash equivalents, end of period $ 58,320,555 $ 783,528

Cash paid for:
Interest $ 30,328 $ 2,123
Income taxes $ - $ -

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

36

~~OXYGEN BIOTHERAPEUTICS, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS, continued~~Statements

~~Non-cash financing activities during the year ended April 30, 2014:~~37

-The Company issued 4,881 shares of restricted common stock for the payment of interest accrued on convertible notes. The shares were issued at a conversion price of $45.10 for the payment of $220,041 interest payable on convertible notes with a gross carrying value of $4,900,000.

-~~The Company issued 831,401 shares of its common stock for the payment of $1,300,204~~ ~~as dividends on the Series C 8% Convertible Preferred stock.~~

-The Company issued 4,600 shares of Series D 8% Convertible Preferred Stock as consideration for cancellation of $4.6 million in outstanding principal amount of a convertible promissory note issued by the Company on July 1, 2011.

-~~The Company issued 576,084 shares of its common stock for the payment of $1,104,000 as dividends on the Series D 8% Convertible Preferred stock.~~

-The Company issued 1,366,844 shares of its common stock that had a fair value of approximately $8.7 million and 32,992 shares of its Series E Convertible Preferred Stock, which are convertible into an aggregate of 3,299,200 shares of common stock, that had a fair value of approximately $15.3 million in exchange for the assets of Phyxius Pharma, Inc., as further discussed in Note D to these consolidated financial statements. The Company recorded Goodwill of ~~$11,265,100~~ ~~as a result of this issuance.~~

~~Non-cash financing activities during the year ended April 30, 2013:~~

-The Company issued 16,524 shares of restricted common stock for the payment of interest accrued on convertible notes. The shares were issued at a conversion price of $45.11 for the payment of $745,208 interest payable on convertible notes with a gross carrying value of $4,900,000.

-~~The Company issued 191,934 shares of its common stock upon the conversion of 3,668 shares of Series A convertible preferred stock with a fair value of $4,509,987.~~

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

37

TENAX THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~As of April 30, 2014 and 2013, and for the years then ended.~~

NOTE A—DESCRIPTION OF BUSINESS

Description of Business—~~Oxygen Biotherapeutics~~Tenax Therapeutics (the “Company”) was originally formed as a New Jersey corporation in 1967 under the name Rudmer, David & Associates, Inc., and subsequently changed its name to Synthetic Blood International, Inc. On June 17, 2008, the stockholders of Synthetic Blood International approved the Agreement and Plan of Merger dated April 28, 2008, between Synthetic Blood International and Oxygen Biotherapeutics, Inc., a Delaware corporation. Oxygen Biotherapeutics was formed on April 17, 2008, by Synthetic Blood International to participate in the merger for the purpose of changing the state of domicile of Synthetic Blood International from New Jersey to Delaware. Certificates of Merger were filed with the states of New Jersey and Delaware, and the merger was effective June 30, 2008. Under the Plan of Merger, Oxygen Biotherapeutics iswas the surviving corporation and each share of Synthetic Blood International common stock outstanding on June 30, 2008 was converted to one share of Oxygen Biotherapeutics common stock. On September 19, 2014, the Company changed its name to Tenax Therapeutics, Inc.

On October 18, 2013, the Company created a wholly owned subsidiary, Life Newco, Inc., a Delaware corporation (“Life Newco”), to acquire certain assets of Phyxius Pharma, Inc., a Delaware corporation (“Phyxius”), pursuant to an Asset Purchase Agreement, dated October 21, 2013 (the “Asset Purchase Agreement”), by and among the Company, Life Newco, Phyxius and the stockholders of Phyxius (the “Phyxius Stockholders”). ~~As further discussed in Note D below, on~~On November 13, 2013, under the terms and subject to the conditions of the Asset Purchase Agreement, Life Newco acquired certain assets, including a license granting Life Newco an exclusive, sublicenseable right to develop and commercialize pharmaceutical products containing ~~Levosimedan,~~levosimendan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial in the United States and Canada.

Reverse Stock Split

The Company initiated a 1-for-20 reverse stock split effective ~~May 10, 2013.~~February 23, 2018 at 5:00 p.m. All shares and per share amounts in these Consolidated Financial Statements and notes thereto have been retroactively adjusted to give effect to the reverse stock split.

Going Concern

Management believes the accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern. The Company has an accumulated deficit of $213,499,285 and $204,659,603 at December 31, 2017 and 2016, respectively, and used cash in operations of $12,140,517 and $15,871,300 during the years ended December 31, 2017 and 2016, respectively. The Company requires substantial additional funds to complete clinical trials and pursue regulatory approvals. Management is actively seeking additional sources of equity and/or debt financing; however, there is no assurance that any additional funding will be available.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying December 31, 2017 balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, to maintain present financing, and to generate cash from future operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

NOTE B—SUMMARY OF ~~SIGNIFICANT~~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 (“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.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts and transactions of ~~Oxygen Biotherapeutics,~~Tenax Therapeutics, Inc. and Life Newco, Inc. All material intercompany transactions and balances have been eliminated in ~~consolidation.~~consolidation.

Goodwill

Acquired businesses are accounted for using the acquisition method of accounting, which requires that assets acquired, including identifiable intangible assets, and liabilities assumed be recorded at fair value, with limited exceptions. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. If the acquired net assets do not constitute a business, the transaction is accounted for as an asset acquisition and no goodwill is recognized.

38

TENAX THERAPEUTICS, INC.

Goodwill is reviewed for impairment on an annual basis or more frequently if events or circumstances indicate potential impairment. The Company’s goodwill evaluation is based on both qualitative and quantitative assessments regarding the fair value of goodwill relative to its carrying value. The Company assesses qualitative factors to determine if its sole reporting unit’s fair value is more likely than not to exceed its carrying value, including goodwill. In the event the Company determines that it is more likely than not that its reporting unit’s fair value is less than its carrying amount, quantitative testing is performed comparing recorded values to estimated fair values. If the fair value exceeds the carrying value, goodwill is not impaired. If the carrying value exceeds the fair value, an impairment charge is recognized through a charge to operations based upon the excess of the carrying value of goodwill over the implied fair value. ~~There~~

During the year ended December 31, 2016, the Company recognized an impairment charge of $33.3 million related to our levosimendan product in Phase 3 clinical trial, which represents approximately $22 million for in-process research and development (“IPR&D”) assets and approximately $11.3 million for goodwill.

The LEVO-CTS trial was completed in December of 2016. Based on the data from the trial, levosimendan, given prophylactically prior to cardiac surgery to patients with reduced left ventricular function, had no ~~impairment to~~effect on the co-primary outcomes. The study did not achieve statistically significant reductions in the dual endpoint of death or use of a mechanical assist device at 30 days, nor in the quad endpoint of death, myocardial infarction, need for dialysis, or use of a mechanical assist device at 30 days. Based on the results of the LEVO-CTS trial and subsequent U.S. Food and Drug Administration (“FDA”) feedback, the Company does not anticipate additional development of levosimendan for the treatment of low cardiac output syndrome (“LCOS”) in patients undergoing cardiac surgery. As of December 31, 2016, management determined the IPR&D asset, and corresponding goodwill, ~~recognized during 2014.~~was more than temporarily impaired.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity date of three months or less, when acquired, to be cash equivalents.

Cash Concentration Risk

On July 21, 2010, the Wall Street Reform and Consumer Protection Act permanently increased the ~~FDIC~~Federal Deposit Insurance Corporation (the “FDIC”) insurance limits to $250,000 per depositor per insured bank. ~~At April 30, 2014, the~~The Company had ~~$58,038,597~~cash balances of ~~cash balances~~$849,851 and $9,362,812 uninsured by the ~~FDIC.~~FDIC as of December 31, 2017 and 2016, respectively.

Liquidity and Capital Resources

~~We have~~The Company has financed ~~our~~its operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. WeThe Company had ~~$58,966,033 and $1,842,251~~ total current assets of $8,062,893 and $13,628,175 and working capital ~~(deficit)~~ of ~~$56,394,986~~$7,054,053 and ~~$(67,326)~~$7,428,937 as of ~~April 30, 2014~~December 31, 2017 and ~~April 30, 2013,~~2016, respectively. ~~Our practice is to invest excess cash, where available, in short-term money market investment instruments.~~

Cash resources, including the fair value of the Company’s available for sale marketable securities as of ~~April 30, 2014~~December 31, 2017 were approximately ~~$58.3~~$9.5 million, compared to approximately ~~$784,000~~$21.9 million as of ~~April 30, 2013.~~December 31, 2016.

The Company expects to continue to incur expenses related to development of levosimendan for pulmonary hypertension and other potential indications, as well as identifying and developing other potential product candidates. Based on its resources at ~~April 30, 2014, and the current plan of expenditure on continuing development of the Company’s current product candidates,~~December 31, 2017, the Company believes that it has sufficient capital to fund its planned operations through the ~~fiscal~~first quarter of calendar year ~~ending April 30, 2017.~~2019. However, the Company will need substantial additional financing in order to fund its operations beyond such period and thereafter until it can achieve profitability, if ever. The Company depends on its ability to raise additional funds through various potential sources, such as equity and debt financing, or to license its product candidates to another pharmaceutical company. The Company will continue to fund operations from cash on hand and through sources of capital similar to those previously described. The Company cannot assure that it will be able to secure such additional financing, or if available, that it will be sufficient to meet its needs.

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 covenants in the related transaction documentation that may affect the manner in which the Company conducts its business. To the extent that the Company raises additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to its technologies or product candidates or grant licenses on terms that may not be favorable to the Company. Any or all of the foregoing may have a material adverse effect on the Company’s business and financial performance.

39

Deferred financing costs

Deferred financing costs represent legal, due diligence and other direct costs incurred to raise capital or obtain debt. Direct costs include only “out-of-pocket” or incremental costs directly related to the effort, such as a finder’s fee and accounting and legal fees. These costs will be capitalized if the efforts are successful or expensed when unsuccessful. Indirect costs are expensed as incurred. Deferred financing costs related to debt are amortized over the life of the debt. Deferred financing costs related to issuing equity are charged to Additional Paid-in Capital.

Derivative financial instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible promissory note instruments and other convertible equity instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under FASB ASC 815, Derivatives and Hedging (“ASC 815”) to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results.

Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability.

39

~~Beneficial conversion and warrant valuation~~

In accordance with FASB ASC 470-20, Debt with Conversion and Other Options, the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that have conversion features at fixed rates that are in-the-money when issued and the fair value of warrants issued in connection with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the convertible debt equal to the intrinsic value of the conversion feature. As described in Note F, the discount recorded in connection with the BCF and warrant valuation is recognized as non-cash interest expense and is amortized over the life of the convertible note.

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 conduct and manage preclinical and clinical trials on its 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~~ fees paid to CROs in connection with clinical trials,
-	~~Fees~~ fees paid to research institutions in conjunction with preclinical research studies, and
-	~~Fees~~ 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.

Property and Equipment, Net

Property and equipment are stated at cost, subject to adjustments for impairment, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives:

Laboratory equipment	3 – 5 years
Office equipment	5 years
Office furniture and fixtures	7 years
Computer equipment and software	3 years
Leasehold improvements	Shorter of useful life or remaining lease term

Maintenance and repairs are charged to expense as incurred, improvements to leased facilities and equipment are capitalized.

~~Impairment of Long-Lived Assets~~

~~The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.~~

~~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. The Company's practice is to accept product returns from retailers only if properly requested, authorized and approved. As a percentage of gross sales, returns were less than 5% in fiscal years 2014 and 2013.

40

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.

Research and Development Costs

Research and development costs include, but are not limited to, (i) expenses incurred under agreements with ~~contract research organizations~~CROs and investigative sites, which conduct our clinical trials and a substantial portion of our preclinical 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, ~~and~~ equipment, ~~and~~ 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 compensation in accordance with ASC 718 Compensation — Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based payment awards granted, modified and settled to our employees and directors. The Company chose the “straight-line” attribution method for allocating compensation costs of each stock option on a straight-line basis over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value.

Loss Per Share

Basic loss per share, which excludes antidilutive securities, is computed by dividing net loss ~~available to common shareholders~~ 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, ~~warrants~~restricted stock and ~~convertible debentures. A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share follows.~~warrants.

41

Year ended April 30,
2014 2013
Historical net loss per share:
Numerator
Net loss, attributable to common stockholders $ (25,345,201 ) $ (10,373,871 )
Less: Effect of amortization of interest expense on convertible notes - (1,382,537 )
Net loss attributable to common stockholders (diluted) (25,345,201 ) (11,756,408 )
Denominator
Weighted-average common shares outstanding 9,362,031 1,650,280
Effect of dilutive securities - 108,745
Denominator for diluted net loss per share 9,362,031 1,759,025

Basic net loss per share $ (2.71 ) $ (6.29 )
Diluted net loss per share $ (2.71 ) $ (6.68 )

The following outstanding options, restricted stock grants, convertible note 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.

	Year ended April 30,				Year ended December 31,
	2014		2013		2017	2016

Options to purchase common stock		3,647,858		11,336	188,744	236,706
Warrants to purchase common stock		2,762,466		759,410	120,773	120,794
Restricted stock grants		42,478		1,917	-	12
Convertible note shares outstanding		6,652		98
Convertible preferred shares outstanding		-		97,400

Operating Leases

The Company maintains operating leases for its office and laboratory facilities. The lease agreements may include rent escalation clauses and tenant improvement allowances. The Company recognizes scheduled rent increases on a straight-line basis over the lease term beginning with the date the company takes possession of the leased space. Differences between rental expense and actual rental payments are recorded as deferred rent liabilities and are included in “Other liabilities” on the consolidated balance sheets.

Recent Accounting Pronouncements

In July 2017, the Financial Accounting Standards Board (the “FASB”), issued an accounting standard that changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The standard will be effective on January 1, 2019. Early adoption is permitted, including adoption in an interim period. The Company does not believe adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued an accounting standard that provides guidance for evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance provides a screen to determine when an integrated set of assets and activities, or a set, does not qualify to be a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in an identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the guidance requires a set to be considered a business to include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs and removes the evaluation as to whether a market participant could replace the missing elements. The standard became effective on January 1, 2018 and was adopted on a prospective basis. The Company does not believe adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued an accounting standard that clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows where diversity in practice exists. The standard is effective in the Company’s first quarter of fiscal 2018. The Company does not believe adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued an accounting standard that amends how credit losses are measured and reported for certain financial instruments that are not accounted for at fair value through net income. This standard will require that credit losses be presented as an allowance rather than as a write-down for available-for-sale debt securities and will be effective for interim and annual reporting periods beginning January 1, 2020, with early adoption permitted, but not earlier than annual reporting periods beginning January 1, 2019. A modified retrospective approach is to be used for certain parts of this guidance, while other parts of the guidance are to be applied using a prospective approach. The Company does not believe adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued an accounting standard that supersedes nearly all existing revenue recognition guidance under GAAP. The standard is principles-based and provides a five-step model to determine when and how revenue is recognized. The core principle of the 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 the Company expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued a standard to clarify the implementation guidance on principal versus agent considerations, and in April 2016, the FASB issued a standard to clarify the implementation guidance on identifying performance obligations and licensing. The 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. Early application prior to the original effective date was not permitted. The standard permits the use of either the retrospective or cumulative effect transition method.

The Company reviewed its current accounting policies and practices to assess the impact of the guidance on its business processes. Based on this evaluation, the adoption of this standard will not have a material impact on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued an accounting standard intended to improve financial reporting regarding leasing transactions. The standard will require the Company to recognize on the balance sheet the assets and liabilities for the rights and obligations created by all leased assets. The standard will also require it 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 months. The standard is effective for financial statements beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements and related disclosures.

In January 2016, the FASB issued an accounting standard that will enhance the Company’s reporting for financial instruments. The 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. The Company does not believe adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

Fair Value

The Company ~~records~~determines the fair value of its financial assets and liabilities in accordance with ~~ASC~~the FASB Accounting Standards Codification (“ASC”) 820 Fair Value Measurements. The ~~Company's consolidated~~Company’s balance sheet includes the following financial instruments: cash and cash equivalents, ~~short-term notes payable, convertible preferred stock~~investments in marketable securities and ~~convertible notes.~~warrant liabilities. 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. ~~The Company did not elect the fair value option and records the carrying value of its convertible notes at amortized cost in accordance with ASC 470-20.~~

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~~“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:

Level one	Quoted market prices in active markets for identical assets or liabilities;
Level two	Inputs other than level one inputs that are either directly or indirectly ~~observable,~~observable; and
Level three	Unobservable inputs developed using estimates and assumptions; which are developed by the reporting entity and reflect those assumptions that a market participant would use.

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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.

Investments in Marketable Securities

The Company classifies all of its investments as available-for-sale. Unrealized gains and losses on investments are recognized in comprehensive income/(loss), unless an unrealized loss is considered to be other than temporary, in which case the unrealized loss is charged to operations. The Company periodically reviews its investments for other than temporary declines in fair value below cost basis and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company believes the individual unrealized losses represent temporary declines primarily resulting from interest rate changes. Realized gains and losses are reflected in other income (expense) in the Consolidated ~~Financial Statements.~~Statements of Operations and Comprehensive Loss and are determined using the specific identification method with transactions recorded on a settlement date basis.

The Company recognized a gain of $422 and a loss $41,955 for the years ended December 31, 2017 and 2016, respectively.

Investments with original maturities at date of purchase beyond three months and which mature at or less than 12 months from the balance sheet date are classified as current. Investments with a maturity beyond 12 months from the balance sheet date are classified as long-term. At December 31, 2017, the Company believes that the costs of its investments are recoverable in all material respects.

The following tables summarize the fair value of the Company’s investments by type. The estimated fair value of the Company’s fixed income investments are classified as Level 2 in the fair value hierarchy as defined in U.S. GAAP. These fair values are obtained from independent pricing services which utilize Level 2 inputs:

	December 31, 2017
	Amortized Cost	Accrued Interest	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
Corporate debt securities	$7,878,955	$69,066	$2,322	$(18,515)	$7,931,828

The following table summarizes the scheduled maturity for the Company’s investments at December 31, 2017 and 2016, respectively:

	December 31, 2017	December 31, 2016
Maturing in one year or less	$6,122,400	$3,284,616
Maturing after one year through three years	1,809,428	8,586,110
Total investments	$7,931,828	$11,870,726

Warrant liability

On July 23, 2013, the Company issued common stock warrants in connection with the issuance of Series C 8% Preferred Stock (the “Series C Warrants”). As part of the offering, the Company issued 137,668 warrants at an exercise price of $52.00 per share and contractual term of 6 years. On November 11, 2013, the Company satisfied certain contractual obligations pursuant to the Series C offering which caused certain “down-round” price protection clauses in the outstanding warrants to become effective on that date. In accordance with ASC 815-40-35-9, the Company reclassified these warrants as a current liability and recorded a warrant liability of $1,380,883, which represents the fair market value of the warrants at that date. The ~~following tables show information regarding assets and liabilities measured at~~initial fair value ~~on a recurring basis~~recorded as warrants within stockholders’ equity of ~~April 30, 2014~~$233,036 was reversed and ~~2013~~:

Fair Value Measurements at Reporting Date Using
Balance as of April 30, 2014 Quoted prices in Active Markets for Identical Securities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Current Assets
Cash and cash equivalents $ 58,320,555 $ 58,320,555 $ - $ -

Current Liabilities
Warrant liabilities $ 954,876 $ - $ - $ 954,876

Fair Value Measurements at Reporting Date Using
Balance as of April 30, 2013 Quoted prices in Active Markets for Identical Securities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Current Assets
Cash and cash equivalents $ 783,528 $ 783,528 $ - $ -

Current Liabilities
Warrant liabilities $ - $ - $ - $ -

~~There were no significant transfers between levels in~~ the ~~years ended April 30 2014 and 2013. The Warrant liabilities are recorded at fair value with~~subsequent changes in fair value are recorded as ~~gains or losses within~~a component of other ~~expense (income).~~expense.

Financial assets or liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

As further discussed in Note G below, on July 23, 2013, the Company issued common stock warrants (the “Series C Warrants”) in connection with the issuance of Series C 8% Convertible Preferred Stock (the “Series C Stock”). The Series C ~~warrants~~Warrants are measured using the Monte Carlo valuation model which is based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. The assumptions used in calculating the estimated fair value of the warrants represent the Company’s best estimates; however, these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liabilities and the change in estimated fair value of the warrants could be materially different.

Inherent in the Monte Carlo valuation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

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The Monte Carlo model is used for the Series C ~~warrants~~Warrants to appropriately value the potential future exercise price adjustments triggered by the anti-dilution provisions. This requires Level 3 inputs which are based on the Company’s estimates of the probability and timing of potential future financings and fundamental transactions. The other assumptions used by the Company are summarized in the following table for the Series C ~~warrants~~Warrants that were outstanding as of ~~April 30, 2014; no~~December 31, 2017 and December 31, 2016:

Series C Warrants	December 31, 2017	December 31, 2016
Closing stock price	$9.80	$39.00
Expected dividend rate	0%	0%
Expected stock price volatility	81.26%	79.60%
Risk-free interest rate	1.83%	1.35%
Expected life (years)	1.56	2.56

As of December 31, 2017, the fair value of the warrant liability was $33,673. The Company recorded a gain of $192,419 for the change in fair value as a component of other expense on the consolidated statement of comprehensive loss for the year ended December 31, 2017.

The Company recorded a gain of $298,248 for the change in fair value as a component of other expense on the consolidated statement of comprehensive loss for the year ended December 31, 2016.

As of December 31, 2017, 12,035 Series C ~~warrants were outstanding~~Warrants are outstanding.

The following tables summarize information regarding assets and liabilities measured at fair value on a recurring basis as of ~~April 30, 2013:~~

Series C Warrants
April 30,
2014

April 30,
2013

Closing stock price $ 4.88 $ -
Expected dividend rate 0 % - %
Expected stock price volatility 90.32 % - %
Risk-free interest rate 1.75 % - %
Expected life (years) 5.23 -
December 31, 2017 and December 31, 2016:

~~Recent Accounting Pronouncements~~

		Fair Value Measurements at Reporting Date Using
	Balance as of December 31, 2017	Quoted prices in Active Markets for Identical Securities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Current Assets
Cash and cash equivalents	$1,604,810	$1,604,810	$-	$-
Marketable securities	$6,122,400	$-	$6,122,400	$-

Long-term Assets
Marketable securities	$1,809,428	$-	$1,809,428	$-

Current Liabilities
Warrant liabilities	$33,673	$-	$-	$33,673

~~In June 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-10,~~ ~~Development Stage Entities (Topic 915)~~. The objective of the amendments in this update is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities. Users of financial statements of development stage entities told the Board that the development stage entity distinction, the inception-to-date information, and certain other disclosures currently required under U.S. GAAP in the financial statements of development stage entities provide information that has limited relevance and is generally not decision useful. As a result, the amendments in this update remove all incremental financial reporting requirements from US GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments are effective for annual reporting periods beginning after December 15, 2014, and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company has elected to early adopt this guidance, and therefore is no longer presenting the financial statements in accordance with ASU 915, with inception to date disclosures.

		Fair Value Measurements at Reporting Date Using
	Balance as of December 31, 2016	Quoted prices in Active Markets for Identical Securities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Current Assets
Cash and cash equivalents	$9,995,955	$9,995,955	$-	$-
Marketable securities	$3,284,616	$-	$3,284,616	$-

Long-term Assets
Marketable securities	$8,586,110	$-	$8,586,110	$-

Current Liabilities
Warrant liabilities	$226,092	$-	$-	$226,092

~~In May 2014,~~There were no significant transfers between levels during the ~~FASB issued Accounting Standard Update 2014-09,~~ ~~Revenue from Contracts with Customers~~ (ASU 2014-09) providing a comprehensive new revenue recognition standard. ASU 2014-09 provides revised standards of recognition predicated on when an entity transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for us in our first quarter of fiscal 2018. ASU 2014-09 can be applied retrospectively with a modified retrospective application permitted. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements.year ended December 31, 2017.

~~In July 2013, the FASB issued ASU No. 2013-11,~~ ~~Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists~~. ASU No. 2013-11 requires entities to present in the consolidated financial statements an unrecognized tax benefit, or a portion of an unrecognized tax benefit as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward except to the extent such items are not available or not intended to be used at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position. In such instances, the unrecognized tax benefit is required to be presented in the consolidated financial statements as a liability and not be combined with deferred tax assets. This guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements.

NOTE C—BALANCE SHEET COMPONENTS

~~Inventory~~

The Company operates in an industry characterized by rapid improvements and changes to its technology and products. The introduction of new products by the Company or its competitors can result in its inventory being rendered obsolete or requiring it to sell items at a discount. The Company evaluates the recoverability of its inventory by reference to its internal estimates of future demands and product life cycles. As of April 30, 2014, due to development delays by the Company’s licensee, the Company does not believe the existing inventory will be sold prior to the expiration of its stability life and has recorded a charge of approximately $97,000 to cost of sales for the year ended April 30, 2014 equal to the carrying value of cosmetics inventory. The Company's future estimates are subjective and actual results may vary.

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Inventories are recorded at cost using the First-In-First-Out (“FIFO”) method. Ending inventories are comprised of raw materials and direct costs of manufacturing and valued at the lower of cost or market. Inventories consisted of the following as of April 30, 2014 and 2013:

April 30,
2014

April 30,
2013

Raw materials $ - $ 28,779
Finished goods - 70,425
$ - $ 99,204

~~Other current assets~~

~~Other current assets consist of the following:~~

April 30,
2014

April 30,
2013

R&D materials $ 177,406 $ 159,892
Other - 7,090
Dermacyte samples - 3,428
$ 177,406 $ 170,410

Property and equipment, net

Property and equipment consist of the following:

	April 30, 2014			April 30, 2013			December 31, 2017	December 31, 2016
Laboratory equipment	$	683,632		$	768,252		$354,861
Computer equipment and software		142,380			135,697		88,998	101,677
Office furniture and fixtures		130,192			130,192		130,192
		956,204			1,034,141		574,051	586,730
Less: Accumulated depreciation and amortization		(831,830	)		(828,752	)
Less: Accumulated depreciation							(564,106)	(567,625)
	$	124,374		$	205,389		$9,945	$19,105

Depreciation and amortization expense was ~~$88,300~~$13,621 and ~~$92,959~~$18,952 for the years ended ~~April 30, 2014~~December 31, 2017 and ~~2013,~~2016, respectively.

Accrued liabilities

Accrued liabilities consist of the following:

April 30,
2014

April 30,
2013

Employee related $ 609,130 $ 66,632
Deferred revenue 124,521 185,068
Operating costs 76,632 19,865
Restructuring liability 43,728 43,728
Convertible note interest payable 4,125 59,583
Accrued settlement costs - 500,000
$ 858,136 $ 874,876

	December 31, 2017	December 31, 2016
Operating costs	$39,252	$4,361,538
Employee related	324,054	884,008
	$363,306	$5,245,546

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~~Other liabilities~~

As further discussed in Note H below, following the closing of the Company’s research and development facility in California, the Company entered into a long-term sublease agreement with an unrelated third party covering the vacated space which extends through the termination date. The Company recorded a liability for the remaining lease payments due under its long-term, non-cancelable operating lease for this facility, net of sublease payments, which expires in July 2015. The table below summarizes the net future minimum payments due under this lease agreement.

April 30,
2014

April 30,
2013

Net non-cancelable operating lease obligation $ 54,660 $ 98,388
Less: current portion (43,728 ) (43,728 )
Long-term portion of net non-cancelable operating lease obligation $ 10,932 $ 54,660

NOTE D—~~ACQUISITION~~

On November 13, 2013, the Company, through its wholly owned subsidiary, Life Newco, acquired certain assets of Phyxius pursuant to the Asset Purchase Agreement. The acquisition was accounted for under the acquisition method of accounting for business combinations in accordance with FASB ASC 805, ~~Business Combinations,~~ which requires, among other things that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Acquisition-related costs are not included as a component of the acquisition accounting, but are recognized as expenses in the periods in which the costs are incurred. Any changes within the measurement period resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recorded at the acquisition date.

Under the terms and subject to the conditions of the Asset Purchase Agreement, Life Newco acquired (the “Acquisition”) certain assets, including that certain License Agreement (the “License”), dated September 20, 2013 by and between Phyxius and Orion Corporation, a global healthcare company incorporated under the laws of Finland (“Orion”), and that certain Side Letter, dated October 15, 2013 by and between Phyxius and Orion. The License grants Life Newco an exclusive, sublicenseable right to develop and commercialize pharmaceutical products containing Levosimedan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial (the “Product”) in the United States and Canada (the “Territory”). Pursuant to the License, Life Newco must use Orion’s “Simdax®” trademark to commercialize the Product. The License also grants to Life Newco 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. Orion’s ongoing role under the License includes sublicense approval, serving as the sole source of manufacture, holding a first right to enforce intellectual property rights in the Territory, and certain regulatory participation rights. Additionally, Life Newco must grant back to Orion a broad non-exclusive license to any patents or clinical trial data related to the Product developed by Life Newco under the License. The License has a fifteen (15) year term, provided, however, that the License will continue after the end of the fifteen year term in each country in the Territory until the expiration of Orion’s patent rights in the Product in such country (the “Term”). Orion may terminate the License if the human clinical trial using the Product and studying reduction in morbidity and mortality of cardiac surgery patients at risk of low cardiac output syndrome (LCOS) as described in the US Food and Drug Administration (the “FDA”) agreed upon clinical study protocol (the “Study”) is not started by July 31, 2014. As of July 24, 2014 the Company is in negotiations with multiple clinical sites.

~~The following table summarizes the consideration transferred to acquire Phyxius and the amounts of identified assets acquired and liabilities assumed at the acquisition date.~~

~~Fair Value of Consideration Transferred:~~

~~Common stock~~			~~8,747,802~~
~~Series E convertible preferred stock~~			~~15,299,198~~
~~Total~~			~~24,047,000~~

The Company issued 1,366,844 shares of its common stock that had a total fair value of approximately $8.7 million based on the closing market price on November 13, 2013, the acquisition date. The Company also issued 32,992 shares of its Series E Convertible Preferred Stock (the “Series E Stock”), which are convertible into an aggregate of 3,299,200 shares of common stock that had a total fair value of approximately $15.3 million.

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The rights, preferences and privileges of the Series E Stock are set forth in the Certificate of Designation of Series E Convertible Preferred Stock that the Company filed with the Secretary of State of the State of Delaware on November 13, 2013. Each share of Series E Stock automatically converted into 100 shares of common stock following receipt of stockholder approval for the transaction at the special meeting of stockholders held on March 13, 2014. Approximately 11% of the shares of converted common stock vested immediately upon receipt of stockholder approval for the transaction, while the remainder vested upon the closing of the Company’s underwritten offering of 9,285,714 shares of common stock on March 21, 2014, which resulted in net proceeds of approximately $55 million.

The Series E Stock was convertible into restricted common shares using a 100-for-one ratio at any time and in accordance with a vesting schedule contingent upon achievement of Company-specific non-financial conditions. As a result, the fair value of the Preferred Shares was inferred based on their common stock equivalent value given the conversion terms. The conditional vesting of the Series E Stock was accounted for by subtracting the fair value of an equal number of put options that would effectively protect the common stock equivalent stock value as of the closing date. The terms of the put options were as follows:

-	~~Exercise price equal to the common stock price as of the Valuation Date.~~

-	Term based on management’s risk-adjusted expected time to meeting the vesting condition, which was further increased by 6 months to reflect the marketability restriction of the unregistered stock, consistent with SEC Rule 144 of the Securities Act.

-	Volatility was consistent with the term for the individual milestone payments derived from the median historical asset volatility for a set of comparable guideline companies. The volatility was then relevered to estimate the equity volatility of the Company.

In accordance with the provisions of FASB ASC 805, the following table presents the preliminary allocation of the total fair value of consideration transferred, as discussed above, to the acquired tangible and intangible assets and assumed liabilities of Phyxius based on their estimated fair values as of the closing date of the transaction, measurement period adjustments recorded since the acquisition date and the adjusted allocation of the total fair value:

November 13,
2013
Measurement
November 13,
2013

(As initially reported) Period Adjustments (1) (As adjusted)
IPR&D $ 22,000,000 $ - $ 22,000,000
Trade and other payables (256,000 ) - (256,000 )
Liabilities arising from a contingency (1,000,000 ) - (1,000,000 )
Deferred tax liability related to intangibles acquired - (7,962,100 ) (7,962,100 )
Total identifiable net assets 20,744,000 (7,962,100 ) 12,781,900
Goodwill 3,303,000 7,962,100 11,265,100
Total fair value of consideration $ 24,047,000 $ - $ 24,047,000

~~(1)~~

The measurement period adjustments primarily reflect the recording of a deferred tax liability and resulting goodwill. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date and did not result from intervening events subsequent to the acquisition date.

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The fair value of the acquired in-process research and development, (“IPR&D”), intangible asset of approximately $22.0 million was determined using the multi-period excess earnings method. The Company did not acquire any other class of assets as a result of the acquisition.

~~Pursuant to the terms of the License, the Company paid to Orion a non-refundable up-front payment in the amount of $1 million.~~

The License also includes the following development milestones for which the Company shall make non-refundable payments to Orion no later than twenty-eight (28) days after the occurrence of the applicable milestone event: (i) $2.0 million upon the grant of FDA approval, including all registrations, licenses, authorizations and necessary approvals, to develop and/or commercialize the Product in the United States; and (ii) $1.0 million upon the grant of regulatory approval for the Product in Canada. Once commercialized, the Company is obligated to make certain non-refundable commercialization milestone payments to Orion, aggregating up to $13.0 million, contingent upon achievement of certain cumulative net sales amounts in the Territory. The Company must also pay Orion tiered royalties based on net sales of the Product in the Territory made by the Company and its sublicensees. After the end of the Term, the Company must pay Orion a royalty based on net sales of the Product in the Territory for as long as the Company sells the Product in the Territory.

In connection with the closing of the Acquisition, Phyxius’ co-founder, Chief Executive Officer and stockholder, John Kelley, became the Company’s Chief Executive Officer and two other Phyxius employees and stockholders, Doug Randall and Douglas Hay, PhD became employees of the Company as Vice President, Business and Commercial Operations and Vice President, Regulatory Affairs, respectively. Michael Jebsen, the Company’s prior Interim Chief Executive Officer and current Chief Financial Officer, continued serving as the Company’s Chief Financial Officer. In addition, Mr. Kelley was subsequently appointed to the Company’s Board of Directors, and Gerald T. Proehl, a designee of the Phyxius Stockholders, was appointed to the Board of Directors on April 3, 2014 following receipt of stockholder approval for the transaction. Pursuant to the Asset Purchase Agreement, the Company agreed to propose that its stockholders approve an amendment to the Company’s 1999 Stock Plan to increase the amount of stock options authorized for issuance under the 1999 Stock Plan to not less than 4,000,000 shares of common stock. On March 13, 2014, the Company received stockholder approval to increase the option plan. In accordance with terms of the Acquisition, the Company issued an aggregate of 3,572,880 stock options with a grant date fair value of $15,818,512, to the individuals described above. See Note G for additional details

The common stock and Series E Stock issued as the consideration in the Acquisition were issued and sold without registration under the Securities Act of 1933 (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws. Accordingly, the Phyxius Stockholders may sell the shares of common stock and Series E Stock only pursuant to an effective registration statement under the Securities Act covering the resale of those securities, an exemption under Rule 144 under the Securities Act or another applicable exemption under the Securities Act.

The table below presents unaudited pro forma information as if the Company’s acquisition of Phyxius had occurred at the beginning of the earliest period presented, which was May 1, 2012. The pro forma financial information is not indicative of the results of operations that would have occurred had the transaction been effected on the assumed date or of the results that may occur in the future:

48

Year ended April 30,
2014 2013
Total net revenue 158,926 1,190,928
Net loss $ 19,560,030 $ 9,418,395

Net loss attributable to common stockholders $ 25,363,392 $ 10,376,466

Net loss per share, basic $ (2.37 ) $ (3.44 )
Weighted average number of common shares outstanding, basic 10,717,037 3,017,124
Net loss per share, diluted $ (2.37 ) $ (3.76 )
Weighted average number of common shares outstanding, diluted 10,717,037 3,125,869

~~NOTE E—~~INTANGIBLE ASSETS

~~The following table summarizes our intangible assets as of April 30, 2014:~~

Asset Category Value Assigned Weighted Average Amortization Period (in Years) Impairments Accumulated Amortization Carrying Value (Net of Impairments and Accumulated Amortization)

IPR&D $ 22,000,000 N/A $ - $ - $ 22,000,000
Patents 724,067 10.8 - (289,943 ) 434,124
License Rights 607,947 14.6 - (148,713 ) 459,234
Trademarks 106,386 N/A - - 106,386
Total $ 23,438,400 $ - $ (438,656 ) $ 22,999,744

~~The following table summarizes our intangible assets as of April 30, 2013:~~

Asset Category Value Assigned Weighted Average Amortization Period (in Years) Impairments Accumulated Amortization Carrying Value (Net of Impairments and Accumulated Amortization)

Patents $ 645,918 11.2 $ (27,279 ) $ (258,499 ) $ 360,140
License Rights 572,370 15.6 - (117,969 ) 454,401
Trademarks 110,157 N/A - - 110,157
Total $ 1,328,445 $ (27,279 ) $ (376,468 ) $ 924,698

For the years ended April 30, 2014 and 2013, the aggregate amortization expense on the above intangibles was approximately $62,189 and $55,845, respectively. The following table summarizes the aggregate amortization expense over the remaining life of the patents and license rights as of April 30, 2014:

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Year ending April 30, Amount

2015 $ 66,525
2016 65,949
2017 62,032
2018 61,239
2019 61,111
Therafter 576,502
$ 893,358

In Process Research and Development—The levosimendan product in Phase ~~III~~3 clinical trial represents an IPR&D asset. The IPR&D asset is a research and development project rather than a product or processes already in service or being sold. Research and development intangible assets are considered indefinite-lived until the abandonment or completion of the associated research and development efforts. If abandoned, the assets would be impaired. Research and development expenditures that are incurred after the acquisition, including those for completing the research and development activities related to the acquired intangible research and development assets, are generally expensed as incurred.

~~Patents~~During the year ended December 31, 2016, the Company recognized an impairment charge of $33.3 million related to our levosimendan product in Phase 3 clinical trial, which represents approximately $22 million for IPR&D assets and ~~License Rights~~—~~The Company currently holds, has filed~~approximately $11.3 million for or owns exclusive rights to, U.S. and worldwide patents covering 13 various methods and uses of its perfluorocarbon (“PFC”) technology. It capitalizes amounts paid to third parties for legal fees, application fees and other direct costs incurred in the filing and prosecution of its patent applications. These capitalized costs are amortized on a straight-line method over their useful life or legal life, whichever is shorter.goodwill.

The ~~Company~~LEVO-CTS trial was completed ~~its annual impairment test~~in December of ~~its patents and license rights during~~2016. Based on the ~~fourth quarter~~data from the trial, levosimendan, given prophylactically prior to cardiac surgery to patients with reduced left ventricular function, had no effect on the co-primary outcomes. The study did not achieve statistically significant reductions in the dual endpoint of ~~fiscal years 2014 and 2013. The Company wrote-off approximately $0 and $27,000~~death or use of ~~capitalized costs~~a mechanical assist device at 30 days, nor in the quad endpoint of death, myocardial infarction, need for ~~patent applications that were withdrawn~~dialysis, or ~~abandoned during~~use of a mechanical assist device at 30 days. Based on the years ended April 30, 2014 and 2013, respectively. These asset impairment charges primarily related to the Company’s topical formulations using alternative PFCs which were determined not to be a core componentresults of the ~~Company’s~~LEVO-CTS trial and subsequent FDA feedback, the Company does not anticipate additional development ~~strategy. The Company capitalized patent costs~~ of ~~approximately $137,000 and $135,000~~levosimendan for the ~~year ended April 30, 2014~~treatment of LCOS in patients undergoing cardiac surgery. As of December 31, 2016, the Company determined the IPR&D asset, and ~~2013, respectively.~~

~~Trademarks~~—The Company currently holds, or has filed for, trademarks to protect the use of names and descriptions of its products and technology. It capitalizes amounts paid to third parties for legal fees, application fees and other direct costs incurred in the filing and prosecution of its trademark applications. These trademarks are evaluated annually for impairment in accordance with ASC 350, Intangibles –corresponding Goodwill, and other. The Company evaluates (i) its expected use of the underlying asset, (ii) any laws, regulations, or contracts that may limit the useful life, (iii) the effects of obsolescence, demand, competition, and stability of the industry, and (iv) the level of costs to be incurred to commercialize the underlying asset. The Company capitalized trademark costs of approximately $0 and $1,100, for the year ended April 30, 2014 and 2013, respectively.was more than temporarily impaired.

NOTE ~~F—NOTES PAYABLE~~

~~The following table summarizes the Company’s outstanding notes payable as of April 30, 2014 and 2013:~~

April 30,
2014

April 30,
2013

Current portion of notes payable, net $ 63,568 $ 57,539
Current portion of convertible notes payable 300,000 -
Less: Unamortized discount (16,678 )
Current portion of notes payable, net $ 346,890 $ 57,539

Long-term portion of convertible notes payable $ - $ 4,900,001
Less: Unamortized discount - (1,905,559 )
Long-term portion of notes payable, net $ - $ 2,994,442

~~Convertible Note~~

On June 29, 2011, the Company issued a note (the “June Note”) with a principal amount of approximately $300,000 and Warrants to purchase 6,652 shares of common stock. On July 1, 2011, the Company issued a separate note (together with the June Note, the “Notes”) with a principal amount of $4,600,000 and warrants to purchase 101,996 shares of common stock. The aggregate gross proceeds to the Company from the offering were approximately $4.9 million, excluding any proceeds from the exercise of any warrants. The aggregate placement agent fees were $297,000 and legal fees associated with the offering were $88,839. These costs have been capitalized as debt issue costs and will be amortized as interest expense over the life of the Notes. The Company recorded amortization of debt issue costs of $128,616 for each of the years ended April 30, 2014 and 2013.

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The total value allocated to the warrants was $1,960,497 and was recorded as a debt discount against the proceeds of the notes. In addition, the beneficial conversion features related to the notes were determined to be $2,939,504. As a result, the aggregate discount on the notes totaled $4,900,001, and is being amortized over term of the notes. The Company recorded interest expense for the amortization of debt discount $483,330 and $1,633,332 for the year ended April 30, 2014 and 2013, respectively.

Interest on the Notes accrues at a rate of 15% annually and will be paid in quarterly installments commencing on the third month anniversary of issuance. The Notes will mature 36 months from the date of issuance. The Notes may be converted into shares of common stock at a conversion price of $45.10 per share (subject to adjustment for stock splits, dividends and combinations, recapitalizations and the like) (the "Conversion Price") in whole or in part, at any time at the option of the holders of the Notes. The Notes also will automatically convert into shares of common stock at the Conversion Price at the election of a majority-in-interest of the holders of notes issued under the purchase agreement or upon the acquisition or sale of all or substantially all of the assets of the Company. The Company may make each applicable interest payment or payment of principal in cash, shares of common stock at the Conversion Price, or any combination thereof. The Company may elect to prepay all or any portion of the Notes without prepayment penalties only with the approval of a majority-in-interest of the note holders under the purchase agreement at the time of the election. The Notes contain various events of default such as failing to timely make any payment under the Note when due, which may result in all outstanding obligations under the Note becoming immediately due and payable.

As further discussed in Note G below, on August 22, 2013 holders of $4.6 million of the Notes received 4,600 shares of the Company’s Series D 8% Convertible Preferred Stock (the “Series D Stock”) as consideration for cancelling their outstanding Note. On that date, the Company recognized non-cash interest expense of $1,311,847 for the remaining unamortized debt discount associated with this Note.

~~NOTE G—~~E—STOCKHOLDERS’ EQUITY

Preferred Stock

Under the Company’s Certificate of Incorporation, the Board of Directors 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.

As of ~~April 30, 2014, 9,947,439~~December 31, 2017, 10,000,000 shares of preferred stock are undesignated.

On November 13, 2013, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 32,992 shares of its authorized but unissued shares of preferred stock as Series E Stock.

On August 22, 2013, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 4,600 shares of its authorized but unissued shares of preferred stock as Series D Stock.

On July 22, 2013, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 5,369 shares of its authorized but unissued shares of preferred stock as Series C Stock.

On February 25, 2013, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 1,600 shares and 500 shares of its authorized but unissued shares of preferred stock as Series B-1 Convertible Preferred Stock (the “Series B-1 Stock”) and Series B-2 Convertible Preferred Stock (the “Series B-2 Stock” and together with the Series B-1 Stock, the “Series B Stock”), respectively.

On December 8, 2011, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware designating 7,500 shares of its authorized but unissued shares of preferred stock as Series A Stock.

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~~Series E Stock~~

As further discussed in Note D above, on November 13, 2013 the Company issued 32,992 shares of its Series E Stock, which are convertible into an aggregate of 3,299,200 shares of common stock, as partial consideration to acquire certain assets of Phyxius Pharma, Inc. pursuant to the Asset Purchase Agreement.

The rights, preferences and privileges of the Series E Stock are set forth in the Certificate of Designation of Series E Convertible Preferred Stock (the “Certificate of Designation”) that the Company filed with the Secretary of State of the State of Delaware on November 13, 2013. Each share of Series E Stock will automatically convert into 100 shares of common stock following receipt of stockholder approval for the transaction. Approximately 11% of the shares of converted common stock will vest immediately upon receipt of stockholder approval for the transaction, while the remainder will vest upon achievement of certain performance milestones related to the development and commercialization of the levosimendan product in North America. In addition, all unvested converted common stock will vest if certain change of control transactions or significant equity financings occur within 24 months of the closing of the Acquisition. The number of shares of common stock into which the Series E Stock converts is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The Series E Stock does not carry dividend or a liquidation preference. The Series E Stock carries voting rights aggregating 4.99% of the Company’s common stock voting power immediately prior to the closing of the Acquisition.

~~During the year ended April 30, 2014, 32,992 shares of Series E Stock were converted into 3,299,200 shares of Common Stock. As of April 30, 2014 there were no shares of Series E Stock outstanding.~~

~~Series D Stock~~

On August 22, 2013, the Company closed its private placement of an aggregate of $4.6 million of shares of the Company’s Series D Stock to JP SPC 3 obo OXBT FUND, SP (“OXBT Fund”). In connection with the purchase of shares of Series D Stock, OXBT Fund received a warrant to purchase 2,358,975 shares of common stock at an exercise price equal to $2.60 (the “Series D Warrant”). As consideration for the sale of the Series D Stock and Series D Warrant, $4.6 million in outstanding principal amount of a Note issued by the Company on July 1, 2011 and held by OXBT Fund was cancelled. The Note carried interest at a rate of 15% per annum and matured on July 1, 2014. Mr. Gregory Pepin, one of the Company’s directors, is the investment manager of OXBT Fund. Pursuant to the terms of a lock-up agreement (the “Lock-Up Agreement”) executed prior to the closing, OXBT Fund and its affiliates are prohibited from engaging in certain transactions with respect to shares of the Company’s common stock and common stock equivalents until such time as the lead investor in the Company’s offering of Series C Stock ceases to own at least 25% of the shares of Series C Stock originally issued to such investor.

~~The table below sets forth a summary of the designation, powers, preferences and rights of the Series D Stock.~~

~~Conversion~~		Subject to certain ownership limitations, the Series D Stock is convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion ratio determined by dividing the stated value of the Series C Stock (or $1,000) by a conversion price of $1.95 per share. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. Until such time that for at least 25 trading days during any 30 consecutive trading days, the volume weighted average price of the Company’s common stock exceeds 250% of the initial conversion price, if the Company sells or grants any option to purchase or sell any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the then conversion price, or the Base Conversion Price, then the conversion price shall be reduced to equal the Base Conversion Price

~~Dividends and Make-Whole Payment~~		Until the third anniversary of the date of issuance of the Series D Stock, the holder of the Series D Stock is entitled to receive dividends at the rate of 8% per annum of the stated value for each share of Series D Stock held by such holder payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the original issue date, and on each dividend payment date. The Company can elect to pay the dividends in cash or in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof. If the Company pays the dividends in shares of common stock, the shares used to pay the dividends will be valued at 90% of the average volume weighted average price for the 20 consecutive trading days ending on the trading day immediately prior to the applicable dividend payment date. From and after the third anniversary of the date of issuance of the Series D Stock, the holder of Series D Stock will be entitled to receive dividends equal, on an as-if-converted to common stock basis, to and in the same form as dividends actually paid on shares of common stock when, as, and if such dividends are paid on shares of common stock. The Company has never paid dividends on its common stock and the Company does not intend to do so for the foreseeable future. In the event OXBT Fund converts its Series D Stock prior to the third anniversary of the date of issuance of the Series D Stock, the Company must also pay to OXBT Fund in cash, or at the Company’s option in common stock valued as described above, or a combination of cash and shares of common stock, with respect to the Series D Stock so converted, an amount equal to $240 per $1,000 of the stated value of the Series D Stock, less the amount of any dividends paid in cash or in common stock on such Series D Stock on or before the date of conversion.

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~~Liquidation~~		Upon any liquidation, dissolution or winding up of the Company after payment or provision for payment of debts and other liabilities of the Company, but before any distribution or payment is made to the holders of any junior securities, the holder of Series D Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount equal to $1,000 per share, after which any remaining assets of the Company shall be distributed among the holders of the other class or series of stock in accordance with the Company’s Certificate of Incorporation.

~~Voting rights~~		Shares of Series D Stock will generally have no voting rights, except as required by law and except that the consent of the holder of the outstanding Series D Stock will, among other things, be required to amend the terms of the Series D Stock.

During the year ended April 30, 2014, 4,600 shares of Series D Stock were converted into 2,358,974 shares of Common Stock and the Company issued 576,084 shares of its common stock in the form of Series D Stock dividends. As of April 30, 2014 there were no shares of Series D Stock outstanding.

~~Series C Stock~~

On July 21, 2013, the Company entered into a Securities Purchase Agreement with certain investors providing for the issuance and sale by the Company (the “Series C Offering”) of an aggregate of approximately $5.4 million of shares of the Company’s Series C Stock, which are convertible into a combined total of 2,753,348 shares of common stock (the “Conversion Shares”). In connection with the purchase of shares of Series C Stock in the Series C Offering, each investor will receive a warrant to purchase a number of shares of common stock equal to 100% of the number of Conversion Shares at an exercise price equal to $2.60 (the “Warrants”). On July 23, 2013, the Company sold 5,369 units for net proceeds of approximately $4.9 million.

~~The table below sets forth a summary of the designation, powers, preferences and rights of the Series C Stock.~~

~~Conversion~~

Subject to certain ownership limitations, the Series C Stock is convertible at any time at the option of the holder into shares of the Company’s common stock at a conversion ratio determined by dividing the stated value of the Series C Stock (or $1,000) by a conversion price of $1.95 per share. The conversion price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

Until such time that for at least 25 trading days during any 30 consecutive trading days, the volume weighted average price of the Company’s common stock exceeds 250% of the initial conversion price, if the Company sells or grants any option to purchase or sell any common stock or common stock equivalents entitling any person to acquire shares of common stock at an effective price per share that is lower than the then conversion price, or the Base Conversion Price, then the conversion price shall be reduced to equal the Base Conversion Price

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~~Dividends and Make-Whole Payment~~		Until the third anniversary of the date of issuance of the Series C Stock, each holder of the Series C Stock is entitled to receive dividends at the rate of 8% per annum of the stated value for each share of Series C Stock held by such holder payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the original issue date, and on each dividend payment date. The Company can elect to pay the dividends in cash or in duly authorized, validly issued, fully paid and non-assessable shares of common stock, or a combination thereof. If the Company pays the dividends in shares of common stock, the shares used to pay the dividends will be valued at 90% of the average volume weighted average price for the 20 consecutive trading days ending on the trading day immediately prior to the applicable dividend payment date. From and after the third anniversary of the date of issuance of the Series C Stock, each holder of Series C Stock will be entitled to receive dividends equal, on an as-if-converted to common stock basis, to and in the same form as dividends actually paid on shares of common stock when, as, and if such dividends are paid on shares of common stock. The Company has never paid dividends on its common stock and the Company does not intend to do so for the foreseeable future. In the event a holder converts his, her or its Series C Stock prior to the third anniversary of the date of issuance of the Series C Stock, the Company must also pay to the holder in cash, or at the Company’s option in common stock valued as described above, or a combination of cash and shares of common stock, with respect to the Series C Stock so converted, an amount equal to $240 per $1,000 of the stated value of the Series C Stock, less the amount of any dividends paid in cash or in common stock on such Series C Stock on or before the date of conversion.

~~Liquidation~~		Upon any liquidation, dissolution or winding up of the Company after payment or provision for payment of debts and other liabilities of the Company, but before any distribution or payment is made to the holders of any junior securities, the holders of Series C Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount equal to $1,000 per share, after which any remaining assets of the Company shall be distributed among the holders of the other class or series of stock in accordance with the Company’s Certificate of Incorporation.

~~Voting rights~~		Shares of Series C Stock will generally have no voting rights, except as required by law and except that the consent of holders of a majority of the outstanding Series C Stock will, among other things, be required to amend the terms of the Series C Stock.

The Company will not affect any conversion of the Series C Stock, nor shall a holder convert its shares of Series C Stock, to the extent that such conversion would cause the holder to have acquired, through conversion of the Series C Stock or otherwise, beneficial ownership of a number shares of common stock in excess of 4.99% of the common stock outstanding immediately preceding the conversion.

During the year ended April 30, 2014, 5,369 shares of Series C Stock were converted into 2,753,327 shares of common stock and the Company issued 831,401 shares of its common stock for the payment of $1,288,560 as dividends on the Series C Stock. As of April 30, 2014 there were no shares of Series C Stock outstanding.

~~Series B Stock~~

On February 22, 2013, the Company entered into a Securities Purchase Agreement with an institutional investor providing for the issuance and sale by the Company of $1.6 million of shares of the Company’s Series B-1 Stock and $0.5 million of shares of the Company's Series B-2 Stock which are convertible into a combined total of 420,000 shares of common stock, subject to adjustment for subsequent equity sales.

On February 27, 2013, the Company sold 2,100 units for net proceeds of approximately $1.9 million. Each unit sold consisted of (i) one share of the Company’s Series B Stock and (ii) a Warrant representing the right to purchase 300 shares of common stock at a price of $1,000 per unit, less issuance costs. The shares of Series B Stock were immediately convertible upon issuance.

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~~The table below sets forth a summary of the designation, powers, preferences and rights of the Series B Stock.~~

~~Dividends~~		~~No dividends shall be paid on shares of Preferred Stock.~~

~~Conversion~~		Holders may elect to convert shares of Series B Stock into shares of common stock at the then-existing conversion price at any time. The initial conversion price is $5.00 per share of common stock, and is subject to certain adjustments, including an anti-dilution provision that reduces the conversion price upon the issuance of any common stock or securities convertible into common stock at an effective price per share less than the conversion price and a one-time price reset following the effectiveness of a reverse split of the Company’s outstanding common stock.

~~Liquidation preference~~		In the event of the Company’s voluntary or involuntary dissolution, liquidation or winding up, each holder of Series B Stock will be entitled to be paid a liquidation preference equal to the initial stated value of such holder’s Series B Stock of $1,000 per share, plus accrued and unpaid dividends and any other payments that may be due on such shares, before any distribution of assets may be made to holders of capital stock ranking junior to the Series B Stock.

~~Voting rights~~		Shares of Series B Stock will generally have no voting rights, except as required by law and except that the consent of holders of a majority of the outstanding Series B Stock will among other things, be required to amend the terms of the Series B Stock.

The Company will not affect any conversion of the Series B Stock, nor shall a holder convert its shares of Series B Stock, to the extent that such conversion would cause the holder to have acquired, through conversion of the Series B Stock or otherwise, beneficial ownership of a number shares of common stock in excess of 4.99% of the common stock outstanding immediately preceding the conversion.

~~During the year ended April 30, 2014, 987 shares of Series B Stock were converted into 644,915 shares of common stock. As of April 30, 2014 there were no shares of Series B Stock outstanding.~~

~~Series A Stock~~

On December 12, 2011, the Company sold 3,500 units for net proceeds of approximately $3.2 million. Each unit sold consisted of (i) one share of the Company’s Series A Stock and (ii) a warrant representing the right to purchase 11.275 shares of common stock (the “2011 Warrants”), at a price of $1,000 per unit, less issuance costs. The shares of Series A Stock were immediately convertible and the 2011 Warrants are exercisable on the one-year anniversary of the closing date.

On June 15, 2012, the Company sold an additional 2,500 units for net proceeds of approximately $2.3 million. Each unit sold consisted of (i) one share of the Company’s Series A Stock and (ii) a 2011 Warrant, at a price of $1,000 per unit, less issuance costs. The shares of Series A Stock were immediately convertible and the 2011 Warrants are exercisable beginning on the one-year anniversary of the closing date.

Interest expense on the outstanding Series A Stock was approximately $0 and $1.7 million for the year ended April 30, 2014 and 2013, respectively. The recorded interest for the prior period was comprised of approximately $657,000 for the calculated fair value of the warrants issued with the Series A Stock and $763,000 for the excess of the fair-value of the shares issued upon conversion over the fair value of the Series A Stock.

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~~Interest expense recorded for the payment of dividends on the Series A Stock was approximately $0 and $310,000 for the year ended April 30, 2014 and 2013, respectively.~~

~~No Series A Stock was outstanding during the years ended April 30, 2014 or April 30, 2013.~~

Common Stock

The Company’s Certificate of Incorporation authorizes it to issue 400,000,000 shares of $0.0001 par value common stock. As of ~~April 30, 2014~~December 31, 2017, and ~~2013,~~December 31, 2016 there were ~~27,858,000~~1,411,840 and ~~1,930,078~~1,406,002 shares of common stock issued and outstanding.

Warrants

On November 11, 2014, the Company issued common stock warrants in connection with the execution of a service agreement for investor relations and corporate communications. As part of the compensation under the agreement, the Company issued up to 8,750 warrants at an exercise price of $80.00 per share and contractual term of 5 years. The warrant is initially exercisable for 1,250 shares of common stock, and the number of shares of common stock exercisable under this warrant would be automatically increased by 2,500 upon the first occurrence of market price goals of $120.00, $160.00 and $200.00, respectively, during the eighteen month period beginning on the effective date. Effective May 11, 2016, the additional 7,500 warrants were no longer exercisable as none of the market price goals were achieved. In accordance with ASC 815, these warrants are classified as equity and their estimated fair-value of $478,115 was recorded as an operating expense in the consolidated statement of operations and as additional paid in capital during the fiscal year ended April 30, 2015. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock. As of December 31, 2017, 1,250 of these warrants are outstanding.

Series D Warrants

On August 22, 2013, the Company closed its ~~previously announced~~ private placement of an aggregate of $4.6 million shares of the Company’s Series D Stock to OXBT Fund. In connection with the purchase of shares of Series D Stock, OXBT Fund received the Series D Warrant to purchase ~~2,358,975~~117,949 shares of common stock at an exercise price equal to ~~$2.60~~$52.00 and contractual term of 6 ~~years.~~years. In accordance with ASC 815, these warrants are classified as equity and their relative fair-value of $1,531,167 was recognized as a deemed dividend on the Series D Stock during the prior fiscal year ended April 30, ~~2014.~~2014. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

The Series D Warrant is exercisable beginning on the date of issuance and expires on August 22, 2019. The exercise price and the number of shares issuable upon exercise of Series D Warrant is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock, and also upon any distributions of assets, including cash, stock or other property to the Company’s stockholders. In addition, if stockholder approval for the transaction is obtained, the Series D Warrant will be subject to anti-dilution provisions until such time that for 25 trading days during any 30 consecutive trading day period, the volume weighted average price of the Company’s common stock exceeds ~~$6.50~~$130.00 and the daily dollar trading volume exceeds $350,000 per trading day.

On January 30, 2014, the Company entered into an agreement with the OXBT Fund to amend the terms of the outstanding Series D Warrants. The amendment replaced the price protection anti-dilution provision of each warrant with a covenant that the Company will not issue common stock or common stock equivalents at an effective price per share below the exercise price of such warrant without prior written consent, subject to certain ~~exceptions.~~exceptions.

The Series D Stock and the Series D Warrant were issued and sold without registration under the Securities Act in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws. Accordingly, OXBT Fund may exercise the Warrant and sell the Series D Stock and underlying shares only pursuant to an effective registration statement under the Securities Act covering the resale of those securities, an exemption under Rule 144 under the Securities Act or another applicable exemption under the Securities Act.

On June 17, 2014, the Company received proceeds of $544,000 and issued 10,461 shares of common stock upon the exercise of the Series D warrants. As of December 31, 2017, 107,488 Series D Warrants are outstanding.

Series C Warrants

AsOn July 23, 2013, as part of the offering of Series C Stock, the Company issued ~~2,753,348~~137,668 Series C Warrants at an exercise price of ~~$2.60~~$52.00 per share and contractual term of 6 ~~years.~~years. In accordance with ASC 815, these warrants are classified as equity and their relative fair-value of $1,867,991 was recognized as a deemed dividend on the Series C Stock during the prior fiscal year ended April 30, ~~2014.~~2014. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

In connection with the Series C Offering described above, the Company entered into a Placement Agency Agreement (the “Placement Agency Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Placement Agent”) pursuant to which the Placement Agent agreed to act as the Company’s exclusive placement agent for the Series C Offering. In accordance with the Placement Agency Agreement, on July 23, 2013 the Company issued to the Placement Agent warrants to purchase ~~53,539~~2,677 shares of common stock at an exercise price of ~~$2.4375~~$48.75 per share and a contractual term of 3 ~~years.~~years. In accordance with ASC 815, these warrants are classified as equity and their relative fair-value of $51,231 was recognized as additional paid in capital during the prior fiscal year ended April 30, ~~2014.~~2014. The estimated fair value is determined using the Black-Scholes Option Pricing Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

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On August 23, 2013, the Company entered into agreements with certain institutional investors to amend the terms of certain outstanding warrants to purchase an aggregate of 2,681,283 shares of the Company’s common stock issued by the Company on February 27,Between October 2013 and July 27, 2013 (collectively, the “Warrant Amendments”). The Warrant Amendments replace the price protection anti-dilution provision of each warrant with a covenant that the Company will not issue common stock or common stock equivalents at an effective price per share below the exercise price of such warrant without prior written consent, subject to certain exceptions. As of April ~~30, 2014, none of these amended warrants remain outstanding.~~

~~During the year ended April 30,~~ 2014, the Company received cash of approximately $6.5 million and issued ~~2,512,825~~125,633 shares of common stock upon the exercise of outstanding Series C Warrants. As of ~~April 30, 2014, 240,523~~December 31, 2017, 12,035 Series C Warrants are outstanding.

In accordance with ASC 815-40-35-8, the ~~company~~Company reassessed the classification of the remaining Series C Warrants. On November 11, 2013, the Company satisfied certain contractual obligations pursuant to the Series C offering which caused certain “down-round” price protection clauses in the outstanding warrants to become effective on that date. In accordance with ASC 815-40-35-9, Onon November 11, 2013, ~~the~~ the Company reclassified these warrants as a current liability and recorded a warrant liability of $1,082,941 which represents the fair market value of the warrants at that date. The initial fair value recorded as warrants within stockholders’ equity of $233,036 was reversed and the change in fair value was recorded as a component of other expense.

The estimated fair value is determined using the Monte Carlo Model which is based on the value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends, expected volatility of the price of the underlying common stock as well as other estimates and assumptions.

As of ~~April 30, 2014,~~December 31, 2017, the fair value of the warrant liability was ~~$954,876.~~$33,673. The Company recorded a ~~loss~~gain of ~~$721,840~~$192,419 for the change in fair value as a component of other expense on the consolidated statement of operations and comprehensive loss for the year ended ~~April 30, 2014.~~December 31, 2017.

~~Series B Warrants~~

~~In connection with the issuance~~As of ~~2,100 shares of Series B Preferred Stock described above, on February 27, 2013~~December 31, 2017, the Company ~~issued Class A~~has 120,773 warrants outstanding. During the years ended December 31, 2017 and ~~Class B warrants to purchase an aggregate of 630,000 shares of common stock. The~~2016, no warrants were issued ~~at an initial exercise price equal to $10.00 and were immediately exercisable. The Class A warrants were issued with a six-year term and the Class B warrants were issued with a two-year term.~~or exercised.

During the year ended April 30, 2014, the Company received proceeds of $567,000 and issued 630,000 shares of common stock upon the exercise of the Series B warrants. As of April 30, 2014, there were no Series B warrants outstanding.

~~Series A Warrants~~

On December 12, 2011, the Company issued warrants to purchase 39,415 shares of common stock as part of the Series A Stock Offering. The warrants were issued at an initial exercise price of $44.40. The Warrants were issued with a six-year term and are exercisable beginning ~~December 12, 2012.~~ In June 2012, the Company issued warrants to purchase 28,154 shares of Common Stock as part of the Series A Stock subsequent closing. The Warrants were issued with a six-year term and are exercisable beginning ~~June 17, 2013.~~ On February 21, 2013, the Company entered into an agreement with the holders of these warrants (the “Warrant Exchange Agreements”) under which all of the outstanding warrants were cancelled in exchange for an aggregate of 20,000 shares of the Company’s common stock and $380,000 in cash pursuant to Section 3(a)(9) under the Securities Act.

The following table summarizes the Company’s warrant activity for the year ended ~~April 30, 2014~~December 31, 2017 and December 31, 2016:

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Warrants Weighted Average Exercise Price
Outstanding at April 30, 2012 261,999 $ 41.60
Issued 658,154 6.69
Cancelled (67,568 ) 44.40
Forfeited (93,175 ) 38.40
Outstanding at April 30, 2013 759,410 $ 11.00
Issued 5,165,862 2.60
Exercised (3,161,145 ) 2.26
Forfeited (1,661 ) 126.00
Outstanding at April 30, 2014 2,762,466 $ 4.28

~~During the year ended April 30, 2014, the Company received approximately $7.1 million and issued 3,161,145 shares of common stock upon the exercise of outstanding warrants~~.

	Warrants	Weighted Average Exercise Price
Outstanding at December 31, 2015	136,423	$87.76
Issued	-	-
Exercised	-	-
Forfeited	(15,629)	358.71
Outstanding at December 31, 2016	120,794	$52.71
Issued	-	-
Exercised	-	-
Forfeited	(21)	2,460.00
Outstanding at December 31, 2017	120,773	$52.29

1999 Amended Stock Plan

In October 2000, the Company adopted the 1999 Stock Plan, as amended and restated on June 17, 2008 (the “Plan”). Under the Plan, with the approval of the Compensation Committee of the Board of Directors, the Company may grant stock options, restricted stock, stock appreciation rights and new shares of common stock upon exercise of stock options. On September 30, 2011, the Company’s stockholders approved an amendment to the Plan which increased the ~~amount~~number of shares authorized for issuance under the Plan to ~~300,000,~~15,000, up from ~~40,000~~2,000 previously authorized.

Pursuant to the Asset Purchase Agreement described in Note D above, the Company agreed to propose that its stockholders approve an amendment to the Company’s 1999 Stock Plan to increase the amount of stock options authorized for issuance under the 1999 Stock Plan to not less than 4,000,000 shares of common stock. On March 13, 2014, ~~at the special meeting of stockholders,~~ the Company’s stockholders approved an amendment to the Plan ~~to increase~~which increased the number of shares of common stock authorized for issuance ~~under the Plan~~ to ~~4,000,000~~a total of 200,000 shares, ~~of common stock.~~ up from 15,000 previously authorized.

In accordance with the terms of the ~~Acquisition,~~acquisition of certain rights to levosimendan from Phyxius, the Company issued an aggregate of ~~3,572,880~~178,644 stock options with a grant date fair value of $15,818,512, to the Chief Executive Officer, the Chief Financial Officer, the Executive Vice President, Business and Commercial Operations and the Executive Vice President, Regulatory Affairs. These options were issued with a six-year term and subject to multiple performance-based vesting conditions. During the year ended April 30, 2014, the Company recorded approximately $7.9 million of compensation expense for the vested options in its consolidated statements of operations. An additional ~~$7.9~~$5.9 million of compensation expense related to these grants will be recognized as performance vesting conditions are achieved.

On September 15, 2015, the Company’s stockholders approved an additional amendment to the Plan which increased the number of shares of common stock authorized for issuance to a total of 250,000 shares, up from 200,000 previously authorized.

As of ~~April 30, 2014~~December 31, 2017 the Company had ~~155,408~~55,561 shares of common stock available for grant under the Plan.

The following table summarizes the shares available for grant under the Plan for the ~~year~~years ended ~~April 30, 2014~~December 31, 2017 and ~~2013:~~

2016:

58

	Shares Available for Grant
Balances, at ~~April 30, 2012~~December 31, 2015		~~276,582~~	49,736
Options granted		(~~1,595~~	36,300)
~~Options cancelled/forfeited~~		~~7,851~~
Restricted stock granted		(~~5,318~~	22)
Restricted stock cancelled/forfeited		~~5,206~~	11
Balances, at ~~April 30, 2013~~December 31, 2016		~~282,726~~
~~additional shares reserved~~		~~3,600,000~~	13,425
Options granted		(~~3,637,822~~	13,000)
Options cancelled/forfeited		~~1,300~~	60,962
Restricted stock granted		(~~135,662~~	10,691)
Restricted stock cancelled/forfeited		~~44,866~~	4,865
Balances, at ~~April 30, 2014~~December 31, 2017		~~155,408~~	55,561

Plan Stock Options

Stock options granted under the 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 Plan may be granted with a term of up to ten years and at prices no less than fair market value for ISOs and no less than 85% of the fair market value for NSOs. Stock options granted generally vest over one to three years.

The following table summarizes the outstanding stock options under the Plan for the years ended ~~April 30, 2014~~December 31, 2017 and ~~2013:~~2016:

	Outstanding Options								Outstanding Options
	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value			Number of Shares	Weighted Average Exercise Price	Aggregate Intrinsic Value
Balances, at April 30, 2012		17,592		$	81.20
Balances at December 31, 2015									200,406	$110.00
Options granted		1,595		$	32.60				36,300	$42.40
Options cancelled		(7,851	)	$	106.40				-	$-
Balances, at April 30, 2013		11,336		$	57.00
Balances at December 31, 2016									236,706	$99.74
Options granted		3,637,822		$	5.64				13,000	$11.06
Options cancelled		(1,300	)	$	43.90				(60,962)	$94.75
Balances, at April 30, 2014		3,647,858		$	5.79	$	8,736	(1)
Balances at December 31, 2017									188,744	$95.24	$- (1)

(1)	Amount represents the difference between the exercise price and ~~$4.88,~~$9.80, the closing price of ~~Oxygen Biotherapeutics’~~Tenax Therapeutics’ stock on ~~April 30, 2014,~~December 31, 2017, as reported on ~~The NASDAQ~~the Nasdaq Capital Market, for all in-the-money options outstanding.

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The following table summarizes all options outstanding as of ~~April 30, 2014:~~

Options Outstanding at April 30, 2014 Options Exercisable and Vested at April 30, 2014
Exercise Price Number of Options Weighted Average Remaining Contractual Life (Years) Number of Options Weighted Average Exercise Price
$ 1.61 to $5.65 3,637,843 9.9 1,826,145 $ 5.63
$ 14.80 to $59.80 6,455 7.0 5,979 $ 39.82
$ 60.80 to $102.00 2,351 4.4 2,351 $ 80.65
$ 111.60 to $138.00 1,209 5.4 1,209 $ 121.81

3,647,858 9.9 1,835,684 $ 5.91
December 31, 2017:

	Options Outstanding at December 31, 2017		Options Exercisable and Vested at December 31, 2017
Exercise Price	Number of Options	Weighted Average Remaining Contractual Life (Years)	Number of Options	Weighted Average Exercise Price
$10.60 to $63.20	44,500	8.8	13,881	$53.64
$67.00 to $95.20	6,251	6.8	6,249	$77.14
$96.40 to $113.00	137,733	2.4	70,743	$112.41
$296.00 to $2,760.00	260	3.3	260	$1,105.85
	188,744	4.0	91,133	$103.88

The following table summarizes options outstanding that have vested and are expected to vest based on options outstanding as of ~~April 30, 2014:~~

Number of Option Shares Weighted Average Exercise Price Aggregate Intrinsic Value (1) Weighted Average Remaining Contractual Life (Years)
Vested 1,835,684 $ 5.91 $ 8,736 9.9
Vested and expected to vest 3,645,025 $ 5.79 $ 9,237 9.9
December 31, 2017:

	Number of Option Shares	Weighted Average Exercise Price	Aggregate Intrinsic Value (1)	Weighted Average Remaining Contractual Life (Years)
Vested	91,133	$103.88	$-	3.7
Vested and expected to vest	118,389	$87.02	$-	4.9

(1)	Amount represents the difference between the exercise price and ~~$4.88,~~$9.80, the closing price of ~~Oxygen Biotherapeutics’~~Tenax Therapeutics’ stock on ~~April 30, 2014,~~December 31, 2017, as reported on ~~The NASDAQ~~the Nasdaq Capital Market, for all in-the-money options outstanding.

The Company chose the “straight-line” attribution method for allocating compensation costs of each stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value.

The Company used the following assumptions to estimate the fair value of options granted under its stock option plans for the years ended ~~April 30, 2014~~December 31, 2017 and ~~2013:~~

For the year ended April 30
2014 2013
Risk-free interest rate (weighted average) 1.80 % 1.29 %
Expected volatility (weighted average) 98.20 % 79.62 %
Expected term (in years) 6 7
Expected dividend yield 0.00 % 0.00 %
2016:

	For the year ended December 31,
	2017	2016
Risk-free interest rate (weighted average)	2.19%	2.28%
Expected volatility (weighted average)	99.59%	83.38%
Expected term (in years)	7	7
Expected dividend yield	0.00%	0.00%

Risk-Free Interest Rate	The risk-free interest rate assumption was based on U.S. Treasury instruments with a term that is consistent with the expected term of the Company’s stock options.

Expected Volatility	The expected stock price volatility for the Company’s common stock was determined by examining the historical volatility and trading history for its common stock over a term consistent with the expected term of its options.

Expected Term	The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. It was calculated based on the historical experience that the Company has had with its stock option grants.

Expected Dividend Yield	The expected dividend yield of 0% is based on the Company’s history and expectation of dividend payouts. The Company has not paid and do not anticipate paying any dividends in the near future.

Forfeitures	As stock-based compensation expense recognized in the statement of operations for the years ended ~~April 30, 2014~~December 31, 2017 and ~~2013~~2016 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on the Company’s historical experience.

The weighted-average grant-date fair value of options granted during the ~~years~~year ended ~~April 30, 2014 and 2013~~December 31, 2017 was ~~$5.64 and $32.60, respectively~~

60

$11.00.

The weighted-average grant-date fair value of options granted during the year ended December 31, 2016 was $42.40.

The Company recorded compensation expense for these stock options grants of $498,491 and $529,708 for the years ended December 31, 2017 and 2016, respectively.

As of ~~April 30, 2014,~~December 31, 2017, there were unrecognized compensation costs of approximately ~~$8 million~~$384,000 related to non-vested stock option awards ~~granted after May 1, 2004~~ that will be recognized on a straight-line basis over the weighted average remaining vesting period of 21.6 years. Additionally, there were unrecognized compensation costs of approximately $5.9 million related to non-vested stock option awards subject to performance-based vesting milestones with a weighted average remaining life of 2.3 years. As of December 31, 2017, none of these milestones have been achieved.

Inducement Stock Options

The table below summarizes the employment inducement stock option award for 1,250 shares of common stock made to our Chief Medical Officer on February 15, 2015. This employment inducement stock option was awarded in accordance with the employment inducement award exemption provided by Nasdaq Rule 5635(c)(4) and was therefore not awarded under the Company’s stockholder approved equity plan. The option award will vest over a three year period, with one-third vesting per year, beginning one year from the grant date. The options have a 10-year term and an exercise price of $64.40 per share, the February 13, 2015 closing price of the Company’s common stock.

A summary of the activity and related information for our stock options follows:

	Number of Shares	Weighted Average Exercise Price
Inducement Stock Options outstanding at December 31, 2015	1,250	$64.40
Options granted	-	-
Options exercised	-	-
Options forfeited or expired	(833)	64.40
Inducement Stock Options outstanding at December 31, 2016	417	$64.40
Options granted	-	-
Options exercised	-	-
Options forfeited or expired	(417)	64.40
Inducement Stock Options outstanding at December 31, 2017	-	$-
Options exercisable at December 31, 2017	-	$-

Inducement stock option compensation expense was approximately $8,000 for the year ended December 31, 2017.

Inducement stock option compensation expense was approximately $20,000 for the year ended December 31, 2016.

There were no inducement stock options outstanding as of December 31, 2017.

The estimated weighted average fair value per inducement option share granted was $64,343 in 2015 using a Black-Scholes option pricing model based on market prices and the following assumptions at the date of inducement option grant: weighted average risk-free interest rate of 1.84%, dividend yield of 0%, volatility factor for our common stock of 93.90% and a weighted average expected life of 7 years for inducement options not forfeited.

Restricted Stock Grants

The following table summarizes the outstanding restricted stock ~~grants~~ under the Plan for the ~~year~~years ended ~~April 30, 2014:~~

Outstanding Restricted Stock Grants
Number of Shares Weighted Average Grant Date Fair Value
Balances, at April 30, 2012 1,805 $ 43.80
Restricted stock granted 5,318 $ 35.00
Restricted stock vested (4,465 ) $ 32.60
Restricted stock cancelled (741 ) $ 36.20
Balances, at April 30, 2013 1,917 $ 48.40
Restricted stock granted 135,662 $ 3.00
Restricted stock vested (50,235 ) $ 2.30
Restricted stock cancelled (31,503 ) $ 1.67
Restricted stock forfeited (13,363 ) $ 4.49
Balances, at April 30, 2014 42,478 $ 6.39
December 31, 2017 and 2016:

	Outstanding Restricted Stock Grants
	Number of Shares	Weighted Average Grant Date Fair Value
Balances, at December 31, 2015	20	$66.80
Restricted stock granted	22	$54.40
Restricted stock vested	(16)	$62.20
Restricted stock cancelled	(14)	$62.60
Balances, at December 31, 2016	12	$54.40
Restricted stock granted	10,691	$13.60
Restricted stock vested	(5,838)	$13.60
Restricted stock cancelled	(4,865)	$13.60
Balances, at December 31, 2017	-	$-

The Company recorded compensation expense for these restricted stock grants of ~~$356,639~~$560 and ~~$162,991~~$1,758 for the ~~year~~years ended ~~April 30, 2014~~December 31, 2017 and ~~April 30, 2013,~~2016, respectively.

As of ~~April 30, 2014,~~December 31, 2017, there were no unrecognized compensation costs ~~of approximately $6,000~~ related to the non-vested restricted stock grants that will be recognized on a straight-line basis over the remaining vesting period.

~~NOTE H—RESTRUCTURING EXPENSE~~2016 Stock Incentive Plan

~~In May 2012,~~On June 16, 2016, the Company’s stockholders approved the 2016 Stock Incentive Plan (the “2016 Plan”), which provides for the issuance of up to 150,000 shares of common stock. Under the 2016 Plan, with the approval of the Compensation Committee of the Board of Directors, the Company decided to consolidate its operations and relocate its research and development function to North Carolina from Costa Mesa, California. To allow for this transition period, all existing development work had been completed and allmay grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards.

As of ~~the manufacturing of the Company’s PFC-based products had been transferred to contract manufacturers. As part of these initiatives,~~December 31, 2017 the Company ~~terminated all related research~~had not issued any awards under the 2016 Plan and ~~development activities and a workforce reduction was implemented. In September 2012,~~there were 150,000 shares of common stock available for grant under the ~~Company entered into a sublease agreement with an unrelated third party that extends throughout the remaining term of the existing lease for the vacated facility.~~

The following table summarizes the impact of the work force reductions and other associated costs on operating expenses and payments for the year ended April 30, 2014, and the liability remaining on the balance sheet as of April 30, 2014.

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Charges Incurred During the Year Ended April 30, 2014 Amounts Paid Through April 30, 2014 Amounts Accrued at April 30, 2014
Future lease obligations, net of sublease revenue $ - $ 87,224 $ 54,660

The Company recorded all restructuring expenses as operating expenses on the consolidated statement of operations. All restructuring costs were paid by April 30, 2014, with the exception of approximately $55,000 of future lease obligations, net of sublease revenue.2016 Plan.

NOTE I—F—COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases its office space under an operating lease that includes fixed annual increases and expires in ~~February 2016.~~June 2021. Total rent expense was ~~$107,946~~$112,431 and ~~$151,125~~$91,208 for the years ended ~~April 30, 2014~~December 31, 2017 and ~~2013,~~2016, respectively.

The future minimum payments for the long-term, non-cancelable lease are as follows:

Year ending December 31,
2018	115,220
2019	118,117
2020	121,084
2021	61,803
	$416,224

Year ending April 30,
2015 111,171
2016 94,917

$ 206,088

Simdax license agreement

~~As further discussed in Note D above, on~~On November 13, 2013 the Company acquired that certain License Agreement (the “License”), dated September 20, 2013, by and between Phyxius and Orion Corporation, a global healthcare company incorporated under the ~~License~~laws of Finland (“Orion”), which granted it an exclusive, sublicenseable right to develop and commercialize pharmaceutical products containing ~~Levosimedan~~levosimendan in the United States and Canada. Pursuant to the License, the Company must use ~~Orion’s~~the “Simdax®” trademark owned by Orion to commercialize ~~the Product.~~pharmaceutical products containing levosimendan, 2.5 mg/ml concentrate for solution for infusion / 5ml vial (the “Product”). The License also grants to 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.

Orion’s ongoing role under the License includes sublicense approval, serving as the sole source of manufacture, holding a first right to enforce intellectual property rights in the ~~Territory,~~United States and Canada (the “Territory”), and certain regulatory participation rights. Additionally, the Company must grant back to Orion a broad non-exclusive license to any patents or clinical trial data related to the Product developed by the Company under the License. The License has a fifteen (15) year term, provided, however, that the License will continue after the end of the fifteen year term in each country in the Territory until the expiration of Orion’s patent rights in the Product in such country. Orion ~~may~~had the right to terminate the License if the ~~Study is~~human clinical trial using the Product and studying reduction in morbidity and mortality of cardiac surgery patients at risk of LCOS was not started by July 31, 2014. While the Company did not commence the trial by that date, on September 9, 2014, Orion notified the Company in writing that it did not intend to terminate the License so long as the trial was commenced on or before October 31, 2014. The Company subsequently commenced the human clinical trial for levosimendan on September 18, 2014 when the first patient was enrolled.

The License includes the following development milestones for which the Company shall make non-refundable payments to Orion no later than twenty-eight (28) days after the occurrence of the applicable milestone event: (i) $2.0 million upon the grant of FDA approval, including all registrations, licenses, authorizations and necessary approvals, to develop and/or commercialize the Product in the United States; and (ii) $1.0 million upon the grant of regulatory approval for the Product in Canada. Once commercialized, the Company is obligated to make certain non-refundable commercialization milestone payments to Orion, aggregating up to $13.0 million, contingent upon achievement of certain cumulative net sales amounts in the Territory. The Company must also pay Orion tiered royalties based on net sales of the Product in the Territory made by the Company and its sublicensees. After the end of the Term, the Company must pay Orion a royalty based on net sales of the Product in the Territory for as long as Life Newco sells the Product in the Territory.

As of ~~April 30, 2014,~~December 31, 2017, the Company has not met any of the developmental milestones and, accordingly, has not recorded any liability for the contingent payments due to Orion.

~~Agreement with Virginia Commonwealth University~~

In May 2008 the Company entered into a license agreement with Virginia Commonwealth University (“Licensor”, “VCU”) whereby it obtained a worldwide, exclusive license to valid claims under three of the Licensor's patent applications that relate to methods for non-pulmonary delivery of oxygen to tissue and the products based on those valid claims used or useful for therapeutic and diagnostic applications in humans and animals. The license includes the right to sub-license to third parties. The term of the agreement is the life of the patents covered by the patent applications unless the Company elects to terminate the agreement prior to patent expiration. Under the agreement the Company has an obligation to diligently pursue product development and pursue, at its own expense, prosecution of the patent applications covered by the agreement. As part of the agreement, the Company is required to pay to VCU nonrefundable payments upon achieving development and regulatory milestones. As of April 30, 2014, the Company has not met any of the developmental milestones.

The agreement with VCU also requires the Company to pay royalties to VCU at specified rates based on annual net sales derived from the licensed technology. Pursuant to the agreement, the Company must make minimum annual royalty payments to VCU totaling $70,000 as long as the agreement is in force. These payments are fully creditable against royalty payments due for sales and sublicense revenue earned during the fiscal year as described above. This fee is recorded as an other current asset and is amortized over the fiscal year. Amortization expense was $70,000 for each of the years ended April 30, 2014 and 2013.

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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.~~consolidated financial statements.

NOTE J—G—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 18 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. The 401(k) Plan is managed by a third-party trustee.

For the ~~periods~~years ended ~~April 30, 2014~~December 31, 2017 and ~~2013,~~2016, the Company recorded ~~$47,087~~$74,990 and ~~$46,847 respectively,~~$83,589 for matching contributions ~~expense.~~expense, respectively.

NOTE K—H—INCOME TAXES

The Company has not recorded any income tax expense ~~or benefit~~(benefit) for the ~~periods~~period ended ~~April 30, 2014 and 2013~~December 31, 2017 due to its history of net operating losses.

The ~~reconciliations~~Company's provision for income taxes is summarized as follows:

	December 31,
	2017	2016

Current federal income tax expense	$-	$-
Deferred federal income tax benefit	-	(7,139,565)
Provision for federal income taxes:	-	(7,139,565)

Current state income tax expense	-	-
Deferred state income tax benefit	-	(822,535)
Provision for state income taxes:	-	(822,535)

Total	$-	$(7,962,100)

The reconciliation of income tax expenses (benefit) at the statutory federal income tax rate of 34% for the periods ended ~~April 30, 2014~~December 31, 2017 and ~~2013 are~~December 31, 2016 is as follows:

2014 2013
U.S. federal taxes (benefit) at statutory rate $ (6,644,225 ) $ (3,201,372 )
State income tax benefit, net of federal benefit (765,026 ) (356,452 )
Stock compensation 3,099,270
Nondeductible interest 827,284 1,592,027
Other nondeductible 292,355 47,652
Other, including effect of tax rate brackets 53,621 132,806
Change in state tax rate (8,377 ) -
Change in valuation allowance 3,145,098 1,785,339
$ - $ -

	December 31,
	2017	2016
U.S. federal taxes (benefit) at statutory rate	$(3,005,491)	$(17,641,231)
State income tax benefit, net of federal benefit	(346,057)	(2,031,238)
Stock compensation	169,312	141,807
Other nondeductible, including goodwill impairment	(71,044)	4,160,717
Change in state tax rate	(426,159)	241,518
Change in the federal tax rate	17,474,188	-
Federal and state net operating loss adjustments	774,875	-
Other, including effect of tax rate brackets	(265,181)	(57,490)
Change in valuation allowance	(14,304,443)	7,223,817
	$-	$(7,962,100)

63

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

							December 31,
Deferred Tax Assets	2014			2013			2017	2016
Net operating Loss Carryforwards	$	30,748,100		$	27,446,605
Net operating loss carryforwards							$32,239,768	$46,227,681
Accruals and other		230,900			336,631		567,090	902,546
Depreciation and amortization		-			16,766
Capital loss carryforwards							16,466	12,395
Valuation allowance							(32,781,999)	(47,086,442)
Net deferred tax assets		30,979,000			27,800,002		41,325	56,180
Deferred Tax Liabilities
IPR&D		(7,962,100	)		-
Other liabilities		(33,900	)		-		(41,325)	(56,180)
Valuation allowance		(30,945,100	)		(27,800,002	)
Net Deferred Tax Liabilities	$	(7,962,100	)	$	-		$-

Our management assessed the effectiveness of our internal control over financial reporting as of ~~April 30, 2014.~~December 31, 2017. In making its assessment, management used the criteria established ~~in Internal Control—Integrated Framework issued~~ by the Committee of Sponsoring Organizations of the Treadway Commission, or ~~COSO.~~COSO, in its 2013 Internal Control — Integrated Framework. Based on its assessment, management has concluded that our internal control over financial reporting was effective as of ~~April 30, 2014.~~

~~ITEM 9B—OTHER INFORMATION~~December 31, 2017.

ITEM 9B—OTHER INFORMATION

There is no information to report under this item for the quarter ended ~~April 30, 2014.~~December 31, 2017.

PART III

ITEM 10—DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE