Honolulu-based biotech company Cardax Inc., which is developing a product that would provide many of the anti-inflammatory benefits of steroids, is running low on cash and looking for investors as its share price has remained below 10 cents since February.
The company furloughed all of its nine employees and its four independent contractors indefinitely and arranged for its top executives to continue their services for the minimum wage of $8.50 an hour. Cardax’s stock, which hit a 52-week high of 59 cents a share Oct. 1, closed Thursday unchanged at 6 cents.
Cardax said its available cash resources are only sufficient to continue operations on a limited budget through May 15. The company said in addition to the $1.8 million raised during 2015, it intends to raise additional capital that would fund its operations at least through 2016.
Cardax reported in a U.S. Securities and Exchange Commission filing Wednesday that the employee shake-up took place Monday. The executives who will be making minimum wage are President and CEO David G. Watumull; his son, David M. Watumull, vice president of operations; and Chief Financial Officer John Russell, who is an independent contractor. The Watumulls are included among the nine employees.
In 2015 David G. Watumull received cash compensation of $88,807 plus stock options, and David M. Watumull received $63,230 in cash plus stock options.
In addition, each of Cardax’s four directors, who include David G. Watumull, has agreed to suspend any additional equity compensation effective today.
“We believe that our resources should be used to continue the development of our CDX-085 product candidate and, on a limited basis, explore development of astaxanthin formulations with manufacturers that may be able to produce product candidates for the consumer health market on a commercially viable basis,” David G. Watumull said in an email. “We may consider leveraging our scientific experience and relationships in the scientific community to market consumer health products utilizing commercial-ready astaxanthin dietary ingredients in order to start generating cash flow and building a market for Cardax astaxanthin products.”
Astaxanthin is normally produced in fresh water, such as ponds or streams, by microalgae. The streams empty into the ocean, where the astaxanthin is eaten by krill and other small crustaceans and taken up the food chain where it protects animals from strong inflammatory processes.
Cardax said the synthetic astaxanthin products it is developing have considerable advantages over natural astaxanthin and are safe to consume daily without side effects.
“Our flagship product candidate, CDX-085, demonstrated blood levels more than 2.5 times higher than microalgal astaxanthin and … its … astaxanthin content is more than 17 times stronger per unit weight than competing microalgal products on the market today,” David G. Watumull said in an email.
He said to support the company’s efforts, additional financing needs to be secured.
“Obviously, if we do not secure this financing, we will have to reassess our path forward,” he said.
The company said in the annual filing that it ended 2015 with a loss of $4.3 million compared with a loss of $17 million in 2014. Cardax said its total deficit since its 2006 inception was $54.2 million as of Dec. 31.
Cardax said it might rehire furloughed employees and contractors at minimum wage from time to time as needed.
“We continue development of our flagship product candidate,” David G. Watumull said in the email. “However, for competitive reasons, we have not announced an anticipated launch date for any of the product candidates we are currently developing or exploring. Our ability to secure additional financing will also impact the development of our product candidates.”
David G. Watumull said it was a tough decision to furlough employees and contractors.
“I value our team immensely and appreciate the contributions and sacrifices everyone has made,” he said. “The furloughs represent a tough yet prudent decision by the company to conserve cash flow … until additional financing is secured.”
