This quarterly report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In this quarterly report, we refer to PLx Pharma Inc., together with its ~~subsidiaries,~~subsidiary, as the “Company,” “we,” “our” or “us.” All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect” or the negative version of these words and similar expressions are intended to identify forward-looking statements.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances included herein may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Any forward-looking statement made by us in this quarterly report speaks only as of the date on which it is made. We disclaim any duty to update any of these forward-looking statements after the date of this quarterly report to conform these statements to actual results or revised expectations.

Other risks may be described from time to time in our filings made under applicable securities laws. New risks emerge from time to time. It is not possible for our management to predict all risks. All forward-looking statements in this quarterly report speak only as of the date made and are based on our current beliefs and expectations. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

We own various U.S. federal trademark registrations and applications and unregistered trademarks and service marks, including:

Solely for convenience, the trademarks and trade names in this quarterly report are sometimes referred to without the TM symbol, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies, products or services.

~~See accompanying notes to unaudited consolidated financial statements.~~ (Unaudited)

~~UNAUDITED~~ CONSOLIDATED STATEMENTS OF CHANGES IN ~~TEMPORARY EQUITY~~ SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a “pandemic”, or a worldwide spread of a new disease. Many countries imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.

In response to COVID-19, the Company has not experienced a disruption or delay in the development of VAZALORE. However, the extent to which COVID-19may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the pandemic. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company has not experienced any significant negative impact on its September 30, 2021 unaudited consolidated financial statements related to COVID-19.

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

The accompanying ~~interim~~ consolidated financial statements are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. The December 31, ~~2019~~ 2020 consolidated balance sheet included herein was derived from audited consolidated financial statements as of that date. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim consolidated financial statements are read in conjunction with the audited financial statements and notes previously filed in its Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2019.~~ 2020. In the opinion of management, the unaudited interim consolidated financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, ~~2020~~ 2021 and the results of operations for the three and nine months ended September ~~30, 2020~~ 20, 2021 and ~~2019.~~2020.

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The accompanying unaudited consolidated financial statements include the accounts of the Company and its ~~direct and indirect~~ wholly-owned ~~subsidiaries,~~subsidiary, PLx Opco Inc. ~~and PLx Chile SpA.~~ All significant intercompany balances and transactions have been eliminated within the consolidated financial statements. ~~The Company dissolved its subsidiary, PLx Chile SpA, in March 2020. The Company operates in one business segment.~~

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Use of Estimates

The preparation of our unaudited consolidated financial statements in conformity with GAAP requires management to make 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 the reported amount of revenues and expenses during the reporting period. In the accompanying unaudited consolidated financial statements, estimates are used for, but not limited to, ~~determining~~the impairment assessment of goodwill, the fair value of warrant ~~liabilities and other financial instruments,~~liability, the fair value of stock-based compensation, sales returns and allowances, trade promotional allowances, allowance for inventory obsolescence, contingent liabilities, ~~the~~ fair value and depreciable lives of long-lived ~~tangible and intangible~~ assets, and deferred taxes and ~~the~~ associated valuation allowance. Actual results could differ from those estimates.

~~Impact of COVID-19 Pandemic on Financial Statements~~

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a “pandemic”, or a worldwide spread of a new disease. Many countries imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.

In response to COVID-19, the Company implemented remote working and has not experienced a disruption or delay in the development of VAZALORE. However, the extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the pandemic.

~~The Company has not experienced any significant negative impact on the September 30, 2020 unaudited interim consolidated financial statements related to COVID-19.~~

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains cash and cash equivalents in a financial institution that at times exceeds federally insured limits. Management believes that the Company’s credit risk exposure is mitigated by the financial strength of the banking institution in which the deposits are held. As of September 30, ~~2020,~~ 2021, the Company had cash and cash equivalents of ~~$9.1~~$82.6 million in U.S. bank accounts which were not fully insured by the Federal Deposit Insurance Corporation.

Inventory

Inventory is stated at the lower of cost or net realizable value, using the ~~average cost method.~~first-in first-out method based on actual costs. Inventory as of September 30, ~~2020~~ 2021 and December 31, ~~2019~~ 2020 was comprised of ~~raw materials for~~ the ~~manufacture~~following:

Description	September 30, 2021		December 31, 2020
Raw Materials	$	99,368	$	143,380
Work-in-Progress		90,901		0
Finshed Goods		2,000,081		0
Total Inventory	$	2,190,350	$	143,380

The Company began shipping inventory to its customers in the third quarter of ~~VAZALORE.~~2021. The Company regularly reviews inventory quantities on hand and assesses the need for an allowance for ~~obsolescence. The~~obsolescence based on estimates of net realizable value, 0 allowance for obsolete inventory was ~~$59,000 and $513,000~~necessary as of September 30, ~~2020~~ 2021 and December 31, ~~2019, respectively, resulting in net inventory of $143,400 and $0 as of September 30, 2020 and December 31, 2019, respectively.~~2020.

Fair Value of Financial Instruments

All financial instruments classified as current assets and liabilities are carried at cost, which approximates fair value, because of the short-term maturities of those instruments. The fair value of the Term Loan (as defined in Note 4) 4) as of December 31, 2020 approximates its face value of ~~$1.6~~$0.6 million based on the Company’s current financial condition and on the variable nature of the Term Loan’s interest feature as compared to current rates. For disclosures concerning fair value measurements, see Note 7.

Leases

At the inception of a contract, the Company determines if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.

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The Company has made certain accounting policy elections whereby the Company (i) does not recognize ROU assets or lease liabilities for short-term leases (those with original terms of ~~12-months~~12-months or less) and (ii) combines lease and non-lease elements of its operating leases. Operating lease ROU assets are included in right of use assets and operating lease liabilities are included in other current and non-current liabilities in the Company’s consolidated balance sheets. As of September 30, ~~2020,~~ 2021, the Company did not have any finance leases.

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Goodwill

Goodwill is not amortized but is subject to periodic review for impairment. Goodwill is reviewed annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying amount of the goodwill might not be recoverable. Management performs its review of goodwill on its one reporting unit.

The Company performs a ~~one-step~~one-step test in its evaluation of the carrying value of goodwill, if qualitative factors determine it is necessary to complete a goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in the Company’s consolidated statements of operations.

The Company has not identified any events or changes in circumstances that indicate that a potential impairment of goodwill occurred during the three and nine months ended September 30, ~~2020~~ 2021 and ~~2019.~~2020.

Revenue Recognition

The Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers; (ii) identification of distinct performance obligations in the contract; (iii) determination of contract transaction price; (iv) allocation of contract transaction price to the performance obligations; and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation. The Company recognizes ~~revenues~~revenue upon the satisfaction of its performance obligations (upon transfer of control of promised goods or services to customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services. Deferred revenue results from cash receipts from or amounts billed to customers in advance of the transfer of control of the promised services to the customer and is recognized as performance obligations are satisfied. When sales commissions or other costs to obtain contracts with customers are considered incremental and recoverable, those costs are deferred and then amortized as selling and marketing expenses on a straight-line basis over an estimated period of benefit.

~~The~~Through June 30, 2021, the Company’s sole revenue ~~arrangement is~~was generated from a cost-reimbursable federal grant with the National Institutes of ~~Health. This federal~~Health, which grant was completed in the second quarter of 2020. The Company ~~recognizes~~recognized revenue on this grant as grant-related expenses ~~are~~were incurred by the Company or its subcontractors. The Company recognized ~~$0 and $41,106~~$30,430 of revenue under this arrangement during the ~~three~~nine months ended September 30, ~~2020~~2020.

The Company began generating revenue in the U.S. from its sales of VAZALORE in 81mg and ~~2019, respectively.~~325 mg doses in the third quarter of 2021 and recognizes revenue, at a point in time, when control of a promised good is transferred to a customer in an amount that reflects consideration that the Company expects to be entitled to in exchange for that good. This occurs either when the finished goods are received by the customer or when a product is picked up by the customer or the customer’s carrier. The Company recognized ~~$30,430 and $541,571~~total revenue from sales of ~~revenue under this arrangement during~~VAZALORE of $6.6 million for the ~~nine~~three months ended September 30, ~~2020~~2021.

Nature of Goods and ~~2019, respectively.~~Services

The Company generates revenue from the sale of its VAZALORE products through a broad distribution platform that includes drugstores, mass merchandisers, supermarkets, and e-commerce channels, all of which sell its products to consumers. Finished goods products are typically shipped FOB destination and accordingly, the Company recognizes revenue upon delivery to the customer or pick-up by the customer’s carrier.

Satisfaction of Performance Obligations

The Company recognizes revenue upon the satisfaction of its performance obligations (upon transfer of control of promised goods or services to customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services. The Company had 0 unsatisfied performance obligations or deferred revenue as of September 30, 2021.

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Variable Consideration

Provisions for certain customer promotional programs, product returns and discounts to customers are accounted for as variable consideration and recorded as a reduction in sales, based on an estimate of future returns, and customer prompt payment discounts, redemption of coupons by consumers and trade promotional allowances paid to customers. These allowances cover extensive promotional activities, primarily comprised of cooperative advertising, slotting, coupons, periodic price reduction arrangements, and other in-store displays.

The reserves for sales returns and consumer and trade promotion obligations are established based on the Company’s best estimate of the amounts necessary to settle future and existing obligations for products sold as of the balance sheet date. The Company uses trend experience and coupon redemption inputs in arriving at coupon reserve requirements and uses forecasted customer and sales organization inputs, and historical trend analysis for consumer brands in determining the reserves for other promotional activities and sales returns. The balance of reserves for sales returns and consumer and trade promotion obligations, reflected in the accompanying unaudited condensed consolidated balance sheets as a reduction to accounts receivable, was $1.8 million as of September 30, 2021 (NaN as of December 31, 2020).

Cost of Sales

Cost of sales include costs related to the manufacture and packaging of the Company’s products charged by our contract manufacturer and packagers. Cost of sales also includes inbound and outbound shipping and warehousing costs, expenses related to order process, quality assurance and royalties.

Sales, Marketing and Administrative

Selling, marketing and administrative (“SM&A”) expenses include costs related to functions such as sales, marketing, corporate management, insurance, and legal costs. Broker commissions are incurred and expensed as SM&A costs in the underlying consolidated statements of income when the underlying sales take place. Sales and marketing expenses also include costs for advertising (excluding the costs of cooperative advertising programs, which are reflected in net sales), contract field force, consumer promotion costs (such as on-shelf advertisements and displays). Sales and marketing costs are expensed as incurred.

The Company has not incurred incremental costs to obtain contracts with customers or material costs to fulfill contracts with customers and did not have any contract assets or liabilities as of September 30, ~~2020~~ 2021 and December 31, ~~2019.~~2020.

Research and Development Expenses

Costs incurred in connection with research and development activities are expensed as incurred. Research and development expenses consist of direct and indirect costs associated with ~~specific projects,~~ manufacturing and regulatory activities and include fees paid to various entities that perform ~~research related~~research-related services for the ~~Company combined with reimbursable costs related to the federal grant with the National Institutes of Health.~~Company.

Stock-Based Compensation

The Company recognizes expense in its consolidated statements of operations for the fair value of all stock-based compensation to key employees, nonemployee directors and advisors, generally in the form of stock ~~options and stock awards.~~options. The Company uses the Black-Scholes option valuation model to estimate the fair value of stock options on the grant date. Compensation cost is amortized on a straight-line basis over the vesting period for each respective award. The Company accounts for forfeitures as they occur.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred income tax assets to the amount expected to be realized.

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Tax benefits are initially recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially, and subsequently, measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts.

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Income (Loss) Per Share

In periods of net loss, basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. The Company’s Series A convertible preferred stock (the “Series A Preferred Stock”) and the Series B convertible preferred stock (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, collectively the “Preferred Stock”) contain non-forfeitable rights to dividends, and therefore are considered to be participating securities; in periods of net income, the calculation of basic earnings per share excludes from the numerator net income attributable to the Preferred Stock and excludes the impact of those shares from the denominator.

~~For~~In periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti-dilutive. For periods of net income, diluted earnings per share is computed using the more dilutive of the “two class method” or the “treasury method.” Dilutive earnings per share under the “two class method” is calculated by dividing net income available to common stockholders as adjusted for the participating impacts of the Preferred Stock, by the weighted-average number of shares outstanding plus the dilutive impact of all other potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method. Dilutive earnings per share under the “treasury method” is calculated by dividing net income available to common stockholders by the weighted- average number of shares outstanding plus the dilutive impact of all potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method, and convertible preferred stock using the if-converted method. ~~For the three months ended September 30, 2019, the “two class method” was more dilutive.~~

~~The Company has calculated basic and diluted earnings per share for the three months ended September 30, 2019 as follows:~~

Basic earnings
per share

Diluted
earnings per
share

Net income
$ 1,703,722 $ 1,703,722

Preferred stock dividends
(311,136
)
(311,136
)
Impact of participation rights
(555,508
)
(555,508
)

Net income available for common shares
$ 837,078 $ 837,078

Weighted average outstanding common shares
8,921,345 8,921,345

Impact of stock options
- 14,910

Weighted average outstanding common shares
8,921,345 8,936,255

Earnings per share
$ 0.09 $ 0.09

Due to net losses, none of the participating securities nor potential dilutive securities had a dilutive impact during the three and nine months ended September 30, ~~2020~~ 2021 and ~~2019 or for the three months ended September 30,~~ 2020.

The ~~number of anti-dilutive shares for~~following table sets forth the three months ended September 30, 2020 and 2019 consisting of common shares underlying (i) common stock options, (ii) stock purchase warrants, and (iii) convertible preferred stock, which have been excluded from the computation of diluted income per share, totaled 13,957,604 and 10,306,370 shares, respectively.potential dilutive securities:

The number of anti-dilutive shares for the nine months ended September 30, 2020 and 2019 consisting of common shares underlying (i) common stock options, (ii) stock purchase warrants, and (iii) convertible preferred stock, which have been excluded from the computation of diluted income per share, totaled 13,957,604 and 10,503,537 shares, respectively.

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	September 30, 2021		September 30, 2020
Stock Options		3,498,297		2,039,047
Warrants		6,665,814		2,704,593
Convertible Preferred Stock		6,476,275		9,213,604
Total Potential Dilutive Shares		16,640,386		13,957,604

Recent Adopted Accounting Standards

In ~~August 2020,~~ November 2019, the Financial Accounting Standards Board (“FASB”) issued guidance (Accounting Standards Update ("ASU") 2019-12) simplifying the accounting for income taxes by removing the following exceptions: 1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, 2) exception requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and 4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss the year. The amendments also simplify accounting for income taxes by doing the following: 1) requiring that an entity recognize a franchise tax or similar tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, 4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date, and 5) making minor Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. The guidance is effective for reporting periods beginning after December 15, 2020, including interim periods within that fiscal year. The Company adopted the provisions of ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on its financial position, results of operations and cash flows.

Unadopted Accounting Standards ~~Update 2020-06~~

In August 2020, the FASB issued ASU 2020-06 Debt – Debt with Conversion and Other Options (Subtopic ~~470-20)~~470-20) and Derivatives and Hedging – Contracts in ~~Entity’s~~Entity’s Own Equity (subtopic ~~815-40)~~815-40) that provides new guidance on the accounting for convertible debt instruments and contracts in an entity’s own equity. The guidance simplifies the accounting for convertible instruments by reducing the various accounting models that can require the instrument to be separated into a debt component and equity component or derivative component. Additionally, the guidance eliminated certain settlement conditions previously required to be able to classify a derivative in equity. The new guidance is effective on a modified or full retrospective basis for fiscal years beginning after December 15, 2023, including interim periods with those fiscal years. The Company will evaluate the impact on the consolidated financial ~~statements upon adoption.~~statements.

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The Company does not believe that any recently issued effective standards, or standards issued but not yet effective, if adopted, would have a material effect on the accompanying unaudited consolidated financial statements.

Subsequent Events

The Company’s management reviewed all material events through the date the unaudited consolidated financial statements were issued for subsequent event disclosure consideration.

NOTE 5. ~~STOCKHOLDERS’~~ STOCKHOLDERS’ EQUITY

Common Stock

~~Equity Distribution Agreement~~On March 5, 2021 the Company completed an underwritten public offering in which the Company issued and sold 7,875,000 shares of the Company’s common stock at a price to the public of $8.00 per share (the "Offering"). Gross proceeds of the Offering were $63 million before deducting underwriting discounts and commissions and other offering expenses payable by the Company and resulted in net proceeds of $59.0 million after deducting underwriting discounts and commissions and other offering expenses payable by the Company. The underwriters retained a customary 30-day overallotment option to purchase up to 1,181,250 shares of common stock at the public offering price, less underwriting discounts and commission. The overallotment option was exercised on March 16, 2021 for 1,049,700 shares with gross proceeds of $8.4 million and net proceeds of $7.9 million after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

~~In March 2019,~~ ATM Offering

On August 6, 2021, the Company entered into ~~the~~an Equity Distribution Agreement with ~~JMP. Pursuant~~JMP Securities LLC (“JMP”), as sales agent, and commenced an at-the-market offering (the “ATM Offering”) pursuant to ~~the terms of the Equity Distribution Agreement,~~which the Company may sell from time to time, at its option, shares of the Company’s common stock, ~~through JMP, as sales agent, with~~having an aggregate ~~sales~~offering price of up to ~~$12.5~~$75.0 million. ~~Any sales~~Sales of ~~shares pursuant to~~ the ~~Equity Distribution Agreement will be~~common stock under the ATM Offering are made under the Company’s previously filed and currently effective ~~“shelf”~~shelf registration statement ~~which allows it~~on Form S-3 and the sales agreement prospectus that forms a part of such registration statement. The aggregate compensation payable to ~~sell debt or equity securities in one or more offerings up to a total public offering price~~JMP is 3.0% of ~~$75 million. In 2019,~~the gross proceeds from each sale of the Company’s common stock. Under the ATM Offering, the Company ~~issued 398,709~~sold 448,268 shares ~~under the Equity Distribution Agreement generating~~and raised gross proceeds of ~~$2.3~~$8.0 million and net proceeds of ~~$2.1~~$7.6 million ~~after deducting legal and commission costs. There have been no issuances in 2020 under~~during the ~~Equity Distribution Agreement.~~ three months ended September 30, 2021. As of September 30, ~~2020, $10.2~~2021 $67.0 million remained available under the ~~"at-the-market" program.~~ATM Offering.

Convertible Preferred Stock

Series A Preferred Stock

In December 2018, the Company entered into a purchase agreement with certain accredited investors for the private placement of $15.0 million of Series A Preferred Stock pending stockholders' approval, which approval was subsequently obtained on February 19, 2019. Accordingly, the Company completed the private placement on February 20, 2019, raising ~~$15.0~~$15.0 million through the issuance of 15,000 shares of Series A Preferred Stock.

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The Series A Preferred Stock was issued at $1,000 per share and iswas initially convertible into shares of common ~~shares~~stock at a conversion price of $2.60 per share, subject to certain adjustments. Holders of the Series A Preferred Stock ~~are~~were entitled to an initial dividend rate of 8.0% per annum, which ~~will stop accruing~~ended on February 26, 2021, the date of the FDA’s approval of the supplemental NDA of VAZALORE 325 mg and VAZALORE 81mg. The dividends ~~are~~were compounded quarterly and payable in cash or shares of Series A Preferred Stock at the Company’s ~~option.~~option or, alternatively, the initial conversion price will be adjusted upon conversion to reflect the impact of the accrued dividends. The Series A Preferred Stock carries a liquidation preference equal to its stated value of $1,000 plus accrued and unpaid dividends.

In June 2021, the Series A Preferred Stock holders converted 2,358 shares of Series A Preferred Stock into shares of common stock pursuant to the original terms of the Series A Preferred Stock. Upon conversion, accrued dividends payable of $2.6 million were settled by adjusting the initial conversion price, resulting in a new conversion price of $2.22 per share. The revision of the conversion price resulted in the recognition of a contingent beneficial conversion feature in the amount of $2.2 million which is reflected as a deemed dividend which was accounted for as an increase and decrease to additional-paid-in capital in equity due to the Company’s accumulated deficit position. As a result of the conversion, Series A Preferred Stock carrying value was reduced $2.6 million and the Company issued 1,064,517 shares of its common stock.

As of September 30, 2021, 12,642 shares of Series A Preferred Stock remain outstanding with a conversion price of $2.22 per share. The Series A Preferred Stock is classified as temporary equity due to the presence of certain contingent cash redemption ~~features. As~~features and has a ~~result of the excess~~carrying value of ~~the Company’s common stock~~$13.7 million as of September 30, 2021.

The Company recognized $2,419,893 (or $0.11 per share) of total dividends on ~~the issuance date over the conversion price of~~ the Series A Preferred Stock a(including the contingent beneficial conversion ~~feature in the amount of $12.7 million was bifurcated from the host instrument and accounted for separately as an increase in additional paid-in capital in equity, and resulted in a deemed dividend~~feature) during the ~~three~~nine months ended ~~March 31, 2019 of $12.7 million which was accounted for as a decrease in additional paid-in capital in equity due to the Company’s accumulated deficit position. At~~ September 30, ~~2020,~~2021 (none during the ~~carrying value of the temporary equity was $13.7 million, net of $1.3 million in offering costs.~~

three months ended September 30, 2021). The Company recognized $336,855 (or $0.04 per share) and $983,823 (or $0.11 per share) of total dividends on the Series A Preferred Stock (including the contingent beneficial conversion feature) during the three and nine months ended September 30, 2020, respectively. The Company recognized $311,136 (or $0.03 per share) and $741,089 (or $0.08 per share) of total dividends on the Series A Preferred Stock during the three and nine months ended September 30, 2019, respectively.2020.

Series B Preferred Stock

In March 2020, the Company entered into a purchase agreement with certain accredited investors for the private placement of $8.0 million of Series B Preferred Stock pending stockholders' approval, which approval was subsequently obtained on May 15, 2020. Accordingly, the Company completed the private placement on May 15, 2020, raising ~~$8.0~~$8.0 million through the issuance of 8,000 shares of Series B Preferred Stock. The Series B Preferred Stock was issued at $1,000 per share and is convertible into shares of common ~~shares~~stock at a conversion price of $3.10 per share, subject to certain adjustments. Holders of the Series B Preferred Stock ~~are~~were entitled to an initial dividend rate of 8.0% per annum, which ~~will stop accruing~~ended on February 26, 2021, the date of the FDA’s approval of the supplemental NDA of VAZALORE 325 mg and VAZALORE 81mg. The dividends ~~are~~were compounded quarterly and payable in cash or shares of Series B Preferred Stock at the Company’s ~~option.~~option or, alternatively, the initial conversion price will be adjusted upon conversion to reflect the impact of the accrued dividends. The Series B Preferred Stock carries a liquidation preference equal to its stated value of $1,000 plus accrued and unpaid dividends.

In June 2021, certain Series B Preferred Stock holders converted 5,636 shares of Series B Preferred Stock into shares of common stock pursuant to the original terms of the Series B Preferred Stock. Upon conversion, accrued dividends payable of $0.4 million were settled by adjusting the initial conversion price, resulting in a new conversion price of $2.91 per share for those holders (the conversion price for holders that did not convert shares remains at $3.10 per share). As a result of the conversion, Series B Preferred Stock carrying value was reduced by $5.8 million and the Company issued 1,935,483 shares of its common stock.

As of September 30, 2021, 364 shares of Series B Preferred Stock remain outstanding with a conversion price of $2.91 per share and 2,000 shares remain outstanding with a conversion price of $3.10 per share. The Series B Preferred Stock is classified as temporary equity due to the presence of certain contingent cash redemption ~~features. At September 30, 2020, the~~features and has a carrying value of ~~the temporary equity was $7.7~~$2.3 million ~~net~~as of ~~$0.3 million in offering costs.~~September 30, 2021.

The Company recognized $105,065 (or $0.005 per share) of total dividends on the Series B Preferred Stock during the nine months ended September 30, 2021 (NaN during the three months ended September 30, 2021). The Company recognized $162,942 (or $0.02 per share) and $243,599 (or $0.03 per share) of total dividends on the Series B Preferred Stock during the three and nine months ended September 30, 2020.

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Warrants

In June 2017, the Company issued stock purchase warrants to purchase 2,646,091 shares of common stock at an exercise price of $7.50 per share. The warrants, exercisable beginning six months and one day after issuance, have a 10-year term and are liability classified due to the holders’ right to require the Company to repurchase the warrants for cash upon certain deferred fundamental ~~transactions.~~transactions ( “June 2017 Warrants”). See Note 7 for the fair value measurement of the warrant liability.

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In connection with the entry into the Term Loan Facility, the Company issued to SVB and one of its affiliates stock purchase warrants to purchase an aggregate of 58,502 shares of the Company’s common stock at an exercise price of $6.41 per ~~share (see Note 4).~~share. These warrants are immediately exercisable, have a 10-year term, contain a cashless exercise provision, and are classified in equity.

In November 2020, the Company issued warrants to purchase 5,230,910 shares of common stock which have an exercise price of $4.31 per share, contain a cashless exercise provision, will expire five years from the date of issuance and are equity classified (the “November 2020 Warrants”).

During the third quarter of 2021, holders of 20,364 of the June 2017 Warrants and 871,099 of the November 2020 Warrants exercised the warrants pursuant to their original terms. As a result of the warrants exercised, 20,364 of the warrants were exercised on a cashless basis and 871,099 of the warrants were exercised for $3.8 million in cash, additional-paid-in-capital was increased $4.1 million, and the Company issued an aggregate of 883,746 shares of common stock upon exercise of such warrants.

For the nine months ended September 30, 2021, holders of 188,590 of the June 2017 Warrants and 1,081,099 of the November 2020 Warrants exercised the warrants pursuant to their original terms. As a result of the warrants exercised, 152,226 of the warrants were exercised on a cashless basis and 1,117,463 of the warrants were exercised for $4.9 million in cash, additional-paid-in-capital was increased $7.1 million and the Company issued an aggregate of 1,192,421 shares of common stock upon exercise of such warrants

The following is a summary of warrant activities for the nine months ended September 30, 2021:

Description	Outstanding @ 12/31/2020		Exercised			Outstanding @ 9/30/21		Exercise Price
2017 Warrants		2,646,091		(188,590	)		2,457,501	$	7.50
2020 Warrants		5,230,910		(1,081,099	)		4,149,811	$	4.31
SVB Warrants		58,502		-			58,502	$	6.41
Total Warrants		7,935,503		(1,269,689	)		6,665,814

Stock Options

~~Following~~The following is a summary of stock option activities for the nine months ended September 30, ~~2020:~~2021:

Number of
Options

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value

Outstanding, December 31, 2019
1,666,797 $ 13.96 7.22 $ 91,475
Granted
571,000 $ 2.19
Exercised, cancelled, or forfeited
(198,750
)
$ 7.52
Outstanding, September 30, 2020
2,039,047 $ 11.29 7.15 $ 528,580

Exercisable, September 30, 2020
1,116,314 $ 17.49 5.6 $ -

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding, December 31, 2020		2,979,047		$	13.96		7.2
Granted		528,000		$	15.28
Exercised, cancelled, or forfeited		(8,750	)		81.28
Outstanding, September 30, 2021		3,498,297		$	10.07		7.5	$	38,970,547

Exercisable, September 30, 2021		1,492,514		$	13.69		5.5	$	15,048,635

On September 13, 2018, the Company’s stockholders approved the 2018 Incentive Plan ~~(the “2018~~(as subsequently amended on November 10, 2020, the “2018 Plan”). The 2018 Plan provides that the Company may grant equity interests to employees, consultants, and members of the Board of Directors in the form of incentive and nonqualified stock options, restricted stock and restricted stock units, stock appreciation rights and various other forms of stock-based awards. ~~There~~As of September 30, 2021, there are ~~1,250,000~~3,000,000 shares authorized to be issued pursuant to the 2018 Plan, of which ~~147,650~~429,650 shares ~~are~~remain available for ~~issuance~~issuance. On August 3, 2021, subject to stockholder approval, the Board of Directors approved an amendment to the 2018 Plan to increase the number of shares of the Company’s common stock issuable under the 2018 ~~Plan.~~ Plan by 4,000,000 shares (the “Plan Amendment”). [The Plan Amendment was [approved] by the stockholders on November 9, 2021.

The Company granted ~~571,000~~528,000 options during the nine months ended September 30, ~~2020~~ 2021 with an aggregate fair value of ~~$0.9~~$5.6 million calculated using the Black-Scholes model on the grant date. Variables used in the Black-Scholes model include: ~~(1)~~(1) discount rate ~~of 0.66%~~ranging from 0.6% - 1.1%, ~~(2)~~(2) expected life of ~~6.0~~6 years, ~~(3)~~(3) expected volatility ranging from of ~~82%~~80.8%-86.9%, and ~~(4)~~ (4) zero expected dividends.

As of September 30, ~~2020,~~ 2021, the Company had ~~$1.9~~$8.5 million in unamortized expense related to unvested options which is expected to be expensed over a weighted average of ~~1.8~~2.9 years.

During the three months ended September 30, ~~2020~~ 2021 and ~~2019,~~2020, the Company recorded ~~$286,185~~$0.7 million and ~~$260,577,~~$0.3 million, respectively, in total stock-based compensation expense related to the stock ~~options and stock bonuses.~~options. During the nine months ended September 30, ~~2020~~ 2021 and ~~2019,~~2020, the Company recorded ~~$828,300~~$1.9 million and ~~$603,314,~~$0.8 million, respectively, in total stock-based compensation expense related to the stock ~~options and stock bonuses.~~options. Substantially all stock-based compensation expense is classified as ~~general~~selling, marketing and administrative expenses in the accompanying unaudited consolidated statements of operations.

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NOTE 6. COMMITMENTS AND CONTINGENCIES

Lease Agreements

The Company presently leases office space under operating lease agreements, expiring ~~on July 31, 2021, October 3, 2021,~~ in September 2023, and June ~~30,~~ 2024. The office leases require the Company to pay for its ~~portion of taxes,~~ maintenance, and insurance. Rental expense under these agreements was ~~$87,851~~$49,501 and ~~$105,072~~$87,851 for the three months ended September 30, ~~2020~~ 2021 and ~~2019, respectively. Rental expense under these agreements~~2020, respectively, and was ~~$263,054~~$227,387 and ~~$289,553~~$263,054 for the nine months ended September 30, ~~2020~~ 2021 and ~~2019,~~2020, respectively.

~~Table~~

In the second quarter of ~~Contents~~

2021, the Company renewed its headquarters office lease through September 2023. The modification resulted in an increase in its right of use assets and lease liabilities of $0.1 million, using a discount rate of 7.25%.

All of the Company’s existing leases as of September 30, ~~2020~~ 2021 are classified as operating leases and have a weighted average remaining lease term of ~~2.0~~2.4 years. Certain of the Company’s existing leases have fair value renewal options, none of which the Company considers certain of being exercised or included in the minimum lease term. The discount rate used in the calculation of the Company’s lease liability ~~is 9.5%~~ranges from 7.25% to 9.50%. In addition, the Company iswas the ~~lessor~~sublessor for office space in New ~~York that it sublets to a tenant;~~York; the sublease ~~expires~~expired in July 2021.

Lease costs, net of sublease income, for the nine months ended September 30, 2020 consisted of the following:
Lease costs, net of sublease income, for the three months ended September 30, 2021 consisted of the following:
Operating lease cost	$	263,054		$	49,501
Sublease income		(182,731	)		(20,694	)
Total lease costs	$	80,323		$	28,807

A maturity analysis of the Company’s operating leases follows:

Future undiscounted cash flows:
2020	$	89,336
2021		262,850			33,474
2022		60,819			132,231
2023		60,264			113,823
2024		30,132			30,132
Total		503,401			309,660

Discount factor		(49,010	)		(30,657	)
Lease liability		454,391			279,003
Current lease liability		(307,967	)		(113,509	)
Non-current lease liability	$	146,424		$	165,494

~~Patent License Agreement with~~ Purchase Commitments

As of September 30, 2021, the ~~Board~~Company has entered into media and advertising commitments for VAZALORE of ~~Regents~~$2.4 million which is expected to be paid during the rest of ~~the University of Texas~~2021.

~~On January 8, 2003, the~~The Company ~~entered into a patent license agreement~~has supply agreements with ~~the Board of Regents of~~its contract manufacturer and packager for VAZALORE which contain minimum annual purchase commitments starting in 2021 and continuing through 2025. The ~~University of Texas System (the “University”), under which it acquired an exclusive license for several patents and patent applications both inside and outside of the United States relating~~minimum annual purchase commitments are intended to ~~gastrointestinal safer formulations of NSAIDs. Additionally, the Company acquired worldwide rights~~ensure that manufactured product is available when required to ~~commercialize licensed products which allow for~~enable the Company to ~~grant sublicenses subject to royalty payments.~~meet its expected market demand for VAZALORE.

Under terms of the agreement, the Company is responsible for conducting clinical trials involving investigational use of a licensed product for the determination of metabolic and pharmacologic actions in humans, the side effects associated with increasing doses, examination of suspected indications, determination of the potential short-term side effects in humans and for establishing the safety, efficacy, labeled indications and risk-benefit profile in humans. The patent license agreement also requires the Company to provide reimbursement for all expenses incurred by The University of Texas Health Science Center at Houston for filing, prosecuting, enforcing and maintaining patent rights and requires an annual nonrefundable license management fee. In addition, the Company is obligated to pay certain milestone payments in future years relating to royalties resulting from the approval to sell licensed products and the resulting sales of such licensed products. The Company recognized total expenses of $10,660 and $10,000 related to the University in the three months ended September 30, 2020 and 2019, respectively. The Company recognized total expenses of $237,300 and $260,000 related to the University in the nine months ended September 30, 2020 and 2019, respectively.

NOTE 7. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received in the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

●

Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.

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	●	Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date.
	●	Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity’s subjective determinations regarding the assumptions market participants would use in pricing the asset or liability and are generally less observable from objective resources and reflect the reporting entity’s subjective determinations regarding the assumptions market participants would use in pricing the asset or liability.

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Financial assets and liabilities measured at fair value on a recurring basis

The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the hierarchy.

The ~~stock purchase warrants issued in~~ June 2017Warrants contain certain cash settlement features and, accordingly, the Company considered them to be liabilities and accounted for them at fair value using Level 3 inputs. The Company determined the fair value of this warrant liability using a binomial asset pricing model that consisted of a conditional probability weighted expected return method that values the Company’s equity securities assuming various possible future outcomes to estimate the allocation of value within one or more of the scenarios. Using this method, unobservable inputs included the Company’s equity value, expected timing of possible outcomes, risk free interest rates and stock price volatility. Variables used at September 30, ~~2020~~ 2021 include: ~~(1)~~(1) the Company stock price of ~~$3.23, (2)~~$19.30, (2) the risk-free rate of ~~0.41%~~1.10%, ~~(3)~~(3) remaining expected life of ~~6.7~~5.7 years, and ~~(4)~~(4) expected volatility of ~~88%~~89%.

The Series A Preferred Stock and the Series B Preferred Stock both contain a contingent put option and, accordingly, the Company considered ~~them~~the put options to be liabilities and accounted for them at fair value using Level 3 inputs. The Company determined the fair value of these liabilities was de minimis at issuance and as of September 30, ~~2020~~ 2021, due to the remote possibly of its occurrence, a Level 3 unobservable input.

The following table sets forth a summary of changes in the fair value of Level 3 liabilities measured at fair value on a recurring basis for the three and nine months ended September 30, ~~2020:~~2021:

Description

Balance at

June 30,

2020

Established

in 2020

Change in

Fair Value

Balance at

September
30,

2020

Balance at

June 30,

2021

Established

in 2021

Change in

Fair Value

Balance at

September 30,

2021

Warrant liability

5,577,269

(134,552

)

5,442,717

25,791,417

(276,547

)

11,784,305

37,229,175

~~The following table sets forth a summary of changes in the fair value of Level 3 liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2020:~~

Description

Balance at

December

31,

2020

Established

in 2021

Change in

Fair Value

Balance at

September 30,

2021

Warrant liability

9,691,271

(2,139,463

)

29,747,367

37,229,175

Description

Balance at
December 31,
2019

Established
in 2020

Change in
Fair Value

Balance at
September
30,
2020

Warrant liability
$ 8,247,679 $ - $ (2,804,962
)
$ 5,442,717

The following table identifies the carrying amounts of such liabilities at September 30, ~~2020~~ 2021 and December 31, ~~2019:~~2020:

Description	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Warrant liability	$	-	$	-	$	5,442,717	$	5,442,717	$	0	$	0	$	37,229,175	$	37,229,175
Balance at September 30, 2020	$	-	$	-	$	5,442,717	$	5,442,717
Balance at September 30, 2021									$	0	$	0	$	37,229,175	$	37,229,175

Description	Level 1		Level 2		Level 3		Total

Warrant liability	$	0	$	0	$	9,691,271	$	9,691,271
Balance at December 31, 2020	$	0	$	0	$	9,691,271	$	9,691,271

Description

Level 1

Level 2

Level 3

Total

Warrant liability
$ - $ - $ 8,247,679 $ 8,247,679
Balance at December 31, 2019
$ - $ - $ 8,247,679 $ 8,247,679

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Financial assets and liabilities carried at fair value on a non-recurring basis

The Company does not have any financial assets or liabilities measured at fair value on a non-recurring basis.

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Non-financial assets and liabilities carried at fair value on a recurring basis

The Company does not have any non-financial assets or liabilities measured at fair value on a recurring basis.

Non-financial assets and liabilities carried at fair value on a non-recurring basis

The Company measures its long-lived assets, including property and equipment and goodwill, at fair value on a non-recurring basis when they are deemed to be impaired. NoNaN such impairment was recognized induring the three and nine months ended September 30, ~~2020~~ 2021 and ~~2019.~~2020.

NOTE 7. SUBSEQUENT EVENTS

None.

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ITEM 22.~~. MANAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements in this Quarterly Report on Form 10-Q (the ~~“Quarterly Report”~~“Quarterly Report”) that are not strictly historical are forward-looking statements and include statements about products in development, results and analyses of pre-clinical studies, clinical trials and studies, research and development expenses, cash expenditures, and alliances and partnerships, among other matters. You can identify these forward-looking statements because they involve our expectations, intentions, beliefs, plans, projections, anticipations, or other characterizations of future events or circumstances. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those in the forward-looking statements as a result of any number of factors. These factors include, but are not limited to, risks relating to our ability to conduct and obtain successful results from ongoing clinical trials, commercialize our technology, obtain regulatory approval for our product candidates, contract with third parties to adequately test and manufacture our proposed therapeutic products, protect our intellectual property rights and obtain additional financing to continue our development efforts. We do not undertake to update any of these forward-looking statements or to announce the results of any revisions to these forward-looking statements except as required by law.

We urge you to read this entire Quarterly Report, including the “Risk Factors” referenced under Part II. Item 1A, the financial statements, and related notes. As used in this Quarterly Report, unless the context otherwise requires, the words “we,” “us,” “our,” “the Company” and “PLx Pharma” refers to PLx Pharma Inc. and its ~~subsidiaries.~~subsidiary. The information contained herein is current as of the date of this Quarterly Report (September 30, ~~2020)~~2021), unless another date is specified. We prepare our interim financial statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). Our financials and results of operations for the three and nine months ended September 30, 2021 and 2020 are not necessarily indicative of our prospective financial condition and results of operations for the pending full fiscal year ending December 31, ~~2020.~~2021. The interim financial statements presented in this Quarterly Report as well as other information relating to the Company contained in this Quarterly Report should be read in conjunction and together with the reports, statements and information filed by us with the United States Securities and Exchange Commission (the “SEC”).

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows.

Overview

We are a ~~late-stage specialty pharmaceutical~~commercial-stage drug delivery platform technology company focused on ~~our clinically-validated~~improving how and ~~patent-protected PLxGuard drug delivery platform to provide more effective and safer products. Our PLxGuard drug delivery platform works by targeting the release of~~where active pharmaceutical ingredients ~~to various portions of~~(APIs) are absorbed in the gastrointestinal ~~(“GI”) tract.~~(GI) tract via its clinically validated and patent protected PLxGuard™ technology. We believe this platform has the potential to improve the absorption of many drugs currently on the market or in development, and to reduce the risk of stomach ~~erosions and ulcers~~injury associated with ~~aspirin and ibuprofen, and potentially other~~certain drugs.

~~The U.S. Food~~VAZALORE is an FDA-approved liquid-filled aspirin capsule, available in 81 mg and ~~Drug Administration (the “FDA”) approved our lead product, VAZALORE~~ 325 mg ~~which is a novel formulation~~doses. VAZALORE delivers aspirin differently from plain and enteric coated aspirin products. The special complex inside the capsule allows for targeted release of aspirin, ~~using~~limiting its direct contact with the ~~PLxGuard drug delivery platform intended to provide faster,~~stomach. VAZALORE delivers fast, reliable ~~and more predictable platelet inhibition~~absorption for pain relief plus the ~~treatment~~lifesaving benefits of vascular disease as compared to the current standard of care, enteric-coated aspirin, and significantly reduce the risk of stomach erosions and ulcers as compared with immediate-release aspirin common in an acute setting. VAZALORE 325 mg (formerly PL2200 Aspirin 325 mg and Aspertec 325 mg) was originally approved under the drug name aspirin, and the proprietary name ‘VAZALORE’ was granted subsequent to the FDA approval. A companion 81 mg dose of the same novel formulation, VAZALORE 81 mg, is in late-stage development and will be the subject of a supplemental New Drug Application (“sNDA”), leveraging the already approved status of VAZALORE 325 mg.aspirin.

Our commercialization strategy ~~will target both~~targets the over-the-counter (“OTC”) ~~and prescription markets,~~market, taking advantage of the existing ~~OTC~~ distribution channels for aspirin while leveraging the FDA approval of VAZALORE 325 mg and anticipated approval for VAZALORE 81 mg for use when recommended by physicians for treatment of vascular disease. Given our clinical demonstration of faster, reliable and more predictable platelet inhibition (as compared with enteric-coated aspirin) and fewer stomach erosions and ulcers (as compared with immediate-release aspirin) common in an acute setting.aspirin. We ~~intend to~~ market VAZALORE to the healthcare professional and the consumer through several sales and marketing ~~channels including a physician-directed sales force.~~channels. Our product pipeline also includes other oral ~~nonsteroidal anti-inflammatory drugs (“NSAIDs”)~~NSAIDs using the PLxGuard drug delivery ~~system~~platform that may be developed, including PL1200 Ibuprofen 200 mg and PL1200 Ibuprofen 400 mg, for pain and inflammation ~~currently~~ in Phase I clinical stage. ~~We are focused on collecting the data required for post-approval manufacturing changes which will be included in the sNDA filing for VAZALORE 325 mg and to support approval of low dose VAZALORE 81 mg.~~

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Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 3 of the Notes to ~~Unaudited~~the Consolidated Financial Statements (unaudited) included elsewhere herein describes the significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

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A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with U.S. GAAP and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:

Impact of COVID-19 Pandemic on Financial Statements

In response to COVID-19, the Company has not experienced a disruption or delay in the development of VAZALORE. However, the extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the pandemic. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company has not experienced any significant negative impact on its September 30, 2021 unaudited consolidated financial statements related to COVID-19.

Use of Estimates

The preparation of our unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make 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 the reported amount of revenues and expenses during the reporting period. In the accompanying unaudited consolidated financial statements, estimates are used for, but not limited to, ~~determining~~ the ~~fair value~~impairment assessment of ~~tangible and intangible assets and liabilities acquired in business combinations,~~goodwill, the fair value of warrant liability, the fair value of stock-based compensation, allowance for inventory obsolescence, contingent liabilities, fair value and depreciable lives of long-lived assets, and deferred taxes and associated valuation allowance. Actual results could differ from those estimates.

Fair Value Measurements

~~The Company’s financial instruments (cash~~Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and ~~cash equivalents, receivables, accounts payable and accrued liabilities)~~liabilities, are carried in the consolidated balance sheet at cost, which reasonably approximates fair value based on their short-term nature. The Company’s warrants are recorded at fair value, with changes in fair value being reflected in the statements of operations for the period of change. The fair value of the Company’s term loan (the "Term Loan") pursuant to its Loan and Security Agreement with Silicon Valley Bank ('SVB"), dated August 9, 2017, that provides for the Term Loan facility approximates its face value of $1.6 million based on the Company’s current financial condition and on the variable nature of the Term Loan’s interest feature as ~~compared to current rates.~~follows:

	●	Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.
	●	Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date.
	●	Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity’s subjective determinations regarding the assumptions market participants would use in pricing the asset or liability.

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Revenue Recognition

The Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers; (ii) identification of distinct performance obligations in the contract; (iii) determination of contract transaction price; (iv) allocation of contract transaction price to the performance obligations; and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation. The Company recognizes revenues upon the satisfaction of its performance obligations (upon transfer of control of promised goods or services to customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services. Deferred revenue results from cash receipts from or amounts billed to customers in advance of the transfer of control of the promised services to the customer and is recognized as performance obligations are satisfied. When sales commissions or other costs to obtain contracts with customers are considered incremental and recoverable, those costs are deferred and then amortized as selling and marketing expenses on a straight-line basis over an estimated period of benefit.

Through June 30, 2021, the Company’s sole revenue was generated from a cost-reimbursable federal grant with the National Institutes of Health, which grant was completed in the second quarter of 2020. The Company recognized revenue on this grant as grant-related expenses were incurred by the Company or its subcontractors. The Company recognized $27,907 and $30,430 of revenue under this arrangement during the nine months ended September 30, 2021 and 2020, respectively.

The Company began generating revenue in the U.S. from its sales of VAZALORE in 81 mg and 325 mg doses in the third quarter of 2021 and recognizes revenue when control of a promised good is transferred to a customer in an amount that reflects consideration that the company expects to be entitled to in exchange for that good. This occurs either when the finished goods are delivered to the customer or when a product is picked up by the customer or the customer’s carrier. The Company recognized total revenue from sales of VAZALORE of $6.6 million for the three months ended September 30, 2021.

Research and Development Expenses

Costs incurred in connection with research and development activities are expensed as incurred. Research and development expenses consist of direct and indirect costs associated with ~~specific projects,~~ manufacturing and regulatory activities, and include fees paid to various entities that perform ~~research related~~research-related services for the ~~Company combined with reimbursable costs related to the federal grant with the National Institutes of Health (“NIH”).~~Company.

Stock-Based Compensation

The Company recognizes expense in the consolidated statements of operations for the fair value of all stock-based compensation to key employees, nonemployee directors and advisors, generally in the form of stock ~~options and stock awards.~~options. The Company uses the Black-Scholes option valuation model to estimate the fair value of stock options on the grant date. Compensation cost is amortized on a straight-line basis over the vesting period for each respective award. The Company accounts for forfeitures as they occur.

Adopted Accounting Guidance

For a discussion of significant accounting guidance recently adopted or unadopted accounting guidance that has the potential of being significant, see Note 3 of the Notes to the Unaudited Consolidated Financial Statements included elsewhere herein.

~~RESULTS OF OPERATIONS~~Non-GAAP Financial Measures

~~Comparison~~We prepare and publicly release quarterly unaudited financial statements prepared in accordance with generally accepted accounting principles (“GAAP”). We also disclose and discuss certain non-GAAP financial measures in our public releases, investor conference calls and filings with the SEC. The non-GAAP financial measures that we disclose include adjusted non-GAAP loss attributable to common stockholders and adjusted non-GAAP net loss per common share. Non-GAAP net loss per share is defined as net loss per share excluding the change in the fair value of ~~Three~~~~Months Ended~~ ~~September~~ ~~30, 2020~~warrant liability and ~~2019~~dividends and beneficial conversion feature related to our preferred stock.

~~Revenue~~

~~Total revenues were $0 for~~We consider adjusted non-GAAP net loss and adjusted non-GAAP net loss per basic and diluted earnings per share to be an important financial indicator of our operating performance, providing investors and analysts with a useful measure of operating results unaffected by the ~~three months ended September 30, 2020, compared to revenues~~impact on the financial statements of ~~$41,106 for~~ the ~~three months ended September 30, 2019. Revenue~~volatility of the change in the ~~2019 period is attributable~~fair value of the warrant liability and non-cash and non-recurring dividends and beneficial conversion features on our preferred stock. Management uses adjusted non-GAAP net loss and adjusted non-GAAP net loss per share when analyzing our performance. Adjusted non-GAAP net loss and adjusted non-GAAP net loss per share should be considered in addition to, ~~work performed~~but not in lieu of net loss or net loss per share reported under ~~a federal grant from the NIH which came to an end in the second quarter of 2020.~~GAAP.

~~Operating Expenses~~

~~Total operating expenses were $3.2 million during~~A reconciliation of adjusted non-GAAP net loss per share to the ~~three months ended September 30, 2020, a 14% decrease from operating expenses of $3.7 million in the~~most directly comparable ~~period in 2019. Operating expenses for the three months ended September 30, 2020 and 2019 were as follows:~~GAAP finance measure is provided below.

Three Months Ended
September 30,

Increase (Decrease)

2020

2019

%

Operating Expenses

Research and development expenses
$ 1,207,302 $ 1,214,029 $ (6,727
)
(1
)%
General and administrative expenses
1,981,037 2,503,314 (522,277
)
(21
)%
Total operating expenses
$ 3,188,339 $ 3,717,343 $ (529,004
)
(14
)%

~~Research and Development Expenses~~

Research and development expenses totaled $1.2 million in the three months ended September 30, 2020 and 2019. The expense in the current period includes clinical-related spending for the bioequivalence study combined with pre-validation manufacturing costs and the prior year period included manufacture and packaging costs for the VAZALORE registration batches.

~~General and Administrative Expenses~~

General and administrative expenses totaled $2.0 million in the three months ended September 30, 2020, compared to $2.5 million in the prior year period. The decrease primarily reflects lower compensation related expenses combined with reduced spending on conferences and related travel due to COVID-19 restrictions.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020

Net loss attributable to common stockholders - GAAP	$	(21,642,492	)	$	(3,626,289	)	$	(52,212,327	)	$	(8,456,792	)
Adjustments:
Change in fair value of warrant liability		11,784,305			(134,552	)		29,747,367			(2,804,962	)
Preferred dividends and beneficial conversion feature		-			499,797			2,524,958			1,227,422

Adjusted non-GAAP net loss attributable to common stockholders	$	(9,858,187	)	$	(3,261,044	)	$	(19,940,002	)	$	(10,034,332	)

Adjusted non-GAAP net loss per common share - basic and diluted	$	(0.37	)	$	(0.36	)	$	(0.89	)	$	(1.10	)

Weighted average shares of common shares - basic and diluted		26,911,855			9,156,260			22,342,538			9,156,260

2122

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RESULTS OF OPERATIONS

Comparison of Three Months Ended September 30, 2021 and 2020

~~Other income (expense), net~~Revenue

~~Other income (expense), net totaled $61,847 and $5.4~~Total revenues were $6.6 million ~~of net other income in~~for the three months ended September 30, 2021, compared to no revenue for the three months ended September 30, 2020, and ~~2019,~~reflected the launch of VAZALORE 81 mg and 325 mg dose strengths with initial distribution to U.S. retail channels. Net sales were led by the 81 mg dose strength (consisting of two SKUs), which represented approximately two-thirds of total revenues in the third quarter of 2021.

Gross Profit

Gross profit for the three months ended September 30, 2021 of $2.7 million reflected VAZALORE’s initial distribution. Gross margin of 41% reflects outsourced manufacturing and packaging costs, shipping and warehousing costs, expenses related to order processing, quality assurance and royalties.

Operating Expenses

Total operating expenses were $12.6 million for the three months ended September 30, 2021, a 294% increase from operating expenses of $3.2 million for the three months ended September 30, 2020 reflected the promotional activities and associated expenses for the commercial launch of VAZALORE. Operating expenses for the three months ended September 30, 2021 and 2020 were as follows:

	Three Months Ended September 30,				Increase
	2021		2020				%
Operating Expenses
Research and development expenses	$	1,551,988	$	1,207,302	$	344,686		29	%
Selling, marketing and administrative expenses		11,013,221		1,981,037		9,032,184		456	%
Total operating expenses	$	12,565,209	$	3,188,339	$	9,376,870		294	%

Research and Development Expenses

Research and development expenses were $1.6 million for the three months ended September 30, 2021 compared to $1.2 million for the three months ended September 30, 2020. The increase reflects the rise in pre-commercial manufacturing-related activities for VAZALORE. Both periods included spending for VAZALORE clinical trials (81mg dose in 2021 and 325 mg dose in 2020).

Selling, Marketing and Administrative Expenses

Selling, marketing and administrative expenses totaled $11.0 million for the three months ended September 30, 2021, compared to $2.0 million for the three months ended September 30, 2020. The increase is primarily due to VAZALORE launch expenses and increased non-cash stock-based compensation. During the third quarter of 2021, the Company launched a cardiovascular specialty field force and a national media television campaign to raise awareness for VAZALORE among healthcare professionals and consumers.

Other income (expense), net

Other income (expense), net totaled $11.8 million of other expense and $0.1 million of other income for the three months ended September 30, 2021 and 2020, respectively. The ~~decrease~~variance is largely attributable to the non-cash change in fair value of warrant liability primarily due to the fluctuation of the price of the Company’s common stock ~~combined with~~offset by lower net interest ~~which was impacted by a lower principal debt balance and lower interest rates.~~due to the payoff of the Term Loan (as defined in Note 4 of the Notes to the Consolidated Financial Statements (unaudited)).

Comparison of Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Revenue

Total revenues were $6.6 million for the nine months ended September 30, 2021 and reflected the launch of VAZALORE 81 mg and 325 mg dose strengths with initial distribution to U.S. retail channels. Net sales were led by the 81 mg dose strength (consisting of two SKUs), which represented approximately two-thirds of total revenues for the 2021 period. The 2020 period reflected revenues of $30,430 for the nine months ended September 30, 2020 ~~compared to revenues of $541,571~~ for ~~the nine months ended September 30, 2019. All revenue in both the 2020 and 2019 periods is attributable to~~ work performed under ~~an award~~a federal grant from the National Institutes of ~~a NIH grant~~Health in the prior year period, which came to an end in the second quarter of 2020.

Gross Profit

Gross profit for the nine months ended September 30, 2021 of $2.7 million reflected VAZALORE’s initial distribution. Gross margin of 41% reflects outsourced manufacturing and packaging costs, shipping and warehousing costs, expenses related to order processing, quality assurance and royalties.

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Operating Expenses

Total operating expenses were ~~approximately $9.8~~$22.6 million ~~during~~for the nine months ended September 30, ~~2020,~~2021, a ~~11% decrease~~131% increase from operating expenses of ~~approximately $11.0~~$9.8 million infor the ~~comparable period in 2019.~~nine months ended September 30, 2020. Operating expenses for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 were as follows:

	Nine Months Ended September 30,				Increase (Decrease)						Nine Months Ended September 30,				Increase
	2020		2019					%			2021		2020				%
Operating Expenses
Research and development expenses	$	3,116,097	$	3,805,617	$	(689,520	)		(18	)%	$	3,494,221	$	3,116,097	$	378,124		12	%
General and administrative expenses		6,681,452		7,180,674		(499,222	)		(7	)%
Selling, marketing and administrative expenses												19,147,297		6,681,452		12,465,845		187	%
Total operating expenses	$	9,797,549	$	10,986,291	$	(1,188,742	)		(11	)%	$	22,641,518	$	9,797,549	$	12,843,969		131	%

Research and Development Expenses

Research and development expenses ~~totaled approximately~~were $3.5 million for the nine months ended September 30, 2021, compared to $3.1 million for the nine months ended September 30, 2020. The increase reflects the rise in pre-commercial manufacturing-related activities for VAZALORE partially offset by lower clinical trial costs.

Selling, Marketing and Administrative Expenses

Selling, marketing and administrative expenses were $19.1 million for the nine months ended September 30, 2021, compared to $6.7 million for the nine months ended September 30, 2020, ~~compared to $3.8 million in the prior year period. The decrease is~~primarily due to ~~lower manufacturing-related activities~~VAZALORE launch expenses and increased non-cash stock-based compensation. During the third quarter of 2021, the Company launched a cardiovascular specialty field force and a national media television campaign to raise awareness for VAZALORE ~~as the prior year period included the manufacture~~among healthcare professionals and packaging of the registration batches. The decrease also reflected lower reimbursable grant expenses as the grant from the NIH came to an end in the second quarter of 2020. Higher clinical-related spending primarily for the bioequivalence study partially offset this decrease.

~~General and Administrative Expenses~~

General and administrative expenses totaled approximately $6.7 million in the nine months ended September 30, 2020, compared to $7.2 million in the prior year period. The decrease was due to compensation-related expense and reduced spending on conferences and related travel due to COVID-19 restrictions, which were offset somewhat by higher spending on pre-launch marketing activities and higher stock compensation.consumers.

Other income (expense), net

Other income (expense), net totaled ~~approximately~~$29.7 million of other expense and $2.5 million of ~~net~~ other income induring the nine months ended September 30, 2021 and 2020, ~~compared to $8.1 million of net other expense in the prior year period.~~respectively. The ~~difference~~increase is largely attributable to the non-cash change in fair value of warrant liability primarily due to the fluctuation of the price of the Company’s common stock ~~combined~~offset with lower net interest ~~expense~~ due to ~~lower interest rates and lower principal debt balance.~~the payoff of the Term Loan.

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LIQUIDITY AND CAPITAL RESOURCES

Financial Condition

The following table summarizes the primary uses and sources of cash for the periods indicated:

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2021			2020

Net cash used in operating activities	$	(9,723,591	)	$	(9,022,626	)	$	(18,756,662	)	$	(9,723,591	)
Net cash used in investing activities	$	(102,000	)	$	(134,219	)
Net cash provided by (used in) investing activities							$	94,542		$	(102,000	)
Net cash provided by financing activities	$	4,910,812		$	13,416,065		$	78,767,766		$	4,910,812

Net Cash Used in Operating Activities

Net cash used in operating activities of ~~$9.7~~$18.8 million and ~~$9.0~~$9.7 million for the nine months ended September 30 ~~2020~~2021 and ~~2019,~~2020, respectively, is higher in ~~2020~~2021 due to the ~~increase in the settlement~~combination of ~~year-end liabilities~~higher operating expenses primarily ~~for manufacturing, pre-commercial~~related to sales and marketing and ~~patent related costs combined with higher purchases~~the inventory build for the launch of ~~raw material related inventory.~~VAZALORE, and the Final Payment Fee (as defined in Note 4 of the Notes to the Consolidated Financial Statements (unaudited)) on the Term Loan offset by the timing of expense payments.

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Net Cash ~~Used in~~Provided by Investing Activities

Net cash ~~used in~~provided by (used in) investing activities ~~totaled $102,000~~of $94,542 and ~~$134,219 in~~($102,000) for the nine months ended September 30 2021 and 2020, respectively, was generated from the sale and ~~2019, respectively,~~purchases of various property and ~~reflects the purchase of manufacturing equipment for VAZALORE.~~equipment.

Net Cash Provided by Financing Activities

Net cash provided by financing activities totaled ~~$4.9~~$78.8 million ~~and $13.4 million in~~during the nine months ended September 30, ~~2020 and 2019, respectively, and~~2021 compared to $4.9 million during the nine months ended September 30, 2020. The current period reflects net proceeds from a public offering and the ~~private placement~~ATM Offering (as defined in Note 5 of ~~our Series B convertible preferred~~the Notes to the Consolidated Financial Statements (unaudited)) along with exercises of various stock ~~in the 2020 year, which was lower than the proceeds from the private placement~~purchase warrants, offset by two months of ~~Series A Preferred Stock and proceeds from the sale of common stock in the prior year. The current year period also includes higher~~ payments of the Term Loan as this was paid off in February 2021. The 2020 period represents proceeds from the ~~prior year period reflected two less~~issuance of Series B Preferred Stock offset by principal payments ~~due to~~on the ~~start of the payment amortization period.~~Term Loan.

Future Liquidity and Capital Needs

As of September 30, ~~2020,~~2021, we had working capital of ~~$5.8~~$81.2 million, including cash and cash equivalents of ~~$9.1~~$82.6 million. In March 2019, we entered into an equity distribution agreement (the "Equity Distribution Agreement") with JMP Securities, Inc (“JMP”) to issue and sell shares of our common stock, having an aggregate offering price of up to $12.5 million, from time to time during the term of the Equity Distribution Agreement, through an “at-the-market” equity offering program at our sole discretion, under which JMP acts as our agent. At September 30, 2020, we had $10.2 million available under this "at -the-market" program.

~~We have~~The Company had not generated any revenue from the sale of products prior to the quarter ended September 30, 2021 and ~~have~~has incurred operating losses in each year since we commenced operations. AsThe Company began generating revenue in the U.S. from its sales of ~~September 30, 2020, we had an accumulated deficit~~VAZALORE in the third quarter of ~~$94.2 million. We expect~~2021. The Company expects to continue to incur significant operating expenses and operating losses for the foreseeable future as ~~we continue~~ the ~~development and~~Company continues the commercialization of VAZALORE. ~~These expenses include pre-commercial marketing spend~~Additionally, as of September 30, 2021, the Company has entered into media and advertising commitments for VAZALORE of $2.4 million which is ~~discretionary~~expected to be paid during the rest of 2021. Further, the Company has supply agreements with its contract manufacturer and ~~controllable as~~packager for VAZALORE which contain minimum annual purchase commitments starting in 2021 and continuing through 2025; the minimum annual purchase commitments are intended to ensure that manufactured product is available when required to enable the ~~timing of the spending and for the sNDA~~Company to meet its expected market demand for VAZALORE.

Even ifthough we ~~do generate revenues,~~are generating revenue, we may never achieve profitability, and even if we do achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Although the achievement of future profitable operations and the ability to generate sufficient cash from operations is uncertain at this time, the Company’s cash on hand at September 30, 2021 provides support that the Company can fund its obligations for at least one year from the date these financial statements were issued and mitigate the substantial doubt consideration.

Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. Because of the numerous risks and uncertainties associated with developing biopharmaceutical products, we are unable to predict the extent of any future losses or when, if ever, we will become profitable.

We ~~will~~may need to obtain ~~significant~~ additional financing in the future ~~in addition~~ to ~~the proceeds from the “at-the-market” program, to execute~~further our commercialization plan. We may obtain additional financing through public or private equity offerings, debt financings (including related-party financings), a credit facility or strategic collaborations.

Additional financing may not be available to us when we need it or it may not be available to us on favorable terms, if at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We currently have no understandings, commitments or agreements relating to any of these types of transactions. If we are unable to raise additional funds when needed, we may be required to sell or license our technologies or clinical product candidates or programs that we would prefer to develop and commercialize ourselves. The Company believes its cash on hand at September 30, 2020 combined with the available funding under the "at-the-market" program and the latitude for the timing of spending of certain expenses is adequate to fund its obligations for at least twelve months from the date that these financial statements were issued and mitigate the substantial doubt consideration.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not required to provide the information required by this item as we are considered a smaller reporting company, as defined in Section 229.10(f)(1) of Regulation S-K.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on an evaluation under the supervision, and with the participation, of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of September 30, ~~2020~~2021 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that ~~most~~many of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Inherent Limitations Over Internal Controls

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:

●

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

●

~~pertain~~provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the ~~maintenance of records that,~~Company’s receipts and expenditures are being made only in ~~reasonable detail, accurately and fairly reflect the transactions and dispositions~~accordance with authorizations of the Company’s ~~assets;~~management and directors; and

●

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

●

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management, including the Company’s principal executive officer and principal financial officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls with respect to future periods is subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART II.OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

WeFrom time to time we are party to legal proceedings that we believe to be ordinary, routine litigation incidental to the business of present or former operations. It is management’s opinion, based on the advice of counsel, that the ultimate resolution of such litigation will not have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this Quarterly Report, please carefully consider the risk factors described in our most recent Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, ~~2019,~~2020, under the heading “Part I – Item 1A. Risk Factors.” The risks described are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that our management currently deems to be immaterial, also may adversely affect our business, financial condition, and/or operating results. There have been no material changes to those risk factors since their disclosure in our most recent Annual Report on Form 10-K, as ~~amended, except for the following:~~

~~The novel coronavirus ("COVID-19") global pandemic could adversely impact our business, including our supply chain.~~

As a result of the recent outbreak of novel COVID-19, we may experience disruptions that could impact our supply chain and the FDA approval of VAZALORE. For example, COVID-19 has resulted in increased travel restrictions and the shutdown or delay of business activities in various regions. To the extent our suppliers and contract manufacturer are unable to comply with their obligations under our agreements with them, our ability to continue advancing the development and manufacturing of VAZALORE may become impaired. COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the pandemic.amended.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Quarterly Report.

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INDEX TO EXHIBITS

Number	Description

10.1	Equity Distribution Agreement, dated August 6, 2021, by and between the Company and JMP Securities LLC (filed as Exhibit 1.2 to the Registration Statement on Form S-3 (File No. 333-333-258540), filed with the SEC on August 6, 2021, and incorporated herein by reference).

31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2	Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1	Certification of the Principal Executive Officer and Principal Financial and Accounting Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Operations (unaudited), (iii) Consolidated Statements of Changes in Series A and Series B Convertible Preferred Stock and Stockholders’ Equity (Deficit)(unaudited), (iv) Consolidated Statements of Cash Flows (unaudited), and (v) Notes to Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags.
~~101.INS~~	XBRL Instance Document.*
104	Cover Page Interactive Data File (Embedded within the Inline XBRL and included in Exhibit 101)
~~101.SCH~~	XBRL Taxonomy Extension Schema Document.*

~~101.CAL~~	XBRL Taxonomy Calculation Linkbase Document.*

~~101.DEF~~	XBRL Taxonomy Extension Definition Linkbase Document.*

~~101.LAB~~	XBRL Taxonomy Label Linkbase Document.*

~~101.PRE~~	XBRL Taxonomy Presentation Linkbase Document.*

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PLX PHARMA INC.

Date: November ~~13, 2020~~12, 2021		/s/ Natasha Giordano
		By: Natasha Giordano
		Title: President and Chief Executive Officer (Principal Executive Officer)

		/s/ Rita O’Connor
		By: Rita O’Connor
		~~Title: Chief Financial Officer~~ ~~(Principal Financial and Accounting Officer)~~	Title: Chief Financial Officer (Principal Financial and Accounting Officer)

2729

Delaware		46-4995704
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

9 Fishers Lane, Suite E Sparta, NJ		07871
(Address of principal executive offices)		(Zip Code)

Common Stock, $0.001 par value	PLXPPLXP	The NASDAQ Capital Market

(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒

Emerging growth company ☐

			Page #

PART I -	FINANCIAL INFORMATION	5

	Item 1.	~~Unaudited~~ Consolidated Financial Statements (unaudited)	5

		~~Unaudited~~ Consolidated Balance Sheets as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 (unaudited)	5

		~~Unaudited~~ Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~(unaudited)	6

		~~Unaudited~~ Consolidated Statements of Changes in ~~Temporary Equity~~Series A and Series B Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~(unaudited)	7

		~~Unaudited~~ Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~(unaudited)	8

		Notes to ~~Unaudited~~ Consolidated Financial Statements (unaudited)	9

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
			20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2426

	Item 4.	Controls and Procedures	2426

PART II -	OTHER INFORMATION	25
			27

Item 1.	Legal Proceedings	2527

	Item1A.	Risk Factors	2527

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

	~~Item 3.~~	~~Defaults Upon Senior Securities~~	25

	~~Item 4.~~	~~Mine Safety Disclosure~~	25

	~~Item 5.~~	~~Other Information~~	25

	~~Item 6.~~	~~Exhibits~~	26

		~~Signatures~~	27

Item 3.	Defaults Upon Senior Securities		27

Item 4.	Mine Safety Disclosure	27

Item 5.	Other Information	27

Item 6.	Exhibits	27

	Signatures	29

	Certificates

PART I.	FINANCIAL INFORMATION

ITEM 1.	~~UNAUDITED~~ CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	●	~~our ability to bring our lead product candidates, VAZALORE 81 mg and 325 mg, to market-readiness;~~
	●	our ability to maintain regulatory approval of ~~VAZALORE~~VAZALORE™ 325 mg ~~or obtain~~ and ~~maintain regulatory approval of VAZALORE~~VAZALORE™ 81 mg (referred to together as “VAZALORE”) and any future product candidates;
	●	the benefits of the use of VAZALORE;
	●	the projected dollar amounts of future sales of ~~products using~~established and novel technologies designed to deliver oral non-steroidal anti-inflammatory drugs (“NSAIDs”) and other analgesics while limiting direct contact with the ~~PLxGuard technology providing more effective and safer products;~~stomach;
	●	our ability to successfully commercialize our VAZALORE products, or any future product candidates;
	●	the rate and degree of market acceptance of our VAZALORE products or any future product candidates;
	●	our expectations regarding government and third-party payor coverage and reimbursement;
	●	our ability to scale up manufacturing of our VAZALORE products to commercial scale;
	●	our ability to successfully build a specialty sales force and commercial infrastructure or collaborate with a firm that has these capabilities;
	●	our ability to compete with companies currently producing ~~nonsteroidal anti-inflammatory drugs, or~~gastrointestinal(“GI”)-safety designed technologies for oral NSAIDs and other ~~products;~~analgesics;
	●	our reliance on third parties to conduct our clinical studies;
	●	our reliance on third-party contract manufacturers to manufacture and supply our product candidates for us;
	●	our ability to obtain supply of raw materials;
	●	our reliance on our collaboration partners’ performance over which we do not have control;
	●	our ability to retain and recruit key personnel, including development of a sales and marketing function;
	●	our ability to obtain and maintain intellectual property protection for our VAZALORE products or any future product candidates;
	●	our estimates of our expenses, ongoing losses, future revenue, capital requirements and our ~~needs~~need for or ability to obtain additional financing;
	●	our ability to identify, develop, acquire and in-license new products and product candidates;
	●	our ability to successfully establish and successfully maintain appropriate collaborations and derive significant revenue from those collaborations, including but not limited to any milestone payments or royalties;
	●	legal, political, judicial and regulatory changes;
	●	any impact of the COVID-19 pandemic on our business and financial results;
	●	our financial performance; and
	●	developments and projections relating to our competitors or our industry.

	●	PLX®

	●	PLX PHARMA®

	●	PLXGUARD™

	●	VAZALORE™

	●	™

	●	FIRST LIQUID-FILLED ASPIRIN CAPSULES™

	●	™

	September 30, 2020			December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	9,086,525		$	14,001,304
Accounts receivable		-			18,683
Inventory, net		143,380			-
Prepaid expenses and other current assets		387,801			263,268
TOTAL CURRENT ASSETS		9,617,706			14,283,255
NON-CURRENT ASSETS
Property and equipment, net		1,252,434			1,466,646
Right of use assets		402,640			618,158
Goodwill		2,061,022			2,061,022
Security deposit		17,035			73,665
TOTAL ASSETS	$	13,350,837		$	18,502,746

LIABILITIES, SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	612,367		$	928,921
Accrued bonuses		718,092			1,166,821
Accrued interest		589,840			34,964
Current portion of term loan, net of discount and fees		1,548,865			3,658,121
Other current liabilities		342,175			304,603
TOTAL CURRENT LIABILITIES		3,811,339			6,093,430
NON-CURRENT LIABILITIES
Accrued interest, net of current portion		-			501,826
Term loan, net of discount, fees and current portion		-			622,265
Warrant liability		5,442,717			8,247,679
Accrued dividends		2,285,920			1,058,498
Other liabilities		146,424			409,431
TOTAL LIABILITIES		11,686,400			16,933,129

Series A convertible preferred stock: $0.001 par value; liquidation value of $17,042,322; 45,000 shares authorized, 15,000 issued and outstanding		13,661,578			13,661,578
Series B convertible preferred stock: $0.001 par value; liquidation value of $8,243,598; 25,000 shares authorized, 8,000 and 0 issued and outstanding		7,723,312			-

Commitments and contingencies

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; $0.001 par value; 930,000 shares authorized; none issued and outstanding		-			-
Common stock; $0.001 par value; 100,000,000 shares authorized; 9,156,260 shares issued and outstanding		9,156			9,156
Additional paid-in capital		74,437,924			74,837,046
Accumulated deficit		(94,167,533	)		(86,938,163	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		(19,720,453	)		(12,091,961	)
TOTAL LIABILITIES, SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)	$	13,350,837		$	18,502,746

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
REVENUES:
Federal grant	$	-		$	41,106		$	30,430		$	541,571
TOTAL REVENUES		-			41,106			30,430			541,571

OPERATING EXPENSES:
Research and development		1,207,302			1,214,029			3,116,097			3,805,617
General and administrative		1,981,037			2,503,314			6,681,452			7,180,674
TOTAL OPERATING EXPENSES		3,188,339			3,717,343			9,797,549			10,986,291
OPERATING LOSS		(3,188,339	)		(3,676,237	)		(9,767,119	)		(10,444,720	)

OTHER INCOME (EXPENSE):
Interest and other expense, net		(72,705	)		(118,432	)		(267,213	)		(476,084	)
Change in fair value of warrant liability		134,552			5,498,391			2,804,962			(7,581,521	)
TOTAL OTHER INCOME (EXPENSE)		61,847			5,379,959			2,537,749			(8,057,605	)
(LOSS) INCOME BEFORE INCOME TAXES		(3,126,492	)		1,703,722			(7,229,370	)		(18,502,325	)
Income taxes		-			-			-			-
NET (LOSS) INCOME		(3,126,492	)		1,703,722			(7,229,370	)		(18,502,325	)

Preferred dividends and beneficial conversion feature		(499,797	)		(311,136	)		(1,227,422	)		(13,433,397	)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(3,626,289	)	$	1,392,586		$	(8,456,792	)	$	(31,935,722	)

Net (loss) income per common share - basic	$	(0.40	)	$	0.09		$	(0.92	)	$	(3.60	)
Net (loss) income per common share - diluted	$	(0.40	)	$	0.09		$	(0.92	)	$	(3.60	)

Weighted average shares of common shares - basic		9,156,260			8,921,345			9,156,260			8,860,168
Weighted average shares of common shares - diluted		9,156,260			8,936,255			9,156,260			8,860,168

	Temporary Equity										Permanent Equity														Temporary Equity												Permanent Equity
																									Series A Convertible Preferred Stock						Series B Convertible Preferred Stock						Common stock				Additional paid-			Accumulated			Total stockholders'
																									Shares			Amount			Shares			Amount			Shares		Amount		in capital			deficit			equity (deficit)
Balance at December 31, 2020																										15,000		$	13,661,578			8,000		$	7,723,312			13,911,633	$	13,912	$	91,203,050		$	(102,148,817	)	$	(10,931,855	)

Stock-based compensation expense																																										573,722						573,722
Series A Preferred - declared dividends																																										(217,206	)					(217,206	)
Series B Preferred - declared dividends																																										(105,065	)					(105,065	)
Issuance of common stock, net of issuance costs																																						8,924,700		8,924		66,872,947						66,881,871
Net loss																																													(11,540,511	)		(11,540,511	)

Balance at March 31, 2021																										15,000			13,661,578			8,000			7,723,312			22,836,333		22,836		158,327,448			(113,689,328	)		44,660,956

Stock-based compensation expense																																										557,583						557,583
Settlement of dividends on Preferred Stock with adjustment of converson price																													2,603,176						386,168													-
Conversion of Preferred Stock																										(2,358	)		(2,556,819	)		(5,636	)		(5,803,813	)		3,000,000		3,000		8,357,633						8,360,633
Exercise of Warrants																																						308,675		309		3,040,437						3,040,746
Net loss																																													(16,504,366	)		(16,504,366	)

Balance at June 30, 2021																										12,642			13,707,935			2,364			2,305,667			26,145,008		26,145		170,283,101			(130,193,694	)		40,115,552

Stock-based compensation expense																																										740,999						740,999
Issuance of common stock, net of issuance costs																																						448,268		448		7,578,179						7,578,627
Exercise of Warrants																																						883,746		884		4,100,100						4,100,984
Net loss																																													(21,642,492	)		(21,642,492	)

Balance at September 30, 2021																										12,642		$	13,707,935			2,364		$	2,305,667			27,477,022	$	27,477	$	182,702,379		$	(151,836,186	)	$	30,893,670
	Series A Convertible Preferred Stock				Series B Convertible Preferred Stock						Common stock				Additional paid-in			Accumulated			Total stockholders' equity
	Shares		Amount		Shares		��	Amount			Shares		Amount		capital			deficit			(deficit)
Balance at December 31, 2019		15,000	$	13,661,578		-			-			9,156,260	$	9,156	$	74,837,046		$	(86,938,163	)	$	(12,091,961	)			15,000		$	13,661,578			-		$	-			9,156,260	$	9,156	$	74,837,046		$	(86,938,163	)	$	(12,091,961	)

Stock-based compensation expense																272,537						272,537																				272,537						272,537
Series A Preferred - declared dividends																(320,290	)					(320,290	)																			(320,290	)					(320,290	)
Net income																			1,496,086			1,496,086																							1,496,086			1,496,086

Balance at March 31, 2020		15,000	$	13,661,578		-		$	-			9,156,260	$	9,156	$	74,789,293		$	(85,442,077	)	$	(10,643,628	)			15,000			13,661,578			-			-			9,156,260		9,156		74,789,293			(85,442,077	)		(10,643,628	)

Stock-based compensation expense																269,578						269,578																				269,578						269,578
Issuance of Series B Preferred Stock, net of issuance costs						8,000		$	7,731,379													-		Issuance of Series B Preferred Stock, net of issuance costs								8,000			7,731,379													-
Series A Preferred - declared dividends																(326,678	)					(326,678	)																			(326,678	)					(326,678	)
Series B Preferred - declared dividends																(80,657	)					(80,657	)																			(80,657	)					(80,657	)
Net loss																			(5,598,964	)		(5,598,964	)																						(5,598,964	)		(5,598,964	)

Balance at June 30, 2020		15,000	$	13,661,578		8,000		$	7,731,379			9,156,260	$	9,156	$	74,651,536		$	(91,041,041	)	$	(16,380,349	)			15,000			13,661,578			8,000			7,731,379			9,156,260		9,156		74,651,536			(91,041,041	)		(16,380,349	)

Series B Preferred Stock issuance costs									(8,067	)																									(8,067	)												-
Stock-based compensation expense																286,185						286,185
Stock-based compensation expesne																																										286,185						286,185
Series A Preferred - declared dividends																(336,855	)					(336,855	)																			(336,855	)					(336,855	)
Series B Preferred - declared dividends																(162,942	)					(162,942	)																			(162,942	)					(162,942	)
Net loss																			(3,126,492	)		(3,126,492	)																						(3,126,492	)		(3,126,492	)

Balance at September 30, 2020		15,000	$	13,661,578		8,000		$	7,723,312			9,156,260	$	9,156	$	74,437,924		$	(94,167,533	)	$	(19,720,453	)			15,000		$	13,661,578			8,000		$	7,723,312			9,156,260	$	9,156	$	74,437,924		$	(94,167,533	)	$	(19,720,453	)


Balance at December 31, 2018		-	$	-								8,743,950	$	8,744	$	72,871,317		$	(66,435,768	)	$	6,444,293

Stock-based compensation expense																66,232						66,232
Issuance of Series A Preferred Stock, net of issuance costs		15,000		13,661,578																		-
Series A Preferred - beneficial conversion feature at issuance																12,692,308						12,692,308
Series A Preferred - conversion feature deemed dividend																(12,692,308	)					(12,692,308	)
Common shares issued to vendor												8,228		8		22,492						22,500
Series A Preferred - declared dividends																(128,218	)					(128,218	)
Net loss																			(10,858,751	)		(10,858,751	)

Balance at March 31, 2019		15,000	$	13,661,578		-		$	-			8,752,178	$	8,752	$	72,831,823		$	(77,294,519	)	$	(4,453,944	)

Stock-based compensation expense																276,505						276,505
Common shares issued to vendor												4,218		4		22,496						22,500
Common shares issued for cash												114,973		115		462,787						462,902
Series A Preferred - declared dividends																(301,735	)					(301,735	)
Net loss																			(9,347,296	)		(9,347,296	)

Balance at June 30, 2019		15,000	$	13,661,578		-		$	-			8,871,369	$	8,871	$	73,291,876		$	(86,641,815	)	$	(13,341,068	)

Stock-based compensation expense																260,577						260,577
Common shares issued to vendor												1,155		1		(1	)					-
Common shares issued for cash												250,466		251		1,478,834						1,479,085
Series A Preferred - declared dividends																(311,136	)					(311,136	)
Net income																			1,703,722			1,703,722

Balance at September 30, 2019		15,000	$	13,661,578		-		$	-			9,122,990	$	9,123	$	74,720,150		$	(84,938,093	)	$	(10,208,820	)

	Basic earnings per share			Diluted earnings per share
Net income	$	1,703,722		$	1,703,722

Preferred stock dividends		(311,136	)		(311,136	)
Impact of participation rights		(555,508	)		(555,508	)

Net income available for common shares	$	837,078		$	837,078

Weighted average outstanding common shares		8,921,345			8,921,345

Impact of stock options		-			14,910

Weighted average outstanding common shares		8,921,345			8,936,255

Earnings per share	$	0.09		$	0.09

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding, December 31, 2019		1,666,797		$	13.96		7.22	$	91,475
Granted		571,000		$	2.19
Exercised, cancelled, or forfeited		(198,750	)	$	7.52
Outstanding, September 30, 2020		2,039,047		$	11.29		7.15	$	528,580

Exercisable, September 30, 2020		1,116,314		$	17.49		5.6	$	-