Exhibit 99.1

 

Condensed Interim Consolidated Financial Statements

As at JUNE 30, 2020 and for the three-month AND SIX-MONTH periodS ended JUNE 30, 2020 and 2019

(In thousands of US dollars)

(Unaudited)

Condensed Interim Consolidated Financial Statements

As at JUNE 30, 2020 and for the three-month AND SIX-MONTH periodS ended JUNE 30, 2020 and 2019

(Unaudited)

Condensed Interim Consolidated Statements of Financial Position	3
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)	5
Condensed Interim Consolidated Statements of Comprehensive Income (Loss)	7
Condensed Interim Consolidated Statements of Cash Flows	8
Notes to Condensed Interim Consolidated Financial Statements	9

2

Condensed Interim Consolidated Statements of Financial Position

(In thousands of US dollars)

(Unaudited)

	June 30, 2020			December 31, 2019
		$			$
ASSETS
Current Assets
Cash and cash equivalents		6,743			7,838
Trade and other receivables (note 5)		814			658
Inventory		375			1,203
Prepaid expenses and other current assets (note 21)		1,123			1,211
Total current assets		9,055			10,910
Restricted cash equivalents		313			364
Right of use assets (note 6)		190			582
Property, plant and equipment		25			35
Identifiable intangible assets		32			40
Goodwill (note 7)		8,054			8,050
Total assets		17,669			19,981
LIABILITIES
Current liabilities
Payables and accrued liabilities (note 8)		1,697			2,148
Provision for restructuring and other costs (note 9)		107			418
Income taxes payable		—			1,448
Current portion of deferred revenues		596			991
Current portion of lease liabilities (note 10)		119			648
Current portion of warrant liability (note 11)		12			6
Total current liabilities		2,531			5,659
Deferred revenues		148			185
Lease liabilities (note 10)		103			255
Warrant liability (note 11)		—			2,249
Employee future benefits (note 12)		13,678			13,788
Non-current provision for restructuring and other costs (note 9)		278			308
Total liabilities		16,738			22,444
SHAREHOLDERS’ EQUITY (DEFICIENCY)
Share capital		226,724			224,528
Warrants (note 13)		4,237			—
Other capital		89,467			89,806
Deficit		(319,592	)		(316,891	)
Accumulated other comprehensive income (“AOCI”)		95			94
Total shareholders’ equity (deficiency)		931			(2,463	)
Total liabilities and shareholders’ equity (deficiency)		17,669			19,981

Commitments and contingencies (note 20)

Subsequent events (note 21)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

3

Approved by the Board of Directors

/s/ Carolyn Egbert	/s/ Pierre-Yves Desbiens
Carolyn Egbert Chair of the Board	Pierre-Yves Desbiens Director

4

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)

For the three MONTHS ended june 30, 2020 and 2019

(In thousands of US dollars, unaudited)

	Common shares (number of)		Share capital		Warrants		Other capital			Deficit			AOCI			Total
				$		$		$			$			$			$
Balance - April 1, 2020		23,472,771		226,413		—		89,694			(314,724	)		304			1,687
Net (loss)		—		—		—		—			(3,450	)		—			(3,450	)
Other comprehensive loss:
Foreign currency translation adjustments		—		—		—		—			—			(209	)		(209	)
Actuarial (loss) on defined benefit plan (note 12)		—		—		—		—			(1,418	)		—			(1,418	)
Comprehensive (loss)		—				—		—			(4,868	)		(209	)		(5,077	)
Reclassification of warrant liability to equity (note 11(b))		—		—		4,237		—			—			—			4,237
Issuance of common shares, net (note 13)		111,300		311		—		(362	)		—			—			(51	)
Share-based compensation costs (note 14)		—		—		—		135			—			—			135
Balance – June 30, 2020		23,584,071		226,724		4,237		89,467			(319,592	)		95			931

	Common shares (number of)		Share capital		Warrants		Other capital		Deficit			AOCI			Total
				$		$		$		$			$			$
Balance - April 1, 2019		16,440,760		222,335		—		89,437		(315,427	)		95			(3,560	)
Net income		—		—		—		—		206			—			206
Other comprehensive loss:
Foreign currency translation adjustments		—		—		—		—		—			(110	)		(110	)
Actuarial (loss) on defined benefit plan (note 12)		—		—		—		—		(756	)		—			(756	)
Comprehensive (loss)		—		—		—		—		(550	)		(110	)		(660	)
Issuance of common shares		191,650		805		—		—		—			—			805
Share-based compensation costs		—		—		—		387		—			—			387
Balance – June 30, 2019		16,632,410		223,140		—		89,824		(315,977	)		(15	)		(3,028	)

5

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)

For the six months ended june 30, 2020 and 2019

(In thousands of US dollars, unaudited)

	Common shares (number of)		Share capital		Warrants		Other capital			Deficit			AOCI		Total
				$		$		$			$			$		$
Balance - January 1, 2020		19,994,510		224,528		—		89,806			(316,891	)		94		(2,463	)
Net (loss)		—		—		—		—			(2,671	)		—		(2,671	)
Other comprehensive loss:
Foreign currency translation adjustments		—									—			1		1
Actuarial (loss) on defined benefit plan (note 12)		—		—		—					(30	)		—		(30	)
Comprehensive (loss)		—									(2,701	)		1		(2,700	)
Reclassification of warrants upon registration (note 11(b))		—		—		4,237		—			—			—		4,237
Issuance of common shares and warrants, net (note 13 and note 11(a), respectively)		3,589,561		2,196		—		(362	)		—			—		1,834
Share-based compensation costs (note 14)		—		—		—		23			—			—		23
Balance – June 30, 2020		23,584,071		226,724		4,237		89,467			(319,592	)		95		931

	Common shares (number of)		Share capital		Warrants		Other capital		Deficit			AOCI			Total
				$		$		$		$			$			$
Balance - January 1, 2019		16,440,760		222,335		—		89,342		(309,781	)		11			1,907
Net (loss)		—		—		—		—		(4,705	)		—			(4,705	)
Other comprehensive loss:
Foreign currency translation adjustments		—		—		—		—		—			(26	)		(26	)
Actuarial (loss) on defined benefit plan (note 12)		—		—		—		—		(1,491	)		—			(1,491	)
Comprehensive (loss)		—		—		—		—		(6,196	)		(26	)		(6,222	)
Issuance of common shares		191,650		805				—		—			—			805
Share-based compensation costs		—		—		—		482		—			—			482
Balance – June 30, 2019		16,632,410		223,140		—		89,824		(315,977	)		(15	)		(3,028	)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

6

Condensed Interim Consolidated Statements of Comprehensive Loss

For the three AND SIX months ended JUNE 30, 2020 and 2019

(In thousands of US dollars, except share and per share data)

(Unaudited)

	Three months ended						Six months ended
	June 30						June 30
	2020			2019			2020			2019
		$			$			$			$
Revenues (note 4)
Royalty income		10			8			24			21
Product sales		—			129			1,016			129
Supply chain		40			39			81			45
Licensing revenue		18			18			37			36
Total revenues		68			194			1,158			231
Operating expenses
Cost of sales		12			101			874			101
Research and development costs		189			571			508			1,099
General and administrative expenses		1,141			1,923			2,265			3,560
Selling expenses		199			495			447			799
Restructuring costs (note 9)		—			773			—			773
Impairment of right of use asset		—			64			—			401
Gain on modification of building lease (notes 6 and 10)		(34	)		—			(219	)		—
Impairment of prepaid asset		—			—			—			169
Total operating expenses (note 14)		1,507			3,927			3,875			6,902
Loss from operations		(1,439	)		(3,733	)		(2,717	)		(6,671	)
Gain (loss) due to changes in foreign currency exchange rates		130			(6	)		26			58
(Loss) gain on change in fair value of warrant liability (note 11)		(2,139	)		3,926			331			1,865
Other finance (costs) income		(2	)		19			(311	)		43
Net finance (costs) income		(2,011	)		3,939			46			1,966
Net (loss) income		(3,450	)		206			(2,671	)		(4,705	)
Other comprehensive (loss):
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments		(209	)		(110	)		1			(26	)
Items that will not be reclassified to profit or loss:
Actuarial (loss) on defined benefit plans (note 12)		(1,418	)		(756	)		(30	)		(1,491	)
Comprehensive (loss)		(5,077	)		(660	)		(2,700	)		(6,222	)
Net (loss) income per share [basic and diluted]		(0.15	)		0.01			(0.12	)		(0.28	)
Weighted average number of shares outstanding (note 19):
Basic		23,515,579			16,622,415			22,519,497			16,532,090
Diluted		23,515,579			17,260,016			22,519,497			16,532,090

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

7

Condensed Interim Consolidated Statements of Cash Flows

For the three AND SIX months ended june 30, 2020 and 2019

(In thousands of US dollars, except share and per share data)

(Unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2020			2019			2020			2019
		$			$			$			$
Cash flows from operating activities
Net (loss) income for the period		(3,450	)		206			(2,671	)		(4,705	)
Items not affecting cash and cash equivalents:
Loss (gain) on change in fair value of warrant liability (note 11)		2,139			(3,926	)		(331	)		(1,865	)
Transaction costs of warrants issued and expensed as finance cost		—			—			310			—
Provision for restructuring costs utilized (note 9)		(21	)		790			(348	)		773
Depreciation and amortization		39			70			146			136
Impairment of right of use asset		—			64			—			401
Impairment of prepaid asset		—			—			—			169
Gain on modification of building lease (notes 6 and 10)		(34	)		—			(219	)		—
Share-based compensation costs		89			595			(23	)		690
Employee future benefits (note 12)		50			2			99			136
Amortization of deferred revenues		(23	)		(18	)		(37	)		(36	)
Foreign exchange (loss) on items denominated in foreign currencies		(84	)		(4	)		(32	)		(49	)
Gain on disposal of property, plant and equipment		(2	)		—			(2	)		(3	)
Other non-cash items		22			—			7			—
Interest accretion on lease liabilities (note 10)		(4	)		(18	)		(15	)		(38	)
Payment of income taxes		(637	)		—			(1,448	)		—
Changes in operating assets and liabilities (note 15)		(494	)		69			(290	)		(785	)
Net cash used in operating activities		(2,410	)		(2,170	)		(4,854	)		(5,176	)
Cash flows from financing activities
Issuance of common shares and warrants (notes 13 and 11, respectively)		—			314			4,500			314
Transaction costs (note 13)		(11	)		—			(611	)		—
Payments on lease liabilities (note 10)		(41	)		(159	)		(199	)		(310	)
Net cash provided by (used in) financing activities		(52	)		155			3,690			4
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment		6			—			6			—
Change in restricted cash equivalents		50			—			50			50
Net cash provided by investing activities		56			—			56			50
Effect of exchange rate changes on cash and cash equivalents		(33	)		341			13			293
Net change in cash and cash equivalents		(2,439	)		(1,674	)		(1,095	)		(4,829	)
Cash and cash equivalents – Beginning of period		9,182			11,357			7,838			14,512
Cash and cash equivalents – End of period		6,743			9,683			6,743			9,683

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

8

Notes to Condensed Interim Consolidated Financial Statements

As at JUNE 30, 2020 and for the three AND SIX months ended JUNE 30, 2020 and 2019

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

1. Summary of business and liquidity and basis of preparation

Summary of business and liquidity

Aeterna Zentaris Inc. (“Aeterna Zentaris” or the “Company”) is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The Company’s lead product, Macrilen™ (macimorelin), is the first and only United States Food and Drug Administration (“FDA”) and European Commission approved oral test indicated for the diagnosis of patients with adult growth hormone deficiency (“AGHD”). Macrilen™ (macimorelin) is currently marketed in the U.S. through a license and assignment agreement (the “License Agreement”) with Novo Nordisk A/S (“Novo”). Aeterna Zentaris is also pursuing the development of macimorelin for the diagnosis of child-onset growth hormone deficiency (“CGHD”), an area of significant unmet need. In addition, we are actively pursuing business development opportunities for the commercialization of macimorelin in Europe and the rest of the world in addition to other non-strategic assets to monetize their value.

The Company’s principal focus is on the commercialization of Macrilen™ (macimorelin) and it currently does not have any other approved products. Under the terms of License Agreement, Novo is funding 70% of the pediatric clinical trial submitted to the European Medicines Agency (“EMA”) and FDA, the Company’s sole development activity. In November 2019, Novo contracted the Company’s wholly owned German subsidiary (“AEZS Germany”) to provide supply chain services for the manufacture of Macrilen™ (macimorelin). In April 2020, we announced the results from AEZS-130-P01 (“Study P01”) to establish a dose that can both be safely administered to pediatric patients and cause a clear rise in growth hormone concentration in subjects ultimately diagnosed as not having growth hormone deficiency. The Company plans to proceed with the pivotal second study, AEZS-130-P02 (“Study P02”), with an expected start date in the first quarter of 2021 and an expected completion date in July 2022, according to the pediatric investigation plan (“PIP”) agreement with the EMA. Study P02 is designed to investigate the diagnostic efficacy and safety of macimorelin acetate in pediatric patients from 2 years of age to 18 years of age with suspected growth hormone deficiency.

Liquidity

As at June 30, 2020, a substantial portion of the Company’s cash is held in AEZS Germany, the Company’s principle operating subsidiary. AEZS Germany is the counter-party to the License Agreement described above with Novo, and as such, for generating future revenue earned under the License Agreement. Management considers the cash resources available to AEZS Germany in executing its obligations under the License Agreement. In the event the current and medium term liabilities of AEZS Germany exceed the fair values ascribed to its assets, under German solvency laws, it may no longer be possible for AEZS Germany’s operations to continue or for AEZS Germany to transfer cash to Aeterna Zentaris or its U.S. subsidiary, if needed.

COVID-19 impact

In 2020, the COVID-19 pandemic began causing significant financial market declines and social dislocation. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The spread of COVID-19 may impact the Company’s operations, including the potential interruption of our clinical trial activities and the Company’s supply chain, or that of the Company’s licensee. For example, the COVID-19 outbreak may delay enrollment in the Company’s clinical trials due to prioritization of hospital resources toward the outbreak, and some patients may be unwilling to be enrolled in the Company’s trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay the Company’s ability to conduct clinical trials or release clinical trial results and could delay the Company’s ability to obtain regulatory approval and commercialize the Company’s product candidates. The pandemic may also impact the ability of the Company’s suppliers to deliver components or raw materials on a timely basis or at all. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease. The Company’s licensee may be impacted due to significant delays of diagnostic activities in the U.S. To date, the Company has not experienced significant business disruption from COVID-19.

9

Basis of presentation

These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements as at and for the year ended December 31, 2019.

These unaudited condensed interim consolidated financial statements were approved by the Board of Directors (the “Board”) on August 5, 2020.

The accounting policies in these condensed interim consolidated financial statements are consistent with those presented in the Company’s annual consolidated financial statements except as noted below:

Share purchase warrants

The Company accounts for share purchase warrants that meet the fixed-for-fixed criteria as equity-settled.

Deferred share units

Deferred share units (“DSUs) are classified as other capital. The Company grants DSUs to members of its Board of Directors who are not employees or officers of the Company. DSUs cannot be redeemed until the holder is no longer a director of the Company and are considered equity-settled instruments. Under the terms of the DSU agreement, the DSUs vest immediately upon grant. The value attributable to the DSUs is based on the market value of the share price at the time of grant and share based compensation expense is recognized in general and administrative expenses on the consolidated statements of loss and comprehensive (loss) income. At the time of redemption, each DSU may be exchanged for one common share of the Company.

Any consideration received by the Company in connection with the exercise of DSUs is credited to share capital. Any other capital component of the share-based compensation is transferred to share capital upon the issuance of shares.

2. Critical accounting estimates and judgements

The preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures. Judgments, estimates and assumptions are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time at which the Company’s condensed interim consolidated financial statements are prepared.

Management reviews, on a regular basis, the Company’s accounting policies, assumptions, estimates and judgments in order to ensure that the condensed interim consolidated financial statements are presented fairly and in accordance with IFRS. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Measurement uncertainty:

The significant spread of COVID-19 within the U.S., Canada, Germany and elsewhere has resulted in a widespread health crisis and has had adverse effects on local, national and global economies generally, the markets the Company serves, its operations and the market price of its common shares.

Uncertain factors, including the duration of the outbreak, the severity of the disease and the actions to contain or treat its impact, could cause interruptions in the Company’s operations and supply chain, which could impact the Company’s ability to accurately measure the net realizable value of inventory and fair value of trade and other receivables.

10

Critical accounting estimates and assumptions, as well as critical judgments used in applying accounting policies in the preparation of the Company’s condensed interim consolidated financial statements, were the same as those applied to the Company’s annual consolidated financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018.

3. Impact of adoption of new IFRS standards in 2020

(a) IAS 1 Presentation of financial statements and IAS 8 Accounting policies, changes in accounting estimates and errors (amendment)

The amendments to IAS 1 and IAS 8 clarify the definition of material and seek to align the definition used in the Conceptual Framework with that in the standards themselves as well as ensuring the definition of material is consistent across all IFRS. The Company adopted these amendments effective January 1, 2020. The adoption of these amendments did not have a significant impact on the Company’s condensed interim consolidated financial statements.

(b) Conceptual framework for financial reporting

Together with the revised Conceptual Framework published in March 2018, the IASB also issued Amendments to References to the Conceptual Framework in IFRS Standards. The Company adopted the Revised Conceptual Framework effective January 1, 2020. The adoption of these amendments did not have a significant impact on the Company’s condensed interim consolidated financial statements.

IFRS Pronouncements issued but not yet effective

(c) IAS 1 – Presentation of financial statements

The amendment to IAS 1 clarifies how to classify debt and other liabilities as either current or non-current. The amendment will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.

(d) Annual improvements to IFRS standards 2018-2020

The annual improvements process addresses issues in the 2018-2020 reporting cycles including changes to IFRS 9, Financial Instruments, IFRS 1, First Time adoption of IFRS, IFRS 16, Leases, and IAS 41, Biological Assets.

i) The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities.

ii) The amendment to IFRS 1 allows a subsidiary adopting IFRS at a later date than its parent to also measure cumulative translation differences using the amounts reported by the parent based on the parent’s date of transition to IFRS.

iii) The amendment to IFRS 16’s illustrative example 13 removes the illustration of payments from the lessor related to leasehold improvements.

These amendments will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.

(e) IAS 37 - Onerous contracts - Cost of fulfilling a contract

The amendment to IAS 37 clarifies the meaning of costs to fulfil a contract and that before a separate provision for an onerous contract is established, an entity recognizes any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to the contract. This amendment will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.

(f) IAS 16 - Proceeds before intended use

The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of Property, plant and equipment any proceeds received from selling items produced while the entity is preparing the assets for its intended use (for example, the proceeds from selling samples produced when testing a machine to see if it is functioning properly). It also clarifies that an entity is testing whether the asset is functioning properly when it assesses the technical and physical performance of the asset. The amendment also requires certain related disclosures. This amendment will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.

11

4. Licensing arrangement and supply chain agreement

On January 16, 2018, the Company entered into the License Agreement which provides (i) for the “right to use” license relating to the Adult Indication, (ii) for the right to acquire a license for the Pediatric Indication if and when the FDA approves a pediatric indication, (iii) that the licensee is to fund 70% of the costs of a pediatric clinical trial submitted for approval to the EMA under the agreed Pediatric Investigation Plan (“PIP”) studies to be run by the Company with customary oversight from a joint steering committee (the “JSC”) and (iv) an interim supply arrangement (“Supply Arrangement”). Strongbridge Ireland Limited (“Strongbridge”), effective December 19, 2018, sold the U.S. and Canadian rights to Macrilen™ (macimorelin) to Novo for a payment plus tiered royalties on net sales. The service agreement under which Novo agreed to fund Strongbridge’s Macrilen™ (macimorelin) field organization as a contract field force to promote the product in the U.S. was terminated as of December 1, 2019.

Following Novo’s acquisition of the U.S. and Canadian rights to Macrilen™ (macimorelin), the JSC has met regularly to discuss Novo’s commercialization plan for the U.S. and Canada, their supply chain needs and the enrollment of patients and protocols of the two PIP studies. The Company expects that quarterly meetings will continue as forecasts for sales, inventory build and needs for the PIP study progresses.

Royalty income earned under the License Agreement for the six-month period ending June 30, 2020 was $24 (2019 - $21) and, during the six-month period ended June 30, 2020, the Company invoiced Novo $310 for its share of PIP study costs (2019 - $621) that are recorded within research and development costs on the condensed interim consolidated statements of comprehensive loss.

The Company agreed, in the Supply Arrangement to the License Agreement, to supply ingredients for the manufacture of Macrilen™ (macimorelin) during an interim period at a price that is set ‘at cost’ without any profit margin. In November 2019, Novo contracted AEZS Germany, to provide supply chain services including API batch production and delivery of certain API and semi-finished goods, as well as the provision of ongoing support activities. During the six-month period ended June 30, 2020, the Company invoiced Novo $85 for supply chain activities and recognized as revenue $81 (2019 – $33 invoiced and recognized as revenue $45) and invoiced and recognized as revenue $1,016 in product sales (2019 - $806).

5. Trade and other receivables

	June 30, 2020		December 31, 2019
		$		$
Trade accounts receivable (net of expected credit losses of $60 (December 31, 2019 - $55))		121		210
Value added tax and income tax receivable		519		254
Other		174		194
		814		658

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6. Right of use assets

	Building			Vehicles and equipment			Total
	$			$			$
Cost
At January 1, 2020		757			106			863
Modification of building lease		(259	)		—			(259	)
Disposals		—			(21	)		(21	)
Impact of foreign exchange rate changes		1			—			1
At June 30, 2020		499			85			584

	Building		Vehicles and equipment			Total
	$		$			$
Accumulated Depreciation
At January 1, 2020		242		39			281
Disposals		—		(20	)		(20	)
Depreciation		116		16			132
Impact of foreign exchange rate changes		1		—			1
At June 30, 2020		359		35			394

	Building		Vehicles and equipment		Total
	$		$		$
Carrying amount
At June 30, 2020		140		50		190
As at December 31, 2019		515		67		582

Upon the renegotiation of the building lease agreement completed effective April 30, 2020 (note 10), a modification was recorded to the building right of use asset in the amount of $259, representing the reduction in the square footage leased from the landlord.

7. Goodwill

The change in carrying value is as follows:

	Carrying amount
	$
At January 1, 2019		8,210
Impact of foreign exchange rate changes		(160	)
At December 31, 2019		8,050
Impact of foreign exchange rate changes		4
At June 30, 2020		8,054

Management evaluated goodwill for impairment based on the Company’s share price, which declined during the first quarter of 2020 and remained low during the second quarter of 2020, and the Company’s declining cash balance from continuing losses to June 30, 2020. This assessment is based on fair value less costs of disposal based on the Company’s market capitalization at June 30, 2020, its issued and outstanding common shares less estimated cost of disposal of approximately $1,132. There was no impairment assessed at June 30, 2020.

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8. Payables and accrued liabilities

	June 30, 2020		December 31, 2019
	$		$
Trade accounts payable		436		1,087
Salaries, employment taxes and benefits		132		64
Accrued audit fees		208		216
PIP study payables		3		118
Accrued severance		171		427
Accrued offering costs (note 21)		480		—
Other accrued liabilities		267		236
		1,697		2,148

9. Provision for restructuring and other costs

On June 6, 2019, the Company announced that it was reducing the size of its German workforce to more closely reflect the Company’s ongoing commercial activities in Frankfurt. AEZS Germany and its Works Council approved a restructuring that affected 8 employees that was completed by January 31, 2020.

The changes in the Company’s provision for restructuring and other costs can be summarized as follows:

	Cetrotide(R) onerous contracts			German Restructuring: severance			Total
	$			$			$
Balance – January 1, 2020		396			330			726
Utilization of provision		(25	)		(323	)		(348	)
Change in provision		14			—			14
Impact of foreign exchange rate changes					(7	)		(7	)
Balance – June 30, 2020		385			—			385
Less current portion		107			—			107
Non-current portion		278			—			278

10. Lease liabilities

	Six months ended			Year ended
	June 30, 2020			December 31, 2019
	$			$
Balance – Beginning of period		903			1,522
Interest paid as charged to comprehensive income (loss) as other finance costs		(15	)		(66	)
Payment against lease liabilities		(199	)		(614	)
Modification of lease liability		(463	)		—
Impact of foreign exchange rate changes		(4	)		61
Balance – End of period		222			903
Current lease liabilities		119			648
Non-current lease liabilities		103			255

Effective March 31, 2020, the Company and its landlord mutually agreed to modify its existing building lease agreement for its German subsidiary, extended the lease term for its portion of the reduced space from April 30, 2021 to March 31, 2022 and, retained one sub-lessee until April 30, 2021.

On May 5, 2020, the sub-lessee terminated its lease with the Company effective April 30, 2020. Concurrent with this termination, the Company was able to renegotiate a further reduction in leased square footage with the landlord, which resulted in a lease modification and a resulting gain of $34 which is recorded in the condensed interim consolidated statements of comprehensive loss.

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11. Warrant liability

The change in the Company’s warrant liability can be summarized as follows:

	Six months ended			Year ended
	June 30, 2020			December 31, 2019
	$			$
Balance – Beginning of period		2,255			3,634
Issuance of warrants (a)		2,325			3,457
Warrants exercised during the period		—			(318	)
Net gain on change in fair value of warrant liability		(331	)		(4,518	)
Warrant liability reclassified to equity (b)		(4,237	)		—
Balance – End of period		12			2,255
Current portion of warrant liability		12			6
Long-term portion of warrant liability		—			2,249

The table presented below shows the inputs and assumptions applied to the Black-Scholes option pricing model in order to determine the fair value of all warrants outstanding as at June 30, 2020.

	Number of equivalent shares		Market value per share price		Weighted average exercise price		Risk-free annual interest rate			Expected volatility			Expected life (years)		Expected dividend yield
				($)		($)		(i)			(ii)			(iii)		(iv)
December 2015 Warrants		2,331,000		0.802		7.10		0.16	%		133.7	%		0.46		0.00	%

(i)	Based on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the warrants.
(ii)	Based on the historical volatility of the Company’s stock price over the most recent period consistent with the expected life of the warrants, as well as on future expectations.
(iii)	Based upon time to expiry from the reporting period date.
(iv)	The Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.

A summary of the activity related to the Company’s share purchase warrants that are classified as a liability is provided below.

	Six months ended					Year ended
	June 30, 2020					December 31, 2019
	Number			Weighted average exercise price		Number			Weighted average exercise price
					$		$
Balance – Beginning of period		6,629,144			4.00		3,391,844			6.23
Exercised		—			—		(87,700	)		1.07
Issued (a)		2,852,174			1.24		3,325,000			1.65
Reclassified to equity (b)		(6,177,174	)		1.46		—			—
Expired (c)		(973,144	)		4.60		—			—
Balance – End of period		2,331,000			7.10		6,629,144			4.00

(a) Warrants issued

2020

On February 21, 2020, the Company closed a registered direct offering for 3,478,261 common shares, at a purchase price of $1.29 per share, priced at-the-market (note 13). Additionally, the Company issued to the investors unregistered warrants to purchase up to an aggregate of 2,608,696 common shares in a concurrent private placement. The warrants have an exercise price of $1.20 per common share, are exercisable immediately and will expire five and one-half years following the date of issuance. The Company also issued 243,478 warrants to the placement agent with an exercise price of $1.62 per common share, which are exercisable immediately and will expire five years following the date of issuance.

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On July 7, 2020, the Company closed a public offering for gross proceeds of $12,000, with the issuance of common shares and warrants, see note 21.

2019

On September 20, 2019, the Company entered into a securities purchase agreement for $4,988 (before total transaction costs of $786) of its common shares in a registered direct offering and warrants to purchase common shares in a concurrent private placement (together, the “Offering”). The combined purchase price for one common share and one warrant was $1.50 (note 13). Under the terms of the securities purchase agreement, the Company sold 3,325,000 common shares. In a concurrent private placement, the Company issued warrants to purchase up to an aggregate of 3,325,000 common shares. The warrants are exercisable commencing six months from the date of issuance, have an exercise price of $1.65 per share and expire 5 years following the date of issuance.

All issued warrants contain a provision where if, at any time while the warrants are outstanding, the Company completes a Fundamental Transaction (as defined in the warrant agreements) but is generally understood to be a change of control of the Company, the warrant holders will have the right to receive payment for the unexercised warrant (as defined in the warrant agreements).

(b) Warrant liability reclassified to equity

The Company had issued 3,325,000 unregistered investor warrants in the September 2019 closed direct offering as well as 2,608,696 unregistered investor warrants and 234,478 unregistered placement agent warrants in the February 2020 closed direct offering transaction. The terms of the warrant agreement stated that if the warrants remained unregistered, the warrant holder could elect to exercise the warrants by way of a cashless exercise. This violated the fixed-for-fixed criterion due to the cashless exercise option, and accordingly these warrants had been accounted for as a liability.

Effective June 16, 2020, the Company registered the common shares underlying these warrants by way of a registration statement which eliminated the cashless exercise option on the warrants, on a one-for-one basis. Accordingly, as of June 16, 2020, the warrant liability was measured at fair value using Black-Scholes option pricing model, with the amount of the remeasurement loss recognized in the condensed interim consolidated statements of comprehensive loss. The carrying value of the warrants was then reclassified from warrant liability to other capital within equity (note 13).

The table presented below shows the inputs and assumptions applied to the Black-Scholes option pricing model in order to determine the fair value of such warrants as at June 16, 2020.

	Number of equivalent shares		Market value per share price		Weighted average exercise price		Risk-free annual interest rate			Expected volatility			Expected life (years)		Expected dividend yield
			($)		($)		(i)			(ii)			(iii)		(iv)
September 2019 Warrants		3,325,000		0.96		1.65		0.30	%		104.5	%		4.3		0.00	%
February 2020 Investor Warrants		2,608,696		0.96		1.20		0.36	%		119.3	%		5.2		0.00	%
February 2020 Placement Agent Warrants		243,478		0.96		1.62		0.32	%		113.3	%		4.7		0.00	%

(i)	Based on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the warrants.
(ii)	Based on the historical volatility of the Company’s stock price over the most recent period consistent with the expected life of the warrants, as well as on future expectations.
(iii)	Based upon time to expiry from the reporting period date.
(iv)	The Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.

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(c) Warrants expired

On March 10, 2020, the Company had 28,144 share purchase warrants expire, each with an exercise price of $1.07. On May 1, 2020, the Company had 945,000 share purchase warrants expire, each with an exercise price of $4.70.

12. Employee future benefits

The Company sponsors a pension plan in Germany (The Aeterna Zentaris GmbH Pension Plan). The change in the Company’s accrued benefit obligations is summarized as follows:

	June 30, 2020									Year ended December 31, 2019
	Pension benefit plans			Other benefit plans			Total			Total
		$			$			$			$
Balances – Beginning of the period		13,705			83			13,788			13,205
Current service cost		23			1			24			49
Interest cost		75			—			75			241
Actuarial loss arising from changes in financial assumptions		30			—			30			1,040
Benefits paid		(214	)		(1	)		(215	)		(483	)
Impact of foreign exchange rate changes		(24	)		—			(24	)		(264	)
Balances – End of the period		13,595			83			13,678			13,788
Amounts recognized:
In net income (loss)		(98	)		(1	)		(99	)		(262	)
In other comprehensive loss		(6	)		—			(6	)		(810	)

The calculation of the pension benefit obligation is sensitive to the discount rate assumption. Effective March 31, 2020, the Company incorporated a decline of 10.35% in its pension liabilities based on publicly available actuarial information. Effective June 30, 2020, based on publicly available actuarial information, this decline was predominantly reversed. The discount rate as at March 31, 2020 was 1.8% while at June 30, 2020, it was 1.1% (December 31, 2019: 1.1%).

13. Share and other capital

The Company has an unlimited number of authorized common shares (being voting and participating shares) with no par value, as well as an unlimited number of preferred, first and second ranking shares, issuable in series, with rights and privileges specific to each class, with no par value.

2020

On February 21, 2020, the Company closed a registered direct offering for 3,478,261 common shares, at a purchase price of $1.29 per share, priced at-the-market. Additionally, 2,608,696 investor share purchase warrants were issued at an exercise price of $1.20 per common share and 243,478 broker share purchase warrants were issued at an exercise price of $1.62 per common share (note 11(a)). The net cash proceeds to the Company from the offering totaled approximately $3,900. The gross proceeds of $4,500 was allocated as $2,326 to warrants based on the ascribed fair value (note 11) and the remaining gross proceeds of $2,174 were allocated to share capital. The transaction costs of $600 were allocated between share capital and warrants based on their relative fair values. The fair value of the share capital was recorded within equity net of the allocated transaction costs. The transaction costs of $310 allocated to the warrant liability were recorded as expense in the statement of comprehensive (loss) income.

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During the second quarter of 2020, directors who were no longer on the Board redeemed their DSUs in full whereby 111,300 common shares were issued.

On July 7, 2020, the Company closed a public offering for $12,000 in gross proceeds, with the issuance of common shares and warrants, see note 21.

2019

On September 20, 2019, the Company entered into a securities purchase agreement with U.S. institutional investors to purchase $4,988 (before total transaction costs of $786) of its common shares in a registered direct offering and warrants to purchase common shares in a concurrent private placement (together, the “Offering”). The combined purchase price for one common share and one warrant was $1.50. Under the terms of the securities purchase agreement, the Company sold 3,325,000 common shares. In a concurrent private placement, the Company issued warrants to purchase up to an aggregate of 3,325,000 common shares (note 11(a)). The gross proceeds of $4,988 was allocated as $3,457 to warrants based on the ascribed fair value and the remaining gross proceeds of $1,531 were allocated to share capital. The transaction costs of $795 were allocated between share capital and warrants based on their relative fair values. The fair value of the share capital was recorded within equity net of the allocated transaction costs. The transaction costs of $550 allocated to the warrant liability were recorded as expense in the statement of comprehensive (loss) income.

Shareholder rights plan

Effective May 8, 2019, the shareholders re-approved the Company’s shareholder rights plan (the “Rights Plan”) that provides the Board and the Company’s shareholders with additional time to assess any unsolicited take-over bid for the Company and, where appropriate, to pursue other alternatives for maximizing shareholder value. Under the Rights Plan, one right has been issued for each currently issued common share, and one right will be issued with each additional common share that may be issued from time to time.

Other capital

The Company accounts for costs associated with share-based compensation from security grants under its long-term incentive plan (the “LTIP”) and stock option plans as other capital in its consolidated statements of changes in shareholders’ equity (deficiency) and as operating expenses in its condensed interim consolidated statements of comprehensive loss.

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The following tables summarize the activity under the LTIP and the Stock Option Plan:

	Six months ended June 30, 2020
	US$ Stock options			Weighted average exercise price		DSUs			CAN$ Stock options			Weighted average exercise price
June 30, 2020	(Number)			(US$)		(Number)			(Number)			(CAN$)
Balance – Beginning of period		741,116			3.61		212,000			441			912.00
Granted		—			—		120,000			—			—
Exercised		—			—		(159,000	)		—			—
Canceled/Forfeited		(330,350	)		2.14		—			—			—
Expired		(84,366	)		15.51		—			(431	)		912.00
Balance – End of period		326,400			2.03		173,000			10			912.00

	Year ended December 31, 2019
	US$ Stock options			Weighted average exercise price		DSUs			CAN$ Stock options			Weighted average exercise price
December 31, 2019	(Number)			(US$)		(Number)			(Number)			(CAN$)
Balance – Beginning of period		727,816			4.07		161,000			869			743.56
Granted		185,000			1.07		150,000			—			—
Exercised		(64,850	)		2.75		(99,000	)		—			—
Canceled/Forfeited		(6,000	)		13,39		—			—			—
Expired		(100,850	)		2.24		—			(428	)		570.00
Balance – End of period		741,116			3.61		212,000			441			912.00

The following table summarizes the activity regarding warrants that were reclassified into equity:

	Six months ended June 30, 2020						Year ended December 31, 2019
			Weighted average exercise price
	Number		(US$)		$		$
Balance – Beginning of the period		—		—		—	Nil
Warrant liability reclassified to equity (note 11(b))		6,177,174		1.46		4,237	Nil
Balance – End of the period		6,177,174		1.46		4,237	Nil

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14. Operating expenses

The nature of the Company’s operating expenses from operations include the following:

	Six months ended June 30,
	2020			2019
	$			$
Key management personnel:
Salaries and short-term employee benefits		483			594
Consultant fees		76			118
Share-based compensation costs		127			681
Post-employment benefits		27			18
		713			1,411
Other employees:
Salaries and short-term employee benefits		491			1,042
Share-based compensation costs		(104	)		9
Post-employment benefits		92			158
		479			1,209
Cost of inventory used and services provided		874			101
Professional fees		929			1,474
Restructuring costs		—			773
Consulting fees		274			76
Insurance		432			446
Third-party research and development		74			307
Travel		41			84
Marketing services		29			2
Laboratory supplies		—			28
Other goods and services		50			64
Leasing costs, net of sublease receipts of $107 (2019 - $58)		62			176
Gain on modification of building lease (notes 6 and 10)		(219	)		—
Impairment of right of use asset (note 6)		—			401
Impairment of prepaid asset		—			197
Depreciation and amortization		14			19
Depreciation of right of use assets (note 6)		132			117
Operating foreign exchange losses		(9	)		17
		3,875			6,902

15. Supplemental disclosure of cash flow information

	Three months ended						Six months ended
	June 30,						June 30,
	2020			2019			2020			2019
	$			$			$			$
Changes in operating assets and liabilities:
Trade and other receivables		(149	)		133			(156	)		(196	)
Inventory		(8	)		(191	)		828			(496	)
Prepaid expenses and other current assets		(279	)		(267	)		99			(123	)
Payables and accrued liabilities		41			502			(451	)		247
Current portion of deferred revenues		11			—			(395	)		—
Employee future benefits (note 12)		(110	)		(108	)		(215	)		(217	)
		(494	)		69			(290	)		(785	)

16. Capital disclosures

The Company’s objective in managing capital, consisting of shareholders’ equity, with cash and cash equivalents and restricted cash being its primary components, is to ensure sufficient liquidity to fund operating expenses and working capital requirements. Over the past several years, the Company has raised capital via public equity and registered direct offerings and issuances under various at-the-market sales programs as its primary source of liquidity. The policy on dividends is to retain cash to keep funds available to finance the activities required to advance the Company’s product development portfolio and to pursue appropriate commercial opportunities as they may arise. The Company is not subject to any capital requirements imposed by any regulators or by any other external source.

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17. Financial instruments and financial risk management

Financial assets and liabilities as at June 30, 2020 and December 31, 2019 are presented below.

June 30, 2020	Financial assets at amortized cost		Financial Liabilities at FVTPL		Financial liabilities at amortized cost		Total
	$		$		$		$
Cash and cash equivalents		6,743		—		—		6,743
Trade and other receivables		295		—		—		295
Restricted cash equivalents		313		—		—		313
Payables and accrued liabilities		—		—		1,697		1,697
Lease liabilities		—		—		222		222
Warrant liability		—		12		—		12
		7,351		12		1,919		5,420

December 31, 2019	Financial assets at amortized cost		Financial liabilities at FVTPL		Financial liabilities at amortized cost		Total
	$		$		$		$
Cash and cash equivalents		7,838		—		—		7,838
Trade and other receivables		404		—		—		404
Restricted cash equivalents		364		—		—		364
Payables and accrued liabilities		—		—		2,148		2,148
Lease liabilities		—		—		903		903
Warrant liability		—		2,255		—		2,255
		8,606		2,255		3,051		3,300

Fair value

IFRS 13, establishes a hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The input levels discussed in IFRS 13 are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices).

Level 3 – Inputs for an asset or liability that are not based on observable market data (unobservable inputs).

In note 11 - Warrant liability, the Black-Scholes valuation methodology uses “Level 2” inputs in calculating fair value.

The carrying values of the Company’s cash and cash equivalents, trade and other receivables, restricted cash equivalents, payables and accrued liabilities and provision for restructuring and other costs approximate their fair values due to their short-term maturities or to the prevailing interest rates of the related instruments, which are comparable to those of the market.

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Financial risk factors

The following provides disclosures relating to the nature and extent of the Company’s exposure to risks arising from financial instruments, including credit risk, liquidity risk and market risk (share price risk) and how the Company manages those risks.

(a) Credit risk

Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. As at June 30, 2020, trade accounts receivable for an amount of approximately $121 were with five counterparties of which $60 was past due and impaired and fully provided for (December 31, 2019 - $265 with four counterparties and $55 past due and impaired and fully provided for). The licensee is obligated to pay its quarterly royalties, 45 days after quarter-end. At June 30, 2020, the Company has provided for all outstanding and unpaid amounts relating to its operations before its licensing of Macrilen^TM (macimorelin). The licensee has paid all amounts owing within 60 days of invoicing. The maximum exposure to credit risk approximates the amount outstanding in the Company’s consolidated statement of financial position.

(b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. As indicated in note 16 - Capital disclosure, the Company manages this risk through the management of its capital structure. It also manages liquidity risk by continuously monitoring actual and projected cash flows. The Board reviews and approves the Company’s operating and capital budgets, as well as any material transactions occurring outside of the ordinary course of business. The Company has adopted an investment policy in respect of the safety and preservation of its capital to ensure the Company’s liquidity needs are met. The instruments are selected with regard to the expected timing of expenditures and prevailing interest rates.

(c) Market risk

Share price risk

The change in fair value of the Company’s warrant liability, which is measured at FVTPL, results from the periodic “mark-to-market” revaluation, via the application of option pricing models, of currently outstanding share purchase warrants. These valuation models are impacted, among other inputs, by the market price of the Company’s common shares. As a result, the change in fair value of the warrant liability, which is reported in the consolidated statements of comprehensive loss, has been and may continue in future periods to be materially affected most notably by changes in the Company’s common share closing price, which on the NASDAQ ranged from $1.44 to $0.42 during the six-months ended June 30, 2020.

(e) Foreign exchange risk

Entities using the Euro as their functional currency

The Company is exposed to foreign exchange risk due to its investments in foreign operations whose functional currency is the Euro. As at June 30, 2020, if the US dollar had increased or decreased by 10% against the Euro, with all variables held constant, net income for the six-month period ended June 30, 2020 would have been lower or higher by approximately $37 (2019 - $546).

18. Segment information

The Company operates in a single operating segment, being the biopharmaceutical segment.

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19. Net (loss) income per share

The following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to common shareholders.

	Three months ended					Six months ended
	June 30,					June 30,
	2020			2019		2020			2019
	$			$		$			$
Net (loss) income		(3,450	)		206		(2,671	)		(4,705	)
Basic weighted average number of shares outstanding		23,515,579			16,622,415		22,519,497			16,532,090
Net (loss) income per share (basic)		(0.15	)		0.01		(0.12	)		(0.28	)
Dilutive effect of stock options		—			—		—			—
Dilutive effect of share purchase warrants		—			—		—			—
Diluted weighted average number of shares outstanding		23,515,579			17,260,016		22,519,497			16,532,090
Net (loss) income per share (diluted)		(0.15	)		0.01		(0.12	)		(0.28	)
Items excluded from the calculation of diluted net loss per share because the exercise price was greater than the average market price of the common shares or due to their anti-dilutive effect
Stock options		326,410			161,021		326,410			641,021
Deferred share units		173,000			150,000		173,000			288,000
Warrants (number of equivalent shares)		8,508,174			3,276,000		8,508,174			3,296,008

Net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of shares outstanding during the relevant period. Diluted weighted average number of shares reflects the dilutive effect of equity instruments, such as any “in the money” stock options and share purchase warrants. In periods with reported net losses, all stock options and share purchase warrants are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal, and thus “in the money” stock options and share purchase warrants have not been included in the computation of net loss per share because to do so would be anti-dilutive.

20. Commitments and Contingencies

	Service and manufacturing
	$
Less than 1 year		910
1 - 3 years		5
4 - 5 years		5
More than 5 years		2
Total		922

Contingencies

In the normal course of operations, the Company may become involved in various claims and legal proceedings related to, for example, contract terminations and employee-related and other matters.

Securities class action lawsuit

On March 9, 2020, the Company settled the previously disclosed class-action lawsuit against it pending in the U.S. District Court for New Jersey. The settlement payment of $6,500 will be funded entirely by the Company’s insurers. The class-action lawsuit alleged that the Company and certain of its former officers and directors violated the Securities Exchange Act of 1934 in connection with certain public statements between August 30, 2011 and November 6, 2014, regarding the safety and efficacy of Macrilen™ (macimorelin) and the prospects for the approval of the Company’s NDA for the product by the FDA. This settlement remains subject to execution of final settlement documents and approval by the U.S. District Court for the District of New Jersey.

21. Subsequent events

On July 7, 2020, the Company closed a public offering of 26,666,666 units at a price to the public of $0.45 per unit, for gross proceeds of $12,000, before deducting placement agent fees and other offering expenses payable by the Company, estimated at $1,500. Each unit contained one common share (or common share equivalent in lieu thereof) and one investor share purchase warrant to purchase one common share. In total, 26,666,666 common shares, 26,666,666 investor share purchase warrants at an exercise price of $0.45 per share expiring July 7, 2025 and 1,866,667 placement agent warrants with an exercise price of $0.5625 per share, expiring July 1, 2025 were issued. As at June 30, 2020, the Company had incurred $537 in offering costs which were deferred and classified in the condensed interim consolidated statements of financial position, in the line “Prepaid expenses and other current assets” and $480 in accrued issuance costs were included within “Payables and accrued liabilities” in the condensed interim consolidated statements of financial position. Upon the completion of the public offing on July 7, 2020, the deferred offering costs were netted against the gross proceeds of the offering within equity. As a result of the public offering, the Company believes it has stockholders’ equity of at least $2.5 million as of the date of this filing and thereby satisfies the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market (“Nasdaq”). The Company received Nasdaq’s formal confirmation of such compliance on July 30, 2020.

Additionally, on August 3, 2020, the Company announced that it had entered into a securities purchase agreement with several institutional investors in the United States providing for the sale and issuance of 12,427,876 common shares at a purchase price of $0.56325 per common share in a registered direct offering priced at-the-market under Nasdaq rules. The offering resulted in gross proceeds of approximately $7,000 and closed on August 5, 2020. Concurrently, the Company issued to the purchasers unregistered warrants to purchase up to an aggregate of 9,320,907 common shares. The warrants are exercisable for a period of five and one-half years, exercisable immediately following the issuance date and have an exercise price of $0.47 per common share. In addition, the Company has issued unregistered warrants to the placement agent to purchase up to an aggregate of 869,952 common shares, with an exercise price of $0.7040625 per share and an expiration date of August 3, 2025.

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