10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2020

Or 

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 001-36351

Commission File Number 001-36351

PLx Pharma Inc.

(Exact name of registrant as specified in its charter)

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)

Registrant’s telephone number, including area code (973) 409-6541 

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.001 par value	PLXP	The NASDAQ Capital Market
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes     ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒Yes     ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes    ☒ No

As of November 11, 2020, there were 9,156,260 shares of common stock, $0.001 par value, issued and outstanding.

1

PLx Pharma Inc.

Table of Contents

			Page #
PART I -		FINANCIAL INFORMATION	5
	Item 1.	Unaudited Consolidated Financial Statements	5
		Unaudited Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	5
		Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	6
		Unaudited Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2020 and 2019	7
		Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	8
		Notes to Unaudited Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
	Item 4.	Controls and Procedures	24
PART II -		OTHER INFORMATION	25
	Item 1.	Legal Proceedings	25
	Item1A.	Risk Factors	25
	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
		Certificates

2

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

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, 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:

● 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 325 mg or obtain and maintain regulatory approval of VAZALORE 81 mg and any future product candidates;

● the benefits of the use of VAZALORE;

● the projected dollar amounts of future sales of products using the PLxGuard technology providing more effective and safer products;

● 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 NSAIDs, and other products;

● 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 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 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;

● our financial performance; and

● developments and projections relating to our competitors or our industry.

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.

3

NOTE REGARDING TRADEMARKS

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

● PLX®

● PLX PHARMA®

● PLXGUARD™

● VAZALORE™

●   ™

● FIRST LIQUID-FILLED ASPIRIN CAPSULES™

● ™

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.

4

PART I.	FINANCIAL INFORMATION
ITEM 1.	UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

PLx Pharma Inc.

UNAUDITED CONSOLIDATED BALANCE SHEETS

	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

See accompanying notes to unaudited consolidated financial statements. 

5

PLx Pharma Inc. 

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 

	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

See accompanying notes to unaudited consolidated financial statements.

6

PLx Pharma Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)

	Temporary Equity									Permanent Equity
	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	)
Stock-based compensation expense															272,537						272,537
Series A Preferred - declared dividends															(320,290	)					(320,290	)
Net income																		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	)
Stock-based compensation expense															269,578						269,578
Issuance of Series B Preferred Stock, net of issuance costs						8,000	$	7,731,379													-
Series A Preferred  - declared dividends															(326,678	)					(326,678	)
Series B Preferred  - declared dividends															(80,657	)					(80,657	)
Net loss																		(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	)
Series B Preferred Stock issuance costs								(8,067	)
Stock-based compensation expense															286,185						286,185
Series A Preferred - declared dividends															(336,855	)					(336,855	)
Series B Preferred - declared dividends															(162,942	)					(162,942	)
Net loss																		(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	)
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	)

See accompanying notes to unaudited consolidated financial statements.

7

PLx Pharma Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW

	Nine months ended September 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,229,370	)	$	(18,502,325	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		98,062			126,692
Stock-based compensation		828,300			603,314
Amortization of right of use assets		215,518			12,538
Amortization of debt discounts and issuance costs		80,979			172,438
Change in fair value of warrant liability		(2,804,962	)		7,581,521
Loss on disposal of property and equipment		218,150			12,398
Changes in operating assets and liabilities
Accounts receivable		18,683			18,234
Inventory		(143,380	)		-
Prepaid expenses and other assets		(67,903	)		165,618
Accounts payable and accrued liabilities		(316,554	)		820,711
Accrued bonuses		(448,729	)		(141,263	)
Accrued interest		53,050			133,410
Other current and long-term liabilities		(225,435	)		(25,912	)
Net cash used in operating activities		(9,723,591	)		(9,022,626	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(102,000	)		(145,661	)
Proceeds from sale of property and equipment		-			11,442
Net cash used in investing activities		(102,000	)		(134,219	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Series A convertible preferred stock		-			13,661,578
Net proceeds from issuance of Series B convertible preferred stock		7,723,312			-
Net proceeds from issuance of common stock		-			1,941,987
Repayments of long-term debt		(2,812,500	)		(2,187,500	)
Net cash provided by financing activities		4,910,812			13,416,065
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(4,914,779	)		4,259,220
Cash and cash equivalents, beginning of period		14,001,304			14,250,267
Cash and cash equivalents, end of period	$	9,086,525		$	18,509,487
SUPPLEMENTAL INFORMATION
Cash paid during the period for:
Income taxes	$	-		$	-
Interest	$	189,948		$	486,902
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Property and equipment included in accounts payable	$	-		$	2,847
Preferred stock beneficial conversion feature and dividends	$	1,227,422		$	13,433,397
Value of common shares issued to vendor for services	$	-		$	45,000

See accompanying notes to unaudited consolidated financial statements.

8

PLx Pharma Inc.

NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS SEPTEMBER 30, 2020

NOTE 1. BACKGROUND AND ORGANIZATION

Business Operations

PLx Pharma Inc., together with its subsidiary PLx Opco Inc., is a late-stage specialty pharmaceutical company focusing on commercializing two patent-protected lead products: VAZALORE™ 325 mg and VAZALORE™ 81 mg (referred to together as “VAZALORE”). VAZALORE 325 mg is approved by the U.S. Food and Drug Administration (“FDA”) for over-the-counter distribution and is the first ever liquid-filled aspirin capsule.  

NOTE 2. LIQUIDITY AND GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations and potential other funding sources, in addition to cash on-hand, to meet its obligations as they become due. The Company has not generated any revenue from sale of products and has incurred operating losses in each year since it commenced operations. As of September 30, 2020, the Company had an accumulated deficit of $94.2 million. The Company expects to continue to incur significant operating expenses and operating losses for the foreseeable future as the Company continues the development and commercialization of VAZALORE. These expenses include pre-commercial marketing spend which is discretionary and controllable as to the timing of the spending. As of September 30, 2020, the Company had working capital of $5.8 million, including cash and cash equivalents of $9.1 million. In March 2019, the Company entered into an equity distribution agreement (the "Equity Distribution Agreement") with JMP Securities, Inc. (“JMP”) to issue and sell shares of its 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 the Company’s sole discretion, under which JMP acts as its agent. At September 30, 2020, the Company had $10.2 million available under this "at-the-market" program. Based on the Company’s expected obligated cash requirements, the Company believes its cash on hand at September 30, 2020 combined with 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.

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 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 for the year ended December 31, 2019. 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 and the results of operations for the three and nine months ended September 30, 2020 and 2019.

The accompanying consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, 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. 

9

Use of Estimates

The preparation of 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 financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, determining the fair value of warrant liabilities and other financial instruments, stock-based compensation, 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, the Company had cash and cash equivalents of $9.1 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. Inventory as of September 30, 2020 and December 31, 2019 was comprised of raw materials for the manufacture of VAZALORE. The Company regularly reviews inventory quantities on hand and assesses the need for an allowance for obsolescence. The allowance for obsolete inventory was $59,000 and $513,000 as of September 30, 2020 and December 31, 2019, respectively, resulting in net inventory of $143,400 and $0 as of September 30, 2020 and December 31, 2019, respectively.

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) 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. 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.

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 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, 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 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 and 2019.

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.

The Company’s sole revenue arrangement is a cost-reimbursable federal grant with the National Institutes of Health. This federal grant was completed in the second quarter of 2020. The Company recognizes revenue on this grant as grant-related expenses are incurred by the Company or its subcontractors. The Company recognized $0 and $41,106 of revenue under this arrangement during the three months ended September 30, 2020 and 2019, respectively. The Company recognized $30,430 and $541,571 of revenue under this arrangement during the nine months ended September 30, 2020 and 2019, respectively.

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 and December 31, 2019.

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 activities, and include fees paid to various entities that perform research related services for the Company combined with reimbursable costs related to the federal grant with the National Institutes of Health.

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. 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.

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 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 potential dilutive securities had a dilutive impact during the nine months ended September 30, 2020 and 2019 or for the three months ended September 30, 2020.

The number of anti-dilutive shares for 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.

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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Recent Accounting Standards

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 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.

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 consolidated financial statements.

Subsequent Events

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

NOTE 4. DEBT

Term Loan Facility

On August 9, 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) that provides for a Term Loan Facility (the “Term Loan Facility” and all amounts borrowed thereunder, the “Term Loan”). Under the Term Loan Facility, the Company borrowed an initial amount of $7.5 million, and had the right to borrow an additional $7.5 million on or before December 31, 2018; this right expired unexercised.

The Term Loan Facility carries interest at a floating rate of 4.0% above the prime rate per annum (for a total interest rate of 7.25% at September 30, 2020), with interest payable monthly. All outstanding principal and accrued and unpaid interest under the Term Loan will be due and payable on February 9, 2021.

The Company may elect to prepay the Term Loan Facility prior to the maturity date subject to defined prepayment fees. The Term Loan Facility includes a final payment fee equal to 8.0% of the original principal amount, which is being accrued using the effective interest method over the term.

The Term Loan Facility is collateralized by substantially all of the Company’s assets, contains certain restrictive covenants, and contains customary events of default. Upon the occurrence of an event of default, all amounts owed by the Company would begin to bear interest at a rate that is 5.00% above the rate effective immediately before the event of default and may be declared immediately due and payable by SVB.

In connection with its 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. The warrants are immediately exercisable, have a 10-year term, contain a cashless exercise provision, and are classified in equity.

During the nine months ended September 30, 2020 and 2019, the Company made principal Term Loan payments of $2.8 million and $2.2 million, respectively.  As of September 30, 2020, and December 31, 2019, $1.6 million and $4.4 million of the Term Loan was outstanding, respectively, and was presented in the accompanying consolidated balance sheets net of current unamortized discounts and issuance costs of $13,635 and $91,879, respectively, and long-term unamortized discounts and issuance cost of $0 and $2,735, respectively. Total interest expense recognized for the three months ended September 30, 2020 and 2019 was $73,477 and $230,053, respectively. Total interest expense recognized for the nine months ended September 30, 2020 and 2019 was $323,976 and $792,750, respectively.

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NOTE 5. STOCKHOLDERS’ EQUITY

Common Stock

Equity Distribution Agreement

In March 2019, the Company entered into the Equity Distribution Agreement with JMP. Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time, at its option, shares of the Company’s common stock, through JMP, as sales agent, with an aggregate sales price of up to $12.5 million. Any sales of shares pursuant to the Equity Distribution Agreement will be made under the Company’s effective “shelf” registration statement, which allows it to sell debt or equity securities in one or more offerings up to a total public offering price of $75 million. In 2019, the Company issued 398,709 shares under the Equity Distribution Agreement generating gross proceeds of $2.3 million and net proceeds of $2.1 million after deducting legal and commission costs. There have been no issuances in 2020 under the Equity Distribution Agreement.  As of September 30, 2020, $10.2 million remained available under the "at-the-market" program.

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 million through the issuance of 15,000 shares of Series A Preferred Stock. The Series A Preferred Stock was issued at $1,000 per share and is convertible into common shares at a conversion price of $2.60 per share, subject to certain adjustments. Holders of the Series A Preferred Stock are entitled to an initial dividend rate of 8.0% per annum, which will stop accruing on the date of the FDA’s approval of the supplemental NDA of VAZALORE 325 mg and VAZALORE 81mg. The dividends are compounded quarterly and payable in cash or shares of Series A Preferred Stock at the Company’s option. The Series A Preferred Stock carries a liquidation preference equal to its stated value of $1,000 plus accrued and unpaid dividends.

The Series A Preferred Stock is classified as temporary equity due to the presence of certain contingent cash redemption features. As a result of the excess value of the Company’s common stock on the issuance date over the conversion price of the Series A Preferred Stock, a 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 during the three 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, the carrying value of the temporary equity was $13.7 million, net of $1.3 million in offering costs.

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 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.

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 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 common shares at a conversion price of $3.10 per share, subject to certain adjustments. Holders of the Series B Preferred Stock are entitled to an initial dividend rate of 8.0% per annum, which will stop accruing on the date of the FDA’s approval of the supplemental NDA of VAZALORE 325 mg and VAZALORE 81mg. The dividends are compounded quarterly and payable in cash or shares of Series B Preferred Stock at the Company’s option. The Series B Preferred Stock carries a liquidation preference equal to its stated value of $1,000 plus accrued and unpaid dividends.

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 carrying value of the temporary equity was $7.7 million, net of $0.3 million in offering costs.

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 the holders’ right to require the Company to repurchase the warrants for cash upon certain deferred fundamental transactions. See Note 7 for the fair value measurement of the warrant liability.  

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). These warrants are immediately exercisable, have a 10-year term, contain a cashless exercise provision, and are classified in equity.

Stock Options

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

	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	$	-

On September 13, 2018, the Company’s stockholders approved the 2018 Incentive Plan (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 are 1,250,000 shares authorized to be issued pursuant to the 2018 Plan, of which 147,650 shares are available for issuance under the 2018 Plan.

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

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

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

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, 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 and $105,072 for the three months ended September 30, 2020 and 2019, respectively. Rental expense under these agreements was $263,054 and $289,553 for the nine months ended September 30, 2020 and 2019, respectively.

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All of the Company’s existing leases as of September 30, 2020 are classified as operating leases and have a weighted average remaining lease term of 2.0 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%. In addition, the Company is the lessor for office space in New York that it sublets to a tenant; the sublease expires in 2021.

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

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

Future undiscounted cash flows:
2020	$	89,336
2021		262,850
2022		60,819
2023		60,264
2024		30,132
Total		503,401
Discount factor		(49,010	)
Lease liability		454,391
Current lease liability		(307,967	)
Non-current lease liability	$	146,424

Patent License Agreement with the Board of Regents of the University of Texas

On January 8, 2003, the Company entered into a patent license agreement with the Board of Regents of 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 to gastrointestinal safer formulations of NSAIDs. Additionally, the Company acquired worldwide rights to commercialize licensed products which allow for the Company to grant sublicenses subject to royalty payments.

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.

● 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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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 2017 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 include: (1) the Company stock price of $3.23, (2) the risk-free rate of 0.41%, (3) remaining expected life of 6.7 years, and (4) expected volatility of 88%.

The Series A Preferred Stock and the Series B Preferred Stock both contain a contingent put option 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 these liabilities was de minimis at issuance and as of September 30, 2020 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 months ended September 30, 2020:

Description	Balance at June 30, 2020		Established in 2020		Change in Fair Value			Balance at September 30, 2020
Warrant liability	$	5,577,269	$	-	$	(134,552	)	$	5,442,717

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, 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 and December 31, 2019:

Description	Level 1		Level 2		Level 3		Total
Warrant liability	$	-	$	-	$	5,442,717	$	5,442,717
Balance at September 30, 2020	$	-	$	-	$	5,442,717	$	5,442,717

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

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. No such impairment was recognized in the three and nine months ended September 30, 2020 and 2019.

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ITEM 2.         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements in this Quarterly Report on Form 10-Q (the “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. The information contained herein is current as of the date of this Quarterly Report (September 30, 2020), 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, 2020 are not necessarily indicative of our prospective financial condition and results of operations for the pending full fiscal year ending December 31, 2020. 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 company focused on our clinically-validated 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 active pharmaceutical ingredients to various portions of the gastrointestinal (“GI”) tract. We believe this has the potential to improve the absorption of many drugs currently on the market or in development, and reduce the risk of stomach erosions and ulcers associated with aspirin and ibuprofen, and potentially other drugs.

The U.S. Food and Drug Administration (the “FDA”) approved our lead product, VAZALORE 325 mg, which is a novel formulation of aspirin using the PLxGuard drug delivery platform intended to provide faster, reliable and more predictable platelet inhibition for the treatment 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.

Our commercialization strategy will target both the over-the-counter (“OTC”) and prescription markets, 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. We intend to market VAZALORE to the healthcare professional and the consumer through several marketing channels including a physician-directed sales force. Our product pipeline also includes other oral nonsteroidal anti-inflammatory drugs (“NSAIDs”) using the PLxGuard delivery system that may be developed, including PL1200 Ibuprofen 200 mg, for pain and inflammation currently in 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 Consolidated Financial Statements 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.

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:

Use of Estimates

The preparation of 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 consolidated financial statements, estimates are used for, but not limited to, determining the fair value of tangible and intangible assets and liabilities acquired in business combinations, 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

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.

The Company’s financial instruments (cash and cash equivalents, receivables, accounts payable and accrued 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.

20

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 services for the Company combined with reimbursable costs related to the federal grant with the National Institutes of Health (“NIH”).

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. 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 Unaudited Consolidated Financial Statements included elsewhere herein.

RESULTS OF OPERATIONS

Comparison of Three Months Ended September 30, 2020 and 2019

Revenue

Total revenues were $0 for the three months ended September 30, 2020, compared to revenues of $41,106 for the three months ended September 30, 2019. Revenue in the 2019 period is attributable to work performed under a federal grant from the NIH which came to an end in the second quarter of 2020.

Operating Expenses

Total operating expenses were $3.2 million during the three months ended September 30, 2020, a 14% decrease from operating expenses of $3.7 million in the comparable period in 2019. Operating expenses for the three months ended September 30, 2020 and 2019 were as follows:

	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.

21

Other income (expense), net

Other income (expense), net totaled $61,847 and $5.4 million of net other income in the three months ended September 30, 2020 and 2019, respectively. The decrease 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 lower net interest which was impacted by a lower principal debt balance and lower interest rates.

Comparison of Nine Months Ended September 30, 2020 and 2019

Revenue 

Total revenues were $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 of a NIH grant which came to an end in the second quarter of 2020.

Operating Expenses

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

	Nine Months Ended September 30,				Increase (Decrease)
	2020		2019					%
Operating Expenses
Research and development expenses	$	3,116,097	$	3,805,617	$	(689,520	)		(18	)%
General and administrative expenses		6,681,452		7,180,674		(499,222	)		(7	)%
Total operating expenses	$	9,797,549	$	10,986,291	$	(1,188,742	)		(11	)%

Research and Development Expenses

Research and development expenses totaled approximately $3.1 million in the nine months ended September 30, 2020, compared to $3.8 million in the prior year period. The decrease is due to lower manufacturing-related activities for VAZALORE, as the prior year period included the manufacture 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.

Other income (expense), net

Other income (expense), net totaled approximately $2.5 million of net other income in the nine months ended September 30, 2020, compared to $8.1 million of net other expense in the prior year period. The difference 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 lower net interest expense due to lower interest rates and lower principal debt balance.

22

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,
	2020			2019
Net cash used in operating activities	$	(9,723,591	)	$	(9,022,626	)
Net cash used in investing activities	$	(102,000	)	$	(134,219	)
Net cash provided by financing activities	$	4,910,812		$	13,416,065

Net Cash Used in Operating Activities

Net cash used in operating activities of $9.7 million and $9.0 million for the nine months ended September 30, 2020 and 2019, respectively, is higher in 2020 due to the increase in the settlement of year-end liabilities primarily for manufacturing, pre-commercial marketing and patent related costs combined with higher purchases of raw material related inventory.

Net Cash Used in Investing Activities

Net cash used in investing activities totaled $102,000 and $134,219 in the nine months ended September 30, 2020 and 2019, respectively, and reflects the purchase of manufacturing equipment for VAZALORE.

Net Cash Provided by Financing Activities

Net cash provided by financing activities totaled $4.9 million and $13.4 million in the nine months ended September 30, 2020 and 2019, respectively, and reflects proceeds from the private placement of our Series B convertible preferred stock in the 2020 year, which was lower than the proceeds from the private placement 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 the prior year period reflected two less payments due to the start of the payment amortization period.

Future Liquidity and Capital Needs

As of September 30, 2020, we had working capital of $5.8 million, including cash and cash equivalents of $9.1 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 not generated any revenue from the sale of products and have incurred operating losses in each year since we commenced operations. As of September 30, 2020, we had an accumulated deficit of $94.2 million. We expect to continue to incur significant operating expenses and operating losses for the foreseeable future as we continue the development and commercialization of VAZALORE. These expenses include pre-commercial marketing spend which is discretionary and controllable as to the timing of the spending and for the sNDA for VAZALORE. Even if we do generate revenues, 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. 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 need to obtain significant additional financing in the future, in addition to the proceeds from the “at-the-market” program, to execute 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.

23

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 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 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 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;

● 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.

24

PART II.       OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

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, 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.

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.

25

INDEX TO EXHIBITS 

Number	Description
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.INS	XBRL Instance Document.*
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.

26

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		/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)

27

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Natasha Giordano, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PLx Pharma Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d– 15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2020	/s/ Natasha Giordano
	Natasha Giordano President and
	Chief Executive Officer (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Rita O’Connor, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PLx Pharma Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2020	/s/ Rita O’Connor
	Rita O’Connor
	Chief Financial Officer (principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of PLx Pharma Inc. (the "Company") for the quarterly period ended September 30, 2020 (the "Report") as filed with the Securities and Exchange Commission on the date hereof, the undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify that, to such officer’s knowledge:

(1)     the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)     the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Dated: November 13, 2020	/s/ Natasha Giordano
	Natasha Giordano
	President and Chief Executive Officer (principal executive officer)
Dated: November 13, 2020	/s/ Rita O’Connor
	Rita O’Connor
	Chief Financial Officer (principal financial officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 11, 2020
Document Information [Line Items]
Entity Registrant Name	PLx Pharma Inc.
Entity Central Index Key	0001497504
Trading Symbol	plxp
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		9,156,260
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock, $0.001 par value

XML

Unaudited Consolidated Balance Sheets - USD ($)	Sep. 30, 2020	Dec. 31, 2019
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
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
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
Series A Convertible Preferred Stock [Member]
NON-CURRENT LIABILITIES
Convertible preferred stock	13,661,578	13,661,578
Series B Convertible Preferred Stock [Member]
NON-CURRENT LIABILITIES
Convertible preferred stock	$ 7,723,312

XML

Unaudited Consolidated Balance Sheets (Parentheticals) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	930,000	930,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	9,156,260	9,156,260
Common stock, shares outstanding (in shares)	9,156,260	9,156,260
Series A Convertible Preferred Stock [Member]
Convertible preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Convertible preferred stock, shares authorized (in shares)	45,000	45,000
Convertible preferred stock, shares issued (in shares)	15,000	15,000
Convertible preferred stock, shares outstanding (in shares)	15,000	15,000
Convertible preferred stock, liquidation value	$ 17,042,322	$ 17,042,322
Series B Convertible Preferred Stock [Member]
Convertible preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Convertible preferred stock, shares authorized (in shares)	25,000	25,000
Convertible preferred stock, shares issued (in shares)	8,000	0
Convertible preferred stock, shares outstanding (in shares)	8,000	0
Convertible preferred stock, liquidation value	$ 8,243,598	$ 8,243,598

XML

Unaudited Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
REVENUES:
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 (in dollars per share)	$ (0.40)	$ 0.09	$ (0.92)	$ (3.60)
Net (loss) income per common share - diluted (in dollars per share)	$ (0.40)	$ 0.09	$ (0.92)	$ (3.60)
Weighted average shares of common shares - basic (in shares)	9,156,260	8,921,345	9,156,260	8,860,168
Weighted average shares of common shares - diluted (in shares)	9,156,260	8,936,255	9,156,260	8,860,168
Grant [Member]
REVENUES:
Total revenues	$ 0	$ 41,106	$ 30,430	$ 541,571

XML

Unaudited Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (Deficit) - USD ($)	Series A Preferred Stock [Member] Preferred Stock [Member]	Series A Preferred Stock [Member] Common Stock [Member]	Series A Preferred Stock [Member] Additional Paid-in Capital [Member]	Series A Preferred Stock [Member] Retained Earnings [Member]	Series A Preferred Stock [Member]	Series B Preferred Stock [Member] Preferred Stock [Member]	Series B Preferred Stock [Member] Common Stock [Member]	Series B Preferred Stock [Member] Additional Paid-in Capital [Member]	Series B Preferred Stock [Member] Retained Earnings [Member]	Series B Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2018											8,743,950
Balance at Dec. 31, 2018											$ 8,744	$ 72,871,317	$ (66,435,768)	$ 6,444,293
Stock-based compensation expense												66,232		66,232
Preferred stock - declared dividends			$ (128,218)		$ (128,218)
Net income (loss)													(10,858,751)	(10,858,751)
Issuance of Preferred Stock, net of issuance costs (in shares)	15,000
Issuance of Preferred Stock, net of issuance costs	$ 13,661,578
Issuance of Preferred Stock, net of issuance costs	13,661,578
Series A Preferred - beneficial conversion feature at issuance					12,700,000							12,692,308		12,692,308
Series A Preferred - conversion feature deemed dividend					12,700,000							(12,692,308)		(12,692,308)
Common shares issued to vendor (in shares)											8,228
Common shares issued to vendor											$ 8	22,492		22,500
Balance (in shares) at Mar. 31, 2019	15,000										8,752,178
Balance at Mar. 31, 2019	$ 13,661,578										$ 8,752	72,831,823	(77,294,519)	(4,453,944)
Balance (in shares) at Dec. 31, 2018											8,743,950
Balance at Dec. 31, 2018											$ 8,744	72,871,317	(66,435,768)	6,444,293
Net income (loss)														(18,502,325)
Balance (in shares) at Sep. 30, 2019	15,000										9,122,990
Balance at Sep. 30, 2019	$ 13,661,578										$ 9,123	74,720,150	(84,938,093)	(10,208,820)
Balance (in shares) at Dec. 31, 2018											8,743,950
Balance at Dec. 31, 2018											$ 8,744	72,871,317	(66,435,768)	6,444,293
Balance (in shares) at Dec. 31, 2019	15,000										9,156,260
Balance at Dec. 31, 2019	$ 13,661,578										$ 9,156	74,837,046	(86,938,163)	(12,091,961)
Balance (in shares) at Mar. 31, 2019	15,000										8,752,178
Balance at Mar. 31, 2019	$ 13,661,578										$ 8,752	72,831,823	(77,294,519)	(4,453,944)
Stock-based compensation expense												276,505		276,505
Preferred stock - declared dividends												(301,735)		(301,735)
Net income (loss)													(9,347,296)	(9,347,296)
Common shares issued to vendor (in shares)											4,218
Common shares issued to vendor											$ 4	22,496		22,500
Common shares issued for cash (in shares)											114,973
Common shares issued for cash											$ 115	462,787		462,902
Balance (in shares) at Jun. 30, 2019	15,000										8,871,369
Balance at Jun. 30, 2019	$ 13,661,578										$ 8,871	73,291,876	(86,641,815)	(13,341,068)
Stock-based compensation expense												260,577		260,577
Preferred stock - declared dividends												(311,136)		(311,136)
Net income (loss)													1,703,722	1,703,722
Common shares issued to vendor (in shares)											1,155
Common shares issued to vendor											$ 1	(1)
Common shares issued for cash (in shares)											250,466
Common shares issued for cash											$ 251	1,478,834		1,479,085
Balance (in shares) at Sep. 30, 2019	15,000										9,122,990
Balance at Sep. 30, 2019	$ 13,661,578										$ 9,123	74,720,150	(84,938,093)	(10,208,820)
Balance (in shares) at Dec. 31, 2019	15,000										9,156,260
Balance at Dec. 31, 2019	$ 13,661,578										$ 9,156	74,837,046	(86,938,163)	(12,091,961)
Stock-based compensation expense												272,537		272,537
Preferred stock - declared dividends			(320,290)		(320,290)
Net income (loss)													1,496,086	1,496,086
Balance (in shares) at Mar. 31, 2020	15,000										9,156,260
Balance at Mar. 31, 2020	$ 13,661,578										$ 9,156	74,789,293	(85,442,077)	(10,643,628)
Balance (in shares) at Dec. 31, 2019	15,000										9,156,260
Balance at Dec. 31, 2019	$ 13,661,578										$ 9,156	74,837,046	(86,938,163)	(12,091,961)
Net income (loss)														(7,229,370)
Balance (in shares) at Sep. 30, 2020	15,000					8,000					9,156,260
Balance at Sep. 30, 2020	$ 13,661,578					$ 7,723,312					$ 9,156	74,437,924	(94,167,533)	(19,720,453)
Balance (in shares) at Mar. 31, 2020	15,000										9,156,260
Balance at Mar. 31, 2020	$ 13,661,578										$ 9,156	74,789,293	(85,442,077)	(10,643,628)
Stock-based compensation expense												269,578		269,578
Preferred stock - declared dividends			(326,678)		(326,678)			$ (80,657)		$ (80,657)
Net income (loss)													(5,598,964)	(5,598,964)
Issuance of Preferred Stock, net of issuance costs (in shares)						8,000
Issuance of Preferred Stock, net of issuance costs						$ 7,731,379
Issuance of Preferred Stock, net of issuance costs						$ 7,731,379
Balance (in shares) at Jun. 30, 2020	15,000					8,000					9,156,260
Balance at Jun. 30, 2020	$ 13,661,578					$ 7,731,379					$ 9,156	74,651,536	(91,041,041)	(16,380,349)
Stock-based compensation expense												286,185		286,185
Preferred stock - declared dividends			$ (336,855)		$ (336,855)							(162,942)		(162,942)
Net income (loss)													(3,126,492)	(3,126,492)
Series B Preferred Stock issuance costs						$ (8,067)
Balance (in shares) at Sep. 30, 2020	15,000					8,000					9,156,260
Balance at Sep. 30, 2020	$ 13,661,578					$ 7,723,312					$ 9,156	$ 74,437,924	$ (94,167,533)	$ (19,720,453)

XML

Unaudited Consolidated Statements of Cash Flow - USD ($)	3 Months Ended				9 Months Ended		12 Months Ended
	Sep. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (3,126,492)	$ 1,496,086	$ 1,703,722	$ (10,858,751)	$ (7,229,370)	$ (18,502,325)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization					98,062	126,692
Stock-based compensation					828,300	603,314
Amortization of right of use assets					215,518	12,538
Amortization of debt discounts and issuance costs					80,979	172,438
Change in fair value of warrant liability	(134,552)		(5,498,391)		(2,804,962)	7,581,521
Loss on disposal of property and equipment					218,150	12,398
Changes in operating assets and liabilities
Accounts receivable					18,683	18,234
Inventory					(143,380)
Prepaid expenses and other assets					(67,903)	165,618
Accounts payable and accrued liabilities					(316,554)	820,711
Accrued bonuses					(448,729)	(141,263)
Accrued interest					53,050	133,410
Other current and long-term liabilities					(225,435)	(25,912)
Net cash used in operating activities					(9,723,591)	(9,022,626)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment					(102,000)	(145,661)
Proceeds from sale of property and equipment						11,442
Net cash used in investing activities					(102,000)	(134,219)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock						1,941,987
Repayments of long-term debt					(2,812,500)	(2,187,500)
Net cash provided by financing activities					4,910,812	13,416,065
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(4,914,779)	4,259,220
Cash and cash equivalents, beginning of period		$ 14,001,304		$ 14,250,267	14,001,304	14,250,267	$ 14,250,267
Cash and cash equivalents, end of period	$ 9,086,525		$ 18,509,487		9,086,525	18,509,487	$ 14,001,304
SUPPLEMENTAL INFORMATION
Income taxes
Interest					189,948	486,902
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Property and equipment included in accounts payable						2,847
Preferred stock beneficial conversion feature and dividends					1,227,422	13,433,397
Value of common shares issued to vendor for services						45,000
Series A Convertible Preferred Stock [Member]
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of convertible preferred stock						13,661,578
Series B Convertible Preferred Stock [Member]
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of convertible preferred stock					$ 7,723,312

XML

Note 1 - Background and Organization

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

NOTE

1.

BACKGROUND AND ORGANIZATION

Business Operations

PLx Pharma Inc., together with its subsidiary PLx Opco Inc., is a late-stage specialty pharmaceutical company focusing on commercializing

two

patent-protected lead products: VAZALORE™ 

325

mg and VAZALORE™ 

81

mg (referred to together as “VAZALORE”). VAZALORE

325

mg is approved by the U.S. Food and Drug Administration (“FDA”) for over-the-counter distribution and is the

first

ever liquid-filled aspirin capsule.  

XML

Note 2 - Liquidity and Going Concern

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

NOTE

2.

LIQUIDITY AND GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations and potential other funding sources, in addition to cash on-hand, to meet its obligations as they become due. The Company has

not

generated any revenue from sale of products and has incurred operating losses in each year since it commenced operations. As of

September 30, 2020,

the Company had an accumulated deficit of

$94.2

million. The Company expects to continue to incur significant operating expenses and operating losses for the foreseeable future as the Company continues the development and commercialization of VAZALORE. These expenses include pre-commercial marketing spend which is discretionary and controllable as to the timing of the spending. As of

September 30, 2020,

the Company had working capital of

$5.8

million, including cash and cash equivalents of

$9.1

million. In

March 2019,

the Company entered into an equity distribution agreement (the "Equity Distribution Agreement") with JMP Securities, Inc. (“JMP”) to issue and sell shares of its 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 the Company's sole discretion, under which JMP acts as its agent. At

September 30, 2020,

the Company had

$10.2

million available under this "at-the-market" program. Based on the Company's expected obligated cash requirements, the Company believes its cash on hand at

September 30, 2020

combined with 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.

XML

Note 3 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Significant Accounting Policies [Text Block]

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

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 for the year ended

December 31, 2019.

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

and the results of operations for the

three

and

nine

months ended

September 30, 2020

and

2019.

The accompanying consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, 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. 

Use of Estimates

The preparation of 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 financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but

not

limited to, determining the fair value of warrant liabilities and other financial instruments, stock-based compensation, 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,

the Company had cash and cash equivalents of

$9.1

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. Inventory as of

September 30, 2020

and

December 31, 2019

was comprised of raw materials for the manufacture of VAZALORE. The Company regularly reviews inventory quantities on hand and assesses the need for an allowance for obsolescence. The allowance for obsolete inventory was

$59,000

and

$513,000

as of

September 30, 2020

and

December 31, 2019,

respectively, resulting in net inventory of

$143,400

and

$0

as of

September 30, 2020

and

December 31, 2019,

respectively.

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

) 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. 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.

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 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,

the Company did

not

have any finance leases.

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 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

and

2019.

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.

The Company's sole revenue arrangement is a cost-reimbursable federal grant with the National Institutes of Health. This federal grant was completed in the

second

quarter of

2020.

The Company recognizes revenue on this grant as grant-related expenses are incurred by the Company or its subcontractors. The Company recognized

$0

and

$41,106

of revenue under this arrangement during the

three

months ended

September 30, 2020

and

2019,

respectively. The Company recognized

$30,430

and

$541,571

of revenue under this arrangement during the

nine

months ended

September 30, 2020

and

2019,

respectively.

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

and

December 31, 2019.

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 activities, and include fees paid to various entities that perform research related services for the Company combined with reimbursable costs related to the federal grant with the National Institutes of Health.

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. 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. 

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.

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 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 potential dilutive securities had a dilutive impact during the

nine

months ended

September 30, 2020

and

2019

or for the

three

months ended

September 30, 2020.

The number of anti-dilutive shares for 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.

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.

Recent Accounting Standards

In

August 2020,

the Financial Accounting Standards Board issued Accounting Standards Update

2020

-

06

Debt – Debt with Conversion and Other Options (Subtopic

470

-

20

) and Derivatives and Hedging – Contracts in Entity's Own Equity (subtopic

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.

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 consolidated financial statements.

Subsequent Events

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

XML

Note 4 - Debt

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

4.

DEBT

Term Loan Facility

On

August 9, 2017,

the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) that provides for a Term Loan Facility (the “Term Loan Facility” and all amounts borrowed thereunder, the “Term Loan”). Under the Term Loan Facility, the Company borrowed an initial amount of

$7.5

million, and had the right to borrow an additional

$7.5

million on or before

December 31, 2018;

this right expired unexercised.

The Term Loan Facility carries interest at a floating rate of

4.0%

above the prime rate per annum (for a total interest rate of

7.25%

at

September 30, 2020),

with interest payable monthly. All outstanding principal and accrued and unpaid interest under the Term Loan will be due and payable on

February 9, 2021.

The Company

may

elect to prepay the Term Loan Facility prior to the maturity date subject to defined prepayment fees. The Term Loan Facility includes a final payment fee equal to

8.0%

of the original principal amount, which is being accrued using the effective interest method over the term.

The Term Loan Facility is collateralized by substantially all of the Company's assets, contains certain restrictive covenants, and contains customary events of default. Upon the occurrence of an event of default, all amounts owed by the Company would begin to bear interest at a rate that is

5.00%

above the rate effective immediately before the event of default and

may

be declared immediately due and payable by SVB.

In connection with its 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. The warrants are immediately exercisable, have a

10

-year term, contain a cashless exercise provision, and are classified in equity.

During the

nine

months ended

September 30, 2020

and

2019,

the Company made principal Term Loan payments of

$2.8

million and

$2.2

million, respectively.  As of

September 30, 2020,

and

December 31, 2019,

$1.6

million and

$4.4

million of the Term Loan was outstanding, respectively, and was presented in the accompanying consolidated balance sheets net of current unamortized discounts and issuance costs of

$13,635

and

$91,879,

respectively, and long-term unamortized discounts and issuance cost of

$0

and

$2,735,

respectively. Total interest expense recognized for the

three

months ended

September 30, 2020

and

2019

was

$73,477

and

$230,053,

respectively. Total interest expense recognized for the

nine

months ended

September 30, 2020

and

2019

was

$323,976

and

$792,750,

respectively.

XML

Note 5 - Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE

5.

STOCKHOLDERS' EQUITY

Common Stock

Equity Distribution Agreement

In

March 2019,

the Company entered into the Equity Distribution Agreement with JMP. Pursuant to the terms of the Equity Distribution Agreement, the Company

may

sell from time to time, at its option, shares of the Company's common stock, through JMP, as sales agent, with an aggregate sales price of up to

$12.5

million. Any sales of shares pursuant to the Equity Distribution Agreement will be made under the Company's effective “shelf” registration statement, which allows it to sell debt or equity securities in

one

or more offerings up to a total public offering price of

$75

million. In

2019,

the Company issued

398,709

shares under the Equity Distribution Agreement generating gross proceeds of

$2.3

million and net proceeds of

$2.1

million after deducting legal and commission costs. There have been

no

issuances in

2020

under the Equity Distribution Agreement.  As of

September 30, 2020,

$10.2

million remained available under the "at-the-market" program.

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

million through the issuance of

15,000

shares of Series A Preferred Stock. The Series A Preferred Stock was issued at

$1,000

per share and is convertible into common shares at a conversion price of

$2.60

per share, subject to certain adjustments. Holders of the Series A Preferred Stock are entitled to an initial dividend rate of

8.0%

per annum, which will stop accruing on the date of the FDA's approval of the supplemental NDA of VAZALORE

325

mg and VAZALORE

81mg.

The dividends are compounded quarterly and payable in cash or shares of Series A Preferred Stock at the Company's option. The Series A Preferred Stock carries a liquidation preference equal to its stated value of

$1,000

plus accrued and unpaid dividends.

The Series A Preferred Stock is classified as temporary equity due to the presence of certain contingent cash redemption features. As a result of the excess value of the Company's common stock on the issuance date over the conversion price of the Series A Preferred Stock, a 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 during the

three

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,

the carrying value of the temporary equity was

$13.7

million, net of

$1.3

million in offering costs.

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 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.

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

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 common shares at a conversion price of

$3.10

per share, subject to certain adjustments. Holders of the Series B Preferred Stock are entitled to an initial dividend rate of

8.0%

per annum, which will stop accruing on the date of the FDA's approval of the supplemental NDA of VAZALORE

325

mg and VAZALORE

81mg.

The dividends are compounded quarterly and payable in cash or shares of Series B Preferred Stock at the Company's option. The Series B Preferred Stock carries a liquidation preference equal to its stated value of

$1,000

plus accrued and unpaid dividends.

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 carrying value of the temporary equity was

$7.7

million, net of

$0.3

million in offering costs.

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.

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 the holders' right to require the Company to repurchase the warrants for cash upon certain deferred fundamental transactions. See Note

7

for the fair value measurement of the warrant liability.  

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

). These warrants are immediately exercisable, have a

10

-year term, contain a cashless exercise provision, and are classified in equity.

Stock Options

Following is a summary of stock option activities for the

nine

months ended

September 30, 2020:

	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	$	-

On

September 13, 2018,

the Company's stockholders approved the

2018

Incentive Plan (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 are

1,250,000

shares authorized to be issued pursuant to the

2018

Plan, of which

147,650

shares are available for issuance under the

2018

Plan.

The Company granted

571,000

options during the

nine

months ended

September 30, 2020

with an aggregate fair value of

$0.9

million calculated using the Black-Scholes model on the grant date. Variables used in the Black-Scholes model include: (

1

) discount rate of

0.66%,

(

2

) expected life of

6.0

years, (

3

) expected volatility of

82%,

and (

4

)

zero

expected dividends.

As of

September 30, 2020,

the Company had

$1.9

million in unamortized expense related to unvested options which is expected to be expensed over a weighted average of

1.8

years.

During the

three

months ended

September 30, 2020

and

2019,

the Company recorded

$286,185

and

$260,577,

respectively, in total stock-based compensation expense related to the stock options and stock bonuses. During the

nine

months ended

September 30, 2020

and

2019,

the Company recorded

$828,300

and

$603,314,

respectively, in total stock-based compensation expense related to the stock options and stock bonuses. Substantially all stock-based compensation expense is classified as general and administrative expenses in the accompanying unaudited consolidated statements of operations.

XML

Note 6 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

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,

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

and

$105,072

for the

three

months ended

September 30, 2020

and

2019,

respectively. Rental expense under these agreements was

$263,054

and

$289,553

for the

nine

months ended

September 30, 2020

and

2019,

respectively.

All of the Company's existing leases as of

September 30, 2020

are classified as operating leases and have a weighted average remaining lease term of

2.0

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%.

In addition, the Company is the lessor for office space in New York that it sublets to a tenant; the sublease expires in

2021.

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

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

Future undiscounted cash flows:
2020	$	89,336
2021		262,850
2022		60,819
2023		60,264
2024		30,132
Total		503,401
Discount factor		(49,010	)
Lease liability		454,391
Current lease liability		(307,967	)
Non-current lease liability	$	146,424

Patent License Agreement with the Board of Regents of the University of Texas

On

January 8, 2003,

the Company entered into a patent license agreement with the Board of Regents of 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 to gastrointestinal safer formulations of NSAIDs. Additionally, the Company acquired worldwide rights to commercialize licensed products which allow for the Company to grant sublicenses subject to royalty payments.

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.

XML

Note 7 - Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

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.

● 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.

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 2017

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

include: (

1

) the Company stock price of

$3.23,

(

2

) the risk-free rate of

0.41%,

(

3

) remaining expected life of

6.7

years, and (

4

) expected volatility of

88%.

The Series A Preferred Stock and the Series B Preferred Stock both contain a contingent put option 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 these liabilities was

de minimis

at issuance and as of

September 30, 2020

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

months ended

September 30, 2020:

Description	Balance at June 3 0 , 2020		Established in 2020		Change in Fair Value			Balance at September 30, 2020
Warrant liability	$	5,577,269	$	-	$	(134,552	)	$	5,442,717

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, 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

and

December 31, 2019:

Description	Level 1		Level 2		Level 3		Total
Warrant liability	$	-	$	-	$	5,442,717	$	5,442,717
Balance at September 30, 2020	$	-	$	-	$	5,442,717	$	5,442,717

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

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.

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.

No

such impairment was recognized in the

three

and

nine

months ended

September 30, 2020

and

2019.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

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

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 for the year ended

December 31, 2019.

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

and the results of operations for the

three

and

nine

months ended

September 30, 2020

and

2019.

The accompanying consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, 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. 

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of 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 financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but

not

limited to, determining the fair value of warrant liabilities and other financial instruments, stock-based compensation, 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 Policy [Policy Text Block]

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, Policy [Policy Text Block]

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,

the Company had cash and cash equivalents of

$9.1

million in U.S. bank accounts which were

not

fully insured by the Federal Deposit Insurance Corporation.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is stated at the lower of cost or net realizable value, using the average cost method. Inventory as of

September 30, 2020

and

December 31, 2019

was comprised of raw materials for the manufacture of VAZALORE. The Company regularly reviews inventory quantities on hand and assesses the need for an allowance for obsolescence. The allowance for obsolete inventory was

$59,000

and

$513,000

as of

September 30, 2020

and

December 31, 2019,

respectively, resulting in net inventory of

$143,400

and

$0

as of

September 30, 2020

and

December 31, 2019,

respectively.

Fair Value Measurement, Policy [Policy Text Block]

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

) 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. For disclosures concerning fair value measurements, see Note

7.

Lessee, Leases [Policy Text Block]

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.

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 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,

the Company did

not

have any finance leases.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

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 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

and

2019.

Revenue from Contract with Customer [Policy Text Block]

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.

The Company's sole revenue arrangement is a cost-reimbursable federal grant with the National Institutes of Health. This federal grant was completed in the

second

quarter of

2020.

The Company recognizes revenue on this grant as grant-related expenses are incurred by the Company or its subcontractors. The Company recognized

$0

and

$41,106

of revenue under this arrangement during the

three

months ended

September 30, 2020

and

2019,

respectively. The Company recognized

$30,430

and

$541,571

of revenue under this arrangement during the

nine

months ended

September 30, 2020

and

2019,

respectively.

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

and

December 31, 2019.

Research and Development Expense, Policy [Policy Text Block]

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 activities, and include fees paid to various entities that perform research related services for the Company combined with reimbursable costs related to the federal grant with the National Institutes of Health.

Share-based Payment Arrangement [Policy Text Block]

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. 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 Tax, Policy [Policy Text Block]

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. 

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.

Earnings Per Share, Policy [Policy Text Block]

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 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 potential dilutive securities had a dilutive impact during the

nine

months ended

September 30, 2020

and

2019

or for the

three

months ended

September 30, 2020.

The number of anti-dilutive shares for 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.

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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Standards

In

August 2020,

the Financial Accounting Standards Board issued Accounting Standards Update

2020

-

06

Debt – Debt with Conversion and Other Options (Subtopic

470

-

20

) and Derivatives and Hedging – Contracts in Entity's Own Equity (subtopic

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.

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 consolidated financial statements.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

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

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Note 3 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	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

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Note 5 - Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	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	$	-

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Note 6 - Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Lease, Cost [Table Text Block]

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

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Future undiscounted cash flows:
2020	$	89,336
2021		262,850
2022		60,819
2023		60,264
2024		30,132
Total		503,401
Discount factor		(49,010	)
Lease liability		454,391
Current lease liability		(307,967	)
Non-current lease liability	$	146,424

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Note 7 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

Description	Balance at June 3 0 , 2020		Established in 2020		Change in Fair Value			Balance at September 30, 2020
Warrant liability	$	5,577,269	$	-	$	(134,552	)	$	5,442,717

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

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

Description	Level 1		Level 2		Level 3		Total
Warrant liability	$	-	$	-	$	5,442,717	$	5,442,717
Balance at September 30, 2020	$	-	$	-	$	5,442,717	$	5,442,717

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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Note 2 - Liquidity and Going Concern (Details Textual) - USD ($)	1 Months Ended
	Mar. 31, 2019	Sep. 30, 2020	Dec. 31, 2019
Retained Earnings (Accumulated Deficit), Ending Balance		$ (94,167,533)	$ (86,938,163)
Working Capital		5,800,000
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Ending Balance		9,100,000
JMP Securities, Inc [Member]
Distribution Agreement, Aggregate Sales Price	$ 12,500,000
Distribution Agreement, Amount Available for Sale		$ 10,200,000

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Note 3 - Summary of Significant Accounting Policies (Details Textual)	3 Months Ended			9 Months Ended
	Sep. 30, 2020 USD ($) shares	Mar. 31, 2020	Sep. 30, 2019 USD ($) shares	Sep. 30, 2020 USD ($) shares	Sep. 30, 2019 USD ($) shares	Dec. 31, 2019 USD ($)	Aug. 09, 2017 USD ($)
Number of Operating Segments		1
Cash, Uninsured Amount	$ 9,100,000			$ 9,100,000
Inventory Valuation Reserves, Ending Balance	59,000			59,000		$ 513,000
Inventory, Net, Total	143,400			143,400		0
Finance Lease, Liability, Total	0			$ 0
Number of Reporting Units				1
Goodwill, Impairment Loss	0		$ 0	$ 0	$ 0
Revenue from Contract with Customer, Including Assessed Tax			$ 41,106	30,430	$ 541,571
Contract with Customer, Asset, before Allowance for Credit Loss, Total	$ 0			$ 0		0
Weighted Average Number Diluted Shares Outstanding Adjustment, Total (in shares) | shares	0		0	0	0
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | shares	13,957,604		10,306,370	13,957,604	10,503,537
Grant [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 0		$ 41,106	$ 30,430	$ 541,571
Term Loan Facility [Member] | Silicon Valley Bank (SVB) [Member]
Debt Instrument, Face Amount	$ 1,600,000			$ 1,600,000		$ 4,400,000	$ 7,500,000

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Note 3 - Summary of Significant Accounting Policies - Basic and Diluted Earnings Per Share (Details) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Net income	$ (3,126,492)	$ (5,598,964)	$ 1,496,086	$ 1,703,722	$ (9,347,296)	$ (10,858,751)	$ (7,229,370)	$ (18,502,325)
Preferred stock dividends				(311,136)
Impact of participation rights				(555,508)
Net income available for common shares				837,078
Net income available for common shares				$ 837,078
Weighted average outstanding common shares (in shares)	9,156,260			8,921,345			9,156,260	8,860,168
Impact of stock options (in shares)				14,910
Weighted average outstanding common shares, basic (in shares)	9,156,260			8,921,345			9,156,260	8,860,168
Weighted average outstanding common shares, diluted (in shares)	9,156,260			8,936,255			9,156,260	8,860,168
Earnings per share, basic (in dollars per share)	$ (0.40)			$ 0.09			$ (0.92)	$ (3.60)
Earnings per share, diluted (in dollars per share)	$ (0.40)			$ 0.09			$ (0.92)	$ (3.60)

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Note 4 - Debt (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	Aug. 09, 2017	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Jun. 30, 2017
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)							2,646,091
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)							$ 7.50
Interest Expense, Debt, Total		$ 72,705	$ 118,432	$ 267,213	$ 476,084
Warrants Issued in Connection with Term Loan Facility [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)	58,502
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)	$ 6.41
Class of Warrant or Right, Term (Year)	10 years
Term Loan Facility [Member] | Silicon Valley Bank (SVB) [Member]
Debt Instrument, Face Amount	$ 7,500,000	1,600,000		1,600,000		$ 4,400,000
Debt Instrument, Unused Borrowing Capacity, Amount	$ 7,500,000
Debt Instrument, Final Payment Fee, Percentage	8.00%
Debt Instrument, Default Interest Rate Percent Above Effective Percentage	5.00%
Repayments of Debt				2,800,000	2,200,000
Debt Instrument, Unamortized Discount (Premium) and Debt Issuance Costs, Net, Current		13,635		13,635		91,879
Debt Instrument, Unamortized Discount (Premium) and Debt Issuance Costs, Net, Noncurrent		0		0		$ 2,735
Interest Expense, Debt, Total		$ 73,477	$ 230,053	$ 323,976	$ 792,750
Term Loan Facility [Member] | Silicon Valley Bank (SVB) [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	4.00%
Debt Instrument, Interest Rate, Effective Percentage		7.25%		7.25%

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Note 5 - Stockholders' Equity (Details Textual) - USD ($)				1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
	May 15, 2020	Feb. 20, 2019	Aug. 09, 2017	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Sep. 13, 2018	Jun. 30, 2017
Proceeds from Issuance of Common Stock, Net Issuance Costs									$ 1,941,987
Adjustments to Additional Paid in Capital, Preferred Stock Beneficial Conversion Feature at Issuance							$ 12,692,308
Adjustments to Additional Paid in Capital, Preferred Stock Beneficial Conversion Feature, Deemed Dividend							(12,692,308)
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)												2,646,091
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)												$ 7.50
Warrants and Rights Outstanding, Term (Year)												10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)								571,000
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount					$ 1,900,000			$ 1,900,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)								1 year 292 days
General and Administrative Expense [Member]
Share-based Payment Arrangement, Expense					286,185	$ 260,577		$ 828,300	603,314
The 2018 Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)											1,250,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)											147,650
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)								571,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Granted in Period, Fair Value								$ 900,000
The 2018 Incentive Plan [Member] | Employees [Member] | Share-based Payment Arrangement, Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Discount Rate								0.66%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term (Year)								6 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate								82.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate								0.00%
Warrants Issued in Connection with Term Loan Facility [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)			58,502
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)			$ 6.41
Class of Warrant or Right, Term (Year)			10 years
Series A Preferred Stock [Member]
Stock Issued During Period, Shares, New Issues (in shares)		15,000
Proceeds from Issuance of Private Placement		$ 15,000,000
Shares Issued, Price Per Share (in dollars per share)		$ 1,000
Preferred Stock, Convertible, Conversion Price (in dollars per share)		$ 2.60
Preferred Stock, Dividend Rate, Percentage		8.00%
Preferred Stock, Liquidation Preference, Value		$ 1,000
Adjustments to Additional Paid in Capital, Preferred Stock Beneficial Conversion Feature at Issuance							12,700,000
Adjustments to Additional Paid in Capital, Preferred Stock Beneficial Conversion Feature, Deemed Dividend							$ 12,700,000
Temporary Equity, Par Value					13,700,000			$ 13,700,000
Payments of Stock Issuance Costs								1,300,000
Dividends, Preferred Stock, Total					$ 336,855	$ 311,136		$ 983,823	$ 741,089
Preferred Stock, Dividends Per Share, Declared (in dollars per share)					$ 0.04	$ 0.03		$ 0.11	$ 0.08
Series B Preferred Stock [Member]
Shares Issued, Price Per Share (in dollars per share)	$ 1,000
Preferred Stock, Convertible, Conversion Price (in dollars per share)	$ 3.10
Preferred Stock, Dividend Rate, Percentage	8.00%
Preferred Stock, Liquidation Preference, Value	$ 1,000
Temporary Equity, Par Value					$ 7,700,000			$ 7,700,000
Payments of Stock Issuance Costs								300,000
Dividends, Preferred Stock, Total					$ 162,942			$ 243,599
Preferred Stock, Dividends Per Share, Declared (in dollars per share)					$ 0.02			$ 0.03
Series B Preferred Stock [Member] | Private Placement [Member]
Stock Issued During Period, Shares, New Issues (in shares)	8,000
Proceeds from Issuance of Private Placement	$ 8,000,000
JMP Securities, Inc [Member]
Distribution Agreement, Aggregate Sales Price				$ 12,500,000
Public Offering Price Allowed under Shelf Registration, Total				$ 75,000,000
Stock Issued During Period, Shares, New Issues (in shares)								0		398,709
Proceeds from Issuance of Common Stock										$ 2,300,000
Proceeds from Issuance of Common Stock, Net Issuance Costs										$ 2,100,000
Distribution Agreement, Amount Available for Sale					$ 10,200,000			$ 10,200,000

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Note 5 - Stockholders' Equity - Stock Option Activity (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Outstanding, number of units, balance (in shares)	1,666,797
Outstanding, weighted average exercise price, beginning balance (in dollars per share)	$ 13.96
Outstanding, weighted average remaining contractual term (Year)	7 years 54 days	7 years 80 days
Outstanding, aggregate intrinsic value	$ 528,580	$ 91,475
Granted, number of units (in shares)	571,000
Granted, weighted average exercise price (in dollars per share)	$ 2.19
Exercised, cancelled, or forfeited (in shares)	(198,750)
Exercised, cancelled or forfeited, weighted average exercise price (in dollars per share)	$ 7.52
Outstanding, number of units, balance (in shares)	2,039,047	1,666,797
Outstanding, weighted average exercise price, balance (in dollars per share)	$ 11.29	$ 13.96
Exercisable, number of units (in shares)	1,116,314
Exercisable, weighted average exercise price (in dollars per share)	$ 17.49
Exercisable, weighted average remaining contractual term (Year)	5 years 219 days
Exercisable, aggregate intrinsic value

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Note 6 - Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Operating Lease, Expense	$ 87,851	$ 105,072	$ 263,054	$ 289,553
Operating Lease, Weighted Average Remaining Lease Term (Year)	2 years		2 years
Operating Lease, Weighted Average Discount Rate, Percent	9.50%		9.50%
Research and Development Expense, Total	$ 1,207,302	1,214,029	$ 3,116,097	3,805,617
Patent License Agreement with the Board of Regents of the University of Texas (NSAIDs) [Member]
Research and Development Expense, Total	$ 10,660	$ 10,000	$ 237,300	$ 260,000

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Note 6 - Commitments and Contingencies - Lease Costs (Details)	9 Months Ended
	Sep. 30, 2020 USD ($)
Operating lease cost	$ 263,054
Sublease income	(182,731)
Total lease costs	$ 80,323

XML

Note 6 - Commitments and Contingencies - Maturity of Operating Leases (Details)	Sep. 30, 2020 USD ($)
2020	$ 89,336
2021	262,850
2022	60,819
2023	60,264
2024	30,132
Total	503,401
Discount factor	(49,010)
Lease liability	454,391
Other Current Liabilities [Member]
Current lease liability	(307,967)
Other Noncurrent Liabilities [Member]
Non-current lease liability	$ 146,424

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Note 7 - Fair Value Measurements (Details Textual) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Asset Impairment Charges, Total	$ 0	$ 0	$ 0	$ 0
Fair Value, Inputs, Level 3 [Member] | Measurement Input, Share Price [Member]
Warrants and Rights Outstanding, Measurement Input	3.23		3.23
Fair Value, Inputs, Level 3 [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input	0.41		0.41
Fair Value, Inputs, Level 3 [Member] | Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input	6.7		6.7
Fair Value, Inputs, Level 3 [Member] | Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input	88		88

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Note 7 - Fair Value Measurements - Measured at Fair Value on a Recurring Basis (Details) - Derivative Warrant Liability [Member] - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020
Balance	$ 5,577,269	$ 8,247,679
Established during period
Change in fair value	(134,552)	(2,804,962)
Balance	$ 5,442,717	$ 5,442,717

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Note 7 - Fair Value Measurements - Carrying Amount of Assets and Liabilities (Details) - Fair Value, Recurring [Member] - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Balance	$ 5,442,717	$ 8,247,679
Derivative Warrant Liability [Member]
Liability	5,442,717	8,247,679
Fair Value, Inputs, Level 1 [Member]
Balance
Fair Value, Inputs, Level 1 [Member] | Derivative Warrant Liability [Member]
Liability
Fair Value, Inputs, Level 2 [Member]
Balance
Fair Value, Inputs, Level 2 [Member] | Derivative Warrant Liability [Member]
Liability
Fair Value, Inputs, Level 3 [Member]
Balance	5,442,717	8,247,679
Fair Value, Inputs, Level 3 [Member] | Derivative Warrant Liability [Member]
Liability	$ 5,442,717	$ 8,247,679