CELSION : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

The following discussions should be read in conjunction with our financial statements and related notes thereto included in this Annual Report. The following discussion contains forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause actual results to differ materially from anticipated results. Factors that could cause or contribute to such differences include those described under "Part I, Item 1A - Risk Factors" appearing in this Annual Report and factors described in other cautionary statements, cautionary language and risk factors set forth in other documents that we file with the Securities and Exchange Commission. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

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Overview

Celsion is an integrated development clinical stage oncology drug company focused on advancing innovative cancer treatments, including directed chemotherapies, DNA-mediated immunotherapy and RNA-based therapies. Our lead product candidate is ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, currently in a Phase III clinical trial for the treatment of primary liver cancer (the "OPTIMA Study"). Second in our product pipeline is GEN-1, a DNA-mediated immunotherapy for the localized treatment of ovarian cancer. These investigational products are based on platform technologies that provide the basis for future development of a range of therapeutics, largely focused on difficult-to-treat forms of cancer. The first platform technology is Lysolipid Thermally Sensitive Liposomes, a heat sensitive liposomal based dosage form that is designed to target disease with known chemotherapeutics in the presence of mild heat. The second platform technology is TheraPlas, a novel nucleic acid-based investigational candidate under development for local transfection of therapeutic DNA plasmids. Employing these technologies, we are working to develop and commercialize more efficient, effective and targeted oncology therapies that maximize efficacy while minimizing side effects common to cancer treatments.

ThermoDox®

ThermoDox® is being evaluated in a Phase III clinical trial for primary liver cancer, which we call the OPTIMA Study, which was initiated in 2014. ThermoDox® is a liposomal encapsulation of doxorubicin, an approved and frequently used oncology drug for the treatment of a wide range of cancers. Localized heat at hyperthermia temperatures (greater than 40° Celsius) releases the encapsulated doxorubicin from the liposome enabling high concentrations of doxorubicin to be deposited preferentially in and around the targeted tumor.

The OPTIMA Study. The OPTIMA Study represents an evaluation of ThermoDox® in combination with a first line therapy, radio frequency ablation ("RFA"), for newly diagnosed, intermediate stage HCC patients. HCC incidence globally is approximately 755,000 new cases per year and is the third largest cancer indication globally. Approximately 30% of newly diagnosed patients can be addressed with RFA alone.

On February 24, 2014, we announced that the United States Food and Drug Administration (the "FDA") provided clearance for the OPTIMA Study, which is a pivotal, double-blind, placebo-controlled Phase III trial of ThermoDox®, in combination with standardized RFA, for the treatment of primary liver cancer. The trial design of the OPTIMA Study is based on the comprehensive analysis of data from an earlier clinical trial conducted by the Company called the HEAT Study (the "HEAT Study"). The OPTIMA Study is supported by a hypothesis developed from an overall survival analysis of a large subgroup of 285 patients from the HEAT Study.

Post-hoc data analysis from our earlier Phase III HEAT Study suggest that ThermoDox® may substantially improve OS, when compared to the control group, in patients if their lesions undergo a 45-minute RFA procedure standardized for a lesion greater than 3 cm in diameter. Data from nine OS sweeps have been conducted since the top line progression free survival ("PFS") data from the HEAT Study were announced in January 2013, with each data set demonstrating substantial improvement in clinical benefit over the control group with statistical significance. On August 15, 2016, we announced updated results from its final retrospective OS analysis of the data from the HEAT Study (the "HEAT Study subgroup"). These results demonstrated that in a large, well bounded, subgroup of patients with a single lesion (n=285, 41% of the HEAT Study patients), treatment with a combination of ThermoDox® and optimized RFA provided an average 54% risk improvement in OS compared to optimized RFA alone. The Hazard Ratio ("HR") at this analysis is 0.65 (95% CI 0.45 - 0.94) with a p-value of 0.02. Median OS for the ThermoDox® subgroup has been reached which translates into a two-year survival benefit over the optimized RFA subgroup (projected to be greater than 80 months for the ThermoDox® plus optimized RFA subgroup compared to less than 60 months projection for the optimized RFA only subgroup).

While this information should be viewed with caution since it is based on a retrospective analysis of a subgroup, we also conducted additional analyses that further strengthen the evidence for the HEAT Study subgroup. We commissioned an independent computational model at the University of South Carolina Medical School. The results unequivocally indicate that longer RFA heating times correlate with significant increases in doxorubicin concentration around the RFA treated tissue. In addition, we conducted a prospective preclinical study in 22 pigs using two different manufacturers of RFA and human equivalent doses of ThermoDox® that clearly support the relationship between increased heating duration and doxorubicin concentrations.

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The OPTIMA Study was designed with extensive input from globally recognized HCC researchers and expert clinicians. The FDA also provided formal written feedback to the Company on the study protocol and trial design. The OPTIMA Study was designed to enroll up to 550 patients globally at approximately 65 clinical sites in the U.S., Canada, European Union (EU), China and other countries in the Asia-Pacific region and will evaluate ThermoDox® in combination with standardized RFA, which will require a minimum of 45 minutes across all investigators and clinical sites for treating lesions three to seven centimeters, versus standardized RFA alone. The primary endpoint for this clinical trial is overall survival ("OS"), and the secondary endpoints are progression free survival and safety. The statistical plan calls for two interim efficacy analyses by an independent Data Monitoring Committee ("DMC").

We completed enrollment of 556 patients in the Phase III OPTIMA Study in August 2018. Data for the study will be reviewed as it matures up to two interim analyses expected to be conducted in the second half of 2019 and in mid-2020. We expect that the final efficacy analysis, if necessary, will be completed in early 2021. ThermoDox® has received U.S. FDA Fast Track Designation and has been granted orphan drug designation for primary liver cancer in both the U.S. and the EU. Additionally, the U.S. FDA has provided ThermoDox® with a 505(b)(2) registration pathway. Subject to a successful trial, the OPTIMA Study has been designed to support registration in all key primary liver cancer markets. We fully expect to submit registrational applications in the U.S., Europe and China. We expect to submit and believe that applications will be accepted in South Korea, Taiwan and Vietnam, three other significant markets for ThermoDox® if it were to receive approval in Europe, China or the U.S.

On December 18, 2018, we announced that the DMC for the OPTIMA Study completed its last scheduled review of all patients enrolled in the trial and unanimously recommended that the OPTIMA Study continue according to protocol to its final data readout. The DMC's recommendation was based on the Committee's assessment of safety and data integrity of all patients randomized in the trial as of October 4, 2018. The DMC reviewed study data at regular intervals throughout the patient enrollment period, with the primary responsibilities of ensuring the safety of all patients enrolled in the study, the quality of the data collected, and the continued scientific validity of the study design. As part of its review of all 556 patients enrolled into the trial, the DMC evaluated a quality matrix relating to the total clinical data set, confirming the timely collection of data, that all data are current as well as other data collection and quality criteria.

On August 5, 2019, the Company announced that the prescribed number of OS events had been reached for the first prespecified interim analysis of the OPTIMA Phase III Study. Following preparation of the data, the first interim analysis was conducted by the DMC on November 1, 2019. This timeline was consistent with the Company's stated expectations and is necessary to provide a full and comprehensive data set that may represent the potential for a successful trial outcome. In accordance with the statistical plan, this initial interim analysis has a target of 118 events, or 60% of the total number required for the final analysis. At the time of the data cutoff, the Company received reports of 128 events. The hazard ratio for success at 128 events is approximately 0.63, which represents a 37% reduction in the risk of death compared with RFA alone and is consistent with the 0.65 hazard ratio that was observed in the prospective HEAT Study subgroup, which demonstrated a two-year overall survival advantage and a median time to death of more than seven and a half years.

On November 4, 2019, the Company announced that the DMC unanimously recommended the OPTIMA Study continue according to protocol. The recommendation was based on a review of blinded safety and data integrity from 556 patients enrolled in the Company's multinational, double-blind, placebo-controlled pivotal Phase III OPTIMA Study. The DMC's pre-planned interim efficacy review followed 128 patient events, or deaths, which occurred in August 2019. Data presented demonstrated that PFS and OS data appear to be tracking with patient data observed at a similar point in the Company's subgroup of patients followed prospectively in the earlier Phase III HEAT Study, upon which the OPTIMA Study is based.

The data review demonstrated the following:

  ? The OPTIMA Study patient demographics and risk factors are consistent with
    what the Company observed in the HEAT Study subgroup with all data quality
    metrics meeting expectations.

  ? Median PFS for the OPTIMA Study reached 17 months as of August 2019. These
    blinded data compare favorably with 16 months median PFS for all 285 patients
    in the HEAT Study subgroup of patients treated with RFA >45 minutes.

  ? Median OS for the OPTIMA Study has not been reached as of August 5, 2019,
    however median OS appears to be consistent with the HEAT Study subgroup of
    patients treated with RFA >45 minutes and followed prospectively for overall
    survival.

  ? The OPTIMA Study has lost only 4 patients to follow-up from the initiation of
    the trial in September 2014 through August 2019 while the trial design allows
    for 3% risk for loss per year, which at this point would have exceeded 60
    patients.




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While the Company has not unblinded the study to report a hazard ratio, PFS and OS are tracking similarly to the subgroup of patients who received more than 45 minutes of RFA in our HEAT Study and followed prospectively for more than three years. This subgroup in the HEAT Study demonstrated a 2-year overall survival advantage and a median time to death of more than 7 ½ years. This tracking appears to bode well for success at the second of two pre-planned interim efficacy analysis, which is intended after a minimum of 158 patient deaths and is projected to occur during the second quarter of 2020. The hazard ratio for success at 158 events is 0.70. This is below the hazard ratio of 0.65 observed in the HEAT Study subgroup of patients treated with RFA > 45 minutes.

The HEAT Study. On January 31, 2013, we announced that ThermoDox® in combination with radio frequency ablation ("RFA") did not meet the primary endpoint of progression free survival ("PFS") for the 701-patient clinical trial in patients with hepatocellular carcinoma (HCC), also known as primary liver cancer (the HEAT Study). We determined, after conferring with the HEAT Study's independent DMC, that the HEAT Study did not meet the goal of demonstrating persuasive evidence of clinical effectiveness, that being a clinically meaningful improvement in progression free survival (PFS), that could form the basis for regulatory approval. In the trial, ThermoDox® was well-tolerated with no unexpected serious adverse events. Following the announcement of the HEAT Study results, we continued to follow patients for overall survival (OS), the secondary endpoint of the HEAT Study. We have conducted a comprehensive analysis of the data from the HEAT Study to assess the future strategic value and development strategy for ThermoDox®.

Findings from the HEAT Study post-hoc data analysis suggest that ThermoDox® may substantially improve overall survival, when compared to the control group, in patients if their lesions undergo a 45-minute RFA procedure standardized for a lesion greater than 3 cm in diameter. Data from nine OS sweeps have been conducted since the top line PFS data from the HEAT Study were announced in January 2013, with each data set demonstrating progressive improvement in clinical benefit and statistical significance. On August 15, 2016, the Company announced the most recent post-hoc OS analysis from the HEAT Study. These results demonstrated that in a large, well bounded subgroup of patients with a single lesion (n=285, 41% of the HEAT Study patients), the combination of ThermoDox® and optimized RFA provided an average 54% risk improvement in OS compared to optimized RFA alone. The Hazard Ratio at this latest OS analysis is 0.65 (95% CI 0.45 - 0.94) with a p-value of 0.02. Median OS for the ThermoDox® group has been reached which translates into a two-year survival benefit over the optimized RFA group (projected to be greater than 80 months for the ThermoDox® plus optimized RFA group compared to less than 60 months projection for the optimized RFA only group). These data continue to strongly suggest that ThermoDox® may significantly improve Overall Survival compared to an RFA control in patients whose lesions undergo optimized RFA treatment for 45 minutes or more as well as support the protocol for our Phase III OPTIMA Study as described below.

Findings from the HEAT Study post-hoc data analysis have shown to be well balanced and not diminished in anyway by other factors. Supplementary computational modeling and prospective preclinical animal studies have shown additional support the relationship between heating duration and clinical outcomes. These data have been presented, without objection, at multiple scientific and medical conferences in 2013 through 2016 by key HEAT Study investigators and leading liver cancer experts.

On October 16, 2017, the Company announced the publication of the manuscript, "Phase III HEAT STUDY Adding Lyso-Thermosensitive Liposomal Doxorubicin to Radiofrequency Ablation in Patients with Unresectable Hepatocellular Carcinoma Lesions," in Clinical Cancer Research, a peer-reviewed medical journal. The article reports on one of the largest controlled studies in hepatocellular carcinoma. It provides a comprehensive review of ThermoDox® for the treatment of primary liver cancer. The article details learnings from the Company's 701 patient HEAT Study and includes results from computer simulation studies and includes findings from a post hoc subgroup analysis, all of which are consistent with each other and which - when examined together - suggests a clearer understanding of a key ThermoDox® heat-based mechanism of action: the longer the target tissue is heated, the greater the doxorubicin tissue concentration. Additionally, the article explores a new hypothesis prompted by these findings: ThermoDox® when used in combination with Radiofrequency Ablation (RFA) standardized to a minimum dwell time of 45 minutes (sRFA > 45 minutes), may increase the overall survival (OS) of patients with HCC. The lead author is Won Young Tak, M.D., Ph.D., Professor Internal Medicine, Gastroenterology & Hepatology, Kyungpook National University Hospital Daegu, Republic of Korea, and there are 22 HEAT Study co-authors along with Nicholas Borys, M.D., Celsion's senior vice president and chief medical officer.

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IMMUNO-ONCOLOGY Program

On June 20, 2014, we completed the acquisition of substantially all of the assets of EGEN, a private company located in Huntsville, Alabama. Pursuant to the Asset Purchase Agreement, CLSN Laboratories acquired all of EGEN's right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. A key asset acquired from EGEN was the TheraPlas Technology Platform and the first drug developed from it is GEN-1.

THERAPLAS Technology Platform

TheraPlas is a technology platform for the delivery of DNA and mRNA therapeutics via synthetic non-viral carriers and is capable of providing cell transfection for double-stranded DNA plasmids and large therapeutic RNA segments such as mRNA. There are two components of the TheraPlas system, a plasmid DNA or mRNA payload encoding a therapeutic protein, and a delivery system. The delivery system is designed to protect the DNA/RNA from degradation and promote trafficking into cells and through intracellular compartments. We designed the delivery system of TheraPlas by chemically modifying the low molecular weight polymer to improve its gene transfer activity without increasing toxicity. We believe that TheraPlas is a viable alternative to current approaches to gene delivery due to several distinguishing characteristics, including enhanced molecular versatility that allows for complex modifications to improve activity and safety.

The design of TheraPlas delivery system is based on molecular functionalization of polyethyleneimine (PEI), a cationic delivery polymer with a distinct ability to escape from the endosomes due to heavy protonation. The transfection activity and toxicity of PEI is tightly coupled to its molecular weight therefore the clinical application of PEI is limited. We have used molecular functionalization strategies to improve the activity of low molecular weight PEIs without augmenting their cytotoxicity. In one instance, chemical conjugation of a low molecular weight branched BPEI1800 with cholesterol and polyethylene glycol (PEG) to form PEG-PEI-Cholesterol (PPC) dramatically improved the transfection activity of BPEI1800 following in vivo delivery. Together, the cholesterol and PEG modifications produced approximately 20-fold enhancement in transfection activity. Biodistribution studies following intraperitoneal or subcutaneous administration of DNA/PPC nanocomplexes showed DNA delivery localized primarily at the injection site with only small amount escaping into systemic circulation. PPC is the delivery component of our lead TheraPlas product, GEN-1, which is in clinical development for the treatment ovarian cancer and in preclinical development for the treatment of glioblastoma. The PPC manufacturing process has been scaled up from bench scale (1-2 g) to 0.6Kg, and several cGMP lots have been produced with reproducible quality.

TheraPlas has emerged as a viable alternative to current approaches due to several distinguishing characteristics such as strong molecular versatility that allows for complex modifications to improve activity and safety with little difficulty. The biocompatibility of these polymers reduces the risk of adverse immune response, thus allowing for repeated administration. Compared to naked DNA or cationic lipids, TheraPlas is generally safer, more efficient, and cost effective. We believe that these advantages place Celsion in strong position to capitalize on this technology.

GEN-1

GEN-1 is a DNA-based immunotherapeutic product for the localized treatment of ovarian and brain cancers by intraperitoneally administering an Interleukin-12 ("IL-12") plasmid formulated with our proprietary TheraPlas delivery system. In this DNA-based approach, the immunotherapy is combined with a standard chemotherapy drug, which can potentially achieve better clinical outcomes than with chemotherapy alone. We believe that increases in IL-12 concentrations at tumor sites for several days after a single administration could create a potent immune environment against tumor activity and that a direct killing of the tumor with concomitant use of cytotoxic chemotherapy could result in a more robust and durable antitumor response than chemotherapy alone. We believe the rationale for local therapy with GEN-1 are based on the following:

  ? Loco-regional production of the potent cytokine IL-12 avoids toxicities and
    poor pharmacokinetics associated with systemic delivery of recombinant IL-12;

  ? Persistent local delivery of IL-12 lasts up to one week and dosing can be
    repeated;

  ? Ideal for long-term maintenance therapy.




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Ovarian Cancer Overview

Ovarian cancer is the most lethal of gynecological malignancies among women with an overall five-year survival rate of 45%. This poor outcome is due in part to the lack of effective prevention and early detection strategies. There were approximately 22,000 new cases of ovarian cancer in the U.S. in 2014 with an estimated 14,000 deaths. Mortality rates for ovarian cancer declined very little in the last forty years due to the unavailability of detection tests and improved treatments. Most women with ovarian cancer are not diagnosed until Stages III or IV, when the disease has spread outside the pelvis to the abdomen and areas beyond causing swelling and pain, where the five-year survival rates are 25 - 41 percent and 11 percent, respectively. First-line chemotherapy regimens are typically platinum-based combination therapies. Although this first line of treatment has an approximate 80 percent response rate, 55 to 75 percent of women will develop recurrent ovarian cancer within two years and ultimately will not respond to platinum therapy. Patients whose cancer recurs or progresses after initially responding to surgery and first-line chemotherapy have been divided into one of the two groups based on the time from completion of platinum therapy to disease recurrence or progression. This time period is referred to as platinum-free interval. The platinum-sensitive group has a platinum-free interval of longer than six months. This group generally responds to additional treatment with platinum-based therapies. The platinum-resistant group has a platinum-free interval of shorter than six months and is resistant to additional platinum-based treatments. Pegylated liposomal doxorubicin, topotecan, and Avastin are the only approved second-line therapies for platinum-resistant ovarian cancer. The overall response rate for these therapies is 10 to 20 percent with median overall survival of eleven to twelve months. Immunotherapy is an attractive novel approach for the treatment of ovarian cancer particularly since ovarian cancers are considered immunogenic tumors. IL-12 is one of the most active cytokines for the induction of potent anti-cancer immunity acting through the induction of T-lymphocyte and natural killer cell proliferation. The precedence for a therapeutic role of IL-12 in ovarian cancer is based on epidemiologic and preclinical data.

GEN-I OVATION Study. In February 2015, we announced that the FDA accepted, without objection, the Phase I dose-escalation clinical trial of GEN-1 in combination with the standard of care in neoadjuvant ovarian cancer (the "OVATION Study"). On September 30, 2015, we announced enrollment of the first patient in the OVATION Study. The OVATION Study was designed to (i) identify a safe, tolerable and potentially therapeutically active dose of GEN-1 by recruiting and maximizing an immune response; (ii) to enroll three to six patients per dose level and will evaluate safety and efficacy and (iii) attempt to define an optimal dose for a follow-on Phase I/II study. In addition, the OVATION Study establishes a unique opportunity to assess how cytokine-based compounds such as GEN-1, directly affect ovarian cancer cells and the tumor microenvironment in newly diagnosed patients. The study was designed to characterize the nature of the immune response triggered by GEN-1 at various levels of the patients' immune system, including:

  ? Infiltration of cancer fighting T-cell lymphocytes into primary tumor and
    tumor microenvironment including peritoneal cavity, which is the primary site
    of metastasis of ovarian cancer;

  ? Changes in local and systemic levels of immuno-stimulatory and
    immunosuppressive cytokines associated with tumor suppression and growth,
    respectively; and

  ? Expression profile of a comprehensive panel of immune related genes in
    pre-treatment and GEN-1-treated tumor tissue.

We initiated the OVATION Study at four clinical sites at the University of Alabama at Birmingham, Oklahoma University Medical Center, Washington University in St. Louis and the Medical College of Wisconsin. During 2016 and 2017, we announced data from the first fourteen patients in the OVATION Study, who completed treatment. On October 3, 2017, we announced final clinical and translational research data from the OVATION Study.

Key translational research findings from all evaluable patients are consistent with the earlier reports from partial analysis of the data and are summarized below:

  ? The intraperitoneal treatment of GEN-1 in conjunction with neoadjuvant
    chemotherapy resulted in dose dependent increases in IL-12 and
    Interferon-gamma (IFN-?) levels that were predominantly in the peritoneal
    fluid compartment with little to no changes observed in the patients' systemic
    circulation. These and other post-treatment changes including decreases in
    VEGF levels in peritoneal fluid are consistent with an IL-12 based immune
    mechanism;




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  ? Consistent with the previous partial reports, the effects observed in the IHC
    analysis were pronounced decreases in the density of immunosuppressive T-cell
    signals (Foxp3, PD-1, PDL-1, IDO-1) and increases in CD8+ cells in the tumor
    microenvironment;

  ? The ratio of CD8+ cells to immunosuppressive cells was increased in
    approximately 75% of patients suggesting an overall shift in the tumor
    microenvironment from immunosuppressive to pro-immune stimulatory following
    treatment with GEN-1. An increase in CD8+ to immunosuppressive T-cell
    populations is a leading indicator and believed to be a good predictor of
    improved overall survival; and

  ? Analysis of peritoneal fluid by cell sorting, not reported before, shows a
    treatment-related decrease in the percentage of immunosuppressive T-cell
    (Foxp3+), which is consistent with the reduction of Foxp3+ T-cells in the
    primary tumor tissue, and a shift in tumor naïve CD8+ cell population to more
    efficient tumor killing memory effector CD8+ cells.

The Company also reported positive clinical data from the first fourteen patients who completed treatment in the OVATION Study. GEN-1 plus standard chemotherapy produced positive clinical results, with no dose limiting toxicities and positive dose dependent efficacy signals which correlate well with positive surgical outcomes as summarized below:

  ? Of the fourteen patients treated in the entire study, two patients
    demonstrated a complete response, ten patients demonstrated a partial response
    and two patients demonstrated stable disease, as measured by RECIST criteria.
    This translates to a 100% disease control rate and an 86% objective response
    rate ("ORR"). Of the five patients treated in the highest dose cohort, there
    was a 100% ORR with one complete response and four partial responses;

  ? Fourteen patients had successful resections of their tumors, with nine
    patients (64%) having a complete tumor resection ("R0"), which indicates a
    microscopically margin-negative resection in which no gross or microscopic
    tumor remains in the tumor bed. Seven out of eight (88%) patients in the
    highest two dose cohorts experienced a R0 surgical resection. All five
    patients treated at the highest dose cohort experienced a R0 surgical
    resection;

  ? All patients experienced a clinically significant decrease in their CA-125
    protein levels as of their most recent study visit. CA-125 is used to monitor
    certain cancers during and after treatment. CA-125 is present in greater
    concentrations in ovarian cancer cells than in other cells; and

On March 2, 2019, the Company announced final PFS results from the OVATION Study. Median progression-free survival (PFS) in patients treated per protocol (n=14) was 21 months and was 17.1 months for the intent-to-treat population (n=18) for all dose cohorts, including three patients who dropped out of the study after 13 days or less, and two patients who did not receive full NAC and GEN-1 cycles. Under the current standard of care, in women with Stage III/IV ovarian cancer undergoing NAC, the disease progresses within about 12 months on average. The results from the OVATION Study support continued evaluation of GEN-1 based on promising tumor response, as reported in the PFS data, and the ability for surgeons to completely remove visible tumor at debulking surgery. GEN-1 was well tolerated and no dose-limiting toxicities were detected. Intraperitoneal administration of GEN-1 was feasible with broad patient acceptance.

GEN-1 OVATION 2 Study. The Company held an Advisory Board Meeting on September 27, 2017 with the clinical investigators and scientific experts including those from Roswell Park Cancer Institute, Vanderbilt University Medical School, and M.D. Anderson Cancer Center to review and finalize clinical, translational research and safety data from the Phase IB OVATION Study in order to determine the next steps forward for our GEN-1 immunotherapy program.

On November 13, 2017, the Company filed its Phase I/II clinical trial protocol with the U.S. Food and Drug Administration for GEN-1 for the localized treatment of ovarian cancer. The protocol is designed with a single dose escalation phase to 100 mg/m² to identify a safe and tolerable dose of GEN-1 while maximizing an immune response. The Phase I portion of the study will be followed by a continuation at the selected dose in 130 patients randomized Phase II study. On November 5, 2019, the Company announced that the independent Data Safety Monitoring Board (DSMB) completed its safety review of data from the first eight patients enrolled in the ongoing Phase I/II OVATION 2 Study. Based on the DSMB's recommendation, the study will continue as planned and the Company will proceed with completing enrollment in the Phase I portion of the trial.

In the OVATION 2 Study, patients in the GEN-1 treatment arm will receive GEN-1 plus chemotherapy pre- and post-interval debulking surgery. The OVATION 2 Study will include up to 130 patients with Stage III/IV ovarian cancer, with 12 to 15 patients in the Phase I portion and up to 118 patients in Phase II. The study is powered to show a 33% improvement in the primary endpoint, PFS, when comparing GEN-1 with neoadjuvant + adjuvant chemotherapy versus neoadjuvant + adjuvant chemotherapy alone. The PFS primary analysis will be conducted after at least 80 events have been observed or after all patients have been followed for at least 16 months, whichever is later.

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Developed with extensive input from the Company's Medical Advisory Board, the OVATION 2 Study builds on promising clinical and translational research data from the Phase IB dose-escalation OVATION I Study, in which enrolled patients received escalating weekly doses of GEN-1 up to 79 mg/m² for a total of eight treatments in combination with NACT, followed by IDS. In addition to exploring a higher dose of GEN-1 in the OVATION 2 study, patients will continue to receive GEN-1 after their IDS in combination with adjuvant chemotherapy.

The latest DSMB review of GEN-1 at 100 mg/m² has confirmed that there were no dose limiting toxicities detected in any of the five patients dosed with GEN-1 and that intraperitoneal administration is well tolerated even when given with standard NACT. Of the eight patients treated in the Phase I portion of the OVATION 2 Study, five patients were treated with GEN-1 plus NACT and three patients were treated with NACT only.

In March 2020, the Company announced highly encouraging initial clinical data from the first 15 patients enrolled in the ongoing Phase I/II OVATION 2 Study for patients newly diagnosed with Stage III and IV ovarian cancer. The OVATION 2 Study combines GEN-1, the Company's IL-12 gene-mediated immunotherapy, with standard-of-care neoadjuvant chemotherapy (NACT). Following NACT, patients undergo interval debulking surgery (IDS), followed by three additional cycles of chemotherapy.

GEN-1 plus standard NACT produced positive dose-dependent efficacy results, with no dose-limiting toxicities, which correlates well with successful surgical outcomes as summarized below:

? Of the 15 patients treated in the Phase I portion of the OVATION 2 Study, nine

patients were treated with GEN-1 at a dose of 100 mg/m² plus NACT and six

patients were treated with NACT only. All 15 patients had successful resections

of their tumors, with seven out of nine patients (78%) in the GEN-1 treatment

arm having an R0 resection, which indicates a microscopically margin-negative

resection in which no gross or microscopic tumor remains in the tumor bed. Only

three out of six patients (50%) in the NACT only treatment arm had a R0

   resection.

? When combining these results with the surgical resection rates observed in the

Company's prior Phase Ib dose-escalation trial (the OVATION 1 Study), a

population of patients with inclusion criteria identical to the OVATION 2

Study, the data reflect the strong dose-dependent efficacy of adding GEN-1 to

the current standard of care NACT:

                                                       % of Patients with
                                                          R0 Resections
         0, 36, 47 mg/m² of GEN-1 plus NACT     n=12                    42 %
         61, 79, 100 mg/m² of GEN-1 plus NACT   n=17                    82 %

? The objective response rate (ORR) as measured by Response Evaluation Criteria

in Solid Tumors (RECIST) criteria for the 0, 36, 47 mg/m² dose GEN-1 patients

were comparable, as expected, to the higher (61, 79, 100 mg/m²) dose GEN-1

patients, with both groups demonstrating an approximate 80% ORR.

Acquisition of EGEN Assets

On June 20, 2014, we completed the acquisition of substantially all of the assets of EGEN, which has changed its company name to EGWU, Inc. after the closing of the acquisition, pursuant to an asset purchase agreement (the "Asset Purchase Agreement") dated as of June 6, 2014, by and between EGEN and Celsion. We acquired all of EGEN's right, title and interest in and to substantially all of the assets of EGEN, including cash and cash equivalents, patents, trademarks and other intellectual property rights, clinical data, certain contracts, licenses and permits, equipment, furniture, office equipment, furnishings, supplies and other tangible personal property. In addition, CLSN Laboratories assumed certain specified liabilities of EGEN, including the liabilities arising out of the acquired contracts and other assets relating to periods after the closing date. The total purchase price for the asset acquisition is up to $44.4 million, including potential future earnout payments of up to $30.4 million contingent upon achievement of certain earnout milestones set forth in the Asset Purchase Agreement. At the closing, we paid approximately $3.0 million in cash after the expense adjustment and issued 193,728 shares of our common stock to EGEN. The shares of common stock were issued in a private transaction exempt from registration under the Securities Act, pursuant to Section 4(2) thereof. In addition, the Company issued the Holdback Shares on June 16, 2017. On March 28, 2019, the Company and EGWU, Inc, entered into the Amended Asset Purchase Agreement. Pursuant to the Amended Asset Purchase Agreement, payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million has been modified. The Company has the option to make the payment as follows:

  a) $7.0 million in cash within 10 business days of achieving the milestone; or
  b) $12.4 million in cash, common stock of the Company, or a combination of
     either, within one year of achieving the milestone.




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The Company provided EGWU, Inc. 200,000 warrants to purchase common stock at a strike price of $0.01 per warrant share as consideration for entering into this amended agreement. The warrant shares have no expiration and were fair valued at $2.00 using the closing price of a share of Celsion stock on the date of issuance offset by the exercise price and recorded as a non-cash expense in the income statement and were classified as equity on the balance sheet.

Our obligations to make the earnout payments will terminate on the eight anniversary of the closing date. In the acquisition, we purchased GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian and brain cancers, and two platform technologies for the development of treatments for those suffering with difficult-to-treat forms of cancer, novel nucleic acid-based immunotherapies and other anti-cancer DNA or RNA therapies, including TheraPlas and TheraSilence.

Acquired in-process research and development ("IPR&D") consists of EGEN's drug technology platforms: TheraPlas and TheraSilence. The fair value of the IPR&D drug technology platforms was estimated to be $24.2 million as of the acquisition date. As of the closing of the acquisition, the IPR&D was considered indefinite lived intangible assets and will not be amortized. IPR&D is reviewed for impairment at least annually as of our third quarter ended September 30, and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. On December 31, 2016, the Company determined one of its IPR&D assets related to its RNA delivery system was impaired and wrote off its fair value, incurring a non-cash charge of $1.4 million during 2016. During its annual assessments on September 30, 2017 and 2018, the Company determined its IPR&D asset related to its glioblastoma multiforme cancer (GBM) product candidate, originally fair valued at $9.4 million on the date of acquisition, was impaired and wrote this asset's carrying value down to $2.4 million collectively after those two assessments, incurring non-cash charges of $2.5 million and $4.5 million during 2017 and 2018, respectively. On September 30, 2019, the Company evaluated its IPR&D of the (GBM) product candidate and concluded that it is not more likely than not that the asset is further impaired. On September 30, 2019 and 2018, the Company evaluated its IPR&D of the ovarian cancer indication and concluded that it is not more likely than not that the asset is impaired. As no other indicators of impairment existed during the fourth quarter of 2019, the Company concluded none of the other IPR&D assets were impaired at December 31, 2019. The carrying amount of the ovarian cancer indication was $13.3 million at December 31, 2019 and 2018.

Covenant Not to Compete (CNTC)

Pursuant to the EGEN Purchase Agreement, EGEN provided certain covenants ("Covenant Not To Compete") to the Company whereby EGEN agreed, during the period ending on the seventh anniversary of the closing date of the acquisition on June 20, 2014, not to enter into any business, directly or indirectly, which competes with the business of the Company nor will it contact, solicit or approach any of the employees of the Company for purposes of offering employment.

Business Plan

As a clinical stage biopharmaceutical company, our business and our ability to execute our strategy to achieve our corporate goals are subject to numerous risks and uncertainties. Material risks and uncertainties relating to our business and our industry are described in "Part I, Item 1A. Risk Factors" in this Annual Report on Form 10-K.

We had $16.7 million in cash, investments, interest receivable and deferred income tax asset as of December 31, 2019, as well as $6.4 million we have raised thus far in 2020 under the 2019 Aspire Purchase Agreement and from the February 2020 Offering. The Company has approximately $15 million available under the Capital on Demand Agreement with JonesTrading International Services LLC. Given our development plans, we anticipate our current cash resources will be sufficient to fund our operations and financial commitments through mid-2021. On March 5, 2020, we terminated the 2019 Aspire Purchase Agreement. Other than the Capital on Demand Agreement with Jones Trading that provides us the ability to sell equity securities in the future, we have no other committed sources of additional capital and there is uncertainty whether additional funding will be available when needed on terms that will be acceptable to it, or at all. If the Company would not be able to obtain financing when needed, it could be unable to carry out the business plan and may have to significantly limit its operations and its business and its financial condition and results of operations could be materially harmed. The extent to which the recent global Covid-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain or treat its impact, among others. Any significant infectious disease outbreak, including the COVID-19 pandemic, could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed.

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Financing Overview

Equity, Debt and Other Forms of Financing

As more fully discussed in Note 9 of the Financial Statement included in this Annual Report, during the fourth quarter of 2018, the Company received eligibility from the New Jersey Economic Development Authority to sell, and did sell, $11.1 million of its unused New Jersey net operating losses under the Technology Business Tax Certificate Program, receiving $10.4 million of non-dilutive funding in the process. During the fourth quarter of 2019, the Company received approval from the New Jersey Economic Development Authority to sell $1.9 million its New Jersey net operating losses. In early 2020, the Company entered into an agreement to sell these net operating losses and expects to receive net proceeds of approximately $1.8 million in the second quarter of 2020.

During 2018 and 2019, we issued a total of 5.1 million shares of common stock as discussed below for an aggregate $9.4 million in gross proceeds. During the first quarter of 2020, the Company has issued a total of 5.6 million shares of common stock for an aggregate of $6.4 million in gross proceeds as discussed in more detail below. In June 2018, we entered a $10 million loan facility with Horizon Technology Finance Corporation ("Horizon").

  ? On June 27, 2018, the Company entered into the Horizon Credit Agreement with
    Horizon that provided $10 million in new capital. The Company drew down $10
    million upon closing of the Horizon Credit Agreement on June 27, 2018. The
    Company anticipates that it will use the funding provided under the Horizon
    Credit Agreement for working capital and advancement of its product pipeline.
    The obligations under the Horizon Credit Agreement are secured by a
    first-priority security interest in substantially all assets of Celsion other
    than intellectual property assets. The obligations will bear interest at a
    rate calculated based on one-month LIBOR plus 7.625%. Payments under the loan
    agreement are interest only for the first twenty-four (24) months after loan
    closing, followed by a 24-month amortization period of principal and interest
    through the scheduled maturity date.

  ? On August 31, 2018, the Company entered into the 2018 Aspire Purchase
    Agreement with Aspire Capital Fund LLC ("Aspire Capital") which provides that,
    upon the terms and subject to the conditions and limitations set forth
    therein, Aspire Capital is committed to purchase up to an aggregate of $15.0
    million of shares of the Company's common stock over the 24-month term of the
    2018 Aspire Purchase Agreement. On October 12, 2018, the Company filed with
    the SEC a prospectus supplement to the 2018 Shelf Registration Statement
    registering all of the shares of common stock that may be offered to Aspire
    Capital from time to time. The timing and amount of sales of the Company's
    common stock to Aspire Capital. Aspire Capital has no right to require any
    sales by the Company but is obligated to make purchases from the Company as
    directed by the Company in accordance with the Purchase Agreement. There are
    no limitations on use of proceeds, financial or business covenants,
    restrictions on future funding, rights of first refusal, participation rights,
    penalties or liquidated damages in the Purchase Agreement. In consideration
    for entering into the Purchase Agreement, concurrently with the execution of
    the Purchase Agreement, the Company issued to Aspire Capital 164,835
    Commitment Shares. The 2018 Aspire Purchase Agreement may be terminated by the
    Company at any time, at its discretion, without any cost to the Company.
    During 2018 and 2019 the Company sold and issued an aggregate of 3.4 million
    shares under the Purchase Agreement, receiving approximately $6.5 million. All
    proceeds from the Company received under the 2018 Aspire Purchase Agreement
    were used for working capital and general corporate purposes. As a result of
    the Company and Aspire Capital entering into a new purchase agreement on
    October 28, 2019 discussed in the next paragraph, the 2018 Aspire Purchase
    Agreement was terminated.

  ? On October 28, 2019, Company, entered into the 2019 Aspire Purchase Agreement
    with Aspire Capital. The terms and conditions pursuant to the 2019 Aspire
    Purchase Agreement are substantially similar to the 2018 Aspire Purchase
    Agreement. Pursuant to the new 2019 Aspire Purchase Agreement, Aspire Capital
    is committed to purchase up to an aggregate of $10.0 million of shares of the
    Company's common stock over the 24-month term of the 2019 Aspire Purchase
    Agreement. Concurrently with entering into the 2019 Aspire Purchase Agreement,
    the Company also entered into a registration rights agreement with Aspire
    Capital (the "Registration Rights Agreement"), in which the Company agreed to
    file one or more registration statements, as permissible and necessary to
    register under the Securities Act of 1933, as amended (the "Securities Act"),
    registering the sale of the shares of the Company's common stock that have
    been and may be issued to Aspire Capital under the 2019 Aspire Purchase
    Agreement. In consideration for entering into the 2019 Aspire Purchase
    Agreement, the Company issued to Aspire Capital an additional 100,000
    Commitment Shares. On November 8, 2019, the Company filed with the SEC a
    Registration Statement on Form S-1 registering all the shares of common stock
    that may be offered to Aspire Capital from time to time under the 2019 Aspire
    Purchase Agreement. During 2019, the Company sold 0.5 million shares of common
    stock under the 2019 Aspire Purchase Agreement, receiving approximately $0.7
    million in gross proceeds. On March 5, 2020, the Company delivered notice to
    Aspire Capital terminating the 2019 Aspire Purchase Agreement effective as of
    March 6, 2020. During the first quarter of 2020, the Company sold 1.0 million
    shares of common stock under the 2019 Aspire Purchase Agreement and received
    $1.6 million in gross proceeds.




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  ? We were a party to a Controlled Equity OfferingSM Sales Agreement (ATM) dated
    as of February 1, 2013 with Cantor Fitzgerald & Co., pursuant to which we may
    sell additional shares of our common stock having an aggregate offering price
    of up to $25 million through "at-the-market" equity offerings from time to
    time. During 2018, the Company sold 0.5 million shares of common stock under
    the ATM, receiving approximately $1.2 million in net proceeds. On October 10,
    2018, the Company delivered notice to Cantor terminating the ATM effective as
    of October 20, 2018. From February 2013 through the date of termination, the
    Company sold 1.8 million shares of Common Stock under the Sales Agreement
    generating gross proceeds of $12.8 million. The Company has no further
    obligations under the ATM.

  ? On December 4, 2018, the Company entered into a new Capital on DemandTM Sales
    Agreement (the "Capital on Demand Agreement") with JonesTrading Institutional
    Services LLC, as sales agent ("JonesTrading"), pursuant to which the Company
    may offer and sell, from time to time, through JonesTrading shares of common
    stock having an aggregate offering price of up to $16.0 million. The Company
    intends to use the net proceeds from the offering, if any, for general
    corporate purposes, including research and development activities, capital
    expenditures and working capital. The Company is not obligated to sell any
    Common Stock under the Capital on Demand Agreement and, subject to the terms
    and conditions of the Capital on Demand Agreement, JonesTrading will use
    commercially reasonable efforts, consistent with its normal trading and sales
    practices and applicable state and federal law, rules and regulations and the
    rules of The Nasdaq Capital Market, to sell common stock from time to time
    based upon Celsion's instructions, including any price, time or size limits or
    other customary parameters or conditions the Company may impose. Under the
    Capital on Demand Agreement, JonesTrading may sell common stock by any method
    deemed to be an "at the market offering" as defined in Rule 415 promulgated
    under the Securities Act of 1933, as amended. The Capital on Demand Agreement
    will terminate upon the earlier of (i) the sale of all shares of our common
    stock subject to the Sales Agreement, and (ii) the termination of the Capital
    on Demand Agreement by JonesTrading or Celsion. The Capital on Demand
    Agreement may be terminated by JonesTrading or the Company at any time upon 10
    days' notice to the other party, or by JonesTrading at any time in certain
    circumstances, including the occurrence of a material adverse change in the
    Company. The Company did not sell any shares under the Capital on Demand
    Agreement during 2018. During 2019, the Company sold 0.5 million shares of
    common stock under the Capital on Demand Agreement, receiving approximately
    $1.0 million.

  ? On February 27, 2020, we entered into a Securities Purchase Agreement (the
    "Purchase Agreement") with several institutional investors, pursuant to which
    we agreed to issue and sell, in a registered direct offering (the "February
    2020 Offering"), an aggregate of 4,571,428 shares (the "Shares") of our common
    stock at an offering price of $1.05 per share for gross proceeds of
    approximately $4.8 million before the deduction of the Placement Agent fees
    and offering expenses. The Shares were offered by the Company pursuant to a
    registration statement on Form S-3 (File No. 333-227236). The Purchase
    Agreement contains customary representations, warranties and agreements by the
    Company and customary conditions to closing. In a concurrent private placement
    (the "Private Placement"), the Company agreed to issue to the investors that
    participated in the Offering, for no additional consideration, warrants, to
    purchase up to 2,971,428 shares of Common Stock (the "Original Warrants"). The
    Original Warrants were initially exercisable six months following their and
    were set to expire on the five-year anniversary of such initial exercise date.
    The Warrants had an exercise price of $1.15 per share subject to adjustment as
    provided therein. On March 12, 2020 the Company entered into private exchange
    agreements (the "Exchange Agreements") with holders the Warrants. Pursuant to
    the Exchange Agreements, in return for a higher exercise price of $1.24 per
    share of Common Stock, the Company issued new warrants to the Investors to
    purchase up to 3,200,000 shares of Common Stock (the "Exchange Warrants") in
    exchange for the Original Warrants. The Exchange Warrants, like the Original
    Warrants, are initially exercisable six months following their issuance (the
    "Initial Exercise Date") and expire on the five-year anniversary of their
    Initial Exercise Date. Other than having a higher exercise price, different
    issue date, Initial Exercise Date and expiration date, the terms of the
    Exchange Warrants are identical to those of the Original Warrants.

Please refer to Note 2 of the Financial Statements contained in this Form 10-K. Also refer to Item IA, Risk Factors, including, but not limited to, "We will need to raise substantial additional capital to fund our planned future operations, and we may be unable to secure such capital without dilutive financing transactions. If we are not able to raise additional capital, we may not be able to complete the development, testing and commercialization of our product candidates."

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Critical Accounting Policies and Estimates

Our financial statements, which appear at Item 8 to this Annual Report, have been prepared in accordance with accounting principles generally accepted in the U.S., which require that we make certain assumptions and estimates and, in connection therewith, adopt certain accounting policies. Our significant accounting policies are set forth in Note 1 to our financial statements. Of those policies, we believe that the policies discussed below may involve a higher degree of judgment and may be more critical to an accurate reflection of our financial condition and results of operations.

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09 "Revenue from Contracts with Customers (Topic 606)," which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. ASU 2014 - 09 was originally going to be effective on January 1, 2017; however, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date," which deferred the effective date of ASU 2014-09 by one year to January 1, 2018. In March 2016, the FASB issued ASU No. 2016 - 8, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The amendments in this ASU do not change the core principle of ASU No. 2014 - 09 but the amendments clarify the implementation guidance on reporting revenue gross versus net. The effective date for the amendments in this ASU is the same as the effective date of ASU No. 2014-09. In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Identifying Performance Obligations and Licensing)," to clarify the implementation guidance on identifying performance obligations and licensing (collectively "the new revenue standards"). The new revenue standards allow for either "full retrospective" adoption, meaning the standard is applied to all periods presented, or "modified retrospective" adoption, meaning the standard is applied only to the most current period presented in the financial statements. The new revenue standard became effective for us on January 1, 2018. Under the new revenue standards, we recognize revenue following a five-step model prescribed under ASU No. 2014-09; (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. As further described in Note 16, the Company currently has only one contract subject to the new revenue standards. After performance of the five-step model discussed above, the Company concluded the adoption of the new revenue standards as of January 1, 2018 did not change our revenue recognition policy nor does it have an effect on our financial statements using either the full retrospective or the modified retrospective adoption methods.

In-Process Research and Development, Other Intangible Assets and Goodwill

During 2014, the Company acquired certain assets of EGEN, Inc. As more fully described in Note 5 to our Consolidated Financial Statements, the acquisition was accounted for under the acquisition method of accounting which required the Company to perform an allocation of the purchase price to the assets acquired and liabilities assumed. Under the acquisition method of accounting, the total purchase price is allocated to net tangible and intangible assets and liabilities based on their estimated fair values as of the acquisition date.

Lease Accounting

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, "Leases" - Topic 842 (ASC Topic 842), which requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This update also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. The update became effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period. The FASB subsequently issued the following amendments to ASC Topic 842, which have the same effective date and transition date of January 1, 2019:

  ? ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amends
    certain narrow aspects of the guidance issued in ASU 2016-02; and

  ? ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for a
    transition approach to initially apply ASU 2016-02 at the adoption date and
    recognize a cumulative-effect adjustment to the opening balance of retained
    earnings in the period of adoption as well as an additional practical
    expedient for lessors to not separate non-lease components from the associated
    lease component.




57

We adopted Topic ASC 842 effective January 1, 2019 and elected to apply the available practical expedients and implement internal controls to enable the preparation of financial information on adoption. We have identified all of our leases which consist of the New Jersey corporate office lease and the Alabama lab facility lease and we estimate the adoption of this standard will result in the recognition of right-of-use assets of approximately $1.4 million, related operating lease liabilities of $1.5 million and reduced other liabilities by approximately $0.1 million on the consolidated balance sheets as of January 1, 2019 of approximately $1.5 million related to our operating lease commitments, with no material impact to the opening balance of retained earnings. See Note 15 for further discussions regarding the adoption of ASC Topic 842.

Statements of Stockholders' Equity

In August 2018, the SEC issued a final rule to simplify certain disclosure requirements. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. In August and September 2018, further amendments were issued to provide implementation guidance on adoption of the SEC rule and transition guidance for the new interim stockholders' equity disclosure. We adopted this amended guidance in the first quarter of 2019. The adoption of this amended guidance resulted in us disclosing the Condensed Consolidated Statements of Changes in Stockholders' Equity in each of the quarterly reporting period starting in 2019.

We review our financial reporting and disclosure practices and accounting policies on an ongoing basis to ensure that our financial reporting and disclosure system provides accurate and transparent information relative to the current economic and business environment. As part of the process, the Company reviews the selection, application and communication of critical accounting policies and financial disclosures. The preparation of our financial statements in conformity with accounting principles generally accepted in the U.S. requires that our management 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 amounts of revenues and expenses during the reporting period. We review our estimates and the methods by which they are determined on an ongoing basis. However, actual results could differ from our estimates.

Results of Operations

Comparison of Fiscal Year Ended December 31, 2019 and Fiscal Year Ended December 31, 2018.

For the year ended December 31, 2019, our net loss was $16.9 million compared to a net loss of $11.9 million for the year ended December 31, 2018. The Company recognized $1.8 million and $10.4 million in tax benefits from the sale of its New Jersey net operating losses under the Technology Business Tax Certificate Program in the fourth quarters of 2019 and 2018, respectively. With $16.7 million in cash, investments, interest receivable and deferred income tax asset at December 31, 2019 coupled with the $6.4 million of additional capital raised during the first quarter of 2020, the Company believes it has sufficient capital resources to fund its operations through mid-2021.

Technology Development and Licensing Revenue

In January 2013, we entered into a technology development contract with Hisun, pursuant to which Hisun paid us a non-refundable technology transfer fee of $5.0 million to support our development of ThermoDox® in the China territory. The $5.0 million received as a non-refundable payment from Hisun in the first quarter 2013 has been recorded to deferred revenue and will be amortized over the ten-year term of the agreement; therefore, we recognized revenue of $500,000 in each of the years 2019 and 2018.

Research and Development Expenses

Research and development ("R&D") expenses increased $1.2 million or 10% from $11.9 million in 2018 to $13.1 million in 2019. Costs associated with the Phase III OPTIMA Study were $4.1 million in 2019 compared to $4.7 million in 2018. The prior year period was favorably impacted by a $0.8 million credit resulting from cost concessions negotiated with the Company's lead contract research organization (CRO) for the OPTIMA Study. Excluding this one-time credit, clinical development costs for the Phase III OPTIMA Study decreased $1.4 million in 2019, due to the completion of enrollment of the study in August 2018. The Company continues to follow patients on the study through the two preplanned efficacy analyses and the final efficacy analysis after 197 OS events. Costs associated with the OVATION 2 Study were $0.6 million in 2019 compared to $0.4 million in 2018. Regulatory costs were $1.1 million in 2019 compared to $0.3 million in 2018. Other clinical costs were $2.5 million in each of 2019 and 2018. Costs associated with the production of ThermoDox® were $1.5 million during 2019 compared to $1.1 million in 2018 as the Company is preparing registration batches at its three CMOs assuming a successful outcome of the OPTIMA Study. R&D costs associated with the development of GEN-1 to support the OVATION program increased by $0.5 million to $3.3 million in 2019 compared to $2.8 million in 2018.

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General and Administrative Expenses

General and administrative expenses decreased to $8.0 million in 2019 compared to $9.7 million in 2018. This decrease is primarily attributable to lower personnel costs of approximately $1.6 million which included a $1.7 million decrease in non-cash stock compensation expense partially offset by an increase in salary and benefits in 2019 compared to 2018.

Change in Earn-out Milestone Liability

The total aggregate purchase price for the acquisition of assets from EGEN included potential future earn-out payments contingent upon achievement of certain milestones. The difference between the aggregate $30.4 million in future earn-out payments and the $13.9 million included in the fair value of the acquisition consideration at June 20, 2014 was based on the Company's risk-adjusted assessment of each milestone and utilizing a discount rate based on the estimated time to achieve the milestone. These milestone payments are fair valued at the end of each quarter and any change in their value is recognized in the consolidated financial statements.

On March 28, 2019, the Company and EGWU, Inc, entered into an amendment to the Asset Purchase Agreement discussed in Note 8. Pursuant to the Amended Asset Purchase Agreement, payment of the earnout milestone liability related to the Ovarian Cancer Indication of $12.4 million has been modified. The Company has the option to make the payment as follows:

  ? $7.0 million in cash within 10 business days of achieving the milestone; or
  ? $12.4 million in cash, common stock of the Company, or a combination of
    either, within one year of achieving the milestone.

The Company provided EGWU, Inc. 200,000 warrants to purchase common stock at a strike price of $0.01 per warrant share as consideration for entering into the amended agreement. These warrants shares have no expiration and were fair valued at $2.00 using the closing price of a share of Celsion stock on the date of issuance offset by the exercise price and recorded $0.4 million as an expense in the income statement and were classified as equity on the balance sheet during 2019.

As of December 31, 2019, the Company fair valued the earn-out milestone liability at $5.7 million and recognized a non-cash benefit of $3.2 million for 2019 as a result of the change in the fair value of these milestones from $8.9 million at December 31, 2018. In assessing the earnout milestone liability at December 31, 2019, the Company the fair valued each of the two payment options per the Amended Asset Purchase Agreement and weighted them at 80% and 20% probability for the $7.0 million and the $12.4 million payments, respectively.

In connection with the write down of the IPR&D asset mentioned below, the Company concluded there was a reduced probability of payments of the earn-out milestones associated with the GBM asset as of September 30, 2018 and reduced the earnout milestone at that time. As of December 31, 2018, the Company fair valued these milestones at $8.9 million and recognized a non-cash benefit of $3.6 million in 2018 as a result of the change in the fair value of these milestones from $12.5 million at December 31, 2017.

Impairment of IPR&D

After our annual assessment of the totality of the events that could impair IPR&D at September 30, 2018, the Company determined certain IPR&D assets related to the development of its GBM product candidate may be impaired. To arrive at this determination, the Company assessed the status of studies in GBM conducted by its competitors and the Company's strategic commitment of resources to its studies in primary liver cancer and ovarian cancer. The Company concluded that the GBM asset, valued at $6.9 million, was partially impaired and wrote down the GBM asset to $2.5 million incurring a non-cash charge of $4.5 million in the third quarter of 2018. The Company concluded none of the other IPR&D assets were impaired at December 31, 2018.

The Company concluded none of the IPR&D assets were impaired further as of December 31, 2019.

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Investment income and interest expense

The Company realized $0.5 million and $0.4 million of investment income from its short-term investments during 2019 and 2018, respectively.

The Company entered a loan facility with Horizon Technology Finance Corporation in June 2018 and incurred interest expense of $1.4 million during 2019 compared to $0.7 million during 2018.

Income Tax Benefit

Annually, the State of New Jersey enables approved technology and biotechnology businesses with New Jersey net operating tax losses the opportunity to sell these losses through the Technology Business Tax Certificate Program (the "NOL Program"), thereby providing cash to companies to help fund their research and development and business operations. During the fourth quarter of 2018, the Company received eligibility from the New Jersey Economic Development Authority to sell, and did sell, $11.1 million of its unused New Jersey net operating losses under the Technology Business Tax Certificate Program, receiving $10.4 million of non-dilutive funding. The Company received approval from the New Jersey Economic Development Authority to sell $1.9 million of its New Jersey net operating losses recognizing a tax benefit for the year ended December 31, 2019 for the net proceeds (approximately $1.8 million) by reducing the deferred income tax valuation allowance. In early 2020, the Company entered into an agreement to sell these net operating losses and expects to receive net proceeds of approximately $1.8 million in the second quarter of 2020. The Company has approximately $2.1 million in future tax benefits remaining under the NOL Program in future years.

Inflation

We do not believe that inflation has had a material adverse impact on our revenue or operations in any of the past three years.

Financial Condition, Liquidity and Capital Resources

Since inception we have incurred significant losses and negative cash flows from operations. We have financed our operations primarily through the net proceeds from the sales of equity, credit facilities sales of our New State net operating losses (as discussed above) and amounts received under our product licensing agreement with Yakult and our technology development agreement with Hisun. The process of developing and commercializing ThermoDox®, GEN-1 and other product candidates and technologies requires significant research and development work and clinical trial studies, as well as significant manufacturing and process development efforts. We expect these activities, together with our general and administrative expenses to result in significant operating losses for the foreseeable future. Our expenses have significantly and regularly exceeded our revenue, and we had an accumulated deficit of $291 million at December 31, 2019.

At December 31, 2019 we had total current assets of $16.2 million (including cash, cash equivalents, short-term investment, interest receivable of $14.9 million) and current liabilities of $7.9 million, resulting in net working capital of $8.3 million. At December 31, 2018 we had total current assets of $28.1 million (including cash, cash equivalents, short-term investments and interest receivable of $27.6 million) and current liabilities of $6.1 million, resulting in net working capital of $22.0 million. We have substantial future capital requirements to continue our research and development activities and advance our product candidates through various development stages. The Company believes these expenditures are essential for the commercialization of its technologies.

Net cash used in operating activities for 2019 was $20.3 million. Our net loss of $16.9 million for 2019 included the following non-cash transactions: (i) $2.3 million in non-cash stock-based compensation expense, (ii) $0.4 million non-cash charge from the issuance of warrants in connection with an amendment to the EGEN Asset Purchase Agreement (iii) $0.4 million in non-cash interest expense and (iv) $3.2 non-cash benefit based on the change in the earn-out milestone liability. The $20.3 million net cash used in operating activities was mostly funded from cash and cash equivalents, short term investments, and cash proceeds received in equity financings during 2019. At December 31, 2019, we had cash, cash equivalents, short-term investment, and interest receivable of $14.9 million.

On June 27, 2018, the Company entered into the Horizon Credit Agreement with Horizon that provided $10 million in new capital. The Company drew down $10 million upon closing of the Horizon Credit Agreement on June 27, 2018. The Company anticipates that it will use the funding provided under the Horizon Credit Agreement for working capital and advancement of its product pipeline. The obligations under the Horizon Credit Agreement are secured by a first-priority security interest in substantially all assets of Celsion other than intellectual property assets. The obligations will bear interest at a rate calculated based on one-month LIBOR plus 7.625%. Payments under the loan agreement are interest only for the first twenty-four (24) months after loan closing, followed by a 24-month amortization period of principal and interest through the scheduled maturity date.

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On August 31, 2018, the Company entered into the 2018 Aspire Purchase Agreement with Aspire Capital Fund LLC ("Aspire Capital") which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $15.0 million of shares of the Company's common stock over the 24-month term of the 2018 Aspire Purchase Agreement. On October 12, 2018, the Company filed with the SEC a prospectus supplement to the 2018 Shelf Registration Statement registering all of the shares of common stock that may be offered to Aspire Capital from time to time. The timing and amount of sales of the Company's common stock to Aspire Capital. Aspire Capital has no right to require any sales by the Company but is obligated to make purchases from the Company as directed by the Company in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future funding, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, the Company issued to Aspire Capital 164,835 Commitment Shares. The 2018 Aspire Purchase Agreement may be terminated by the Company at any time, at its discretion, without any cost to the Company. During 2018 and 2019 the Company sold and issued an aggregate of 3.4 million shares under the Purchase Agreement, receiving approximately $6.5 million. All proceeds from the Company received under the 2018 Aspire Purchase Agreement were used for working capital and general corporate purposes. As a result of the Company and Aspire Capital entering into a new purchase agreement on October 28, 2019 as discussed in the next paragraph, the 2018 Aspire Purchase Agreement terminated.

On October 28, 2019, Company, entered into the 2019 Aspire Purchase Agreement with Aspire Capital. The terms and conditions pursuant to the 2019 Aspire Purchase Agreement are substantially similar to the 2018 Aspire Purchase Agreement. Pursuant to the new 2019 Aspire Purchase Agreement, Aspire Capital is committed to purchase up to an aggregate of $10.0 million of shares of the Company's common stock over the 24-month term of the 2019 Aspire Purchase Agreement. Concurrently with entering into the 2019 Aspire Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital (the "Registration Rights Agreement"), in which the Company agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended (the "Securities Act"), registering the sale of the shares of the Company's common stock that have been and may be issued to Aspire Capital under the 2019 Aspire Purchase Agreement. In consideration for entering into the 2019 Aspire Purchase Agreement, the Company issued to Aspire Capital an additional 100,000 Commitment Shares. On November 8, 2019, the Company filed with the SEC a Registration Statement on Form S-1 registering all the shares of common stock that may be offered to Aspire Capital from time to time under the 2019 Aspire Purchase Agreement. During 2019, the Company sold 0.5 million shares under the 2019 Aspire Purchase Agreement, receiving approximately $0.7 million. On March 5, 2020, the Company delivered notice to Aspire Capital terminating the 2019 Aspire Purchase Agreement with Aspire Capital effective as of March 6, 2020. The Company sold 1.0 million shares receiving $1.6 million during 2020 until the date of termination under the 2019 Aspire Purchase Agreement.

We were a party to a Controlled Equity OfferingSM Sales Agreement (ATM) dated as of February 1, 2013 with Cantor Fitzgerald & Co., pursuant to which we may sell additional shares of our common stock having an aggregate offering price of up to $25 million through "at-the-market" equity offerings from time to time. During 2018, the Company sold 0.5 million shares of common stock under the ATM, receiving approximately $1.2 million in net proceeds. On October 10, 2018, the Company delivered notice to Cantor terminating the ATM effective as of October 20, 2018. From February 2013 through the date of termination, the Company sold 1.8 million shares of Common Stock under the Sales Agreement generating gross proceeds of $12.8 million. The Company has no further obligations under the Sales Agreement.

On December 4, 2018, the Company entered into a new Capital on DemandTM Sales Agreement (the "Capital on Demand Agreement") with JonesTrading Institutional Services LLC, as sales agent ("JonesTrading"), pursuant to which the Company may offer and sell, from time to time, through JonesTrading shares of Common Stock having an aggregate offering price of up to $16.0 million. The Company intends to use the net proceeds from the offering, if any, for general corporate purposes, including research and development activities, capital expenditures and working capital. The Company is not obligated to sell any Common Stock under the Capital on Demand Agreement and, subject to the terms and conditions of the Capital on Demand Agreement, JonesTrading will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of The Nasdaq Capital Market, to sell Common Stock from time to time based upon Celsion's instructions, including any price, time or size limits or other customary parameters or conditions the Company may impose. Under the Capital on Demand Agreement, JonesTrading may sell Common Stock by any method deemed to be an "at the market offering" as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Capital on Demand Agreement will terminate upon the earlier of (i) the sale of all shares of our common stock subject to the Sales Agreement, and (ii) the termination of the Capital on Demand Agreement by JonesTrading or Celsion. The Capital on Demand Agreement may be terminated by JonesTrading or the Company at any time upon 10 days' notice to the other party, or by JonesTrading at any time in certain circumstances, including the occurrence of a material adverse change in the Company. The Company did not sell any shares under the Capital on Demand Agreement during 2018. During 2019, the Company sold 0.5 million shares under the Capital on Demand Agreement, receiving approximately $1.0 million.

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On February 27, 2020, we entered into a Securities Purchase Agreement (the "Purchase Agreement") with several institutional investors, pursuant to which we agreed to issue and sell, in a registered direct offering (the "February 2020 Offering"), an aggregate of 4,571,428 shares (the "Shares") of our common stock at an offering price of $1.05 per share for gross proceeds of approximately $4.8 million before the deduction of the Placement Agent fees and offering expenses. The Shares were offered by the Company pursuant to a registration statement on Form S-3 (File No. 333-227236). The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. In a concurrent private placement (the "Private Placement"), the Company agreed to issue to the investors that participated in the Offering, for no additional consideration, warrants, to purchase up to 2,971,428 shares of Common Stock (the "Original Warrants"). The Original Warrants were initially exercisable six months following their and were set to expire on the five-year anniversary of such initial exercise date. The Warrants had an exercise price of $1.15 per share subject to adjustment as provided therein. On March 12, 2020 the Company entered into private exchange agreements (the "Exchange Agreements") with holders the Warrants. Pursuant to the Exchange Agreements, in return for a higher exercise price of $1.24 per share of Common Stock, the Company issued new warrants to the Investors to purchase up to 3,200,000 shares of Common Stock (the "Exchange Warrants") in exchange for the Original Warrants. The Exchange Warrants, like the Original Warrants, are initially exercisable six months following their issuance (the "Initial Exercise Date") and expire on the five-year anniversary of their Initial Exercise Date. Other than having a higher exercise price, different issue date, Initial Exercise Date and expiration date, the terms of the Exchange Warrants are identical to those of the Original Warrants.

The Company had $16.7 million in cash, investments, interest receivable and deferred income tax asset as of December 31, 2019, as well as $6.4 million we have raised thus far in 2020 under the 2019 Aspire Purchase Agreement and the February 2020 Offering. Given our development plans, we anticipate cash resources will be sufficient to fund our operations through mid-2020. The Company has approximately $15 million available under the Capital on Demand Agreement with JonesTrading International Services LLC. On March 5, 2020, we terminated the 2019 Aspire Purchase Agreement. Other than the Capital on Demand Agreement that provides us the ability to sell equity securities in the future, we have no other committed sources of additional capital. However, our future capital requirements will depend upon numerous unpredictable factors, including, without limitation, the cost, timing, progress and outcomes of clinical studies and regulatory reviews of our proprietary drug candidates, our efforts to implement new collaborations, licenses and strategic transactions, general and administrative expenses, capital expenditures and other unforeseen uses of cash.

The Company may seek additional capital through further public or private equity offerings, debt financing, additional strategic alliance and licensing arrangements, collaborative arrangements, or some combination of these financing alternatives. If we raise additional funds through the issuance of equity securities, the percentage ownership of our stockholders could be significantly diluted, and the newly issued equity securities may have rights, preferences, or privileges senior to those of the holders of our common stock. If we raise funds through the issuance of debt securities, those securities may have rights, preferences, and privileges senior to those of our common stock. If we seek strategic alliances, licenses, or other alternative arrangements, such as arrangements with collaborative partners or others, we may need to relinquish rights to certain of our existing or future technologies, product candidates, or products we would otherwise seek to develop or commercialize on our own, or to license the rights to our technologies, product candidates, or products on terms that are not favorable to us. The overall status of the economic climate could also result in the terms of any equity offering, debt financing, or alliance, license, or other arrangement being even less favorable to us and our stockholders than if the overall economic climate were stronger. We also will continue to look for government sponsored research collaborations and grants to help offset future anticipated losses from operations and, to a lesser extent, interest income.

If adequate funds are not available through either the capital markets, strategic alliances, or collaborators, we may be required to delay or, reduce the scope of, or terminate our research, development, clinical programs, manufacturing, or commercialization efforts, or effect additional changes to our facilities or personnel, or obtain funds through other arrangements that may require us to relinquish some of our assets or rights to certain of our existing or future technologies, product candidates, or products on terms not favorable to us.

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Contractual Obligations

In July 2011, we entered into a lease with Brandywine Operating Partnership, L.P., a Delaware limited partnership for a 10,870 square foot premises located in Lawrenceville, New Jersey in connection with the relocation of our offices from Columbia, Maryland. In late 2015, Lenox Drive Office Park LLC, purchased the real estate and office building and assumed the lease. Under the current terms of the lease, which was amended effective May 1, 2017 and is set to expire on September 1, 2022, we reduced the size of the premises to 7,565 square feet and are paying a monthly rent that ranges from approximately $18,900 in the first year to approximately $20,500 in the final year of the amendment. On February 1, 2019, we amended the current terms of the lease to increase the size of the premises by 2,285 square feet to 9,850 square feet and also extended the lease term by one year to September 1, 2023. In conjunction with the February 1, 2019 lease amendment, we agreed to modify our one-time option to cancel the lease as of the 36th month after the May 1, 2017 lease commencement date.

In connection with the Asset Purchase Agreement, in June 2014, we assumed the existing lease with another landlord for an 11,500 square foot premises located in Huntsville, Alabama. In January 2018, we entered into a new 60-month lease agreement for 9,049 square feet with rent payments of approximately $18,100 per month.

Following is a table of the lease payments and maturity of our operating lease liabilities as of December 31, 2019:

                                                      For the
                                             years ending December 31,
          2020                              $                   525,809
          2021                                                  530,734
          2022                                                  535,579
          2023                                                  233,117
          2024 and thereafter                                         -
          Subtotal future lease payments                      1,825,239
          Less imputed interest                                (293,789 )
          Total lease liabilities           $                 1,531,450

          Weighted average remaining life                    3.45 years

          Weighted average discount rate                           9.98 %

For the 2019, operating lease expense was $522,380 and cash paid for operating leases included in operating cash flows was $485,848. For 2018, operating lease expense was $450,430 and cash paid for operating leases included in operating cash flows was $457,321.

Off-Balance Sheet Arrangements

We do not utilize off-balance sheet financing arrangements as a source of liquidity or financing.

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