UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.DC 20549


FORMForm 10-Q


(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017Quarterly Period Ended March 31, 2022


OR


☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from to ________


Commission File No.Number:001-34079
Rexahn Pharmaceuticals,
Ocuphire Pharma, Inc.
(Exact name of registrantRegistrant as specified in its charter)


Delaware
 11-3516358
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)Number)


15245 Shady Grove Road, Suite 455
37000 Grand River Avenue, Suite 120
Farmington Hills, MI
48335
(Address of Principal Executive Offices)(Zip Code)

Rockville, MD 20850
(Address of Principal Executive Offices, Including Zip Code)

Telephone: (240) 268-5300
(Registrant’s Telephone Number, Including Area Code)Code: (248) 681-9815

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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

Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share

OCUP
The Nasdaq Stock Market LLC

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§(section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 definitionthe definitions of “accelerated filer,” “large accelerated filer,”filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Act:


Large accelerated filer
☐
Non-accelerated filer
Accelerated filer☑☒
Non-accelerated
Accelerated filer
☐(Do not check if a smaller reporting company)
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 ☑☒


Indicate theThe number of shares outstanding of eachshares of the issuer’s classes ofregistrant’s common stock as of the latest practicable date: 31,725,114 shares as of November 3, 2017.May 11, 2022 was 19,364,367.

REXAHN PHARMACEUTICALS,
OCUPHIRE PHARMA, INC.
FORM 10-Q
TABLE OF CONTENTSINDEX



Page

PART 1 – FINANCIAL INFORMATION
PART I1
Item 11.
Financial Statements (Unaudited)
12
 
1)Condensed Balance SheetSheets as of September 30, 2017March 31, 2022 (unaudited) and December 31, 20162021
12
 
2)Condensed  Statement of Operations for the three and nine months ended September 30, 2017 and 2016
2
3)Condensed StatementConsolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 (unaudited)
3
 
4)Condensed StatementConsolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three months ended March 31, 2022 and 2021 (unaudited)
4
Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2022 and 20162021 (unaudited)
45
 
5)Notes to the Condensed Consolidated Financial Statements (unaudited)
56
Item 22.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2616
Item 33.
Quantitative and Qualitative Disclosures About Market Risk
3525
Item 44.
Controls and Procedures
3525
  
PART II – OTHER INFORMATION

Item 1.
3626
Item 1A1A.
3626
Item 22.
3626
Item 63.
26
Item 4.
26
Item 5.
26
Item 6.
3627
  
3728

PART I – FINANCIAL INFORMATION

PART I. Financial Information
Item 1.Financial Statements

Ocuphire Pharma, Inc.
Condensed Item 1. FinancialBalance Sheets
(in thousands, except share amounts and par value)
  As of 
  
March 31,
2022
  
December 31,
2021
 
  (unaudited)    
Assets      
Current assets:      
Cash and cash equivalents 
$
19,246
  
$
24,534
 
Prepaids and other current assets
  1,095   1,314 
Short-term investments
  
135
   
219
 
Total current assets  
20,476
   
26,067
 
Property and equipment, net  
9
   
10
 
Total assets 
$
20,485
  
$
26,077
 
         
Liabilities and stockholders’ equity
        
Current liabilities:        
Accounts payable 
$
1,579
  
$
1,584
 
Accrued expenses  
1,419
   
1,733
 
Short-term loan
  215   538 
Total current liabilities  
3,213
   
3,855
 
Warrant liabilities  
0
   
0
 
Total liabilities  
3,213
   
3,855
 
         
Commitments and contingencies (Note 4 and Note 9)  0   0 
         
Stockholders’ equity
        
Preferred stock, par value $0.0001; 10,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 0 shares issued and outstanding at March 31, 2022 and December 31, 2021.
  
0
   
0
 
Common stock, par value $0.0001; 75,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 19,213,651 and 18,845,828 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.
  
2
   
2
 
Additional paid-in capital  
113,233
   
111,588
 
Accumulated deficit  
(95,963
)
  
(89,368
)
Total stockholders’ equity
  
17,272
   
22,222
 
Total liabilities and stockholders’ equity
 
$
20,485
  
$
26,077
 
See accompanying notes.

2
Ocuphire Pharma, Inc.
Condensed Consolidated Statements of Comprehensive Loss

REXAHN PHARMACEUTICALS, INC.
Condensed Balance Sheet(in thousands, except share and per share amounts)
(Unaudited)


  September 30, 2017  December 31, 2016 
ASSETS 
Current Assets:      
Cash and cash equivalents $8,226,189  $11,578,473 
Marketable securities  14,977,346   8,737,107 
Prepaid expenses and other current assets  1,277,604   608,517 
Total Current Assets  24,481,139   20,924,097 
Security Deposits  30,785   30,785 
Equipment, Net  79,056   88,650 
Total Assets $24,590,980  $21,043,532 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current Liabilities:        
Accounts payable and accrued expenses $2,338,777  $1,882,500 
         
Deferred Research and Development Arrangement  393,750   450,000 
         
Other Liabilities  61,557   79,204 
         
Warrant Liabilities  6,676,091   1,573,366 
         
Total Liabilities  9,470,175   3,985,070 
Commitments and Contingencies (note 14)
        
Stockholders’ Equity:        
Preferred stock, par value $0.0001, 10,000,000 authorized shares, none issued and outstanding  -   - 
Common stock, par value $0.0001, 50,000,000 authorized shares, 28,459,805 and 23,736,878 issued and outstanding  2,846   2,374 
Additional paid-in capital  151,858,173   132,086,419 
Accumulated other comprehensive loss  (13,965)  (6,122)
Accumulated deficit  (136,726,249)  (115,024,209)
         
Total Stockholders’ Equity  15,120,805   17,058,462 
         
Total Liabilities and Stockholders’ Equity $24,590,980  $21,043,532 

 
Three Months Ended
March 31,
 
  2022
  2021
 
Operating expenses:      
General and administrative 
$
1,736
  
$
1,704
 
Research and development  
4,772
   
3,482
 
Total operating expenses  
6,508
   
5,186
 
Loss from operations  
(6,508
)
  
(5,186
)
Interest expense  
(5
)
  
0
 
Fair value change in warrant liabilities
  
0
   
(33,829
)
Other (expense) income, net
  
(82
)
  
1
 
Loss before income taxes  
(6,595
)
  
(39,014
)
Benefit (provision) for income taxes  
0
   
0
 
Net loss  
(6,595
)
  
(39,014
)
Other comprehensive loss, net of tax  
0
   
0
 
Comprehensive loss 
$
(6,595
)
 
$
(39,014
)
Net loss per share:        
Basic and diluted (Note 10) 
$
(0.35
)
 
$
(3.57
)
Number of shares used in per share calculations:        
Basic and diluted  
18,888,471
   
10,923,651
 


(See accompanying notes to the condensed financial statements)notes.
 
13
REXAHN PHARMACEUTICALS, INC.
Ocuphire Pharma, Inc.
Condensed Consolidated Statements of Changes in Condensed Statement of OperationsStockholders’ Equity (Deficit)
(in thousands, except share amounts)
(Unaudited)

  
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
Revenues: $-  $-  $-  $- 
                 
Expenses:                
General and administrative  1,574,323   1,418,990   5,004,832   4,490,145 
Research and development  2,644,999   2,298,585   7,451,656   8,004,193 
                 
Total Expenses  4,219,322   3,717,575   12,456,488   12,494,338 
                 
Loss from Operations  (4,219,322)  (3,717,575)  (12,456,488)  (12,494,338)
                 
Other Income (Expense)                
Interest income  60,750   26,145   135,329   83,884 
Unrealized gain (loss) on fair value of warrants  3,120,500   967,637   (9,047,831)  3,941,682 
Financing expense  -   (143,203)  (333,050)  (313,090)
Total Other Income (Expense)  3,181,250   850,579   (9,245,552)  3,712,476 
                 
Net Loss Before Provision for Income Taxes  (1,038,072)  (2,866,996)  (21,702,040)  (8,781,862)
Provision for income taxes  -   -   -   - 
Net Loss $(1,038,072) $(2,866,996) $(21,702,040) $(8,781,862)
                 
Net loss per share, basic and diluted $(0.04) $(0.13) $(0.83) $(0.42)
                 
Weighted average number of shares outstanding, basic and diluted  28,459,316   21,644,182   26,121,160   21,075,847 
  Common Stock  
Additional
Paid–In
  Accumulated  Total 
  Shares  Amount  Capital  Deficit  Equity (Deficit) 
                
Balance at December 31, 2020
  
10,882,495
  
$
1
  
$
19,207
  
$
(32,675
)
 
$
(13,467
)
Reclassification of Series A warrant liability to  equity  
—
   
0
   
61,793
   
0
   
61,793
 
Stock–based compensation  
40,000
   
0
   
494
   
0
   
494
 
Exercise of stock options  7,386   0   10   0   10 
Net and comprehensive loss  
—
   
0
   
0
   
(39,014
)
  
(39,014
)
Balance at March 31, 2021
  
10,929,881
  
$
1
  
$
81,504
  
$
(71,689
)
 
$
9,816
 
                     
Balance at December 31, 2021
  
18,845,828
  
$
2
  
$
111,588
  
$
(89,368
)
 
$
22,222
 
Issuance of common stock in connection with the at-the-market program  
336,544
   
0
   
1,208
   
0
   
1,208
 
Issuance costs
  —   0   (35)  0   (35)
Stock–based compensation  
6,970
   
0
   
445
   
0
   
445
 
Exercise of stock options  
24,309
   
0
   
27
   0   
27
 
Net and comprehensive loss  
—
   
0
   
0
   
(6,595
)
  
(6,595
)
Balance at March 31, 2022
  
19,213,651
  
$
2
  
$
113,233
  
$
(95,963
)
 
$
17,272
 


(See accompanying notes to the condensed financial statements)notes.
 
24
REXAHN PHARMACEUTICALS, INC.
 Ocuphire Pharma, Inc.
Condensed Consolidated Statements of Condensed Statement of Comprehensive Loss Cash Flows
(in thousands)
(Unaudited)

  
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
             
Net Loss $(1,038,072) $(2,866,996) $(21,702,040) $(8,781,862)
                 
Unrealized gain (loss) on available-for-sale securities  11,740   (6,983)  (7,843)  13,385 
                 
Comprehensive Loss $(1,026,332) $(2,873,979) $(21,709,883) $(8,768,477)
  
Three Months Ended
March 31,
 
  2022
  2021
 
Operating activities      
Net loss 
$
(6,595
)
 
$
(39,014
)
Adjustments to reconcile net loss to net cash used in operating activities:        
Stock-based compensation  
445
   
494
 
Depreciation  
1
   
1
 
Fair value change in warrant liabilities  
0
   
33,829
 
Unrealized loss from short-term investments
  84   0 
Change in assets and liabilities:        
Prepaid expenses and other assets  
219
   
(159
)
Accounts payable  
(5
)
  
200
 
Accrued and other liabilities  
(319
)
  
(1,163
)
Net cash used in operating activities  
(6,170
)
  
(5,812
)
Investing activities        
Net cash used in investing activities  
0
   
0
 
Financing activities        
Proceeds from issuance of common stock in connection with the at-the-market program  1,208   0 
Issuance costs  (30)  0 
Payments made in connection with short-term loan  (323)  0 
Exercise of stock options  
27
   
10
 
Net cash provided by financing activities  
882
   
10
 
Net decrease in cash and cash equivalents  
(5,288
)
  
(5,802
)
Cash and cash equivalents at beginning of period  
24,534
   
16,399
 
Cash and cash equivalents at end of period 
$
19,246
  
$
10,597
 
Supplemental disclosure of cash flow information:        
Cash paid for income taxes 
$
0
  
$
0
 
Cash paid for interest 
$
5
  
$
0
 
Supplemental non-cash financing transactions:        
Non-cash reclassification of Series A warrant liability to equity 
$
0
  
$
61,793
 
Unpaid issuance and deferred offering costs 
$
5
  
$
88
 
 
(See accompanying notes to the condensed financial statements)notes.

35
REXAHN PHARMACEUTICALS, INC.
Condensed Statement of Cash Flows
(Unaudited)
  
For the Nine Months Ended
September 30,
 
  2017  2016 
Cash Flows from Operating Activities:      
Net loss $(21,702,040) $(8,781,862)
Adjustments to reconcile net loss to net cash used in operating activities:        
Compensatory stock  31,200   97,649 
Depreciation and amortization  30,963   24,123 
Amortization of premiums and discounts on marketable securities, net  40,578   21,535 
Stock-based compensation  790,006   1,063,589 
Amortization of deferred research and development arrangement  (56,250)  (56,250)
Unrealized loss (gain) on fair value of warrants  9,047,831   (3,941,682)
Financing expense  333,050   313,090 
Amortization of deferred lease incentive  (9,333)  (9,333)
Deferred lease expenses  (8,314)  (8,787)
Changes in assets and liabilities:        
Prepaid expenses and other assets  (669,087)  419,765 
Accounts payable and accrued expenses  456,277   (875,574)
Net Cash Used in Operating Activities  (11,715,119)  (11,733,737)
Cash Flows from Investing Activities:        
Purchase of equipment  (21,369)  (8,263)
Purchase of marketable securities  (15,008,660)  (8,747,423)
Redemption of marketable securities  8,720,000   8,560,000 
Net Cash Used in Investing Activities  (6,310,029)  (195,686)
Cash Flows from Financing Activities:        
Issuance of common stock and units, net of issuance costs  9,241,271   10,122,223 
Proceeds from exercise of stock warrants  5,354,093   - 
Proceeds from exercise of stock options  77,500   - 
Net Cash Provided by Financing Activities  14,672,864   10,122,223 
Net Decrease in Cash and Cash Equivalents  (3,352,284)  (1,807,200)
Cash and Cash Equivalents – beginning of period  11,578,473   10,199,440 
Cash and Cash Equivalents - end of period $8,226,189  $8,392,240 
Supplemental Cash Flow Information        
Non-cash financing and investing activities:        
Warrants issued $4,107,488  $4,364,110 
Warrant liability extinguishment from exercise of warrants $8,052,594  $- 
(See accompanying notes to the condensed financial statements)
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.OperationsCompany Description and OrganizationSummary of Significant Accounting Policies

Operations
Nature of Business
 
Rexahn Pharmaceuticals,
Ocuphire Pharma, Inc. (the “Company”(the "Company" or "Ocuphire”), a Delaware corporation, is a clinical-stage ophthalmic biopharmaceutical company whose principal operations arefocused on developing and commercializing therapies for the discovery, developmenttreatment of refractive and commercializationretinal eye disorders. Ocuphire’s pipeline currently includes 2 small molecule product candidates targeting several of innovative treatments for cancer.such indications. The Company had an accumulated deficitCompany’s lead product candidate, Nyxol® Eye Drops (“Nyxol”), is a once-daily eye drop formulation of $136,726,249 at September 30, 2017phentolamine mesylate designed to reduce pupil diameter and anticipates incurring losses through fiscal year 2017improve visual acuity. The Company’s second product candidate, APX3330, is a twice-a-day oral tablet designed to target multiple pathways relevant to retinal and beyond.choroidal (the vascular layer of the eye) diseases such as diabetic retinopathy (“DR”) and diabetic macular edema (“DME”) which, if left untreated, can result in permanent visual acuity loss and eventual blindness. The Company has not yet generated commercial revenuesalso in-licensed APX2009 and has funded its operating losses to date through the saleAPX2014, which are second-generation product candidates and analogs of shares of its common stock and warrants to purchase shares of its common stock, convertible debt, interest income from cash, cash equivalents and marketable securities, and proceeds from reimbursed research and development costs.  The Company believes that its cash, cash equivalents, and marketable securities will be sufficient to cover its cash flow requirements for its current activities for at least the next 12 months from the date these financial statements were issued.  Management believes it has the capability of managing the Company’s operations within existing cash available by focusing on select research and development activities, selecting projects in conjunction with potential financings and milestones, and efficiently managing the Company’s general and administrative affairs.APX3330.

Basis of Presentation
 
The Company has sustained operating losses since inception and expects such losses to continue indefinitely until a sustained revenue source is realized. Management plans to continue financing the Company’s operations primarily through additional issuances of the Company’s equity and debt securities. If adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate part or all of its research and development programs.
 
The Company’s headquarters is located in Farmington Hills, Michigan.
COVID-19

As a result of the COVID-19 pandemic, the Company has experienced, and may continue to experience, delays and disruptions in our clinical trials, as well as interruptions in our manufacturing, supply chain, shipping and research and development operations.



The Company’s plans for further testing or clinical trials may be further impacted by the continuing effects of COVID-19. The global outbreak of COVID-19 continues to evolve. The extent to which the COVID-19 pandemic may further impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the effect of the pandemic on our suppliers and distributors and the global supply chain, the duration of the outbreak, travel restrictions and social distancing in the U.S. and other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S. and other countries to contain and treat the disease. The COVID-19 pandemic may also continue to impact our business as a result of employee illness, school closures, and other community response measures.



The COVID-19 pandemic may also impact the Company’s ability to secure additional financing. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity in fiscal year 2022 and beyond.


Basis of Presentation
The accompanying unaudited condensed consolidated financial statements ofhave been prepared by the Company, have been preparedwithout audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for interim(“SEC”). Certain information and footnote disclosures normally included in financial information.  Accordingly, they dostatements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.
The December 31, 2021 condensed balance sheet was derived from audited financial statements, and may not include all ofdisclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements.  In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2017 and December 31, 2016 and of the results of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016 have been included.  Operating results for the three and nine months ended September 30, 2017 arepresented not necessarily indicative of results that may be expected for any other interim period or the full fiscal year ending December 31, 2017. The accompanyingmisleading. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto included infor the Company’s Annual Report on Form 10-K for thefiscal year ended December 31, 2016 (the “2016 Form 10-K”).  Information included2021.
In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.
On December 31, 2021, the Company merged its wholly-owned subsidiary, OcuSub Inc, with and into the Company, with the Company remaining as the surviving entity. The merger of the Company’s wholly-owned subsidiary did not have a financial impact in the periods presented. Upon close of this merger, the Company did not have any remaining entities that required consolidation for financial statement reporting purposes. All significant intercompany accounts and transactions were eliminated in the preparation of the condensed balance sheet as offinancial statements prior to the December 31, 2016 has been derived2021 merger with OcuSub Inc.
6
Index

Notes to Condensed Consolidated Financial Statements
Going Concern
The Company’s ability to continue operating as a going concern is contingent upon, among other things, its ability to secure additional financing and to achieve and maintain profitable operations. The Company plans to issue additional equity and debt instruments to finance operating and working capital requirements, including additional issuances under the 2021 at-the-market program discussed further below. While the Company expects to obtain the additional financing that is needed, there is no assurance that the Company will be successful in obtaining the necessary funding for future operations. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the Company’s audited financial statements for the year ended December 31, 2016 included in the 2016 Form 10-K.outcome of these uncertainties.


Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported amounts of assets and liabilities andin the disclosure of contingent assets and liabilities at the date of thecondensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

 
Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the reported amountsCompany’s chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer views the Company’s operations and manages its business in 1 operating segment, which is the business of revenuesdevelopment and expenses during the reporting period.  These estimates are based on management’s best knowledgecommercialization of current eventsproducts related to vision performance and actionshealth. Accordingly, the Company may undertakehas a single reporting segment.

Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of deposit to be cash equivalents.

Concentration of Credit Risk


Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash is held by two long-standing financial institutions in the future.  Actual resultsUnited States. Amounts on deposit may ultimately differat times exceed federally insured limits. Management believes that the financial institutions are financially sound, and accordingly, minimal credit risk exists with respect to the financial institutions. As of March  31, 2022, the Company had deposits that exceeded federally insured amounts by $18.7 million.



Short-term Investments



The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and are recorded on a settlement date basis. The Company’s short-term investments are comprised of equity securities, which in accordance with the fair value hierarchy described below are recorded at fair value using Level l inputs on the balance sheets.  Subsequent changes in fair values are recorded in other (expense) income, net on the  condensed consolidated statements of comprehensive loss. The Company classifies investments available to fund current operations as current assets on its balance sheets. The Company did 0t recognize any impairments on its investments to date through March 31, 2022.



General and Administrative Expenses



General and administrative expenses (“G&A”) consist primarily of personnel-related costs, including salaries and stock-based compensation costs, for personnel in functions not directly associated with research and development activities. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and tax services, settlement costs with third parties and other services provided by business consultants.



Research and Development



Research and development expenses (“R&D”) consist of costs incurred in performing research and development activities, including compensation for research and development employees and consultants, costs associated with preclinical studies and clinical trials, regulatory activities, manufacturing activities to support clinical activities, license fees, fees paid to external service providers that conduct certain research and development, and an allocation of R&D related overhead expenses.



Other (Expense) Income, net



Other (expense) income, net includes payments made by the Company in connection with the Contingent Value Rights Agreement discussed further below with former stockholders of Rexahn Pharmaceuticals, Inc. (“Rexahn”). In addition, Other (expense) income, net includes interest earned from these estimates.  These estimates are reviewed periodically,cash and as adjustments become necessary,cash equivalent investments, realized and unrealized gains (losses) from equity investments, and when they are reportedoccur, reimbursements in earningsconnection with grants and other sources.



Stock-Based Compensation



The Company accounts for stock-based compensation in accordance with the period in which they become available.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

2.Recent Accounting Pronouncements Affecting the Company
Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards UpdateCodification (“ASU”ASC 718”) 2014-09, “Revenue from Contracts with Customers,” a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under U.S. GAAP., Compensation — Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant date fair value. The standard’s core principle is that a company should recognize revenueCompany records forfeitures when it transfers goods or servicesthey occur. Stock-based compensation arrangements to customers in an amount that reflects the consideration to which the company expects to be entitled in exchangenon-employees are accounted for those goods and services, and provides a revenue recognition framework in accordance with this principle.  On August 12, 2015, the FASB issued ASU 2015-14, which defers the effective dateapplicable provisions of ASU 2014-09 by one year to December 15, 2017 for annual reporting periods beginning after that date and interim periods therein.  The Company expects to adopt this standard for the annual reporting period beginning January 1, 2018.   As the Company currently does not have revenue, contracts the Company does not expect the adoption of this standard to have a material impact on the operating results of the Company.ASC 718.


Leases

In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires an entity to recognize assets and liabilities arising from leases on the balance sheet and to provide additional disclosures about leasing arrangements.  ASU 2016-02 will be effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance will have on its financial statements.

Compensation-Stock Compensation

In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation: Improvements to Employee Share Based Payment Accounting,” which includes multiple provisions intended to simplify various aspects of accounting for share-based payments.  The guidance is effective for reporting periods beginning after December 15, 2016, with early adoption permitted.  The Company adopted this guidance for the three months ended March 31, 2017.  This pronouncement did not have a material impact on the financial statements.

67
Table of ContentsIndex

REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

3.Marketable Securities

Warrant Liabilities
Marketable securities are considered “available-for-sale”


The Company issued Series A Warrants in accordanceconnection with FASB Accounting Standards Codification (“ASC”) 320, “Debtthe Pre-Merger Financing (see Note 3 – Pre-Merger Financing) and Equity Securities,” and thus are reportedassumed Rexahn warrants issued prior to the Merger. The Company accounts for these warrants as a liability while outstanding at fair value induring periods when certain provisions preclude equity accounting treatment for these instruments. Additionally, issuance costs associated with the Company’s accompanying balance sheet, with unrealized gainswarrants classified as liabilities are expensed as incurred and losses excluded from earnings and reportedreflected as a separate component of stockholders’ equity.  Amounts reclassified out of accumulated other comprehensive income (loss) into realized gains and losses are accounted for on the basis of specific identification and are included in other income orinterest expense in the statementaccompanying consolidated statements of operations.comprehensive loss. The Company classifies such investments as current on the balance sheet as the investments are readily marketable and available for usechange in current operations.

The following table shows the Company’s marketable securities’ adjusted cost, gross unrealized gains and losses, and fair value by significant investment category as of September 30, 2017 and December 31, 2016:

  September 30, 2017 
  
Cost
Basis
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Fair
Value
 
Commercial Paper $3,230,566  $-  $(1,983) $3,228,583 
Corporate Bonds  11,760,745   142   (12,124)  11,748,763 
Total Marketable Securities $14,991,311  $142  $(14,107) $14,977,346 

  December 31, 2016 
  
Cost
Basis
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Fair
Value
 
Certificates of Deposit $720,000  $197  $-  $720,197 
Commercial Paper  3,987,424   -   (1,684)  3,985,740 
Corporate Bonds  4,035,805   -   (4,635)  4,031,170 
Total Marketable Securities $8,743,229  $197  $(6,319) $8,737,107 

The Company typically invests in highly-rated securities, with the primary objective of minimizing the potential risk of principal loss.  As of September 30, 2017, the Company had three investments of commercial paper with an aggregate fair value of $3,228,583 and unrealized losses of $1,983, and 11 corporate bonds with an aggregate fair value of $11,249,968 and unrealized losses of $12,124 all of which have been unrealized losses for less than 12 months.  The Company does not intend to sell its marketable securities in an unrealized loss position.  Based upon these securities’ fair value relative to the cost, high ratings, and volatility of fair value, the Company considers the declines in market value of its marketable securities to be temporary in nature, does not consider any of its investments other-than-temporarily impaired, and anticipates that it will recover the entire amortized cost basis.

The amortized cost basis and fair value of marketable securities by contractual maturity are:
Maturity Cost Basis  Fair Value 
Less than 1 year $11,963,973  $11,955,906 
1 to 5 years  3,027,338   3,021,440 
Total Marketable Securities $14,991,311  $14,977,346 
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

4.Prepaid Expenses and Other Current Assets
  
September 30,
2017
  
December 31,
2016
 
       
Deposits on contracts $611,550  $179,476 
Prepaid expenses and other current assets  666,054   429,041 
         
  $1,277,604  $608,517 

Deposits on contracts consist of deposits on research and development contracts for services that had not been incurred as of the balance sheet date.  Prepaid expenses and other assets include prepaid general and administrative expenses, such as insurance, rent, investor relations fees and compensatory stock issued for services not yet incurred as of the balance sheet date.

5.Equipment, Net
  
September 30,
2017
  
December 31,
2016
 
       
Furniture and fixtures $78,794  $78,794 
Office and computer equipment  121,817   113,932 
Lab equipment  445,134   431,650 
Leasehold improvements  133,762   133,762 
         
Total equipment  779,507   758,138 
Less: Accumulated depreciation and amortization  (700,451)  (669,488)
         
Net carrying amount $79,056  $88,650 

6.Accounts Payable and Accrued Expenses
  
September 30,
2017
  
December 31,
2016
 
       
Trade payables $462,602  $430,013 
Accrued expenses  142,270   141,190 
Accrued research and development contract costs  1,163,545   499,889 
Payroll liabilities  570,360   811,408 
         
  $2,338,777  $1,882,500 
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

7.Deferred Research and Development Arrangement
Rexgene Biotech Co., Ltd.
In 2003, the Company entered into a collaborative research agreement with Rexgene Biotech Co., Ltd. (“Rexgene”), a shareholder.  Rexgene is engaged in the development of pharmaceutical products in Asia and has agreed to assist the Company with the research, development and clinical trials necessary for registration of the Company’s drug candidate Archexin® in Asia.  This agreement provides Rexgene with exclusive rights to license, sublicense, make, have made, use, sell and import Archexin in Asia.  In accordance with the agreement, Rexgene paid the Company a one-time fee of $1,500,000 in 2003.  The agreement terminates at the later of 20 years or the term of the patent.  The amortization reduces research and development expenses for the periods presented.

The Company is using 20 years as its basis for recognition and accordingly, research and development expenses were reduced by $18,750 for each of the three month periods ended September 30, 2017 and 2016 and $56,250 for each of the nine month periods ended September 30, 2017 and 2016.  The remaining $393,750 and $450,000 to be amortized at September 30, 2017 and December 31, 2016, respectively, is reflected as a deferred research and development arrangement on the balance sheet.  The payment from Rexgene is being used in the cooperative funding of the costs of development of Archexin. Royalties of 3% of net sales of licensed products will become payable by Rexgene to the Company on a quarterly basis once commercial sales of Archexin begin in Asia.  The product is still under development and commercial sales in Asia are not expected to begin until at least 2018.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)
8.Other Liabilities

Deferred Lease Incentive

In accordance with the Company’s office lease agreement, as amended and further discussed in Note 14, the Company has been granted leasehold improvement allowances from the lessor to be used for the construction cost of improvements to the leased property, which included architectural and engineering fees, government agency plan check, permit and other fees, sales and use taxes, testing and inspection costs and telephone and data cabling and wiring in the premises.  The Company accounted for the benefit of the leasehold improvement allowance as a reduction of rental expense over the term of the office lease.
The following table sets forth the cumulative deferred lease incentive:

  
September 30,
2017
  
December 31,
2016
 
       
Deferred lease incentive $154,660  $154,660 
Less accumulated amortization  (132,884)  (123,551)
         
Balance $21,776  $31,109 

Deferred Office Lease Expense

The lease agreement, as amended, provided for an initial annual base rent with annual increases over the lease term.  The Company recognizes rental expense on a straight-line basis over the term of the lease, which resulted in a deferred rent liability of $39,781 and $48,095 as of September 30, 2017 and December 31, 2016, respectively.
9.Net Loss per Common Share
Basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period.  Diluted loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding, plus the number of common share equivalents that would be dilutive.  As of September 30, 2017 and December 31, 2016, there were stock options, restricted stock units and warrants to acquire, in the aggregate, 7,166,209 and 7,142,728 shares of the Company’s common stock, respectively, that are potentially dilutive. However, diluted loss per share is the same as basic loss per share for all periods presented because the inclusion of common share equivalents would be anti-dilutive.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)
10.Common Stock

The following transactions occurred during the nine months ended September 30, 2017:

Reverse Stock Split

On May 5, 2017 the Company effected a one-for-ten reverse stock split of the outstanding shares of the Company’s common stock, together with a corresponding proportional reduction in the number of authorized shares of the Company’s capital stock.  Each ten shares of the Company’s common stock, par value $0.0001 per share, issued and outstanding at the effective time of the reverse stock split were reclassified and combined into one share of common stock par value $0.0001 per share. The number of shares of common stock and preferred stock the Company is authorized to issue was reduced to 50 million and 10 million, respectively.  All share and per share amounts of common stock, stock options, stock warrants and restricted stock units have been restated for all periods to give retroactive effect to the reverse stock split.  Accordingly, an amount equal to the par value of the decreased shares resulting from the reverse stock split was reclassified from “Common stock” to “Additional paid-in capital.”

Warrant Exercises

During the nine months ended September 30, 2017, warrant holders exercised warrants to purchase shares of the Company’s common stock for cash of $5,354,093 and the Company issued 1,652,623 shares.

Stock Option Exercises

During the nine months ended September 30, 2017, a stock option holder exercised options to purchase shares of the Company’s common stock for cash of $77,500 and the Company issued 25,000 shares.

Compensatory Shares

During the nine months ended September 30, 2017, the Company issued 15,000 shares to a privately held investor relations firm in exchange for investor relations services.  The aggregate market value of the stock issued was $31,200.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

Registered Direct Offering

On June 12, 2017 the Company closed a registered direct public offering of 3,030,304 shares of common stock and warrants to purchase up to 1,515,152 shares of common stock.  The common stock and warrants were sold in units, consisting of a share of common stock and a warrant to purchase 0.5 shares of common stock, at a price of $3.30 per unit, with an exercise price for the warrants of $4.00 per share.  The total gross proceeds of the offering were $10,000,003.  The warrants issued will become exercisable beginning six months after the closing date, and will remain exercisable until the five-year anniversary of the initial exercise date, and were recorded as liabilities at fair value.

A summary of the allocation of the proceeds of the offering is shown below:
Gross Proceeds: $10,000,003 
     
Allocated to warrant liabilities  3,673,168 
Allocated to common stock and additional paid-in capital  6,326,835 
     
Total allocated gross proceeds: $10,000,003 

The Company also issued warrants to purchase up to an aggregate 181,818 shares of common stock to the placement agent in the offering.  The closing costs for the offering of $1,193,052 included $434,320 for the placement agent warrants and $758,732 for placement agent and other fees.  Based on the estimated fair value of the stock and warrants in the units, the Company allocated $333,050 to financing expense for the warrants and $860,002 as stock issuance costs.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

11.Stock-Based Compensation

As of September 30, 2017, the Company had 1,830,443 options to purchase common stock and 47,300 restricted stock units (“RSUs”) outstanding.

At the Company’s Annual Meeting of Shareholders held on June 10, 2013, the Company’s shareholders voted to approve the Rexahn Pharmaceuticals, Inc. 2013 Stock Option Plan (the “2013 Plan”).  Under the 2013 Plan, the Company grants equity awards to key employees, directors and consultants of the Company.  The Company initially reserved 1,700,000 shares of common stock for issuance pursuant to the 2013 Plan, and on April 11, 2017, the Company’s shareholders approved an increase of 1,700,000 shares of common stock reserved for issuance pursuant to the 2013 Plan. As of September 30, 2017, there were 1,483,443 options and 47,300 RSUs outstanding under the 2013 Plan, and 1,868,507 shares were available for issuance.

On August 5, 2003, the Company established a stock option plan (the “2003 Plan”).  Under the 2003 Plan, the Company granted stock options to key employees, directors and consultants of the Company.  With the adoption of the 2013 Plan, no new stock options may be issued under the 2003 Plan, but previously issued options under the 2003 Plan remain outstanding until their expiration.  As of September 30, 2017, there were 335,000 options outstanding under the 2003 Plan.

In March 2016, the Company granted to a third party an option to purchase up to 12,000 shares of the Company’s common stock.  These were the only Company stock options outstanding as of September 30, 2017, that were not issued pursuant to the 2013 Plan or the 2003 Plan.

Accounting for Awards

Stock-based compensation expense is the estimated fair value of options and RSUs granted amortized on a straight-line basis over the requisite vesting service period for the entire portion of the award. Total stock-based compensation recognized by the Company for the three and nine months ended September 30, 2017 and 2016 is as follows:
  
For the Three Months
Ended September 30,
  
For the Nine Months
Ended September 30,
 
  2017  2016  2017  2016 
Statement of operations line item:            
General and administrative $184,914  $232,951  $580,812  $673,064 
Research and development  42,700   136,451   209,194   390,525 
                 
Total $227,614  $369,402  $790,006  $1,063,589 
No income tax benefit has been recognized in the statement of operations for stock-based compensation arrangements as the Company has provided for a 100% valuation allowance on its deferred tax assets.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

Summary of Stock Option Transactions

There were 483,260 stock options granted at exercise prices ranging from $1.84 to $6.18 with an aggregate fair value of $738,937 during the nine months ended September 30, 2017.  There were  587,637 stock options granted at exercise prices ranging from $2.60 to $3.70 with an aggregate fair value of $1,150,513 during the nine months ended September 30, 2016.

The majority of the option grants to employees vest over a four-year period from the grant date. The vesting period is either (i) 30%, 30% and 40% on the first, second and third anniversaries of the grant date, respectively, or (ii) 25% each on the first four anniversaries of the grant date.  With the exception of the options granted in March 2016, which have a three-year term, options generally expire ten years from the date of grant. For the majority of grants to non-employee consultants of the Company, the vesting period is between one and three years, subject to the fulfillment of certain conditions in the individual stock agreements, or 100% upon the occurrence of certain events specified in the individual stock agreements.

The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model.  The Company took into consideration guidance under ASC 718, “Compensation-Stock Compensation” and Staff Accounting Bulletin No. 107 (“SAB 107”) when reviewing and updating assumptions.  The expected volatility is based upon historical volatility of the Company’s stock.  The expected term is based upon the simplified method as allowed under SAB 107.

The assumptions made in calculating the fair values of options are as follows:
  Nine Months Ended September 30, 
  2017  2016 
Black-Scholes assumptions      
Expected dividend yield  0%  0%
Expected volatility  69-79%  31-75%
Risk free interest rate  1.8-2.0%  0.8 -1.4%
Expected term (in years) 5.5-6 years  2-6 years 
A summary of stock option activity for the nine months ended September 30, 2017 is as follows:

  
Number of
Options
  
Weighted
Average
Exercise
Price
 
Weighted Average
Remaining
Contractual Term
 
Aggregate
 Intrinsic
Value
 
Outstanding, January 1, 2017  1,690,037  $6.20 7.3 years $- 
Granted  483,260  $2.37      
Exercised  (25,000) $3.10      
Expired  (15,000) $16.07      
Cancelled  (302,854) $5.00      
              
Outstanding, September 30, 2017  1,830,443  $5.35 7.4 years $194,644 
Exercisable, September 30, 2017  1,068,630  $6.60 6.3 years $- 
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

The total intrinsic value of options exercised was $97,872 for the nine months ended September 30, 2017.  There were no stock options exercised during the three months ended September 30, 2017 or the three and nine months ended September 30, 2016.  The weighted average fair value of the options granted was $1.53 and $1.96 for the nine months ended September 30, 2017 and 2016, respectively.
A summary of the Company’s unvested options as of September 30, 2017 and changes during the nine months ended September 30, 2017 is presented below:

  2017 
  Number of Options  
Weighted Average Fair
Value at Grant Date
 
Unvested at January 1, 2017  897,123  $3.21 
Granted  483,260  $1.53 
Vested  (458,968) $3.12 
Cancelled  (159,602) $2.27 
         
Unvested at September 30, 2017  761,813  $2.41 
As of September 30, 2017 there was $1,487,756 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average vesting period of 2.6 years.
Summary of Restricted Stock Unit Transactions
The Company began granting RSUs to employees in 2017.  There were 62,300 RSUs granted with an aggregate fair value of $114,632 during the nine months ended September 30, 2017.  The fair value of an RSU award is the closing price of the Company’s common stock on the date of grant.
A summary of RSU activity for the nine months ended September 30, 2017 is as follows:

  Number of RSUs  
Weighted
Average Grant
Date Fair Value
 
Outstanding, January 1, 2017  -  $- 
Granted  62,300  $1.84 
Vested and Released  -  $- 
Cancelled  (15,000) $1.84 
         
Outstanding, September 30, 2017  47,300  $1.84 
As of September 30, 2017, there was $72,824 of total unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average vesting period of 3.4 years.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

12.Warrants
As of September 30, 2017, warrants to purchase up to 5,288,466 shares were outstanding, having exercise prices ranging from $3.00 to $12.80 and expiration dates ranging from December 4, 2017 to December 12, 2022.

  2017  2016 
  
Number of
warrants
  
Weighted
average exercise
price
  
Number of
warrants
  
Weighted average
exercise price
 
Balance, January 1  5,452,691  $4.92   2,649,199  $7.97 
Issued during the period  1,696,970  $4.01   3,194,000  $3.47 
Exercised during the period  (1,861,195) $3.51   -  $- 
Expired during the period  -  $-   (390,508) $13.72 
                 
Balance, September 30  5,288,466  $5.13   5,452,691  $4.92 
At September 30, 2017 the weighted average remaining contractual life of the outstanding warrants was 3.8 years.

The warrants issued to investors in the December 2012, November 2015, March 2016 and September 2016 offerings contain a provision for net cash settlement in the event of a fundamental transaction (contractually defined to include a merger, sale of substantially all assets, tender offer or share exchange).  Pursuant to the November 2015, March 2016, and September 2016 warrants, if fundamental transaction occurs, then the warrant holder has the option to receive cash, equal to the fair value of the remaining unexercised portion of the warrant.  The option is available to holders of the December 2012 warrants only if the consideration issued in the fundamental transaction consists of cash or stock in a non-public company.  Due to these contingent redemption provisions, the warrants require liability classification in accordance with ASC 480, “Distinguishing Liabilities from Equity,” and are recorded at fair value.   The June 2017 warrants contain a provision that allows the holder to opt for cash settlement in a fundamental transaction that was approved by, or required to be approved by, the board of directors of the Company. All of the Company’s outstanding warrants provide the holder the option as to the type of consideration received if the holders of common stock receive an option as to their consideration. In addition, all of the Company’s outstanding warrants contain a cashless exercise provision that is exercisable only in the event that a registration statement is not effective. That provision may not be operative if an effective registration statement is not available because an exemption under the U.S. securities laws may not be available to issue unregistered shares.  As a result, net cash settlement may be required, and the warrants require liability classification.

ASC 820, “Fair Value Measurements and Disclosures,” provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition.  Fair values for warrants were determined using the Binomial Lattice (“Lattice”) valuation technique. The Lattice model provides for dynamic assumptions regarding volatility and risk-free interest rates within the total period to maturity. Accordingly, within the contractual term, the Company provided multiple date intervals over which multiple volatilities and risk free interest rates were used. These intervals allow the Lattice model to project outcomes along specific paths that consider volatilities and risk free rates that would be more likely in an early exercise scenario.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

Significant assumptions are determined as follows:
Trading market values—Published trading market values;
Exercise price—Stated exercise price;
Term—Remaining contractual term of the warrant;
Volatility—Historical trading volatility for periods consistent with the remaining terms; and
Risk-free rate—Yields on zero coupon government securities with remaining terms consistent with the remaining terms of the warrants.

Due to the fundamental transaction provision, which could provide for early redemption of the warrants, the model also considered the probability the Company would enter into a fundamental transaction during the remaining term of the warrant. Because the Company is not yet achieving positive cash flow, management believes the probability of a fundamental transaction occurring over the term of the warrant is unlikely and therefore estimates the probability of entering into a fundamental transaction to be 5%.  For valuation purposes, the Company also assumed that if such a transaction did occur, it was more likely to occur towards the end of the term of the warrants.

The significant unobservable inputs used in the fair value measurement of the warrants include management’s estimate of the probability that a fundamental transaction may occur in the future.  Significant increases (decreases) in the probability of occurrence would result in a significantly higher (lower) fair value measurement.
The following table summarizes the fair value of the warrants as of the respective balance sheet dates:

  Fair Value as of: 
Warrant Issuance: September 30, 2017  December 31, 2016 
December 2012 Investor Warrants $10  $49 
July 2013 Investor Warrants  57,422   2,060 
October 2013 Investor Warrants  106,316   3,708 
January 2014 Investor Warrants  125,862   714 
November 2015 Investor Warrants  1,564,850   260,500 
November 2015 Placement Agent Warrants  3,882   13,542 
March 2016 Investor Warrants  862,700   358,945 
March 2016 Placement Agent Warrants  -   21,320 
September 2016 Investor Warrants  1,289,457   854,640 
September 2016 Placement Agent Warrants  -   57,888 
June 2017 Investor Warrants  2,395,683   - 
June 2017 Placement Agent Warrants  269,909   - 
Total: $6,676,091  $1,573,366 
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

The following table summarizes the number of shares indexed to the warrants as of the respective balance sheet dates:

  Number of Shares indexed as of: 
Warrant Issuance September 30, 2017  December 31, 2016 
December 2012 Investor Warrants  17,430   17,430 
July 2013 Investor Warrants  200,000   200,000 
October 2013 Investor Warrants  231,732   231,732 
January 2014 Investor Warrants  476,193   476,193 
November 2015 Investor Warrants  1,250,001   1,250,001 
November 2015 Placement Agent Warrants  3,334   83,335 
March 2016 Investor Warrants  607,806   1,171,875 
March 2016 Placement Agent Warrants  -   78,125 
September 2016 Investor Warrants  805,000   1,800,000 
September 2016 Placement Agent Warrants  -   144,000 
June 2017 Investor Warrants  1,515,152   - 
June 2017 Placement Agent Warrants  181,818   - 
Total:  5,288,466   5,452,691 
The assumptions used in calculating the fair values of the warrants are as follows:

  September 30, 2017  December 31, 2016 
Trading market prices $2.42  $1.40 
Estimated future volatility  104%  104%
Dividend  -   - 
Estimated future risk-free rate  1.06-2.25%  1.06-2.44%
Equivalent volatility  56-109%  51-60%
Equivalent risk-free rate  0.72-1.52%  0.59-1.25%
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

Changes in the fair value of the warrant liabilities carried atwhile outstanding was recognized as a component of the fair value reported as “unrealized gain (loss) on fair value of warrants”change in derivative and warrant liabilities line item in the statementcondensed consolidated statements of operations:
  
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
Expired Warrants $-  $-  $-  $2,590 
December 2012 Investor Warrants  7,306   2,212   39   9,490 
July 2013 Investor Warrants  125,686   22,040   (55,362)  115,940 
October 2013 Investor Warrants  135,683   30,264   (102,608)  159,871 
January 2014 Investor Warrants  177,900   12,190   (125,148)  129,905 
November 2015 Investor Warrants  797,688   409,125   (1,304,350)  1,613,750 
November 2015 Placement Agent Warrants  1,691   24,683   (366,694)  104,842 
March 2016 Investor Warrants  356,472   425,625   (2,873,309)  1,677,891 
March 2016 Placement Agent Warrants  -   26,283   (351,899)  112,188 
September 2016 Investor Warrants  506,353   12,780   (4,807,246)  12,780 
September 2016 Placement Agent Warrants  -   2,435   (503,150)  2,435 
June 2017 Investor Warrants  894,076   -   1,277,485   - 
June 2017 Placement Agent Warrants  117,645   -   164,411   - 
Total: $3,120,500  $967,637  $(9,047,831) $3,941,682 
19
Table of Contents
comprehensive loss.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

Fair Value Measurements
13.Income Taxes
 
No provision for federal and state income taxes was required for the three and nine months ended September 30, 2017 and 2016 due to the Company’s operating losses and increased deferred tax asset valuation allowance.  At September 30, 2017 and December 31, 2016, the Company had unused net operating loss carry-forwards of approximately $123,515,000 and $111,605,000 respectively, which expire at various dates through 2037.  Some of this amount may be subject to annual limitations under certain provisions of the Internal Revenue Code related to “changes in ownership.”
As of September 30, 2017 and December 31, 2016, the deferred tax assets related to the aforementioned carry-forwards have been fully offset by valuation allowances, because significant utilization of such amounts is not presently expected in the foreseeable future.
Deferred tax assets and valuation allowances consist of:

  
September 30,
2017
  
December 31,
2016
 
       
Net Operating Loss Carryforwards $48,171,000  $43,526,000 
Stock Compensation Expense  1,947,000   1,968,000 
Book tax differences on assets and liabilities  425,000   547,000 
Valuation Allowance  (50,543,000)  (46,041,000)
         
Net Deferred Tax Assets $-  $- 

The Company files income tax returns in the U.S. federal and Maryland state jurisdictions.  Tax years for fiscal 2014 through 2016 are open and potentially subject to examination by the federal and Maryland state taxing authorities.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)
14.Commitments and Contingencies
a)The Company has contracted with various vendors for services, with termsfollows accounting guidance that emphasizes that require payments over the terms of the agreements, usually ranging from two to 36 months. The costs to be incurred are estimated and are subject to revision. As of September 30, 2017, the total estimated cost to complete these agreements was approximately $10,750,000.  All of these agreements may be terminated by either party upon appropriate notice as stipulated in the respective agreements.
b)On June 22, 2009, the Company entered into a License Agreement with Korea Research Institute of Chemical Technology (“KRICT”) to acquire the rights to all intellectual property related to quinoxaline-piperazine derivatives that were synthesized under a Joint Research Agreement.  The initial license fee was $100,000, all of which was paid as of December 31, 2009.  The agreement with KRICT calls for a one-time milestone payment of $1,000,000 within 30 days after the first achievement of marketing approval of the first commercial product arising out of or in connection with the use of KRICT’s intellectual property.  As of September 30, 2017, the milestone has not occurred.
c)Office Space Lease
On June 5, 2009, the Company entered into a commercial lease agreement for 5,466 square feet of office space in Rockville, Maryland.  The lease was amended on June 7, 2013 to extend the term until June 30, 2019.
On July 26, 2014 the lease was amended to add 1,727 square feet of office space for a term beginning on September 1, 2014 and ending on August 31, 2015, which was subsequently renewed through June 30, 2019. Under the lease agreement, the Company pays its allocable portion of real estate taxes and common area operating charges.
Rent paid under the Company’s lease during the three months ended September 30, 2017 and 2016 was $52,172 and $51,823, respectively, and rent paid during the nine months ended September 30, 2017 and 2016 was $153,968 and 154,426, respectively.
Laboratory Lease
On April 20, 2015, the Company signed a five-year lease agreement for 2,552 square feet of laboratory space commencing on July 1, 2015 and ending on June 30, 2020.  Under the lease agreement, the Company pays its allocable portion of real estate taxes and common area operating charges. Rent paid under this lease during the three months ended September 30, 2017 and 2016 was $16,244 and $15,771, respectively, and rent paid during the nine months ended September 30, 2017 and 2016 was $47,787 and $46,395, respectively.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

Future rental payments over the next five years for all leases are as follows:
For the remaining three months ending December 31:2017 $68,943 
For the year ending December 31:2018  279,274 
 2019   176,080 
 2020  34,468 
      
 Total $558,765 
d)
The Company has established a 401(k) plan for its employees.  The Company has elected to match 100% of the first 3% of an employee’s compensation plus 50% of an additional 2% of the employee’s deferral. Expense related to this matching contribution aggregated to $31,453 and $29,114 for the three months ended September 30, 2017 and 2016, respectively, and $102,536 and $92,203 for the nine months ended September 30, 2017 and 2016, respectively.
e)In July 2013, the Company entered into an exclusive license agreement with the University of Maryland, Baltimore for a novel drug delivery platform, Nano-Polymer Drug Conjugate Systems.  RX-21101 is the Company’s first drug candidate utilizing this platform.  The agreement requires the Company to make payments to the University of Maryland if RX-21101 or any products from the licensed delivery platform achieve development milestones.  As of September 30, 2017, no development milestones have occurred.
f)In October 2013, the Company signed an exclusive license agreement with the Ohio State Innovation Foundation, for a novel oligonucleotide drug delivery platform, Lipid-Coated Albumin Nanoparticle.  The agreement requires the Company to make payments to the Ohio State Innovation Foundation if any products from the licensed delivery platform achieve development milestones.  As of September 30, 2017, no development milestones have occurred.
REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Financial Statements
(Unaudited)

15.Fair Value Measurements
ASC 820 defines fair value is a market-based measurement, not an entity-specific measurement. Fair value is defined as the“the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not adjusted for transaction costs.  ASC 820 also establishesdate.” Fair value measurements are defined on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).three-level hierarchy:

The three levels are described below:


●
Level 1 Inputs
—inputs: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company;in active markets;


●
Level 2 Inputs—inputs: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or financial instruments forinputs which all significant inputs are observable, eitherwhether directly or indirectly;indirectly, for substantially the full term of the asset or liability; and


●
Level 3 Inputs—inputs: Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability including significant assumptions ofat the Company and other market participants.measurement date.

As of March 31, 2022 and December 31, 2021, the fair values of cash and cash equivalents, prepaid and other assets, accounts payable, accrued expenses and short-term loan approximated their carrying values because of the short-term nature of these assets or liabilities. The fair value of the short-term investments, while outstanding, were based on observable Level 1 inputs in the form of quoted market prices from a major stock exchange. The fair value of the warrant liabilities, while outstanding, were based on cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants for similar instruments and were based on Level 3 inputs. There were 0 transfers between fair value hierarchy levels during the three months ended March 31, 2022 and 2021.
 
The fair value of financial instruments measured on a recurring basis is as follows (in thousands):
  As of March 31, 2022 
Description Total  Level 1  Level 2  Level 3 
Assets:            
Short-term investments
 
$
135
  
$
135
  
$
0
  
$
0
 
Total assets at fair value
 
$
135
  
$
135
  
$
0
  
$
0
 

  As of December 31, 2021 
Description Total  Level 1  Level 2  Level 3 
Assets:            
Short-term investments
 
$
219
  
$
219
  
$
0
  
$
0
 
Total assets at fair value
 
$
219
  
$
219
  
$
0
  
$
0
 

The following tables present assets and liabilities that aretable provides a roll-forward of short-term investments measured at fair value on a recurring basis using observable level 1 inputs for the three months ended March 31, 2022 and are categorized using2021 (in thousands):

  2022
  2021
 
Short-term investments      
Balance as of beginning of period $219  $0 
Unrealized loss
  (84)  0 
Balance as of end of period $135  $0 

The following table provides a roll-forward of the warrant liabilities measured at fair value hierarchy.  There have been no changes inon a recurring basis using unobservable level 3 inputs for the methodologies used at September 30, 2017three months ended March 31, 2022 and December 31, 2016.2021 (in thousands):
 
de
Fair Value Measurements at September 30, 2017 
  Total  Level 1  Level 2  Level 3 
Assets:            
Commercial Paper  3,228,583   -   3,228,583   - 
Corporate Bonds  11,748,763   -   11,748,763   - 
Total Assets: $14,977,346  $-  $14,977,346  $- 
                 
Liabilities:                
Warrant Liabilities $6,676,091  $-  $-  $6,676,091 
Fair Value Measurements at December 31, 2016 
  Total  Level 1  Level 2  Level 3 
Assets:            
Certificates of Deposit $720,197  $-  $720,197  $- 
Commercial Paper  3,985,740   -   3,985,740   - 
Corporate Bonds  4,031,170   -   4,031,170   - 
Total Assets: $8,737,107  $-  $8,737,107  $- 
                 
Liabilities:                
Warrant Liabilities $1,573,366  $-  $-  $1,573,366 
  2022
  2021
 
Warrant liabilities      
Balance as of beginning of period 
$
0
  
$
27,964
 
Change in fair value of warrant liabilities  
0
   
33,829
 
Reclassification of Series A warrants from liability to equity  
0
   
(61,793
)
Balance as of end of period 
$
0
  
$
0
 
 
238
Table of ContentsIndex

REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses”. The ASU sets forth a “current expected credit loss” (“CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The Company does not expect that the adoption of this ASU on January 1, 2023 will have a significant impact on its consolidated financial statements.

In August 2020, FASB issued ASU 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ​ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, this ASU modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in this ASU are effective for public business entities that meet the definition of a Securities and Exchange Commission (“SEC”) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2020-06 on its condensed consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance, to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. The amendments in this ASU are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted this guidance on January 1, 2022 and it did not have a material impact to our financial statements.
2.Merger and Contingent Value Rights Agreement
On November 5, 2020, the Company completed its merger transaction (the “Merger”) with Rexahn. In connection with the Merger, the Company, Shareholder Representatives Services LLC, as representative of the Rexahn stockholders prior to the Merger, and Olde Monmouth Stock Transfer Co., Inc., as the rights agent, entered into a Contingent Value Rights Agreement (the “CVR Agreement”).
Pursuant to the terms of the Merger and the CVR Agreement, Rexahn stockholders of record as of immediately prior to the effective time of the Merger received 1 contingent value right (“CVR”) for each share of Rexahn common stock held.
Each CVR entitles such holders to receive, for each calendar quarter (each, a “CVR Payment Period”) during the 15-year period after the Closing (the “CVR Term”), an amount equal to the following:

●90% of all payments received by Rexahn or its affiliates during such CVR Payment Period from or on behalf of BioSense Global LLC (“BioSense”) pursuant to that certain License and Assignment Agreement, dated as of February 25, 2019, by and between BioSense and Rexahn, as amended by Amendment No. 1, dated August 24, 2019, and as further amended by Amendment No. 2, dated March 10, 2020, minus certain permitted deductions;

●90% of all payments received by Rexahn or its affiliates during such CVR Payment Period from or on behalf of Zhejiang HaiChang Biotechnology Co., Ltd. (“HaiChang”) pursuant to that certain Exclusive License Agreement, dated as of February 8, 2020, by and between HaiChang and Rexahn, minus certain permitted deductions; and

●75% of the sum of (i) all cash consideration paid by a third party to Rexahn or its affiliates during the applicable CVR Payment Period in connection with the grant, sale or transfer of rights to Rexahn’s pre-closing intellectual property (other than a grant, sale or transfer of rights involving a sale or disposition of the post-Merger combined company) that is entered into during the 10-year period after the Closing (“Parent IP Deal”), plus (ii) with respect to any non-cash consideration received by Rexahn or its affiliates from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by Rexahn and its affiliates for such non-cash consideration at the time such non-cash consideration is monetized by Rexahn or its affiliates, minus (iii) certain permitted deductions.
The CVRs are not transferable, except in certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest and will not be registered with the SEC or listed for trading on any exchange. The CVR Agreement will continue in effect until the later of the end of the CVR Term and the payment of all amounts payable thereunder. As of March 31, 2022, 0 milestones had been accrued as there were 0 additional potential milestones yet considered probable beyond those previously reported in the second and third quarter of calendar year 2021.

9
Index

Notes to Condensed Consolidated Financial Statements
Former Rexahn Warrants
Following the closing of the Merger, 231,433 outstanding, unexercised Rexahn warrants to purchase common stock remained outstanding, the majority of which were subsequently repurchased according to the terms of the original warrant agreements.  As of March 31, 2022, 66,538 of the Rexahn warrants remained outstanding with exercise prices ranging from $38.40 to $198.00 per share with an average remaining contractual life of 1.7 years.

3.Pre-Merger Financing



Securities Purchase Agreement



On June 17, 2020, Ocuphire, Rexahn and certain investors entered into a Securities Purchase Agreement, which was amended and restated in its entirety on June 29, 2020 (as amended and restated, the “Securities Purchase Agreement”).  Pursuant to the Securities Purchase Agreement, the investors invested a total of $21.15 million in cash, including $300,000 invested by 5 directors of Ocuphire Pharma, Inc., prior to the Merger and 1 director of Rexahn upon closing of the Merger (the “Pre-Merger Financing”).  The Pre-Merger Financing also included the issuance of Series A Warrants and Series B Warrants discussed further below.



Waiver Agreements



Effective February 3, 2021, each investor that invested in the Pre-Merger Financing entered into a Waiver Agreement with the Company (collectively, the “Waiver Agreements”). Pursuant to the Waiver Agreements, the investors and the Company agreed to waive certain rights, finalize the exercise price and number of Series A Warrants and Series B Warrants, eliminate certain financing restrictions, extend the term of certain leak-out agreements, and, in the case of certain investors, grant certain registration rights for the shares underlying the warrants.


The Waiver Agreements provide for the elimination of the full ratchet anti-dilution provisions contained in the Series A Warrants (as certain of the anti-dilution provisions had previously caused liability accounting treatment for the Series A Warrants). Upon the effective date of the Waiver Agreements, the Series A Warrants were reclassified to equity.

Pursuant to the Waiver Agreements, the number of shares underlying all of the Series B Warrants was fixed in the aggregate with respect to all investors, eliminating any future resets.


Series A Warrants



The Series A Warrants were issued on November 19, 2020 at an initial exercise price of $4.4795 per share, were immediately exercisable upon issuance and have a term of five years from the date of issuance. The Series A Warrants are exercisable for 5,665,838 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein) and were outstanding as of March 31, 2022. Prior to the execution of the Waiver Agreements, the Series A Warrants were accounted for and classified as liabilities on the accompanying condensed balance sheets given certain price reset provisions not used for a fair valuation under a fixed for fixed settlement scenario as required for equity balance sheet classification. Upon the February 3, 2021 effective date of the Waiver Agreements, the Series A Warrants were reclassified to equity. A final fair valuation of the Series A Warrants was performed utilizing a Black Scholes model to estimate the aggregate fair value of the Company’s Level 2 marketable securities is determined by usingSeries A Warrants prior to being re-classified as equity. Input assumptions used were as follows: risk-free interest rate 0.4%; expected volatility of 86.6%; expected life of 4.8 years; and expected dividend yield 0 percent. The underlying stock price used was the market price as quoted prices from independent pricing services that use market data for comparable securities in active or inactive markets.  A varietyon Nasdaq as of  data inputs, including benchmark yields, interest rates, known historical trades and broker dealer quotes are used with pricing models to determineFebruary 3, 2021, the quoted prices.

effective date of the Waiver Agreement.  The fair value methodology for the warrant liabilities is disclosed in Note 12.

The carrying amounts reported in the financial statements for cash and cash equivalents (Level 1), approximate fair value becausechange of the short term maturity of these financial instruments.

The following table sets forth a reconciliation of changes for the nine months ended September 30, 2017Series A Warrants was $33.8 million and 2016 inwas recorded to the fair value change in warrant liabilities line item on the accompanying condensed consolidated statements of comprehensive loss for the three months ended March 31, 2021. As a result of the liabilitiesreclassification to equity, the Series A Warrants are no longer subject to remeasurement.



Series B Warrants



The Series B Warrants have an exercise price of $0.0001, were exercisable upon issuance and will expire on the day following the later to occur of (i) the Reservation Date (as defined therein), and (ii) the date on which the investor’s Series B Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein) and 0 shares remain issuable thereunder. The Series B Warrants outstanding as of March 31, 2022 were exercisable for 78,700 shares of common stock. The Series B Warrants were accounted for and classified as Level 3 inequity on the fair value hierarchy:accompanying condensed balance sheets.
  Warrant Liabilities 
Balance at January 1, 2017 $1,573,366 
Additions  4,107,488 
Unrealized losses, net  9,047,831 
Transfers out of level 3  (8,052,594)
Balance at September 30, 2017 $6,676,091 
  Warrant Liabilities 
Balance at January 1, 2016 $2,739,163 
Additions  4,364,110 
Unrealized gains, net  (3,941,682)
Transfers out of level 3  - 
Balance at September 30, 2016 $3,161,591 

Additions consist of the fair value of warrant liabilities upon issuance.  Transfers out of Level 3 for warrant liabilities consist of warrant exercises, where the liability is converted to additional paid-in capital upon exercise.  The Company’s policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstance that caused the transfer.
4.
Commitments and Contingencies
 
24Apexian Sublicense Agreement
On January 21, 2020, the Company entered into a sublicense agreement with Apexian Pharmaceuticals, Inc., pursuant to which it obtained exclusive worldwide patent and other intellectual property rights. In exchange for the patent and other intellectual rights, the Company agreed to certain milestone payments and royalty payments on future sales (See Note 9 — Apexian Sublicense Agreement). As of March 31, 2022, there was sufficient uncertainty with regard to any future cash milestone payments under the sublicense agreement, and as such, no liabilities were recorded related to the sublicense agreement.

10
Table of ContentsIndex

REXAHN PHARMACEUTICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
16.Subsequent Events
Facility Leases
 
On October 17, 2017
In May 2019, the Company closedentered into a registered direct publicshort-term non-cancellable facility lease (the “HQ Lease”) for its operations and headquarters for a seven-month term beginning in June 2019. The HQ Lease, as amended, has extended the term to December 31, 2022. Additionally, Ocuphire leased office space in Rockville, Maryland through June 30, 2021 previously occupied by Rexahn (the “Rexahn Lease”). The HQ Lease and the Rexahn Lease qualified for the short-term lease exception under ASC 842, Leases. The monthly base rent, as amended, for the HQ Lease is approximately $3,000. The monthly base rent for the Rexahn Lease was $13,000. The rent expense associated with the HQ Lease and Rexahn Lease amounted to $12,000 and $48,000 during the three months ended March 31, 2022 and 2021, respectively. Total remaining expected rental payments under the HQ Lease amount to $27,000 through its December 31, 2022 expiration date.

Other

In the ordinary course of business, from time to time, the Company may be subject to a broad range of claims and legal proceedings that relate to contractual allegations, patent infringement and other claims. In addition, the Company from time to time may be potentially committed to reimburse third parties for costs incurred associated with business development related transactions upon the achievement of certain milestones. The Company establishes accruals when applicable for matters and commitments which it believes losses are probable and can be reasonably estimated. To date, no loss contingency for such matters and potential commitments have been recorded. Although it is not possible to predict with certainty the outcome of these matters or potential commitments, the Company is of the opinion that the ultimate resolution of these matters and potential commitments will not have a material adverse effect on its results of operations or financial position.
5.Supplemental Balance Sheet Information
Prepaid and Other Assets
Prepaid and other assets consist of the following (in thousands):
  
March 31,
2022
  
December 31,
2021
 
Prepaids 
$
1,062
  
$
1,243
 
Other  
33
   
71
 
Total prepaids and other assets 
$
1,095
  
$
1,314
 

Property and Equipment, net
Property and equipment held for use by category are presented in the following table (in thousands):
  
March 31,
2022
  
December 31,
2021
 
Equipment 
$
20
  
$
20
 
Furniture  
5
   
5
 
Total property and equipment 

25
   
25
 
Less accumulated depreciation  
(16
)
  
(15
)
Property and equipment, net 
$
9
  
$
10
 

Depreciation expense was $1,000 during each of the three months ended March 31, 2022 and 2021.

Accrued Expenses

Accrued expenses consist of the following (in thousands):
  March 31,  December 31, 
  2022
  2021
 
R&D services and supplies 
$
962
  
$
1,081
 
Payroll  
193
   
488
 
Professional services  
189
   
84
 
Other  
75
   
80
 
Total 
$
1,419
  
$
1,733
 

11
Index

Notes to Condensed Consolidated Financial Statements

Short-Term Loan



The Company entered into an unsecured short-term loan (the “Loan”) agreement in the amount of $0.6 million in November 2021 related to financing an insurance policy.  The Loan is payable in 6 monthly installments of $108,000 beginning in December 2021.  The Loan has an annual interest rate of 5.5% per annum.  Interest expense in the amount of $5,000 was recognized in connection with the Loan during the three months ended March 31, 2022.

6.Related Party Transactions
Pre-Merger Financing and Waiver Agreements
NaN directors of Ocuphire Pharma, Inc., prior to the Merger, and 1 director of Rexahn participated in the Pre-Merger Financing, investing an aggregate of $300,000.  Following the closing of the Merger, these directors received 17,729 converted initial shares of common stock, 53,189 converted shares of additional common stock, 80,366 Series A Warrants and 9,444 Series B Warrants. In connection with the Pre-Merger Financing, 6 directors of the Company signed Waiver Agreements, waiving certain reset provisions and financing restrictions.  These directors did not receive any of the additional Series B Warrants that were issued in connection with the Waiver Agreements. See Note 3 – Pre-Merger Financing.
7.
Stockholders’ Equity
At-The-Market Program

On February 4, 2021, Ocuphire filed a Form S-3 shelf registration under the Securities Act of 1933 which was declared effective by the SEC on February 12, 2021 (the “2021 Shelf”) under which the Company may offer and sell, from time to time in its sole discretion, securities having an aggregate offering price of 3,265,309up to $125 million. In connection with the 2021 Shelf, on March 11, 2021, Ocuphire entered into a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) under which the Company may offer and sell, from time to time at its sole discretion, to or through JonesTrading, acting as agent and/or principal, shares of its common stock having an aggregate offering price of up to $40 million (the “2021 ATM”). During the three months ended March 31, 2022, 336,544 shares of common stock were sold under the 2021 ATM for gross proceeds in the amount of $1.2 million before deducting issuance expenses, including the placement agent’s fees, legal and accounting expenses, in the amount of $35,000.  There were 0 sales of common stock under the 2021 ATM during the three-month period ended March 31, 2021.

Registered Direct Offering

On June 4, 2021, the Company entered into a placement agency agreement with A.G.P./Alliance Global Partners (“AGP”). Pursuant to the terms of the placement agency agreement, AGP on June 8, 2021 sold an aggregate of 3,076,923 shares of the Company’s common stock and warrants to purchase up to 1,632,654 shares of common stock.  The common stock and warrants were sold in units, consisting of a share of common stock and a warrant to purchase 0.5 shares of common stock, at a price of $2.45 per unit, with an exercise price for the warrants of $2.85 per share.  The total gross proceeds of the offering were $8,000,007.  The warrants issued will become exercisable beginning six months after the closing date, and will remain exercisable until the five-year anniversary of the initial exercise date.  The Company also issued warrants to purchase up to 195,9191,538,461 shares of the Company’s common stock at(the “RDO Warrants”). The RDO Warrants have an exercise price of $3.06$6.09 per share, to designeesare exercisable from the initial issuance date of June 8, 2021, and will expire five years following the placement agentinitial issuance date. As of March 31, 2022, 1,538,461 RDO Warrants were outstanding.

8.Stock-based Compensation
Stock-based compensation expense was included in general and administrative and research and development costs as follows in the offering.accompanying condensed consolidated statements of comprehensive loss for the three-month periods indicated below (in thousands):
  March 31, 
  2022
  2021
 
General and administrative 
$
295
  
$
193
 
Research and development  
150
   
301
 
Total stock-based compensation 
$
445
  
$
494
 

Ocuphire Stock Options
 
25Inducement Plan

On February 22, 2021, the Company adopted the Ocuphire Pharma, Inc. Inducement Plan (the “Inducement Plan”), pursuant to which the Company reserved 325,258 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

12
Table of ContentsIndex

Notes to Condensed Consolidated Financial Statements
2020 Equity Incentive Plan
The stockholders of the Company approved the 2020 Equity Incentive Plan (the “2020 Plan”) for stock-based awards. The 2020 Plan became effective on November 5, 2020.  Under the 2020 Plan, (i) 1,000,000 new shares of common stock were reserved for issuance and (ii) up to 70,325 additional shares of common stock may be issued, consisting of (A) shares that remain available for the issuance of awards under prior equity plans and (B) shares of common stock subject to outstanding stock options or other awards covered by prior equity plans that have been cancelled or expire on or after the date that the 2020 Plan became effective. The 2020 Plan permits the grant of incentive and nonstatutory stock options, appreciation rights, restricted stock, restricted stock units, performance stock and net loss awards, and other stock‑based awards.
2018 Equity Incentive Plan
Prior to the 2020 Plan, the Company had adopted a 2018 Equity Incentive Plan (the “2018 Plan”) in April 2018 under which 1,175,000 shares of the Company’s common stock were reserved for issuance to employees, directors and consultants. Upon the effective date of the 2020 Plan, 0 additional shares were available for issuance under the 2018 Plan.
2020 Plan Evergreen Provision
Under the 2020 Plan, the shares reserved automatically increase on January 1 of each year, for a period of not more than ten years from the date the 2020 Plan is approved by the stockholders of the Company, commencing on January 1, 2021 and ending on (and including) January 1, 2030, by an amount equal to 5% of the shares of common stock outstanding as of December 31st of the preceding calendar year. Notwithstanding the foregoing, the Board of  Directors may act prior to January 1st of a given year to provide that there will be no January 1 increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. On January 1, 2022, 942,291 shares were added to the 2020 Plan as a result of the evergreen provision.
General

During the three months ended March 31, 2022 and 2021, 552,305 and 41,800 options were granted to officers, and employees and consultants, respectively, generally vesting over a six (6) to forty-eight (48) month period. The Company recognized $417,000 and $446,000 in stock-based compensation expense related to stock options during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and December 31, 2021, 2,616,544 and 2,096,836 stock options were outstanding, respectively.
The weighted average fair value per share of options granted during the three months ended March 31, 2022 and 2021 was $2.29 and $6.71, respectively. The Company measures the fair value of stock options with service‑based and performance‑based vesting criteria to employees, directors, consultants and directors on the date of grant using the Black‑Scholes option pricing model. The Company does not have sufficient share trading history to support a calculation of volatility and expected term. As such, the Company has used a weighted average volatility considering the volatilities of several guideline companies.
For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, and stage of life cycle. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The average expected life of the options was based on the contractual term for agreements that allow for exercise of vested options through the end of the contractual term upon termination of continuous service, and for all other agreements, was based on the midpoint between the vesting date and the end of the contractual term according to the “simplified method” as described in Staff Accounting Bulletin 110. The risk-free interest rate is determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. The Company records forfeitures when they occur.

The weighted average assumptions used in the Black‑Scholes option pricing model are as follows during the three months ended March 31, 2022 and 2021:
  2022
  2021
 
       
Expected stock price volatility  
99.6
%
  86.6%
Expected life of options (years)  
6.0
   5.6 
Expected dividend yield  0%  0
%
Risk free interest rate  
1.7
%
  0.8%

During the three months ended March 31, 2022 and 2021, 62,698 and 118,217 stock options vested, respectively. The weighted average fair value per share of options vesting during the three months ended March 31, 2022 and 2021 was $2.90 and $3.66, respectively. During the three months ended March 31, 2022 and 2021, 24,309 and 7,386 stock options were exercised, respectively, with an intrinsic value of $59,000 and $74,000, respectively. During the three months ended March 31, 2022 and 2021, 8,288 and 0 options were forfeited, respectively. As of March 31, 2022, 1,280,792 shares were available for future issuance under the 2020 Plan and Inducement Plan in the aggregate. NaN shares were available for future issuance under the 2018 Plan.
Unrecognized stock-based compensation cost was $3.3 million as of March 31, 2022. The unrecognized stock-based expense is expected to be recognized over a weighted average period of 1.5 years.
13
Index

Notes to Condensed Consolidated Financial Statements
Ocuphire Restricted Stock Awards
The Company did 0t grant any restricted stock awards (RSAs) during any of the periods presented. The RSAs granted in previous periods were subject to various vesting schedules.  During the three months ended March 31, 2022 and 2021, 0 and 40,000 RSAs vested, respectively, and 0 RSAs were forfeited during the periods presented. The stock-based compensation expense attributed to the RSAs during the three months ended March 31, 2022 and 2021 was 0 and $22,000, respectively.
Common Stock Issued for Services
The Company granted stock for services in the amount of 8,024 and 4,474 common shares to 2 board members who elected to receive their board retainers in the form of stock for services performed during the three months ended March 31, 2022 and 2021, respectively. The stock-based compensation related to these services amounted to $28,000 and $26,000 during the three months ended March 31, 2022 and 2021, respectively.

Former Rexahn Options
There were 82 outstanding, unexercised and vested options to purchase common stock granted under the Rexahn Pharmaceuticals Stock Option Plan, as amended (the “Rexahn 2003 Plan”), as of March 31, 2022 and December 31, 2021.  The exercise prices related to the outstanding options granted under the Rexahn 2003 Plan was $182.40 per share with an average remaining contractual life of 0.2 years.

9.Apexian Sublicense Agreement
On January 21, 2020, the Company entered into a sublicense agreement (as amended on June 4, 2020, the “Apexian Sublicense Agreement”) with Apexian, pursuant to which it obtained exclusive worldwide patent and other intellectual property rights that constitute a Ref-1 Inhibitor program relating to therapeutic applications to treat disorders related to ophthalmic and diabetes mellitus conditions. The lead compound in the Ref-1 Inhibitor program is APX3330, which the Company intends to develop as an oral pill therapeutic to treat diabetic retinopathy and diabetic macular edema initially, and potentially later to treat wet age-related macular degeneration. In connection with the Apexian Sublicense Agreement, the Company issued a total of 891,422 shares of its common stock to Apexian and to certain affiliates of Apexian in calendar year 2020. As a result of the common stock issued pursuant to the Apexian Sublicense Agreement, Apexian is considered by Ocuphire to be a related party.

The Company also agreed to make one-time milestone payments under the Apexian Sublicense Agreement for each of the first ophthalmic indication and the first diabetes mellitus indication for the development and regulatory milestones, and once for each of several sales milestones. These milestone payments include (i) payments for specified developmental and regulatory milestones (including completion of the first Phase 2 trial and the first Phase 3 pivotal trial in the United States, and filing and achieving regulatory approval from the FDA for the first New Drug Application for a compound) totaling up to $11 million in the aggregate and (ii) payments for specified sales milestones of up to $20 million in the aggregate, which net sales milestone payments are payable once, upon the first achievement of such milestone. Lastly, the Company also agreed to make a royalty payment equal to a single-digit percentage of its net sales of products associated with the covered patents under the Apexian Sublicense Agreement. If it is not terminated pursuant to its terms, the Apexian Sublicense Agreement shall remain in effect until expiration of the last to expire of the covered patents.
None of the milestone or royalty payments were triggered or deemed probable as of March 31, 2022 or December 31, 2021.

10.Net loss per share
Basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.  Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s warrants, unissued common stock for services and stock options while outstanding are considered common stock equivalents for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants, unissued common stock for services and stock options. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the periods presented.

The following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been anti-dilutive for the three-month periods ended presented below:
  March 31, 
  2022
  2021
 
Series A, Series B and RDO warrants
  
7,282,999
   
7,374,172
 
Stock options
  
2,616,544
   
1,818,612
 
Unissued common stock for services
  
8,024
   
4,474
 
Former Rexahn warrants
  
66,538
   
66,538
 
Former Rexahn options
  
82
   
123
 

14
Index

Notes to Condensed Consolidated Financial Statements
11.
Income Taxes
The effective tax rate for the three months ended March 31, 2022 and 2021 was 0 percent. As of March 31, 2022, a full valuation allowance has been established to reduce the Company’s net deferred income tax assets. As such, 0 tax benefit related to the Company’s pre-tax loss was recognized for any of the periods presented.

The Company’s corporate returns are subject to examination for tax years beginning in 2018 for federal income tax purposes and subject to examination in various state jurisdictions. The Company does not have any reserves for income taxes that represent the Company’s potential liability for uncertain tax positions.

12.
Deferred Compensation Plan
Effective October 1st, 2021, the Company began offering a 401(k) plan (“401K Plan”) to its employees. All employees are eligible to participate in the 401K Plan. The Company makes matching contributions equal to 100% on the first3% of compensation that is deferred as an elective deferral and an additional 50% on the next 2% of compensation. The Company’s matching contributions are made on a payroll-by-payroll basis. During the three months ended March 31,2022, the Company contributed $25,000 to the 401K Plan.
13.Subsequent Events
On April 8, 2022, Ocuphire entered into a consulting agreement with Jay Pepose, a director of the Company.  The consulting agreement provides for $10,000 a month in cash payments, effective as of April 1, 2022.  Additionally, on April 8, 2022, in connection with the consulting arrangement, Dr. Pepose received a stock option grant for 50,000 options, 25% of which will vest on March 31, 2023, with the remainder vesting in equal monthly installments over 36 months.

15
Ocuphire Pharma, Inc.
Form 10-Q

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations

OVERVIEW


The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and notes thereto set forthincluded in Part I “Financial Information”, Item 1I “Financial Statements” of this Quarterly Report on Form 10-Q (the “Report”) and the audited financial statements and notes theretorelated footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2016.2021.


Except for the historical informationForward-Looking Statements

Certain statements contained herein, the matters discussed in this Quarterly Report on Form 10-Q may be deemed to beare not statements of historical fact and are forward-looking statements that involve risks and uncertainties.  We make such forward-looking statements pursuant towithin the safe harbor provisionsmeaning of Section 27A of the Private Securities Litigation Reform Act of 19951933, as amended, and other federal securities laws.  In this Quarterly Report on Form 10-Q,Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give current expectations or forecasts of future events or our future financial or operating performance. We may, in some cases, use words such as “believe”, “estimate”, “expect”, “anticipate”, “will”, “may”, “intend”“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and other similar expressions are intendedthat convey uncertainty of future events or outcomes to identify these forward-looking statements.  We caution that

These forward-looking statements reflect our management’s beliefs and views with respect to future events, are based largely on our expectationsestimates and assumptions as of the date of this Report and are subject to a number of known and unknown risks and uncertainties, thatmany of which are subject to change based on factors that are, in many instances, beyond our control.  Actualcontrol, that could cause our actual results performance or achievements mayto differ materially from those contemplated, expressed or implied by thein these forward-looking statements.

Although we believe that the expectations reflected We discuss many of these risks in greater detail under Part I, Item 1A “Risk Factors” in our forward-looking statements are reasonable asAnnual Report on Form 10-K for the year ended December 31, 2021 and subsequent reports filed with or furnished to the Securities and Exchange Commission (the “SEC”). Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the date we make them,extent to which any factor, or combination of factors, may cause actual results couldto differ materially from those currently anticipated due to a number of factors, including risks relating to:

·our understandings and beliefs regarding the role of certain biological mechanisms and processes in cancer;

·our drug candidates being in early stages of development, including in pre-clinical development;

·our ability to initially develop drug candidates for orphan indications to reduce the time-to-market and take advantage of certain incentives provided by the U.S. Food and Drug Administration;

·our ability to transition from our initial focus on developing drug candidates for orphan indications to candidates for more highly prevalent indications;

·our ability to successfully and timely complete clinical trials for our drug candidates in clinical development;

·uncertainties related to the timing, results and analyses related to our drug candidates in pre-clinical development;

·our ability to obtain the necessary U.S. and international regulatory approvals for our drug candidates;

·our reliance on third-party contract research organizations and other investigators and collaborators for certain research and development services;

·our ability to maintain or engage third-party manufacturers to manufacture, supply, store and distribute supplies of our drug candidates for our clinical trials;
26
·our ability to form strategic alliances and partnerships with pharmaceutical companies and other partners for sales and marketing of certain of our product candidates;

·demand for and market acceptance of our drug candidates;

·the scope and validity of our intellectual property protection for our drug candidates and our ability to develop our candidates without infringing the intellectual property rights of others;

·our lack of profitability and the need for additional capital to operate our business; and

·other risks and uncertainties, including those set forth herein and in our Annual Report on Form 10-K for the year ended December 31, 2016 under the caption “Risk Factors” and those detailed from time to time in our filings with the Securities and Exchange Commission.

Thesecontained in any forward-looking statements arewe may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking statement made by us in this Report speaks only as of the date hereof and weor as of the date specified herein. We undertake no obligation to publicly update or revise theany forward-looking statements,statement, whether as a result of new information, future eventsdevelopments or otherwise.otherwise, except as may be required by applicable laws or regulations.


We areOverview
Ocuphire is a clinical stageclinical-stage ophthalmic biopharmaceutical company dedicatedfocused on developing and commercializing therapies for the treatment of refractive and retinal eye disorders. Ocuphire’s pipeline currently includes two small molecule product candidates targeting several of such indications.
Its lead product candidate, Nyxol® Eye Drops (“Nyxol”), is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. As a result, Nyxol can potentially be used for the treatment of multiple indications such as reversal of pharmacologically-induced mydriasis (“RM”) (dilation of the pupil), presbyopia (age-related blurry near vision) and dim light or night vision disturbances (“NVD”) (halos and glares). Ocuphire’s management believes these multiple indications potentially represent a significant market opportunity. Nyxol has been studied in a total of 11 clinical trials (3 Phase 1, 5 Phase 2, 2 Phase 3 and for safety in young pediatric patients (ages 3-11)) in a total of over 950 patients (with over 590 Nyxol-treated) and has demonstrated promising clinical data for use in the multiple ophthalmic indications mentioned above. Ocuphire reported positive top-line data from the first Phase 3 trial (MIRA-2) for RM, reported positive top-line data from a 2nd Phase 3 RM trial (MIRA-3) in March 2022, and reported positive data from a pediatric safety study (MIRA-4) for RM in April 2022. Ocuphire also reported positive top-line data from a Phase 2 trial of Nyxol for treatment of presbyopia, both alone and with low-dose pilocarpine (pilocarpine hydrochloride 0.4% ophthalmic solution, “LDP”) as adjunctive therapy. Ocuphire announced completion of enrollment of its NVD Phase 3 trial (LYNX-1) in January 2022. Ocuphire expects to report top-line results from the LYNX-1 NVD Phase 3 study in the second quarter of 2022. Assuming successful and timely completion of the RM trials, Ocuphire anticipates submitting a new drug application (“NDA”) to the discovery,U.S. Food and Drug Administration (“FDA”) in late 2022 under the 505(b)(2) pathway for its drug led combination product. Ocuphire has started pre-commercialization planning and activities in anticipation of a successful RM approval.
Ocuphire’s second product candidate, APX3330, is a twice-a-day oral tablet designed to target multiple pathways relevant to retinal and choroidal (the vascular layer of the eye) diseases such as diabetic retinopathy (“DR”) and diabetic macular edema (“DME”) which, if left untreated, can result in permanent visual acuity loss and eventual blindness. DR is a disease resulting from diabetes in which chronically elevated blood sugar levels cause progressive damage to blood vessels in the retina. DME is a severe form of DR which involves leakage of protein and fluid into the macula, the central portion of the retina, causing swelling and vascular damage. Prior to Ocuphire’s in-licensing of the product candidate, APX3330 had been studied by other sponsors in a total of 11 clinical trials (6 Phase 1 and 5 Phase 2) in a total of over 420 healthy volunteers or patients (with over 340 APX3330-treated) for inflammatory and oncology indications, and had demonstrated evidence of tolerability, pharmacokinetics, durability, and target engagement. Ocuphire has also in-licensed APX2009 and APX2014, which are second-generation product candidates and analogs of APX3330. Ocuphire initiated a Phase 2 trial for APX3330 in April 2021 for the treatment of patients with DR, including moderately severe non-proliferative DR (“NPDR”) and mild proliferative DR (“PDR”), as well as patients with DME without loss of central vision. Ocuphire reported enrollment completion of 103 patients in the ZETA-1 trial in March 2022 and expects to report top-line results from the ZETA-1 DR/DME Phase 2b study in the second half of 2022. In May 2022, Ocuphire reported masked safety data from the ongoing Phase 2 trial in DR/DME for the 103 patients enrolled. These safety data are consistent with safety data from the prior 11 clinical trials with total exposure experience of over 6,000 subject-days with 600 mg daily dose of APX3330.
16
Index

Ocuphire Pharma, Inc.
Form 10-Q
Strategic Outlook
As part of its strategy, Ocuphire will continue to explore opportunities to acquire additional ophthalmic assets and to seek strategic partners for late-stage development, regulatory preparation and commercialization in key global markets. To date, Ocuphire’s primary activities have been conducting research and development activities, planning clinical trials, performing business and financial planning, recruiting personnel and raising capital. Ocuphire does not have any products approved for sale and has not generated any significant amounts of innovative treatmentsrevenue. Ocuphire does not expect to generate significant revenues until, and unless, the FDA or other regulatory authorities approve Nyxol or APX3330 and Ocuphire successfully commercializes its product candidates. Until such time, if ever, as Ocuphire can generate substantial product revenue, Ocuphire expects to finance its cash needs through a combination of equity and debt financings as well as collaborations, strategic alliances and licensing arrangements. Through March 31, 2022, Ocuphire has funded its operations primarily through equity financings that totaled $50.8 million in gross proceeds, of which $21.15 million was received in connection with the merger (“Merger”) with Rexahn Pharmaceuticals, Inc. (“Rexahn”), net cash at Rexahn, a minor amount of license fee payments earned under license agreements related to Rexahn’s RX-3117 drug compound, and through the issuance of convertible notes in private placements that totaled $8.5 million in gross proceeds. Ocuphire’s net losses were $6.6 million and $39.0 million for cancer. Our mission is to improve the livesthree months ended March 31, 2022 and 2021, respectively. As of cancer patients by developing next-generation cancer therapiesMarch 31, 2022, Ocuphire had an accumulated deficit of $96.0 million. Ocuphire anticipates that are designed to maximize efficacy while minimizing the toxicityits expenses will increase substantially as it:
continues clinical trials for Nyxol, APX3330 and side effects traditionally associated with cancer treatment. Our clinical pipeline features three oncologyfor any other product candidatescandidate in Phase II clinical developmentits future pipeline;
continues preclinical studies for Nyxol, APX3330 and additional compoundsfor any other product candidate in pre-clinical development. Our strategy is to continue building a significant pipeline of innovative oncologyits future pipeline;
develops additional product candidates that we intendit identifies, in-licenses or acquires;
seeks regulatory approvals for any product candidates that successfully complete clinical trials;
contracts to manufacture its product candidates;
maintains, expands and protects its intellectual property portfolio;
hires additional staff, including clinical, scientific, operational and financial personnel, to execute its business plan;
adds operational, financial and management information systems and personnel, including personnel to support its product development and potential future commercialization efforts;
continues to operate as a public company; and
establishes on its own or with partners, a sales, marketing and distribution infrastructure to commercialize any products for which Ocuphire may obtain regulatory approval;
Ocuphire’s net losses may fluctuate significantly from quarter–to quarter and year–to year, depending on the timing of its preclinical studies, clinical trials and its expenditures on other research and development activities as well as level of license fee payments received under license agreements in connection with partners. Our three clinical stagethe former Rexahn drug candidates in active development are RX-3117, SupinoxinTM (RX-5902) and Archexin®.compounds.

·
RX-3117 is a small molecule nucleoside compound that we believe has therapeutic potential in a broad range of cancers, including pancreatic, bladder, colon, and lung cancer. RX-3117 is being evaluated as monotherapy in a multi-center Phase IIa clinical trial in metastatic pancreatic cancer in patients who are refractory to, or have relapsed after, multiple prior rounds of chemotherapy.  We are also planning to evaluate RX-3117 in combination with Abraxane® (nab-paclitaxel) as first line treatment in patients who are newly-diagnosed with metastatic pancreatic cancer and have not had prior cytotoxic treatment.  In 2016, we commenced enrollment in another Phase IIa trial in patients with locally advanced or metastatic bladder cancer.  This Phase IIa clinical trial is a multi-center open label, single agent study of RX-3117 being conducted at 10 clinical centers in the United States.  RX-3117 has received orphan drug designation from the U.S. Food and Drug Administration (the “FDA”) for pancreatic cancer.  Orphan drug designation in the United States provides tax incentives for clinical research and a waiver from user fees under certain circumstances. In addition, an orphan drug generally receives seven years of exclusivity after approval for a designated use, during which period the FDA generally cannot approve another product with the same active moiety for the same indication.  Rexahn has also received a positive opinion from the European Medicines Agency recommending orphan drug designation in pancreatic cancer.

·
Supinoxin, or RX-5902, is a potential first-in-class small molecule inhibitor of phosphorylated-p68, a protein that we believe plays a key role in cancer cell growth, progression and metastasis through its interaction with beta-catenin. In February, 2017 we initiated a Phase IIa clinical study of Supinoxin in patients with metastatic triple negative breast cancer (“TNBC”).
Recent Developments
 
27
For a discussion of business developments that occurred during the first quarter of 2022 through March 24, 2022, see "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments" included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 24, 2022.
Clinical Milestones

On March 29, 2022, Ocuphire announced positive top-line results in MIRA-3, the second Phase 3 FDA registration trial evaluating the safety and efficacy of Nyxol eye drops to reverse pharmacologically-induced mydriasis (RM) in 368 subjects. The topline results demonstrated that the MIRA-3 trial met its primary endpoint with 58% of patients (study eye) treated with Nyxol returning to ≤ 0.2 mm of their baseline pupil diameter (PD) at 90 minutes compared to only 6% of subjects (study eye) treated with placebo (p <0.0001). The effect was also significant at 60 minutes (Nyxol 42% vs. placebo 2%, p <0.0001). In comparison, only 36% of placebo treated subjects returned back to baseline PD at 6 hours. These results showed clinically meaningful differences between Nyxol and placebo for accelerating reversal of pharmacologically-induced mydriasis with a favorable safety profile.
On April 28, 2022, Ocuphire announced positive results in the MIRA-4 trial evaluating the safety and efficacy of Nyxol eye drops for RM in 23 pediatric patients. The results demonstrated that Nyxol’s efficacy and safety in pediatric patients 3-11 years of age was consistent with that shown in prior MIRA trials which enrolled both adolescents (age 12-17 years) and adults (age 18 years and older), The primary endpoint was met with Nyxol demonstrating a favorable safety and tolerability profile. Specifically, there were no complaints of headaches, redness, instillation site discomfort or pain, blurry vision, burning or stinging or change in vital signs reported.

In May 2022 at the Retina World Congress, Ocuphire presented that new masked safety data for the 103 diabetic patients enrolled in the ZETA-1 trial is consistent with APX3330’s favorable safety and tolerability as seen in 11 previous trials in healthy, hepatic and cancer patients. APX3330 at 600mg/day dose has over 6,000 subject-exposure days. Ocuphire will continue providing masked safety data at various conferences prior to reporting the topline data planned for the second half of 2022.

17
Table of ContentsIndex

Ocuphire Pharma, Inc.
Form 10-Q
·
Archexin is a potential best-in-class, potent inhibitor of the protein kinase Akt-1, which we believe plays a critical role in cancer cell proliferation, survival, angiogenesis, metastasis and drug resistance. Archexin has received orphan drug designation from the FDA for renal cell carcinoma (“RCC”), glioblastoma, ovarian cancer, stomach cancer and pancreatic cancer. We are currently conducting a Phase IIa proof-of-concept clinical trial of Archexin in patients with metastatic renal cell carcinoma to evaluate its safety and efficacy in combination with AFINITOR® (everolimus).
Presentations, Publications and Conferences


Since our inception, our effortsOcuphire’s management team and resourcesmedical advisors have been focused primarily on developing our pharmaceutical technologies, raising capitalparticipated by invitation at ten major medical and recruiting personnel.  We have no product sales to date, and we will not generate any product sales until we receive approval fromindustry conferences since the FDA or equivalent foreign regulatory bodies to begin selling our pharmaceutical candidates.  Our major sources of working capital have been proceeds from various private and public financings, and licensing and collaboration agreements with our strategic investors and partners.

On May 5, 2017 the Company effected a one-for-ten reverse stock splitbeginning of the outstanding sharesyear, including sixteen papers, posters and panel talks. The Company has been engaging with dozens of key opinion leaders to expand awareness of the Company’s common stock, togetherNyxol and APX3330 development programs.
COVID-19
As a result of the COVID-19 pandemic, Ocuphire has experienced, and may continue to experience, delays and disruptions in our clinical trials, as well as interruptions in our manufacturing and analytical lab operations, global supply chain and shipping, and clinical development operations.
Ocuphire’s plans for further testing or clinical trials may be further impacted by the continuing effects of COVID-19. The global outbreak of COVID-19 continues to rapidly evolve. The extent to which the COVID-19 pandemic may further impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with a corresponding proportional reductionconfidence, such as the effect of the pandemic on our suppliers and distributors and the global supply chain, the duration of the outbreak, travel restrictions and social distancing in the numberU.S. and other countries, business closures or business disruptions and the effectiveness of authorized sharesactions taken in the U.S. and other countries to contain and treat the disease. The COVID-19 pandemic may also continue to impact our business as a result of employee illness, school closures, and other community response measures.

The COVID-19 pandemic may also impact our ability to secure additional financing. Although Ocuphire cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company’s capital stock.  See Note 10, “Common Stock—Reverse Stock Split,”results of future operations, financial position, and liquidity in the Notes to Consolidated Financial Statements.fiscal year 2022 and beyond.
 
Recently Issued Accounting Standards

See Note 2, “Recent Accounting Pronouncements Affecting
Financial Operations Overview
Collaborations Revenue
To date, Ocuphire had limited collaborations revenue during the Company,”second and third quarters of 2021 related to fees earned from license agreements with BioSense Global LLC (“BioSense”) and Processa Pharmaceuticals, Inc. (“Processa”) in connection with the Rexahn RX-3117 drug compound. We anticipate that we may earn additional revenues stemming from additional milestone and royalty payments from these or other license agreements related to Rexahn’s legacy drug compounds; however, the attainment of milestones or level of sales required to earn royalty payments is highly uncertain.
Ocuphire does not expect to generate significant revenue unless or until it obtains regulatory approval of and commercializes Nyxol or APX3330. If Ocuphire fails to complete the development of Nyxol, APX3330, or any other product candidate it may pursue in the Notesfuture, in a timely manner, or fails to Condensed Financial Statements for a discussion of recent accounting pronouncements.obtain regulatory approval, Ocuphire’s ability to generate significant revenue would be compromised.

Results of OperationsOperating Expenses

Comparison of the ThreeOcuphire’s operating expenses are classified into two categories: general and Nine Months Ended September 30, 2017administrative and September 30, 2016research and development.

Total Revenues

We had no revenues for the three and nine months ended September 30, 2017 or 2016.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and related expensesstock-based compensation costs, for executive, financepersonnel in functions not directly associated with research and administrative activities. Other significant costs include insurance coverage for directors and officers and other administrative personnel, recruitment expenses,property and liability exposures, legal fees relating to intellectual property and corporate matters, professional fees for accounting and tax services, and other corporate expenses, includingservices provided by business development, investor relations, andconsultants. Ocuphire anticipates that its general legal activities.

General and administrative expenses will significantly increase in the future to support its continued research and development activities and costs associated with operating as a public company. These increases will include increased approximately $155,000, or 10.9%,costs related to $1,574,000the hiring of additional personnel and fees for the three months ended September 30, 2017 from $1,419,000 for the three months ended September 30, 2016.  General and administrative expenses increased approximately $515,000, or 11.4%, to $5,005,000 for the nine months ended September 30, 2017 from $4,490,000 for the nine months ended September 30, 2016.  The increases were primarily attributable to higher personnel costslegal and professional fees in 2017.services as well as other public company related costs.
 
28
Table of Contents
Research and Development Expenses

To date, Ocuphire’s research and development expenses have related primarily to the clinical-stage development of Nyxol and APX3330. Research and development expenses increased approximately $346,000, or 15.1%, to $2,645,000 for the three months ended September 30, 2017, from $2,299,000 for the three months ended September 30, 2016.  Research and development expenses decreased approximately $552,000, or 6.9%, to $7,452,000 for the nine months ended September 30, 2017, from $8,004,000 for the nine months ended September 30, 2016.  In both the three and nine-month periods ended September 30, 2017, we experienced increased clinical trialconsist of costs compared to the prior year periods, partially offset by a decreaseincurred in personnel expenses.  In the three-month period ended September 30, 2017, a new drug manufacturing campaign that began in the third quarter together with the increased clinical trial costs contributed to the overall increase inperforming research and development expenses in the period.  Conversely, the increased clinical trial costs in the nine-month period ended September 30, 2017 were more than offset by lower drug manufacturing costs as a result of supplies that were available from earlier manufacturing campaigns.  During the nine months ended September 30, 2017, we incurred approximately $1,324,000 of drug manufacturing costs, primarily as a result of the drug manufacturing campaign that began in the third quarter, compared to approximately $2,325,000 during the nine months ended September 30, 2016, primarily from large manufacturing campaigns in the early months of 2016.  Because the volumeactivities, including compensation and timing of our drug manufacturing does not correlate directly with the level and timing of clinical trial activity, we expect expenses related to drug manufacturing costs to vary from period to period based not only on the progress of clinical trials, but also when we engage in manufacturing activities.  We expectbenefits for research and development expenses to increase in the remaining quarter of 2017 compared to the quarter ended September 30, 2017 due to continued patient enrollment in ouremployees and costs for consultants, costs associated with preclinical studies and clinical trials, and newregulatory activities, manufacturing campaigns.

The table below summarizes the approximate amounts incurred in each of ouractivities to support clinical activities, license fees, nonlegal patent costs, fees paid to external service providers that conduct certain research and development, projects for the three and nine months ended September 30, 2017 and 2016:

  
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2017  2016  2017  2016 
Clinical Candidates:            
RX-3117 $1,245,500  $510,000  $3,134,000  $1,944,700 
Supinoxin  492,000   513,300   1,189,800   1,842,700 
Archexin  123,200   337,600   422,000   1,421,200 
                 
Preclinical, Personnel and Overhead  784,299   937,685   2,705,856   2,795,593 
                 
Total Research and Development Expenses $2,644,999  $2,298,585  $7,451,656  $8,004,193 

Interest Income

Interest income increased approximately $35,000 and $51,000 or 132.4% and $61.3%, respectively for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016.  The increases were primarily attributable to higher aggregate balancesan allocation of cash and cash equivalents and marketable securities and higher interest rates on marketable securities for the three and nine months ended September 30, 2017 compared to the same periods in 2016.
29
Unrealized Gain (Loss) on Fair Value of Warrants

Our warrants are recorded as liabilities at fair value, and the warrants are valued using a lattice model.  Changes in the fair value of warrants are recorded as an unrealized gain or loss in our statement of operations.  During the three months ended September 30, 2017 and 2016, we recorded unrealized gains on the fair value of our warrants of approximately $3,121,000 and $968,000.  During the nine months ended September 30, 2017, we recorded unrealized (losses) gains on the fair value of warrants of approximately ($9,048,000) and $3,942,000 respectively.  Estimating fair values of warrants requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the warrants due to related changes to external market factors.  The large unrealized gain for the three months ended September 30, 2017 primarily resulted from a decrease in the stock price of the underlying common stock at September 30, 2017 compared to June 30, 2017.  The large unrealized loss for the nine months ended September 30, 2017 primarily resulted from a significant increase in the stock price of the underlying common stock at September 30, 2017 compared to December 31, 2016.  An increase in volatility of the common stock during that period and the large number of outstanding warrants also had an impact on the large unrealized loss for the nine months ended September 30, 2017.

Financing Expense

We incurred approximately $333,000 and $313,000 of financing expenses during the nine months ended September 30, 2017, and 2016, respectively related to our registered direct offerings in June 2017, September 2016 and March 2016.  We incurred approximately $143,000 of financing expenses during the three months ended September 30, 2016, related to our registered direct offering in September 2016.  We did not incur financing expenses during the three months ended September 30, 2017.

Net Loss

As a result of the above, net loss for the three and nine months ended September 30, 2017 was approximately $1,038,000 and $21,702,000, or $0.04 and $0.83 per share, respectively, compared to approximately $2,867,000 and $8,782,000, or $0.13 and $0.42 per share, respectively, for the three and nine months ended September 30, 2016.  As previously discussed, included in the net loss for the three and nine months ended September 30, 2017 are non-cash charges of approximately $3,121,000 and ($9,048,000) in unrealized gains (losses) on the fair value of warrants, compared to unrealized gains of $968,000 and $3,942,000 for the three and nine months ended September 30, 2016.
30
Research and Development Projects

overhead expenses. Research and development costs are expensed as incurred.  Theseincurred and costs consistincurred by third parties are expensed as the contracted work is performed. Ocuphire accrues for costs incurred as the services are being provided by monitoring the status of the study or project, and the invoices received from its external service providers. Ocuphire adjusts its accrual as actual costs become known. Research and development activities are central to Ocuphire’s business model.
18
Index

Ocuphire Pharma, Inc.
Form 10-Q
Ocuphire expects that Nyxol and APX3330 will have higher development costs during their later stages of clinical development, as compared to costs incurred during their earlier stages of development, primarily due to the increased size and duration of salariesthe later-stage clinical trials. Ocuphire expects its research and related personneldevelopment expenses to significantly increase over the next several years. However, it is difficult for Ocuphire to determine with certainty the duration, costs and timing to complete its current or future preclinical programs and clinical trials of Nyxol, APX3330, and other product candidates. The duration, costs and timing of clinical trials and development of Nyxol, APX3330 and other product candidates will depend on a variety of factors that include, but are not limited to, acquire pharmaceutical products andthe following:
per patient trial costs;
the number of patients that participate in the trials;
the number of sites included in the trials;
the countries in which the trials are conducted;
the length of time required to enroll eligible patients;
the number of doses that patients receive;
the drop-out or discontinuation rates of patients;
potential additional safety monitoring or other studies requested by regulatory agencies;
the duration of patient follow-up;
the phase of development of the product rights for development and amounts paid tocandidate;
arrangements with contract research organizations hospitals and laboratoriesother service providers; and
the efficacy and safety profile of the product candidates.
Interest Expense
Interest expense consists of interest costs related to interest on principal related to a short-term loan (related to financing an insurance policy) having an annual interest rate of 5.5%.
Fair Value Change in Warrant Liabilities
The fair value change in warrant liabilities comprises the change in the fair value of the warrant liabilities during the period the warrant liabilities are outstanding.
Other (Expense) Income, net

Other (expense) income, net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from equity investments and reimbursements in connection with grants and other sources when they occur. In addition, payments made by us in connection with the Contingent Value Rights Agreement (the “CVR Agreement”) with former Rexahn shareholders when they occur are also included in this line item.
Provision for Income Taxes
Provision for income taxes consists of federal and state income taxes in the United States, as well as deferred income taxes and changes in related valuation allowance reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Currently, there is no provision for income taxes, as Ocuphire has incurred operating losses to date, and a full valuation allowance has been provided on the net deferred tax assets as of March 31, 2022 and December 31, 2021.

19
Index

Ocuphire Pharma, Inc.
Form 10-Q
Results of Operations
Comparison of Three Months Ended March 31, 2022 and 2021
The following table summarizes Ocuphire’s operating results for the provisionperiods indicated (in thousands):

  
For the Three Months Ended
March 31,
 
  2022  2021  Change 
          
Operating expenses:         
General and administrative $1,736  $1,704  $32 
Research and development  4,772   3,482   1,290 
Total operating expenses  6,508   5,186   1,322 
Loss from operations  (6,508)  (5,186)  (1,322)
Interest expense  (5)  —   (5)
Fair value change in warrant liabilities  —   (33,829)  33,829 
Other (expense) income, net  (82)  1   (83)
Loss before income taxes  (6,595)  (39,014)  32,419 
Provision for income taxes  —   —   — 
Net loss $(6,595) $(39,014) $32,419 

General and Administrative
General and administrative expenses for the three months ended March 31, 2022 were $1.7 million compared to $1.7 million for the three months ended March 31, 2021. The slight increase period over period of $32,000 was primarily attributable to an increase in in administrative employee headcount and stock-based compensation, offset largely by a decrease in professional services, legal support, insurance and materials for drug developmentpublic company costs. General and clinical trials.  Costs incurredadministrative expenses included $0.3 million and $0.2 million in obtainingstock-based compensation expense during the license rights to technology in the researchthree months ended March 31, 2022 and 2021, respectively.
Research and Development
Research and development stage that have no alternative future uses are expensedexpenses for the three months ended March 31, 2022 were $4.8 million compared to $3.5 million for the three months ended March 31, 2021. The $1.3 million increase was primarily attributable to an increased activity level associated with clinical trials and manufacturing activities for Nyxol and APX3330 period over period as incurred.  Our researchwell as additional preclinical and other development activities during the current period. Research and development programs areexpenses also included $0.1 million and $0.3 million in stock-based compensation expense during the three months ended March 31, 2022 and 2021, respectively.
Interest Expense
Interest expense for the three months ended March 31, 2022 of $5,000 was comprised of interest on principal related to our oncology clinical stage drug candidates, RX-3117, Supinoxin and Archexin, and our pre-clinical stage drug candidate, RX-21101.  As we expand our clinical studies, we expecta short-term loan (related to enter into additional development agreements.  Significant additional expenditures will be required if we complete our clinical trials, start new trials, applyfinancing an insurance policy). There was no interest expense during the comparable prior year period.
Fair Value Change in Warrant Liabilities
The fair value change in warrant liabilities was an expense of $33.8 million for regulatory approvals, continue development of our technologies, expand our operations and bring our productsthe three months ended March 31, 2021. The fair value change was due primarily to market.  The eventual total cost of each clinical trial is dependent on a number of uncertainties such as trial design, the lengthissuance of the trial,Series A Warrants in connection with the number of clinical sitesPre-Merger Financing in November 2020, discussed further below, and to the fluctuations in Ocuphire’s common stock fair value and the number of patients.potential shares of common stock issuable upon conversion of the underlying Ocuphire warrant liabilities were outstanding during the relevant periods. Upon the February 3, 2021 effective date of the Waiver Agreements, discussed further below, the Series A Warrants were reclassified to equity and are no longer subject to remeasurement. There was a negligible change to the fair value of the warrant liability associated with the Rexahn warrants during the three months ended March 31, 2022.
Other (Expense) Income, net
During the three months ended March 31, 2022, Ocuphire had other expense of $84,000 stemming principally from net unrealized losses from our short-term investments. Other expense during the three months ended March 31, 2021 was negligible.

During the three months ended March 31, 2022 and 2021, Ocuphire had interest income related to cash deposits on hand in the amount of $2,000 and $1,000, respectively.
Liquidity and Capital Resources
Capital Resources
As of March 31, 2022, Ocuphire’s principal sources of liquidity consisted of cash and cash equivalents of $19.2 million. Ocuphire believes that its cash on hand will be sufficient to fund its operations into the second quarter of 2023. The process of obtainingCompany’s cash and maintainingcash equivalents are invested primarily in cash deposits at large, long-standing financial institutions.
Ocuphire has not generated any revenue and anticipates that it will continue to incur losses for the foreseeable future. Future capital requirements depend on many factors, including the need for the following:
continued clinical trials and preclinical studies for Nyxol, APX 3330 and for any other product candidate in its future pipeline;
20
Index

Ocuphire Pharma, Inc.
Form 10-Q
developing additional product candidates that it identifies, in-licenses or acquires;
seeking regulatory approvals for new therapeuticany product candidates that successfully complete clinical trials;
contracts to manufacture its product candidates;
establishing on its own or with partners, a sales, marketing and distribution infrastructure to commercialize any products is lengthy, expensivefor which it may obtain regulatory approval;
maintaining, expanding and uncertain.  Becauseprotecting its intellectual property portfolio;
hiring additional staff, including clinical, scientific, operational and financial personnel, to execute its business plan;
adding operational, financial and management information systems and personnel, including personnel to support its product development and potential future commercialization efforts; and
operating as a public company.
 Historical Capital Resources
Ocuphire’s primary source of cash to fund its operations has been various equity offerings in the successful developmentamount of our most advanced drug candidates, RX-3117, Supinoxin$50.8 million and Archexin, is uncertain,the issuance of convertible notes in the amount of $8.5 million, inclusive of the promissory notes exchanged for Ocuphire convertible notes.
At-The-Market Program
On February 4, 2021, Ocuphire filed a Form S-3 shelf registration under the Securities Act which was declared effective by the SEC on February 12, 2021 (the “2021 Shelf”) under which the Company may offer and because RX-21101 issell, from time to time in early-stage development, weits sole discretion, securities having an aggregate offering price of up to $125 million. In connection with the 2021 Shelf, on March 11, 2021, Ocuphire entered into a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) under which the Company may offer and sell, from time to time at its sole discretion, to or through JonesTrading, acting as agent and/or principal, shares of its common stock having an aggregate offering price of up to $40 million (the “2021 ATM”). During the three months ended March 31, 2022, 336,544 shares of common stock were sold under the 2021 ATM for gross proceeds in the amount of $1.2 million.  A total of 3,115,434 shares of common stock were sold under the 2021 ATM for gross proceeds through March 31, 2022 in the amount of $14.7 million before deducting issuance expenses in the amount of $0.5 million.
Registered Direct Offering
On June 4, 2021, the Company entered into a placement agency agreement with A.G.P./Alliance Global Partners (“AGP”). Pursuant to the terms of the placement agency agreement, AGP on June 8, 2021, sold an aggregate of 3,076,923 shares of the Company’s common stock and warrants to purchase 1,538,461 shares of the Company’s common stock (the “RDO Warrants”) at an offering price of $4.875 per share and 0.50 RDO Warrants, for gross proceeds of $15.0 million, before deducting AGP’s fees and related offering expenses in the amount of $1.1 million. The purchase agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, other obligations of the parties and termination provisions.
The RDO Warrants have an exercise price of $6.09 per share, are unableexercisable upon the initial issuance date of June 8, 2021, and will expire five years following the initial exercise date.Subject to estimatelimited exceptions, a holder of a RDO Warrant will not have the costsright to exercise any portion of completing our researchits RDO Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of a holder prior to the date of issuance, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise; provided, however, that upon prior notice to the Company, the holder may increase or decrease the beneficial ownership limitation, provided further that in no event shall the beneficial ownership limitation exceed 9.99%. As of March 31, 2022, 1,538,461 RDO Warrants were still outstanding.
The offering of the Securities was made pursuant to the Company’s effective shelf registration statement on Form S-3.
21
Index

Ocuphire Pharma, Inc.
Form 10-Q
Pre-Merger Financing

Securities Purchase Agreement
On June 17, 2020, Ocuphire, Rexahn and development programs,certain investors entered into a Securities Purchase Agreement, which was amended and restated in its entirety on June 29, 2020 (as amended and restated, the timing“Securities Purchase Agreement”).  Pursuant to the Securities Purchase Agreement, the investors invested a total of bringing$21.15 million in cash, including $300,000 invested by directors of Ocuphire Pharma, Inc. prior to the Merger, and one director of Rexahn, upon closing of the Merger (the “Pre-Merger Financing”). Pursuant to the Pre-Merger Financing, (i) Ocuphire issued and sold to the investors shares of common stock of Ocuphire Pharma, Inc. prior to the Merger (the “Initial Shares”) which converted pursuant to the exchange ratio in the Merger into an aggregate of 1,249,996 shares (the “Converted Initial Shares”) of common stock, (ii) Ocuphire deposited into escrow, for the benefit of the Investors, additional shares of common stock of Ocuphire Pharma, Inc. prior to the Merger (the “Additional Shares”) which converted pursuant to the exchange ratio in the Merger into an aggregate of 3,749,992 shares of common stock (the “Converted Additional Shares”), which Converted Additional Shares were delivered (or became deliverable) to the investors on November 19, 2020, and (iii) the Company agreed to issue to each investor on the tenth trading day following the consummation of the Merger (x) Series A Warrants representing the right to acquire shares of common stock equal to the sum of (A) the Converted Initial Shares purchased by the investor, (B) the Converted Additional Shares delivered or deliverable to the investor, without giving effect to any limitation on delivery contained in the Securities Purchase Agreement and (C) the initial number of shares of common stock, if any, underlying the Series B Warrants issued to the Investor and (y) additional warrants to purchase shares of common stock.
Waiver Agreements
Effective February 3, 2021, each investor that invested in the Pre-Merger Financing (each, a “Holder”) entered into a Waiver Agreement with the Company (collectively, the “Waiver Agreements”). Pursuant to the Waiver Agreements, the Holders and the Company agreed to waive certain rights, finalize the exercise price and number of Series A Warrants and Series B Warrants, eliminate certain financing restrictions, extend the term of certain leak-out agreements, and, in the case of certain Holders, grant certain registration rights for the shares underlying the warrants.
The Waiver Agreements provide for the permanent waiver of the full ratchet anti-dilution provisions, contained in the Series A Warrants (as certain of the anti-dilution provisions had previously caused liability accounting treatment for the Series A Warrants). Upon the effective date of the Waiver Agreement, the Series A Warrants were reclassified to equity.
Pursuant to the Waiver Agreements, the number of shares underlying all of the Series B Warrants was fixed to 1,708,334 in the aggregate with respect to all Holders.
Series A Warrants
The Series A Warrants were issued on November 19, 2020 at an initial exercise price of $4.4795 per share, were immediately exercisable upon issuance and have a term of five years from the date of issuance. The Series A Warrants are exercisable for 5,665,838 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein). As of March 31, 2022, 5,665,838 Series A Warrants were still outstanding.
At issuance, the Series A Warrants contained certain provisions that could have resulted in a downward adjustment of the initial exercise price and an upward adjustment in the number of shares underlying the warrants if Ocuphire were to have issued or sold, or made an agreement to issue or sell, any shares of common stock for a price lower than the exercise price then in effect.  Pursuant to the terms of the Waiver Agreements, these provisions are no longer in effect.
Series B Warrants
The Series B Warrants have an exercise price of $0.0001, were exercisable upon issuance and will expire on the day following the later to occur of (i) the Reservation Date (as defined therein), and (ii) the date on which the investor’s Series B Warrants have been exercised in full (without giving effect to any limitation on exercise contained therein) and no shares remain issuable thereunder. The Series B Warrants were initially exercisable for 665,836 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein) and ultimately became exercisable for 1,708,334 shares of common stock upon execution of the Waiver Agreements. As of March 31, 2022, 78,700 Series B Warrants were still outstanding.
At issuance, the Series B Warrants contained certain provisions that could have resulted in the issuance of additional Series B Warrants depending on the dollar volume-weighted average prices of a share of Common Stock during a 45-trading day Reset Period.  Pursuant to the terms of the Waiver Agreements, those provisions are no longer in effect.
Ocuphire Convertible Notes
From May 2018 through March 2020, Ocuphire issued convertible notes (the “Ocuphire convertible notes”) for aggregate gross proceeds of $8.5 million, inclusive of the promissory notes exchanged for Ocuphire convertible notes. The final closing of the Ocuphire convertible notes occurred on March 10, 2020. The Ocuphire convertible notes had an interest an interest rate of 8% per annum.  On November 4, 2020, all of Ocuphire’s outstanding notes were converted into 977,128 shares of Ocuphire common stock in connection with the completion of the Merger.
22
Index

Ocuphire Pharma, Inc.
Form 10-Q
Cash Flows
The following table summarizes Ocuphire’s cash flows for the periods indicated (in thousands):
  
For the Three Months Ended
March 31,
 
  2022  2021 
    
Net cash used in operating activities $(6,170) $(5,812)
Net cash provided by (used in) investing activities  —   — 
Net cash provided by financing activities  882   10 
Net decrease in cash and cash equivalents $(5,288) $(5,802)

Cash Flow from Operating Activities
For the three months ended March 31, 2022, cash used in operating activities of $6.2 million was attributable to a net loss of $6.6 million, partially offset by $0.5 million in non-cash operating expenses and a net change use of $0.1 million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted principally of stock-based compensation of $0.4 million and unrealized loss on short-term investments of $0.1 million. The change in operating assets and liabilities was primarily attributable to a decrease in Ocuphire’s accounts payable and accrued liabilities, offset in part by an decrease in prepaid expenses and other assets associated with the fluctuations of Ocuphire’s operating expenses under the normal course of business.
For the three months ended March 31, 2021, cash used in operating activities of $5.8 million was attributable to a net loss of $39.0 million, partially offset by $34.3 million in non-cash operating expenses and a net change of $(1.1) million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted of the fair value change in the warrant liabilities of $33.8 million, stock-based compensation of $0.5 million and depreciation expense of $1,000. The change in operating assets and liabilities was primarily attributable to a decrease in Ocuphire’s accrued liabilities, on net basis, and increase in prepaid expenses associated with the fluctuations of Ocuphire’s operating expenses and in connection with operating as a public company post-Merger.
Cash Flow from Investing Activities
There were no sources or uses from investing activities during the periods presented.
Cash Flow from Financing Activities
Net cash provided by financing activities during the three months ended March 31, 2022 was $0.9 million in connection with the 2021 ATM financing net proceeds of $1.2 million and exercise of stock options in the amount of $27,000, offset by payments made on the short-term loan of $0.3 million.
Net cash provided by financing activities during the three months ended March 31, 2021 was $10,000 in connection with the exercise of stock options.
Liquidity and Capital Resource Requirements
Ocuphire has no current source of revenue to sustain its present activities, and Ocuphire does not expect to generate significant revenue until, and unless, the FDA or other regulatory authorities approve Nyxol or APX3330 and it successfully commercializes its product candidates. Until such programstime, if ever, as Ocuphire can generate substantial product revenue, it expects to marketfinance its cash needs through a combination of equity and therefore, when material cash inflows could commence fromdebt financings as well as collaborations, strategic alliances and licensing arrangements. Ocuphire does not have any committed external source of funds. To the extent that Ocuphire raises additional capital through the sale of equity or convertible debt securities, the ownership interest of Ocuphire’s stockholders will be diluted, and the terms of these drugsecurities may include liquidation, warrants, or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting Ocuphire’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If Ocuphire raises additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, Ocuphire may have to relinquish valuable rights to its technologies, future revenue streams or grant licenses on terms that may not be favorable to Ocuphire. If Ocuphire is unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances or licensing arrangements when needed, Ocuphire may be required to delay, limit, reduce or terminate its product development, future commercialization efforts, or grant rights to develop and market its product candidates if any.  If these projects are not completedthat Ocuphire would otherwise prefer to develop and market itself.
Future Capital Requirements
Ocuphire’s independent registered public accounting firm included an explanatory paragraph in its report on Ocuphire’s financial statements as planned, ourof and for the years ended December 31, 2021 and 2020, noting the existence of substantial doubt about its ability to continue as a going concern. This uncertainty arose from management’s review of Ocuphire’s results of operations and financial condition wouldand its conclusion that, based on Ocuphire’s operating plans, Ocuphire did not have sufficient existing working capital to sustain operations substantially beyond twelve months following the date of the report filing. To continue to fund operations, Ocuphire will need to raise capital. Ocuphire may obtain additional financing in the future through the issuance of common stock, through other equity or debt financings or through collaborations or partnerships with other companies. Ocuphire may not be negatively affected.able to raise additional capital on terms acceptable to it, or at all, and any failure to raise capital as and when needed could compromise Ocuphire’s ability to execute on its business plan.

RX-3117
23
Index

Ocuphire Pharma, Inc.
Form 10-Q
The development of Nyxol and APX3330 is subject to numerous uncertainties, and Ocuphire has based these estimates on assumptions that may prove to be substantially different than what Ocuphire currently anticipates and could result in cash resources being used sooner than what Ocuphire currently expects. Additionally, the process of advancing early-stage product candidates and testing product candidates in clinical trials is costly, and the timing of progress in these clinical trials is uncertain. Ocuphire’s ability to successfully transition to profitability will be dependent upon achieving a level of product sales adequate to support its cost structure. Ocuphire cannot give any assurance that it will ever be profitable or generate positive cash flow from operating activities.
Contractual Obligations and Commitments
Facility Lease
Ocuphire leases a facility under a non-cancellable operating lease that commenced on June 8, 2019 and expires on December 31, 2022, as amended, for a base rent in the amount of $3,000 per month.
 
 RX-3117 isApexian Sublicense Agreement
On January 21, 2020, Ocuphire entered into the Apexian Sublicense Agreement, pursuant to which it obtained exclusive worldwide patent and other intellectual property rights that constitute a novel, investigational oral small molecule nucleoside compound.  We believe RX-3117 hasRef-1 Inhibitor program relating to therapeutic potential in a broad range of cancers including pancreatic, bladder, cervical, non-small cell lung cancer and colon cancer.  We previously identified the MTD of RX-3117, which we are evaluating in Phase IIa proof-of-concept clinical trials in patients with relapsed or refractory metastatic pancreatic cancer and patients with locally advanced or metastatic bladder cancer.

Expensesapplications to treat disorders related to RX-3117 increased duringophthalmic and diabetes mellitus conditions. The lead compound in the threeRef-1 Inhibitor program is APX3330, which Ocuphire intends to develop as an oral tablet therapeutic to treat DR and nine months ended September 30, 2017 compareddiabetic macular edema, and potentially wAMD.
In connection with the Apexian Sublicense Agreement, Ocuphire issued 843,751 shares of Ocuphire common stock to Apexian and certain of Apexian’s affiliates.
Ocuphire agreed to make one-time milestone payments under the same period in 2016 due to increased clinicalApexian Sublicense Agreement for each of the first ophthalmic indication and the first diabetes mellitus indication. These milestone payments include (i) payments for specified developmental and regulatory milestones (including completion of the first Phase 2 trial and patient enrollments resultingthe first Phase 3 pivotal trial in the United States, and filing and achieving regulatory approval from the progression of our pancreatic and bladder cancer clinical trials, as well as manufacturing costsFDA for new campaigns. We expect that expenses relatedthe first New Drug Application for a compound) totaling up to RX-3117 will increase$11 million in the remainderaggregate and (ii) payments for specified sales milestones of 2017 comparedup to $20 million in the three and nine months ended September 30, 2017 due to patient enrollment costs, continued manufacturing costs for new campaigns, andaggregate, each of which net sales milestone payments is payable once, upon the commencementfirst achievement of a combination Phase IIa clinical trial with Abraxane in pancreatic cancer.

Supinoxin (RX-5902)such milestone.
 
Supinoxin is a potential first-in-class small molecule inhibitor of phosphorylated p68, a protein that we believe plays a key role in cancer growth, progression and metastasis through its interaction with beta-catenin. Phosphorylated p68 results in up-regulation of cancer-related genes and a subsequent proliferation of cancer cells and tumor growth.  In February 2017, we initiated a Phase IIa clinical study of Supinoxin in patients with metastatic TNBC.

Expenses relatedLastly, Ocuphire also agreed to Supinoxin decreased during the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016.  The decrease is primarily attributable to decreased manufacturing costs duemake royalty payments equal to a significant supplysingle-digit percentage of drug product already available from earlier manufacturing campaigns.  However, we expect that expenses related to Supinoxin will increase inits net sales of products covered by the remainderpatents under the Apexian Sublicense Agreement. None of 2017 compared to the three and nine months ended September 30, 2017 due to patient enrollment costs associated with our Phase IIa trial in patients with metastatic TNBC and new manufacturing campaigns.milestone or royalty payments were triggered as of the date of this Report.
 
31
Table of Contents
Archexin

Archexin is a potential best-in-class, potent inhibitor of the protein kinase Akt-1, which we believe plays a critical role in cancer cell proliferation, survival, angiogenesis, metastasis and drug resistance.  We are currently conducting a Phase IIa proof-of-concept clinical trial of Archexin in patients with metastatic RCC to evaluate its safety and efficacy in combination with AFINITOR (everolimus).

Expenses related to Archexin decreased during the three and nine months ended September 30, 2017 compared to the same periods in 2016.  The decrease is primarily attributable to decreased manufacturing costs due to a significant supply of drug product already available.  We expect that expenses related to Archexin will remain flat for the remainder of 2017 compared to the three and nine months ended September 30, 2017 as we continue the ongoing Archexin clinical trial.

Pre-clinical Pipeline

Expenses related to our pre-clinical candidates increased for the three and nine months ended September 30, 2017 compared to the same periods in 2016 primarily as a result of increased research activities.  We expect that expenses related to our pre-clinical pipeline, including RX-21101, will remain flat for the remainder of 2017 compared to the three and nine months ended September 30, 2017 as we continue testing and development.

Research and Development Process Other Commitments
 
We have engaged third-party contractIn the course of normal operations, Ocuphire entered into cancellable purchase commitments with its suppliers for various key research, organizationsclinical and other investigators and collaborators, such as universities and medical institutions,manufacturing services. The purchase commitments covered by these arrangements are subject to conduct our pre-clinical studies, toxicology studies and clinical trials.  Engaging third-party contract research organizations is typical practice in our industry. However, relyingchange based on such organizations means that the clinical trials and other studies described above are being conducted at external locations and that the completion of these trials and studies is not within our direct control. Trials and studies may be delayed due to circumstances outside our control, and such delays may result in additional expenses for us.
Liquidity and CapitalResources

Cash Flows

Cash used in operating activities was approximately $11,715,000 for the nine months ended September 30, 2017.  The operating cash flows during the nine months ended September 30, 2017 reflect a net loss of $21,702,000, offset by an unrealized loss on the fair value of warrants of $9,048,000 and a net increase of cash components of working capital and non-cash charges totaling $939,000.  Cash used in operating activities was approximately $11,734,000 for the nine months ended September 30, 2016.  The operating cash flows during the nine months ended September 30, 2016 reflect our net loss of $8,782,000, an unrealized gain on the fair value of warrants of 3,942,000 and a net increase of cash components of working capital and other non-cash charges totaling $990,000.

Cash used in investing activities was approximately $6,310,000 for the nine months ended September 30, 2017, which consisted of $15,009,000 and $21,000 for the purchases of marketable securities and equipment, respectively, offset by $8,720,000 from the redemption of marketable securities. Cash used in investing activities was approximately $196,000 for the nine months ended September 30, 2016, which consisted of $8,748,000 and $8,000 for the purchases of marketable securities and equipment, respectively offset by $8,560,000 from the redemption of marketable securities.
32
Table of Contents
Cash provided by financing activities was approximately $14,673,000 for the nine months ended September 30, 2017, which consisted of net proceeds of $9,241,000 from our registered direct public offering in June 2017 and $5,354,000 and $78,000 from the exercise of stock warrants and options, respectively.  Cash provided by financing activities was approximately $10,122,000 for the nine months ended September 30, 2016, which consisted of net proceeds from our registered direct public offerings in March 2016 and September 2016.

After September 30, 2017, on October 17, 2017, we closed a registered direct public offering of 3,265,309 shares of common stock and warrants to purchase up to 1,632,654 shares of common stock, resulting in gross proceeds to us of approximately $8,000,000.

Contractual Obligations

We have a variety of contractual obligations, as more fully described in our 2016 Form 10-K.  These obligations include, but are not limited to, contractual obligations in connection with license agreements (including related milestone payments), lease payments, employee compensation and incentive program expenses, and contracts with various vendors for services.  As of September 30, 2017, the total estimated cost to complete our contracts with vendors for research and development services was approximately $10,750,000 under the terms of the applicable agreements.  All of these agreements may be terminated by either party upon appropriate notice as stipulated in the respective agreements.

Current and Future Financing Needs

We have incurred negative cash flow from operations since we started our business.  We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, our clinical trials and ourOcuphire’s research and development efforts.  We will need
 Other Funding Requirements
As noted above, certain of our cash requirements relate to raise additional capital through public or private equity or debt offerings or through arrangements with strategic partners or other sources in order to continue to developthe funding of our drug candidates.  There can be no assurance that additional capital will be available when needed or on terms satisfactory to us, if at all.  If we are not able to raise sufficient additional capital, we will have to reduce ourongoing research and development activities. of Nyxol and APX3330, inclusive of any potential milestone and royalty obligations under our intellectual property licenses. See “Part I, Item 1— Business—Nyxol and APX3330 Clinical Experience Summaries —Ocuphire Clinical Development Plan —Future Planned Nyxol Trials—Potential Clinical Plans for APX3330—Future In-Licensing and Acquisition Opportunities—Manufacturing—Apexian Sublicense Agreement— Review and Approval of Drugs in the United States” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of design, development, pre-clinical and clinical activities that we may conduct in the future, including expected cash expenditures required for some of those activities, to the extent we are able to estimate such costs.
Our other cash requirements within the next twelve months include accounts payable, accrued expenses, purchase commitments and other current liabilities. Our other cash requirements greater than twelve months from various contractual obligations and commitments may include operating leases and contractual agreements with third-party service providers for clinical research, product development, manufacturing, supplies, payroll, equipment maintenance, and audits for periods into calendar year 2023. Refer to Note 4 – Commitments and Contingencies included in Part 1, Item 1 – Financial Statements” of this  Report for further detail of our lease obligation and license agreements with regard to the timing of expected future payments.

We believeexpect to satisfy our short-term and long-term obligations through cash cash equivalents,on hand and marketable securitiesfrom future equity and debt financings until we generate an adequate level of revenue from commercial sales to cover expenses, if ever.
Critical Accounting Policies and Estimates
Ocuphire’s financial statements are prepared in accordance with U.S. GAAP. These accounting principles require Ocuphire to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. Ocuphire believes that the estimates and judgments upon which it relies are reasonably based upon information available to Ocuphire at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, Ocuphire’s financial results will be sufficientaffected. The accounting policies that reflect Ocuphire’s more significant estimates and judgments and which it believes are the most critical to cover our cash flow requirements for our current activities for at least the next 12 months from the date theseaid in fully understanding and evaluating its reported financial statements were issued.

The actual amount of funds we will need to operate is subject to many factors, some of whichresults are beyond our control.  These factors include the following:

·the progress of our product development activities;

·the number and scope of our product development programs;

·the progress of our pre-clinical and clinical trial activities;

·the progress of the development efforts of parties with whom we have entered into collaboration agreements;
described below.
 
3324
Table of ContentsIndex

Ocuphire Pharma, Inc.
Form 10-Q
·our ability to maintain current collaboration programs and to establish new collaboration arrangements;
Our significant accounting policies are discussed in Note 1 — Company Description and Summary of Significant Accounting Policies, included in “Part I, Item 1 – Financial Statements and Supplementary Data” of this Report. We believe that the following accounting policies and estimates are the most critical to aid in fully understanding and evaluating our reported financial results. These estimates require our most difficult, subjective, or complex judgments because they relate to matters that are inherently uncertain. We have reviewed these critical accounting policies and estimates and related disclosures with the Audit Committee of our Board of Directors. We have not made any material changes to date, nor do we believe there is a reasonable likelihood of a material future change to the accounting methodologies for the areas described below.

·the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and
Warrant Liabilities


·the costs and timing of regulatory approvals.

Off-Balance Sheet Arrangements

Following the Merger, Ocuphire issued the Series A Warrants in connection with the Pre-Merger Financing and assumed Rexahn warrants issued prior to the Merger. Ocuphire accounts for these warrants as a liability at fair value as long as certain provisions precluding equity accounting treatment are present.  Upon the execution of the Waiver Agreements described in Note 3 — Pre-Merger Financing included in Part 1, Item 1 – Financial Statements” of this  Report, the Series A Warrants were no longer subject to cash settlement or indexation provisions, precluding equity classification, and as a result, not subject to fair value remeasurement. Ocuphire will continue to adjust the Rexahn warrant liability for changes in fair value until the earlier of the exercise, expiration, or until such time that cash settlement or indexation provisions are no longer in effect for the Rexahn warrants.  We do not have any off-balance sheet arrangements or holdingsexpect that the fluctuations in variable interest entities.fair value attributed to the Rexahn warrant liability will be significant.

Stock-based Compensation
 
34Ocuphire accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation — Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant date fair value which is not subject to remeasurement. We record equity instrument forfeitures when they occur. For discussions about the application of grant date fair value associated with our stock-based compensation, see Note 8 — Stock-based Compensation included in “Part 1, Item 1 – Financial Statements” of this  Report.
Table
Income Tax Assets and Liabilities

Currently, there is no provision for income taxes, as we have incurred operating losses to date, and a full valuation allowance has been provided on our net deferred tax assets. For additional information, see Note 11 — Income Taxes included in “Part 1, Item 1 – Financial Statements” of Contentsthis  Report.

Contingencies

We are subject to numerous contingencies arising in the ordinary course of business, including obligations related to certain license agreements. For additional information, see Note 4 — Commitments and Contingencies included in “Part 1, Item 1 – Financial Statements” of this  Report.

 Recent Accounting Pronouncements

Refer to Note 1— “Company Description and Summary of Significant Accounting Policies” to our condensed consolidated financial statements included in “Part 1, Item 1 – Financial Statements” in this Report for a discussion of recently issued accounting pronouncements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.Risk


Not applicable for smaller reporting companies.
For quantitative and qualitative disclosures about market risk, refer to “Quantitative and Qualitative Disclosures About Market Risk” in our 2016 Form 10-K.  Our exposures to market risk have not changed materially since December 31, 2016.

Item 4.Controls and Procedures.Procedures

Evaluation of Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of the design and operation of ourWe maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concludedare designed to ensure that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information we are required to be disclosed by usdisclose in reports filed under theour Exchange Act reports is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (the “SEC’s”)SEC’s rules and forms, and (ii)that such information is accumulated and communicated to our management, including our CEOprincipal executive officer and CFO,principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. A

We designed and evaluated our disclosure controls system cannotand procedures recognizing that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance and not absolute assurance however,of achieving the desired control objectives. Also, the design of a control system must reflect the fact that there are resource constraints and that the objectivesbenefits of controls must be considered relative to their costs. Because of the controls system are met, andinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


25
Index

Ocuphire Pharma, Inc.
Form 10-Q
Under the supervision of and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15(d)- 15(e) promulgated under the Exchange Act as of March 31, 2022. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2022.

Changes in Internal Control Over Financial Reporting


There has beenwere no changechanges in our internal control over financial reporting (as such term is defined in RulesRule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2017March 31, 2022, that hashave materially affected, or isare reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.

35PART II – OTHER INFORMATION

Item 1.Legal Proceedings

TableFrom time to time, we may be involved in various claims and legal proceedings relating to claims arising out of Contents
our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

PART II. Other Information

Item 1A.
Risk Factors.
Factors


InvestingThere have been no material changes in our stock involves a high degree of risk.  In addition torisk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the other information set forth in this report, youyear ended December 31, 2021.  You should carefully consider the factors set forth in the Risk Factors section of our 2016 Form 10-K, as well as other information contained in the 2016 Form 10-Krisks and in other reports we file with the SEC. We do not believe that there have been any material changes to the risk factors disclosed in our 2016 Form 10-K.uncertainties described therein.


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


None.
Pursuant
Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable to a consulting agreement, we issued 7,500 shares of common stock during the three months ended September 30, 2017 to a privately held investor relations firm in consideration for investor relations services.  The shares of common stock were not registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the exemption from registration requirements provided by Section 4(a)(2) of the Securities Act, as a transaction not involving a public offering.our Company.


Item 5.Other Information

None.

26

Ocuphire Pharma, Inc.
Form 10-Q
Item 6.Exhibits.Exhibits

Exhibit No.EXHIBIT
NUMBER
Description
​
DESCRIPTION OF DOCUMENT
FormAmended and Restated Certificate of Warrant, filed as Exhibit 4.1Incorporation of the Registrant (incorporated by reference to Appendix G to the Company’sRegistrant’s Definitive Proxy Statement on Schedule 14A, filed on April 29, 2005).
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 13, 2017, is incorporated herein by reference.May 5, 2017).
  
FormCertificate of Securities Purchase Agreement, dated asAmendment of October 13, 2017,Amended and Restated Certificate of Incorporation of the Registrant (incorporated by and between Rexahn Pharmaceuticals, Inc. and the purchasers identified on the signature pages thereto, filed asreference to Exhibit 10.13.1 to the Company’sRegistrant’s Current Report on Form 8-K, filed on October 13 2017, is incorporated herein by reference.August 30, 2018).
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on April 12, 2019).
Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on November 6, 2020).
Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on November 6, 2020).
Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K, filed on November 6, 2020).
Consulting Agreement between the Registrant and Jay Pepose dated April 8, 2022.
  
Certification of ChiefPrincipal Executive Officer pursuant to Rules 13a-14(a) / 15d-14(a)Section 302 of the Sarbanes-Oxley Act of 2002.
  
Certification of ChiefPrincipal Financial Officer pursuant to Rules 13a-14(a) / 15d-14(a)Section 302 of the Sarbanes-Oxley Act of 2002.
  
Certification of ChiefPrincipal Executive Officer pursuant to 18 U.S.C. 1350, as adoptedand Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002.
  
101.INS
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Inline XBRL Instance Document.
  
101
101.SCH
The following materials from Rexahn Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q, formattedInline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Extensible Business Reporting Language (“XBRL”): (i) Condensed Balance Sheet; (ii) Condensed Statement of Operations; (iii) Condensed Statement of Comprehensive Loss; (iv) Condensed Statement of Cash Flows; and (v) Notes to the Financial Statements.Exhibit 101)

+
Indicates management contract or compensatory plan.
*
Documents are furnished not filed.

3627

Ocuphire Pharma, Inc.
Form 10-Q
SIGNATURES


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


Dated: May 13, 2022

REXAHN PHARMACEUTICALS, INC.Ocuphire Pharma, Inc.
                           (Registrant)
By:
/s/ Mina Sooch


By:
Mina Sooch
/s/ Peter D. Suzdak
Date: November 3, 2017Peter D. Suzdak

Chief Executive Officer
(principal executive officer)


(Principal Executive Officer)


By:
/s/ Amy Rabourn


By:
Amy Rabourn
/s/ Tae Heum Jeong
Date: November 3, 2017
Vice President Finance
Tae Heum Jeong

Chief(Principal Financial Officer and SecretaryOfficer)
(principal financial and accounting officer)



3728