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| · | 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).
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Ocuphire Pharma, Inc.
Since our inception, our effortsForm 10-Q
Strategic Outlook
As part of its strategy, Ocuphire will continue to explore opportunities to acquire additional ophthalmic assets and resourcesto seek strategic partners for late-stage development, regulatory preparation and commercialization in key global markets. To date, Ocuphire’s primary activities have been focused primarily on developing our pharmaceutical technologies,conducting research and development activities, planning clinical trials, performing business and financial planning, recruiting personnel and raising capitalcapital. Ocuphire does not have any products approved for sale and recruiting personnel. We have no product saleshas not generated any significant amounts of revenue. Ocuphire does not expect to date,generate significant revenues until, and we will not generate any product sales until we receive approval fromunless, the FDA or equivalent foreignother regulatory bodiesauthorities approve Nyxol or APX3330 and Ocuphire successfully commercializes its product candidates, or if Ocuphire enters into any significant license and/or collaboration agreements. Until such time, if ever, as Ocuphire can generate substantial product revenue, Ocuphire expects to begin selling our pharmaceutical candidates. Our major sourcesfinance its cash needs through a combination of working capital have been proceeds from various privateequity and publicdebt financings as well as collaborations, strategic alliances and licensing and collaboration agreements with our strategic investors and partners.
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. See Note 10, “Common Stock—Reverse Stock Split,” in the Notes to Consolidated Financial Statements.
Recently Issued Accounting Standards
See Note 2, “Recent Accounting Pronouncements Affecting the Company,” in the Notes to Condensed Financial Statements for a discussion of recent accounting pronouncements.
Results of Operations
Comparison of the Three and Nine Months Endedarrangements. Through September 30, 20172022, Ocuphire has funded its operations primarily through equity financings that totaled $54.1 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 September 30, 2016
Total Revenues
We had no revenuesthrough the issuance of convertible notes in private placements that totaled $8.5 million in gross proceeds. Ocuphire’s net losses were $16.1 million and $50.4 million for the three and nine months ended September 30, 20172022 and 2021, respectively. As of September 30, 2022, Ocuphire had an accumulated deficit of $105.4 million. Ocuphire anticipates that its expenses will increase substantially as it:
continues clinical trials for Nyxol, APX3330 and for any other product candidate in its future pipeline;
continues preclinical studies for Nyxol, APX3330 and for any other product candidate in its future pipeline;
develops additional product candidates that it identifies, in-licenses or 2016.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 the former Rexahn drug compounds.
Recent Developments
Clinical Milestones
In September 2022, Ocuphire announced last patient last visit completion in ZETA-1, a Phase 2b trial evaluating the safety and efficacy of APX3330 in diabetic retinopathy patients. Top-line data from this trial is expected in early 2023.
In July 2022, Ocuphire submitted a Phase 3 protocol to the FDA for the VEGA-2 trial. This is the first of two Phase 3 registration trials intended to support a presbyopia indication for Nyxol alone and Nyxol with LDP and is anticipated to initiate in the fourth quarter of 2022. In addition, the VEGA-3 trial (the second Phase 3) and LYRA-1 trial (1-year safety) are planned to begin in 2023. If successful, the Company plans to file a supplemental NDA for Nyxol as a single-agent for presbyopia and a new NDA for the combination thereafter.
Non-clinical Update
In support of conducting clinical trials using Nyxol for chronic indications such as presbyopia and NVD, Ocuphire has successfully completed a 6-month rabbit ocular toxicology study. The findings from the 6-month study provide support for the conduct of the planned 1-year Phase 3 safety trial LYRA-1. The submission of the final report is planned in the fourth quarter of 2022 to the FDA.
In support of the combination of Nyxol and LDP treatment in presbyopia, a 90-day nonclinical ocular toxicology study with Nyxol and LDP in Dutch-belted rabbits has been conducted. The in-life phase has successfully been completed and the report is being finalized with a subsequent submission to the FDA.
Ocuphire Pharma, Inc.
Form 10-Q
Regulatory Update
In August 2022, the FDA granted a small business waiver of the Prescription Drug User Fee Act (PDUFA) fee of $3.1 million for the 505(b)(2) NDA for Nyxol.
Presentations, Publications and Conferences
Ocuphire’s management team and medical advisors have participated by invitation at over 25 medical, scientific, industry and investment conferences from January through October 2022, at which over 40 papers, posters and panel talks were presented. The Company has been engaging with many key opinion leaders to expand awareness of the Nyxol and APX3330 development programs.
In early November 2022, Ocuphire announced a manuscript titled “A randomized phase 2 clinical trial of phentolamine mesylate eye drops in patients with severe night vision disturbances,” was published in peer-reviewed journal BMC Ophthalmology.
Medical Advisory Board
Ocuphire announced expansion of the Medical Advisory Board with seven new medical advisors totaling 22 across refractive, retina and medical optometry.
Global Economic Conditions
Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the COVID‑19 pandemic and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected.
The COVID-19 pandemic that began in late 2019 introduced significant volatility to the global economy, disrupted supply chains and had a widespread adverse effect on the financial markets. 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. Testing and clinical trials, manufacturing, component supply, shipping and research and development operations may be further impacted by the continuing effects of COVID-19.
Additionally, the Company’s operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the conflict in Ukraine, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates.
Financial Operations Overview
Collaborations Revenue
To date, Ocuphire had limited collaborations revenue during the 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, or until it enters into a significant license agreement for either Nyxol or APX3330. If Ocuphire fails to complete the development of Nyxol, APX3330, or any other product candidate it may pursue in the future, in a timely manner, or fails to obtain regulatory approval, Ocuphire’s ability to generate significant revenue would be compromised.
Operating Expenses
Ocuphire’s operating expenses are classified into two categories: general and administrative and research and development.
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,costs related to the hiring of additional personnel and fees for legal and professional services as well as other public company-related costs.
Ocuphire Pharma, Inc.
Form 10-Q
Research and Development
To date, Ocuphire’s research and development expenses have been related primarily to the clinical-stage development of Nyxol and APX3330. Research and development expenses consist of costs incurred in performing research and development activities, including compensation and benefits for research and development employees and costs for consultants, costs associated with preclinical studies and clinical trials, regulatory activities, manufacturing activities to support clinical activities, license fees, non-legal patent costs, fees paid to external service providers that conduct certain research and development, and an allocation of overhead expenses. Research and development costs are expensed as incurred and costs incurred 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 10.9%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.
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 the later-stage clinical trials. Ocuphire expects its research and development 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, the 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 candidate;
arrangements with contract research organizations and other service providers; and
the efficacy and safety profile of the product candidates.
Interest Expense
Interest expense consists of interest costs relates to interest on principal associated with a short-term loan (related to financing an insurance policy) during the period it is outstanding. The short-term loan had 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 Income (Expense), net
Other income (expense), net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from equity investments and foreign currency exchange transactions, 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 $1,574,000date, and a full valuation allowance has been provided on the net deferred tax assets as of September 30, 2022 and December 31, 2021.
Ocuphire Pharma, Inc.
Form 10-Q
Results of Operations
Comparison of the Three Months Ended September 30, 2022 and 2021
The following table summarizes Ocuphire’s operating results for the periods indicated (in thousands):
| | | For the Three Months Ended | |
| | | September 30, | |
| | | 2022 | | | 2021 | | | Change | |
| | | | | | | | | | |
| Collaborations revenue | | $ | — | | | $ | 489 | | | $ | (489 | ) |
| | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | |
| General and administrative | | | 1,703 | | | | 1,595 | | | | 108 | |
| Research and development | | | 2,835 | | | | 3,126 | | | | (291 | ) |
| Total operating expenses | | | 4,538 | | | | 4,721 | | | | (183 | ) |
| Loss from operations | | | (4,538 | ) | | | (4,232 | ) | | | (306 | ) |
| Other income, net | | | 7 | | | | 2 | | | | 5 | |
| Loss before income taxes | | | (4,531 | ) | | | (4,230 | ) | | | (301 | ) |
| Provision for income taxes | | | — | | | | — | | | | — | |
| Net loss | | $ | (4,531 | ) | | $ | (4,230 | ) | | $ | (301 | ) |
Collaborations Revenue
Collaborations revenue was $0.5 million for the three months ended September 30, 20172021. Revenue during the period was derived from $1,419,000the license agreement with Processa related to certain technology transfers. There was no collaborations revenue recognized during the current year period.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2016.2022 were $1.7 million compared to $1.6 million for the three months ended September 30, 2021. The $0.1 million increase was largely attributed to an increase in legal costs on a net basis. General and administrative expenses increased approximately $515,000, or 11.4%,included $0.3 million in stock-based compensation expense during each of the three-month periods ended September 30, 2022 and 2021.
Research and Development Expenses
Research and development expenses for the three months ended September 30, 2022 were $2.8 million compared to $5,005,000$3.1 million for the three months ended September 30, 2021. The $0.3 million decrease was primarily attributable to the completion of clinical trials and the timing of manufacturing activities for Nyxol and APX3330. Research and development expenses also included $ 0.2 million in stock-based compensation expense during each of the three-month periods ended September 30, 2022 and 2021.
Other Income, net
During the three months ended September 30, 2022, Ocuphire had other income, net of $7,000 which consisted of interest income related to cash and cash equivalents of $34,000, offset in part by unrealized losses from our short-term investments of $25,000 and from realized foreign currency exchange losses of $2,000.
Other income, net during the three months ended September 30, 2021 consisted primarily of unrealized gains from our short-term investments and to a lesser extent interest income from our cash and cash equivalent investments in the aggregate of $94,000, offset largely by payments due in connection with the CVR Agreement in the amount of $92,000.
Ocuphire Pharma, Inc.
Form 10-Q
Comparison of the Nine Months Ended September 30, 2022 and 2021
The following table summarizes Ocuphire’s operating results for the periods indicated (in thousands):
| | | For the Nine Months Ended | |
| | | September 30, | |
| | | 2022 | | | 2021 | | | Change | |
| | | | | | | | | | |
| Collaborations revenue | | $ | — | | | $ | 589 | | | $ | (589 | ) |
| | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | |
| General and administrative | | | 5,215 | | | | 6,707 | | | | (1,492 | ) |
| Research and development | | | 10,769 | | | | 10,437 | | | | 332 | |
| Total operating expenses | | | 15,984 | | | | 17,144 | | | | (1,160 | ) |
| Loss from operations | | | (15,984 | ) | | | (16,555 | ) | | | 571 | |
Interest expense | | | (9 | ) | | | — | | | | (9 | ) |
| Fair value change in warrant liabilities | | | — | | | | (33,829 | ) | | | 33,829 | |
| Other (expense) income, net | | | (60 | ) | | | 4 | | | | (64 | ) |
| Loss before income taxes | | | (16,053 | ) | | | (50,380 | ) | | | 34,327 | |
| Provision for income taxes | | | — | | | | — | | | | — | |
| Net loss | | $ | (16,053 | ) | | $ | (50,380 | ) | | $ | 34,327 | |
Collaborations Revenue
Collaborations revenue was $0.6 million for the nine months ended September 30, 20172021. Revenue during the period was derived from $4,490,000the license agreements with Processa and BioSense related to certain technology transfers. There was no collaborations revenue recognized during nine months ended September 30, 2022.
General and Administrative Expenses
General and administrative expenses for the nine months ended September 30, 2016. The increases2022 were primarily attributable$5.2 million compared to higher personnel costs and professional fees in 2017.
Research and Development Expenses
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$6.7 million for the nine months ended September 30, 2017, from $8,004,0002021. The $1.5 million decrease was largely attributable to the $1.6 million non-cash settlement with certain investors in the comparable prior year period, offset by a slight increase in general and administrative expenses attributed to higher payroll and other operating costs of $0.1 million, on a net basis, in the current year period when compared to the comparable prior year period. General and administrative expenses included $0.9 million and $0.8 million in stock-based compensation expense during the nine months ended September 30, 2022 and 2021, respectively.
Research and Development Expenses
Research and development expenses for the nine months ended September 30, 2016. In both2022 were $10.8 million compared to $10.4 million for the three and nine-month periodsnine months ended September 30, 2017, we experienced increased clinical trial costs compared2021. The $0.3 million increase was primarily attributable to the prior year periods, partially offset by a decreasetiming of clinical trials and manufacturing activities for Nyxol and APX3330 as well as regulatory, preclinical and other development activities. Research and development expenses also included $0.5 million and $0.6 million in personnel expenses. Instock-based compensation expense during the three-month periodnine months ended September 30, 2017, a new drug manufacturing campaign that began2022 and 2021, respectively.
Fair Value Change in Warrant Liabilities
The fair value change in warrant liabilities was an expense of $33.8 million for the third quarter together with the increased clinical trial costs contributed to the overall increase in research and development expenses in the period. Conversely, the increased clinical trial costs in the nine-month periodnine months ended September 30, 20172021 and was due to the issuance of the Series A Warrants in connection with the Pre-Merger Financing in November 2020. The fair value of the Series A Warrants was impacted by the fluctuations in Ocuphire’s common stock fair value and by the number of potential shares of common stock issuable upon conversion of the underlying Ocuphire warrant liabilities. Upon the February 3, 2021 effective date of the Waiver Agreements, the Series A Warrants were more than offset by lower drug manufacturing costs asreclassified to equity and are no longer subject to remeasurement.
There was a resultnegligible change to the fair value of supplies that were available from earlier manufacturing campaigns.the warrant liability associated with the Rexahn warrants during the nine months ended September 30, 2022.
Other (Expense) Income, net
During the nine months ended September 30, 2017, we incurred2022, Ocuphire had other expense, net of $60,000 stemming from net unrealized losses from our short-term investments of $118,000 and realized currency losses of approximately $1,324,000$1,000, offset in part by interest income of drug manufacturing costs, primarily as a result of the drug manufacturing campaign that began in the third quarter, compared$59,000 related to approximately $2,325,000cash and cash equivalents.
Other income, net during the nine months ended September 30, 2016,2021 consisted primarily of unrealized gains from large manufacturing campaignsour short-term investments and to a lesser extent interest income from our cash and cash equivalent investments in the early monthsaggregate of 2016. Because the volume and timing of our drug manufacturing does not correlate directly$96,000, offset largely by payments due in connection 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 expect research and development expenses to increaseCVR Agreement in the remaining quarteramount of 2017 compared to the quarter ended$92,000.
Ocuphire Pharma, Inc.
Form 10-Q
Liquidity and Capital Resources
Capital Resources
As of September 30, 2017 due to continued patient enrollment in our clinical trials and new manufacturing campaigns.
The table below summarizes the approximate amounts incurred in each2022, Ocuphire’s principal sources of our 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 balancesliquidity consisted of cash and cash equivalents of $13.9 million. Ocuphire believes that its cash on hand will be sufficient to fund its operations into the fourth quarter of 2023. The Company’s cash and marketable securitiescash equivalents are invested primarily in cash deposits at large, long-standing financial institutions.
Ocuphire has not generated any significant revenue to date and higher interest rates on marketable securitiesanticipates that it will continue to incur losses for the threeforeseeable future in the absence of successful product commercialization or execution of significant license agreements with third parties. Future capital requirements depend on many factors, including the need for the following:
continued clinical trials and nine months ended September 30, 2017 comparedpreclinical studies for Nyxol, APX3330 and for any other product candidate in its future pipeline;
developing additional product candidates that it identifies, in-licenses or acquires;
seeking regulatory approvals for any 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 for which it may obtain regulatory approval;
maintaining, expanding and protecting 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 same periodsamount of $54.1 million and the issuance of convertible notes in 2016.the amount of $8.5 million, inclusive of the promissory notes exchanged for Ocuphire convertible notes.
At-The-Market Program
29On 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 sell, from time to time in its 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”). A total of 4,627,870 shares of common stock were sold under the 2021 ATM for gross proceeds through September 30, 2022 in the amount of $17.9 million before deducting issuance expenses in the amount of $0.6 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 exercisable upon the initial issuance date of June 8, 2021, and will expire five years following the initial exercise date. Subject to limited exceptions, a holder of a RDO Warrant will not have the right to exercise any portion of its 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 September 30, 2022, 1,538,461 RDO Warrants were still outstanding.
Unrealized Gain (Loss)Ocuphire Pharma, Inc.
Form 10-Q
The offering of the securities was made pursuant to the Company’s effective shelf registration statement on Fair ValueForm S-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 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.
Our warrants are recorded as liabilities at fair value,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 warrants are valued using a lattice model. ChangesCompany 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 fair valuecase of warrantscertain 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 1,708,335 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 recorded as an unrealized gain or lossexercisable for 5,665,838 shares of common stock in our statementthe aggregate (without giving effect to any limitation on exercise contained therein). As of operations. During the three months ended September 30, 20172022, 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 2016, we recorded unrealized gainsan 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 fair valueday following the later to occur of our warrants(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 approximately $3,121,000common stock in the aggregate (without giving effect to any limitation on exercise contained therein) and $968,000. Duringultimately became exercisable for 1,708,335 shares of common stock upon execution of the Waiver Agreements. As of September 30, 2022, 77,678 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
Ocuphire Pharma, Inc.
Form 10-Q
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 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.
Cash Flows
The following table summarizes Ocuphire’s cash flows for the periods indicated (in thousands):
| | | For the Nine Months Ended | |
| | | September 30, | |
| | | 2022 | | | 2021 | |
| | | | |
| Net cash used in operating activities | | $ | (14,477 | ) | | $ | (13,724 | ) |
| Net cash provided by (used in) investing activities | | | — | | | | — | |
| Net cash provided by financing activities | | | 3,798 | | | | 19,575 | |
| Net (decrease) increase in cash and cash equivalents | | $ | (10,679 | ) | | $ | 5,851 | |
Cash Flow from Operating Activities
For the nine months ended September 30, 2017, we recorded unrealized (losses) gains on the fair value2022, cash used in operating activities of warrants$14.5 million was attributable to a net loss of $16.1 million, partially offset by $1.5 million in non-cash operating expenses, and attributable to a net cash increase of approximately ($9,048,000)$0.1 million stemming from the change in Ocuphire’s net operating assets and $3,942,000 respectively. Estimating fair valuesliabilities. The non-cash expenses consisted principally of warrants requires the developmentstock-based compensation of significant$1.4 million and subjective estimates that may,unrealized loss on short-term investments of $0.1 million. The change in operating assets and are likelyliabilities was primarily attributable to change over the durationa net cash source of the warrants due$0.7 million attributed 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 prepaid expenses, offset largely by a decrease in accounts payable and accrued expense associated with the stock pricefluctuations of the underlying common stock at September 30, 2017 compared to June 30, 2017. The large unrealized loss forOcuphire’s operating expenses.
For the nine months ended September 30, 2017 primarily resulted from2021, cash used in operating activities of $13.7 million was attributable to a significant increasenet loss of $50.4 million, partially offset by $36.5 million in non-cash operating expenses and a net change of $0.2 million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted principally of the fair value change in the stock pricewarrant liabilities of $33.8 million, a share settlement with certain investors in the underlyingamount of $1.6 million, stock-based compensation of $1.4 million and non-cash impact from the receipt of common stock at September 30, 2017 comparedstemming from the fulfillment of revenue milestones ($0.4) million. The change in operating assets and liabilities was primarily attributable to December 31, 2016. An increasea decrease in volatility ofOcuphire’s prepaid expenses offset in part by a net decrease in accrued liabilities 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 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.periods presented.
Cash Flow from Financing ExpenseActivities
We incurred approximately $333,000 and $313,000 ofNet cash provided by financing expensesactivities 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 $143,0002022 was $3.8 million that consisted principally of financing expenses duringproceeds received from 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 result2021 ATM net 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, includedissuance costs in the net loss for the three and nine months ended September 30, 2017 are non-cash chargesamount of approximately $3,121,000 and ($9,048,000)$4.3 million, offset in unrealized gains (losses)part by payments made on the fair valueshort-term loan of warrants, compared to unrealized gains of $968,000 and $3,942,000 for the three and nine months ended September 30, 2016.$0.5 million.
Research and Development Projects
Research and development costs are expensed as incurred. These costs consist primarily of salaries and related personnel costs, costs to acquire pharmaceutical products and product rights for development and amounts paid to contract research organizations, hospitals and laboratories for the provision of services and materials for drug development and clinical trials. Costs incurred in obtaining the license rights to technology in the research and development stage that have no alternative future uses are expensed as incurred. Our research and development programs are 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 expect to enter into additional development agreements. Significant additional expenditures will be required if we complete our clinical trials, start new trials, apply for regulatory approvals, continue development of our technologies, expand our operations and bring our products to market. The eventual total cost of each clinical trial is dependent on a number of uncertainties such as trial design, the length of the trial, the number of clinical sites and the number of patients. The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive and uncertain. Because the successful development of our most advanced drug candidates, RX-3117, Supinoxin and Archexin, is uncertain, and because RX-21101 is in early-stage development, we are unable to estimate the costs of completing our research and development programs, the timing of bringing such programs to market and, therefore, when materialNet cash inflows could commence from the sale of these drug candidates, if any. If these projects are not completed as planned, our results of operations and financial condition would be negatively affected.
RX-3117
RX-3117 is a novel, investigational oral small molecule nucleoside compound. We believe RX-3117 has 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.
Expenses related to RX-3117 increased during the three and nine months ended September 30, 2017 compared to the same period in 2016 due to increased clinical trial and patient enrollments resulting from the progression of our pancreatic and bladder cancer clinical trials, as well as manufacturing costs for new campaigns. We expect that expenses related to RX-3117 will increase in the remainder of 2017 compared to the three and nine months ended September 30, 2017 due to patient enrollment costs, continued manufacturing costs for new campaigns, and the commencement of a combination Phase IIa clinical trial with Abraxane in pancreatic cancer.
Supinoxin (RX-5902)
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 related 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 due to a significant supply of drug product already available from earlier manufacturing campaigns. However, we expect that expenses related to Supinoxin will increase in the remainder 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.
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
We have engaged third-party contract research organizations and other investigators and collaborators, such as universities and medical institutions, to conduct our pre-clinical studies, toxicology studies and clinical trials. Engaging third-party contract research organizations is typical practice in our industry. However, relying 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 operatingprovided by financing 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 reflect2021 was $19.6 million in connection with proceeds received from both the Registered Direct Offering and 2021 ATM, net of issuance costs, and to 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 usedmuch lesser extent proceeds 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.
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 fromconnection with the exercise of stock warrantsoptions.
Liquidity and options, respectively. Cash provided by financingCapital Resource Requirements
Ocuphire has no current source of revenue to sustain its present activities, was approximately $10,122,000 forand Ocuphire does not expect to generate significant revenue until, and unless, the nine months ended September 30, 2016, which consisted of net proceeds from our registered direct public offerings in March 2016FDA or other regulatory authorities approve Nyxol or APX3330 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 withit successfully commercializes its product candidates or if Ocuphire enters into any significant license agreements (including related milestone payments), lease payments, employee compensationwith third parties. Until such time, if ever, as Ocuphire can generate substantial product revenue, it expects to finance its cash needs through a combination of equity and incentive program expenses,debt financings as well as collaborations, strategic alliances and contracts with various vendors for services. Aslicensing arrangements. Ocuphire does not have any committed external source of September 30, 2017,funds. To the total estimated cost to complete our contracts with vendors for researchextent 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 development services was approximately $10,750,000 under the terms of the applicable agreements. All of these securities 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 terminated by either party upon appropriate noticerequired to delay, limit, reduce or terminate its product development, future commercialization efforts, or grant rights to develop and market its product candidates that Ocuphire would otherwise prefer to develop and market itself.
Ocuphire Pharma, Inc.
Form 10-Q
Future Capital Requirements
Ocuphire’s independent registered public accounting firm included an explanatory paragraph in its report on Ocuphire’s financial statements as stipulated inof and for the respective agreements.
Currentyears ended December 31, 2021 and Future Financing Needs
We have incurred negative cash flow from operations since we started our business. We have spent, and expect2020, 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 and its conclusion that, based on Ocuphire’s operating plans, Ocuphire did not have sufficient existing working capital to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, our clinical trials and our research and development efforts. Wesustain 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 capitalfinancing in the future through public or privatethe issuance of common stock, through other equity or debt offeringsfinancings or through arrangementscollaborations or partnerships with strategic partners or other sources in order to continue to develop our drug candidates. There cancompanies. Ocuphire may not 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 weon 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.
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 havebe dependent upon achieving a level of product sales adequate to reduce oursupport 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.
Apexian 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 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 Ocuphire intends to develop as an oral tablet therapeutic to treat DR and DME, 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 Apexian 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 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, each of which net sales milestone payments is payable once, upon the first achievement of such milestone.
Lastly, Ocuphire also agreed to make royalty payments equal to a single-digit percentage of its net sales of products covered by the patents under the Apexian Sublicense Agreement. None of the milestone or royalty payments were triggered as of the date of this Report.
Other Commitments
In the course of normal operations, Ocuphire entered into cancellable purchase commitments with its suppliers for various key research, clinical and manufacturing services. The purchase commitments covered by these arrangements are subject to change based on Ocuphire’s research and development activities. We believeefforts.
Other Funding Requirements
As noted above, certain of our cash requirements relate to the funding of our ongoing research and development 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 equivalents, and marketable securities will be sufficientexpenditures required for some of those activities, to cover ourthe extent we are able to estimate such costs.
Our other cash flow requirements for our current activities for at leastwithin the next 12twelve 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, commercialization, 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 date these financial statements were issued.
The actual amounttiming of funds we will need to operate is subject to many factors, some of which 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; |
expected future payments.
3327
| · | our ability to maintain current collaboration programs and to establish new collaboration arrangements; |
Ocuphire Pharma, Inc.
| · | the costs involved in prosecuting and enforcing patent claims and other intellectual property rights; and |
Form 10-Q
| · | the costs and timing of regulatory approvals. |
We expect to satisfy our short-term and long-term obligations through cash on hand and from future equity and debt financings until we generate an adequate level of revenue from commercial sales to cover expenses, if ever.
Off-Balance Sheet ArrangementsCritical 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 affected. The accounting policies that reflect Ocuphire’s more significant estimates and judgments and which it believes are the most critical to aid in fully understanding and evaluating its reported financial results are described below.
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” 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.
For discussion about the determination of collaborations revenue, see Note 10 — Collaborations and License Agreements included in “Part 1, Item 1 – Financial Statements” of this Report. To date, we have not had, nor expect to have in the future, significant variable consideration adjustments related to product revenue, such as chargebacks, sales allowances and sales returns.
Warrant Liabilities
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.
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 12 — Income Taxes included in “Part 1, Item 1 – Financial Statements” of this Report.
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.
Ocuphire Pharma, Inc.
Form 10-Q
| 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.
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 September 30, 2022. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 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, 20172022, that hashave materially affected, or isare reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
PART
II. Other InformationII – OTHER INFORMATION
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of 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.
InvestingOur business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. During the three months ended September 30, 2022, our risk factors have not changed materially from those risk factors previously disclosed in our stock involves a high degree of risk. In addition toAnnual 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 forthrisks and uncertainties discussed in the Risk Factors section ofPart I, Item 1A “Risk Factors” in our 2016Annual Report on Form 10-K as well as other information contained infor the 2016 Form 10-K 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.year ended December 31, 2021.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds |
None.
| Item 3. | Defaults Upon Senior Securities |
None.
Item 4.
| Mine Safety Disclosures |
PursuantNot 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.
None.
Ocuphire Pharma, Inc.
Form 10-Q
Exhibit No.
| Description
NUMBER | | DESCRIPTION OF DOCUMENT |
| | Form
| Amended 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). |
| | | First Amendment to Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 10, 2022). |
| | | Second Amendment to Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on June 17, 2022). |
| | | Fourth Lease Amendment, dated as of October 17, 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 | | Inline XBRL Instance Document. |
| 101.SCH | | Inline 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. |
| 104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
|
| | |
| Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* |
| | |
101
| The following materials from Rexahn Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q, formatted 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.
Documents are furnished not filed |
Ocuphire Pharma, Inc.
Form 10-Q
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.
| | REXAHN PHARMACEUTICALS, INC.
Dated: November 4, 2022 |
| |
| (Registrant)Ocuphire Pharma, Inc. |
| |
By: | /s/ Mina Sooch | |
| | By: | /s/ Peter D. Suzdak |
Date: November 3, 2017Mina Sooch | | Peter D. Suzdak |
| | Chief Executive Officer (principal executive officer)
|
| | |
| | By: | /s/ Tae Heum Jeong |
Date: November 3, 2017(Principal Executive Officer) | |
Tae Heum JeongBy: | /s/ Amy Rabourn | |
| | Amy Rabourn | |
| | ChiefVice President of Finance
| |
| (Principal Financial Officer and SecretaryOfficer) (principal financial and accounting officer)
| |
31