UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

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

For the Quarterly Period Ended ~~June 30, 2022~~March 31, 2023

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

For the transition period from to ________

Commission File Number: 001-34079

Ocuphire Pharma, Inc.

(Exact name of Registrant as specified in its charter)

Delaware		11-3516358
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

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

Registrant’s Telephone Number, Including Area Code: (248) ~~681-9815~~957-9024

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 Class		Trading 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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

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

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

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

The number of outstanding shares of the registrant’s common stock as of ~~August 9, 2022~~May 10, 2023 was ~~20,579,779.~~20,952,170.

Index

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Ocuphire Pharma, Inc.

Condensed Balance Sheets

(in thousands, except share amounts and par value)

	As of
	June 30, 2022			December 31, 2021			As of
	(unaudited)						March 31, 2023 (unaudited)			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	17,025		$	24,534		$	38,988		$	42,634
Accounts receivable (Note 9)								2,834			1,298
Contract asset (Note 9)								2,467			3,552
Prepaids and other current assets		740			1,314			1,088			1,453
Short-term investments		126			219			22			49
Total current assets		17,891			26,067			45,399			48,986
Property and equipment, net		8			10			5			6
Total assets	$	17,899		$	26,077		$	45,404		$	48,992

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,886		$	1,584		$	2,221		$	1,069
Accrued expenses		1,418			1,733			1,933			1,684
Short-term loan		0			538
Total current liabilities		3,304			3,855			4,154			2,753
Warrant liabilities		0			0			—			—
Total liabilities		3,304			3,855			4,154			2,753

Commitments and contingencies (Note 4 and Note 9)
Commitments and contingencies (Note 3 and Note 8)

Stockholders’ equity:
Preferred stock, par value $0.0001; 10,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021.		0			0
Common stock, par value $0.0001; 75,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 20,099,602 and 18,845,828 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.		2			2
Additional paid-in-capital		115,483			111,588
Stockholders’ equity
Preferred stock, par value $0.0001; 10,000,000 shares authorized as of March 31, 2023 and December 31, 2022; no shares issued and outstanding at March 31, 2023 and December 31, 2022.								—			—
Common stock, par value $0.0001; 75,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 20,947,830 and 20,861,315 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively.								2			2
Additional paid-in capital								118,519			117,717
Accumulated deficit		(100,890	)		(89,368	)		(77,271	)		(71,480	)
Total stockholders’ equity		14,595			22,222			41,250			46,239
Total liabilities and stockholders’ equity	$	17,899		$	26,077		$	45,404		$	48,992

See accompanying notes.

Index

Ocuphire Pharma, Inc.

Condensed ~~Consolidated~~ Statements of Comprehensive Loss

(in thousands, except share and per share amounts)

~~(unaudited)~~(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Collaborations revenue	$	0		$	100		$	0		$	100

License and collaborations revenue													$	1,749		$	—

Operating expenses:
General and administrative		1,776			3,408			3,512			5,112			2,285			1,736
Research and development		3,162			3,829			7,934			7,311			5,595			4,772
Total operating expenses		4,938			7,237			11,446			12,423			7,880			6,508
Loss from operations		(4,938	)		(7,137	)		(11,446	)		(12,323	)		(6,131	)		(6,508	)
Interest expense		(4	)		0			(9	)		0			—			(5	)
Fair value change of warrant liabilities		0			0			0			(33,829	)
Fair value change in warrant liabilities														—			—
Other income (expense), net		15			1			(67	)		2			340			(82	)
Loss before income taxes		(4,927	)		(7,136	)		(11,522	)		(46,150	)		(5,791	)		(6,595	)
Benefit (provision) for income taxes		0			0			0			0			—			—
Net loss		(4,927	)		(7,136	)		(11,522	)		(46,150	)		(5,791	)		(6,595	)
Other comprehensive loss, net of tax		0			0			0			0			—			—
Comprehensive loss	$	(4,927	)	$	(7,136	)	$	(11,522	)	$	(46,150	)	$	(5,791	)	$	(6,595	)
Net loss per share:
Basic and diluted (Note 10)	$	(0.25	)	$	(0.52	)	$	(0.60	)	$	(3.76	)	$	(0.28	)	$	(0.35	)
Number of shares used in per share calculations:
Basic and diluted		19,502,563			13,608,596			19,197,213			12,273,541			20,939,607			18,888,471

See accompanying notes.

Index

Ocuphire Pharma, Inc.

Condensed ~~Consolidated~~ Statements of Changes in Stockholders’ Equity ~~(Deficit)~~

(in thousands, except share amounts)

(Unaudited)

	Common Stock				Additional Paid–In			Accumulated			Total			Common Stock				Additional Paid–In			Accumulated			Total
	Shares		Amount		Capital			Deficit			Equity (Deficit)			Shares		Amount		Capital			Deficit			Equity

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
Issuance of common stock and warrants in connection with registered direct offering		3,076,923		1		14,999			0			15,000
Issuance of common stock in connection with the at-the-market program		900,943		0		4,067			0			4,067
Issuance of common stock in connection with settlement with investors		350,000		0		1,614			0			1,614
Issuance costs		0		0		(1,271	)					(1,271	)
Stock–based compensation		4,474		0		463			0			463
Exercise of Series B warrants		1,629,634		0		0			0			0
Net and comprehensive loss		—		0		0			(7,136	)		(7,136	)
Balance at June 30, 2021		16,891,855	$	2	$	101,376		$	(78,825	)	$	22,553

Balance at December 31, 2021		18,845,828	$	2	$	111,588		$	(89,368	)	$	22,222			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			336,544		—		1,208			—			1,208
Issuance costs		—		0		(35	)		0			(35	)		—		—		(35	)		—			(35	)
Stock–based compensation		6,970		0		445			0			445			6,970		—		445			—			445
Exercise of stock options		24,309		0		27			0			27			24,309		—		27			—			27
Net and comprehensive loss		—		0		0			(6,595	)		(6,595	)		—		—		—			(6,595	)		(6,595	)
Balance at March 31, 2022		19,213,651		2		113,233			(95,963	)		17,272			19,213,651	$	2	$	113,233		$	(95,963	)	$	17,272
Issuance of common stock in connection with the at-the-market program		877,927		0		1,858			0			1,858

Balance at December 31, 2022															20,861,315	$	2	$	117,717		$	(71,480	)	$	46,239
Issuance costs				0		(53	)		—			(53	)		—		—		(2	)		—			(2	)
Stock–based compensation		8,024		0		445			0			445			68,646		—		804			—			804
Exercise of warrants															17,869		—		—			—			—
Net and comprehensive loss		—		0		0			(4,927	)		(4,927	)		—		—		—			(5,791	)		(5,791	)
Balance at June 30, 2022		20,099,602	$	2	$	115,483		$	(100,890	)	$	14,595
Balance at March 31, 2023															20,947,830	$	2	$	118,519		$	(77,271	)	$	41,250

See accompanying notes.

Index

Ocuphire Pharma, Inc.

Condensed ~~Consolidated~~ Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended June 30,						Three Months Ended March 31,
	2022			2021			2023			2022
Operating activities
Net loss	$	(11,522	)	$	(46,150	)	$	(5,791	)	$	(6,595	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		890			957			804			445
Depreciation		2			2			1			1
Fair value change in warrant liabilities		0			33,829			—			—
Non-cash share settlement with investors		0			1,614
Unrealized loss from short-term investments		93			0			27			84
Change in assets and liabilities:
Collaborations receivable		0			(50	)
Accounts receivable								(1,536	)		—
Contract asset								1,085			—
Prepaid expenses and other assets		574			313			365			219
Accounts payable		302			161			1,152			(5	)
Accrued and other liabilities		(318	)		(816	)		247			(319	)
Net cash used in operating activities		(9,979	)		(10,140	)		(3,646	)		(6,170	)
Investing activities
Net cash used in investing activities		0			0			—			—
Financing activities
Proceeds from issuance of common stock – registered direct offering		0			15,000
Proceeds from issuance of common stock – at-the-market program		3,066			4,067
Proceeds from issuance of common stock in connection with the at-the-market program								—			1,208
Issuance costs		(85	)		(1,102	)		—			(30	)
Payments in connection with short-term loan		(538	)		0
Payments made in connection with short-term loan								—			(323	)
Exercise of Series B warrants								—			—
Exercise of stock options		27			10			—			27
Net cash provided by financing activities		2,470			17,975			—			882
Net (decrease) increase in cash and cash equivalents		(7,509	)		7,835
Net decrease in cash and cash equivalents								(3,646	)		(5,288	)
Cash and cash equivalents at beginning of period		24,534			16,399			42,634			24,534
Cash and cash equivalents at end of period	$	17,025		$	24,234		$	38,988		$	19,246
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	0		$	0		$	—		$	—
Cash paid for interest	$	9		$	0		$	—		$	5
Supplemental non-cash financing transactions:
Non-cash reclassification of Series A warrant liability to equity	$	0		$	61,793
Unpaid issuance and deferred offering costs	$	3		$	169		$	2		$	5

See accompanying notes.

Index

Notes to Condensed ~~Consolidated~~ Financial Statements

1.	Company Description and Summary of Significant Accounting Policies

Nature of Business

Ocuphire Pharma, Inc. ~~(the "Company"~~(the “Company” or ~~"Ocuphire”~~“Ocuphire”) is a clinical-stage ophthalmic biopharmaceutical company focused on developing ~~and commercializing~~novel therapies for the treatment of ~~refractive~~unmet needs of patients with retinal and ~~retinal~~refractive eye disorders. ~~Ocuphire’s pipeline currently includes 2 small molecule product candidates targeting several of such indications.~~

The Company’s 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. The Company’s second~~retinal 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. The Company has also in-licensed APX2009 and APX2014, which are second-generation product candidates and analogs of ~~APX3330~~.APX3330.

~~The~~In November 2022, the Company ~~has sustained operating losses since inception~~entered into a license and ~~expects~~collaboration agreement (the “Nyxol License Agreement”) with FamyGen Life Sciences, Inc. (acquired by Viatris, Inc. (“Viatris”) in January 2023) pursuant to which it granted Viatris an exclusive license to develop, manufacture, import, export and commercialize its refractive product candidate phentolamine ophthalmic solution 0.75% (Nyxol® Eye Drops or “Nyxol”). Nyxol is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. Nyxol can potentially be used across multiple indications 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~~as treatment of pharmacologically-induced mydriasis (“RM”) (dilation of the ~~Company’s equity~~pupil), presbyopia (age-related blurry near vision) and ~~debt securities~~ dim light or ~~through collaborations or partnerships with other companies. 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~~night vision disturbances (“DLD”) (halos, glares and ~~development programs.~~

starbursts).

Reverse Merger with Rexahn

On June 17, 2020, Ocuphire, Rexahn Pharmaceuticals, Inc. (“Rexahn”), Razor Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Rexahn (“Merger Sub”), entered into an Agreement and Plan of Merger and Reorganization, as amended on June 29, 2020 (as amended, the “Merger Agreement”), pursuant to which, among other things, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Merger Sub would merge with and into Ocuphire, with Ocuphire continuing as a wholly-owned subsidiary of Rexahn and the surviving corporation of the merger (the “Merger”). The Merger closed on November 5, 2020. Upon completion of the Merger, Rexahn changed its name to Ocuphire Pharma, Inc. and changed its ticker symbol on the Nasdaq Capital Market to “OCUP”.

The Company’s headquarters is located in Farmington Hills, Michigan.

Global Economic Conditions

~~The COVID-19 pandemic that began around December 2019 introduced significant volatility~~Generally, worldwide economic conditions remain uncertain, particularly due to the ~~global economy, disrupted supply chains and had a widespread adverse effect on the financial markets. As a result~~effects 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.

The lingering impacts of COVID-19 throughout 2021 and into 2022 have impeded global supply chains and resulted in inflationary cost increases. These broad-based inflationary impacts may increase future manufacturing costs of our products and product candidates. We expect these inflationary impacts to continue for the foreseeable future.

In addition to the direct and indirect impacts of COVID-19, the United States and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and ~~Ukraine. In February 2022, Russia launched a full-scale military invasion~~Ukraine, disruptions in the banking system and financial markets, lingering 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 ~~Ukraine. As a result~~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.

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 the United States, United Kingdom, European Union and other countries have levied economic sanctions and bans on Russia and Russia has responded with its own retaliatory measures. These measures have contributed to significant volatility and negative pressure in ~~financial markets. Securities of microcap and small-cap companies, including biotechnology companies in particular, have experienced substantial volatility~~Ukraine, disruptions in the ~~recent past, often based on factors unrelated~~banking system and financial markets, and steps taken by governments and central banks, particularly in response to the ~~companies’ financial performance or prospects. Further decline~~COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in ~~global economic conditions could have a lasting impact on regional~~costs and ~~global economies,~~has caused changes in fiscal and ~~may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity for the duration of fiscal year 2022 and beyond~~monetary policy, including increased interest rates.

Basis of Presentation

The accompanying condensed ~~consolidated~~ financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements 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~~2022 condensed balance sheet was derived from audited financial statements, and may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, ~~2021.~~2022.

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 condensedfinancial statements prior to the December 31, 2021 merger with OcuSub Inc.

Index

Notes to Condensed ~~Consolidated~~ Financial Statements

~~Going Concern~~

Liquidity

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 underaccompanying condensed financial statements have been prepared on 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~~basis 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. From its inception, the Company has devoted substantially all of its efforts to drug development and conducting clinical trials.

As of March 31, 2023, the Company had $39.0 million in cash and cash equivalents. The Company believes its current available cash and cash equivalents will be sufficient to fund the Company’s planned expenditures and meet its obligations for at least 12 months following May 15, 2023, which is the date that these condensed ~~consolidated~~ financial statements doare being issued.

In the future, the Company may need to raise additional funds until it is able to generate sufficient revenues to fund its development activities. The Company’s future operating activities, coupled with its plans to raise capital or issue debt financing, may provide additional liquidity in the future, however these actions are not ~~include any adjustments that might result from~~solely within the control of the Company and the Company is unable to predict the ultimate outcome of these ~~uncertainties.~~actions to generate the liquidity ultimately required.

Use of Estimates

The preparation of condensed ~~consolidated~~ financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed ~~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 Company’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 1one operating segment, which is the business of development ~~and commercialization~~ of products related to vision performance and health. Accordingly, the Company has 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 or managed by ~~two long-standing~~one financial ~~institutions~~institution in the United States. Amounts on deposit ~~may at times~~ exceed federally insured limits. Management believes that the financial ~~institutions are~~institution is financially sound, and accordingly, minimal credit risk exists with respect to the financial ~~institutions.~~institution. In addition, the Company limits its exposure through the kind, quality and concentration of its investments. As of ~~June 30, 2022,~~March 31, 2023, the Company had deposits that exceeded federally insured amounts by ~~$16.5~~$38.7 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 income (expense), 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 0tnot recognize any impairments on its investments to date through ~~June 30, 2022.~~March 31, 2023.

Revenue Recognition

The Company follows the provisions of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The guidance provides a five-step model to determine how revenue is recognized. The Company has entered into license agreements which have revenue recognition implications (See Note 9 – License and Collaboration Agreements).

In determining the appropriate amount of revenue to be recognized, the Company performs the following steps: (i) identification of the contracts with a customer; (ii) determination of the performance obligations in the contract; (iii) measurement of the transaction price, including potential constraints on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated stand-alone selling prices; and (v) recognition of revenue when (or as) the Company satisfies a performance obligation.

Index

Notes to Condensed Financial Statements

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. Performance obligations may include license rights, development and other services. Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations are either completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.

As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. The Company allocates the total transaction price to each performance obligation based on the relative standalone selling prices of the promised goods or service underlying each performance obligation.

Licenses of intellectual property and research and development services: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer, and the customer can use and benefit from the license. For licenses that are bundled with other obligations, such as research and development services, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. For research and development services that are distinct from a license transfer obligation, the Company determines whether the services are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from such services. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission) is included in the transaction price. Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until such contingency occurs (such as receipt of those approvals).

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Contract Asset

The Company recognizes a contract asset when goods or services are transferred to the customer before the customer pays or before payment is due, excluding any amounts presented as an accounts receivable. The Company recorded a contract asset in connection with a license and collaboration agreement in the amount of $2.5 million as of March 31, 2023. See Note 9- License and Collaboration Agreements.

Accounts Receivable and Allowances for Doubtful Accounts

The Company records a provision for doubtful accounts, when appropriate, based on historical experience and a detailed assessment of the collectability of its accounts receivable. In estimating the allowance for doubtful accounts, the Company considers, among other factors, the aging of the accounts receivable, its historical write-offs, the credit worthiness of each customer, and economic conditions that could affect the collectability of the balances in the future. Account balances are charged off against the allowance when the Company believes that it is probable that the receivable will not be recovered. Actual write-offs may be in excess of the Company’s estimated allowance. The Company has not incurred any bad debt expense to date and no allowance for doubtful accounts has been recorded during the periods presented.

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 ~~Expenses~~

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.R&D costs include costs that are reimbursed under the Nyxol License Agreement.

Index

Notes to Condensed Financial Statements

Other Income (Expense), net

Other income (expense), net reflected in this line item 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”).~~shareholders. In addition, ~~Other~~other income (expense), net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from equity investments and ~~when they occur,~~ reimbursements in connection with grants and other ~~sources.~~sources when they occur.

~~Index~~

~~Notes to Condensed Consolidated Financial Statements~~

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 718”), Compensation — Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant date fair value. The Company records forfeitures when they occur. Stock-based compensation arrangements to non-employees are accounted for in accordance with the applicable provisions of ASC 718.

Warrant Liabilities

The Company ~~issued Series A Warrants in connection with the Pre-Merger Financing (see Note 3 – Pre-Merger Financing) and~~ assumed Rexahn warrants issued prior to the Merger. The Company accounts for these warrants as a liability while outstanding at fair value during periods when certain provisions preclude equity accounting treatment for these instruments. Additionally, issuance costs associated with the warrants classified as liabilities are expensed as incurred and reflected as interest expense in the accompanying consolidated statements of comprehensive loss. The change in fair value of the warrant liabilities while outstanding ~~was~~are recognized as a component of the fair value change in warrant liabilities line item in the condensed ~~consolidated~~ statements of comprehensive loss.

Fair Value Measurements

The Company follows accounting guidance that emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Fair value is defined as “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.” Fair value measurements are defined on a three-level hierarchy:

●

Level 1 inputs: Unadjusted quoted prices for identical assets or liabilities in active markets;

●

Level 2 inputs: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, whether directly or indirectly, for substantially the full term of the asset or liability; and

●

Level 3 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 at the measurement date.

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the fair values of cash and cash equivalents, accounts receivable, contract asset, prepaid and other assets, accounts payable, accrued expenses ~~and short-term loan, while outstanding,~~ 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~~a Black-Scholes option model using Level 3 ~~inputs.~~inputs. There were 0no transfers between fair value hierarchy levels during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

The fair value of financial instruments measured on a recurring basis is as follows (in thousands):

As of June 30, 2022
Description Total Level 1 Level 2 Level 3
Assets:
Short-term investments

$
126

$
126

$
0

$
0

Total assets at fair value

$
126

$
126

$
0

$
0

	As of March 31, 2023
Description	Total		Level 1		Level 2		Level 3
Assets:
Short-term investments	$	22	$	22	$	—	$	—
Total assets at fair value	$	22	$	22	$	—	$	—

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

	As of December 31, 2022
Description	Total		Level 1		Level 2		Level 3
Assets:
Short-term investments	$	49	$	49	$	—	$	—
Total assets at fair value	$	49	$	49	$	—	$	—

The following table provides a roll-forward of short-term investments measured at fair value on a recurring basis using observable level 1 inputs for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

2022
2021

Short-term investments
Balance as of beginning of period $ 219 $ 0
Unrealized loss
(93 ) 0
Balance as of end of period $ 126 $ 0

	2023			2022
Short-term investments
Balance as of beginning of period	$	49		$	219
Unrealized loss		(27	)		(84	)
Balance as of end of period	$	22		$	135

Index

Notes to Condensed ~~Consolidated~~ Financial Statements

The following table provides a roll-forward of the warrant liabilities measured at fair value on a recurring basis using unobservable level 3 inputs for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

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

	2023		2022
Warrant liabilities
Balance as of beginning of period	$	—	$	—
Change in fair value of warrant liabilities		—		—
Balance as of end of period	$	—	$	—

The fair value of the warrant liabilities associated with the Rexahn warrants was de minimis during the periods presented. See Note 2 - Merger.

There were no financial instruments measured on a non-recurring basis for any of the periods presented.

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “~~Financial~~“Financial Instruments – Credit Losses”. The ASU sets forth a ~~“current~~current expected credit ~~loss”~~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~~adopted this ASU on January 1, 2023 ~~will~~and it did not have a significant impact on its condensed ~~consolidated~~ financial ~~statements~~.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~~adopted this ASU on January 1, 2023 and the adoption did not have a material impact ~~of ASU 2020-06~~ on its condensed ~~consolidated~~ financial ~~statements~~.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~~the condensed financial statements.

2.	Merger ~~and Contingent Value Rights Agreement~~

On November 5, 2020, the Company completed ~~its merger~~the 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 1one 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

Index

Notes to Condensed Financial Statements

●

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.

~~Index~~

~~Notes to Condensed Consolidated Financial Statements~~

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 ~~June 30, 2022, 0 milestones~~March 31, 2023, no payments subject to the CVR had been ~~accrued as there were 0 additional potential milestones yet considered probable~~received beyond those previously reported in the second and third quarters of calendar year 2021. In addition, no milestones had been accrued as there were no potential milestones yet considered probable beyond those previously reported.

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 ~~June 30, 2022, 63,734~~March 31, 2023, 60,713 of the Rexahn warrants remained outstanding with exercise prices ranging from $38.40 to ~~$146.88~~$136.80 per share with an average remaining contractual life of ~~1.5~~0.8 years.

3.	~~Pre-Merger Financing~~

~~Securities Purchase Agreement~~

~~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 June 30, 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 Series 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 on Nasdaq as of February 3, 2021, the effective date of the Waiver Agreement. The fair value change of the Series A Warrants was $33.8 million and was recorded to the fair value change in warrant liabilities line item on the accompanying condensed consolidated statements of comprehensive loss for the six months ended June 30, 2021. As a result of the reclassification 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 June 30, 2022 were exercisable for 78,701 shares of common stock. The Series B Warrants were accounted for and classified as equity on the accompanying condensed balance sheets.

~~Index~~

~~Notes to Condensed Consolidated Financial Statements~~

4.3.	Commitments and Contingencies

Apexian 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 98 — Apexian Sublicense Agreement). As of ~~June 30, 2022,~~March 31, 2023, 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~~agreement..

Facility Leases

~~In May 2019, the~~The Company ~~entered into~~has a short-term non-cancellable facility lease (the “HQ Lease”) for its operations and ~~headquarters for a seven-month term beginning in June 2019.~~headquarters. 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~~.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.~~$3,000. The rent expense associated with the HQ Lease ~~and Rexahn Lease~~ amounted to $9,000 and ~~$50,000~~$12,000 during the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The ~~rent expense associated with the HQ Lease and Rexahn Lease amounted to $21,000 and $98,000 during the six months ended June 30, 2022 and 2021, respectively. Total~~total remaining expected rental payments under the HQ Lease amount to ~~$18,000~~$27,000 through its current expiration date of December 31, ~~2022 expiration date~~2023.

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.

5.4.	Supplemental Balance Sheet Information

Prepaid and Other Assets

Prepaid and other assets consist of the following (in thousands):

	June 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Prepaids	$	709	$	1,243	$	1,010	$	1,373
Other		31		71		78		80
Total prepaids and other assets	$	740	$	1,314	$	1,088	$	1,453

Property and Equipment, net

Index

Notes to Condensed Financial Statements

Property and equipment held for use by category are presented in the following table (in thousands):

	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Equipment	$	20		$	20		$	20		$	20
Furniture		5			5			5			5
Total property and equipment		25			25			25			25
Less accumulated depreciation		(17	)		(15	)		(20	)		(19	)
Property and equipment, net	$	8		$	10		$	5		$	6

Depreciation expense was $1,000 during each of the three ~~month periods~~months ended ~~June 30, 2022~~March 31, 2023 and ~~2021 and $2,000 during each of the six month periods ended June 30, 2022 and 2021.~~2022.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

	June 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
R&D services and supplies	$	945	$	1,081
Income taxes					$	315	$	315
Payroll		330		488		233		782
Professional services		104		84		222		208
R&D services and supplies						1,120		212
Other		39		80		43		167
Total	$	1,418	$	1,733	$	1,933	$	1,684

~~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 was payable in 6six monthly installments of $108,000 beginning in December 2021. The Loan had an annual interest rate of 5.5% per annum. Interest expense in the amount of ~~$4,000 and $9,000~~$5,000 was recognized in connection with the Loan during the three ~~and six~~ months ended ~~June 30,~~March 31, 2022. ~~The final payment on~~No interest expense was recognized during the ~~Loan was made in May 2022.~~three months ended March 31, 2023.

6.5.	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.

On April 8, 2022, Ocuphire entered into a consulting agreement with Jay Pepose, a director of the Company. The consulting agreement ~~provides~~provided for ~~$10,000~~$10,000 a month in cash payments, effective as of April 1, 2022. Additionally, on April 8, 2022, in connection with the consulting arrangement, ~~the director~~Dr. Pepose received a stock option grant for 50,000 options, 25% ~~of which will vest~~ vested on March 31, 2023, with the remainder vesting in equal monthly installments over 36 months. The consulting agreement was amended on September 19, 2022 to provide for vesting acceleration for stock-based awards in the event of a change in control. The consulting agreement was also amended effective December 1, 2022 to increase the cash payment to $25,000 per month. The Company incurred related consulting expenses of ~~$30,000~~$75,000 during the three ~~and six~~ months ended ~~June 30, 2022.~~March 31, 2023. There were 0no related consulting expenses incurred during the three ~~and six~~ months ended ~~June 30, 2021. $10,000~~March 31, 2022. As of March 31, 2023 and ~~NaN~~December 31, 2022, $50,000 and $25,000 of the related consulting expenses were unpaid, ~~as of June 30, 2022 and December 31, 2021, respectively~~respectively..

7.6.	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 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 ~~and six~~ months ended ~~June 30,~~March 31, 2022, ~~877,927 and 1,214,471~~336,544 shares of common stock were sold under the 2021 ATM for ~~aggregate~~ gross proceeds in the amount of ~~$1.9~~$1.2 million ~~and $3.1 million, respectively,~~ before deducting issuance expenses, including the placement agent’s fees, legal and accounting expenses, in the amount of ~~$53,000 and $88,000, respectively. During the three and six months ended June 30, 2021, 900,943 shares~~$35,000.There were ~~sold~~no sales of common stock under the 2021 ATM ~~for gross proceeds in~~during the ~~amount of approximately $4.1 million, before deducting issuance expenses in the amount of approximately $0.2 million.~~
three-month period ended March 31, 2023.

Registered Direct Offering

On June 4, 2021, the Company entered into a placement agency agreement~~for a registered direct offering (“RDO”)~~ 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 one share and 0.50~~. The RDO Warrants ~~for gross proceeds of approximately $15,000,000, before AGP’s fees and related offering expenses in the amount of approximately $1.1 million.~~

~~The RDO Warrants~~are equity classified, have an exercise price of $6.09 per share, are exercisable from the initial issuance date of June 8, 2021, and will expire five years following the initial issuance date. As of ~~June 30, 2022,~~ March 31, 2023, 1,538,461 RDO Warrants were outstanding.

Index

Notes to Condensed Financial Statements

Pre-Merger Financing

Series A Warrants

Series B Warrants

The Series B Warrants had an exercise price of $0.0001, were exercisable upon issuance and would have expired on the day following the later to occur of (i) the Reservation Date (as defined therein) or (ii) the date on which the investor’s Series B Warrants would have been exercised in full (without giving effect to any limitation on exercise contained therein). None of the Series B Warrants were outstanding at March 31, 2023 as the remaining 17,869 warrants were exercised for shares of common stock during the first quarter of 2023. The Series B Warrants were accounted for and classified as equity on the accompanying condensed balance sheets while outstanding.

8.7.	Stock-based Compensation

Stock-based compensation expense was included in general and administrative and research and development costs as follows in the accompanying condensed ~~consolidated~~ statements of comprehensive loss for the ~~three- and six-month~~three-month periods indicated below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,				March 31,
	2022		2021		2022		2021		2023		2022
General and administrative	$	276	$	288	$	571	$	481	$	468	$	295
Research and development		169		175		319		476		336		150
Total stock-based compensation	$	445	$	463	$	890	$	957	$	804	$	445

~~Index~~

~~Notes to Condensed Consolidated Financial Statements~~

Ocuphire Stock Options

Inducement 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.

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~~non-statutory stock options, appreciation rights, restricted stock, restricted stock units, performance stock and net loss awards, and other ~~stock-based~~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, 0no 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~~2023, 1,043,066 shares were added to the 2020 Plan as a result of the evergreen provision.

~~General~~

Index

Notes to Condensed Financial Statements

Stock Options

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~174,000~~665,383 and ~~726,305 stock~~552,305 options were granted to ~~directors,~~ officers, employees and consultants, respectively, generally vesting over a ~~twelve (12)~~five (5) to forty-eight (48) month period. During the three and six months ended June 30, 2021, 218,000 and 259,800 stock options were granted to newly-hired consultants and employees, respectively, generally vesting over a six (6) to ~~forty-eight~~ (48) month period. The Company recognized ~~$418,000~~$500,000 and ~~$434,000~~$417,000 in stock-based compensation expense related to stock options during the three months ended ~~June 30,~~March 31, 2023 and 2022, respectively. As of March 31, 2023 and ~~2021, respectively,~~December 31, 2022, 3,601,427 and ~~$835,000 and $880,000 during the six months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022, 24,309~~2,936,044 stock options were ~~exercised with an intrinsic value of $59,000. During the six months ended June 30, 2021, 7,386 stock options were exercised with an intrinsic value of $74,000.~~outstanding, respectively.

The weighted average fair value per share of options granted during the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 was ~~$1.71~~$2.75 and ~~$2.15,~~$2.29, respectively. ~~The weighted average fair value per share of options granted during the three and six months ended June 30, 2021 was $4.50 and $4.85.~~ The Company measures the fair value of stock options with ~~service-based and performance-based~~service‑based vesting criteria to employees, directors, consultants and directors on the date of grant using the ~~Black-Scholes~~Black‑Scholes option pricing model. The Company does not have sufficient share trading history to support aan internal calculation of volatility and expected term. As such, the Company has used a ~~weighted-average~~weighted average volatility considering the volatilities of several guideline companies.

~~Index~~

~~Notes to Condensed Consolidated Financial Statements~~

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‑~~weighted average assumptions used in the ~~Black-Scholes~~Black‑Scholes option pricing model are as follows during the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~
2022:

	2023			2022

Expected stock price volatility		95.4	%		99.6	%
Expected life of options (years)		6.1			6.0
Expected dividend yield		—	%		—	%
Risk free interest rate		3.7	%		1.7	%

Three Months
Ended
June 30,

Six Months
Ended
June 30,

2022
2021
2022
2021

Expected stock price volatility 96.2 % 99.2 % 98.8 % 97.2 %
Expected life of options (years) 5.7 5.8 5.9 5.8
Expected dividend yield 0 % 0 %
0 % 0 %
Risk free interest rate 3.3 % 0.9 % 2.1 % 0.9 %

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~204,406~~246,068 and ~~267,103~~62,698 stock options vested, respectively. The weighted average fair value per share of options vesting during the three months ended March 31, 2023 and 2022 was $2.44 and $2.90, respectively. During the three ~~and six~~ months ended ~~June 30, 2021, 114,727~~March 31, 2023 and ~~232,944~~2022, zero and 24,309 stock options ~~vested (as adjusted for~~were exercised, respectively, with an intrinsic value of zero and $59,000, respectively. During the ~~Exchange Ratio),~~three months ended March 31, 2023 and 2022, zero and 8,288 options were forfeited, respectively.

Restricted Stock Units

During the three ~~and six~~ months ended ~~June 30, 2022, 6,000~~March 31, 2023, the Company granted an aggregate of 291,584 restricted stock units (“RSUs”) to certain officers and ~~14,288 options~~employees under the 2020 Plan. The weighted average grant date fair value of the RSUs granted during the three months ended March 31, 2023 was $3.50 per unit. The RSUs vest over a four year period with 25 percent vesting annually on each anniversary of the grant date, subject to the recipient’s continued service on such dates.

During the three months ended March 31, 2023, no RSUs vested and no RSUs were forfeited ~~respectively. During~~during this period. The total expense for the three ~~and six~~ months ended ~~June 30, 2021, 25,558 options were forfeited.~~ March 31, 2023 related to these RSUs was $57,000.

Common Stock Issued for Services

The Company granted stock for services in the amount of 68,646 and 8,024 common shares during the three months ended March 31, 2023 and 2022, respectively, to four and two board members during these periods, respectively, who elected to receive their board retainers in the form of stock for services. The stock-based compensation related to these services amounted to $247,000 and $28,000 during the three months ended March 31, 2023 and 2022, respectively.

General

As of ~~June 30, 2022, 1,098,645~~March 31, 2023, 912,373 shares were available for future issuance under the 2020 Plan and Inducement ~~Plan. NaN~~Plan in the aggregate. No shares were available for future issuance under the 2018 Plan.

Unrecognized stock-based compensation cost was ~~$3.2~~$4.9 million as of ~~June 30, 2022.~~March 31, 2023. The unrecognized stock-based expense is expected to be recognized over a weighted average period of ~~1.4~~1.7 years.

~~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 six months ended June 30, 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 six months ended June 30, 2022 and 2021 was 0 and $22,000, respectively.

~~Common Stock Issued for Services~~

The Company granted stock for services in the amount of 14,147 and 4,923 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 June 30, 2022 and 2021, respectively, and 22,171 and 9,397 common shares during the six months ended June 30, 2022 and 2021, respectively. The stock-based compensation related to these services amounted to $27,000 and $29,000 during the three months ended June 30, 2022 and 2021, respectively, and $55,000 during each of the six months ended June 30, 2022 and 2021.

~~Former Rexahn Options~~

NaN and 123 outstanding, unexercised and vested options to purchase Common Stock granted under the Rexahn Pharmaceuticals Stock Option Plan, as amended (the “Rexahn 2003 Plan”), remained outstanding as of June 30, 2022 and December 31, 2021, respectively. D~~uring the three and six months ended June 30, 2022, 82 and 123 options expired~~.

~~Index~~

~~Notes to Condensed Consolidated Financial Statements~~

9.8.	Apexian Sublicense Agreement

Index

Notes to Condensed Financial Statements

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~~tablet therapeutic to treat diabetic retinopathy ~~and diabetic macular edema~~ initially, and potentially later to treat diabetic macular edema, geographic atrophy and 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 ~~criteria to recognize~~ milestone or royalty ~~obligations~~payments were ~~met during the three and six month periods ended June 30~~triggered or deemed probable as of March 31, 2023 or December 31, 2022~~, 2022 and 2021.~~.

9.	License and Collaboration Agreements

Nyxol License Agreement

On November 6, 2022, the Company entered into the Nyxol License Agreement, pursuant to which it granted Famy an exclusive, perpetual, sub-licensable license to develop, manufacture, import, export and commercialize (i) Nyxol for treating (a) reversal of mydriasis, (b) night vision disturbances or dim light vision, and (c) presbyopia, and (ii) Nyxol and low dose pilocarpine for treating presbyopia (together, the “Nyxol Products”) worldwide except for certain countries and jurisdictions in Asia (the “Viatris Territory”). The Company retains the exclusive right to develop, manufacture, have manufactured, import, export and commercialize the Product outside of the Viatris Territory. In January 2023, Famy was acquired by Viatris Inc., and Viatris has assumed all of Famy’s obligations under the Nyxol License Agreement.

Under the terms of the Nyxol License Agreement, the Company in partnership with Viatris, will develop the Nyxol Products in the United States. Viatris will reimburse the Company for budgeted costs related to the development of the Nyxol Products through FDA approval. Viatris will be responsible for developing the Nyxol Products in countries and jurisdictions in the Viatris Territory outside of the United States. The parties established a joint steering committee, which oversees and makes decisions regarding the development of the Nyxol Products. The committee is composed of an equal number of representatives of Viatris and Ocuphire. Viatris will commercialize the Nyxol Products in the Viatris Territory for each indication that receives regulatory approval.

Pursuant to the Nyxol License Agreement, the Company received a one-time non-refundable cash payment of $35 million in November 2022 for the exclusive, perpetual, sub-licensable license to develop, manufacture, import, export and commercialize the Nyxol Products in the Viatris Territory. In addition, with respect to each Nyxol Product, the Company will be eligible to receive potential additional payments of up to $130 million in the aggregate upon achieving certain specified regulatory or net sales milestones, with the first potential payment of $10 million to be made following approval by the FDA of Nyxol for reversal of mydriasis. The Company will also receive tiered royalties, starting at low double-digit royalties up to low twenty percent royalties, based on the aggregate annual net sales of all Nyxol Products in the United States, and will receive low double digit royalties based on all annual net sales in the Viatris Territory outside of the United States. The royalty payments will continue on a country-by-country basis from the date of the first commercial sale of the first Nyxol Product in a country of the Viatris Territory until December 31, 2040.

Either party may terminate the Nyxol License Agreement upon written notice in the case of the other party’s material breach (subject to applicable cure periods) or if the other party becomes subject to an insolvency event. In addition, the Company may terminate the agreement in its entirety if Viatris or its affiliates commences an action challenging the validity, enforceability or scope of any of Ocuphire’s patents that are exclusively licensed under the Nyxol License Agreement. Additionally, if Viatris determines not to pursue development or commercialization of a Product in a country or jurisdiction in the Viatris Territory, Viatris may terminate the license with respect to such Product in such country or jurisdiction.

Both Ocuphire and Viatris have agreed to indemnify the other party against certain losses and expenses relating to any breach of the indemnifying party’s obligations, representations, warranties or covenants under the Nyxol License Agreement.

The Nyxol License Agreement was accounted for under the provisions of ASC 606. In accordance with the provisions under ASC 606, the Company identified two distinct performance obligations at the effective date: (1) the license to its intellectual property (“license transfer”) and (2) research and development services.

Index

Notes to Condensed Financial Statements

The aggregate transaction price associated with the Nyxol License Agreement, as adjusted for variable consideration subsequent to December 31, 2022, was $40.0 million which comprised the Initial License Transfer fee of $35.0 million and the $5.0 million payment anticipated under the research and development services that were not subject to cancellation. The transaction price was allocated between performance obligations based on their relative standalone selling price (“SSP”). The performance obligations for research and development services through the non-cancellation period were fully met by the Company as of March 31, 2023.

The SSP for the license transfer and for the research and development services was determined to be $ 287.8 million and $5.0 million, respectively. The SSP for the license transfer was determined based on a discounted royalty cash flow approach, taking into consideration assumptions, including projected worldwide net profit for each of the respective programs based on probability assessments, projections based on internal forecasts, industry data, and information from other guideline companies within the same industry and other relevant factors. The SSP for the research and development services was determined using a cost plus margin approach, based on anticipated expenditure outlays within the first 120-day non-cancellation window. On a relative SSP basis, $39.3 million and $0.7 million of the transaction price was allocated to the license transfer and to the research and development services obligations, respectively.

Recognition of Revenue

The Company determined that the licenses transferred represented functional intellectual property. As such, the revenue related to the licenses was recognized at the point in time in which the license/know-how was delivered to Viatris (as successor to Famy) which occurred during the fourth quarter of 2022. The Company determined that revenue related to the research and development services constrained to the 120-day non-cancellation period was to be recognized over time as the services are rendered based on an estimated percentage of completion input model.

Revenue recognized under the Nyxol License Agreement during the three months ended March 31, 2023 was $1.7 million.

Regulatory Milestones under the Nyxol License Agreement

The Company has evaluated the regulatory milestones that may be received in connection with the Nyxol License Agreement. There is uncertainty that the events to obtain the regulatory milestones will be achieved given the nature of clinical development and the stage of the development of the Products. The remaining regulatory milestones will be constrained until it is probable that a significant revenue reversal will not occur.

Sales Milestone and Royalty Payments

Sales milestones and royalties relate predominantly to a license of intellectual property granted to Viatris and are determined by sales or usage-based thresholds. The sales milestones and royalties are accounted for under the royalty recognition constraint and will be accounted for as constrained variable consideration. The Company applies the royalty recognition constraint for each commercial milestone and will not recognize revenue for each until the subsequent sale of a licensed product (achievement of each) occurs.

Each of the remaining regulatory and sales milestone performance obligations and royalty payments were fully constrained as of March 31, 2023 and no revenue was recognized.

A reconciliation of the closing balance of the contract asset associated with the Nyxol License Agreement is as follows as of March 31, 2023 (in thousands):

Contract Asset
Balance as of December 31, 2022	$	3,552
Revenue recognized		1,749
Reclassification to accounts receivable related to costs billed under the Nyxol License Agreement		(2,834	)
Balance as of March 31, 2023	$	2,467

The remaining amounts in the contract asset as of March 31, 2023 attributed to the research and development services are expected to be settled during the second quarter of 2023.

BioSense License and Assignment Agreement

On March 10, 2020, pre-Merger, Rexahn entered into an amendment to its collaboration and license agreement, (as amended, the “BioSense License and Assignment Agreement”) with BioSense to advance the development and commercialization of RX-3117 for all human uses in the Republic of Singapore, China, Hong Kong, Macau, and Taiwan (the “BioSense Territory”). Under the terms of the BioSense License and Assignment Agreement, the Company (i) granted BioSense an exclusive license to develop and commercialize pharmaceutical products containing RX-3117 as a single agent for all human uses in the BioSense Territory and (ii) assigned and transferred all of the former Rexahn patents and patent applications related to RX-3117 in the BioSense Territory. The upfront payment consisted of an aggregate of $1,650,000, of which $1,550,000 was paid to Rexahn prior to the Merger and the remaining $100,000 during calendar year 2021.

Index

Notes to Condensed Financial Statements

Under the BioSense License and Assignment Agreement, the Company is eligible to receive additional milestone payments in an aggregate of up to $84,500,000 upon the achievement of development, regulatory and commercial goals and will also be eligible to receive tiered royalties at low double-digit rates on annual net sales in the BioSense Territory. The Company determined that none of the milestone payments under the BioSense License and Assignment Agreement were probable of payment as of March 31, 2023, and as a result, no revenue related to the milestones was recognized as the achievement of events entitling the Company to any milestone payments were highly susceptible to factors outside of the Company’s control. Future sales-based royalties related to the exclusive license to develop RX-3117 will be recognized in the period the underlying sales transaction occurs.

Payments received under the BioSense License and Assignment Agreement are subject to the CVR Agreement described in Note 2 – Merger.

Processa License Agreement

On June 16, 2021, the Company entered into a license agreement (the “Processa License Agreement”) with Processa Pharmaceuticals, Inc. (“Processa”), pursuant to which the Company has agreed to grant Processa an exclusive license to develop, manufacture and commercialize RX-3117 globally, excluding the BioSense Territory.

Processa will make future payments to the Company upon the achievement of certain development and regulatory milestones, which primarily consist of dosing a patient in pivotal trials or having a drug indication approved by a regulatory authority in the United States or another country. In addition, Processa will pay the Company mid-single-digit royalties based on annual sales under the license and will make one-time sales milestone payments based on the achievement during a calendar year of certain thresholds for annual sales. Processa is also required to give the Company 32% of any milestone payments received based on any sub-license agreement Processa may enter into with respect to the Processa License Agreement. The Company determined that none of the milestone payments under the Processa License Agreement were probable of payment as of March 31, 2023, and as a result, no revenue related to the milestones was recognized, as the achievement of events entitling the Company to any milestone payments were highly susceptible to factors outside of the Company’s control.

Processa is required to use commercially reasonable efforts, at its sole cost and expense, to conduct development activities in one or more countries, including meeting specific diligence milestones that consist of: (i) first patient administered drug in a clinical trial of a licensed product prior to the three (3) year anniversary of the effective date; and (ii) first patient administered drug in a pivotal clinical trial of a licensed product or first patient administered drug in a clinical trial for a second indication of a licensed product prior to the five (5) year anniversary of the effective date. Either party may terminate the agreement in the event of a material breach of the agreement that has not been cured following written notice and a 120-day opportunity to cure such breach, and Processa may terminate the agreement for any reason upon 120 days prior written notice to Ocuphire.

Future payments received under the Processa License Agreement will be subject to the CVR Agreement described in Note 2– Merger.

10.	Net loss per share

Basic ~~loss~~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, stock options, RSUs and any unissued common stock for services, ~~and stock options~~ while outstanding, are considered common stock equivalents for this purpose. Diluted earnings ~~are~~is computed utilizing the treasury method for the warrants, stock options, RSUs and any unissued common stock for ~~services and stock options.~~services. 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.~~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 and six month~~three-month periods ended presented below:

	June 30,				March 31,
	2022		2021		2023		2022
Series A, Series B, and RDO warrants		7,283,000		7,282,999		7,204,299		7,282,999
Stock options		2,784,544		2,011,054		3,601,427		2,616,544
RSUs						291,584		—
Unissued common stock for services		14,147		4,923		—		8,024
Former Rexahn warrants		63,734		66,538		60,713		66,538
Former Rexahn options		0		82		—		82

Index

Notes to Condensed Financial Statements

11.	Income Taxes

The effective tax rate for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ was 0zero percent. As of ~~June 30, 2022,~~March 31, 2023, a full valuation allowance has been established to reduce the Company’s net deferred income tax assets. As such, 0no 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~~2019 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 1st1~~st,~~, 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 first 3% 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 ~~and six~~ months ended ~~June 30~~March 31, 2023 and 2022, the Company contributed $~~20,000~~34,000 and ~~$45,000~~$25,000 to the 401K Plan, respectively.

13.	Subsequent Events

On April 19, 2023, the Company terminated the employment of Mina Sooch, the President and Chief Executive Officer of the Company, and appointed Richard Rodgers as the Company’s interim President and Chief Executive Officer. In connection with the appointment of Richard Rodgers as interim President and Chief Executive Officer of the Company, the Company and Mr. Rodgers entered into a letter agreement concerning Mr. Rodgers’s services (the “Letter Agreement”). The Letter Agreement provides that Mr. Rodgers will receive a $40,000 monthly salary, and that Mr. Rodgers is eligible for potential prorated bonus at the discretion of the Board, at the end of his term. Mr. Rodgers also received 50,000 restricted stock units under the Company’s 2020 Equity Incentive Plan which will vest 12 months following the grant date.

Index

Ocuphire Pharma, Inc.

Form 10-Q

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes included in Part I “Financial Information”, Item I “Financial Statements” of this Quarterly Report on Form 10-Q (the “Report”) and the audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~

2022.

Forward-Looking Statements

Certain statements contained in this Report are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and 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 “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements.

These forward-looking statements reflect our management’s beliefs and views with respect to future events, are based on estimates and assumptions as of the date of this Report and are subject to risks and uncertainties, many of which are beyond our control, that could cause our actual results to differ materially from those in these forward-looking statements. We discuss many of these risks in greater detail under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 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 extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we 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 or as of the date specified herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable laws or regulations.

Overview

~~Overview~~

We are

~~Ocuphire is~~ a clinical-stage ophthalmic biopharmaceutical company focused on developing ~~and commercializing~~novel therapies for the treatment of unmet needs of patients with retinal and refractive ~~and retinal~~ eye ~~disorders. Ocuphire’s pipeline currently includes two small molecule product candidates targeting several of such indications.~~disorders.

APX3330

~~Its~~Our 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 12 clinical trials (3 Phase 1, 5 Phase 2, 4 Phase 3) in a total of approximately 1,100 patients (with over 650 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 1^st ~~Phase 3 trial (MIRA-2) for RM in March 2021, reported positive top-line data from a 2~~^nd Phase 3 RM trial (MIRA-3) in March 2022, reported positive data from a pediatric safety study (MIRA-4) for RM in April 2022, and Ocuphire reported positive top-line data from a Phase 3 trial of Nyxol for treatment of NVD in May 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 in June 2021 and January 2022. Ocuphire anticipates submitting a new drug application (“NDA”) to the 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 approval of its RM application.

~~Ocuphire’s second~~retinal 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~~our in-licensing ~~of the~~this 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 (hepatic) and oncology indications, and had demonstrated evidence of ~~tolerability,~~target engagement, pharmacokinetics, durability, and ~~target engagement. Ocuphire has~~favorable safety and tolerability. We also in-licensed APX2009 and APX2014, which are second-generation product candidates and analogs of APX3330. ~~Ocuphire initiated a~~In January 2023, we reported top-line efficacy and safety results from the ZETA-1 Phase 2 trial ~~for APX3330~~conducted in ~~April 2021 for the treatment~~103 subjects (51 treated with 600 mg daily dose of ~~patients with~~APX3330) in 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~~Although the ZETA-1 clinical trial did not meet the primary endpoint of ~~103~~% of patients with a ≥ 2-step improvement in Early Treatment of Diabetic Retinopathy Study (ETDRS) diabetic retinopathy severity scale (DRSS) at week 24 in the ~~ZETA-1 trial~~study eye, statistical significance was achieved on a key pre-specified secondary endpoint of preventing clinically meaningful progression of diabetic retinopathy (defined by binocular 3 or more steps worsening on the DRSS scale, calculated as the sum of changes in ~~March 2022 and expects to report top-line results from~~each eye) after 24 weeks of treatment. Given the ~~ZETA-1 DR/DME Phase 2b study~~systemic delivery of APX3330, an endpoint that evaluates the effects on both eyes is a potential FDA registration endpoint for future trials. The binocular DRSS endpoint will be confirmed at an End-of-Phase 2 (EOP2) meeting with the FDA in the second half of ~~2022. In July 2022, Ocuphire reported masked~~2023. APX3330 demonstrated favorable safety ~~data as of mid-June 2022, from~~and tolerability in the ~~ongoing Phase 2~~ZETA-1 trial, ~~in DR/DME for the 103 patients enrolled where 100% of these patients completed 12 weeks of dosing and approximately 70% patients completed 24 weeks of dosing. These masked safety data are~~ consistent with the ~~favorable~~ safety ~~profile~~data from the prior 11 clinical ~~trials~~trials. Treatment-related adverse events were uncommon, and most were mild in severity. There were no treatment-related serious adverse events. No changes were observed in liver, kidney, or heart function. There were no treatment-related effects on hematologic or blood chemistry evaluations.

Nyxol

In November 2022, we entered into a license and collaboration agreement (the “Nyxol License Agreement”) with ~~total exposure experience of over 9,000 subject-days with 600 mg daily dose of APX3330.~~

FamyGenLife Sciences, Inc. (acquired by Viatris, Inc. (“Viatris”) in January 2023)pursuant to which we granted Viatris an exclusive license to develop, manufacture, import, export and commercialize our refractive product candidate phentolamine ophthalmic solution 0.75% (Nyxol^® Eye Drops or “Nyxol”).

Index

Ocuphire Pharma, Inc.

Form 10-Q

~~Strategic Outlook~~

Nyxol is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. Nyxol can potentially be used across multiple indications such as treatment of pharmacologically-induced mydriasis (“RM”) (dilation of the pupil), presbyopia (age-related blurry near vision) and dim light or night vision disturbances (“DLD”) (halos, glares and starbursts). Our management believes these multiple indications potentially represent a significant market opportunity. Nyxol has been studied in a total of 12 clinical trials (3 Phase 1, 5 Phase 2 and 4 Phase 3) in a total of over 1100 patients (with over 650 Nyxol-treated) and has demonstrated promising clinical data across the three targeted refractive indications.

We reported positive top-line data from Phase 3 trials in RM: MIRA-2 in March 2021, MIRA-3 in March 2022 and MIRA-4 in April 2022. We also reported positive top-line data from a Phase 2 trial of Nyxol for treatment of presbyopia, both as monotherapy and with low-dose pilocarpine (pilocarpine hydrochloride ophthalmic solution 0.4%, “LDP”) as adjunctive therapy (VEGA-1). We reported top-line data from a Phase 3 trial in DLD in May 2022 (LYNX-1). We submitted a new drug application (“NDA”) to the U.S. Food and Drug Administration (“FDA”) in November 2022 under the 505(b)(2) pathway for Nyxol for RM with a Prescription Drug User Fee Act (PDUFA) goal date of September 28, 2023. The first phase 3 registration trial of Nyxol for the treatment of presbyopia (VEGA-2), as monotherapy and with LDP as adjunctive therapy, was started in late December 2022, and topline results from this trial are expected in late 2023. Funded by our partner Viatris, registration trials are planned for presbyopia (VEGA-3) and DLD (LYNX-2), as well as a supportive long-term safety trial for both chronic indications (LYRA-1).

As part of its our strategy, ~~Ocuphire~~we will continue to explore opportunities to acquire additional ophthalmic assets and seek strategic partners for late-stage development, regulatory preparation, and commercialization of drugs in key global markets.

Strategic Outlook

We will continue to explore opportunities to acquire additional ophthalmic assets and to seek strategic partners for late-stage development, regulatory preparation and commercialization of APX3330 in key global markets. To date, ~~Ocuphire’s~~our primary activities have been conducting research and development activities, planning clinical trials, performing business and financial planning, recruiting personnel and raising capital. ~~Ocuphire does~~We do not have any products approved for sale, and ~~has not generated any significant amounts of revenue. Ocuphire does~~we do not expect to consistently generate significant revenues, other than license and collaborations revenue, until, and unless, the FDA or other regulatory authorities approve ~~Nyxol or APX3330~~ and ~~Ocuphire~~we successfully ~~commercializes its product candidates.~~commercialize APX3330. Until such time, if ever, as ~~Ocuphire~~we can consistently generate substantial product revenue, ~~Ocuphire expects~~we expect to finance ~~its~~our cash needs through a combination of equity and debt financings as well as through collaborations, strategic alliances and licensing arrangements.

Through ~~June 30, 2022, Ocuphire has~~March 31, 2023, we have funded ~~its~~our operations primarily through equity financings that totaled ~~$52.7~~$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 through the issuance of convertible notes in private placements that totaled $8.5 million in gross ~~proceeds. Ocuphire’s~~proceeds net ~~losses were $11.5~~cash. In addition, we recently received a one-time non-refundable licensee fee payment of $35.0 million and ~~$46.2~~reimbursement for costs related to development in connection with the Nyxol License Agreement.

Our net loss was $5.8 million for the ~~six~~three months ended ~~June 30, 2022 and 2021, respectively.~~March 31, 2023 as compared to a net loss of $6.6 million for the three months ended March 31, 2022. As of ~~June 30, 2022, Ocuphire~~March 31, 2023, we had an accumulated deficit of ~~$100.9~~$77.3 million. ~~Ocuphire anticipates~~Furthermore, we anticipate that ~~its~~our expenses will increase ~~substantially~~ as ~~it:~~we:

~~continues~~

continue clinical trials for APX3330, Nyxol ~~APX3330~~ and for any other product candidate in ~~its~~our future pipeline;

~~continues~~

continue preclinical studies for APX3330, Nyxol ~~APX3330~~ and for any other product candidate in ~~its~~our future pipeline;

~~develops~~

develop additional product candidates that ~~it identifies, in-licenses~~we identify, in-license or ~~acquires;~~acquire;

~~seeks~~

seek regulatory approvals for any product candidates that successfully complete clinical trials;

~~contracts~~

contract to manufacture ~~its~~our product candidates;

~~maintains, expands~~

maintain, expand and ~~protects its~~protect our intellectual property portfolio;

~~hires~~

hire additional staff, including clinical, scientific, operational and financial personnel, to execute ~~its~~our business plan;

~~adds~~

add operational, financial and management information systems and personnel, including personnel to support ~~its~~our product development and potential future commercialization efforts;

~~continues~~

continue to operate as a public company; and

~~establishes~~

establish on ~~its~~our own or with partners, a sales, marketing and distribution infrastructure to commercialize any products for which ~~Ocuphire~~we may obtain regulatory ~~approval;~~approval.

~~Ocuphire’s~~Our net ~~losses may~~income (loss) will likely continue to fluctuate significantly from ~~quarter–~~quarter to quarter and ~~year–~~year to year, depending on the timing of ~~its~~our preclinical studies, clinical trials, ~~and its~~ expenditures on other research and development activities ~~as well as level of license fee~~(and reimbursement thereof), and from potential milestone payments received from and revenue earned under the Nyxol License Agreement or any other license and collaboration agreements ~~in connection with~~that we enter into, and potential payments we that may become payable from time to time under the ~~former Rexahn drug compounds.~~Apexian Sublicense Agreement.

Index

Ocuphire Pharma, Inc.

Form 10-Q

Recent Developments

Clinical Milestones

~~On May 19, 2022, Ocuphire~~APX3330

In January 2023, we announced ~~positive top-line~~topline efficacy and safety results from ZETA-1, a Phase 2b trial of APX3330 in ~~LYNX-1,~~diabetic retinopathy patients. In ZETA-1, APX3330 demonstrated statistical significance on a key pre-specified endpoint, binocular DRSS worsening, which is a potential registration endpoint for DR. These results, along with a favorable systemic and ocular safety profile, support our plans to move forward to an End-of-Phase 2 meeting with the FDA.

Nyxol

In January 2023, we announced the initiation of the VEGA-2 Phase 3 pivotal ~~clinical~~ trial, investigating the safety and efficacy of Nyxol for night (or dim light) vision disturbances (NVD) in 145 subjects. The FDA-agreed primary endpoint was met, with a statistically significant greater percentage of Nyxol-treated subjects having gained 15 or more letters of mesopic low contrast distance visual acuity (mLCVA) at Day 8, compared to placebo. Key secondary endpoints were also met, including 10 and 15 or more letters of mLCVA improvement at day 15. Nyxol continued to show a favorable safety and tolerability profile with no serious adverse events, and the low adverse events occurring in Nyxol-treated subjects were predominantly mild in severity and were consistent with those observed in previous trials. This is the first Phase 3 trial to study NVD and to show an improvement in distance and contrast vision at night with a pupil modulation mechanism which has cross-over differentiation to presbyopia.

~~Non-clinical Update~~

For presbyopia, the in-life phase of a 90-day nonclinical ocular toxicology study has been completed for Nyxol and LDP doses in Dutch-belted rabbits. This study was designed to support any future chronic indication for such combination. Reports will be finalized and submitted to the FDA.

~~Regulatory Update~~

Previously, Ocuphire completed a Type-C meeting with the FDA on February 14, 2022 from which it obtained guidance regarding the design of VEGA-2 and VEGA-3 pivotal trials for Nyxol both as a single agent and with LDP as adjunct eye drops for the treatment of presbyopia. In addition to the February 2022 Type-C meeting, Ocuphire completed a Type B (Pre-NDA) meeting on June 24, 2022 from which it obtained guidance on the content of CMC, Clinical and Non-Clinical Modules. The FDA confirmed that OraVerse and Regitine were appropriate to use as reference listed drugs to support a 505(b)(2) NDA. In July 2022, Ocuphire submitted a Phase 3 protocol for Study OPI-NYXP-301 (VEGA-2). This is the first of two Phase 3 registration trials intended to support ~~the~~a presbyopia indication for Nyxol alone and ~~is anticipated to initiate~~Nyxol with LDP. Topline results from this trial are expected in late 2023. Funded by our partner Viatris, registration trials are planned for presbyopia (VEGA-3) and DLD (LYNX-2), as well as a supportive long-term safety trial for both chronic indications (LYRA-1).

Regulatory Update

In January 2023, we announced that the ~~second half of 2022. If successful,~~FDA has accepted for review the ~~Company expects to file a supplemental~~ NDA for Nyxol ~~as a single-agent for presbyopia and a new NDA~~ for the ~~combination thereafter.~~

~~Index~~

treatment of pharmacologically-induced mydriasis (RM). The FDA assigned a Prescription Drug User Fee Act (PDUFA) action date of September 28, 2023. Upon approval of Nyxol for RM by the FDA, Viatris would owe Ocuphire ~~Pharma, Inc.~~

~~Form 10-Q~~

~~Presentations, Publications and Conferences~~

Ocuphire’s management team and medical advisors have participated by invitation at twenty medical, scientific, industry and investment conferences from January through August 2022, at which over twenty papers, posters and panel talks were presented. The Company has been engaging with dozens of key opinion leaders to expand awareness ofa $10 million milestone payment under the Nyxol ~~and APX3330 development programs.~~License Agreement.

~~Patents~~

On August 3, 2022, Ocuphire announced that the United States Patent and Trademark Office (USPTO) issued U.S. Patent No. 11,400,077, with claims directed to methods of treating mydriasis using phentolamine mesylate. This patent extends patent protection for Nyxol for Reversal of Mydriasis by 5 years into 2039 and is listable in the FDA Orange Book. This new U.S. patent, issued on August 2, 2022, complements the company’s patent estate relating to Nyxol, which contains U.S. and foreign patents and patent applications for phentolamine mesylate formulations and methods of using phentolamine mesylate that include 19 patents and over 30 pending patent applications.

On June 29, 2022, Ocuphire announced that the United States Patent and Trademark Office (USPTO) issued new U.S. patent 11,351,130, which extends the duration of U.S. patent protection for, and broadens coverage of, the company’s late-stage oral product candidate, APX3330. U.S. Patent No. 11,351,130 has claims directed to methods of treatment using APX3330, which makes it eligible for listing in the U.S. FDA Orange Book. It issued on June 7, 2022 and has a term that expires in 2038. Claims in this patent include methods of treating inflammation and chronic pain in a subject suffering from diabetes. This patent complements the company’s patent estate relating to APX3330 and the company’s pipeline products including APX2009 and APX2014, together the subject of over 40 cases that are a combination of patents and pending patent applications directed to ophthalmic and other uses in the U.S., Europe, Japan, and other foreign countries.

Global Economic Conditions

~~The COVID-19 pandemic that began in late 2019 introduced significant volatility~~

Generally, worldwide economic conditions remain uncertain, particularly due to the ~~global economy, disrupted supply chains and had a widespread adverse effect on the financial markets.~~ ~~As a result~~effects 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

In addition to the direct and indirect impacts of COVID-19, the United States and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and ~~Ukraine. In February 2022, Russia launched a full-scale military invasion~~Ukraine, disruptions in the banking system and financial markets, lingering 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 our access to capital and increased the cost of ~~Ukraine. As a result~~capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, our future cost of equity or debt capital and access to the capital markets could be adversely affected.

Additionally, our 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 the United States, United Kingdom, European Union and other countries have levied economic sanctions and bans on Russia and Russia has responded with its own retaliatory measures. These measures have contributed to significant volatility and negative pressure in ~~financial markets. Securities of microcap and small-cap companies, including biotechnology companies in particular, have experienced substantial volatility~~Ukraine, disruptions in the ~~recent past, often based on factors unrelated~~banking system and financial markets, and steps taken by governments and central banks, particularly in response to the ~~companies’ financial performance or prospects. Further decline~~COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in ~~global economic conditions could have a lasting impact on regional~~costs and ~~global economies,~~has caused changes in fiscal and ~~may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity for the duration of fiscal year 2022 and beyond.~~monetary policy, including increased interest rates.

Financial Operations Overview

License and Collaborations Revenue

~~To date, Ocuphire had limited~~License and collaborations revenue ~~during~~to date was derived from a one-time non-refundable payment and reimbursement of expenses earned under the ~~second~~Nyxol License Agreement, and ~~third quarters of 2021 related~~ to ~~fees earned~~a much lesser degree, 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 will recognize revenue as we earn reimbursement for research and development services in connection with the Nyxol License Agreement and we may earn additional revenues ~~stemming~~ from ~~additional~~potential milestone and royalty payments from ~~these~~the agreements with Viatris, BioSense, Processa, or from other license agreements ~~related to Rexahn’s legacy drug compounds;~~entered into the future; however, the attainment of milestones or level of sales required to earn royalty payments is highly ~~uncertain.~~uncertain for the reasons explained below.

~~Ocuphire does~~To date, outside of the license and collaborations revenue referenced above, we do not expect to generate significant revenue unless or until ~~it obtains~~ regulatory approval ofis obtained and ~~commercializes Nyxol~~commercialization begins for APX3330 or ~~APX3330.~~Nyxol. If ~~Ocuphire fails~~we fail to complete the development of APX3330, Nyxol, ~~APX3330,~~ or any other product candidate itwe may pursue in the future, in a timely manner, or ~~fails~~fail to obtain regulatory approval, ~~Ocuphire’s~~our ability to generate significant revenue would be compromised.

Index

Ocuphire Pharma, Inc.

Form 10-Q

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 stock-based compensation costs, for personnel in functions not directly associated with research and administrative activities. Other significant costs include insurance coverage for directors and officers and other property and liability exposures, legal fees relating to intellectual property and corporate matters, professional fees for accounting and tax services, ~~and~~ other services provided by business ~~consultants. Ocuphire anticipates that its general~~consultants 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 costs related to the hiring of additional personnel and fees for legal ~~and professional services as well as other public company-related costs.~~settlements.

Research and Development Expenses

To date, ~~Ocuphire’s~~our research and development expenses have ~~been~~ related primarily to the ~~clinical-stage~~clinical stage development of ~~Nyxol~~APX3330 and ~~APX3330.~~Nyxol. 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~~nonlegal patent costs, fees paid to external service providers that conduct certain research and development, and an allocation of overhead expenses. ~~Research~~

Pursuant to the Nyxol License Agreement, our budgeted research and development expenses related to the development of Nyxol are fully reimbursed by Viatris. However, all research and development costs, including those related to Nyxol, are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed. ~~Ocuphire accrues~~We accrue for costs incurred as the services are being provided by monitoring the status of the study or project, and the invoices are received from ~~its~~our external service providers. ~~Ocuphire adjusts its~~We adjust our accrual as actual costs become known. Research and development activities are central to ~~Ocuphire’s~~our business model.

~~Ocuphire expects~~

We expect that ~~Nyxol~~APX3330 and ~~APX3330~~Nyxol will have higher development costs during ~~their~~the 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~~We expect our research and development expenses to ~~significantly~~ increase over the next several years. However, it is difficult for ~~Ocuphire~~us to determine with certainty the duration, costs and timing to complete ~~its~~our current or future preclinical programs and clinical trials of APX3330, Nyxol, ~~APX3330,~~ and other product candidates. The duration, costs and timing of clinical trials and development of APX3330, 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 ~~related to~~ ~~interest~~ on principal related to a short-term loan (related to financing an insurance policy) ~~having~~during the period it was outstanding. The short-term loan had an annual interest rate of 5.5%. The short-term loan was fully repaid in May 2022.

Fair Value Change in Warrant Liabilities

The fair value change in warrant liabilities ~~comprises~~consists of the change in the fair value of the warrant liabilities during the period ~~the warrant liabilities~~they are outstanding.

Index

Ocuphire Pharma, Inc.

Form 10-Q

Other Income (Expense), net

Other income (expense), net reflected in this line item includes payments made by us in connection with the Contingent Value Rights Agreement (the “CVR Agreement”) with former Rexahn shareholders. In addition, other income (expense), net also 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~~A full valuation allowance has been provided on the net deferred tax assets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Results of Operations

Comparison of ~~the~~ Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~

The following table summarizes Ocuphire’s operating results for the periods indicated (in thousands):

	For the Three Months Ended									For the Three Months Ended
	June 30,									March 31,
	2022			2021			Change			2023			2022			Change

Collaborations revenue	$	—		$	100		$	(100	)
License and collaborations revenue										$	1,749		$	—		$	1,749

Operating expenses:
General and administrative		1,776			3,408			(1,632	)		2,285			1,736			549
Research and development		3,162			3,829			(667	)		5,595			4,772			823
Total operating expenses		4,938			7,237			(2,299	)		7,880			6,508			1,372
Loss from operations		(4,938	)		(7,137	)		2,199			(6,131	)		(6,508	)		377
Interest expense		(4	)		—			(4	)		—			(5	)		5
Fair value change in warrant liabilities		—			—			—			—			—			—
Other income, net		15			1			14
Other income (expense), net											340			(82	)		422
Loss before income taxes		(4,927	)		(7,136	)		2,209			(5,791	)		(6,595	)		804
Provision for income taxes		—			—			—			—			—
Net loss	$	(4,927	)	$	(7,136	)	$	2,209		$	(5,791	)	$	(6,595	)	$	804

License and Collaborations Revenue

~~Collaborations~~

License and collaborations revenue was ~~$0.1~~$1.7 million for the three months ended ~~June 30, 2021.~~March 31, 2023. There was no license and collaboration revenue during the three months ended March 31, 2022. Revenue during the ~~period~~first quarter of 2023 was derived from the ~~license agreement with BioSense related to certain technology transfers. There was no collaborations revenue recognized during~~reimbursement of research and development services under the ~~current year period.~~Nyxol License Agreement.

General and Administrative ~~Expenses~~

General and administrative expenses for the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$1.8~~$2.3 million compared to ~~$3.4~~$1.7 million for the three months ended ~~June 30, 2021.~~March 31, 2022. The ~~$1.6~~increase period over period of $0.5 million was primarily attributable to an increase in stock-based compensation of $0.2 million, professional services of $0.1 million, legal support of $0.2 million and business development activities of $0.1 million, offset in part by a decrease ~~was largely attributed to settlement~~in payroll and insurance costs ~~incurred with certain investors in the comparable prior year period.~~of $0.1 million on a net basis. General and administrative expenses included $0.5 million and $0.3 million in stock-based compensation expense during ~~each of~~ the ~~three-month periods~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021.~~respectively.

Research and Development ~~Expenses~~

Research and development expenses for the three months ended ~~June 30, 2022~~March 31, 2023 were ~~$3.2~~$5.6 million compared to ~~$3.8~~$4.8 million for the three months ended ~~June 30, 2021.~~March 31, 2022. The ~~$0.7~~$0.8 million ~~decrease~~increase was primarily attributable to ~~the completion of clinical trials and the timing of~~increased manufacturing activities for Nyxol and ~~APX3330.~~APX3330 period over period as well as increased payroll and consulting costs during the current period. Research and development expenses also included ~~$ 0.2~~$0.3 million and $0.1 million in stock-based compensation expense during ~~each of~~ the ~~three-month periods~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021.~~respectively.

Interest Expense

Interest expense for the three months ended ~~June 30,~~March 31, 2022 of ~~$4,000~~$5,000 was comprised of interest on principal related to a short-term ~~loan.~~loan (related to financing an insurance policy). There was no interest expense during the ~~comparable prior year~~current three month period.

~~Fair Value Change in Warrant Liabilities~~

~~There was a negligible change to the fair value of the warrant liability associated with the Rexahn warrants during the three months ended June 30, 2022 and 2021.~~

2123

Index

Ocuphire Pharma, Inc.

Form 10-Q

~~Other Income, net~~

During the three months ended June 30, 2022, Ocuphire had other income, net of $15,000 which consisted of interest income related to cash and cash equivalents of $22,000 and realized currency gains of $2,000, offset in part by unrealized losses from our short-term investments of $9,000. Other income during the three months ended June 30, 2021 was attributed largely to interest income.

~~Comparison of the Six Months Ended June 30, 2022 and 2021~~

~~The following table summarizes Ocuphire’s operating results for the periods indicated (in thousands):~~

For the Six Months Ended
June 30,
2022 2021 Change

Collaborations revenue $ — $ 100 $ (100 )

Operating expenses:
General and administrative 3,512 5,112 (1,600 )
Research and development 7,934 7,311 623
Total operating expenses 11,446 12,423 (977 )
Loss from operations (11,446 ) (12,323 ) 877
Interest expense (9 ) — (9 )
Fair value change in warrant liabilities — (33,829 ) 33,829
Other (expense) income, net (67 ) 2 (69 )
Loss before income taxes (11,522 ) (46,150 ) 34,628
Provision for income taxes — — —
Net loss $ (11,522 ) $ (46,150 ) $ 34,628

~~Collaborations Revenue~~

Collaborations revenue was $0.1 million for the six months ended June 30, 2021. Revenue during the period was derived from the license agreement with BioSense related to certain technology transfers. There was no collaborations revenue recognized during six months ended June 30, 2022.

~~General and Administrative Expenses~~

General and administrative expenses for the six months ended June 30, 2022 were $3.5 million compared to $5.1 million for the six months ended June 30, 2021. The $1.6 million decrease was largely attributable to the $1.6 million non-cash settlement with certain investors in the comparable prior year period. Administrative employee headcount and other operating cost increases of approximately $0.2 million were offset by decreases in legal and public company costs in the current year period when compared to the comparable prior year period. General and administrative expenses included $0.6 million and $0.5 million in stock-based compensation expense during the six months ended June 30, 2022 and 2021, respectively.

~~Research and Development Expenses~~

Research and development expenses for the six months ended June 30, 2022 were $7.9 million compared to $7.3 million for the six months ended June 30, 2021. The $0.6 million increase was primarily attributable to more ongoing clinical trials and manufacturing activities for Nyxol and APX3330 as well as regulatory, preclinical and other development activities. Research and development expenses also included $0.3 million and $0.5 million in stock-based compensation expense during the six months ended June 30, 2022 and 2021, respectively.

Fair Value Change in Warrant Liabilities

The fair value change in warrant liabilities was ~~an expense of $33.8 million for~~de minimis during the ~~six~~three months ended ~~June 30, 2021 related to the issuance of the Series A Warrants in connection with the Pre-Merger Financing in November 2020~~March 31, 2023 and to the fluctuations in Ocuphire’s common stock fair value and the number of potential shares of common stock issuable upon conversion of the underlying Ocuphire warrant liabilities that were outstanding during the relevant periods. Upon the February 3, 2021 effective date of the Waiver Agreements, 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 liability2022 associated with the Rexahn ~~warrants during the six months ended June 30, 2022.~~warrants.

Other Income (Expense) ~~Income,~~, net

During the ~~six~~three months ended ~~June 30,~~March 31, 2023, Ocuphire had other income (expense), net of $0.3 million related to interest income related to our cash and cash equivalents on-hand of $367,000, offset in part by net unrealized losses from our short-term investments of $27,000.

During the three months ended March 31, 2022, Ocuphire had other ~~expense,~~income (expense), net of ~~$67,000~~$(82,000) stemming principally from net unrealized losses from our short-term investments of ~~$93,000,~~$84,000, offset in part by interest income ~~of $24,000~~ related to cash and cash equivalents ~~on hand and realized currency gains~~on-hand of $2,000. ~~Other income during the six months ended June 30, 2021 was largely attributed to interest income.~~

~~Index~~

~~Ocuphire Pharma, Inc.~~

~~Form 10-Q~~

Liquidity and Capital Resources

Capital Resources

As of ~~June 30, 2022, Ocuphire’s~~March 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents of ~~$17.0~~$39.0 million. ~~Ocuphire believes~~We believe that ~~its~~our cash on hand will be sufficient to fund ~~its~~our operations ~~through~~ for at least twelve months beyond the ~~third quarter~~date of ~~2023. The Company’s~~this filing. As of March 31, 2023, our cash and cash equivalents ~~are invested primarily in cash deposits~~on-hand were held largely at one large ~~long-standing~~ financial ~~institutions.~~institution.

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, 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~~Our primary source of cash to fund ~~its~~our operations has been various equity offerings in the amount of ~~$52.7~~$54.1 million and the issuance of convertible notes in the amount of $8.5 million, inclusive of the promissory notes exchanged for Ocuphire convertible notes. In addition, during the fourth quarter of 2022, we received a one-time non-refundable cash payment of $35.0 million and recently received reimbursement for costs related to development in connection with the Nyxol License Agreement.

At-The-Market Program

On February 4, 2021, ~~Ocuphire~~we 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~~our sole discretion, securities having an aggregate offering price of up to $125 million. In connection with the 2021 Shelf, on March 11, 2021, ~~Ocuphire~~we entered into a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) under which ~~the Company~~we may offer and sell, from time to time at ~~its~~our sole discretion, to or through JonesTrading, acting as agent and/or principal, shares of ~~its~~our common stock having an aggregate offering price of up to $40 million (the ~~“2021 ATM”~~“ATM”). A total of ~~3,993,361~~4,627,870 shares of common stock were sold under the ~~2021~~ ATM for ~~gross~~net proceeds through ~~June 30,~~September 2022 in the amount of ~~$16.6 million before deducting issuance expenses in~~$17.3 million. No shares of common stock were sold under the ~~amount~~ATM during the fourth quarter of ~~$0.5 million.~~2022 or during the first quarter of 2023.

Registered Direct Offering

On June 4, 2021, ~~the Company~~we 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~~our common stock and warrants to purchase 1,538,461 shares of ~~the Company’s~~our 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,~~Ocuphire, customary conditions to closing, indemnification obligations of ~~the Company,~~Ocuphire, 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,~~us, 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 ~~June 30, 2022,~~March 31, 2023, 1,538,461 RDO Warrants were still outstanding.

The offering of the securities was made pursuant to ~~the Company’s~~our effective shelf registration statement on Form S-3.

2324

Index

Ocuphire Pharma, Inc.

Form 10-Q

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~~we 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~~Ocuphire 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 1,708,335 in the aggregate with respect to all Holders.

Series A Warrants

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~~had an exercise price of $0.0001, were exercisable upon issuance and ~~will expire~~would have expired on the day following the later to occur of (i) the Reservation Date (as defined therein)~~, and~~ or (ii) the date on which the investor’s Series B Warrants would 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 1,708,335 shares of common stock upon execution of the Waiver Agreements. As of ~~June 30, 2022, 78,701~~March 31, 2023, none of the Series B Warrants ~~were still~~remained 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~~were no longer in effect.

~~Index~~

~~Ocuphire Pharma, Inc.~~

~~Form 10-Q~~

Ocuphire Convertible Notes

From May 2018 through March 2020, ~~Ocuphire~~we 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.

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 Six Months Ended						For the Three Months Ended
	June 30,						March 31,
	2022			2021			2023			2022

Net cash used in operating activities	$	(9,979	)	$	(10,140	)	$	(3,646	)	$	(6,170	)
Net cash provided by (used in) investing activities		—			—			—			—
Net cash provided by financing activities		2,470			17,975			—			882
Net (decrease) increase in cash and cash equivalents	$	(7,509	)	$	7,835
Net decrease in cash and cash equivalents							$	(3,646	)	$	(5,288	)

Cash Flow from Operating Activities

For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, cash used in operating activities of ~~$10.0~~$3.6 million was attributable to a net loss of ~~$11.5~~$5.8 million, partially offset by ~~$1.0~~$0.8 million in non-cash operating expenses and a net change cash source of ~~approximately $0.5~~$1.3 million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted principally of stock-based compensation of ~~$0.9~~$0.8 million and unrealized loss on short-term investments of $27,000. The change in operating assets and liabilities was primarily attributable to an increase in Ocuphire’s accounts payable and accrued expenses, and by decreases in our contract asset and prepaid expenses, associated with Ocuphire’s operating expenses under the normal course of business. These net change sources of cash were offset in part by an increase in our accounts receivable during the period.

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 ~~net cash use of $0.6 million attributed to an increase in prepaid expenses associated with the fluctuations of Ocuphire’s operating expenses.~~

For the six months ended June 30, 2021, cash used in operating activities of $10.1 million was attributable to a net loss of $46.2 million, partially offset by $36.4 million in non-cash operating expenses and a net change of $(0.4) million in Ocuphire’s net operating assets and liabilities. The non-cash expenses consisted principally of the fair value change in the warrant liabilities of $33.8 million, a share settlement with certain investors in the amount of $1.6 million and stock-based compensation of $1.0 million. The change in operating assets and liabilities was primarily attributable to a decrease in Ocuphire’s accounts payable and accrued ~~liabilities, on net basis,~~expenses, offset in part by aan decrease in prepaid expenses and ~~an increase in accounts receivable~~other assets associated with the fluctuations of Ocuphire’s operating expenses ~~and in connection with operating as a public company post-Merger.~~under the normal course of business.

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 ~~six~~three months ended ~~June 30,~~March 31, 2022 was ~~$2.5~~$0.9 million ~~that consisted principally of proceeds received from~~in connection with the 2021 ATM financing net proceeds of ~~issuance costs~~$1.2 million and exercise of stock options in the amount of ~~$3.0 million,~~$27,000, offset ~~in part~~ by payments made on the short-term loan of ~~$0.5~~$0.3 million.

~~Net cash provided by~~ There was no financing activities during the ~~six~~three months ended ~~June 30, 2021 was $18.0 million in connection with proceeds received from both the Registered Direct Offering and 2021 ATM net of issuance costs.~~March 31, 2023.

Liquidity and Capital Resource Requirements

~~Ocuphire has no current source~~As of March 31, 2023, we had cash and cash equivalents of $39.0 million. License and collaborations revenue inception to ~~sustain its present activities,~~date was derived from a one-time non-refundable payment of $35 million and ~~Ocuphire does~~reimbursement and expected reimbursement of expenses earned under the Nyxol License Agreement, and to a much lesser degree, 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 will recognize revenue as we earn reimbursement for research and development services in connection with the Nyxol License Agreement and we may earn additional revenues from future potential milestone and royalty payments from the agreements with Viatris, BioSense, Processa, or from other license agreements entered into the future; however, the attainment of milestones or level of sales required to earn royalty payments is highly uncertain for the reasons explained below.

To date, outside of the license and collaborations revenue referenced above, we do not expect to generate significant revenue unless or until regulatory approval is obtained and ~~unless,~~commercialization begins for APX3330 or Nyxol. If we fail to complete the ~~FDA or other regulatory authorities approve~~development of APX3330, Nyxol, or ~~APX3330 and it successfully commercializes its~~any other product ~~candidates. Until such time, if ever, as Ocuphire can~~candidate we may pursue in the future, in a timely manner, or fail to obtain regulatory approval, our ability to generate ~~substantial product~~significant revenue it expects to finance its cash needs through a combination of equity and debt financings as well as collaborations, strategic alliances and licensing arrangements. Ocuphire does not have any committed external source of funds. would be compromised.

To the extent that ~~Ocuphire raises~~we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of ~~Ocuphire’s~~our stockholders will be diluted, and the terms 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~~our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If ~~Ocuphire raises~~we raise additional funds through future collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, ~~Ocuphire~~we may have to relinquish valuable rights to ~~its~~our technologies, future revenue streams or grant licenses on terms that may not be favorable to ~~Ocuphire.~~us. If ~~Ocuphire is~~we are unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances or licensing arrangements when needed, ~~Ocuphire~~we may be required to delay, limit, reduce or terminate ~~its~~our product development, future commercialization efforts, or grant rights to develop and market ~~its~~our product candidates that ~~Ocuphire~~we 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 of 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 and 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 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.ourselves.

Index

Ocuphire Pharma, Inc.

Form 10-Q

Future Capital Requirements

The development of ~~Nyxol and~~ APX3330 is subject to numerous uncertainties, and ~~Ocuphire has~~we have based these estimates on assumptions that may prove to be substantially different than what ~~Ocuphire~~we currently ~~anticipates~~anticipate and could result in cash resources being used sooner than what ~~Ocuphire~~we currently ~~expects.~~expect. 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~~Our ability to successfully transition to profitability will be dependent upon achieving a level of product sales adequate to support ~~its~~our cost structure. ~~Ocuphire~~We cannot give any assurance that itwe will ever be profitable or generate positive cash flow from operating activities.

Contractual Obligations and Commitments

Facility Lease

~~Ocuphire leases~~

We lease a facility under a non-cancellable operating lease that ~~commenced on June 8, 2019 and~~ expires on December 31, ~~2022,~~2023, as amended, for a base rent in the amount of $3,000 per month.

Apexian Sublicense Agreement

On January 21, 2020, ~~Ocuphire~~we entered into the Apexian Sublicense Agreement, pursuant to which itwe 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~~we intend to develop as an oral tablet therapeutic to treat DR and DME, and potentially wAMD.

In connection with the Apexian Sublicense Agreement, ~~Ocuphire~~we issued 843,751 shares of ~~Ocuphire~~our common stock to Apexian and certain of Apexian’s affiliates.

~~Ocuphire~~We 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 (if such trial meets a primary endpoint) 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~~we also agreed to make royalty payments equal to a single-digit percentage of ~~its~~our 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 Annual Report.

Other Commitments

In the course of normal operations, ~~Ocuphire~~we entered into cancellable purchase commitments with ~~its~~our suppliers for various key research, clinical and manufacturing services. The purchase commitments covered by these arrangements are subject to change based on ~~Ocuphire’s~~our research and development efforts.

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~~Summary —Ocuphire Clinical Development Plan ~~—Future Planned Nyxol Trials—Potential~~—Potential Clinical Plans for APX3330—Future In-Licensing and Acquisition Opportunities—Manufacturing—Apexian Sublicense Agreement— Review and Approval of Drugs in the United ~~States~~” States”in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 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, commercialization, supplies, payroll, equipment maintenance, and audits for periods into calendar year ~~2023.~~2024. Refer to Note 43 – 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 expect to satisfy our short-term and long-term obligations through cash on hand, ~~and~~ from future equity and debt financings, and from reimbursement payments, potential milestone and royalty payments under the Nyxol License Agreement and any future collaborations and license agreements, until we generate an adequate level of revenue from commercial sales to cover expenses, if ever.

~~Index~~

~~Ocuphire Pharma, Inc.~~

~~Form 10-Q~~

Critical Accounting Policies and Estimates

~~Ocuphire’s~~Our financial statements are prepared in accordance with U.S. GAAP. These accounting principles require ~~Ocuphire~~us 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~~We believe that the estimates and judgments upon which ~~it relies~~we rely are reasonably based upon information available to ~~Ocuphire~~us at the time that ~~it makes~~we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, ~~Ocuphire’s~~our financial results will be affected. The accounting policies that reflect ~~Ocuphire’s~~our more significant estimates and judgments and which ~~it believes~~we believe are the most critical to aid in fully understanding and evaluating ~~its~~our reported financial results are described below.

Index

Ocuphire Pharma, Inc.

Form 10-Q

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”~~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.

License and Collaborations Revenue

We account for license and collaborations revenue in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The guidance provides a unified model to determine how revenue is recognized. We have entered into license and collaboration agreements which have revenue recognition implications. We recognize license and collaborations revenue by first allocating the transaction price of a contract to each performance obligation under the contract based on its stand-alone price. The stand-alone price of each performance obligation is based on its fair value utilizing a discounted cash flow approach, taking into consideration assumptions, including projected worldwide net profit for each of the respective programs based on probability assessments, projections based on internal forecasts, industry data, and information from other guideline companies within the same industry and other relevant factors. We do not expect to have in the future, significant variable consideration adjustments related to our existing license and collaborations revenue recognized. For discussion about the determination of license and collaborations revenue, see Note 9 — License and Collaboration Agreements included in Part 1, Item 1 – Financial Statements” of this Report.

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 expect that the fluctuations in fair value attributed to the Rexahn warrant liability will be significant.

Stock-based Compensation

Ocuphire accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation — Stock ~~Compensation.~~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 87 — 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~~A full valuation allowance has been provided on our net deferred tax assets given the uncertainty of future taxable income and other related factors impacting the realizability of our remaining net deferred tax assets. For additional information, see Note 12 — Income Taxes included in “Part II, Item 8 – Financial Statements and Supplementary Data” in our Annual Report filed on Form 10-K for the year ended December 31, 2022, and see Note 11 — Income Taxes included in “Part 1, Item 1 – Financial Statements” of this 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 43 — Commitments and Contingencies included in “Part 1, Item 1 – Financial Statements” of this Report.

Recent Accounting Pronouncements

Refer to Note ~~1 —~~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

Not applicable for smaller reporting companies.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Index

Ocuphire Pharma, Inc.

Form 10-Q

We designed and evaluated our disclosure controls and procedures recognizing that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance and not absolute assurance 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 benefits of controls must be considered relative to their costs. Because of the inherent 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, 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 ~~June 30, 2022.~~March 31, 2023. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2022.~~March 31, 2023.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended ~~June 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

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.

Item 1A.

Risk Factors

~~There~~Other than as set forth below, there have been no material changes in our risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. You should carefully consider the risks and uncertainties described below and therein.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable to our Company.

Item 5.

Other Information

None.

Index

Ocuphire Pharma, Inc.

Form 10-Q

Item 6.

Exhibits

EXHIBIT NUMBER		DESCRIPTION OF DOCUMENT
3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Appendix G to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed on April 29, 2005).

3.2		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 May 5, 2017).

3.3		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 August 30, 2018).

3.4		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).

3.5		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).

3.6		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).

3.7		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).

3.8		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).

3.9		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).

~~10.1~~10.1+		Interim President and CEO Consulting Letter Agreement by and between Ocuphire Pharma, Inc. and Richard Rodgers, dated April 20, 2023.

10.2		Non-Employee Director Compensation ~~Policy~~Policy.

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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)

+	Indicates management contract or compensatory plan.

*	Documents are furnished not ~~filed~~filed.

Index

Ocuphire Pharma, Inc.

Form 10-Q

SIGNATURES

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

~~Dated: August 12, 2022~~

~~Ocuphire Pharma, Inc.~~

Dated: May 15, 2023



Ocuphire Pharma, Inc.

By:	/s/ ~~Mina Sooch~~Richard J. Rodgers
	~~Mina Sooch~~Richard J. Rodgers
	Interim Chief Executive Officer
	(Principal Executive Officer)

By:	/s/ Amy Rabourn
	Amy Rabourn
	Senior Vice President of Finance
	(Principal Financial Officer)

		Page
	PART 1 – FINANCIAL INFORMATION	32
Item 1.	Financial Statements	32
	Condensed Balance Sheets as of ~~June 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021~~2022	32
	Condensed ~~Consolidated~~ Statements of Comprehensive Loss for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	43
	Condensed ~~Consolidated~~ Statements of Changes in Stockholders’ Equity ~~(Deficit)~~ for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	54
	Condensed ~~Consolidated~~ Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	65
	Notes to Condensed ~~Consolidated~~ Financial Statements (unaudited)	76
It~~em 2~~. Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2728
Item 4.	Controls and Procedures	2728

	PART II – OTHER INFORMATION	2829

Item 1.	Legal Proceedings	2829
Item 1A.	Risk Factors	2829
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
~~Item 3.~~	~~Defaults Upon Senior Securities~~	28
~~Item 4.~~	~~Mine Safety Disclosures~~	28
~~Item 5.~~	~~Other Information~~	28
~~Item 6.~~	~~Exhibits~~	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

SIGNATURES		3031

	As of June 30, 2022
Description	Total		Level 1		Level 2		Level 3
Assets:
Short-term investments	$	126	$	126	$	0	$	0
Total assets at fair value	$	126	$	126	$	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