What changed in this filing

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Item 1. Financial Statements

2020-10-29 compared with 2020-08-14 · 261 added, 242 removed, 372 unchanged (57% of the section changed)

2 unchanged sentences

Condensed Balance Sheet

June 30, 2020

September 30,

December 31, 2019

19 unchanged sentences

Preferred stock, par value $0.0001, 10,000,000 authorized shares, none issued and outstanding

Common stock, par value $0.0001, 75,000,000 authorized shares, 4,019,141 issued and outstanding

Common stock, par value $0.0001, 75,000,000 authorized shares, 4,483,198 and 4,019,141 issued and outstanding

Additional paid-in capital

7 unchanged sentences

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

General and administrative

3 unchanged sentences

Interest income

Unrealized (loss) gain on fair value of warrants

Total Other (Loss) Income

Unrealized gain (loss) on fair value of warrants

Total Other Income (Loss)

Net Loss Before Provision for Income Taxes

6 unchanged sentences

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

Unrealized gain (loss) on available-for-sale securities

3 unchanged sentences

Condensed Statement of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2020 and 2019

For the Three and Nine Months Ended September 30, 2020 and 2019

Comprehensive

1 unchanged sentence

Stockholders'

Balances at April 1, 2020

Balances at July 1, 2020

Stock-based compensation

Balances at June 30, 2020

Balances at April 1, 2019

Stock issued from warrant exchanges

Balances at September 30, 2020

Balances at July 1, 2019

Stock-based compensation

Other comprehensive income

Balances at June 30, 2019

Balances at September 30, 2019

(See accompanying notes to the condensed financial statements)

1 unchanged sentence

Condensed Statement of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2020 and 2019 (continued)

For the Three and Nine Months Ended September 30, 2020 and 2019 (continued)

Comprehensive

3 unchanged sentences

Stock-based compensation

Stock issued from warrant exchanges

Other comprehensive loss

Balances at June 30, 2020

Balances at September 30, 2020

Balances at January 1, 2019

3 unchanged sentences

Other comprehensive income

Balances at June 30, 2019

Balances at September 30, 2019

(See accompanying notes to the condensed financial statements)

1 unchanged sentence

Condensed Statement of Cash Flows

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash Flows from Operating Activities:

15 unchanged sentences

Redemption of marketable securities

Net Cash Provided by (Used in) Investing Activities

Net Cash Provided by Investing Activities

Cash Flows from Financing Activities:

9 unchanged sentences

Operating lease right-of-use assets obtained in exchange for lease obligations

Warrant liability extinguishment from exchange of warrants

(See accompanying notes to the condensed financial statements)

3 unchanged sentences

Rexahn Pharmaceuticals, Inc.

(the “Company”), a Delaware corporation, is a biopharmaceutical company whose principal operations have been

the development of innovative therapies to improve patient outcomes in cancers that are difficult to treat.

The Company had an accumulated deficit of $166,420,604 at June 30, 2020 and anticipates incurring losses in the foreseeable future.

On June 17, 2020, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Original Merger Agreement,” and as

amended on June 29, 2020, the “Merger Agreement”) with Razor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Ocuphire Pharma Inc., a Delaware corporation (“Ocuphire”), pursuant to which, among

other things, and subject to the satisfaction and waiver of certain conditions set forth in the Merger Agreement, Merger Sub will merge with and into Ocuphire, with Ocuphire continuing as a wholly owned subsidiary of the Company and the surviving

corporation of the merger (the “Merger”).

(the “Company”), a Delaware corporation, is a biopharmaceutical company whose principal operations have been the development of innovative therapies

to improve patient outcomes in cancers that are difficult to treat.

The Company had an accumulated deficit of $167,824,100 at September 30, 2020 and anticipates incurring losses for the foreseeable future.

On June 17, 2020, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Original Merger Agreement,” and as amended on June 29, 2020, the “Merger

Agreement”) with Razor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Ocuphire Pharma Inc., a Delaware corporation (“Ocuphire”), pursuant to which, among other things, and subject to the

satisfaction and waiver of certain conditions set forth in the Merger Agreement, Merger Sub will merge with and into Ocuphire, with Ocuphire continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the

See Note 2, Merger Agreement and Pre-Merger Financing, for further information.

The Company believes that its cash and cash equivalents of approximately $9.2 million as of June 30, 2020 will be sufficient to cover its

cash flow requirements for its current activities for at least the next 12 months from the date these financial statements were issued, assuming the Merger does not close.

The Company believes that its cash and cash equivalents of approximately $8.1 million as of September 30, 2020 will be sufficient to cover its cash flow requirements for its

current activities for at least the next 12 months from the date these financial statements were issued, assuming the Merger does not close.

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the

Securities and Exchange Commission (“SEC”) for interim financial information.

The accompanying unaudited condensed financial statements of the Company have been prepared pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission

(“SEC”) for interim financial information.

Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S.

complete financial statements.

In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of June 30, 2020 and

December 31, 2019 and of the results of operations, comprehensive loss, and stockholders’ equity for the three and six months ended June 30, 2020 and 2019 and the cash flows for the six months ended June 30, 2020 and 2019 have been included.

Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of results that may be expected for any other interim period or the full fiscal year ending December 31, 2020.

The accompanying unaudited condensed

financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”).

Information included in

the condensed balance sheet as of December 31, 2019 has been derived from the Company’s audited financial statements for the year ended December 31, 2019 included in the 2019 Form 10-K.

The unaudited condensed financial statements have been

prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

GAAP”) for complete financial statements.

opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of September 30, 2020 and December 31, 2019 and of the results of

operations, comprehensive loss, and stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and the cash flows for the nine months ended September 30, 2020 and 2019 have been included.

Operating results for the three and

nine months ended September 30, 2020 are not necessarily indicative of results that may be expected for any other interim period or the full fiscal year ending December 31, 2020.

The accompanying unaudited condensed financial statements should be

read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”).

Information included in the condensed balance sheet as of

December 31, 2019 has been derived from the Company’s audited financial statements for the year ended December 31, 2019 included in the 2019 Form 10-K.

The unaudited condensed financial statements have been prepared on a basis that assumes the

Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates are based on

management’s best knowledge of current events and actions the Company may undertake in the future.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates are based on management’s best knowledge of

current events and actions the Company may undertake in the future.

Actual results may ultimately differ from these estimates.

These estimates are reviewed periodically, and as adjustments become necessary, they are

reported in earnings in the period in which they become available.

These estimates are reviewed periodically, and as adjustments become necessary, they are reported in earnings in the

period in which they become available.

REXAHN PHARMACEUTICALS, INC.

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COVID-19 Pandemic

The outbreak of the COVID-19 disease, which the World Health Organization declared a pandemic in March 2020, has led to disruption in the

global economy and the biopharmaceutical industry.

The extent of the COVID-19 pandemic’s impact on the Company’s business, financial condition and results of operations, as well as the Company’s ability to consummate the Merger, is highly uncertain

and will depend on various factors, including the duration and scope of the pandemic, restrictions on business and social distancing guidelines that may be requested or mandated by governmental authorities, other actions taken to contain the impact

of the pandemic, and the Company’s access to additional capital.

The outbreak of the COVID-19 disease, which the World Health Organization declared a pandemic in March 2020, has led to disruption in the global economy and the biopharmaceutical

including the duration and scope of the pandemic, restrictions on business and social distancing guidelines that may be requested or mandated by governmental authorities, other actions taken to contain the impact of the pandemic, and the Company’s

access to additional capital.

Merger Agreement and Pre-Merger Financing

Merger Agreement

On June 17, 2020, the Company, Merger Sub and Ocuphire entered into the Original Merger Agreement, which was subsequently amended on June 29, 2020, pursuant

to which Merger Sub will merge with and into Ocuphire, with Ocuphire continuing as a wholly owned subsidiary of the Company in an all-stock transaction.

On June 17, 2020, the Company, Merger Sub and Ocuphire entered into the Original Merger Agreement, which was subsequently amended on June 29, 2020, pursuant to

which Merger Sub will merge with and into Ocuphire, with Ocuphire continuing as a wholly owned subsidiary of the Company in an all-stock transaction.

For accounting purposes, Ocuphire is considered to be acquiring the Company even though the Company will be the issuer of the common stock in the Merger due to various considerations, including the

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Effective Time (excluding shares held as treasury stock, shares held by Ocuphire and dissenting shares) will be converted into the right to receive shares of Company common stock equal to the Exchange Ratio described below;

outstanding Ocuphire stock option that has not previously been exercised prior to the Effective Time will be assumed by the Company.

and (b) each outstanding

Ocuphire stock option that has not previously been exercised prior to the Effective Time will be assumed by the Company.

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

Under the exchange ratio formula in the Merger Agreement (the “Exchange Ratio”), immediately following the consummation of the Merger (the “Closing”), the Company’s then-current stockholders would

own approximately 14.3% of the combined company’s common stock, and the former Ocuphire securityholders would own approximately 85.7% of the combined company’s common stock, in each case calculated on a fully-diluted basis, assuming the Company’s

net cash balance at the anticipated Closing date is between $3.2 million and $6.0 million.

The Exchange Ratio formula in the Merger Agreement is subject to adjustment for every $100,000 that the Company’s actual net cash balance at the anticipated

Closing date is less than $3.2 million or more than $6.0 million.

Based on the Company’s current estimates, the Company anticipates delivering net cash between $0 and $500,000 assuming the Closing occurs by November 14, 2020, which is the end date

set forth in the Merger Agreement;

however, the final net cash amount will not be calculated until the anticipated Closing date, and may vary significantly depending on, among other things, the Company’s ability to control and correctly estimate

its operating expenses, expenses relating to the Company’s ongoing litigation and the trading price of the Company’s common stock (and its impact on the estimated warrant liability, which reduces net cash).

If the Company’s actual net cash balance

at the anticipated Closing date is $0, which is the minimum amount of net cash that the Company is required to deliver to Close, then immediately following the Closing, the Company’s then-current stockholders would own approximately 11.2% of the

cash balance calculated on the date that is ten days prior to the anticipated Closing date (the “determination date”) is between $3.2 million and $6.0 million.

The Exchange Ratio formula in the Merger Agreement is subject to adjustment for every

$100,000 that the Company’s actual net cash balance calculated on the determination date is less than $3.2 million or more than $6.0 million.

Based on the Company’s current estimates, the Company anticipates delivering net cash between $1.9 million

and $2.4 million assuming the Closing occurs by November 14, 2020, which is the end date set forth in the Merger Agreement;

however, the final net cash amount will not be calculated until the determination date, and may vary significantly depending

on, among other things, the Company’s ability to control and correctly estimate its operating expenses, expenses relating to the Company’s ongoing litigation and the trading price of the Company’s common stock (and its impact on the estimated warrant

liability, which reduces net cash).

If the Company’s actual net cash balance as calculated on the determination date is $1.9 million, then immediately following the Closing, the Company’s then-current stockholders would own approximately 13.1% of the

combined company’s common stock, and the former Ocuphire securityholders would own approximately 86.9% of the combined company’s common stock, in each case calculated on a fully-diluted basis.

Under the terms of the Merger Agreement, the Company’s

stockholders’ ownership percentage in the combined company is subject to a floor of 9.1% regardless of the Company’s actual net cash balance at the anticipated Closing date, assuming Ocuphire waives the minimum net cash requirement at the

anticipated Closing date.

These ownership percentages give effect to the shares of Ocuphire common stock that will be issued to Investors (as defined below) in the Pre-Merger Financing (as defined below) prior to the Closing, but do not account for

any additional shares of Company common stock that may be issued following the Closing or the warrants issuable to Investors after Closing.

As a result, holders of Company common stock could own significantly less of the combined company than

currently contemplated.

For example, if the average of the five lowest volume-weighted average trading prices of Company common stock on Nasdaq Capital Market (“Nasdaq”) during the first ten trading days immediately following the closing of the

Pre-Merger Financing reaches a certain floor price specified in the Securities Purchase Agreement (as defined below), then the pre-Merger holders of Company common stock could own a low single-digit percentage of the fully-diluted combined company

equity securities, depending on the Company’s actual net cash amount at the anticipated Closing date.

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

stockholders’ ownership percentage in the combined company is subject to a floor of 9.1% regardless of the Company’s actual net cash balance as calculated on the determination date, assuming Ocuphire waives the minimum net cash requirement at

shares of Company common stock that may be issued following the Closing or the warrants issuable to Investors after Closing.

As a result, holders of Company common stock could own significantly less of the combined

company than currently contemplated.

For example, if the average of the five lowest volume-weighted average trading prices of Company common stock on Nasdaq Capital Market (“Nasdaq”) during the first ten trading days

immediately following the closing of the Pre-Merger Financing reaches a certain floor price specified in the Securities Purchase Agreement (as defined below), then the pre-Merger holders of Company common stock could own a low single-digit percentage

of the fully-diluted combined company equity securities, depending on the Company’s actual net cash amount as calculated on the determination date.

Consummation of the Merger is subject to certain Closing conditions, including, among other things:

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Company’s Board of Directors, and the remaining six directors are expected to include existing Ocuphire board members and an additional director designated by Ocuphire.

Following the Closing, Mina Sooch is expected to serve as the Company’s

President and Chief Executive Officer.

Also at the Effective Time, the Company expects to effect a name change to “Ocuphire Pharma, Inc.” and it is anticipated that the Company’s securities will be listed for trading on Nasdaq under the symbol

Following the Closing, Mina Sooch is expected to serve as the Company’s President

and Chief Executive Officer.

In accordance with the Merger Agreement, on June 17, 2020, the Board of Directors approved the termination of Douglas J.

13 unchanged sentences

Notes to Condensed Financial Statements

The Merger is expected to close in the second half of 2020, subject to approval by the Company’s stockholders at a special meeting to be held at a future date and other closing conditions.

The Merger is expected to close, at the earliest, on or about November 5, 2020, subject to approval by the Company’s stockholders at a special meeting to be held on November 2, 2020 and other closing

Contingent Value Rights Agreement

6 unchanged sentences

deductions, (ii) 90% of all payments received by the Company from Zhejiang HaiChang Biotechnology Co., Ltd.

(“HaiChang”) pursuant to that certain Exclusive License Agreement, dated as of February 8, 2020, by and between HaiChang and the Company

(the “HaiChang License Agreement”), less certain permitted deductions, and (iii) 75% of (a) all cash consideration paid by a third party to the Company during the applicable CVR Payment Period in connection with the grant, sale or transfer of

rights to certain of the Company’s pre-Closing intellectual property (“Parent IP”) under an agreement that is entered into during the 10-year period after the Closing (“Parent IP Deal”);

plus (b) with respect to any non-cash consideration received

by the Company from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by the Company at the time such non-cash consideration is monetized, less (c) certain permitted deductions.

(“HaiChang”) pursuant to that certain Exclusive License Agreement, dated as of February 8, 2020, by and between HaiChang and the Company (the

“HaiChang License Agreement”), less certain permitted deductions, and (iii) 75% of (a) all cash consideration paid by a third party to the Company during the applicable CVR Payment Period in connection with the grant, sale or transfer of rights to

certain of the Company’s pre-Closing intellectual property (“Parent IP”) under an agreement that is entered into during the 10-year period after the Closing (“Parent IP Deal”);

plus (b) with respect to any non-cash consideration received by the

Company from a third party during the applicable CVR Payment Period in connection with any Parent IP Deal, all amounts received by the Company at the time such non-cash consideration is monetized, less (c) certain permitted deductions.

Securities Purchase Agreement

On June 29, 2020, Ocuphire, the Company and certain institutional healthcare investors, accredited investors and certain directors and officers of Ocuphire (the “Investors”) entered into a

Securities Purchase Agreement, which amended and restated in its entirety the prior securities purchase agreement among the same parties dated June 17, 2020 (the “Securities Purchase Agreement”).

Pursuant to the Securities Purchase Agreement, the

Investors agreed to invest a total of $21.15 million in cash (the “Purchase Price”) to fund the combined company following the Merger (the “Pre-Merger Financing”).

In return, based on an agreed upon pre-money valuation of the combined company of

$120 million, Ocuphire will issue shares of Ocuphire common stock to the Investors, which shares will be exchangeable in the Merger for approximately 15% of the combined company on a fully diluted basis (the “Initial Shares”).

In addition, (i)

Ocuphire will deposit three times the number of Initial Shares into escrow with an escrow agent for the benefit of the Investors, to be exchanged for Company common stock in the Merger, and to be delivered, in whole or in part, based on the formula

set forth in the Securities Purchase Agreement, out of escrow to the Investors if 85% of the average of the five lowest volume-weighted average trading prices of a share of Company common stock on Nasdaq during the first ten trading days (or

earlier, at the election of any Investor) immediately following the closing date of the Pre-Merger Financing (which closing date will be the same date as the Closing) is lower than the effective price per share paid by the Investors for the shares

of Company common stock issued at Closing in exchange for the Initial Shares, and (ii) on the tenth trading day following the closing date of the Pre-Merger Financing (the “warrant closing date”), the Company will issue to the Investors (x) Series

A warrants to purchase shares of Company common stock and (y) Series B warrants to purchase shares of Company common stock.

On June 29, 2020, Ocuphire, the Company and certain institutional healthcare investors, accredited investors and certain directors and officers of Ocuphire (the “Investors”) entered into a Securities

Purchase Agreement, which amended and restated in its entirety the prior securities purchase agreement among the same parties dated June 17, 2020 (the “Securities Purchase Agreement”).

Pursuant to the Securities Purchase Agreement, the Investors

agreed to invest a total of $21.15 million in cash (the “Purchase Price”) to fund the combined company following the Merger (the “Pre-Merger Financing”).

In return, based on an agreed upon pre-money valuation of the combined company of $120 million,

Ocuphire will issue shares of Ocuphire common stock to the Investors, which shares will be exchangeable in the Merger for approximately 15% of the combined company on a fully diluted basis (the “Initial Shares”).

In addition, (i) Ocuphire will

deposit three times the number of Initial Shares into escrow with an escrow agent for the benefit of the Investors, to be exchanged for Company common stock in the Merger, and to be delivered, in whole or in part, based on the formula set forth in

the Securities Purchase Agreement, out of escrow to the Investors if 85% of the average of the five lowest volume-weighted average trading prices of a share of Company common stock on Nasdaq during the first ten trading days (or earlier, at the

election of any Investor) immediately following the closing date of the Pre-Merger Financing (which closing date will be the same date as the Closing) is lower than the effective price per share paid by the Investors for the shares of Company common

stock issued at Closing in exchange for the Initial Shares, and (ii) on the tenth trading day following the closing date of the Pre-Merger Financing (the “warrant closing date”), the Company will issue to the Investors (x) Series A warrants to

purchase shares of Company common stock and (y) Series B warrants to purchase shares of Company common stock.

REXAHN PHARMACEUTICALS, INC.

1 unchanged sentence

Marketable Securities

Marketable securities are considered “available-for-sale” in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 320, “Debt and Equity Securities,” and

thus are reported at fair value in the Company’s accompanying balance sheet, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity.

Amounts reclassified out of accumulated other

comprehensive income (loss) into realized gains and losses are accounted for on the basis of specific identification and are included in other income or expense in the statement of operations.

The Company classifies such investments as current on

the balance sheet as the investments are readily marketable and available for use in current operations.

The Company had no marketable securities as of June 30, 2020.

The following table shows the Company’s marketable securities’ adjusted cost, gross unrealized gains and losses, and fair value by significant investment

category as of December 31, 2019:

are reported at fair value in the Company’s accompanying balance sheet, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity.

Amounts reclassified out of accumulated other comprehensive

income (loss) into realized gains and losses are accounted for on the basis of specific identification and are included in other income or expense in the statement of operations.

The Company classifies such investments as current on the balance

sheet as the investments are readily marketable and available for use in current operations.

The Company had no marketable securities as of September 30, 2020.

The following table shows the Company’s marketable securities’ adjusted cost, gross unrealized gains and losses, and fair value by

significant investment category as of December 31, 2019:

December 31, 2019

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Total Marketable Securities

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

Equipment, Net

September 30,

Furniture and fixtures

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Net carrying amount

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

Accounts Payable and Accrued Expenses

September 30,

Trade payables

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BioSense Global LLC

On March 10, 2020, the Company entered into an amendment to its collaboration and license agreement, (as amended, the “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 “Territory”).

Under the terms of the License and Assignment Agreement, upon payment in full of an

upfront payment, the Company will (i) grant BioSense an exclusive license to develop and commercialize pharmaceutical products containing RX-3117 as a single agent for all human uses in the Territory and (ii) assign and transfer all of the

Company’s patents and patent applications related to RX-3117 in the Territory.

On March 10, 2020, the Company entered into an amendment to its collaboration and license agreement, (as amended, the “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 “Territory”).

Under the terms of the License and Assignment Agreement, upon payment in full of an upfront

payment, the Company will (i) grant BioSense an exclusive license to develop and commercialize pharmaceutical products containing RX-3117 as a single agent for all human uses in the Territory and (ii) assign and transfer all of the Company’s patents

and patent applications related to RX-3117 in the Territory.

The upfront payment consists of an aggregate of $1,650,000, of which $1,550,000 has been received to date.

Under the License and Assignment Agreement, the Company is

eligible to receive 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 in the mid-single digits to low tens on annual

net sales in the Territory.

Under the License and Assignment Agreement, the Company is eligible to receive

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 in the mid-single digits to low tens on annual net sales in the

The Company has evaluated the License and Assignment Agreement under ASC 606, “Revenue from Contracts with Customers,” to determine the appropriate amount of revenue to be

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The Company determined at the contract outset

and as of June 30, 2020 that all milestone payments should be fully constrained, as it is not probable that a significant reversal of revenue will not occur in a future period, given the significance of the milestone payments and that the payments

are earned based upon the achievement of events that are highly susceptible to factors outside of the Company’s control.

and as of September 30, 2020 that all milestone payments should be fully constrained, as it is not probable that a significant reversal of revenue will not occur in a future period, given the significance of the milestone payments and that the

payments are earned based upon the achievement of events that are 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.

The $1,650,000 upfront payment has been allocated to the performance obligations on the basis of the relative standalone selling price estimated for each performance

The Company has determined the standalone selling price of the exclusive license to develop RX-3117 using the adjusted market approach, which represents the price the market will bear based on the license rights granted and the state of

the intellectual property, and has determined the standalone selling price of the supply of the Transferred Materials using a cost approach.

Accordingly, the Company has allocated $750,000 of the upfront transaction price to the exclusive license

to develop RX-3117 and $900,000 to the supply of the Transferred Materials.

Additional transaction price recognized in future periods related to milestone payments and royalties will be allocated solely to the exclusive license to develop RX-3117,

as these amounts relate to efforts associated with the development and commercialization of products related to the exclusive license to develop RX-3117.

The $1,650,000 upfront payment has been allocated to the performance obligations on the basis of the relative standalone selling price estimated for each performance obligation.

Company has determined the standalone selling price of the exclusive license to develop RX-3117 using the adjusted market approach, which represents the price the market will bear based on the license rights granted and the state of the intellectual

property, and has determined the standalone selling price of the supply of the Transferred Materials using a cost approach.

Accordingly, the Company has allocated $750,000 of the upfront transaction price to the exclusive license to develop RX-3117

and $900,000 to the supply of the Transferred Materials.

Additional transaction price recognized in future periods related to milestone payments and royalties will be allocated solely to the exclusive license to develop RX-3117, as these amounts

relate to efforts associated with the development and commercialization of products related to the exclusive license to develop RX-3117.

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

As of June 30, 2020, $1,550,000 of the upfront payment had been paid, and the remaining $100,000 remained unpaid.

As of June 30, 2020, the exclusive license had not been

As of September 30, 2020, $1,550,000 of the upfront payment had been paid, and the remaining $100,000 remained unpaid.

As of September 30, 2020, the exclusive license had not been

transferred and no revenue was recognized related to that performance obligation, however, the Company had satisfied the performance obligation related to the Transferred Materials during the three months ended March 31, 2020.

Therefore, the

Company recognized no revenue and $900,000 in revenue for the three and six months ended June 30, 2020, respectively.

Therefore, the Company has recorded the additional $650,000 of transaction consideration received as of June 30, 2020 as deferred

revenue on the Company’s balance sheet.

Therefore, the Company

recognized no revenue and $900,000 in revenue for the three and nine months ended September 30, 2020, respectively.

Therefore, the Company has recorded the additional $650,000 of transaction consideration received as of September 30, 2020 as

deferred revenue on the Company’s balance sheet.

Zhejiang HaiChang Biotechnology Co., Ltd.

On February 8, 2020, the Company entered into the HaiChang License Agreement with HaiChang pursuant to which the Company granted HaiChang an exclusive

(even as to the Company), royalty-bearing, sublicensable worldwide license to research, develop and commercialize pharmaceutical products comprising RX-0201 (subject to and limited by the exclusive rights of NEXT BT Co.

Ltd (“Next BT”) with respect

to RX-0201 in Asia), the nano-liposomal formulation of RX-0201 known as RX-0301, and RX-0047, a proprietary compound currently in preclinical development.

HaiChang has agreed to use commercially reasonable efforts to develop, seek regulatory

approval for, and commercialize one product comprising RX-0301 and one product comprising RX-0047.

On February 8, 2020, the Company entered into the HaiChang License Agreement with HaiChang pursuant to which the Company granted HaiChang an exclusive (even

as to the Company), royalty-bearing, sublicensable worldwide license to research, develop and commercialize pharmaceutical products comprising RX-0201 (subject to and limited by the exclusive rights of NEXT BT Co.

Ltd (“Next BT”) with respect to

RX-0201 in Asia), the nano-liposomal formulation of RX-0201 known as RX-0301, and RX-0047, a proprietary compound currently in preclinical development.

HaiChang has agreed to use commercially reasonable efforts to develop, seek regulatory approval

for, and commercialize one product comprising RX-0301 and one product comprising RX-0047.

HaiChang paid a one-time upfront payment of $250,000 to the Company for certain materials to be transferred by the Company to HaiChang.

HaiChang will pay the Company development milestone payments

in an aggregate of up to $63,000,000 with respect to RX-0201 and RX-0301 and up to $33,000,000 with respect to RX-0047, and royalties based on percentages of net sales in the low tens with respect to RX-0201 and RX-0301 and the mid-single digits

with respect to RX-0047.

However, if HaiChang exclusively sublicenses its rights to a third party with respect to RX-0201 and RX-0301 or RX-0047 in a particular jurisdiction, instead of the foregoing milestones and royalties to the extent relating

to such compound(s) and jurisdiction, HaiChang will pay the Company a percentage of any sublicensing revenue received by HaiChang, provided that in any event HaiChang will pay a milestone payment on initiation of a Phase 3 clinical trial that is

subject to reduction by the amount of any sublicensing revenue paid with respect to the applicable compound(s) as of the time of initiation of the trial.

HaiChang will pay the Company development milestone

payments in an aggregate of up to $63,000,000 with respect to RX-0201 and RX-0301 and up to $33,000,000 with respect to RX-0047, and royalties based on percentages of net sales in the low tens with respect to RX-0201 and RX-0301 and the mid-single

digits with respect to RX-0047.

relating to such compound(s) and jurisdiction, HaiChang will pay the Company a percentage of any sublicensing revenue received by HaiChang, provided that in any event HaiChang will pay a milestone payment on initiation of a Phase 3 clinical trial

that is subject to reduction by the amount of any sublicensing revenue paid with respect to the applicable compound(s) as of the time of initiation of the trial.

The Company accounts for the HaiChang License Agreement under ASC 606.

The Company has determined the performance obligations under the contract relate to the transfer of materials and the license

of intellectual property.

The Company has determined the performance obligations under the contract relate to the transfer of materials and the

license of intellectual property.

Revenue associated with the materials and license is recognized at a point in time.

3 unchanged sentences

property, and allocated the entire fixed consideration to the materials.

The Company transferred the materials during the three months ended March 31, 2020 and therefore recognized $0 and $250,000 in revenue during the three and six months ended

June 30, 2020, respectively.

The Company transferred the materials during the three months ended March 31, 2020 and therefore recognized $0 and $250,000 in revenue during the three and nine months ended

September 30, 2020, respectively.

The variable consideration relates to the milestone payments, sublicense fees and future sales-based royalty payments .

1 unchanged sentence

contract using the expected value method.

Given the early stage and the uncertain success of the development work to be performed by HaiChang, the Company has determined that the variable consideration in the contract should be fully constrained

at the contract outset and as of June 30, 2020.

the contract outset and as of September 30, 2020.

REXAHN PHARMACEUTICALS, INC.

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Operating lease cost

2 unchanged sentences

The right-of-use asset and lease liability were calculated using an estimated incremental borrowing rate of 11%.

At June 30, 2020, the weighted average lease term was 1.0 years.

The table below summarizes the Company’s scheduled future minimum lease payments recorded on the balance sheet, as of June 30, 2020:

At September 30, 2020, the weighted average lease term was 0.8 years.

The table below summarizes the Company’s scheduled future minimum lease payments recorded on the balance sheet, as of September 30, 2020:

Year Ending December 31:

2020 (excluding the six months ended June 30, 2020)

2020 (excluding the nine months ended September 30, 2020)

Minimum lease payments

3 unchanged sentences

Basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period.

Diluted loss per common share

is computed by dividing net loss by the weighted average number of shares of common stock outstanding, plus the number of common share equivalents that would be dilutive.

As of June 30, 2020 and December 31, 2019, there were stock options and

Diluted loss per common share is

computed by dividing net loss by the weighted average number of shares of common stock outstanding, plus the number of common share equivalents that would be dilutive.

As of September 30, 2020 and December 31, 2019, there were stock options and

warrants to acquire, in the aggregate, 1,071,790 and 2,126,063 shares of the Company’s common stock, respectively, that are potentially dilutive.

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Stock-Based Compensation

As of June 30, 2020, the Company had 146,224 options to purchase common stock outstanding.

As of September 30, 2020, the Company had 146,058 options to purchase common stock outstanding.

In June 2013, the Company’s shareholders voted to approve the Rexahn Pharmaceuticals, Inc.

2013 Stock Option Plan (the “2013 Plan”).

Under the 2013 Plan, the Company grants

equity awards to key employees, directors and consultants of the Company.

Under the 2013 Plan, the Company grants equity

awards to key employees, directors and consultants of the Company.

The Company has reserved 283,333 shares of common stock for issuance pursuant to the 2013 Plan.

As of June 30, 2020, there were 142,066 options outstanding under the 2013

Plan, and 139,236 shares were available for issuance.

In addition, as of June 30, 2020, there were 4,158 options outstanding under a previously established stock option plan under which no new stock options may be granted.

As of September 30, 2020, there were 142,066 options outstanding under the 2013 Plan,

and 139,236 shares were available for issuance.

In addition, as of September 30, 2020, there were 3,992 options outstanding under a previously established stock option plan under which no new stock options may be granted.

Accounting for Awards

Stock-based compensation expense is the estimated fair value of options granted amortized on a straight-line basis over the requisite vesting service period for the entire

portion of the award.

Total stock-based compensation recognized by the Company for the three and six months ended June 30, 2020 and 2019 is as follows:

Stock-based compensation expense is the estimated fair value of options granted amortized on a straight-line basis over the requisite vesting service period for the entire portion

of the award.

Total stock-based compensation recognized by the Company for the three and nine months ended September 30, 2020 and 2019 is as follows:

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Statement of operations line item:

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Research and development

No income tax benefit has been recognized in the statement of operations for stock-based compensation arrangements as the Company has provided for a 100% valuation allowance on

its deferred tax assets.

No income tax benefit has been recognized in the statement of operations for stock-based compensation arrangements as the Company has provided for a 100% valuation allowance on its

deferred tax assets.

REXAHN PHARMACEUTICALS, INC.

1 unchanged sentence

Summary of Stock Option Transactions

A summary of stock option activity for the six months ended June 30, 2020 is as follows:

WeightedAverage

A summary of stock option activity for the nine months ended September 30, 2020 is as follows:

Weighted Average

Contractual Term

Outstanding, January 1, 2020

Outstanding, June 30, 2020

Exercisable, June 30, 2020

A summary of the Company’s unvested options as of June 30, 2020 and changes during the six months ended June 30, 2020 is presented below:

Outstanding, September 30, 2020

Exercisable, September 30, 2020

A summary of the Company’s unvested options as of September 30, 2020 and changes during the nine months ended September 30, 2020 is presented below:

Weighted Average Fair

1 unchanged sentence

Unvested at January 1, 2020

Unvested at June 30, 2020

As of June 30, 2020, there was $425,525 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average

Unvested at September 30, 2020

As of September 30, 2020, there was $368,685 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average

vesting period of 1.7 years.

1 unchanged sentence

Notes to Condensed Financial Statements

The following table summarizes the Company’s outstanding warrants to purchase common stock as of June 30, 2020 and December 31, 2019:

The following table summarizes the Company’s outstanding warrants to purchase common stock as of September 30, 2020 and December 31, 2019:

Number of Warrants:

Warrant Issuance

June 30, 2020

December 31, 2019

September 30,

Exercise Price

Expiration Date

Liability-classified Warrants

14 unchanged sentences

Total outstanding warrants

The following table summarizes the Company’s warrant activity for the six months ended June 30, 2020:

The following table summarizes the Company’s warrant activity for the nine months ended September 30, 2020:

Number of Warrants

1 unchanged sentence

Balance, January 1, 2020

Issued during the period

Exercised during the period

Expired during the period

Balance, June 30, 2020

At June 30, 2020, the weighted average remaining contractual life of the outstanding warrants was 3.2 years.

Exchanged during the period

Balances, September 30, 2020

At September 30, 2020, the weighted average remaining contractual life of the outstanding warrants was 3.0 years.

REXAHN PHARMACEUTICALS, INC.

3 unchanged sentences

Warrant Issuance:

June 30, 2020

September 30, 2020

December 31, 2019

8 unchanged sentences

The assumptions used in calculating the fair values of the liability-classified warrants are as follows:

June 30, 2020

September 30, 2020

December 31, 2019

6 unchanged sentences

Fundamental transaction timing

September 2020

November 2020

As discussed in Note 2, on June 17, 2020, the Company entered into the Original Merger Agreement, which meets the definition of a fundamental transaction as defined by the warrant agreements.

Therefore, the Company adjusted the likelihood and timing of its fundamental transaction assumptions when calculating the fair values of the liability-classified warrants as of June 30, 2020.

Therefore, the Company adjusted the likelihood and timing of its fundamental transaction assumptions when calculating the fair values of the liability-classified warrants as of September 30, 2020.

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

Changes in the fair value of the warrant liabilities, carried at fair value, reported as “unrealized (loss) gain on fair value of warrants” in the statement of operations:

Changes in the fair value of the warrant liabilities, carried at fair value, reported as “unrealized gain (loss) on fair value of warrants” in the statement of operations:

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

November 2015 Investors

6 unchanged sentences

October 2017 Placement Agent

No provision for federal and state income taxes was required for the three and six months ended June 30, 2020 and 2019 due to the Company’s operating losses and

No provision for federal and state income taxes was required for the three and nine months ended September 30, 2020 and 2019 due to the Company’s operating losses and

increased deferred tax asset valuation allowance.

At June 30, 2020 and December 31, 2019, the Company had unused net operating loss carry-forwards of approximately $160,154,000 and $ 156,586 ,000

At September 30, 2020 and December 31, 2019, the Company had unused net operating loss carry-forwards of approximately $161,859,000 and $ 156,586 ,000

respectively, portions of which expire at various dates beginning in 2021.

Some of the Company’s unused net operating loss carryforwards may be subject to annual limitations under certain provisions of the Internal Revenue Code related to

“changes in ownership.”

As of June 30, 2020 and December 31, 2019, the deferred tax assets related to the aforementioned carry-forwards have been fully offset by valuation allowances, because

Some of the Company’s unused net operating loss carryforwards may be subject to annual limitations under certain provisions of the Internal Revenue Code related to “changes

in ownership.”

As of September 30, 2020 and December 31, 2019, the deferred tax assets related to the aforementioned carry-forwards have been fully offset by valuation allowances, because

significant utilization of such amounts is not presently expected in the foreseeable future.

Deferred tax assets and valuation allowances consist of:

September 30,

Net Operating Loss Carryforwards

11 unchanged sentences

The Company has contracted with various vendors for services, with terms that require payments over the terms of the agreements, usually ranging from two to 36 months.

The costs to be incurred are estimated and

are subject to revision.

As of June 30, 2020, the total estimated cost to complete these agreements was approximately $210,000.

The costs to be incurred are estimated and are

subject to revision.

As of September 30, 2020, the total estimated cost to complete these agreements was approximately $160,000.

All of these agreements may be terminated by either party upon appropriate notice as stipulated in the

4 unchanged sentences

product arising out of or in connection with the use of KRICT’s intellectual property.

As of June 30, 2020, the milestone has not occurred.

As of September 30, 2020, the milestone has not occurred.

The Company has established a 401(k) plan for its employees.

The Company has elected to match 100% of the first 3% of an employee’s compensation plus 50% of an additional 2% of the employee’s deferral.

Expense related to this matching contribution aggregated to $9,785 and $18,506 for the three months ended June 30, 2020 and 2019, respectively, and $21,014 and $46,385 for the six months ended June 30,

2020 and 2019, respectively.

Expense related to this matching contribution aggregated to $7,840 and $16,355 for the three months ended September 30, 2020 and 2019, respectively, and $28,854 and $62,740 for the nine months ended

September 30, 2020 and 2019, respectively.

On February 5, 2018, the Company and Next BT terminated a research collaboration agreement between the Company and Rexgene Biotech Co., Ltd, a predecessor in interest to Next BT.

The Company agreed to pay Next BT

a royalty in the low single digits of any net sales of RX-0201 the Company makes in Asia and 50% of the Company’s licensing revenue related to licensing of RX-0201 in Asia, up to an aggregate of $5,000,000.

The Company agreed to pay Next BT a

royalty in the low single digits of any net sales of RX-0201 the Company makes in Asia and 50% of the Company’s licensing revenue related to licensing of RX-0201 in Asia, up to an aggregate of $5,000,000.

On June 18, 2018, the Company

reinstated the exclusive license to RX-0201 in Asia, which had no effect on the potential royalty payments granted to Next BT in February 2018.

As of June 30, 2020, the Company has not made any royalty payments to Next BT.

As of September 30, 2020, the Company has not made any royalty payments to Next BT.

Legal Proceedings

On July 31, 2020, a putative stockholder class action was filed in the Court of Chancery of the State of Delaware (the “Chancery Court”) styled Stahlman v.

Rexahn Pharmaceuticals, Inc., et al., Case No.

Additionally, on August 3, 2020, a putative stockholder class action was filed in the United States District Court for the District of Delaware

styled Thompson v.

Rexahn Pharmaceuticals, Inc., et al.

1:20-cv-01036-UNA (D.

On August 7, 2020 and August 17, 2020, putative stockholder class actions were filed in the United States District

Court for the Southern District of New York styled, respectively, Manes v.

Rexahn Pharmaceuticals, Inc., et al., Case No.

1:20-cv-06227 (S.D.N.Y.) and Talsma v.

Pharmaceuticals, Inc., et al., Case No.

1-20-cv-06541 (S.D.N.Y.).

Finally, on August 18, 2020, a putative stockholder class action was filed in the United States District Court for the Eastern District of New York styled Juilfs v.

Rexahn Pharmaceuticals, Inc., et al.

, Case No 1:20-cv-03780 (F.D.N.Y.) (together with the Stahlman , Thompson , Manes and Talsma actions, the “Stockholder Actions”).

The Stockholder Actions assert claims against the Company and members of its board of directors (the “Individual

Defendants”).

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

The Stahlman and Manes complaints allege that the Individual Defendants breached their fiduciary

duties owed to the Company’s stockholders.

The Thompson , Manes , Juilfs and Talsma complaints

allege that the Company and the Individual Defendants violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by failing to disclose in the initial Registration Statement on Form S-4 that the Company filed with the SEC on

July 6, 2020 (File No.

333-239702) (the “Initial Registration Statement”) certain information regarding, among other things, financial projections for the Company and Ocuphire, the valuation analyses performed by the Company’s financial advisor,

Oppenheimer & Co., Inc., in support of its fairness opinion and the process leading to the execution of the Merger Agreement.

The Thompson , Manes , Juilfs and Talsma complaints also allege that the Individual Defendants violated Section 20(a) of the Exchange Act as control persons who had the ability to prevent the

Proxy Statement from being false and misleading.

The Stockholder Actions seek, among other things, an injunction preventing consummation of the Merger, an award of damages, and an award of costs and expenses, including attorneys’ fees.

8, 2020, plaintiff Thompson made a filing in the United States District Court for the District of Delaware voluntarily dismissing the Thompson complaint.

On September 22, 2020, the plaintiff filed a notice of

voluntary dismissal of the Juilfs action in the United States District Court for the Eastern District of New York.

On August 6, 2020, another party sent a letter to the Company’s counsel demanding that the Company and the Individual Defendants amend the Initial Registration Statement to provide

additional disclosures that the party alleges were improperly omitted from the Initial Registration Statement in violation of Sections 14(a) and 20(a) of the Exchange Act, including certain information regarding financial data and the background and

process leading to the execution of the Merger Agreement (the “Demand Letter”).

The Company is unable to estimate the potential loss or range of losses as a result of the Stockholder Actions remaining as of September 30, 2020 and the Demand Letter.

Subsequent Events , for information regarding developments in the Stahlman and Manes actions subsequent to September 30,

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

Fair Value Measurements

1 unchanged sentence

measurement date, not adjusted for transaction costs.

ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted

prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices

in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels are described below:

6 unchanged sentences

The following tables present assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

Fair Value Measurements at June 30, 2020

Fair Value Measurements at September 30, 2020

Warrant Liabilities

4 unchanged sentences

Warrant Liabilities

There have been no changes in the methodologies used at June 30, 2020 and December 31, 2019, and no transfers between Level 1, 2 and 3 during the six months ended June 30, 2020.

There have been no changes in the methodologies used at September 30, 2020 and December 31, 2019, and no transfers between Level 1, 2 and 3 during the nine months ended September 30, 2020.

REXAHN PHARMACEUTICALS, INC.

Notes to Condensed Financial Statements

The reconciliation of changes to the fair value of the Company’s warrant liabilities for the six months ended June 30, 2020 is as follows:

The reconciliation of changes to the fair value of the Company’s warrant liabilities for the nine months ended September 30, 2020 is as follows:

Warrant Liabilities

1 unchanged sentence

Unrealized losses, net

Balance at June 30, 2020

Liability extinguished in warrant exchange

Balance at September 30, 2020

Subsequent Events

Warrant Exchange Agreement

On July 31, 2020, the Company entered into a Warrant Exchange Agreement with Armistice Capital Master Fund Ltd.

(“Armistice”) pursuant to which, on August 3, 2020, the Company issued to Armistice

an aggregate of 215,000 shares of common stock of the Company in exchange for the surrender and cancellation of 160,257 and 208,334 of the October 2018 and January 2019 Investor Warrants held by Armistice, respectively.

Legal Proceedings

On July 31, 2020, a putative stockholder class action was filed in the Court of Chancery of the State of Delaware styled Stahlman v.

Pharmaceuticals, Inc., et al., Case No.

Additionally, on August 3, 2020, a putative stockholder class action was filed in the United States District Court for the District of Delaware styled Thompson

Rexahn Pharmaceuticals, Inc., et al.

1:20-cv-01036-UNA (D.

On August 7, 2020, a putative stockholder class action was filed in the United States District Court for the Southern District of New York styled Manes v.

Rexahn Pharmaceuticals, Inc., et al., Case No.

1:20-cv-06227 (S.D.N.Y.) (together with the Stahlman and Thompson

actions, the “Stockholder Actions”).

The Stockholder Actions assert claims against the Company and members of the Company’s board of directors (the “Individual Defendants”).

The Stahlman and Manes complaints allege that the Individual Defendants breached their fiduciary duties owed to

the Company’s stockholders.

The Thompson and Manes complaints allege that the Company and the Individual Defendants violated Section 14(a) of the Securities

Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder, by failing to disclose in the Registration Statement on Form S-4 that the Company filed with the SEC on July 6, 2020 (File No.

333-239702) (the

“Registration Statement”) certain information regarding, among other things, financial projections for the Company and Ocuphire, the valuation analyses performed by the Company’s financial advisor, Oppenheimer & Co., Inc., in support of its

fairness opinion and the process leading to the execution of the Merger Agreement.

The Thompson and Manes complaints also allege that the Individual Defendants violated Section 20(a) of the Exchange Act,

as control persons who had the ability to prevent the Proxy Statement from being false and misleading.

The Stockholder Actions seek, among other things, an injunction preventing consummation of the Merger, an award of damages, and an award of costs

and expenses, including attorneys’ fees.

Additionally, on August 6, 2020, another party sent a letter to the Company’s counsel demanding that the Company and the Individual Defendants amend the Registration Statement to provide additional

disclosures that the party alleges were improperly omitted from the Registration Statement in violation of Sections 14(a) and 20(a) of the Exchange Act, including certain information regarding financial data and the background and process leading

to the execution of the Merger Agreement (the “Demand Letter”).

The Company intends to defend against the Stockholder Actions and the Demand Letter, however it is reasonably possible that a loss may be incurred.

At this time, the Company is unable to estimate

the potential loss or range of losses.

On October 1, 2020, the Chancery Court granted an unopposed motion to dismiss the Stahlman action, but retained jurisdiction for the limited purpose of deciding

any fee application should that become necessary.

On October 8, 2020, the plaintiff filed a notice of voluntary dismissal of the Manes action in the United States District Court for the Southern District of

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements