What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-08-14 · 115 added, 112 removed, 243 unchanged (48% of the section changed)

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result in us having significantly less net cash than currently anticipated, which may prevent us from consummating the Merger or result in our stockholders owning significantly less of the combined company than currently estimated;

conditions to payment under the CVRs may not be met and the CVRs may never deliver any value to our stockholders;

conditions to payment under the contingent value right s (“ CVRs”) may not be met and the

CVRs may never deliver any value to our stockholders;

uncertainties about the paths of our programs and our ability to evaluate and identify a path forward for those programs, particularly given the constraints we have as a small company with limited financial,

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which induces apoptotic cell death of tumor cells.

RX-3117 has been the subject of a Phase 2a clinical trial in combination with Celgene’s ABRAXANE® (paclitaxel protein-bound particles for injectable suspension) as a first-line treatment

in patients newly diagnosed with metastatic pancreatic cancer.

RX-3117 has been the subject of a Phase 2a clinical trial in combination with Celgene’s ABRAXANE ®

(paclitaxel protein-bound particles for injectable suspension) as a first-line treatment in patients newly diagnosed with metastatic pancreatic cancer.

The trial reached its target enrollment in February 2019.

As of July 24, 2019, an overall response rate of 23% had been observed in 40 patients that had at least one scan on

Preliminary and unaudited data indicates that the median progression free survival for patients in the study is approximately 5.4 months.

As of July 24, 2019, an

overall response rate of 23% had been observed in 40 patients that had at least one scan on treatment.

Preliminary and unaudited data indicates that the median progression free survival for patients in the study is approximately 5.4

Complete data from the trial is expected to be available in 2020.

We do not plan to

conduct or sponsor any additional trials with RX-3117.

We do not plan to conduct or sponsor any additional trials with RX-3117.

On March 10, 2020, we amended our collaboration and license agreement (as amended, the “License and Assignment Agreement”) with BioSense Global LLC (“BioSense”) to advance the

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Supply Agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme B.V.

(“Merck”) to evaluate the combination of RX-5902 and Merck’s anti-PD-1 therapy, KEYTRUDA ® (pembrolizumab) in a Phase 2 trial in patients with

metastatic triple negative breast cancer (“TNBC”).

On April 7, 2020, we notified Merck that we were terminating the Collaboration Agreement, effective immediately, in connection with our determination to discontinue development of RX-5902

for the treatment of TNBC.

(“Merck”) to evaluate the combination of RX-5902 and Merck’s anti-PD-1 therapy, KEYTRUDA ® (pembrolizumab) in a Phase 2 trial in patients with metastatic triple negative breast cancer (“TNBC”).

On April 7, 2020, we notified Merck that we were terminating the Collaboration Agreement, effective immediately, in

connection with our determination to discontinue development of RX-5902 for the treatment of TNBC.

We do not plan to conduct or sponsor any additional trials with RX-5902.

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is currently in preclinical development by Zhejiang HaiChang Biotechnology Co., Ltd.

(“HaiChang”) as a nano-liposomal formulation of RX-0201 (Archexin ® ) using HaiChang’s proprietary QTsome™ technology.

On February 8, 2020, we

entered into an exclusive license agreement with HaiChang (the “HaiChang License Agreement”) pursuant to which we granted HaiChang an exclusive (even as to us), royalty-bearing, sublicensable worldwide license to research, develop and

commercialize RX-0201 and RX-0301.

The HaiChang License Agreement supersedes a prior agreement with HaiChang to develop RX-0301 under which HaiChang was to conduct certain preclinical and clinical activities through completion of a Phase 2a

proof-of-concept clinical trial in hepatocellular carcinoma.

(“HaiChang”) as a nano-liposomal formulation of RX-0201 (Archexin ® ) using

HaiChang’s proprietary QTsome™ technology.

On February 8, 2020, we entered into an exclusive license agreement with HaiChang (the “HaiChang License Agreement”) pursuant to which we granted HaiChang an exclusive (even as to us),

royalty-bearing, sublicensable worldwide license to research, develop and commercialize RX-0201 and RX-0301.

The HaiChang License Agreement supersedes a prior agreement with HaiChang to develop RX-0301 under which HaiChang was to conduct

certain preclinical and clinical activities through completion of a Phase 2a proof-of-concept clinical trial in hepatocellular carcinoma.

Merger Agreement

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immediately prior to the Effective Time will receive one contingent value right (“CVR”).

Refer to Note 2— Merger Agreement and Pre-Merger Financing to our condensed financial statements included in Part I

“Financial Information”, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for further information.

Refer to Note 2, Merger Agreement and Pre-Merger Financing , in the Notes to Condensed Financial Statements included

in Part I “Financial Information”, Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for further information.

The discussion below excludes any impact that may result from the Merger.

The Merger has been approved by the boards of directors

of both companies and is expected to close in the second half of 2020, subject to approval by our stockholders and Ocuphire’s stockholders as well as certain other closing conditions.

The total fees and costs of the proposed Merger are expected to

be material to our results of operations in 2020.

Following the Merger, the combined company will be a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of several eye

The Merger has been approved by the boards of

directors of both companies and is expected to close, at the earliest, on or about November 5, 2020, subject to approval by our stockholders at the Special Meeting of Stockholders on November 2, 2020 as well as certain other closing conditions.

total fees and costs of the proposed Merger are expected to be material to our results of operations in 2020.

Following the Merger, the combined company will be a clinical-stage ophthalmic biopharmaceutical company focused on developing and

commercializing therapies for the treatment of several eye disorders.

Although we have entered into the Merger Agreement and intend to consummate the Merger, there is no assurance that we will be able to successfully consummate the Merger on a timely

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issuable upon exercise of the Series A Warrants will also be subject to adjustment in the event of any stock splits, dividends or distributions or other similar transactions.

Pursuant to the Series A Warrants, we will agree not to enter into, allow or be party to certain fundamental transactions, generally including any merger with or into another entity, sale of all

or substantially all of our assets, tender offer or exchange offer, or reclassification of our common stock (a “Fundamental Transaction”) until the 45th trading day immediately following the earlier to occur of (x) such time as all of the

Underlying Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), and (y) one year after the warrant closing date (the “Reservation Date”).

upon any exercise of a Series A Warrant, the holder shall have the right to receive, for each warrant share that would have been issuable upon such exercise immediately prior to the occurrence of a Fundamental Transaction, at the option of the

holder (without regard to any limitation on the exercise of the Series A Warrant), the number of shares of common stock of the successor or acquiring corporation or of us, if we are the surviving corporation, and any additional consideration (the

Pursuant to the Series A Warrants, we will agree not to enter into, allow or be party to certain fundamental transactions, generally including any merger with or into another entity, sale of all or

substantially all of our assets, tender offer or exchange offer, or reclassification of our common stock (a “Fundamental Transaction”) until the 45th trading day immediately following the earlier to occur of (x) such time as all of the Underlying

Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1), and (y) one year after the warrant closing date (the “Reservation Date”).

Thereafter, upon any

exercise of a Series A Warrant, the holder shall have the right to receive, for each warrant share that would have been issuable upon such exercise immediately prior to the occurrence of a Fundamental Transaction, at the option of the holder

(without regard to any limitation on the exercise of the Series A Warrant), the number of shares of common stock of the successor or acquiring corporation or of us, if we are the surviving corporation, and any additional consideration (the

“Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of our common stock for which the Series A Warrant is exercisable immediately prior to such Fundamental Transaction (without

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The Series A Warrants will also contain a “cashless exercise” feature that allows the holders to exercise the Series A Warrants without making a cash payment.

The Series A Warrants will be

subject to a blocker provision which restricts the exercise of the Series A Warrants if, as a result of such exercise, the holder, together with its affiliates and any other person whose beneficial ownership of our common stock would be

aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would beneficially own in excess of 4.99% or 9.99% of our outstanding common stock (including the shares of our common stock issuable upon such exercise).

If we fail to issue to a holder of Series A Warrants the number of shares of our common stock to which such holder is entitled upon such holder’s exercise of the Series A Warrants, then we shall

be obligated to pay the holder on each day while such failure is continuing an amount equal to 1.5% of the market value of the undelivered shares determined using a trading price of our common stock selected by the holder while the failure is

continuing and if the holder purchases shares of our common stock in connection with such failure (“Series A Buy-In Shares”), then we must, at the holder’s discretion, reimburse the holder for the cost of such Series A Buy-In Shares or deliver

the owed shares and reimburse the holder for the difference between the price such holder paid for the Series A Buy-In Shares and the market price of such shares, measured at any time of the holder’s choosing while the delivery failure was

The Series A Warrants will be subject

to a blocker provision which restricts the exercise of the Series A Warrants if, as a result of such exercise, the holder, together with its affiliates and any other person whose beneficial ownership of our common stock would be aggregated with the

holder’s for purposes of Section 13(d) of the Exchange Act would beneficially own in excess of 4.99% or 9.99% of our outstanding common stock (including the shares of our common stock issuable upon such exercise).

If we fail to issue to a holder of Series A Warrants the number of shares of our common stock to which such holder is entitled upon such holder’s exercise of the Series A Warrants, then we shall be

obligated to pay the holder on each day while such failure is continuing an amount equal to 1.5% of the market value of the undelivered shares determined using a trading price of our common stock selected by the holder while the failure is

owed shares and reimburse the holder for the difference between the price such holder paid for the Series A Buy-In Shares and the market price of such shares, measured at any time of the holder’s choosing while the delivery failure was continuing.

Further, the Series A Warrants will provide that, in the event that we do not have sufficient authorized shares to deliver in satisfaction of an exercise of a Series A Warrant, then unless the

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The Series B Warrants will be issued to each Investor on the warrant closing date, and each Investor’s Series B Warrants will have an exercise price per share of $0.0001, will be immediately

exercisable and will expire on the day following the later to occur of (i) the Reservation Date, and (ii) the date on which the Investor’s Series B Warrants have been exercised in full (without giving effect to any limitation on exercise

contained therein) and no shares remain issuable thereunder.

Each Investor’s Series B Warrants will be initially exercisable for an amount of our common stock equal to the number (if positive) obtained by subtracting (i) the sum of (a) the number

of Converted Initial Shares issued to the Investor and (b) the number of Converted Additional Shares delivered or deliverable to the Investor as of the warrant closing date, from (ii) the quotient determined by dividing (a) the pro rata portion

of the Purchase Price paid by the Investor by (b) 85% of the average of the five lowest volume-weighted average trading prices of a share of our common stock on Nasdaq during the first ten trading days (or earlier at the election of any Investor)

therein) and no shares remain issuable thereunder.

Each Investor’s Series B Warrants will be initially exercisable for an amount of our common stock equal to the number (if positive) obtained by subtracting (i) the sum of (a) the number of

Converted Initial Shares issued to the Investor and (b) the number of Converted Additional Shares delivered or deliverable to the Investor as of the warrant closing date, from (ii) the quotient determined by dividing (a) the pro rata portion of the

Purchase Price paid by the Investor by (b) 85% of the average of the five lowest volume-weighted average trading prices of a share of our common stock on Nasdaq during the first ten trading days (or earlier at the election of any Investor)

immediately following the Closing, subject to the Floor Price.

Additionally, every Reset Date following (i) the earlier date to occur of (x) such time as all of the Underlying Securities may be sold without restriction or limitation pursuant to Rule 144 and

(y) six months following the issuance date (such earlier date, the “Six Month Reset Date”) and (ii) if a Public Information Failure has occurred at any time following the Six Month Reset Date, the earlier to occur of (x) the date that such

Public Information Failure is cured and no longer prevents the holder from selling all of the Underlying Securities pursuant to Rule 144 without restriction or limitation and (y) the earlier to occur of (I) the date all of the Underlying

Securities may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) and (II) one year after the issuance date (each such date provided in the foregoing clauses (i),

(ii) and (iii), an “End Reset Measuring Date”) (such 45 trading day period, the “Reset Period” and each such 45th trading day after an End Reset Measuring Date, an “End Reset Date”), the number of shares issuable upon exercise of each Investor’s

Series B Warrants shall be increased (“Reset”) to the number (if positive) obtained by subtracting (i) the sum of (a) the number of Converted Initial Shares issued to the Investor and (b) the number of Converted Additional Shares delivered or

deliverable to the Investor as of the warrant closing date, from (ii) the quotient determined by dividing (a) the pro rata portion of the Purchase Price paid by the Investor, by (b) the greater of (x) the arithmetic average of the five lowest

dollar volume-weighted average prices of a share of Rexahn Common Stock on Nasdaq during the applicable Reset Period immediately preceding the applicable Reset Date to date and (y) a floor price per share (the “Floor Price”) calculated based on a

pre-money valuation (of the combined company, assuming for this purpose the pre-money issuance of the Converted Initial Shares and Converted Additional Shares) of $10 million (such number resulting in this clause (b), the “Reset Price”).

Information Failure is cured and no longer prevents the holder from selling all of the Underlying Securities pursuant to Rule 144 without restriction or limitation and (y) the earlier to occur of (I) the date all of the Underlying Securities may be

sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) and (II) one year after the issuance date (each such date provided in the foregoing clauses (i), (ii) and (iii), an “End

Reset Measuring Date”) (such 45 trading day period, the “Reset Period” and each such 45th trading day after an End Reset Measuring Date, an “End Reset Date”), the number of shares issuable upon exercise of each Investor’s Series B Warrants shall be

increased (“Reset”) to the number (if positive) obtained by subtracting (i) the sum of (a) the number of Converted Initial Shares issued to the Investor and (b) the number of Converted Additional Shares delivered or deliverable to the Investor as

of the warrant closing date, from (ii) the quotient determined by dividing (a) the pro rata portion of the Purchase Price paid by the Investor, by (b) the greater of (x) the arithmetic average of the five lowest dollar volume-weighted average

prices of a share of Rexahn Common Stock on Nasdaq during the applicable Reset Period immediately preceding the applicable Reset Date to date and (y) a floor price per share (the “Floor Price”) calculated based on a pre-money valuation (of the

combined company, assuming for this purpose the pre-money issuance of the Converted Initial Shares and Converted Additional Shares) of $10 million (such number resulting in this clause (b), the “Reset Price”).

Pursuant to the Series B Warrants, we will agree not to enter into, allow or be party to a Fundamental Transaction until the Reservation Date.

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The Series B Warrants will also contain a “cashless exercise” feature that allows the holders to exercise the Series B Warrants without making a cash payment.

The Series B Warrants will be

subject to a blocker provision which restricts the exercise of the Series B Warrants if, as a result of such exercise, the holder, together with its affiliates and any other person whose beneficial ownership of our common stock would be

If we fail to issue to a holder of Series B Warrants the number of shares of our common stock to which such holder is entitled upon such holder’s exercise of the Series B Warrants, then we shall

continuing and if the holder purchases shares of our common stock in connection with such failure (“Series B Buy-In Shares”), then we must, at the holder’s discretion, reimburse the holder for the cost of such Series B Buy-In Shares or deliver

the owed shares and reimburse the holder for the difference between the price such holder paid for the Series B Buy-In Shares and the market price of such shares, measured at any time of the holder’s choosing while the delivery failure was

The Series B Warrants will be subject

to a blocker provision which restricts the exercise of the Series B Warrants if, as a result of such exercise, the holder, together with its affiliates and any other person whose beneficial ownership of our common stock would be aggregated with the

If we fail to issue to a holder of Series B Warrants the number of shares of our common stock to which such holder is entitled upon such holder’s exercise of the Series B Warrants, then we shall be

owed shares and reimburse the holder for the difference between the price such holder paid for the Series B Buy-In Shares and the market price of such shares, measured at any time of the holder’s choosing while the delivery failure was continuing.

Further, the Series B Warrants will provide that, in the event that we do not have sufficient authorized shares to deliver in satisfaction of an exercise of a Series B Warrant, then unless the

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Financing Lock-Up Agreements

In connection with the Pre-Merger Financing, we and Ocuphire will enter into additional lock-up agreements (the “Financing Lock-Up Agreements”) with each officer, director or other person that

will be subject to Section 16 of the Exchange Act, with respect to us immediately following the Closing (the “Financing Lock-Up Parties”), pursuant to which each of the Financing Lock-Up Parties will agree that until the date that is 90 calendar

days after the earlier of (i) such time as all of the Underlying Securities may be sold without restriction or limitation pursuant to Rule 144 and (ii) six months after the closing of the Pre-Merger Financing (provided that, if there is a Public

In connection with the Pre-Merger Financing, we and Ocuphire will enter into additional lock-up agreements (the “Financing Lock-Up Agreements”) with each officer, director or other person that will

be subject to Section 16 of the Exchange Act, with respect to us immediately following the Closing (the “Financing Lock-Up Parties”), pursuant to which each of the Financing Lock-Up Parties will agree that until the date that is 90 calendar days

after the earlier of (i) such time as all of the Underlying Securities may be sold without restriction or limitation pursuant to Rule 144 and (ii) six months after the closing of the Pre-Merger Financing (provided that, if there is a Public

Information Failure, such date shall be such later date on which the Public Information Failure is cured and no longer prevents the Investors from selling all of the Underlying Securities), subject to certain customary exceptions, such Financing

Lock-Up Party will not and will cause its affiliates not to (A) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose of or agree to dispose of, directly or

indirectly, any shares of our common stock or common stock equivalents, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to

any shares of Rexahn Common Stock or common stock equivalents owned directly by the Financing Lock-Up Parties (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of

the SEC (collectively, the “Subject Shares”), or (B) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Subject Shares, whether any such transaction

shares of Rexahn Common Stock or common stock equivalents owned directly by the Financing Lock-Up Parties (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of the

SEC (collectively, the “Subject Shares”), or (B) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Subject Shares, whether any such transaction

described in clause (A) or (B) above is to be settled by delivery of shares of our common stock or other securities, in cash or otherwise, (C) make any demand for or exercise any right or cause to be filed a registration statement, including any

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2020 and June 30, 2019

Comparison of the Three and Nine Months Ended September 30, 2020 and September 30, 2019

Total Revenues

We had no revenues for the three months ended June 30, 2020 and 2019.

We recorded revenues of $1,150,000 during the six months ended June 30, 2020, consisting of $250,000 earned from the

HaiChang License Agreement and $900,000 from the BioSense License and Assignment Agreement.

We had no revenues for the six months ended June 30, 2019.

We had no revenues for the three months ended September 30, 2020 and 2019.

We recorded revenues of $1,150,000 during the nine months ended September 30, 2020, consisting of $250,000 earned from

the HaiChang License Agreement and $900,000 from the BioSense License and Assignment Agreement.

We had no revenues for the nine months ended September 30, 2019.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, recruitment expenses, professional fees, and

other corporate expenses, including business development, investor relations, and general legal activities.

General and administrative expenses increased approximately $777,000, or 58.0% to approximately $2,117,000 for the three months ended June 30, 2020 compared to approximately $1,340,000 for the

three months ended June 30, 2019.

General and administrative expenses increased approximately $337,000, or 11.1% to approximately $3,373,000 for the six months ended June 30, 2020 compared to approximately $3,036,000, for the six months ended

June 30, 2019.

General and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, recruitment expenses, professional fees, and other

corporate expenses, including business development, investor relations, and general legal activities.

General and administrative expenses increased approximately $207,000, or 18.0% to approximately $1,356,000 for the three months ended September 30, 2020 compared to approximately $1,149,000 for

the three months ended September 30, 2019.

General and administrative expenses increased approximately $544,000, or 13.0% to approximately $4,729,000 for the nine months ended September 30, 2020 compared to approximately $4,185,000, for the nine

months ended September 30, 2019.

The increases were primarily attributable to increased legal and professional fees related to the Merger Agreement, offset by decreases in personnel and operating costs resulting from the streamlining of operations.

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Our research and development expenses are currently related to our oncology drug candidates.

Research and development expenses decreased approximately $1,416,000, or 85.9%, to approximately $232,000 for the three months ended June 30, 2020, from approximately $1,648,000 for the three

months ended June 30, 2019.

Research and development expenses decreased approximately $3,203,000, or 82.3%, to approximately $688,000 for the six months ended June 30, 2020, from approximately $3,891,000 for the six months ended June 30, 2019.

Research and development expenses decreased approximately $981,000, or 86.8%, to approximately $150,000 for the three months ended September 30, 2020, from approximately $1,131,000 for the three

months ended September 30, 2019.

Research and development expenses decreased approximately $4,184,000, or 83.3%, to approximately $838,000 for the nine months ended September 30, 2020, from approximately $5,022,000 for the nine months ended

September 30, 2019.

The decreases are a result of the completion of our RX-3117 and RX-5902 clinical trials, and decreased drug manufacturing costs.

The table below summarizes the approximate amounts incurred in each of our research and development projects for the three and six months ended June 30, 2020 and 2019:

The table below summarizes the approximate amounts incurred in each of our research and development projects for the three and nine months ended September 30, 2020 and 2019:

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Clinical Candidates:

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Total Research and Development Expenses

We expect total research and development expenses to decrease in the remainder of 2020 as compared to the three and six months ended June 30, 2020 as we complete our Phase 2a clinical trial of

RX-3117 with Abraxane and progress toward consummation of the Merger.

We expect total research and development expenses to decrease in the remainder of 2020 as compared to the three and nine months ended September 30, 2020 as we complete our Phase 2a clinical trial

of RX-3117 with Abraxane and progress toward consummation of the Merger.

Interest Income

Interest income decreased approximately $91,000 and $138,000, or 93.7% and 77.3%, respectively, for the three and six months ended June 30, 2020, respectively, compared to the same periods in

The decreases were primarily attributable to lower interest rates and balances of cash, cash equivalents and marketable securities for the three and six months ended June 30, 2020 compared to the same periods in 2019.

Unrealized (Loss) Gain on Fair Value of Warrants

Interest income decreased approximately $77,000 and $214,000, or 97.7% and 83.5%, respectively, for the three and nine months ended September 30, 2020, respectively, compared to the same periods in

The decreases were primarily attributable to lower interest rates and balances of cash, cash equivalents and marketable securities for the three and nine months ended September 30, 2020 compared to the same periods in 2019.

Unrealized Gain (Loss) on Fair Value of Warrants

Our liability-classified warrants are recorded at fair value, and the warrants are valued using a lattice model.

Changes in the fair value of warrants are recorded as an unrealized gain or loss

in our statement of operations.

During the three months ended June 30, 2020 and 2019, we recorded unrealized (losses) gains on the fair value of our warrants of approximately $(169,000) and $427,000, respectively.

During the six months ended

June 30, 2020 and 2019, we recorded unrealized (losses) gains on the fair value of our warrants of approximately $(227,000) and $1,941,000, respectively.

Changes in the fair value of warrants are recorded as an unrealized gain or loss in

our statement of operations.

During the three months ended September 30, 2020 and 2019, we recorded unrealized gains on the fair value of our warrants of approximately $101,000 and $243,000, respectively.

During the nine months ended September

30, 2020 and 2019, we recorded unrealized (losses) gains on the fair value of our warrants of approximately $(126,000) and $2,184,000, respectively.

Estimating fair values of warrants requires the development of significant and subjective

estimates that may, and are likely to, change over the duration of the warrants due to related changes to external market factors.

The large unrealized gain for the three and six months ended June 30, 2019 primarily resulted from a significant

decrease in the stock price of the underlying common stock at the end of this period compared to the beginnings of this period.

As a result of the above, net loss for the three and six months ended June 30, 2020 was approximately $2,511,000 and $3,098,000, or $0.62 and $0.77 per share, respectively, compared to

approximately $2,464,000, and $4,807,000, or $0.61 and $1.23 per share, respectively, for the three and six months ended June 30, 2019.

The large unrealized gain for the three and nine months ended September 30, 2019 primarily resulted from a

significant decrease in the stock price of the underlying common stock at the end of this period compared to the beginnings of this period.

As a result of the above, net loss for the three and nine months ended September 30, 2020 was approximately $1,404,000 and $4,501,000 or $0.33 and $1.10 per share, respectively, compared to

approximately $1,959,000, and $6,767,000, or $0.49 and $1.72 per share, respectively, for the three and nine months ended September 30, 2019.

Liquidity and Capital Resources

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We expect to continue to incur negative cash flow and operating losses.

We have spent, and if the Merger is

not consummated, expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, clinical trials and research and development efforts We believe that our

cash and cash equivalents of approximately $9.2 million as of June 30, 2020 will be sufficient to cover our cash flow requirements for our current activities for at least the next 12 months following the issuance of the financial statements

We have spent, and if the Merger is not

consummated, expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, clinical trials and research and development efforts We believe that our cash

and cash equivalents of approximately $8.1 million as of September 30, 2020 will be sufficient to cover our cash flow requirements for our current activities for at least the next 12 months following the issuance of the financial statements

contained in this Quarterly Report, assuming the Merger does not close.

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There can be no assurance that we will be able to obtain the needed financing on acceptable terms or at all.

Additionally, equity or debt financings may have a dilutive effect on the holdings

of our existing stockholders.

Cash used in operating activities was approximately $3,011,000 for the six months ended June 30, 2020.

The operating cash flows during the six months ended June 30, 2020 reflect a net loss of

approximately $3,098,000, a net increase of cash components of working capital and non-cash charges totaling $87,000.

Cash used in operating activities was approximately $6,187,000 for the six months ended June 30, 2019.

The operating cash flows

during the six months ended June 30, 2019 reflect a net loss of approximately $4,807,000, an unrealized gain on the fair value of warrants of approximately $1,941,000, and a net increase of cash components of working capital and non-cash charges

totaling approximately $561,000.

Cash provided by investing activities was $3,000,000 from the redemption of marketable securities for the six months ended June 30, 2020.

Cash used in investing activities was approximately

$2,901,000 for the six months ended June 30, 2019 which consisted of approximately $8,888,000 and approximately $19,000 from the purchases of marketable securities and equipment, respectively, offset by approximately $6,000 from the sale of

equipment and $6,000,000 from the redemption of marketable securities.

There was no cash provided by financing activities for the six months ended June 30, 2020.

Cash provided by financing activities was approximately $7,654,000 for the six months ended June 30,

2019, which consisted of net proceeds from our underwritten offering in January 2019.

Additionally, equity or debt financings may have a dilutive effect on the holdings of

our existing stockholders.

Cash used in operating activities was approximately $4,140,000 for the nine months ended September 30, 2020.

The operating cash flows during the nine months ended September 30, 2020 reflect a net

loss of approximately $4,501,000, a net increase of cash components of working capital and non-cash charges totaling $361,000.

Cash used in operating activities was approximately $8,565,000 for the nine months ended September 30, 2019.

operating cash flows during the nine months ended September 30, 2019 reflect a net loss of approximately $6,767,000, an unrealized gain on the fair value of warrants of approximately $2,184,000, and a net increase of cash components of working

capital and non-cash charges totaling approximately $386,000.

Cash provided by investing activities was $3,000,000 from the redemption of marketable securities for the nine months ended September 30, 2020.

Cash provided by investing activities was

approximately $99,000 for the nine months ended September 30, 2019 which consisted of approximately $9,000,000 from the redemption of marketable securities, and approximately $6,000 from the sale of equipment, offset by approximately $8,888,000 and

approximately $19,000 from the purchases of marketable securities and equipment, respectively.

There was no cash provided by financing activities for the nine months ended September 30, 2020.

Cash provided by financing activities was approximately $7,654,000 for the nine months ended

September 30, 2019, which consisted of net proceeds from our underwritten offering in January 2019.

Contractual Obligations

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agreements (including related milestone payments), lease payments, employee compensation and incentive program expenses, and contracts with various vendors for services.

As of June 30, 2020, the total estimated cost to complete our contracts

As of September 30, 2020, the total estimated cost to complete our contracts

with vendors for research and development services was approximately $160,000 under the terms of the applicable agreements.

3 unchanged sentences

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 2. Management’s Discussion and Analysis